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 182007

In Search of Automated Relevance

In Search of Automated Relevance

A bunch of us had a free form meeting last week that started out as an Email Summit focused on protocols and ended up, as Brad put it, with us rolling around in the mud of a much broader and amorphous Messaging Summit.  The participants (and some of their posts on the subject) in addition to me were Fred Wilson (pre, post), Brad FeldPhil Hollows, Tom Evslin (pre, post), and Jeff Pulver (pre, post).  And the discussion to some extent was inspired by and commented on Saul Hansell’s article in the New York Times about “Inbox 2.0” and how Yahoo, Google, and others are trying to make email a more relevant application in today’s world; and Chad Lorenz’s article in Slate called “The Death of Email” (this must be the 923rd article with that headline in the last 36 months) which talks about how email is transitioning to a key part of the online communications mix instead of the epicenter of online communications.

Ok, phew, that’s all the background. 

With everyone else’s commentary on this subject already logged, most of which I agree with, I’ll add a different $0.02.  The buzzword of the day in email marketing is “relevance.”  So why can’t anyone figure out how to make an email client, or any messaging platform for that matter, that starts with that as the premise, even for 1:1 communications?  I think about messaging relevance from two perspectives:  the content, and the channel.

  In terms of the content of a message, I think of relevance as the combination of Relationship and Context.  The relationship is all about my connection to you.  Are you a friend, a friend of a friend, or someone I don’t know that’s trying to burrow your way onto my agenda for the day?  Are you a business that I know and trust, are you a carefully screened and targeted offer coming from an affiliate of a business I trust, or are you a spammer? 

But as important as the relationship is to the relevance of your message to me, the context is equally important.  Let’s take Brad as an example.  I know him in two distinct contexts:  as one of my venture investors, and as an occasional running partner.  A message from Brad (a trusted relationship) means very different things to me depending on its context.  One might be much more relevant than the other at any moment in my life.

Channel.  The channel through which I send or receive a message has an increasing amount to do with relevance as well.  As with content, I think of channel relevance as the combination of two things –  device, and technology.  For me, the device is limited to three things, two with heavy overlap.  The first is a fixed phone line – work or home (I still think cell service in this country leaves a lot to be desired).  The second is a mobile device, which could mean voice but could also mean data.  The third is a computer, whether desktop or laptop.  In terms of technology, the list is growing by the day.  Voice call, email, IM, Skype, text message, social network messaging, and on and on.

So what  do I mean about channel relevance?  Sometimes, I want to send a message by email from my smartphone.  Sometimes I want to send a text message.  Sometimes I want to make a phone call or just leave a voicemail.  Sometimes I even want to blog or Twitter.  I have yet to desire to send a message in Facebook, but I do sometimes via LinkedIn, so I’m sure I’ll get there.  Same goes for the receiving side.  Sometimes I want to read an email on my handheld.  Sometimes a text message does the job, etc.  Which channel and device I am interested in depends to some extent on the content of the message, per above, but sometimes it depends on what I’m doing and where I am.

So what?  Starting to feel complex?  It should be.  It is.  We all adjusted nicely when we added email to our lives 10 years ago.  It added some communication overhead, but it took the place of some long form paper letters and some phone calls as well.  Now that we seem to be adding new messaging channels every couple weeks, it’s becoming increasingly difficult to get the relevance right.  Overlaying Content (Relationship and Context) with Channel (Device and Technology) creates a matrix that’s very difficult to navigate.

How do we get to a better place?  Technology has to step in and save the day here.  One of the big conclusions from our meeting was that no users care about or even know about the protocol – they just care about the client they interact with.  Where’s the ultra flexible client that allows me to combine all these different channels, on different devices?  Not a one-size-fits-all unified messaging service, but something that I can direct as I see fit?  There are glimmers of hope out there – Gmail integrating IM and email…Simulscribe letting me read my voicemail as an email…Twitter allowing me to input via email, SMS, or web…even good old eFax emailing me a fax – but these just deal with two or three cells in an n-dimensional matrix.

