Apr 102014

Understanding the Drivers of Success

Understanding the Drivers of Success

Although generally business is great at Return Path  and by almost any standard in the world has been consistently strong over the years, as everyone internally knows, the second part of 2012 and most of 2013 were not our finest years/quarters.  We had a number of challenges scaling our business, many of which have since been addressed and improved significantly.

When I step back and reflect on “what went wrong” in the quarters where we came up short of our own expectations, I can come up with lots of specific answers around finer points of execution, and even a few abstracted ones around our industry, solutions, team, and processes.  But one interesting answer I came up with recently was that the reason we faltered a bit was that we didn’t clearly understand the drivers of success in our business in the 1-2 years prior to things getting tough.  And when I reflect back on our entire 14+ year history, I think that pattern has repeated itself a few times, so I’m going to conclude there’s something to it.

What does that mean?  Well, a rising tide — success in your company — papers over a lot of challenges in the business, things that probably aren’t working well that you ignore because the general trend, numbers, and success are there.  Similarly, a falling tide — when the going gets a little tough for you — quickly reveals the cracks in the foundation.

In our case, I think that while some of our success in 2010 and 2011 was due to our product, service, team, etc. — there were two other key drivers.  One was the massive growth in social media and daily deal sites (huge users of email), which led to more rapid customer acquisition and more rapid customer expansion coupled with less customer churn.  The second was the fact that the email filtering environment was undergoing a change, especially at Gmail and Yahoo, which caused more problems and disruption for our clients’ email programs than usual — the sweet spot of our solution.

While of course you always want to make hay while the sun shines, in both of these cases, a more careful analysis, even WHILE WE WERE MAKING HAY, would have led us to the conclusion that both of those trends were not only potentially short-term, but that the end of the trend could be a double negative — both the end of a specific positive (lots of new customers, lots more market need), and the beginning of a BROADER negative (more customer churn, reduced market need).

What are we going to do about this?  I am going to more consistently apply one of our learning principles, the Post-Mortem  –THE ART OF THE POST-MORTEM, to more general business performance issues instead of specific activities or incidents.  But more important, I am going to make sure we do that when things are going well…not just when the going gets tough.

What are the drivers of success in your business?  What would happen if they shifted tomorrow?

Filed under: Business, Return Path

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Nov 252007

The Facebook Fad

The Facebook Fad

I’m sure someone will shoot me for saying this, but I don’t get Facebook.  I mean, I get it, but I don’t see what all the fuss is about.  I made similar comments before about Gmail (here, here), and people told me I was an idiot at the time.  Three years later, Gmail is certainly a popular webmail service, but it’s hardly changed the world. In fact, it’s a distant fourth behind Yahoo, Microsoft, and AOL.  So I don’t feel so bad about not oohing and ahhing and slobbering all over the place about Facebook.

Facebook reminds me of AOL back in the day.  AOL was the most simple, elegant, general purpose entree for people who wanted to get online and weren’t sure how in the early days of online services, before the Internet came of age.  It was good at packaging up its content and putting everything “in a box.”  It was clean.  It was fun.  People bragged about being an AOL member and talked about their screen name like it was on their birth certificate or something.  And the company capitalized on all the goodwill by becoming a PR machine to perpetuate its membership growth.

Now Facebook — it’s the most simple, elegant, general purpose social networking site here in the early days of social networking.  It’s pretty good about packaging up its applications, and certainly opening up its APIs is a huge benefit that AOL didn’t figure out until it embraced the open web in 1999-2000.  It is pretty good about putting everything in a box for me as a member.  And like AOL, the company is turning into a PR juggernaut and hoping to use it to perpetuate its registration numbers.

But let’s look at the things that caused (IMO) AOL’s downfall (AOL as we knew it) and look at the parallels with Facebook.  AOL quickly became too cluttered.  It’s simple elegance was destroyed by too much stuff jammed into its clean interface.  It couldn’t keep up with best of breed content or even messaging systems inside its walled garden.  Spam crushed its email functionality.  It couldn’t maintain its “all things to all people” infrastructure on the back end.  Ultimately, the open web washed over it.  People who defected were simply having better experiences elsewhere.

The parallels aren’t exact, but there are certainly some strong ones.  Facebook is already too cluttered for me.  Why are people writing on my wall instead of emailing me — all that does is trigger an email from Facebook to me telling me to come generate another page view for them.  Why am I getting invitations to things on Facebook instead of through the much better eVite platform?  The various forms of messaging are disorganized and hard to find. 

