Part of a multiple-day conference also featuring panels on journalism and music at night, the innovation festival focused a lot on small companies and startups, and how VCs appraise them.

The talk that kicked things off featured former eMusic CEO David Pakman, who is currently a partner at Venrock, who talked about how VCs find the right company and, by proxy, entrepreneurs.

The firm has invested in Dollar Shave Club, and a lot of the questions from the moderator from Fortune and the audience focused on that unique unicorn (whom we have written about before) and subscription models in general.

While Pakman said that not every business makes sense as a subscription (he picked cars out of the air, though the moderator wisely said that may change as car ownership wanes and automated cars changes the dynamic), the value of having a direct connection with your consumers cannot be understated or underestimated.

The most interesting he said was that he was not bullish on companies that don’t have a direct access to their consumers. Of course, that means he’s not bullish on many established companies, the ones that have historically created products and then sold them to intermediaries who then sold them onto customers.

If you buy a Coke (or Pepsi, if that’s okay), you’re not buying it from Coca-Cola. You’re buying from a supermarket or bodega, a vending machine, restaurant, or a host of other companies that are not Coca-Cola. Same thing with Serta, Kraft Macaroni and Cheese, and millions of other products.

Contrast that with Casper or Blue Apron, customers are entering into a direct relationship with the product creators. As such, those companies own the data relationship with the customers, have a direct contract to continue to supply their customers, and do not have to pay an intermediate to complete the transaction.

Now it may make sense why so many consumer products behemoths are acquiring these subscription-model companies.

The post The Bullish Future of Subscription Models appeared first on DMNews.

1. Mobile advertising still way behind where it should be — using time spent as a metric. Consumers spend 28% of their “media” time on mobile devices, but mobile only receives 21% of ad spend. For the record, TV, Internet, and radio all more or less match up on ad spend and time spent. Print is the one with the significant deficit (4% of time spent, 12% of ads).
2. Tough time for publishers. First, the good news: Non-Google, non-Facebook revenue rose from last year (9%). The bad news: Google revenue rose 20% and Facebook’s rose an amazing 62%. The trends are not kind to anyone not run by Mark Zuckerberg or Larry Page.
3. Annoying ads stay annoying. Unsurprisingly, the least liked ads were the most intrusive, such as popups and autoplays. The most popular? Mobile rewards inducements.
4. Postal a secret weapon. Yes, fewer people are sending letters these days. But the valuable by-product of the online revolution is that more and more people are buying things online. Things that need to be sent as parcels. There is 9% year-over-year growth in parcel delivery.
5. Retail getting smaller, smarter. For decades, retail companies could shirk customer improvements on their locations because, where else would anyone be able to buy things? Now that online is easier, quicker, and more pragmatic, unprofitable stores are closing. But smart online companies are opening up stores, attempting to bring what they know from online and bringing unique experiences that can’t be replicated anywhere but in person.

The post 5 Takeaways from Mary Meeker’s Iconic Internet Report appeared first on DMNews.

While the Trump Administration is definitely changing the normal political conventions, it’s usually true that a Republican-led government is business-friendly. And often times business-friendly policies can have a negative impact on customer privacy.

But even if upcoming policies enable businesses to take more liberties with customers, it doesn’t mean they have to do so. So, in anticipation, here are some consumer-friendly practices businesses should consider.  

As traditional display advertising wanes, the temptation of data is driving more businesses.

Clear Service Terms

For too long, companies have mendaciously argued that readers don’t care about the terms and services, of that they don’t read them. This creates a Catch 22 where they are written as if no layperson would read them.

Pay in Dollars Instead of Paying in Data

With data-collection and processing improving by the day, it’s safe to assume that data collection is surpassing advertising . This approach has an analog in products like YouTube Red, where you can pay the service money to not have to see any ads. In this scenario, you will instead pay to protect your data.

