Let Customers Try the Good Seats

In a sense, software companies and airline companies are at completely opposite ends of the spectrum.  Airlines sell a perishable resource: seats on flights.  If the seat doesn’t sell, the flight goes anyway, and most of the cost (fuel, personnel salaries, etc.) is incurred with no offsetting revenue.  Software, by contrast, can manufacture as many “seats” as demand will bear, with the occasional hiccup due to scalability concerns if demand is too fast and furious.  Traditional manufacturing is somewhere in between.

Imagine my amusement when I read a recent tail (sorry for the pun!) of United Airlines by Ed Cone, which Jeff Jarvis elegantly calls “an airline’s exquisite stupidity.”  United offers “economy plus” seating for an extra $30 on the flight Ed Cone was on.  Curiously, on this particular flight, economy plus was empty and the rows behind were packed.

Passengers started out asking if they could move and were quickly told they had to pay for the seats.  Then, enterprising passengers wanted to take United up on the offer.  Immediately.  After all, Cone muses, you can buy a drink for $5 on the spot, why not a seat for $30.  But no, the attendants were not amenable to that either, saying they were not set up to take reservations.  Heavy dose of disbelief here.  There is no “reserving” involved really.  The doors close, the plane rolls down the runway, the wheels come up, and nobody else is getting on that flight! 

So what could United have done?  Lots of obvious choices.  At the least, they could have agreed to sell the seats for $30.  While I’m sure there are complex pricing algorithms in United’s reservation system and the airline may not always offer those seats for $30 more, offering people a chance to upgrade “in flight” for a fixed fee on any United flight would seem like mighty nice customer service policy to have in place. 

A step beyond that would have been to offer to upgrade frequent flyers before the plane was boarded.  Airlines have tons of miles racked up and getting them off the books is beneficial or you could just give it to the customer for even more impact.  I have actually been fortunate exactly once in my years of business travel to be offered a free upgrade without asking, but it sure put a smile on my face to be called up to the desk and offered the upgrade to First Class. 

In my mind, even better would have been to have the attendants empowered to parcel out the seats without strings attached once it was clear they would not be needed.  When was the last time an airline did something that thoughtful?  Yes, there are potential problems.  There may not be enough seats for everyone, but surely there was a strategy that would make people happier than staring at a big block of empty seats they were barred from using.  Perhaps offering the poor sods seated in the middle seat the first opportunity would have a certain fairness.

But as I think about this, the software world comes back to me, and darned if there aren’t times when we do exactly the same thing to our customers.  Consider the area of self-service.  Do you make it easy for your customers to self-service their way into everything you sell, or do you insist on your equivalent of the “reservation system” these attendants were so worried about?  I remember trying to get more disk space from my ISP for my family web site.  They’re not set up for self-service.  All of their self-service is focused on new customers.  In fact, it turned out to be quite an odd ordeal to add disk space.  Few people had evidently ever needed more than the standard package allowed, so they weren’t set up well for it.  I had to spend a lot of time on two different phone calls to get it taken care of.  Nothing more annoying than businesses who make it hard for you to give them your money for a service they clearly sell.

Contrast that with a conversation I had with 3Tera.  They related that if you make it easy for customers to provision, they will provision a lot more.  Things it may not have occured to you they would even be interested in will suddenly be selling.  I’ve heard this sort of story from multiple places.

And what about the customer experience?  What if you have a many-tiered collection of services, and you were to go to some of your best customers in the lower tiers, and offer them a chance to try the better tiers for a time at no extra charge?  Isn’t that the exact analog of these seats on an airliner?  If you were that customer, wouldn’t that make you happy?

I remember Seth Godin saying one time it’s worth stopping and thinking about the one thing of value you could give your best customers without their having to ask or do anything.  Just take it and give it to them, with your thanks that they’ve supported you.  It’s not for everyone, and it doesn’t happen often, so it leaves an impression.

The biggest thing the Web brings us is choice.  What is scarce in a world of endless choice?  Real customer service.  A great experience.  Choice is all about the going in, but experience comes after the choice.  What are you doing to deliver an exceptional customer experience?

