B2B / VRM / CRM 2.0

Post by Jeremiah Owyang on The Future of Twitter: Social CRM (abridged):

Manually tracking a large brand within Twitter isn’t scalable

It’s important to first realize that managing a large brand on Twitter isn’t scalable, with hundreds –maybe thousands of tweets about a marketplace a day, individuals will have a very difficult time managing, Brian Solis has some relevant stats on growth. The next challenge? determining who these people are, and if they are a potential customer is important, who are these people, are they important, where do they live? Lastly, responding in near real time is going to be key –as some users may ask their peers for product recommendations during point of sale, right in the store.

Twitter has two of the three key features of a CRM system

First, let’s break down why Twitter is going to be a Social CRM, let’s start by analyzing what entails Customer Relationship Management:

1) Customers: Yes, they got that. More than that, they have prospects, which to some marketers is far more valuable. However the challenge is mapping which Twitter ID is which customer –many don’t use their real names.

2) Relationships: Got that too. Now I realize that the intended definitions of CRM meant the relationships between customers and employees of a brand, but now you can see how people in Twitter are connecting to each other, and those that follow a brand, their indicating affinity towards them. The interesting thing is they don’t just offer affinity towards your brand, but also competitors, which helps in segmenting your market, and can help with poaching.

3) Management: Here lies the opportunity Twitter has no management tools to support this, as a result, their data is being whisked away in the API and being aggregated by two types of companies.

Jeremiah's argument is that this is a good opportunity for CRM companies to import twitter data into their listening platforms, and then offer simple workflow and task management (no doubt this article is written to tie in to the Salesforce.com announcement of Twitter support). He suggest they go down Facebook's route:

Twitter can go further than this, they could be their own CRM system, by perhaps offering their own analytics system to brands, that will help them to track and manage the conversations within the 140 sphere. This has tremendous opportunities for Twitter should they create their own brand management system that they can resell to the world’s companies to monitor, alert, track, prioritize, triage, assign, followup, and report on the interactions with brands.

I'm not sure this is a Good Plan, as Facebook has been involved in some pretty noisy episodes regarding doing various flavours of this, as has Phorm, and even Do-No-Evil Google is increasingly distrusted for just this sort of thing.

I wonder if a better play might be for Twitter to reverse this and build tools to let users manage their own data, a la VRM principles. In many ways Twitter facilitates this as:

- Asymmetric following goes both ways, users can as easily follow brands they want

- The 140 character limit is a great tool for semantic ontologies - initiating easily understood coded convos in this solution space would be relatively easy and lightweight

- you could put in lightweight clientside apps to manage customer / server interactions automatically

- Its realtime, so when required one can step up to conversation in an instant

- It should be possible to complete a transaction (and take a %) via the platform or a proxy service

VRM is also a less intrusive and potentially a more valuable system as:

- in this case there are a variety of business models (from producer pays to consumer pays, with various inbetweens)

- the "endgame" for VRM is to reduce the spend on unnecessary advertising and stock to mitigate demand uncertainty. This requires trust built over many lightweight "moments" of truth.

Realtime Unified Comms is a nice platform to run these sort of services off.

Not so long after a piece of research showing that display Ads are more effective than previously thought, comes this one from Barron's noting at display ads may be less so:

In a fascinating series of reports today, new Canaccord Adams Internet analyst Jeff Rath takes a close look at the Internet advertising sector, and concludes that the CPC model is more vulnerable than some people might believe. Rath launched coverage today on 7 Internet stocks today, starting 5 of them with Neutral ratings - Google (GOOG), IAC (IACI), Marchex (MCHX), Local.com (LOCM) and Answers Corp. (ANSW). He has a Sell rating on ValueClick (VCLK), and his sole Buy rating on BankRate (RATE).

For Google, he has a price target of $300, below the current level.

“We believe the tide on performance-based advertising as a counter-cyclical ad format better able to weather a downturn has shifted, and we expect to see CPC pricing and the density/volume of clicks to decline,” he writes. “Our checks support the thesis that while Google continues to have various levers at its disposal to meet estimates, revenue estimates estimates could be at risk with search representing the company’s primary source of revenue.”

