Marketing, Economics, and the Web 2.0

The Sports Guy, using statistics, and the gambler’s fallacy

November 20, 2009 · Leave a Comment

Today my favorite writer – The Sports Guy – wrote an excellent column about Bill Belichick’s “reckless” call to go for it on 4th and 2 when his team was up by 6, on their own 28 yard line, with just over 2 minutes left to play. Much of the article goes into great detail on the problems inherent with relying on statistics in such a situation (see: Insane angle #1: Statistically, it was right move). But in Insane angle #2, he can’t help but pull out his own statistics to “justify” why the Pats shouldn’t have gone for it.

Unfortunately, The Sports Guy made an all-too-common mistake while doing so – providing a reminder that however dangerous putting blind trust in statistics can be, the problem is that much worse if you don’t understand them properly.

His argument was simple. Indianapolis had already completed two long touchdown drives in the 4th quarter. By punting, New England would have forced them to do it a third time. So, to “prove” his point, he asked someone to crunch the numbers on “the number of times a team started and completed three touchdown drives in the fourth quarter to erase a double-digit deficit and win an NFL game since 2005.” The answer he found was 4 – it happens less than once per season. He then started banging his head on his desk.

It sure looks like a perfectly reasonable, statistically-based argument, but there are some major flaws. The one I’m going to focus on here (another big one is switching from %s to a raw count of a known rare situation, which is almost always an easy but meaningless thing to do) is tied to what’s called the “Gambler’s fallacy” – the belief that deviations from expected behavior in the past are likely to be evened out by opposite deviations in the future. The common example is coin flips, but I’m going to use a basketball analogy – since that’s the Sports Guy’s favorite sport.

Let’s say your playing the Cleveland Cavaliers, and for no obvious reason whatsoever they run a play to get a three-point shot for Shaquille O’Neal – who has only even attempted one such shot in the last decade or so. The defense is so confused by this that they foul him, and he steps to the line. Even though he’s only a 50% FT shooter, he hits the first two. What are the odds of him hitting the third?

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Twitter popularity and Marvel Comics: an interesting difference between follower and list counts

November 20, 2009 · Leave a Comment

As part of my ongoing research, I’ve been paying close attention to developments around Twitter’s “list” feature (launched in October) – “A great way to organize the people you follow and discover new and interesting accounts.” Yesterday I stumbled upon an interesting finding (that has me scratching my ahead a bit) in relation to follower vs. list counts as a measure of popularity.

One would think that there would be a very high correlation between the two – if a lot of people follow you, you are likely to make a lot of lists. While I haven’t actually run a regression to prove that, as I’ve looked around it generally seems like a fairly safe assumption. But there’s one interesting anomaly I’ve found recently – @Marvel vs. @Agent_M.

@Marvel is “the official Twitter for Marvel Comics, Movies, Games and More.” Agent_M is the “editor for Marvel.com. Writer, blogger, loves tacos, tattoos, comics…” I’ve been watching these two accounts with interest for some time, because the former has about 43 thousand followers, and the latter has about 1.4 million. This would seem to say something important about relative popularity, and it’s interesting when the editor is more widely followed than the content.

But the “list” count tells a slightly different story. @Marvel has been added to 1,467 lists, while @Agent_M has been added to 1,234. So even though Agent_M has 0ver 30 times more followers, his account has been added to fewer lists. Divide lists Marvel is on by total followers you get 3.4%; for Agent_M you get 0.1%. ; Why is that? And what does it mean?

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Twitter, and the challenge of innovating while having an open API

November 12, 2009 · Leave a Comment

I was just reading about the Trouble at Twitter – how U.S. visitors were down 8% in October – on Tech Crunch. The CEO mentions that they’re hoping a “slew” (currently a couple) of new features will help revive growth on the site – such as the retweet button, lists, and geolocation features. It very well might – but it got me thinking about a peculiar competitive position they are in.

For most of the last year, Twitter has done very little innovation directly. But thanks to their open API, that doesn’t mean innovation hasn’t been happening – all kinds of new tools and applications have been constantly emerging. My question is centered around how they’re going to manage this ecosystem, as the company itself starts innovating more. There are more and more data points emerging that indicate, to me, that the line between partners and competitors is blurring.