Interview With Rally Development’s Tim Miller and Ryan Martens

I had the pleasure recently of interviewing Rally Development’s CEO TIm Miller and CTO Ryan Martens.  I’ve mentioned Rally before as a company who I think does an exceptional job (particularly for a startup!) of leveraging the web.  In the wake of my recent Steve Singh interview, I wanted to continue to follow up on how SaaS companies are doing customer acquisition, and what they’re doing that really sets them apart from the crowd by using the web.

Give us a little background on  yourselves and on Rally Development

Ryan and I have worked together for 17 years and this is our third startup together.  Rally Development is a company focused on delivering a workflow product for Agile Programming.  Agile Programming is an engineering lifecycle process that is analogous to Lean Manufacturing.  We’re helping companies using traditional waterfall development to make the big step forward to modern Agile software development.  Companies today need to deliver in real time almost, and this is particularly true for SaaS companies.

We’re 110 employees, and we’re hiring 25 employees a quarter, so we’re aggressively expanding.  We’re at the tail end of closing another round of financing.  We have 375 customers and 15,000 users.  We’ve been growing 40% quarter over quarter for the last several quarters and expect to keep doing that into 2008.  Our largest customer has over 1000 seats.

Wow!  You guys are really growing. How did you manage that?

We modeled our company after Salesforce.com in every conceivable way.  The exception is we don’t have a Marc Benioff, but that’s appropriate.  We sell to engineers, not sales folks, so we need to be a bit quieter.

Like Salesforce, we’re multi-tenant from the ground up, we have nearly the same Average Selling price, same revenue per customer, same seats per customers, and we’re both workflow oriented products.  The difference is our product implements workflow for an engineering lifecycle–Agile Programming.

<At this point we talked a bit about Agile.  I shared that I have some background there since James Coplien wrote one of the papers that led to Scrum based on his study of my Quattro Pro team at Borland and how we were achieving enormous productivity.  For this interview, I wanted to keep going on the customer acquisition theme though, so that’s where we focused.>

Tell Us How You Go About Selling

Up until recently, we had a traditional inside sales model.  No outbound calling, very reactive to leads we created.  Over the last 3 years we’ve consistently reduced our cost per lead from well over $50 to about half that now.

We’ve been very successful selling to ISV’s, and started with almost all our customers being ISV’s in 2005.  In 2006 we started reaching large corporate IT departments, and such customers became about half our business in 2006.  By 2007, we were 2/3’s IT.  We haven’t gone head on into IT or changed our selling process yet, but we anticipate doing that soon.  This may increase our cost per lead given the publications IT read.

Over the last couple quarters we started getting out in the field more.  Unlike most companies, we’re not trying to turn an Enterprise sales force into a volume inside sales force.  We’re doing just the opposite.  A big deal for us is any deal with more than 50 seats.  Over the last 3 quarters we did 15 big deals, then 30 big deals, then 45 big deals.  Such deals require more face time, and we’re not shy about getting on an airplane to go visit someone.  We have both East and West coast sales people.  Eventually, we’ll get to Europe.

<At this point I mentioned how many SaaS companies I talk to are going through this evolution.  At one time, nobody wanted feet on the street.  Now companies are pushing hard up market and finding they need a real sales force.>

What are your thoughts on Sales 2.0?

You can’t just use feet on the street.  You need a volume business that lets you hit your number even if you don’t close any big deals.  You need both, and you have to feed them both.  Traditionally, half our business is big deals, but last quarter we didn’t do a single one and we still made our number.

When you sell to engineers, they don’t want to be hounded by a sales guy.  They want to download and try it and get educated, and then have sales come in and answer any remaining questions or help them scale and roll out Agility more broadly in their organizations.

<At this point, they made a passing mention of some “secret sauce”, so I had to follow up!>

What’s your secret sauce?

