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Saturday, May 17th, 2014

The Network Effect

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The network effect is defined as an entity getting more valuable the more people who use it. This can equate to a “winner-takes-all” position for businesses and a “moat”, as Warren Buffett and Charlie Munger like to say, to defend your castle (business).

Let’s look at a few examples of The Network Effect:

Amazon

A key to Amazon’s success is that it:

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Sunday, July 24th, 2011

These $1Billion+ Brands Began As Something Different

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Some of the most successful products of all time began as something else — I love coaching entrepreneurs on this fact!

The morale of the story is: get started on building your products because the sooner you get started, the sooner you’ll know what amazing product you can build!

Here are 10 of my favorites products that began as something else:

Bubble Wrap

Two engineers, Marc Chavannes and Aldred Fielding, sealed two shower curtains together to create a new type of wallpaper (with bubbles in it). It was later marketed as greenhouse insulation.

It wasn’t until years later that Bubble Wrap would be used to help protect IBM computers during shipping.

BubbleWrap is also ranked #22 in my list of The Top 100 Brands Synonomous With Their Product Category.

Coke

It was at first a patent medicine invented in the late 19th century by John Pemberton.

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Monday, November 22nd, 2010

Wanna Buy Facebook Stock Pre-IPO? — Tips Inside

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I sat in on a conference call hosted by Sharespost, a marketplace for privately-held stock, today to learn more about buying stock in private companies. Nearly 100 Sharespost members were on the phone.

Facebook Founder Mark Zuckerberg at South By Southwest 2008

I thought I’d share the basics of how buying privately-held stock works using Facebook (the topic of today’s call) as the example.

The below information is based on knowledge as well as things I learned from today’s call (hosted by Tim Sullivan of Sharespost).

How do you buy Facebook stock when it’s still privately-held?

Some Facebook insiders, such as former employees, have begun to sell their privately-held shares through new private exchanges such as Sharespost, SecondMarket, Cogent Partners and Campbell Luytens.

Who is selling the Facebook stock in this case?

A former Facebook employee is selling 50,000 shares of their Facebook stock, according to Tim Sullivan of Sharespost.

Do you buy Facebook stock directly from the employee?

No. You typically buy membership units in a new fund that buys the Facebook stock for a group of investors and you own your pro-rata % of the fund.

For example, Sharespost in this case is offering membership units in a newly-formed Delaware-based LLC that will hold up to 50,000 of Facebook’s privately-held shares at $20 per share.

Can anyone buy these Membership Units?

No. You have to be an accredited investor and you have to be chosen by the firm (e.g. Sharespost in this case) offering the Membership Units.

There may also be a minimum investment you have to make to be buy Membership Units (e.g. Sharespost is asking that you commit at least $100,000).

Who sets the price of the privately-held Facebook stock?

In this case, Sharespost is setting the price. They have closed an exclusive deal with the former Facebook employee to buy their 50,000 shares at $20 each (a total of $1 million).

What is Facebook’s valuation?

Around $45 billion based on these Sharespost Membership Units.

Can Facebook veto the purchasing of their stock by outsiders.

Yes. Facebook can exercise their right of first refusal (also known as a “rofer” or “rofering”) on stock that their insiders are trying to sell within 30 days of the attempted sale of the Facebook stock.

How often does Facebook “rofer” their stock?

Facebook rofers their purchase of privately held Facebook stock about half the time it’s available, according to Sharespost’s Tim Sullivan. He added that he heard that Facebook rofered stock at $18 per share recently.

When could a buyer of these Facebook Membership units sell their stock?

Owners of the Facebook Membership Units could sell their stocks through Sharespost private marketplace (though it’s not guaranteed that there will be a buyer) or at the point of a Facebook IPO (Initial Public Offering).

note: there will be lock-up restrictions on the exact timing of your sale of the Membership Units/Facebook stock.