Coming at it from one side, TechCrunch highlighted in September how StockTwits is growing up and away from Twitter, as they develop their own desktop app. To quote the article, “Yes, StockTwits is slowly breaking away from the service that inspired its name.” What should the company do if StockTwits, slowly but surely, starts to compete with them directly? On the other side, Lists are a step towards Twitter helping users sift through information directly – something TweetDeck already does (in a different, and more advanced, way). If Twitter continues to innovate on this front, what are the competitive implications?

It’s a question I constantly struggle with in our research – and it seems particularly relevant when a company is facing slowing growth (or a decline) in users, before they’ve found a business model. Could the ecosystem implode on itself? Or will they find a way to keep working with each other? What do you do if a current “partner” looks like a future competitor – and what implications does it have for prospective partners / the innovation cycle?

 

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Outvesting: A peculiar combination of localism, prosumerism, and capital allocation

October 28, 2009 · Leave a Comment

Every once in awhile I come across a story that, while interesting, makes absolutely no sense to me. Outvesting, which I discovered through Springwise, is just such a story. What the site has managed to do is raise $5,000 in seed capital, through 100 donations of $50 each, for a yet-unchosen Irish start-up to use. Those that have provided the capital will get to vote on who gets the money. Twitter has been a big part of how they’ve managed to accumulate the funds.

If I stop right there, it sounds like an interesting story of using prosumers to provide (an admittedly small) amount of venture funding, which is clearly targetted at people with a little Irish pride. But where I find it weird is in relation to the term outvesting. As the site clearly defines it, investing is “The act of committing money to a business while expecting income or profit in return.” Outvesting is “The act of committing money to a business while expecting to get nothing in return, other than the satisfaction of giving a leg up to Irish entrepreneurs.”

So the natural question, of course, is what exactly is the benefit of outvesting over investing? Obviously from the perspective of whoever ends up with the money, it’s pretty clear – they get money for free. But is that really a better model? Will it lead to better innovation? After all, the basic premise of investing is that the incentive to earn a positive return leads people to allocate capital to projects they deem most likely to succeed. With that incentive not in place, won’t more capital get wasted if an approach like this scaled at all?

Like I said, I find it interesting – but right now I just don’t quite get it. I’d much rather see a more traditional model here – using Twitter, micro-capital-contributions, etc. to allow people to invest in small, promising start ups. But am I just missing something here?

 

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Will ‘paranormal activity’ kill the ’snakes on plane’ mindset?

October 14, 2009 · Leave a Comment

A couple of months ago, buried deep within a post about the Memphis Grizzlies’ prosumer experiment, I made reference to how the experience of “Snakes on a Plane” using an innovative social media marketing experiment, and then failing to put butts in the seats, was being misread. In short, people seemed to jump to the conclusion that social media marketing didn’t work for movies – people might talk about it, but they don’t pay to see it. I proposed that it’s possible the movie was just bad, and you can’t blame social media for people not wanting to see it. I then tied this back to what the Grizzlies are doing, saying “remember to distinguish between whether the approach was wrong, or the underlying product was just too messed up to use it effectively.”

I now, finally, have a good example to back up the assertion. The success of the movie “Paranormal Activity” is all over the news. It is a low budget film, that’s used a slow (and staggered) release, driven by input from potential fans, to roll it out in select theatres (160 so far). Last weekend they averaged $49,379 per theatre – about four times as much as Couples Retreat (which, in fairness, was released in 3,000 theatres). You can read all about it doing a search like this, but the basic idea is that people got behind, word of mouth did it’s job, and it was a great, low-cost marketing move.

But the key lesson to me is simple. Social media allows messages to go viral – but you can’t really control the message that is sent around. So if the movie isn’t good, social media isn’t going to help you much. If it is, a lot of good things can happen. And as this trend continues, what’s really going to matter is not how you market yourself – but whether you can indeed come up with a better mousetrap.

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Leading brands from different parts of the Twitter Matrix

September 30, 2009 · Leave a Comment

padmasree 2Back in March I wrote about a potential framework for how different brands use Twitter. It’s a simple 2 x 2 matrix. On the X-axis I separate out brand and personality centric accounts – basically whether it’s a “real” human or a company / logo. On the Y-axis I separate out broadcast and conversation centric accounts, using “% of @reply messages” as a proxy for conversational activity.