Most important, for a social network, it turns out that I don’t actually want my entire universe of friends and contacts to be able to connect with each other through me.  Like George Costanza in Seinfeld, I apparently have a problem with my “worlds colliding.”  I already know of one couple who either hooked up or is heavily flirting by connecting through my Facebook profile, and it’s not one I’m proud to have spawned.  I think I let one of them “be my friend” by mistake in the first place.  And I am a compulsive social networker.  It’s hard to imagine that these principles scale unfettered to the whole universe.

The main thing Facebook has going for it in this comparison is that its open APIs will lead to best of breed development for the platform.  But who cares about Facebook as a platform?  Isn’t the open web (or Open Social) ultimately going to wash over it?  I get that there are cool apps being written for Facebook – but 100% of those applications will be on the open web as well.  It’s certainly possible that Facebook’s marrying of my “social network” with best of breed applications will make it stickier for longer than AOL…but let’s remember that AOL has clung to life as a proprietary service for quite a while on the stickiness of people’s email addresses.  And yet, it is a non-event now as a platform. 

It will be interesting to see how Facebook bobs and weaves over the coming years to avoid what I think of as its inevitable fate.  And yes, I know I’m not 18 and if I were, I’d like Facebook more and spend all day in it.  But that to me reinforces my point even more — this is the same crew who flocked to, and then quickly from, MySpace.  When will they get tired of Facebook, and what’s to prevent them moving onto the next fad?

Filed under: Email

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Jun 292006

Gmail as Competition – Another View?

Gmail as Competition – Another View?

This week, while many from the industry have been in Brussels at the outstanding yet oddly-named MAAWG conference for ISPs and filtering companies, internet marketing pundit Ken Magill had a scary, scary headline related to Google’s insertion of ads in email — Is Gmail Feeding Your Customers to the Competition?

The assertion is that Gmail’s contextual ad program, combined with image blocking in commercial emails, could easily lead to a situation where one of your subscribers doesn’t see your own content but then sees an ad for a competitor in the sidebar.

Scary, I admit, but how much is that really happening?

We analyzed some data from our Postmaster Direct business that is quite revealing, but in a completely counter-intuitive way.

The overall response rate for our mailings sent out in May across all clients, all campaigns, and all ISPs/domains was just under 2%.  The response rate for our mailings in May to Gmail users, on the other hand, was about 3.5%, a whopping 75% BETTER.

Even more stunning is the comparison of response rates in the same time period for subscribers who have joined Postmaster Direct in the last 6 months.  That’s probably a more useful analysis, since the number of Gmail subscribers has grown steadily over time.  On that basis, our overall response rate for May mailings, again across all clients, campaigns, and ISPs/domains, is just over 2.8%.  Howerver, for mailings in May to Gmail users, average response rates were about 5.6%, or 100% BETTER.

I’m not sure what to make of this.  My theory about this at the moment is that Gmail users are generally more sophisticated and therefore are better about keeping their inbox clean and only full of solicited offers, so therefore the user base is more responsive.  But who knows?  What I do make of it is that the issue Ken raises probably isn’t having a big impact on advertisers — or if it is, then Gmail users must be EVEN MORE responsive relative to the rest of the world.

Thanks to Ed Taussig, our director of software development for our list and data group, for this analysis.  Ed is also co-author of our corporate blog’s posting about subject line character length optimization, also a must-read for online marketers if you haven’t seen it.

Filed under: Email

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May 082006

So, Where’d They Go?

So, Where’d They Go?

As we’ve reported a couple times in the past, one of our interesting nuggets at Return Path is a wealth of “ISP switching data” that comes from our very large, active, self-reported Email Change of Address, or ECOA, service (consumer sign-up; client info).

I noted the article floating around last week that AOL lost about 1 million subscribers last quarter, the lion’s share in the U.S., of course.

So, where’d they all go?

Well, according to our ECOA data, which may of course be somewhat skewed by our data sources (but has data from well over 1 million consumers each quarter), AOL users defected as follows:

To Yahoo! — 42.5%

To broadband providers in aggregate (cable, etc.)– 23.5%

To Hotmail/MSN — 19.5%

To Gmail — 2.7%

Thanks to my colleague Iffat Ahmed for help pulling these numbers together.

