The Evolution of Twitter’s Business Model

For years Twitter has boasted its uniqueness as a non-advertising site. As a pioneer social network with soaring popularity, a proper business model is still unclear for either the founder or the e-commercial specialists. However, they have to find the way of keeping steady income to cope with its innovation and expansion costs.

Advertising? Subscribing? These two words are refused by Twitter. That’s why it has gained overwhelming popularity and most trust by customers who are willing to express more of their thoughts and interest frequently on the site. But sadly, as discussed by emarketing experts and journalists, the new strategy delivered by the founders still couldn’t avoid these two golden principles to make money. What they try to achieve is to make these methods less intrusive and more resilient. That is to say, to apply advertising and subscribing in a hidden and healthy way. 

Advertising

Similar to google adwords, Twitter chooses to drive traffic to their promoted tweets. When you are seeking particular groups with common interest, the recommended accounts will appear on top of the list. The founder claimed that the promoted tweets will only appear at Twitter’s search engine developed by a third-party applicant, which is said to be even more robust and up-to-date than Google and Bing in some aspects.

Also, in order to put users at the first place, Twitter is innovating a measurement tool called ’resonance’, which analyses viewed times and replied frequency of these promoted account, and the number of customers who add it to their favorites. It will choose to continue recommending or stop advertising for the company according to its popularity. The strategy shows signs of democracy and putting users at the heart of the value, while it is still at the risk of putting down the twitter fans who went for its ads-free feature.

Subscription

Twitter keeps the promise of free to its individual users, but turns to cover their investment from business dealers. It has created successful sales platform, official form and in-time service information centre for firms like Dell, which has generated $6.5 million sales in a year on the Twitter presence . Provided with such an ideal, multi-functional and interactive sales environment, few companies could deny to pay certain charge for this brilliant opportunity for business.

Moreover, there are certain premium accounts exclusively for business use. Corporates are willing to pay to verify the authority of their accounts (twitter 101), to establish their formal business platform on twitter, or to claim their unique rights to reach the exact targets in this “real-time social interest graph”[1].

There’s nothing wrong with seeking returns for further development, while on the gradual step forward, the traditional business model such as advertising would inevitably interfere Twitter’s well-established brand image as a least commercial social network.  Also, with more business entering the sites, how to balance between providing demographic information to the corporates and protecting user privacy is another big issue for Twitter. Any improper trying could lead to the devaluated brand equity or less trust among their fans.

 

References: [1] IDG. Twitter gives the lowdown on new business model. 

                        [2] David L. Smith. Twitter’s business Model.

The Teabag Battle

The power of advertising could last for over couples of decades that ‘PG tips’ has rooted into British tea culture just as Coca-cola to carbonates drinks. This case study of branding is quite old but still classical and have profound influences until now.

The idea of using chimps as its “celebrity” came from a copy writer who visited Regent’s Park Zoo and saw a tea party held by the chimpanzees. It received an overwhelming popularity within two years and lifted PG tips to the brand leader. Apart from creativity of the ads,how to keep consistency from the ads, PR campaigns to the brand image turned out to be the major mission of the teabag battle. To keep fashionable and deliver continuous delights to the consumers, the chimps have experienced various events according to the changing of the society and they always spoke the most up-to-date slang.

(The First TV ads of PG Tips)

Well, it’s also a good example on how to measure and distinguish the add-value brought solely by the intangible BRAND. 

1.  Blind test that.

Although consumers claimed that PG tips tasted better, in the blind test of ten labels from big player Typhoon to supermarket own products, the subjects couldn’t tell the difference. A cup of tea is only a cup of tea, maybe they have added too much milk and sugar:p

 2.Demand Elasticity

In the economic analysis chart, the flat curve showed that consumers are less sensitive towards the price change of PG tips.  That is to say, not like the fluctuated demand to other brands, they won’t stop buying or switch to other products even if PG tips has raised its price. PG Tips had of course enjoyed the price premium and also was the price leader in the market.