What commission does the private marketplace (e.g. Sharespost) take in the transaction.

Sharespost is charging a one0time services fee of 5% and a distribution fee of 3% (of the total size of the round of funds they raise through the private placement).

Is SharesPost affiliated with Facebook.

No.

Does Facebook have audited financials that the public (or prospective buyers of the Membership Units) can see?

No.

What’s Facebook’s estimated revenues or profits.

It’s not publicly disclosed, but there are reports of Facebook’s revenues for 2010 being projected at anywhere from $1.5 billion to $2.4 billion, according to Tim Sullivan.

Is Facebook profitable?

Tim says that there are reports of Facebook being more profitable (on a margin basis) than Google, one of the most profitable publicly-traded Internet companies.

Has Facebook’s stock recently split?

Yes, there was a 5 for 1 split of Facebook shares October 1, 2010, according to Tim Sullivan.

Will Sharespost offer additional Facebook shares for purchase in the future.

Yes. Sharespost expects to offer additional Facebook shares in the future. Other private marketplaces likely will too.

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Sunday, October 10th, 2010

Tips On How Local Businesses Use Social Media

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  • When I attended the Social Currency CrunchUp, there was a panel of businesses (all local except one (Levi’s)) whose members mentioned some tid-bits on how social media was working for them.

Here are my notes from the panel:

Curtis Kimball, The Creme Brulee Man

  • Sells Creme Brulle, primarily in San Francisco and changes his location (a cart) regularly
  • His customer Acquisition focuses on Twitter
    • Has 14,100 followers) because it’s so easy…a majority of my customers come from Twitter or from friends who are on Twitter.
    • Doesn’t have a fixed address because he doesn’t have a permit (“Permitting situation in San Francisco is a nightmare.”)

    the creme brulee man

Dr. Robert Vaksman, Dentist

  • “Nineteen percent of our traffic comes from Facebook Page (>100 fans)…and some of them are coming in to the office.”
  • Uses Twitter and YouTube too

Dan Yoo, Stone Korean Kitchen (Restaurant owner with 50+ seats)

  • Groupon has filled his restaurant more than 50 times ($35 worth of food for $15)
  • Had to pay Groupon 50% ($7.50) of what customer paid
  • One thing he’d like to know is how many of his Groupon customers came from the 94110 zip code (so that he can remarket them).

Oren Jacob, Ready, Set, Bag! (Movie maker)

  • Used Groupon to sell tickets to his documentary…for free he has the market reach that a large movie maker has — “It levels the playing field.”
  • Groupon helped him do 2 things:
  1. Drum up publicity (because people saw the film promoted on Groupon)
  2. Sold tickets to the actual movie

Note: He’d like to see more demographic information on these customers that Groupon generated for hm

Megan O’Connor, Levi’s

  • Focuses on Facebook — 520,000 Fans who can “like” Levis and particular promotions
  • Tracking: “We can track some sales (from offers) (on Facebook).”

Note: The panel was moderated by Erick Schonfeld and David Hornik.

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Friday, May 21st, 2010

How One Biz Used A Free Coke To Get 25,000 Facebook Leads (Real Leads with Physical/Email Address!)

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If you want to generate free leads on Facebook, Scott Crider is someone you should listen to.

He’s been preaching the benefits of creating value through social media for a few years now.

Scott_Crider_bio_photo.jpg

Back in 2007 Scott built the Dogs Against Romney blog after hearing Presidential hopeful Romney tell a reporter about how he had once strapped a dog cage to the roof of his car (with his dog in it!) on family vacation, traveling 80MPH…scaring the dog so badly that it shit all down the side of the car.

Dogs Against Romney was an overnight viral success picked up by major media outlets — it generated at least 500,000 visits in less than a month.

Scott also helped his friend and Presidential candidate Mike Huckabee get hundreds of thousands of free Web site visitors during his campaign.