Users Get Paid

In a world where free services are plentiful, the next competitive advantage could be paying customers to actively use the service. Sound crazy? Well, imagine that in order to use Service A, you agree to minimal data harvesting. But if you are willing to give up more, you could get paid a nominal fee that can increase based on tiers. This can manifest itself in a number of ways, including surveys, brand trials, and other ways.

Go the Distance

There is a lot of confusion about why companies need (or want) your data and what they do with it. Save for terms and conditions and the occasional interview (when something goes wrong), companies do not spend a lot of time dwelling on the whys and hows. This is, likely, because they’d rather people not think about this. But treating it as an unsavory act just exacerbates the problem. It seems unsavory when you don’t talk about things openly. Imagine in Mark Zuckerberg went around to Facebook user town halls to explain the company’s data policy instead of his half-baked “listening tour” to set up some far-future political career.

Set Up a Marketplace

One reason consumers are distrustful of companies’ data policies is that they can’t really know where their personal data is going or how it’s being bundled. One way around this is to ask customers to opt-in to specific uses of their data. For example, they could enable Brands A – Z to receive their anonymous data, but not Brands AA – ZZ.

No data conversation is easy, but any conversation is better than none, as consumers continue to fret about what they are giving away for free.

The post How to Be a Customer-Friendly Data Company appeared first on DMNews.

The chatbot revolution continues, but poor quality control and confusion of terms weighs heavily on adoption.

Facebook has put chatbots at the center of its refreshed Messenger platform, creating a directory where users can easily find useful applications. But the platform is only as good as the bots created for it, and many were lacking.

The Information tested a number of Facebook Messenger bots and found they could only ” fulfill only about 30 per cent of requests without human agents,” per a Register [UK] report.

“There’s not much quality control on Facebook,” said Jordi Torras, botmaster at Inbenta, a maker of customer support, e-commerce and conversational chatbots. “The team in charge of quality control at Facebook was likely overwhelmed. Trying to have a centralized approach to having quality control is very difficult. It’s a huge task to embrace.”

The ravine between a well-designed, intelligent bot and a substandard one is quite significant.

“Many of these bots have the minimum capacity to understand human language,” Torras said. “They use a common line interface. And so they can only understand commands if you type lines exactly as they’re programmed to understand.”

“If it’s [just a] line of commands; it’s not a true chatbot,” Torras said.

Command-line bots are often the likely setup for weather and news apps.

“They just send you news that might be relevant to you,” Torras said. “They call it chatbot as well, even though there’s not chatting with you- you’re restricted to a few commands.”

Despite the gap and public perception, Torras is bullish on the future of bots.

“I believe that chatbots are here to stay,” and will evolve, Torras said. “If you look at any science fiction movie, [the interactions with machines are] always conversations. It’s going to happen – it’s in our human nature [to build these].

He added: “Forget screens, forget keyboards; the only efficient way to interact with machines will be talking.”

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A Klaviyo email analysis report released today demonstrated just how powerful marketing segmentation is for ROI. 

Email campaigns sent to a segmented list bested those sent to the entire list in open rates (18.29% vs. 12.93%), click-through rates (2.17% vs. 1.33%), and revenue per recipient ($.17 vs. $.11).

Klaviyo’s results stemmed from analysis of 1.5 billion emails from 1,000 of the email and advertising company’s customers in Q4 2016.

Segmentation also continues to be a case of the haves and have-nots. The report said companies studied with $10 million in revenue had lists in 10 times more segments than companies with fewer than $100,000 in revenue.

“There are two main reasons for the disparity we saw in number of segments. First, in the cases where revenue correlates with a customer base, smaller companies have smaller lists. And smaller lists themselves limit how deep you can go with segmentation,” said Agata Celmerowski, VP Marketing at Klaviyo, in an email. “Second, there’s a perception that segmentation is difficult, that the tools are expensive, and that you need a lot of resources to execute. If you’re a small but growing business, that perception is enough to keep you from doing it.”