Agile is an open source methodology.  We can help scale lots of small teams onto 2-4 week cycles, ultimately distributed around the world.  We have users in 35 countries although we have only ever sold in 3 or 4 countries.  That’s the great story around SaaS–the reach it provides.  Worldwide, big deals, small deals, it all works for SaaS.  Selling to small customers scales to big customers because that’s how we grow incrementally and it’s how we make sure the product works for everyone.  That’s how we get to do the whole long tail.

Walk me through your customer acquisition and download model

We started with a single edition of the product, with demand generation driven lead acquisition, feeding those leads to volume reps, and now most recently we added a tier that feeds the leads to territory reps. 

We added a lower price point version than the core, called the Team version.  It worked okay, but wasn’t the right fit.  We needed a free version to take all the friction out of the initial acquisition.  So, we created the community edition, which is limited to one project.  Because SaaS lets us precisely target who uses our software, the free version didn’t have to be a bastard step child that was bad because you took out all the features and got something that didn’t work for anybody.  With SaaS, we can offer customers all the modules, but focus them to just a single development team, up to 10 seats.

That was a huge deal for us.  We launched last summer and it has been a rocket for growth and our sales organization then converts the free users to paying customers.

How do you talk customers into converting to the paid version?

We encourage customers to take as many community editions as they want.  In fact, we almost insist they start there and understand how Agile works for a single team.  As a result, we take all the selling barriers out and then we have upgrade incentives to convert.  We make it easy to migrate to the full-fledged product.

We know a customer is ready to convert when they have multiple community editions in use.  They get near their 10 user limit, and so then we call.  When they’ve already gotten a lot of use out of it and learned the value, they’re ready for a sales call.   A hard sell would be counter-productive, and it isn’t needed at that point anyway.

How do you guys do customer support?

Agile Commons is our support piece.  It’s a Web 2.0 community site providing expertise around Agility.  One of the top level menu items is Rally Community.  You don’t get to see a lot of that if you aren’t a customer.  Inside, we have things like an idea voting system similar to Salesforce’s IdeaStorm, we have dialogs with customers on features under development.  Customers get to see actual prototypes.  And, there is single sign on between our application and the Commons.

It’s been amazing the level of feedback we garner, the attention before shipping, and the way that gives us the ability to prepare and educate the installed base on what to expect from the next release.  We can instantaneously form beta groups this way and make customers a part of the product development team.

It builds trust, loyalty, and helps customers get what they need.  Customers can create their own topical areas and comment as well.  We’re about to let any member invite other members too.  Also, if you go through Agile University you get to join the Commons.  Many of the materials you need for University are found in the Commons.  Partners get to have sites in the Commons too.

<It’s clever to use community access as a way to drive upgrading to paid versions of the product.  What’s even more clever is the way they’ve tied together all of these ingredients to create virtuous cycles.  Customers help out with new version feedback, and beta testing, and in the process get educated so they’re better users of a product.  The University/education piece is tied in.  To get your “degree” in Agile programming, you have to learn to function in the community.  Lastly, letting members invite others to the exclusive club is very much along the lines of Social Networks.  I don’t remember seeing it done this well by a business before.>

That’s so creative, how did you guys come up with this?

We use HiveLive, another Colorado-based company, and that helped us grasp what was possible.  Their innovation was to remove all the admin problems with creating groups and permissions by empowering users to do that.  All the templates are configurable.  You take the IT resource out completely and push it to the users.

Once we saw that we were able to leverage that product.  We sell CommunityManager.  it takes the Hive Live platform, which is sort of a Ning/SocialText competitor, and we added on top of that all the templates needed to run the support org for a software company.  We added voting capabilities to that and built it into our Product Manager module.  PM’s love being able to access the voting feature.

It’s very powerful to integrate all these platforms.  Software is going from a linear product release business to a continuous flow service business.  Agile is the methodology that enables that.  SaaS is the delivery vehicle, and it is sold more as a continuous flow.  Community Manager brings this continuous process mentality to support.

Who else does this?

Salesforce has some of this in SuccessForce and IdeaForce.  We have a better community system, but theirs is a bigger community.  We’re in a completely different niche though.  We’re really tied to the operational flow and the product side of software driven organizations.  Salesforce is so CRM focused with little brand extensions off that core.  We work well with SFDC.  They’re a good partner more than a competitor.