If Elvis Presley were still alive, he’d probably be asking Scott for help monetizing Facebook (Scott’s firm, Aristotle Interactive, handles email marketing for Elvis Presley Enterprises).

Scott and the Aristotle team had a recent win helping a business generate leads through Facebook.

I asked him a few questions about lead gen win and general subject of making money through Facebook — enjoy!

Q: Would you explain how a business begins to think about making money through Facebook?

The real power in Facebook is in turning people into advocates for your brand, and you do that by giving them something of value, in a cool way, and making it easy for them to share.

Q: What is your definition of a Facebook app?

My definition of a Facebook app is one that requires the user to grant permission for it to access their personal information, and everything has to function within the Facebook API (the user never leaves Facebook).

Q: Tell me about Murphy USA — how did you help them acquire Facebook leads?

Murphy USA is a Fortune 100 gas station-convenience store chain, and a great client that lets us do great work.

They tasked us (Aristotle Interactive) to come up with a way of helping them grow their fans from their then-level of 5,100 (many of whom were associates of the company) to a much higher number of customers, and to activate those customers to visit their stores.

Q: So what was your approach?

We created a custom app for them that offered both existing and new fans a free Coca-Cola product of their choice, to be picked up at any Murphy USA location, and the app also allowed everyone to who got a free Coke to share one with their friends, as well.

Murphy_app_screen_cap

The app collected both email and physical addresses, as well as age info (a Facebook requirement) from the customers, and delivered the free Coke in the form of a secure, printable coupon to their email address.

Q: Can you walk us through the steps that a user would experience in this app you built?

  1. Well, first off, existing fans of the Murphy USA Facebook page (about 5,100 people) were the first to see the new custom tab on Facebook that said “Help Murphy USA share 100,000 Cokes!”
  2. After launching the app and getting their own coupon, fans were then presented the message “Your free Coke is on its way. Now share one with your friends!” The app, still running within the Murphy USA Facebook page, then presented the customer with his or her complete friends list, and they could select up to 12 people to share the promotion with (a Facebook restriction).
  3. Each of the 12 people the promotion was shared with then got a message in their Facebook inbox from their friend that said “You have a Murphy USA coupon invitation.”
  4. The message linked the person directly to the Murphy USA page where the default tab was set to the promotion.
  5. The fan was asked to “Show us you like us!” (click the “Like” button on Facebook, launching the app) and the process started all over again.

Q: Were there other ways the app you built encouraged Facebook fans to spread the word?

Yes, in addition to choosing 12 friends to share the promotion with, the app also offered each person the opportunity to post a message to their news feed that said “I got a free Coke from Murphy USA!” which could be seen by everyone.

Q: On average, how many friends did each Murphy USA fan share the app with?

I’d estimate that most of them shared it with all 12 friends they were allowed to share it with, and posted the message to their news feeds as well.

Q: So, that would mean that perhaps two thousand of Murphy USA’s fans shared the app (the free coke coupon) with 20,000 of their friends?

It’s hard to say. It went viral extremely quickly. Literally within minutes. The first two days the app was live they grew by 7,000 new fans each day.

It was so much traffic that our outbound coupon email volume to AOL caused them to temporarily block us and we had to put some bottlenecks in to slow it down. It was something like 800 AOL emails in an hour that triggered it. I didn’t even know 800 people still used AOL!

So far, the app has taken them to over 32,000 fans in 3 weeks since it launched, and virtually 100% of them have stayed as fans.

How much does an application like this cost to build?

I probably shouldn’t reveal any figures on that, because the client is in a very competitive business and they’re pretty tight-lipped about things that give them an advantage. Let’s just say that it cost less than you might think. It easily fit within their normal quarterly promotions budget.

How does Murphy USA use the email address they now have for their 30,000 + new fans for marketing follow-up?

Murphy USA really respects people’s privacy, so they chose to send one follow up email message to them to offer them the opportunity to opt into Murphy’s monthly e-Offers (an opt-in email database that offers promotions on all the different things they sell).