As our CTO Andy Sautins says, software can do anything if it’s designed thoughtfully and if you have enough talent and time to write and test it.  So I believe this “messaging client panacea” could exist if someone put his or her mind to it.  One of the big questions I have about this software is whether or not relevance can be automated, to borrow a phrase from Stephanie Miller, our head of consulting.  Sure, there is a ton of data to mine – but is there ever enough?  Can a piece of software figure out on its own that I want to get a message from Brad about “running” (whatever channel it comes in on) as a text message on my smartphone if we’re talking about running together the next day, but otherwise as an RSS feed in the same folder as the posts from his running blog, but a voicemail from Brad about “running the company” (again, regardless of how he sends it) as an email automatically sorted to the top of my inbox?  Or do I have to undertake an unmanageable amount of preference setting to get the software to behave the way I want it to behave?  And oh by the way, should Brad have any say over how I receive the message, or do I have all the control?  And does the latter question depend on whether Brad is a person or a company?

What does this mean for marketers?  That’s the $64,000 question.  I’m not sure if truly Automated Relevance is even an option today, but marketers can do their best to optimize all four components of my relevance equation:  content via relationship and context, and channel via device and technology.  A cocktail of permission, deep behavioral analysis, segmentation, smart targeting, and a simple but robust preference center probably gets you close enough.  Better software that works across channels with built-in analytics – and a properly sized and whip smart marketing team – should get you the rest of the way there.  But technology and practices are both a ways off from truly automated relevance today.

I hope this hasn’t been too much rolling around in the mud for you.  All thoughts and comments (into my fancy new commenting system, Intense Debate) are welcome!

Filed under: Email, Technology

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Jul 042007

The Acquisition (a parody of a parody)

The Acquisition (a parody of a parody)

I just spent a great 4th of July with my brother Michael, one of the finer and funnier people I know.  Among other things, we treated ourselves to about the 18th viewing of Mel Brooks’ History of the World, Part I on DVD.

One of our favorite moments in the movie is the Broadway musical version of “The Inquisition” (lyrics, download MP3).  Since both of us work in the online marketing industry (Michael is a marketing manager at search agency Did-It), Michael came up with the brilliant idea of a parody of a parody…so here goes, all in good fun.

The acquisition, what a show
The acquisition, here we go
We’re on a mission, have you heard the news?

The acquisition, serve those ads
The acquisition, we’re so glad
We’ll make an offer, that they can’t refuse

Google, don’t be boring
WPP, don’t feel set
Yahoo seems to be ignoring:
It’s better to lose your market cap than your market!

Hey, Steven Ballmer, what do you say?
“I just got back from Avenue A”
“Avenue A?  What’s Avenue A?”
“It’s what I ought not have bought, but I bought anyway!”

The acquisition, what a show
The acquisition, here we go
We know you’re wishin’ that we’d go away.
But the acquisition’s here and it’s here to stay!

Happy 4th, everyone!

Feb 152007

Stuck in the Middle

Stuck in the Middle

I was trying to explain the current state of Return Path’ Postmaster Network online advertising business (email lists, lead gen, RSS) to someone from outside the industry the other day, when it occurred to me that many online marketing vehicles are still split between running on the offline paradigm and running on the online paradigm.  I don’t have a lot of detailed stats on all of this at my fingertips, but bear with my observations.

To me, the offline paradigm has always been characterized by big agency buys, driven by thematic/brand oriented creative campaigns that cost a fortune to develop.  This is even true to a large extent for direct marketing, although the mechanics are different.  It’s relied on lots of third party intermediaries to connect the audience (or more specifically, estimates of the audience) to the marketer.  It has paid all of these people on a percentage of the media spend, which is so massive that a 10% override on it can keep you in business and be dissociated from effort expended or value created.  Many of the original forms of online media — banners, lists — still operate partially in this world.  This part of the online ad market is growing, but more slowly than others.

Contrast this with the online paradigm that has been characterized by automated buying, rapid testing cycles, small up-front dollar outlays, and an “always on” marketing that’s not necessarily tied to a big campaign.  It’s been much more marketplace, aggregator, and bid-driven and frequently has marketers connecting straight to their audience, or at least to the media vehicle that their audience is on.  Fees are success-based or labor-based.  This is the part of the market that’s exploding in popularity.

So why are some parts of online marketing stuck in the middle today?  It seems to me that the things that are related to the offline paradigm in some way are still living in that paradigm, while things that are truly new in the last 5+ years are freed from those shackles.  So some things, like email list rental and banner buys, go through an agency or a broker (or sometimes both), because, well, that’s how clients have always rented mailing lists or bought column inches in magazines.  But anyone with a credit card can start bidding for keywords on Google or Yahoo, or post offers to an affiliate network, trying out their own creative and optimizing it within minutes or hours.

