See Crusty Sea: why internet marketing

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When it was first announced that IZOD IndyCar Series driver Danica Patrick would be officially making her debut in the NASCAR Nationwide Series for the 2010 season, the internet exploded with the fans blogging about what type of impact she would have on the sport.

With many unanswered questions because of her lack of experience behind the wheel of the heavier stock car, and the fact that her Indy car career was less than stellar at best.

The fans began to take sides after they realized she was serious about her attempt to try and compete in a series, which is nowhere near the types of cars she grew up racing in.

Before long, the first of many unsupportive jabs were thrown, when Kyle Petty, who is now retired, kicked it off with this rant.

"She's not Dario Franchitti and she's not Tony Stewart. She's not really shown over there [in the Indy Racing League] and won races and done stuff over there numbers-wise,” said Petty during the Sight and Sound which marked the unofficial start of the 2010 NASCAR racing season.

Petty also added, “She's just a marketing machine. Let's look at the facts and be blunt about it. If she gets in that car and doesn't win races, it's not the car, it's not the engines and it’s not the team.”

Petty finished with, “The only impact she'll have on the sport is she wasted two or three years on a car that a good driver could have been in and could have been developing.”

Janet Guthrie, who was the first woman to reach the top level of open wheel racing and NASCAR in the 1970s, along with being a member of NASCAR’s appeal panel said, "She should stay where she is in the IndyCar Series.”

Guthrie also added, "She is in the best possible situation, and in the catbird seat with one of the few teams [Andretti Autosport] that is capable of winning."

Earnhardt Ganassi driver Juan Montoya, who made his first start in 2006 coming from the open wheel ranks said, "Danica, I think she's got the talent and everything but I don't think she knows what she's getting into."

Montoya finished with, "They're so different to drive, and it's not the same feeling. I wouldn't be doing both cars, to be honest with you, that's my advice."

The fact of the matter is, the only reason she has gotten this much publicity is because she is a high profile female trying to make it in one of the most popular motorsports today.

Not only is she a female, but because in the sex-sells society that we live in, her success that she has had in the IRL falls more on the heels of selling herself as a sex symbol than a race car driver.

You can’t blame her sponsor GoDaddy.com for coupling their marketing skills with the racy commercials to sell not only their product, but Patrick as well.

"We're thrilled to expand our long-standing relationship with Danica into NASCAR,” said GoDaddy CEO and Founder Bob Parsons.

Parsons also added that, “This is not only big news for NASCAR fans; it has all the ingredients for some major GoDaddy-esque marketing magic."

Parsons thrust Patrick into the limelight with his unique marketing strategy, while just about closing the door for any female to have a chance in the series unless they are willing to follow his technique with the focus pointed at teasing members of the opposite sex.

Each fan who chose to do so shared their opinion pertaining to the success that she could have in the series, and she will continue to be scrutinized until she can prove that her career is not based off her marketing power, and more on her driving abilities in NASCAR.

Skepticism ran rampant as the season progressed, and Patrick herself made it hard for the fans to gauge if indeed she had what it took to compete at this level, since her results reflected her lack of experience.

With each passing race, we heard the watered down versions of why she might become an overnight success, with most of them based on her one victory that came in the IZOD IndyCar Series.

Patrick ran a total of 13 races in 2010 without a top-five, or top-10 finish, and only finished one race on the lead lap.

With all the hype and expectations that followed her into the Nationwide series, she only lead four, and completed 2040 of the 2355 laps she ran during the year, which to most was a big accomplishment given the fact she only competed on a part-time basis.

Until Patrick makes a decision to drive full-time in the NNS, or continue her career in the IZOD IndyCar Series, she will continue to be put under a microscope of uncertainty concerning her driving abilities in NASCAR.

The consensus around the internet has gone both ways, as far as how much success she could possibly have if indeed she chose the NNS over her open wheel career, with no in-betweens.

Editor’s note: Brand dollars are still the biggest unclaimed prize on the interent. Guest author Steven Carpenter handicaps the players who are most likely to get them.