Celmerowski said companies should begin thinking about segmentation when they hit around 5,000 email subscribers.

Those who did segment saw rewards in multiple scenarios. By sending abandoned cart emails, which are triggered when a shopper fills a shopping cart but without following through to purchase, “generated significant revenue per recipient, ranging from $1.23 for stores with an average order size of under $50 to $14.14 for stores with an average order size over $200,” according to Klaviyo.

The study also provided some context into the value of different types of segmented email, such as welcome series, the aforementioned abandoned cart emails, browse abandonment emails, and customer winback emails.

“Companies with an average order size of $100 to $200 had an average revenue per recipient of $7.01 for abandoned cart flows, $3.34 for welcome series, $1.95 for browse abandonment emails, and $0.84 for winback emails,” the company said in its release.

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Snap has taken somewhat of a circuitous path to this inevitable point. While it tried out different formats – like its $750K minimum takeovers of 2015 — the unifying protocol was that brands had to buy directly through Snap representatives. 

As the Wall Street Journal reported:

“With the new tools, marketers will be able to purchase ads themselves using a credit card starting in July, Snap said—which could encourage a broader base of companies to experiment with its ad offerings.”

It gave 20 brands beta access to the tool, according to the Journal.

This significant and expected change means that ad quality may go down, but revenues increase; an important development for a publicly traded company, even one with millennial shareholders. 

Like all startups that require a network effect of users and a coolness factor, Snap founder Evan Spiegel always betrayed lukewarm points of view towards advertising. When ads were first announced in 2014, he used words like “opt-in” and how users only had to watch ads if they wanted to. 

Again, this is a common practice. Tumblr’s David Karp was openly critical of ads until it became necessary and Instagram’s Kevin Systrom famously claimed to review every ad on Instagram before it went live, when the company first launched their product. All loosened the reigns in one way or another eventually.

Snap is no doubt still concerned about what opening the floodgates will do to its cool factor, but advertising is most of its revenue and they need to offer a cost-effective solution to smaller brands. 

The post Snap, Like Predecessors, Arrives at Self-Service Ads appeared first on DMNews.

While the world focuses more intently on Facebook’s AR plans, the company also quietly announced a reboot to its Messenger platform. While the broader Facebook message is about how it will connect people through human-to-human chatting, the social media giant is chasing the promise of automized, on-demand customer service connections between companies and their customers.

Facebook rolled out its bot program a year ago, and it’s been riddled with bugs and bad connections. The company now has 100,000 bots on the platform but conceded that many people didn’t know about them. We’ve written about some of these bots before, like Torani’s recipe maker. Even if users did know about the bots, not everyone is comfortable using them yet. 

“We’re kind of already the White Pages of messaging apps. With now 20 million businesses actively responding to messages and 100,000 bots out there, we have a shot at becoming the Yellow Pages of messaging apps as well,” Facebook VP of Messenger David Marcus, told Marketing Land last week.

So what’s about to change? While there are tweaks to the interface (such as prompt buttons versus requiring people to type questions), the biggest is a bot directory where people can browse which bots to use. Marcus told Marketing Land that the company’s directory is coming at the right time, many of the bots that were hard to find previously were not ready for prime time. Now, the bots are better and people more equipped to use them. We’ll see if Facebook can crack the code and roll out a truly decentralized customer service chatbot program.

The service is not yet live, but will be worth watching when it is.

The post Facebook Bot Reboot Intriguing for Businesses appeared first on DMNews.

While Burger King clearly conceived of the ad as a media stunt (unknown whether they anticipated the Wikipedia editing that cast the Whopper in negative light), it portends a future showdown between brands, advertising agencies, consumers and virtual assist device and operating system developers. 

The ad’s effectiveness was short-lived, Google tweaked its operating system to shut down the request. But this will be an arm’s race. 

Advertisements currently rely on data intake from a complex, but fallible operating system – the human brain. The advertisers judge success by how well that same “computer” – the one that routinely forgets names and birthdays and where the keys are – recalls the ad. 