Of course, nearly all 30,000+ of them are still fans of Murphy’s Facebook page, too, and can be communicated with there anytime.

How would you describe Murphy’s ROI on this?

I’d say the return on their investment has to be pushing 1,000+%, probably more, considering the lifetime value of these new relationships.

Will Murphy USA do more of these free coupons?

I’m sure they will. Re-skinning the app and replacing the coupon is fairly easy, plus it’s a win/win for Murphy USA and their product partners.

Q: What did Aristotle do to ensure security for all this (i.e. make sure there’s not an unlimited # of free coupons that people use)?

That was another level of complication in the app creation, but a necessary one to protect both the client and Coca-Cola.

We built a system that generated a custom coupon for each recipient. They received an email with a one-time link to the coupon, and each coupon had the recipient’s email address screened across the entire face of it. So they could only access it once, and they were discouraged from making copies.

Q: Can you give me another example of a business that could do really well with a free giveaway on Facebook?

Imagine Victoria’s Secret — if they launched something like this as a “share a free panty with your friends” on Facebook, it would go stratospheric. Are you listening Victoria? Call me (ha!).

Q: So, if you had to sum up the keys to making one of these Facebook marketing apps work, what would it be?

Three things:

  1. Share something of value – a coupon, good content, a fun digital experience
  2. Do it in a cool way and make sharing easy
  3. Let the customers who share it look good to their friends

Q: That’s a fascinating use-case, Scott — If someone were to want to get in touch with you or Aristotle Interactive, what’s the best way for them to do so?

They can call me at Aristotle Interactive at 501-374-4638, or hook up with me on Twitter @CScottCrider or here on Linked In.


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Friday, March 5th, 2010

Facebook's Revenues & Highlights From Wall Street Journal Profile

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It’s amazing how much momentum Facebook is generating these days. The press is certainly going wild.

Earlier this week, InsideFacebook shared some revenue estimates.

Based on their estimates, as well as one mentioned in the Wall Street Journal today and past ones from Starup Review and Don Dodge, here’s a very rough estimate of Facebook’s revenues since its founding in 2005:

Facebook Revenues for 2005 to 2010 (Estimated & Projected)

Facebook Revenues for 2005 to 2010 (Estimated & Projected)

Today’s Wall Street Journal cover story had these highlights about Facebook:

CEO Mark Zuckerberg’s Management Style

  • He is short on praise and believes that getting the product right should be its own reward
  • He is clear and purposeful on vision: believing that Facebook’s promise has to do with facilitating people’s ability to share almost any and everything with anyone at any time via Web sites, mobile phones and even videogames
  • He is a micromanager
  • In Facebook’s earlier years, Zuckerberg ended meetings by pumping his fist in the air and leading employees in a chant of “domination.”
  • Zuckerberg believes he has a special capacity for delaying gratification (and that will be helpful in holding out on an IPO)
  • Good listener: He’s met with Intel CEO Paul Otellini and Oracle President Charles Philips and keeps a long list of advice on his Blackberry
  • Zuckerberg controls votes for three of the five board seats

Facebook passed up on two acquisition offers:

  • Yahoo’s $1 billion offer in 2006 and
  • Microsoft’s offer of $8 billion or more sometime later

Facebook Financials and an IPO

  • Facebook’s revenue could hit $1.2 billion to $2 billion this year (2010)
  • It has been cash-flow positive (enough to pay its 1,200 employees and overhead) since 2009
  • Timing of an IPO: Board member Jim Breyer told a German audience last month that an IPO would not happen in 2010

Zuckerberg is clearly in control of the business

  • Zuckerberg owns more than a quarter of Facebook’s stock
  • Zuckerberg has control over 3 of the 5 board seats

I expect Facebook’s press to escalate further leading up to a likely IPO this year or in 2011; in what would likely be the largest Internet IPO since Google.