3. Advertising weight

 Tetly, the other teabag brand was shown to be very vulnerable in loyalty that the demand would easily plunge if they reduce the advertising intensity. In contrast, PG Tips’ brand equity was strong enough to survive a couple of months of no advertising. It kept having a robust performance of about 25% market shares, beating all the rivals with less marketing investment.

4. Qualitative Research in perception of the brand

PG Tips was “loved” by the subjects, and they responded instantly with the slogan in the chimps advertising. Therefore, besides the high brand awareness, consumers had also built a strong and sentiment relationship with the brand, which is admirable for all the advertisers.

In recent years PG tips’  position is challenged by Unilivers’ ‘ignorance’ after acquiring and also by ever-growing substitutes such as coffee and green teas. It is still a mystery that how far the brand could go, while the fact that the chimps has brought PG tips half a century of leader in the UK tea market is already a miracle.

Buzz Advocacy for Movies

Have you ever been influenced by the online buzz?

Recently I read a report of buzz research by WaveMetrix, elaborating how online advocacy impact the sales of the movies. The analysis is based on multi-dimensions, identifying various attributes including film, filmmaker, cast, plot and their different level of influence on box offices. It correlates the movie sales with every variables such as positive/negative; implicit/explicit recommendations and also investigates the sentimental tendencies.

The highlight would be the case studies. For “Inglorious Basterds”, it identifies the director power of Qunteen Tarantino, the other key attributes from Buzz clouds and compared its importance with that of the overall conclusion; whereas in the movie “Up”, the touching plot has won the top attributes in the advocacy.

A very systematic report based on rigorous data. It points out that 37% of film revenues could attributes to online recommendations. Moreover, as the impact of the buzz is immediate and will soon fade away, constant advocacy would be a reasonable strategy for online movie marketing.

Well, in my master dissertation talking about the cross-cultural star effect on audience preference, there was countless of variables that would influence a movies’ box office. The extensive findings by both academic and movie executives have tried every method to compare different drivers and evaluate their importance in a film’s success – star power (actors/directors), genre types, critic reviews, investment, distribution strategies, etc……

Although the research has some valuable discoveries on its own research area, the limited matrix only focusing on the online advocacy as a corner of the overall critic reviews presents a single-equation type of analysis which is far from comprehensiveness. Online Buzz does have its impact, while how strong it is and whether it’s the most important driver remains unclear. For example, I choose to watch ‘Inglorious Basterds only because I’m a fan of Brad Pitt, I decided to see “Up” simply to enjoy the marvelous 3D effect when I saw its trailer before the my 3D film in the cinema.

On the other hand, although it takes audience sentiment as a key variable, there’s no adequate data on how these sentiments have led to the actual viewing decisions. For example, I might have positive feeling about ‘Inglorious Basterds’ but I won’t necessarily go to the cinema to ‘purchase’ the movie. In this sense, the analysis in this report about the sales and the sentiments are rather two separate conclusions without correlation.

References: Online Buzz Research. www.wavemetrix.com

The Art of Subscription Marketing

How does a brand keep contact with you? Do you have regular newsletters of the new discounted products from, say, bodyshop? Are you informed of new messages and event from facebook through your email adress?

All these convenient service around you are kinds of subscription marketing. Sometimes you might even be willing to click on the RSS logo to actively subscribe some good articles on mobile phone.  Brands try to be good friends with you, and subscription marketing is exactly a very gentle and intimate way to build your long term relationships.

It is common as a method of direct email marketing, copywriting, a growing strategy in online publishing.

Permission marketing

Suggest visitors to tick the box for regular newsletters and always includes the option of unsubscribing at the end of the emails. It’s another way to show the politeness. After all, they can’t impose you to be their friend.

Freebie Marketing

Provide most content for free to attract enough visitors as “free” or “discount” are the most attractive word for people to have a look ‘inside’. Once obssessed with busy traffic, the websites will have more chance to find the potential customers who are willing to pay for their premium contents.