Filed under: Email

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Apr 212005

Gmail, I Don’t Get It, Part III

Gmail, I Don’t Get It, Part III

This is the third in a somewhat drawn-out series of postings on Gmail featuring some interesting data from Return Path’s Email Change of Address service, which captures self-reported address change data from nearly 1 million consumers every month.

The first posting, back when Gmail launched nearly a year ago, was that I didn’t understand the fuss.  This is even more true now that Yahoo is in a “free storage” war with Google.

The second, in November, had some change of address stats reporting that the numbers of people joining Gmail was tiny relative to other ISPs…and also that Gmail was starting to have people switch away from it, but only at the rate of about 1 for every 3 people joining it.

So we have some new updated data now from the first quarter that are even more interesting.  First, the number of people joining Gmail seems to have flattened out over the last couple of months.  Our metric is about 14,000 in each of the last few months (remember, that’s not the whole number, just 14,000 out of our 1 million).  But the flattening is the highlight.  There’s still the same competitive set — lots of Hotmail churn, some Yahoo, very little from AOL and other providers.

Here’s the kicker, though.  At least within our data set, we actually saw more people LEAVE Gmail than join Gmail in February and March.  That surprised me quite a bit.  One side note, about 9% of the change volume for Gmail is people changing from one Gmail account to another.

Is Gmail in trouble?  I doubt it.  But I do continue to wonder if they’ll ever be able to achieve the market share in email that people predicted at the beginning of Gmail.

Filed under: Email

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Nov 092004

Gmail – I Don’t Get It, Part II

Gmail – I Don’t Get It, Part II

Back in June, I blogged about Google’s new Gmail service, how I didn’t understand the fuss, and how its features would ultimately be replicated and true usership stalled at a couple million.  I stand by those assertions (just look at what Yahoo, Hotmail, and Lookout have done to the landscape since then), but my company Return Path published some data today that’s interesting on this topic.

We run the largest Email Forwarding and Email Change of Address service around, so our data on email switching is pretty solid — we’ve had about 16 million consumers register a change of email with us in total, and about 25,000 new ones come in every single day to report a new ISP.  So our numbers are probably pretty good relative to each other (ISP to ISP or month to month at the same ISP), but they’re certainly not meant to be correct on an absolute basis.

– In July, we saw 375 people join Gmail, in August, 802, and in September, 2,396.  To put these numbers in context, we see 50,000-100,000 new users every month at Hotmail  and Yahoo, and even 5,000-15,000 new users every month at smaller ISPs like AOL, Earthlink, Comcast, and Roadrunner.  These numbers are obviously on the rise, but they’re still pretty small.  In all fairness, though, G-mail is still invitation-only, at least in theory.

– Gmail is mainly stealing share from Hotmail and Yahoo, twice as rapidly from Hotmail as from Yahoo — and twice as rapidly from Yahoo as from AOL.

Read the full article in eMarketer here.

After I saw the article this morning, I asked my colleagues Jack Sinclair and Jennifer Wilson to tell me how many people we saw leaving Gmail every month, an interesting metric to offset the one most people are interested in covering.  The answer at this point is also revealing.  While we recorded 2,396 new Gmail users in September, we also recorded 741 people leaving Gmail in the same month.   That’s a sign to me that a lot of people are trying it out to see what the buzz is all about, but many are quickly switching back after a little experimentation.

And yes, we also took a look at how many people are leaving Yahoo, Hotmail, and AOL every month relative to the number of people joining those services.  Hotmail and Yahoo do a lot of treading water (lots of people leaving, lots of people joining), but let’s just say I wouldn’t want to be the guy in charge of AOL subscriptions these days.

Jun 112004

Gmail – I Don’t Get It

I honestly don’t get all the buzz about Gmail, Google’s new email service. I took a look at it today to see what the the big deal was.

It’s got a few features which are marginally better than other webmail services, but not too many and not massively better. The free storage is not a big issue for most users, although it may cause a few power users to switch over. The most interesting feature in my mind is the ability to use Google Search on your own email file, which is very useful.

All in all, it’s a good product, but all these people talking about how 30mm people are going to switch over to it must be seeing something I don’t. My prediction (and I’ll happily and publicly acknowledge defeat if I am misreading this) is that they will get a few million new users initially, many for a second or third address as opposed to their primary address, and that many of them won’t stick with it to become active users over a longer period of time. After that, they’ll grow at the same rate, with the same type of characteristics, as Yahoo, Hotmail, and other webmail providers.

Email and email addresses, unlike search engines, are pretty sticky things.

Filed under: Email

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