He goes on to assert that Google could be reaching “the inflection point of its product cycle,” and that “margin contraction could be significant.” He writes that Google “has tremendous alternative product opportunities in its pipeline that could reinvigorate the product cycle,” but that he does not expect any of those to contribute materially in the near term.

Here are few of Rath’s other observations about the Internet ad environment:

- He sees CPM rates dropping “precipitously” in Q1, with prices potentially falling by 15%-20%, “as checks indicate budget cuts around branding campaigns are the first to be pulled.” (That would be bad for Yahoo, among others.)
- He expects CPC rates to be weaker than expected; he thinks CPC growth could turn negative over the next several quarters due to weaker demand; he says pricing could come down due to “weak bid density on keywords.”
- December quarter and 2009 consensus estimates “are potentially at risk due to recent foreign exchange volatility that has seen the U.S. dollar strengthen materially.”
- He thinks 2009 EPS for the sector could show modest to zero EPS growth.
- Another risk, he says, is reduced interest income, with cash balances yielding next to nothing.
- The ad network space is over-crowded, with more than 300 players. He expects them to see “severe competitive pressures,” and notes that increased integration of DoubleClick by Google and aQuantive by Microsoft could place further pressure on the independent networks and lead to “aggressive consolidation.” (Ergo, the Sell rating on VCLK.)
- He expects TAC, traffic acquisition costs, to trend higher due to competitive pressures from competing search engines.

The only thing Google makes margin from at present is search Ads, so if margins reduce on these then this will put a lot more pressure on their other operations. Early signposts will be closure of more marginal services, and effors to reduce YouTube losses. Funnily enough, thats what they've been up to recently........

On Monday the London VRM (Vendor Relationship Management) Hub put together a first half day workshop, looking mainly at User & Supplier issues (though of course it rapidly broadened into all sorts of other topics). I couldn't make it till later, but reading the blogs it seems a good time was had by all. For my bit in the Great VRM Endeavour, I've been looking at the economics and business models for VRM, and on Monday a number of the key issues it faces emerged. I've tried to summarise the key ones below:

Firstly, the economics of Conversational Markets



Doc Searls, one of the Authors of the Cluetrain manifesto, is the spiritual father of VRM, and one of the key tenets of Cluetrain is all markets are conversations. To a large extent this has been taken on board as a VRM core tenet, and is one of the features that gives it it's unique flavour.

However, the immediate comeback from commercially experienced people is that there is clearly a whole raft of relationships where the transaction costs are high, and / or the surplus value in the product is so low (see diagram above) that any conversation more than "Visa - that will do nicely" is impossible to cost justify. What we will therefore need to show going forward is that VRM can push these barriers back, in 2 ways:

- that VRM allows a sustained conversation such that the cost over a series of transactions are bearable

- that VRM can facilitate additional types of value via conversation (reduced churn, say)

Secondly, there is a debate about whether VRM can be executed by the users alone, or whether it needs to tempt suppliers to collaborate (ie either the gross value of serving all those VRM'ers is sufficienly alluring, vs. There has to be a giveaway to make suppliers use it). Any supplier will have to invest in new equipment /processes to serve VRM customers, so will be looking at +ve ROI. To answer this issue I looked at where the benefits are to the supplier, and they lie in 3 key areas:

Firstly, revenue increase:

- Increased Sales Volumes - if there are enough VRM'ers, then catering to them increases sales volume vs competitors that don't

- Increased Average Revenue per Customer - in theory having a deeper relationship should allow higher prices for higher service values, and higher trust can increase on-selling and cross-selling

Secondly, OPEX reduction:

- Relationships should also transalte into loner customer lifecycle / reduced churn

- Reduced OPEX - advertising becomes more predictable so teh 50% that doesn't work can be reduced, and better customer knowledge allows reductions in production and distribution waste, since more certainty allows better Lean Operation techniques to be used

Thirdly, CAPEX reductions:

- more productive use of existing assets via more efficient understanding of demand

- reduction in future CAPEX via better use of existing services and/or better targeting of future investment

While we can see that VRM can potentially address all these areas - even a small % improvement in each area yields huge increase in value - we are still very much in the "prove it" phase. We need some pilots!