Invite-Only Shopping Clubs

These exclusive online stores was advocated by vente-privee.com from France that mainly trades large-discounted luxury goods on the site, which enjoys over 1 billion revenue. The business model is to provide limited large-discount sales to its invite only members.  Now we can see vivid growing sites such as ideeli.com, guilt.com, ruelala.com[1]. 

(Resource: quantcast.com) 

It is the similar strategy  to “long tail”  as I mentioned in the blog before, they are more focused on the very niche market, providing small quantity to the more detailed segments. This strategy enables them to make the most of their investments and deliver the best value to the right customers. 

Why Invite-only Makes You Tick? 

Well, it reminds me of the word “sacred”, which means you put special value on something, for example the ring your Mum gave you, the lucky pen you use in examinations. 

Becoming the member of these sites will to some extent make you feel yourself different and in-group. Isn’t it good to have the privilege in something while others can’t? Also, other than mass social media, it builds close relationship with the members by informing them only what they want. The protection of ‘invite-only’ filters spam advertisements or useless information, which adds to your trust to the brand. It’s more like a friends’ club where you don’t waste time talking rubbish to each other. 

In addition, they are featured by first come first serve,  cooperation with luxury brands for goods up to about 75%, all of which encourage members coming back and enhance the brand loyalty. 

How far can it go? 

Although they limit the customer size in a niche market, once these revenue is steady, what’s the next step? They do have some promotion to publish invitation code on magazines or expand by word of mouth, while compared to the official luxury brand shops their resources are rather limited. On the other side, compared to big trade platforms, their existence could hardly count. In the current environment where service and products actively find potential customers, how to be outstanding by sitting at the corner?

 

 

 

 

 

 

 

 

 

 

Reference: [1] Online Shopping: By Invitation Only

Google Waving the Piece of Pie from China

On March 23th 2010, Google announced officially to close the google.cn in China and reorient the site in google.com.hk. Having been threatening to leave for two months, it was still not able to ‘detour around’ the strict censorship[1].

Google – Failed to compete with Local Players

Entered China in 2000, Google’s market share has shrunk from 1/4 to 14%  in ten years. Its local competitor Baidu, now the No.1 search engine site in China, accounts for about 68% clicks [2]. This result is not surprising as Yahoo has sold its share to Alibaba, MSN Messenger comes No.2 after Tencent QQ, whereas eBay finds no way to catch up with the most popular local trading platform – Taobao [1].

Obviously, Chinese goverment prefer national online firms which are under control [2] , while we couldn’t deny the fact that these local websites have solid performance. In contrast, the foreign companies haven’t got a clue on how to blend their product features into the local culture.

Nevertheless, there might be some political reason rather than the technical problems for Google’s final decision, as any enterprise would not easily give up the piece of big pie from the world’s largest online market.

(Resource: news.yahoo.com)

Chinese Situation – When will it Blow Up?

There’s an interesting metaphor from Hanhan, a young and elite writer from Shanghai. He said in the blog that offering Chinese citizens 100% free rights to speak is like adding more free vegetables to their baskets. They are definitely happy to receive it, while it makes no huge difference if you refuse to offer them as they already have too much pressure from work and life. Google has overestimated Chinese people’s reaction toward the issue in his threatening policy. If one wants to get resources from google he’s still got the method to ’cross over’ the Great Firewall.

Chinese censorship has already blocked global popular websites such as Facebook, YouTube, Twitter. It’s a shame that the government  is so scared of open public voice that it hires around 30 thousand staff to censor the internet. It is not prepared to confront any riots or rebellion.  I’m not a person with great political sense, but at the end of the day, a nation can’t be strong enough or well developed with its citizens receiving such asymmetric information.

