I’ve had a number of people ask me about my approach to online lead generation. It has been a prominent element of a number of my projects, such as LoanSurfer and Ideaforest. Now, with Brill Street, it is again a core part of our strategy. I enjoy lead gen for a number of reasons: it’s measurable and highly analytical, results in rapid feedback cycles, offers many opportunities for optimization, and can create substantial value.

One of the most important concepts in lead generation is the supply curve. If you’ve ever taken macroeconomics, you know what I’m talking about. Here’s an example supply curve:

If you look at the chart, you’ll realize it is nothing more than a scale rank ordering of lead generation initiatives by unit acquisition cost. I had to create this one manually because Excel doesn’t offer this as a chart type. Apparently Mr. Excel offers a VBA supply curve chart maker, but I’m writing this on my Mac Pro so that’s not an option.

Creating the online lead generation supply curve

How do you create a supply curve for lead generation? Well, first you have to start with the data. Here’s the sample data used to create the above chart:

Enter your initiatives into Excel, with unit cost and results. Then order by unit cost. The chart is just an arrangement of blocks of initiatives laid out from lowest unit cost to highest unit cost. The height of each block represents the unit cost of acquiring a conversion. The width of each block is the quantity of conversions acquiring using that method.

Using the online lead generation supply curve

What good is an supply curve for online lead generation? Well, it tells us a lot of things in a very simple to digest manner. Here are a few key insights:

• The total area of each block represents total spending for an initiative
• The height of each block tells us the efficiency of each initiative
• Duh: Wide flat boxes = good. Tall thin boxes = bad.
• The distance from the vertical axis to a given point on the horizontal axis is a total dollar amount spent
• We can set a moving forward budget by setting a limit along the horizontal axis (anything to the right is over-budget)
• We can set a maximum conversion cost by setting a limit along the vertical axis (anything above is too expensive)

Whenever I’m working through a lead generation strategy, this is one of the key views I use to determine how to allocate resources and create moving forward budgets. Also, by tracking the evolution of supply charts you can learn a great deal about evolutions in the efficacy of your online marketing efforts. Perhaps I’ll cover how to derive some of those insights into another post.

The blogosphere has been speculating on the future of the “Google OS.” Many thought it would be based on Android, their open source telephone platform. When I read about Chrome’s protected memory spaces (via acquisition of GreenBorder in 2007 or so), I thought that it sounded more like an operating platform than a web browser.

Protection allows much more complex applications to run with lower risk of crashing or affecting other applications. I don’t know about you, but I haven’t had too many problems with this yet. But I guess Google thinks (probably rightly so) that it’s going to be an issue as applications move to the cloud.

By owning its own browser, Google can have much more influence on which features are built into browsers. I think it’s only a matter of time before Firefox and the other browsers include protected memory. And Chrome’s emphasis on fast javascript rendering is definitely creating a bit of a (great) arms race in that regard.

All of this dovetails with Google’s strategy of pushing toward browser based applications. Their Google Apps just came out of beta, and are making a good run at the enterprise… even threatening Outlook (long term). Google’s strategy is simple, and probably inexorable. They can provide high quality solutions for free because they make money from ancillary sources, e.g., advertising.

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I had the privilege of participating on a panel about ubiquitous computing at the 2009 Kellogg Private Equity and Venture Capital Conference yesterday. Other panelists were Tim Chang from Norwest Venture Partners, and Enrique Godreau from Voyager Capital. Participating on a panel with such august speakers is thrilling, but they set a rather high bar! Enrique’s background in ubicom dates back to Xerox PARC when Mark Weiser first articulated the term (around 1988). Tim Chang also has a long experience with ubicom.

Enrique spoke first, giving a flawlessly articulated explanation of the roots of ubicom and how it impacts our daily lives. Tim (in his usual thoughtful manner), put ubicom into perspective, threading it into his investment theses. Tough acts to follow!

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Recently I had the CEO of a local startup ask me about a branding strategy for his technology startup. He wanted to brand the company itself, and also create sub-brands for specific company products.

In some ways, that makes sense. Different products may appeal to different users. The more specific your goal with a brand, the more likely you can make it resonate with certain customers.

But there are reasons why most tech startups should create a single company brand, and avoid creating product sub-brands.

