The beauty of sites like Hotwire and Priceline is that you can get a discounted price provided you are flexible about times, locations, and brands. In general, we have had a great experience booking hotels and run most of our conference business through them. This one time, we booked a 4 star hotel in Santa Clara for what looked like a great price.
One of our co-founders, Dean Mao, won another coding competition, this time with WeekendApps on the OpenSocial platform. He doesn’t like publicity, but I thought I’d mention this feat anyway. He won a pass to the Google IO conference, 1 million banner ad impressions, and some conversations from two private equity guys who want to hire away our star. Next week, the app will be live on myspace/orkut/my.yahoo/ igoogle. And we hope to be able to ad serve it with our social ad platform. Congratulations to Dean! Look for a note from him when the app is publicly live.
If you have a tripod, which of the legs is most important? Of course, they are all equally important– if you take any one of them away, the item being supported collapses. The same is true in hiring. Do you want smart folks, trustworthy folks, or hard-working folks? How about hiring an absolute genius who is lazy or a hardworking thief, or a trustworthy idiot? Over the course of the last year, BlitzLocal has grown to 53 employees and it has been a tough road in finding the right people. If you have been cursed with success, to have more great projects than you have people– then you understand the urge to hire people who aren’t necessarily awesome, but might be “good enough”.
The weakest link
And thus, you might be tempted to bring in folks who aren’t superstars. You have a variety of justifications: we really need some one right now, we can train them later, every company needs to have some grunt workers, they’re “good enough”, he’s a nice guy, and maybe we can use them for another project later. But when you’ve lowered your standards, you create a cascading set of problems. At first, this person performs poor work– but that’s normal, you say, since they’re still getting up to speed. After a few weeks, they exhibit some of the same problems, but you decide to give them more time– and carry them by not only training them, correcting the work, and eventually just doing it yourself. At some point, you become exasperated and complain that you should have just done it yourself in the first place– would have been less time and the project would have been done well and on time.
At the point this person realizes that they aren’t cutting it, they’ll probably go into defensive mode. Rather than accept any kind of responsibility, they’ll claim they’re too busy, that someone else didn’t complete something they needed, or that they actually did the work already– maybe you lost it in your email? Whatever way that the dog ate their homework, you’ll end up wasting your time trying to get them to straighten up. Their saran wrap shield is see-through and absurdly weak, but they don’t know that. Maybe they told a fib along the way, but now that they’ve gone so far with it, they can’t back out now– that’s my story and I’m sticking to it. I’ve had several folks say the nuttiest things with a straight face to me, in spite of chat logs and being caught red-handed.
But wait, there’s more!
Because you didn’t get rid of them right away– because you are a nice person who wants to extend multiple opportunities– this person feels that they can slide by undetected. They have made friends with other team members– kind of like an a parasite that has set down roots into the host victim. When they sense fear of being dislodged, they will politic and create turmoil– a smokescreen to perhaps confuse or distract you. After all, they have kids to feed, a mortgage to pay, and a general lifestyle to support that they’ve become accustomed to. Keeping them around longer is telling them that their performance level is okay and even if it weren’t– that you’re not about to do anything about it anyway. Perhaps you have a reputation as being such a nice guy that they don’t think you have the guts to call them out on it. They might even be so bold as to steal from you, and then boast to their friends about how they did it.
Just say “No!”
Has this happened to you? Joel Spolsky has one of the clearest rules of hiring. If you’re not absolutely sure it’s a yes on the candidate, then the answer is no. If you’re thinking “maybe”, then the answer is “no”. If they have some great qualities in one area, but your instinct says that they’re either not trustworthy (they complain about how the last company treated them), not intelligent (can’t give clear explanations of what they actually did, or not a go-getter (talks too much about work-life balance and priorities), then the answer is no. And if this person has managed to slip by– perhaps they were a friend of a friend, said the things they thought you wanted to hear, or made a great first impression with their professional clothes, then the kindest thing to do is let them go right away– don’t let them and everyone else suffer.
Another BlitzLocal colleague and I were discussing “leadership” and what that truly meant. We came up with this analogy, which I hope you’ll enjoy.
Imagine you move rocks for a living. The more rocks you move, the more you’re paid. You don’t move rocks, you don’t get paid. Thus, you understand the direct linkage between putting in time and compensation. This is the hourly wage model– some rock movers get paid more than others, whether flipping burgers, working in a big corporation, or drilling teeth. The more teeth you can drill, the more you’re paid. Are you a corporate wage slave or someone who is paid piecemeal? This was me for twenty years of my life– a prostitute selling my time for money. Whether I billed $5 per hour or $250– it was the same thing. One day in the proverbial quarry, you decide that moving more rocks to get paid more was not the right answer. At best, you might move 20% more rocks than the other guy in a particular day, but it wasn’t sustainable. So you leave the quarry for 7 days, much to the surprise of your fellow laborers. In that time you move no rocks and make no income.