Anyway, this is also a culture thing.  We can see British youngsters drinking their head off every nights for fun, for socialising or whatever excitement they get. I reckon such excessive excitement is largely due to the British law that forbidding kids under 18 to touch alcohol. In consequence, there are more teenagers stealing beer or  causing accident because of over drunk. The law is absolute necessary for the current British drinking culture, while it’s just a similar phenomenon that the harder you want to control, the crazier their attitude will be.

Fortunately, with more people studying and working abroad, the Chinese young generation is becoming more subjective towards the government’s words and policies. It takes a long time for this nation to open up as the restrict of conventional culture and the uncertainty of potential risks that might benefit minor rioters. However, as the famous Chinese saying goes, to conquer the flood you’d better open branches to let the water flow away if the dam doesn’t work.

References:

[1] China thwarts Google’s detour around censorship. Yahoo News

[2] Google Shuts China Site in Dispute Over . New York Times

Is Social Media Merely a Bubble?

I read an article recently which made critical comments on the heated up social media.

Very good points that revealed the weakness of these upcoming bubbles, where companies and online gurus were so eager to expand their influence by optimising the ‘first-sight appearance’ that they overlooked the importance of quality improvement of the content [1].

 Also, it’s true that people can’t build robust relationships simultaneously with thousands facebook friends or twitter followers.  Most times they were just interested in some points, added the connection, closed the window and forgot about that. It is called ‘relationship inflation’ in the blog, where the ties between people are thin enough to break itself.

Is Social Media merely a Bubble?

Well, I still believe that social media is a promising and necessary way to build the brand equity in the long term.

At first, the Web 2.0 marketing is still on its way to take effect. The webmasters will learn lessons eventually about what they have done improper to waste money on the campaign or even devaluate their reputation.It’s like when companies first advertised products on TV.  They followed the golden principle such as AIDA (Attention-Interest-Desire-Action) or other cognitive models intending to persuade the audience without the understanding of their interaction, neglect or even negative impressions.

Also, you don’t do business in the social media. You only let others know you through the networks. They might forget you right after they clicks away, while you never know if they will recall the brand when you do other online and offline promotions. To put it another way, social media is very important as part of the Integrated Marketing Communication.

The Low Attention Process

This hidden power was well elaborated in Heath’s book[2]. It is opposite to high attention process where people will judge and make rational analysis on the advertisements, which leads to less chance to change belief into attitude as consumers have less trust in ads nowadays. In the low attention communication, they subconsciously  absorb information by implicit or passive learning, where these kind of leaning never stops and are either under control.

In this process, their perpetual and conceptual memories of the brand evolves and the attitude toward a brand is formed based on associations and emotional links, which will automatically affect the intuitive brand choices or purchasing decisions. What’s more, this kind of emotional association is already rooted into the memory and can hardly be changed deliberately.

He recommended that by delivering repeated and simple messages in the advertisement, the audience will be influenced steadily and it could be more effective to get them on your side than stunning pictures or innovative stories in the TV ads where they only remember the scenarios and even forget what it is selling.

What Social Media Boasts

To this point, we can see clearly a great advantage of social media. It starts relationships by simple and friendly messages and people usually accept it without critical analysis of the information. Also, people in the same groups are at least of some common interest.  From the advertisers to the internet users, all of us are free to express and share emotions, plus the opinion formers who have become more influencial by their spreading and dramatising of the messages. 

It certainly takes a long time to establish reputation in these networks and make friends with potential customers or business partners, and we need continuous improvement in the process by monitoring our performance and their interaction.  All these above are crucial to build the awareness and attitude of a brand gradually.

We can see bubbles around as social media is a bit overheated and neither the relationship nor the content there is valuable enough. However, if we are more cautious and patient about the building and penetration both on the professional and emotional level, I belive it will gear profound impact on individuals, companies and the whole market.

References:

[1] Umair Haque’s Blog -  The Social Media Bubble

[2] Robert Heath, 2001. ‘The Hidden Power of Advertising’, Admap.