Which brings me on to the third model issue - STL's Martin Geddes was there on Monday (see Doc Searls's summary of some of Martin's thinking over here), we have worked together on 2 sided business models elsewhere in the online service space. Martin's view is that VRM is potentially likely to need a 2 sided model (ie a transacting party in the middle), whereas others in the VRM space feel it is far simpler buyer/supplier relationship.

I suspect there will need to be space for both approaches (and others), in the early days at any rate. There will be a huge wave of experimentation across all the VRM axes in the early days, and we need to run a broad ecosystem so that darwinian evolution can occur. In fact, I chatted about this with Doc Searls the next day, he noted that in his view the "best of breed" solutions to VRM could easily come from a direction nobody has yet imagined, as it does so often in new emerging areas.

An excellent day, with excellent commentary, conversation and creative thoughts - as someone said, this is the coffee houses of London all over again. Kudos to Adriana Lukas for driving it....

On November the 3rd 2008, London's VRM scene is putting up the first London VRM Conference starting at 2pm and on to drinks and discussion. Details are on the VRM Hub site.

For those not aware, VRM stands for Vendor Relationship Management - the ‘flipside’ of Customer Relationship Management. Customers and vendors are in a locked see-saw with one side hugely outweighing the other. Like with a real world see-saw in such position, the fun is spoiled for both. VRM supports creation of tools that equip the individual and minimize the control one party has over another in a relationship. It aims to create a more efficient and balanced relationship between business and their customers, markets and companies, demand and supply.

Adriana Lukas, chief organiser, has deliberately made it Users and Suppliers only, talking about the practicalities of VRM, so no venal consultancies, experts etc will be on stage This should give some fantastic insight to the real world issues VRM needs to address to succeed.

It's FREE as well!

So don't delay, register here today!

Article in Read/Write Web about an interview with (Sir) Tim Berners Lee (points to a more complete transcript on ZD Net as well):

“There’s an awful lot of data out there. And I think, one of the huge misunderstandings about the Semantic Web is, ‘oh, the Semantic Web is going to involve us all going to our HTML pages and marking them up to put semantics in them.’ Now, there’s an important thread there, but to my mind, it’s actually a very minor part of it. Because I’m not going to hold my breath while other people put semantics in by hand… So, where is the data going to come from? It’s already there. It’s in databases…”

Our hypothesis is that the Semantic Web will be initially implemented in verticals, where the the total number of terms used is smaller and thus manageable (See earlier posts here and here), and I think this is also an implicit recognition of that, because most databases are in verticals. Some verticals are far more advanced in using common terms (eg EDI) to communicate than others

In fact I'd go so far as to say the Semantic Web is here, now - just very unevenly distributed

In addition, there was an allusion to the area we think will most drive the semantic web, ie the needs of machines on the 'net - they are just not smart enough to understand context, and thus will need a simple taxonomy (an Esperanto for sensors - the Pidgin protocols?) to function.

Incidentally, this could also have huge benefits for people, eg making it easy to have one identity and not have to sign in multiple times with names, addresses etc onto multiple systems.

Update - Paul Miller has a vodcast interview on the subject over on Nodalities (my RSS reader too is unevenly ditributed )

Its Friday night, and the weekend approaches - so what does a gentleman do in London Town? Thats right, he goes across town in the rain and dark, and approaches a dark dive deep in a basement - but not to partake of the sins of the flesh. No, dear reader, one goes to talk about Vendor Relationship Management (VRM) with other plotters of the Customer Revolution, including one Doc Searls, who having written part of the Cluetrain Manifesto was here in London to spread sedition this Guy Fawkes week.