But when you come back, you are driving a bulldozer. Now, in one day you are able to move 100 times what a single laborer can do. But to get that bulldozer, you had to temporarily earn nothing– plus spend money to buy the vehicle and spend time learning how to drive the thing. Your fellow laborers, noses down, continue to keep moving rocks– they don’t look up to see you in the bulldozer. They have heard about bulldozers in the magazines, but never thought it was something possible for them.
You hang out with the other guys driving bulldozers. You have newfound wealth, which is fleeting, since the crowd you run with also enjoys the same standard of living. You’re right back in the middle of your peers. It feels great to be 100 times more productive than you were before, but you’re not quite fulfilled.
So you leave the quarry again and disappear for 7 days. In that time you move no rocks and make no income. And when you return, you are back with 100 bulldozers and 100 other eager new bulldozer operators. You’ve opened a bulldozer training school! Flocks of manual laborers who used to move rocks now come to be trained by you. And you make a commission on the rocks they move, since these laborers didn’t have enough money to buy their own bulldozers. These laborers are now moving 100 times what they did before, but given the costs of training, equipment, and your profit, they only make 10 times what they did before. Still, they are happy.
And you are temporarily happy. With 100 bulldozer operators moving 100 times as many rocks as a single man can do, you’re at 10,000 times your earlier productivity. Your lifestyle has changed, too. You have have a Granite Card by American Express and have a new mansion in Boulder. People admire you–you’re a ROCK star. They think that the secret to your success is getting stoned.
But it’s not enough– something inside you is not quite satisfied. You can only train so many new bulldozer operators per day. You’re still moving rocks in a sense, just mass quantities. Growth in your bulldozer school is directly related to the amount of time you’ve put in. So one day you close the bulldozer school. The press thinks you’ve gone mad– that you’ve lost your marble.
SCALE UP AGAIN
You disappear for 7 days. And when you return, you’re holding a brochure in your hand– “How to Open Your Own Bulldozer Training School”. You’re created a franchise model, where you are training up other school owners. You have first hand experience in training new bulldozer operators, so new school owners can rely on your experience. You now have sold 100 franchises, each one with a happy owner training 100 bulldozer operators, who in turn do the work of 100 laborers. That’s 1 million times leverage.
You would not have been able to pull this off unless you had personal experience moving rocks, driving bulldozers, training bulldozer operators, and running a franchised business. You were able to take your knowledge and multiply it. If you didn’t intimately understand each aspect of the business, scaling up would have just multiplied losses.
Now examine your life and what you do. Are you moving rocks or are you multiplying? Writing software is a multiplication process. You can write one copy and sell it an infinite number of times. You could hand-build a single PPC campaign for a client or perhaps write a campaign management tool that can do it over and over in an automated fashion. But just like the rock moving analogy, if you aren’t a practitioner with hands-on experience in managing campaigns, your automation won’t be effective. There are lots of guys selling software that builds websites, manages PPC campaigns, creates SEO reports, sends out emails, and any variety of tasks.
If you want to create massive value, consider the rocks that you are moving. Can you write software or processes that can make life easier for others– or perhaps do some task faster, more effectively, or at lower cost? Everyone has something they know exceedingly well. What is that skill for you? You don’t have to be able to write code. Software is nothing more than rules for machines, just like processes are rules for humans.
McDonalds is a software company that just happens to make burgers. People go to McDonalds not because it has the most delicious burgers, but for the consistency of the food and the experience. You can take pimply-faced teens all over the world, minds distracted with their latest relationship dramas, speaking different languages, skilled or not– and still turn out that same value meal each time. That’s process for you.
NOW IT’S YOUR TURN
BlitzLocal is about empowering individuals to become entrepreneurs– we provide the tools and process to allow folks who know little about internet marketing, but are eager and willing to learn, to perform like experts. Our analysts are trained to help small business owners grow their practices. We’re about the little guy helping the little guy. Do you want to be a part of our team? Contact me to find out more.
Pubmatic released a report covering the massive drop– Q408 average CPMs are at 26 cents. Before folks claim economic peril, let’s consider a few other factors. The mix of inventory for ad network has shifted dramatically to social, which has historically terrible CPMs. From a weighted average perspective, it’s hard to say exactly the impact, but we know that 4 of the top 10 sites out there are now social and that social traffic recently passed adult as the largest category. And the reason that social network have bad traffic is not necessarily because of a young demographic. The more pages that users consume on a site, the lower the frequency they click on ads. If heavy users are consuming 60 to 100 pages per day on a social network, as opposed to 6 to 10 pages on other sites, you cannot expect ad clicks to increase in linear proportion to pageviews.