Do you see this whole ecosystem as a way to do Viral Marketing for SaaS?

We sell ourselves as the experts in Agility.  We do that through content, white papers, webinars, and all those traditional pieces.  We push that first, rather than product, and that’s a key differentiator.  The content leads the product.  In fact, we give away the product for your first 10 seats.  We totally cannibalize that end of the market.

While we push being the experts, we dont’ charge for it.  But, when you retrieve our content, we get a warm lead and it builds our house list.

<This, I think, is their real secret sauce.  Content, and specifically being the experts at the best practices, sells the product.  Every company has the opportunity to be the experts with their own products, but how many really take the time to do so and give that expertise back?  What a powerful selling and community-building tool!>

How do you get good at producing content?

We’ve had since day 1 a services arm on our staff that produce this kind of content.  We have some of the world’s best Agile coaches, so we have a ton of content produced for keynote presentations or training.

But, even so, it was hard to keep the see rising.  To keep the sea rising around Agile is too much work for Rally alone.  So, creative commons open souced the content, we share it, and we let others use it for their own businesses so long as they don’t compete with us.

Now many people are incented to help create and disseminate content around Agile programming in our community.

<And here is the other half of the secret sauce.  Using open source for content gives them tremendous leverage over having to create all the content themselves.  Plus, it aligns a bigger ecosystem around their product offering.>

What else should we talk about this interview?

We’re going through the Geoffrey Moore lifecycle process  with our first product.  Now we’re starting to look at the platform space.  Not a wide horizontal SaaS platform, but one that our customers can develop on and mash up.  We’re not ready to announce anything, but we’ll be in touch!

<Despite a radically different scale of company and a totally different market they are very much on track with what Concur’s Steve Singh said about his public software company’s approach to customer acquisition.  Lots of interesting lessons to take away from these guys:

- You can use the web to take a prospect all the way to highly qualified status where there is little question they’re ready to buy.  It takes a free version of the product to get started with, a community, and a best practices university offering content.

- High value content is the starting point.  Some of it you have to develop.  Once you get a critical mass, a community and open source can help you crowdsource content for your company or cause.

- There are a number of virtuous connections and feedback loops between product, community, content, marketing and sales.  Make sure you’ve got them all wired together to emphasize this!

- Lots of ways to incent desirable behaviour, but they key here is incentive.  Rally uses exclusivity (only paying customers get full community access), free valuable content, referrals, partner incentives (you can use our content and you can plug into our community), and I would bet a variety of other incentives.>

Is Microsoft Playing Possum for Yahoo? It Could Be Much Worse!

The prevailing wisdom is that Yahoo’s stock hasn’t totally cratered because Microsoft is simply being coy, and will inevitably be back after shareholders have made Yahoo management a little more pliable.

Personally, I’m not in that camp.  I think Yahoo fought so hard that Microsoft now views them as incompatible.  So what’s next in the Microsoft-Yahoo-Google love triangle?

Mike Arrington thinks Microsoft is just playing possum.  He writes recently of Gates’ apparent about face on strategy where he is no saying there’ll be no major acquisitions.  First, I would take that to mean they’re not looking at any at the moment.  But second, it made me think what that means for the Microsoft-Yahoo relationship if its true.  If Microsoft is determined to follow a go-it-alone strategy, how will they grow their search and advertising businesses?  It’s a safe bet they’re not suddenly going to hobble Google.  No, Microsoft has their own version of the scorched earth strategy. 

My bet is that it could be much worse for Yahoo than the investment community’s theory they’re just waiting to acquire them later.  The danger scenario for Yahoo is that Microsoft has decided the best approach is to spend up to the 40-odd billion bid taking all the market share they want away from Yahoo.

Why not?  Clearly Yahoo is in a severely weakened state.  Culturally, this is exactly what Microsoft has always done well.  Focusing all their energy on crushing the life out of a competitor is familiar ground.  And who wouldn’t want to view Yahoo as that competitior rather than try it against Google?