The thing I find so interesting about this is that all of these different online marketing tactics, whether old school or new school, are trying to do the same things — generate more sales/leads/customers, and build brand.  But the legacy machinery of old world marketing and advertising still lingers in the background while the new machinery of search and automated marketing/bidding engines are gaining steam.

It will be interesting to see how this all shakes out over time, but I’d be surprised if there’s a lot of the purchasing of high value online real estate that continues to be in the control of old-style agencies and brokers for too much longer.  It’s just getting too easy for marketers to control their own destiny.  What I think is even more fascinating is the possibility that these new technologies and techniques might move upstream to influence how “old media” is bought as well over time, as seen in both Yahoo’s and Google’s recent deals with offline media brokers (and even, one could argue, the YouTube acquisition).  There’s no logical reason why marketers shouldn’t be able to bid on 30-second TV commercials across the major networks and cable stations and not be held to big up-front commitments and markups.  Oh, right, and come back to the network afterwards and ask for a make good if the ad doesn’t drive enough sales on the back-end.

Maybe agencies and brokers will change…maybe some courageous traditional media vehicles will change…or maybe a little of both, but old school online customer acquisition marketing won’t be stuck in the middle forever.  The scale and ROI will guarantee it.

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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Feb 032006

Why Email Stamps Are a Bad Idea

Why Email Stamps Are a Bad Idea

(also posted on the Return Path blog)

Rich Gingras, CEO of Goodmail is an incredibly smart and stand-up professional.  I’ve always liked him personally and had a tremendous amount of respect for him.  However, the introduction of the email stamp model by Goodmail is a radical departure from the current email ecosystem, and while I’m all for change and believe the spam problem is still real, I don’t think stamps are the answer.  Rich has laid out some of his arguments here in the DMNews blog, so I’ll respond to those arguments as well as add some others in this posting.  I will also comment on the DMNews blog site itself, but this posting will be more comprehensive and will include everything that’s in the other posting.

It seems that Goodmail’s main argument in favor of stamps is that whitelists don’t work.  While he clearly does understand ISPs (he used to work at one), he doesn’t seem to understand the world of publishers and marketers.  His solution is fundamentally hostile to the way they do business.  I’m happy to have a constructive debate with him about the relative merits of different approaches to solving the false positive problem for mailers and then let the market be the ultimate judge, as it should be.

First, whitelists are in fact working.  I know — Return Path runs one called Bonded Sender.  We have documented several places that Bonded Senders have a 21% lift on their inbox delivery rates over non-Bonded Senders.  It’s hard to see how that translates into “bad for senders” as Rich asserts.  When the average inbox deliverability rate is in the 70s, and a whitelist — or, by the way, organic improvements to reputation — can move the needle up to the 90s, isn’t that good?

Second, why, as Goodmail asserts, should marketers pay ISPs for spam-fighting costs?  Consumers pay for the email boxes with dollars (at AOL) or with ads (at Google/Yahoo/Hotmail).  Good marketers have permission to mail their customers.  Why should they have to pay the freight to keep the bad guys away?  And for that matter, why is the cost “necessary?”  What about those who can’t afford it?  We’ve always allowed non-profits and educational institutions to use Bonded Sender at no cost.  But beyond that, one thing that’s really problematic for mailers about the Goodmail stamp model is that different for-profit mailers have radically different costs and values per email they send.

For example, maybe a retailer generates an average of $0.10 per email based on sales and proit.  So the economics of a $0.003 Goodmail stamp would work.  However, they’re only paying $0.001 to deliver that email, and now Goodmail is asserting that they “only” need to pay $0.003 for the stamp.  But what about publishers who only generate a token amount per individual email to someone who receives a daily newsletter based on serving a single ad banner?  What’s their value per email?  Probably closer to $0.005 at most.  Stamps sound like they’re going to cost $0.003.  It’s hard to see how that model will work for content delivery — and content delivery is one of the best and highest uses of permission-based email.

Next, Rich’s assertion that IP-based whitelists are bad for ISPs and consumers because IP-based solutions have inherent technology flaws that allow senders to behave badly doesn’t make sense.  A cryptographically based solution is certainly more sophisticated technology — I’ve never doubted that.