What I’d like to see is gross earnings by site quarter over quarter. Internet advertising is such that we have a growing audience of users consuming more pages per session– thus CTR will continue to slide. And if revenue per click is constant, you can’t help but see eCPM (what publishers are earning per thousand impression) and CPMs slide. My hunch is that gross earnings per site are flat, as opposed to down 50%. Falling CPMs is both normal and good.
Yodle and Ambassador, both out of NYC, were featured in a Kelsey Group press release. Yodle was founded by a friend of a friend of mine and just raised $10MM. And ReachLocal’s $300MM valuation is insane. Funny that these guys, Orange Soda, Webvisible, LocalLaunch, Marchex, and other folks are getting into the local advertising game, but that the engines and yellow pages themselves aren’t making significant innovations here. It’s still early and it may be years before any one of these companies, BlitzLocal included, has a full suite of offerings that truly helps local companies get more leads– not just on the web, but via any channel.
The risk of trying to grow quickly in a new market is hiring over-aggressive sales people, hiring too quickly, spending your newfound venture capital money and putting growth ahead of true success. I’ve seen big players put marketshare ahead of both profitability as well as client success. The result of that, as discussed by the major players at the Kelsey Conferences, is high customer churn. You can automate creation of websites and pay-per-click marketing campaigns, but it will take a lot more than that to truly deliver results to local service businesses that they can appreciate and understand.
It will be interesting to see who the leaders are 6 months from now, or even 3 years from now. The tightening economy will only accelerate losses that “fast growth” companies are experiencing, plus reveal flaws in the business model. I anticipate a bubble in local search within the next year, though it won’t be on the scale of the dot-com bubble. Business fundamentals, my friends– you have to make money at some point. And you have to do it while still providing superior results to your small biz clients and compensating your people. Doing that is ultra hard– client acquisition is easy.
Lee Scott in his annual address to the National Retail Federation, noted that in the latest focus group of young shoppers, “Every one of them had given something up, and they were talking about how good they felt about doing that.” Thus, he doesn’t see a rebound in sales any time soon. Look at your life. Are there things that you can give up? Maybe it’s time to do a little housekeeping on your recurring expenses– see what you really need. I’m not saying that you should be ascetic or start being frugal, even. But maybe simplifying your life can be better.
I first heard of Yodle about 4 years ago, back when it was called NatPal, by Nathaniel Stevens out of UPenn, a friend of Brad Twohig, who is our joint friend. Since then, I’ve seen the company grow from a few dozen clients to a reported 5,000, bring in a CEO (Court Cunningham), and a whole executive team. Of anyone in the marketplace, I see these guys as the leaders so far, even though Webvisible and ReachLocal are far larger in terms of customer base, revenue, and staff.
The local advertising game is far from won—- the mainstream has yet to see a dominant player emerge, much less be able to recall any name brands. As much as we’d like to believe the yellow pages will die an instant death, change occurs slowly. And I see the most efficient player being able to win. Yodle.com sells less on force of sales and more on the performance basis of calls driven. Call tracking is powerful, as clients can see measurable impact. But the game is early. Nobody yet has figured out a true multi-channel marketing play that delivers pure ROI for local, even though the search engines, yellow pages, newspapers, radio stations, agencies, and other guys are trying to build their own and partner with others. Expect to see some consolidation as a result of the economic downturn.
The eventual winners (and I believe there is room for many large players) will be the ones that deliver great value to the clients (transparent results and a large share of the client dollar actually going to marketing spend), plus take great care of their sales, operations, and engineering teams. Social media is increasingly important, for example, Facebook advertising for local. Trouble now is that building such a team realistically costs $5-10MM, depending on how it’s done. It takes, by my estimate, a team of two dozen folks for two years to build this out. The fully loaded cost of a person is about $125k in a major metro. Add in some marketing and sales expense and you can see how the numbers shake out.
Kudos to Yodle.com for being able to raise another round in a difficult environment.
CNN.com reported a story where Larry Flynt and some other porn executives are asking Congress for a bailout. I suppose the folks making free porn are losing their shirts, literally? If the adult industry, one of the largest and most lucrative segments of internet traffic, is asking for a handout, then things must really be bad. Who will be next in line for free federal money? We already know tobacco gets massive subsidies– $530 million from 1995 to 2006, for example.
Here’s the response from an unhappy customer of ours on SocialMedia.com, when I ran the ad network there a year ago. Reminds me of the United Airlines customer who was so mad about United not responding to his issues– repeatedly– that he created untied.com. United’s management stance was that they should not respond to such folks. Aside from the PR issues involved from corporate speak on the boards or not responding, it’s good business practice to show customers that you are taking action to give them great performance.
Moral of the story, respond to these folks before they get so mad, they begin undermining your brand. Or better yet– don’t even allow problems to get to this point. It doesn’t matter whether you are an affiliate ad network, a seller of horse nutritional supplements, a Colorado cosmetic surgeon, or seller of discount caskets. Take care of your customers!