Even worse is that Google might actually decide they need to pursue a similar course.  Rather than let Microsoft have the share, they may feel they need to take it.

Tough position for Yahoo to be in, caught between those two giants.

Related Articles

No sooner did I post this did I read that Microsoft has now approached Facebook to see if they’re interested.  As I say above, Microsoft is done with Yahoo.  They are very black and white about who is an enemy and who is a friend.  Once you’re an enemy, they stop at nothing to crush you.  This is how it starts.

Is There Still A Chasm?

An interesting post by Leigh has popped up on Techmeme.  She wonders, as I have, whether the fundamental notion of Moore’s Chasm has changed.  Leigh’s question is whether the generation that grew up on Technology still even thinks of it as early adoption, or if the behaviour has become so widespread that there really is no Chasm any longer.

It’s an interesting question, but I believe there will always be a Chasm of some sort.  My question is whether the Early Adopter crowd is now so large, and the Internet so effective at reaching them, that perhaps it is possible to build a business without the painful dislocation that is Crossing the Chasm.  Perhaps there are enough on the Early Adopter side to make a tidy business after all.

Integration and Expertise Matter More for SaaS

I recently had lunch with an executive one of the more successful SaaS startups in the Valley.  Our conversation ranged far and wide over many topics, but eventually I wanted to understand their product differentiation.  There are several players in the space, what had these guys been successful in emphasizing?

The answer was a surprise to me:  integration with other SaaS apps.  As he put it, “Our customers care a lot more about this than they used to when I worked for a perpetual software company in the same space selling to bigger enterprises.”

This was completely at odds with my logic before the lunch.  SOA and fancy integrations had seemed entirely a feature that catered to giant Enterprise IT that had to have things their own way and were willing to boil the ocean to get there.

After a bit of further questioning, it became obvious why the SaaS customers might care even more than their big company counterparts.  SaaS typical sells to SMB’s.  These smaller organizations have minimal IT staffs.  I once talked to a SaaS company whose professional services group had to deal with the CFO being the only IT staff that could answer questions and help get the software going.  That’s small!

When you have a large IT group, you can afford to, and indeed, may even want to dedicate some of them to building the integrations.  When you have a small group, if the vendor can’t do it for you, it probably won’t ever get done.  So it isn’t that the little guys care more, they’re just helpless to get any kind of solution if they care at all.

What does this mean for SaaS vendors?  In this case, having out-of-the-box tight integration with other SaaS vendors (or On-premises packages) was a big differentiator.  It lowered the deal friction (less to worry about on the custom install side) and increased customer satisfaction (hey, we could never get these two systems to talk before!).

Today, I read in one of Jeffrey Monaghan’s posts the following:

It is important to be viewed as the expert when you are selling a product…but it is imperative when selling a service. Customers are buying a promise from you. And an expert is perceived as someone who is most likely to deliver. Everything you do should scream “We’re experts!” Collateral material, websites, even the way your sales team dresses.

Jeffrey is making a slightly different point than the integration point, but it’s really the same story again, isn’t it?  Small businesses can’t afford to hire Accenture or somebody to come partner with their software or sevice vendor to help them out with “Best Practices” or “Business Process Re-engineering.”  The software itself had better have all that built in, and the vendor had better look like the experts, and be prepared to help educate the customer as much or as little as needed.  It can’t be an extra cost option.

This is just another thing I really liked about how Rally Development’s web site is set up.  There is that perfect mirepoix of product marketing, best practices (and in their University, clearly there’d be experts there!), and community.  Rally is just a site I came across by accident when two different people asked if I knew of them.  Their site really resonated with my idea of what a small company should be doing with the web to get the word out.

How about you, are you the experts in your area?  Shouldn’t you be?

Content Quality Matters (Enterprise 2.0 Take Note!)

No sooner did I pen Immediate Gratification Matters than I read Jason Menayan’s GigaOm post on 7 Things HubPages Did to Beat Squidoo.