In terms of the practical application, though, I’m not sure there’s a huge difference.  Either type of system (IP or crypto) can be breached, either one is trackable, and either one can shut a mailer out of the system immediately — the only difference is that one form of breach would be trackable at the individual email level and the other would only be trackable in terms of the pipeline or IP.  I’m not sure either one is more likely to be breached than the other — a malicious or errant spammy email can either be digitally signed or not, and an IP address can’t be hijacked or spoofed much like a digital signature can’t be spoofed.

It’s a little bit like saying your house in the suburbs is more secure with a moat and barbed wire fence around it than with locks on the doors and an alarm system.  It’s an accurate statement, but who cares?

I’m not saying that Return Path will never consider cryptographic-based solutions.  We absolutely will consider them, and there are some things around Domain Keys (DKIM) that are particularly appealing as a broad-based standard.  But the notion that ONLY a cryptographic solution works is silly, and the development of a proprietary technology for authentication and crypotgraphy when the rest of the world is trying desparately to standardize around open source solutions like DKIM is an understandable business strategy, but disappointing to everyone else who is trying to cooperate on standards for the good of the industry.  I won’t even get into the costs and time and difficulty that mailers and ISPs alike will have to incur to implement the Goodmail stamp system, which are real.  Now mailers are being told they need to implement Sender ID or SPF as an IP-based authentication protocol — and DKIM as a crypto-based protocol — and also Goodmail as a different, competing crypto-based protocol.  Oy vey!

Email stamps also do feel like they put the world on a slippery slope towards paid spam — towards saying that money matters more than reputation.  I’m very pleased to hear Goodmail clarify in the last couple of days that they are now considering implementing reputation standards around who qualifies for certified mail as well, since that wasn’t their original model.  That bodes well for their program and certainly removes the appearance of being a paid spam model.  However, I have heard some of the proposed standards that Goodmail is planning on using in industry groups, and the standards seem to be much looser than AOL’s current standards, which, if true, is incredibly disappointing to say the least.

Jupiter analyst David Daniels also makes a good point, which is that stamps do cost money, and money on the line will force mailers to be more cautious about “overmailing” their consumers.  But that brings me to my final point about organic deliverability.  The mailers who have the best reputations get delivered through most filtering systems.  Reputations are based largely on consumer complaints and unknown user rates.  So the mailers who do the best job of keeping their lists clean (not overmailing) and only sending out relevant, requested mail (not overmailing) are the ones that will naturally rise to the top in the world of organic deliverability.  The stamp model can claim one more forcing function here, but it’s only an incremental step beyond the forcing function of “fear of being filtered” and not worth the difficulty of adopting it, or the costs, or the risks associated with it.

Rich, I hope to continue to dialog with you, and as noted in my prior posting, I think separating the issues here is healthy.

Jan 252006

Buying Back Your Own Left Leg

Buying Back Your Own Left Leg

There has been much written about the spectacular sale of Pixar to Disney for $7.4 billion this week.  The fact that Steve Jobs is now Disney’s largest individual shareholder is amazing news on many levels.  Fred has a great posting on this today from the investor perspective.

Another angle that I find interesting about this transaction is that it reminds me to some extent of Yahoo’s purchase of Overture a couple years back.  Yahoo OWNED the search business.  For years.  Invented it.  Synonymous with it.  Then they let others lap them they became more of a diversified online media company, and voila!  Others focused, innovated, and created a massive business in paid search.  Yahoo lost its own leg and had to pay $1 billion or so to buy it back.

The same could be said of Disney.  There was no other animated film company in America of note for DECADES.  Disney was it.  The mouse ruled the house.  Then others innovated, figured out how to sprinkle their own version of pixie dust on things, while Disney became a global multi-dimensional media and entertainment conglomerate, and poof!  $7.4 billion later, they had to buy their own franchise back to reclaim the animation throne.

Maybe I’m missing something here, but these stories tell me that diversification may be a wonderful thing, but businesses should never forget to innovate at their core and think like insurgents, not like unassailable market leaders.

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.

Oct 102004

It’s Up There With Air and Water Now

It’s Up There With Air and Water Now

A study on “web withdrawl” conducted by Yahoo and OMD confirmed that most people are now so accustomed to using the web that they have problems when internet access is taken away from them. Nothing too earthshattering, but it’s an interesting quick read.

My favorite part: one person reported that he even missed getting spam. Now THAT’S a sign that it’s time to get outside and enjoy some fresh air.

Filed under: Email

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