Virtual and home assistants are the evolution for which advertisers have been waiting a long time. It can enable advertisements to rely on a smarter system to push their message further down the funnel. Imagine an ad that can purchase tickets or supplies directly for you. Or put a sale on your calendar. The possibilities are endless. 

Also endless will the fighting: you, the consumer, and the Googles of the world will not want their products hijacked for marketing messages. Brands obviously do not want to annoy you to the point that you end up hating them, but they also don’t mind a bit of disruption.

Google and Amazon (and others sure to follow) know that their current products are still “beta” and do not want the consumers that are still wary of usability and security to find a simple reason to not use their products. 

At some point in time, there will likely be a middle ground where ads like this are opt-in and useful, but prepare for a lot of moving fast and breaking things before we get there. 

The post What the Burger King Internet of Things Ad Portends appeared first on DMNews.

In the middle of a brand crisis, Chipotle announced a massive program to induce customer purchasing. Customers could earn an escalating amount of food based on how much money the spent, a sort of edible pyramid scheme. The grand prize was a catered lunch for 20 people.

When we wrote about the campaign, industry watchers told us that it was not a loyalty program, but rather a retention program. The difference intrigued us so we wanted to explore it more.

The term loyalty has typically been used as a catchall to describe any program that customers can opt into to get some sort of rewards. The simplest of these programs is the famous punch card where ten purchases get you a discount or free purchase once completed.

“There are frequency programs or punch card-driven programs, but, to me, that’s not really a loyalty program,” says John Bartold, Epsilon‘s practice leader of loyalty and customer experience.

“Loyalty has so many other components. Do you talk about the brand? Do you engage with the brand,” Bartold adds, adding a personal anecdote. “If I look at my daily relationships as merely transactional, I wouldn’t have a lot of friends.”

While, yes, a punch card does lead to repeat purchases, loyalty is much more than transactional.  Are you using a punch card because you are budget conscious, or do you actually value the company or brand? Are you more or less likely to frequent them if you don’t have the punch card? There’s a lot unsaid when your only interaction with a customer is for a volume discount.

It’s also somewhat of a blunt instrument. A simple punch card or other type of volume discount can feel like a chore; for example I have to buy six more sandwiches to get my benefit. It doesn’t surprise and delight a customer the way a customized experience does.

“A retained customer is not necessarily a loyal customer,” says Erin Raese, SVP of Customer Loyalty, Aimia, a data-based marketing and loyalty analytics vendor, via email.

Raese pointed out that customer retention programs are created to “provide an incentive, such as coupons and discounts, for customers to continue shopping with a particular brand or retailer.”

Retention also takes the form of an inducement to stay with the brand under unfavorable circumstances. If you call up your telecom or Internet provider to cancel, they will undoubtedly offer some deal to keep you. Even if you remain retained, you are not very loyal and even may be a negative brand influence on people in your social circle.

The success of retention programs is determined by retention rate, “which is essentially the percentage of a customer base that was active on some earlier date and is currently still considered to be active.”

Smart brands, Bartold says, will find a way to include both loyalty and retention aspects into any program.

“Marriott still has its mega bonus, which is really frequency based,” Bartold says. Marriott is an Epsilon client. “But they’re also engaging members by asking questions and keeping them apprised of properties that they may be interested in.”

What does a smart loyalty program look like?  Well, for one, it knows a lot about you, the customer and can tailor experiences to your preferences.

“We see a lot of feedback [along the lines of people] wishing the brand knew me better and understood me,” Bartold says.

Raese agrees.

“Brands are beginning to realize that customers expect tailored and relevant experiences,” she says. Data from Aimia’s “Loyalty Lens” research showed that at least 50% of consumers get annoyed if companies do not use customer information to offer a better tailored product or service.