HubPages and Squidoo are sites where people can write short articles about topics they care about.  Squidoo was founded by Seth Godin, a famous marketer whose blog I follow religiously.  Despite rapid initial growth, HubPages was languishing a year later, and trailed far behind Squidoo in terms of traffic as well as revenue generated for the company and its authors.

So what did HubPages do to beat Squidoo?  They list 7 things:

1. Remove all adjult content:  At the time they did it, adult content was 1/3 of all traffic.  Clearly they had to choose to get rid of one audience in order to encourage others to step up.  Would you company give up 1/3 of its sales for the promise of much larger sales later?  Something similar keeps a lot of companies from going SaaS.
2. Disallow spam:  No aggressively promotional articles were permited, and links to sites being promoted had to be toned down.  You couldn’t just publish your ads as pages.
3. Purely personal articles (like blogs) were eliminated:  The feeling was they were less likely to be useful to readers or to attract search engine traffic.
4. Copied content was penalized:  Ever come across content that is just a blatant republication of some other content?  Sometimes there is an issue of rights to use the content, but even if there is a right to republish it was felt that original content was more valuable.  Hence article scores were penalized though the article itself was not removed.
5. Articles Linking to Questionable Sites Were Flagged:  If they could see that a site might potentially phish, display obnoxious popups, or redirect to a different site immediately, the site is marked as such.  I just noticed Google doing a bit of this too, and appreciate it.  It’s never been a pleasant surprise to land on one of these obnoxious sites after clicking on an innocuous-looking search result.
6. Added a discussion forum:  This encourages real community and conversation, which was evidently lacking.  With a forum, users can help each other out, share advice, and socialize beyond simply publishing articles.
7. Up front payments for very high-quality articles:  Great articles attract significant traffic and create success stories that are a good example for others to emulate.  I’m not sure how those success stories are propogated, but I would make the propogation in some way very easy to make this more viral.

These are all ways of increasing the quality fo content and incenting people to build a quality-focused community around the content.  There is a lot to be learned from this for would be purveyors of content.  What is your strategy to increase your content quality?

Somehow I find this message to be strangely ironic.  As I mention, I follow Seth Godin religiously.  The idea to focus on content quality is definitely one of his core themes.  His book “Dip” is all about finding out what you can be the best person in the world at and focusing on that one area.  Yet, a competitor has gotten more focused about it than Squidoo.

Seth recently wrote:

In the face of infinity, many of us are panicking and searching less, going shallower, relying on bestseller lists and simple recommendations. The vast majority of Google searches are just one or two words, and obvious ones at that. The long tail gets a lot shorter when you don’t know what’s out there.

Organizations that can help us manage the infinite are facing a huge (can I say it? nearly infinite) opportunity.

To the issue of getting yourself hooked into “shallower” ways of finding content, one should add that when there is infinite content, it can be particularly differentiating to have better content.  This is something that has always bothered me about the crowd that says, “Content is a commodity.”  This has been such a popular meme lately, but it is so hollow. 

The next time you’re going through pages of Google search results just trying to find one good read about you topic, ask yourself, “Would getting to quality sooner have mattered to you on that search?”  I’ll bet the answer was “yes” for most searches.

P.S.  Why should Enterprise 2.0 take note?  Because these folks are going to be particularly sensitive to the kinds of content that HubPages eliminated.  Does your Enterprise 2.0 solution have a way to do that automatically, or are you going to leave it up to your customers to police their sites? 

Immediate Gratification Matters

When your users access your service on the web, how fast do you gratify them?  Do you think about response time, or is your view that so long as it gets there before “too long”, it’s not a problem?

Google has made a business case for slamming down latency.  They invest zillions of dollars and IQ points trying to make their service respond faster when you hit the search button.  Why?  Because they’ve found it matters for the user experience.  Here is a graph of their recent experience with latency:

Fred Wilson recently tried Slideshare.  He liked it, but his primary complaint was that it took 12 hours after he uploaded his .ppt file to convert the slideshow to Flash.  As he puts it, “I went to bed before it finished.”  I had the same reaction to Animoto.  Loved the service, but I made one slideshow and then forgot about it.

