From Istanbul To Sand Hill Road

Marketing is More Than Search

Today I spent some time at the Stanford AlwaysOn conference and the accompanying CEO Showcase.  The conference had a few very interesting panels, one of which put together one researcher from Yahoo and another from Google to discuss the search paradigm.  Normally, this would result in a fun panel where at the end, everybody thinks what a great company Google is.  Not when the Yahoo representative is Dr. Usame Fayyad, who I've known for a number of years and come to have a great deal of respect, especially when it comes to makings sense out of data.

It was one of the rare instances where the Yahoo representative was more insightful and more importantly held the intellectual high ground.  Question after question, Usama built the case that marketing is more than search.  Having a portal, and content gives the media company a lot of rich information about the user that could be more important than what that person is looking for at an instant in time. 

To drive this point home he gave an example of a marketing campaign that showed banner ads for a period of time, following text ads that referred to the banner ad.  In this case there was material increase, I heard more than 200%, in click through rates.  So you show some banner ads, educate the consumer, then you show a text and and voila! the click through rate goes up.  Makes  a lot of sense.  This is a differntiating data point for Yahoo to show because Yahoo can offer both to their advertisers, and Google can't.  You can do a lot better if you had a number of tools, as opposed to just search.  This was the gist of his message. 

All of this is true and interesting, but I think it misses something.  Sacrificing simplicity for efficiency is a mistake.  Google has some 100K credit card relationships with small businesses all of whom hate complexity.  Adwords works because it's simple.  How can you possibly have a self-service system where a small business has to optimize a number of banner ads following text ads?  They have to build the banner ad, figure out frequencies.  It would be a nightmare.

You can increase efficiency by lowering your price to the end user, but once you give up simplicity you lose the customer.  So all the properties Yahoo, has and all the information they collect about their users, is irrelevant unless they make it absolutely simple.  Yahoo needs to 'design the experience' for the advertiser around simplicity.

The moderator, Bambi Francisco, (who was unfortunately a lightweight to moderate this panel, and it showed) asked why Google didn't show historical frequencies of keywords, and the answer given was simply that it wouldn't make the solution simple.  They get it.

So this panel showed clearly where Google and Yahoo are coming from.  Yahoo knows a lot more about the consumer than Google, but needs to find a simpler way to bring that knowledge to the advertiser.  Google may not know as much about the person putting in the keyword, but they sure make it easy for the advertiser to put an ad in front of the consumer.  The catch is both companies have scale getting to customers, but the battleground is getting advertisers.

"My Users Are Not Your Salesforce!"

That is what Myspace is saying when they block 3rd party widgets that divert users away from Myspace.  Techcrunch covers it here.  They are also showing the world how much they love YouTube.  The security flaw they are fixing is the perfect excuse to add this feature.  They've taken a page out of recent politics.  Well done.

It's the right thing to do for them.  Comments on the Techcrunch article mention how it's killing viral growth etc, and yes that is true.  A lot of people relying on those widgets to get them traffic will be adversely affected.  But the viral growth of a third party using Myspace, is not Myspace's problem.  They don't want anybody hijacking their pageviews.  Period.  I called this long time ago here after asking this very question to the CEO of AOL.

The blogosphere is ranting about how competitors will be all over this.  I disagree.  This is a perfect chance for big players to collude.  Just watch.  Welcome to the new Web 2.0.

Unconventional Success

Unconventional Success is a book about personal investing which shows Warren Buffet-like clarity of thought and insight.  This should not be surprising at all, because the author, David F. Swensen, is a Warren Buffet-like investor.  He is the chief investment officer of Yale University and in that position delivered 16.% per annum returns for two decades (that's twenty years, 20).  So when somebody like him writes, we read, and learn.

The book teaches us that for institutional portoflios, 90 percent of variability stems from asset allocation and 10% from security selection and timing.  Basically, you should spend most of your time on asset allocation and not on stockpicking.  Swensen's key message is that there are three big variables to consider when creating a portfolio, which are 1) Equity bias - a big chunk of your investment should be in equities, 2) Diversification - optimizes risk to return, 3) Tax sensitivity - an often forgotten piece of the puzzle that effects ultimate returns to investors.  Why these three variables?  He answers that by showing the long-term historical impact of these variables on return relative to others.  So optimizing for these three variables, Swensen comes up with six core asset classes that one should invest in.  They are:

1) Domestic Equities

2) Foreign Developed Market Equities

3) Emerging Market Equities

4) U.S. Treasury Bonds

5) U.S. Treasury Inflation-Protected Securities

6) Real Estate

With the right mix between these, Swensen believes that you can maximize the three variables he considers critical in long term success.  This part of the book is education on best practices.  The rest is about non-core assets and how investing in these will actually hurt the investor long terms.  What are they?  Mutual funds (all for-profit funds), hedge funds, private equity funds, buyouts and even Venture Capital (well he does make a small exception for top tier Venture funds :-)  Mutual funds, a very popular investment vehicle is missing.  That's for a good reason.

Example after example, Swensen shows how mutual fund industry has stacked the deck against the individual investor.  You will really think twice investing in mutual funds after you read this book, beware.  And that is what I most recommend.  It opens your eyes to how much you are losing when you pick mutual funds in your 401K carelessly.  I recommend this book to anybody who has a dollar invested in the stock market.

Thank you Casper De Clerq for recommending me this book.