Smart loyalty programs often hone in on “soft benefits” like “recognition, exclusive access to products and services, and tiered benefits,” Raese says.

Bartold adds that people are more knowledgeable about customer preference tracking, so they may say, “You know who am I – why am I getting this [undesired] offer?”

This new approach to loyalty has opened avenues for companies not used to such opportunities. Consider the car manufacturer or dealer. A car purchase is one that happens once every couple of years, potentially more than a decade. But, now, auto companies, for instance, are no longer just in the car business; they’re in the mobility business. They’re branching out from just selling cars to getting into the ride share game and are able to reach both car buyers and those who will never own a car through multiple touch points.

Bartold says that car companies used to track customers through vehicle identification numbers (VIN). But with developments in transportation like leasing  (“Some manufacturers are seeing that 30% of all cars are now leased”) and ride-sharing, auto companies are tracking customers on an individual level. And car companies obviously don’t fit a punchcard model, so their loyalty programs center around services, like content and customized information about cars and transportation at large.

“Good loyalty programs start to play out the personalities of the brands,” Bartold says.

So what’s next?

“The next era of reward design will increasingly feature customized and personalized reward experiences based on customer demographic, psychographic, and behavioral data,” Raese says. “We’ll start to see more rewards recommendations for consumers and exclusives for top customers, for instance.”

The post Knowing the Difference Between Loyalty and Retention Programs appeared first on DMNews.

While FCC and FTC heads joined together to pen an op-ed in the Washington Post to allay fears, few are bound to take comfort for any official explanation. Why? Even if ISPs decline to participate, the Trump administration is clearly willing to forge unpopular paths and reject existing norms. So, you could quickly find yourself with little recourse but to share your data or opt out of many services to stay safe.

Consumers are right to be worried about what information is being shared with whom and how this affects their expectations for privacy, especially considering the array of increasingly sophisticated and data-hungry advertising technologies. 

Data is an obvious drug for advertisers that will be very difficult to give up, something New York Times columnist Farhad Manjoo touched upon in a recent piece.

Through profiling, now ad companies know — or, at least, aim to know — exactly who is reading a certain site or watching a certain video. So instead of buying ads tied to a certain piece of content, companies can buy ads targeted exactly to an audience.

….

But it’s deeper than that. Ad companies don’t just know the user, but they also know the user’s context — for instance, whether you’re at work or at home, or whether you’re in the mood for shopping or not. All of this comes together in a real-time calculation as you wander around the digital world, from app to website to social feed. The computers are watching what you do and deciding which ads to serve you when. Often the ads are sold dynamically in an auction — different companies offer to pay different amounts to get your attention at different times.

All of the above may seem pernicious to the consumer, but incredibly valuable to the advertiser. I can’t imagine brands going back to spray-and pray advertising when they have machine learning and data scientists telling them the moment a consumer is ripe for a sale. 

There will always be a push and pull of privacy and data rights. Our economy is currently built upon at least some access to data, and its corporate actors cannot quit data cold. It would be disastrous. 

Many services that would otherwise charge consumers are free. If they decided they no longer wanted data, or the consumers voted with their delete buttons, those companies would need to pivot to paid services, many of which would not be welcome additions in anyone’s budget. 

Most new businesses in the media or “service” space that forgo advertising for patronage or membership tend to be small and niche. While there are always outliers, it’s safe to assume any ad-supporting company could not forgo advertising and data without significantly downsizing.

In the abstract, you might think, I’d be willing to pay Facebook, Twitter, or YouTube a fee. In fact, YouTube has already introduced a premium service, but, at last glance, it has only 1.5 million subscribers. Ars Technica writer Valentina Palladino tried the service but opted out after deciding she didn’t mind the video ads. Still, fees inhibit scale, which is a usually a prerequisite for VC funding (the most likely funding apparatus of many transformative companies).

Ultimately, brands and consumers will have to come up with a data collection solution that works for them both. It’s a tug-of-war, and neither side wants to lose. 

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