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Thursday, November 19th, 2009

How to Leverage Social Media For Your Business

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Social media is changing the way consumers interact with information and products…and it’s likely going to change your business.

One person specializing in social media for business is Sacha Cohen, CEO of Grassfed Media, an integrated communications company that serves green and socially responsible companies.

Grassfed Media CEO Sacha Cohen

Grassfed Media CEO Sacha Cohen

Her clients have included National Geographic, The Washington Post, and AARP.

Sacha was kind enough to answer some questions regarding social media and business.

Q: Here’s a lob-ball question to start us off with: would you define social media for us?

Ah, the million-dollar question. Generally, it refers to user-generated content (blogs, video, social networking sites, etc) that enables people to interact, share information, and communicate online.

Here’s a cool little video that illustrates the concept of social media better than I could ever explain in a few words: Social Media in Plain English.

Q: Would you give us a little “Social Media 101″ on the top few social media tools (LinkedIn, Twitter, Facebook, etc.) — and how a business should participate in each?

I’m going to point you to Mashble’s Social Media 101 Guides which has, for example, these how-to tutorials and many more:

What I will say is that no matter what forum you are participating in or what tool you are using, becoming familiar with the etiquette and conventions of each is critical.

Chris Brogan, who is something of a social media god, offers this excellent Twitter Etiquette Guide.

Q: Your firm provides social media marketing services for socially conscious businesses — would you elaborate on challenges a business might face that you can help them with?

The social media universe is constantly changing and evolving. I’ve found that many businesses are overwhelmed by this new world; I help them navigate through it.

The other challenge is having enough bandwidth to successfully engage through Twitter, Facebook, LinkedIn, etc. They can all be huge time-sucks if you’re not careful.

On the other hand, they can be extremely useful for connecting to customers, product development, and marketing-it’s a matter of focusing on goals and staying on message.

Q: Whose job within a business is it to set social media strategy?

There’s no one-size-fits-all, but it’s usually a collaboration between marketing, PR, and customer service.

Q: What do you think are important new social media trends happening right now?

Here  are three:

  1. Social media for social good (e.g. Fledgling Wine)
  2. Mobile and local social media (e.g. Four Square)
  3. Mass mingling

Q: Would you list examples of businesses using social media most effectively?

Love this one. Here are my top picks: Zappos, Virgin America, and Starbucks. As for non-profits, I’d have to say the Nature Conservancy and Share Our Strength.

Q: You mentioned that you used social networking to increase conversion 17% for one of your clients — what can you tell us about how that worked?

Actually, it wasn’t a client. It was a company I worked for full time. We were able to increase conversion by introducing product reviews and rating with help from a company called Bazaarvoice.

Customers want to know what other customers think; they want real, unbiased opinions. That’s what we delivered and it was a huge success.

Senior management was very resistant at first, but by showing them the research and best practices from other companies, they eventually saw the light.

Q: How do you see social media and public relations working together to grow a business?

Honestly, these days, you really can’t have one without the other. People are talking about your product and company, whether you know it or not.

The questions is: Are you going to ignore the conversation or join it?

Q: What are Top Essential Tools You Recommend for Twitter? (this was added after the original Q&A)

  1. TweetDeck — This is a must-have Twitter application. It can help you manage multiple Twitter accounts, keep track of mentions and friends, help you find other people to follow, and more.
  2. Twitter Grader — Find out how you stack up to other Tweeters in your area.
  3. TwitPic — Easily upload photos to Twitter via your phone or the web.
  4. Twellow — You’ve signed up for Twitter. Now what? Find people who share common interests on this Twitter directory.
  5. Qwitter — Are you posting good content? Keep track of who is unfollowing you with this clever notification tool.

Q: Thanks, Sacha! If someone wanted to get in touch with you, how should they do so?

They can email me at sacha@grassfedmediadc.com or call me at 202-234-0104.

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