One of the biggest business opportunities in the consumer Internet space is to create products and services that attract a share of the billions of dollars in held-up brand marketing that has yet to find its way onto the web. With the explosion of various kinds of content and the innovative ways advertisers can segment and track users, why are marketers so reluctant to open up the floodgates? Quite simply, because the current online solutions—search, lead generation, display, video—do not provide a high enough return for these kinds of categories and are not consistent with the image these brands have invested so heavily to achieve.

Commensurate with the potential riches, there is an enormous amount of startup energy and experimentation going on in this area. In this installment of the TechCrunch Teardown, I will look at the four leaders—Facebook, Twitter, Foursquare, and Groupon—and how their new interactions—“like”, “follow”, “friend/check-in”, “group coupon”—are fairing with brand advertisers.

The $20 Billion Opportunity

According to Ad Age, the Top 100 Global Advertisers spent over $100 billion in 2009 across the various print, television, radio, outdoor, and Internet channels; based on data from the previous year, 39 of the 100 had budgets of $1 billion or more (see table 1, click to enlarge). Procter & Gamble, manufacturer of 50 leading brands (such as Tide, Dawn, Pampers, Gillette, and Crest), of which 23 generate $1 billion or more in sales, is the world’s largest advertiser, spending close to $9 billion annually. It should follow, then, that the Internet economy as a whole is effected by how the brand managers at these companies decide to allocate their funds online.

As you can see from the last column in the table at right, the leading marketers are only spending $1.8 billion, or 2.6% of their total budgets, online, despite the fact that consumers are spending close to 30% of their time on the Internet. Of the top marketers, only General Motors, Disney, Bank of America, and News Corp. allocated more than $100 million to the web.

So who has found the best marketing value online? Companies that market and sell financial services, insurance, automotive, communications and media, and consumer technology. It makes sense: these are companies with products that can be found easily using search, and whose customers are most likely to be acquired online because they can transact online. To date, Google and vertical content sites such as Yahoo! Finance and Bankrate have been the largest benefactors of these re-allocated dollars.

New Kleiner Perkins partner, and former Morgan Stanley analyst, Mary Meeker, estimates that closing the gap between consumer attention and ad dollars spent on the Internet to be a $50 billion global opportunity. If the Top 100 marketers bring their marketing budgets in alignment with 30% of time spent, I estimate online brand marketing to be a $30 billion global opportunity and $20 billion in the U.S. As evidenced by Google’s recent pursuit of Groupon, its traditional CPC and display advertising may not be sufficient enough to meet these marketers’ needs.

The Four Horsemen

There are four Internet companies currently best positioned to work with brands to create innovative marketing solutions that will appeal to millions of consumers—Facebook, Twitter, Foursquare, and Groupon. I acknowledge it is not exactly a fair comparison for two main reasons: 1) Facebook has enjoyed a 3-4 year head start on the field and 2) each product has a different use case and thus attracts a different audience with distinct revenue opportunities. Each company, though, has found its way into the mainstream and now finds itself with an attractive platform for brand experimentation.

I see the four product experiences these companies offer on a continuum of online-to-offline interaction on one axis, and requiring passive-to-active behavior on the other. The Facebook experience, for example, is largely an online one where a user can say something about herself by associating with a particular brand by “liking” it. This is an incredibly passive expression that requires a split-second action with little to no long-term repercussions. She can choose to visit the brand page and see the news feed at her convenience.

Twitter, on the other hand, is a personal tool for gathering realtime information—no one knows which feeds the consumer decides to consume or to ignore. While Twitter is similar to Facebook in its largely online-focused consumption, it is a much more “active” medium. Users are constantly reminded when they are following a brands’ information stream. As soon as the information becomes unimportant, too frequent, or spammy, she will simply cut off the connection.

Groupon (which I wrote about in an earlier teardown) is the lightest application, ironically, even though it is the only one of the four that requires a user to make a purchasing decision. Transactions occur easily online and the offline experience of presenting a coupon is consistent with decades of proven user behavior.

As of now, Foursquare asks the most of its users in relation to branded campaigns, but it is also the closest of the four to placing customers in the physical proximity of brands and retailers.

How They Are Doing

You can see how the four different interactions 1) naturally lend themselves to different brands and 2) exhibit a large disparity in terms of the sheer number of participants. And this is not necessarily a bad thing: 44,000 passionate luxury fashionistas at NY Fashion Week may be more valuable to Yves Saint Laurent than 5 million fans on Facebook.