The debate on whether startups have any business focusing on scalability rages in the blogosphere in the wake of the Twitter shakeup as we speak.  People like Ted Dziuba say essentially, “Scalability is not your problem, getting people to care is.”  The trouble is, as the two examples above show, getting people to care is at least partially a function of delivering immediate gratification from the software.  Scaling does matter for that.

Immediate Gratification matters most of all when selling.  If prospects can try your application out online, make sure it responds blindingly fast so they can get as far as possible in the evaluation while they are in the mood to look.  If a site doesn’t perform well on the trial version, my expectation is that it will perform poorly in production too.  That’s not what you want. 

Process matters too.  How often have you gone to a site, seen a white paper or demo you wanted to get access to, and had to answer 20 questions before you could get in?  Worse, how often did you answer 20 questions and then get told they’d get back to you?

They’re protecting the ability of their sales staff to control the process and making sure they capture your lead info.  But it’s a mistake because it just kills the momentum of an interested viewer.  What kind of customer wants to be kept waiting before they can give you their money?  It’s one thing to be kept waiting because of overwhelming demand for a private beta, that’s exclusivity.  It’s quite another to do one of these hurry up and wait sales wonders.

Gather the least information you can (name, email, and company?) and then give immediate access.  What are you doing otherwise, preventing competition from seeing your app and sales materials?  Balooney.  They’ve already seen it.  Trust me on this one.  Every customer that winds up choosing them instead of you, every friend of a friend employee that moves on, and a hundred other potential sources has eventually given them access to the 411 on exactly what you have.  If your lead is so fragile that the information you give any qualified process can sink your ship in the competition’s hands, you’d better get going on some radical innovation or you’re not going to make it.

I recently came upon Rally Development’s site.  Rally makes a SaaS tool for Agile teams.  I loved the site because of all the Instant Gratification.  In fact, it may be the best non-consumer startup site I’ve seen in a long time.  They touch every base– traditional product + marketing, education/learning, and community/evangelism –with a well-organized low friction and content rich offering that tells me what I need to know.

In an age of real-time scalability with services like Amazon.com, there’s no good technical reason to keep your customers waiting.  At the very least you should run some tests to see if faster response times improve your sales.  Once the scaling and infrastructure side is handled, the rest of it is in your hands in terms of the processes you force your customers to follow.

Immediate gratification matters!

Google: Oh Ye Of Little Faith!

By now you must have heard about Google’s results. 

As I wrote right before they announced, quality matters.  It’s why they’re winning the ad wars.  They have an unfair advantage:

- They are often the last thing you look at before you go to the place you’ll make your purchase.

- You’ve told them what you want to purchase before they show you the ads.

- They know more than any other business on the planet about inferring meaning from words and links.  That’s what they do.  It’s their business.

They transfer that advantage to their advertisers who transfer to them profits.  Lots and lots of profits.

What’s your unfair advantage?

Ray Ozzie On Microsoft’s Expensive Rift With the Web…

No, of course Ray Ozzie isn’t admitting or even suggesting Microsoft has an “expensive rift with the web.”  That’s what I called it in my original post about their us-vs-them situation.  Despite the fact that Microsoft Loyalists take me to task for bringing this stuff up, I’m not the only one who notices it.  Coté over at RedMonk has described it very clearly too.  As he puts it:

Microsoft frameworks are plagued by lock-in fears. That is, you’re either a 100% Microsoft coder or a 0% Microsoft coder.

Now what Ozzie did do is remove all doubt (what’s that saying about opening your mouth and removing all doubt?) by saying this about Open Source:

My position toward open source generally is that it’s a part of the environment. It’s very useful for developers to be able to get the source code to certain things, to modify them. Microsoft fundamentally, as a whole, has changed dramatically as a result of open-source as people have been using it more and more. The nature of interoperability between our systems and other systems has increased. I can tell you from an inside perspective … when you build a new product, immediately you start thinking, how shall this product expose its APIs. … 

Open source is a reality. We have a software business that is based on proprietary software. We tactically or strategically, depending on how you look at it, will take certain aspects of what we do and we will open-source them where we believe there is a real benefit to the community and to the nature of the growth of that technology in open-sourcing it. … The bottom line is we believe very much in the quality of Microsoft products and we are an (intellectual-property) based business. But we live in a world together with open-source, and we have to make it possible for you to build solutions, or customers to build solutions, that incorporate aspects of that.