(Aside to clarify - VRM as used here is the concept of turning CRM on its head, not to be confused with the ERP based module attached to Purchasing Management)

We (along with many others I suspect) have been working on some aspects of what is emerging as the "VRM thang" for several years, so it was very interesting to meet fellow plotters from various walks of life and compare notes, as it has become apparent to us over the last few months that the full articulation of the VRM concept taps into a number of parallel universes (Customer aggregation, C2B thinking etc, Social Networking), needs to understand complex Transcation Theory, the Semantic Web - or at least M2M comms - and has to deal with the emerging Digital Trinity (Privacy, Identity, Security). Plus there is enough cryptography and smart database design to keep even the Broadsight geeks happy (Quadruple-play real time OSS systems being pretty geeky, let me tell you...)

And be simple and instinctive to use, of course....

The net present value of the customers' future spend is a large number, and to return proper value to the user it has to be under the user's control. And right now nearly all the commercial interest is in building tools to disenfranchise the users, not empower them. (Despite the official blurb, many of the Web 2.0 sites are designed to monetise your work and content and hand you back very little value in return).

So, this Guy Fawkes week made it a very timely soiree - as you may have observed reading this blog, we are more than a bit concerned with the more Orwellian aspects of what players like Facebook and Google can do with data, and we feel that the customer needs a more coherent form of defence. If we don't hang out together, we will most certainly be hung out to dry separately.

Thanks also to Adriana Lukas for organising the soiree, the pizza, and the beers. If Guy Fawkes had had Pizza, who knows what turn history may have taken.

....I like this one by Lynette Webb..an interactive chart that could be updateable like a wiki. (If you follow the link to the original you will see that you can roll over the datapoints, and Lynette asks for people to submit data as it comes in).

It also plots Flickr's hockey-stick in mirrorvision...

For those who are Powerpoint-weary yet get fed up with the vacuity of the "loads of media and fanny all content" approach, this is quite a useful take on gettinng data across.

There is a fascinating piece in this week's Economist about how power in software development is shifting from business based apps to consumer based apps, and how businesses are now adopting consumer apps in and around the business IT function.

For those old enough to remember, the last time this happened at such a structural level was the invasion of the PC into corporate worlds in the late 1980s imho.

This is going to be a Big Disruption I think....Salesforce.com is just the start.

Carpe Diem......Sam Sethi and Mike Butcher have now set up on their own now, at Vecosys (that was Sam's Sethis old website, I don't know if they will keep that as the brand)

No news of any TechCrunch plans to re-launch in UK as of yet.

Postscript...Mike Arrington has written an astoundingly detailed post of the goings on here but no news of plans for the UK

Was reading about the Skype boys' new project, The Venice Project. I love the blurb:

We're working on a project that combines the best things about television with the social power of the internet - a project that gives viewers, advertisers and content owners more choice, control and creativity than ever before.

Can't resist this - it reminded me so much of the stuff going on in the South Sea Bubble in the early 18th century....Among the many companies, more or less legitimate, to go public in 1720 was – famously – one that advertised itself as

"a company for carrying out an undertaking of great advantage, but nobody to know what it is".

No beta in those days, just hand over the money....

Seriously though, leaving The Original Bubble aside, it started me thinking about what a proper VideoSkype could be. I have VoIP and Webcam from Skype (and MSN.....come back Unified Messaging), but its pretty much for social comms, not professional so you have to integrate a whole lot of things together to videoconference and videowork with colleagues. So at Broadsight we're fairly tech savvy, we can do all that - but its takes time and effort and hassle. The power of a totally integrated, semi pro VideoWorking Webservice would be pretty useful for Small Businesses and Corporates alike.

There has been lots of work over the years on the Integrated Workstation of the Future, but it seems to me that using a combo of the consumer technology around today, Web2.0 principles and a big broadband pipe is a clear way to go.

And if investment is basically just a Webcam plus the service and the gear for MyPCTV, it will come in an order of magnitude lower in cost than most VideoCon systems today.

Just wifi in the mobile phone as well........

The issue initially will be QoS, but I think over the next few years this will largely go away as:

(i) Technology for video transfer over the 'Net improves
(ii) Corporates will buy the most groomed networks
(iii) Cometh the need....the darknet will be lit up

This feels to me like VoIP technology c 1999