I’ve continued to use this as high-level lens for looking at how companies are using Twitter, and I find it very useful. One of the main messages that derives from repeatedly doing the analysis is that while many people argue the RIGHT way to use social media is to have people-driven conversations, I believe that there are merits to each of the four approaches. To that point, today I thought I’d cover four different accounts that are the “main” faces of different brands on Twitter – each with over 1 million Twitter followers, and each residing in a different quadrant of the matrix. These four are @WholeFoods, @padmasree, @zappos, and @woot.

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How to make twitter better (for me): category and link filters

September 29, 2009 · Leave a Comment

I’ve been doing quite a few presentations on Twitter lately, and in each one I admit I’m still on the fence about the whole thing. At it’s best, I find it to be a very useful source for finding information I would otherwise have never located. But at the same time, I’m frustrated by the deluge of information. While tools like TweetDeck have helped, they’ve only taken me so far. And more and more I hear from people that want to want to use Twitter, but just can’t find a way to make it as useful as they think it could be.

So I sat down to start specing out exactly what would make it better for me – and two simple things seemed to bubble up to the top, and both are very simple. I’d like each Twitter account to be able to designate (say) 5 topics that they tend to tweet about, and then each message they send they click which ones they are relevent to. And I’d like the option, on an account by account basis, to determine whether I’ll only receive tweets with links in them.

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An age-old question about the ‘rebound’ in the wealth of Canadians

September 15, 2009 · Leave a Comment

Yesterday the Globe and Mail had a story about how the wealth of Canadian households had rebounded last quarter, after declines for most of the last year. While this is seen as positive news in regards to our economic health, I believe there’s an important element the report leaves out – wealth of Canadian households by age-group. My hunch is that older Canadians got a fair bit wealthier during this time period, but younger Canadians – on aggregate – treaded water while lurching into ever-greater debt. And it is this group of Canadians that I’m concerned about.

The reason I started thinking about this was simple. The article presents two key facts:

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Effectively broadcasting on Twitter: woot.com

September 11, 2009 · Leave a Comment

Yesterday I talked about how broadcasting – contrary to popular belief – can be a very effective strategy on Twitter. I gave two examples – Amazonmp3 and Whole Recipes – and decided I should provide a few more over the coming weeks. So today I thought I’d highlight another in woot.com, which is a pretty cool company anyway you look at it.

Woot.com, in their own words, is “an online store and community that focuses on selling cool stuff cheap.” What’s different about it is that the company sells one new item every day, and it stays up for 24 hours or until it sells out. For example, today’s offer is a Gateway computer – if you want one better get it before they’re all gone. And before I get to the Twitter account, you know how people argue all companies need to be nice, provide good customer service and all that? Check out there “what is woot?” page. Hilarious. Among other things, no you cannot talk to a live person, you can post a question on the board but there is no guarantee they will respond, there is no customer support, you can’t return anything, and if you think there’s a problem the product it’s probably your fault – so just Google it (though if you dig far enough defective products can be returned).

So basically they do everything most people recommend against, while attracting tons of traffic and customers – and tied to my underlying argument, their twitter account follows the same “against the grain” model. What they do each day is broadcast the deal -period. No @replies, no RTs, no conversations, just the deal. And they have 1,268,731 followers – good for #51 on the twitterholic rankings, right after the Zappos CEO (who as I’ve noted before, is a broadcaster himself). And what’s interesting is that even though they’re not “really” engaged, a lot of their customers are – you can check out some of the comments and stats here. Wikipedia highlights a variety of things that customers have contributed over time – status checkers, widgets, bots, etc. And if you dig through an @woot search on Twitter, there’s lots of people  promoting their various sales for them.

Now Woot might be a bit of an extreme case – but I would argue a lot of the examples from the “other side” of Twitter (extremely active, conversational, “always on all the time”) are extreme cases as well. For woot, broadcasting seems to work – and it’s an approach that makes sense given what the company does. And I’d also argue many companies could learn a lot from them…

(side note on Woot – check out this interesting “treatise” on whether or not they’re an indicator of financial stability).

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Effectively using social media in a way many social media experts hate

September 10, 2009 · 3 Comments

I’ve found there to be some common threads across many (I believe the majority) of the discussions about the “right way” to use social media. You might recognize some of them – it’s about conversations, not broadcasts; it’s about engaging with people, not trying to sell to them; you need to humanize the brand – it’s about people, not logos. Rare is the person that will stand up and say “actually, a brand doing nothing but broadcasting themselves and trying to sell stuff can actually work!” But I think it can.

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