Can you make any sense of that? Doesn’t it seem so totally Microsoft?

I got this via the excellent Patrick Logan who had me laughing out loud at his post:

 

Ray Ozzie speaks, and he speaks about Open Source Software. I don’t even know what to quote from his statement. They’re just not in the right ballpark. The only thing Ozzie communicates here is that he just does not understand the open source community, which _is_ the community for building out the internets.

There’s more about Groove and Microsoft in general.  Go read it.  Patrick sees the Expensive Rift clearly.  This goes so well with the crazy video debacle, Yahoo, and the rest of what’s happening with the company. 

That link in the Patrick Logan quote, BTW, is on Techmeme right now.  It says no more than what I quoted.  Tells you lots of people see the Rift.  That’s part of what makes it an Expensive Rift.

Google’s Paid Click Rates: Google Needs the Best Clicks

More gnashing and moaning about Google’s paid clicks says Larry Dignan.  This is one of the factors that’s hammered Google’s stock prices as the world worries that Google is slowing down suddenly.  There’s been a lot of back and forth, and Google for its part say they triggered some of this by changing how things work to improve the quality of the click throughs for advertisers.  Tim Armstrong, Google’s president of advertising and commerce in North America has said:

“We have a clear drive that a consumer should see really good ads,” said Armstrong, speaking at a Bear Stearns media conference in Palm Beach, Fla. “The outside world looked at that change as not healthy for Google, (but) advertisers got increased conversion. For us we looked at that as a positive change.”

Google has also said they would compensate elsewhere, for instance by “dialing up” advertising on YouTube.  The latter remark is interesting in the wake of Marshall Kirkpatrick’s article that suggests YouTube dominates video even more than Google dominates search.

I’m not here to predict what results Google will turn in very shortly, but I am here to say that Google’s focus on increased conversion of the click-throughs is worthwhile. 

Why has Google been so successful?  As I noted in another post, MySpace reports $10M profit on $500M in revenues.  Google, by contrast, got there on $80M in revenues.  It was wildly more profitable in other words.

Profit is a sign of market inefficiency somewhere.  In this case, the inefficiency is the gap between how well advertising with Google works versus advertising on MySpace.  In fact, Google was onto a far better mousetrap almost from their beginning.  Being able to eliminate an inefficiency in the markets let’s a company play the spread between the status quo and the new higher level of efficiency that they can offer.

Google’s move here is aimed at preserving or perhaps even widening that gap in how well their advertising works versus how well other’s ads work.  It’s an interesting chess move.  There could be several outcomes:

-  The market doesn’t care.  Google just gave up a bunch of click throughs for no gain.

-  It is a competitive response.  We’re not privy to how big the efficiency “gap” still is.  Ohers may have made progress closing the gap and this is a defensive move by Google to keep it open.

-  It is a prelude to price increases.  If Google has made the gap even wider, they have earned the right to raise prices because the ads are more effective.  With a tough economy, the volume may be down, so it may be important to be able to increase prices.

Profitability is hugely important, and becomes the primary factor in many endgames (the other being strategic value if you are not profitable).  Being unreasonably profitable has always been a Google strength.  We shouldn’t be surprised if they try to manage for continued profitability even perhaps at some expense to raw growth.

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Andrew Chen wants to know what it means when services like Alexa and Compete can be so wrong about Google and, “these same, somewhat flawed approaches are driving the decisions of media buyers in a $40B+ global advertising industry?”

As I told Andrew in a comment to the post, it means the quality of clicks really does matter.  Hence Google’s great results.  Hence their continued dominance.  Hence it’s hard to sell advertising if you don’t have an unfair click quality advantage.