It should come as no surprise that the biggest brand in the entire social ecosystem is Coca-Cola with 20 million Facebook Fans. Whole Foods is the biggest brand on Twitter with 1.8 million followers and the Gap, having sold 440,000 half-off coupons using Groupon, is that startup’s largest brand experiment.

Of the top 50 pages on Facebook, 8 of them are leading advertisers and brands, compared to Twitter which doesn’t have a single brand in its top 50 users. Of Facebook’s top 50 brand pages, 31 of them are food and beverage companies, while 11 are consumer products such as Converse All-Stars and Victoria’s Secret. The most important takeaway is that brands have a far greater following on Facebook than they do on their own sites. Facebook’s best move has been to convince brands to market their Facebook pages rather than driving traffic to their own websites.

The most interesting finding is that what seems to be popular on Facebook is not so on Twitter. If you click on the table at right an dlook at the top 50 brands on Facebook, the “Follower/Fan Ratio” (the result of dividing the number of Twitter followers to Facebook fans) does not get higher than 8% (Disney). This indicates that Twitter might have a more difficult time than Facebook in attracting overall brand dollars with its current product feature set.

This is evident when you look in detail at one CPG company and its portfolio of brands. I did a comparison of the differing success of P&G’s top brands using the two platforms (click on table at right to enlarge). In every case except one (Dawn), the branded experience on Facebook is more popular in terms of numbers than on Twitter. In a few cases, there does not appear to be a reason for even having a Twitter presence. It is interesting to note that the most followed P&G Twitter account is the company’s own corporate PR team.

Facebook still has a lot of work to do and it is far from a foregone conclusion that it has won. While the lightness of its interaction makes getting to scale easier, maintaining enough valuable interactions on the branded pages and engaging long-term customer interest is a huge challenge. For example, according to eMarketer, nearly 1/3 of Facebook users who unsubscribed from a branded page simply were no longer interested in it. And, more to the point, simply because Coke has 20 million Fans does not necessarily mean Coke will pay for the privilege to advertise on Facebook if it cannot see a return.

So what brands seem to be working well on Twitter and far better than on Facebook? Daily deals, such as Dell Outlet, Amazon, and Woot, and companies that place customer service and community at the heart of the brand experience, like Zappos and Etsy, exhibit the most lopsided Follower/Friend ratio. It is important to note that two companies that had horrific customer service challenges over the past few years—JetBlue and Toyota—have fully embraced Twitter as a direct communications channel. The biggest driver of Twitter success as compared to Facebook is the timeliness of the information.

Twitter, then, is well positioned to capture marketing dollars from companies optimizing for deals, retailers that have frequent specials, ticketing and events, movie studios, television shows, last minute deals, airlines, and hotels.

It is still early days for both Foursquare and Groupon in terms of working with big brands. Foursquare has seen traction with high-end luxury and media brands, likely as a result of its headquarters being located in New York and early media partnerships. Of course, Foursquare’s long-term viability as a stand-alone “check-in” company is still an open question with Facebook Places breathing down its neck. This is a strategic move on Facebook’s part to get closer to offline actions, transactions, and local commerce.

While Groupon is the defining company of next-generation e-commerce, it has a tougher road in terms of working with brands and large retailers. These companies tend to be more sensitive to heavy discounting as they don’t want to train their customers to wait for 50%-off coupons. And, they don’t like to be so indiscriminate with their offers.

Overall Assessment

I evaluated the four companies along the six different types of offers and campaigns that I can see consumer brands wanting to engage in:

Coupons: Simple discount off purchases

Location: Physical check-in or product scan

Loyalty: Frequency, “Mayorship

Time-based

Special Events: VIP’s

Inventory Close-Outs

Based on my research, while Facebook, Twitter, Foursquare, and Groupon are the best positioned to capture the estimated $20 billion in pent-up consumer marketing dollars, none of the four are currently optimized to execute along all of the necessary dimensions. There are considerable opportunities for startups to innovate and capture share. I look for this to be one of the most attractive areas for entrepreneurs in the consumer internet for years to come.

Bugatti teardown photo credit: Flickr/David Villarreal Fernández

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Tuesday, December 28, 2010

why internet marketing

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