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As an entrepreneur, I’m into building value. That goes without saying, right?

When I started my first company in 1994, my only business plan was to make the $600 minimum monthly payment on my credit card for startup expenses. A brilliant and reasoned plan, I know.

When, in the first month, I brought in $25,000 I thought I hit the lottery (aside from the splitting headache from lack of sleep). Things only improved from there (except for the lack of sleep part). Very quickly I had 20 employees. Still, I had never stopped to figure out what I was doing, or more importantly what I wanted out of it.

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Effortless scalability. I want it. I’ll pay for it.

Planning a smooth scale-out growth of a web application can be a nightmare. You are never certain how popular the application will be. You can’t tell when the users will actually use the service. When your site hits the first page on Digg, you feel elation and terror at the same time. Even worse, it can be very difficult to estimate how your users will use the site, how many videos they will watch, and how many database updates they will trigger.

It is easy to set up a single-server web application, or even to separate the major tiers onto separate servers. But when it comes to scaling out to more servers, particularly more database servers, life gets difficult. You face data concurrency issues, latency challenges, failover needs, and backup requirements. Solving each of these is complex, time-consuming, and often expensive.

None of this is conducive to building the next big Internet startup. Solving the scaling issue is a necessary evil… for now. In my opinion, whoever fixes it will make a heap of money. It’s a commodity problem. Someone ought to fix it.

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The blogosphere is replete with references to an interesting post by Michael Mace, “Mobile Applications, RIP“. Michael believes that the age of custom mobile application stacks is dead. Instead, he posits, the mobile web is surging in importance, despite its being inelegant and inferior technologically. He points out that

“A platform that is technically flawed but has a good business model will always beat a platform that is elegant but has a poor business model.”

In principle, I agree with him, but his choice of language and approach to the issue suggest that technology comes first. As he says “A platform (subject) … has a … business model (object).” I don’t mean to sound like a third-grade English teacher, but this is an important distinction. Platforms don’t have business models (or at least they shouldn’t). Business models have platforms.

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Note: This article derives from a paper I co-authored in 2007, “Understanding Key Success Factors for Social Web Ventures”. It won first place in the Insightory.com competition. You can view the entire paper here. This blog entry is part of a series of entries covering social web ventures.

Metcalfe’s Law says the value of a network equals the square of the number of its users. Larger networks create network externalities, leading to competitive advantage. Users post on YouTube because there are more visitors. And visitors come to YouTube because there are more videos to watch.

Therefore, network size is key to a successful social web venture. More users and content than your competitors means more consumer value, which in turn creates a snowball growth effect.

But when should you start monetizing your traffic? Critics suggest that many startups wait too long to start monetizing. However, until we find revenue models that do not reduce consumer value, the wisest strategy is to hold off monetizing your traffic at least until you reach an inflection point (e.g., second derivative hits zero).

Most revenue models, such as advertising, reduce consumer value. Metacafe, which has long had relatively intrusive ads, launched nearly two years before YouTube, but continues to trail far behind the market leaders.

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I’m on the executive board for a very promising Chicago-based startup. The CEO and CTO consult me weekly (sometimes daily) for my thoughts and advice about various aspects of their business. We often shoot emails back and forth about industry news and events, and the activities of potential acquirers, competitors, etc.

There is one competitor in particular that has been creating a lot of buzz. Each time their competitor makes a big PR splash, I can see / hear the stress on the faces of the entrepreneurs. It’s a natural thing, and to a certain extent it can be helpful. But many entrepreneurs overreact to the activities of the competition.

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Note: This article derives from a paper I co-authored in 2007, “Understanding Key Success Factors for Social Web Ventures”. It won first place in the Insightory.com competition. You can view the entire paper here. This blog entry is part of a series of entries covering social web ventures.

Social Web Ventures

Despite the financial and market challenges of the dot-com crash, some companies not only survived, but flourished. Many new internet sites also emerged. Google hurtled past incumbent search engines like Yahoo and AltaVista. EBay grew steadily. Friendster and then MySpace appeared without warning. In 2005, YouTube began its meteoric rise.

These sites all share one thing in common: they are to one extent or another social web ventures. These ventures harness the social interests of their customers to create value, enabled by an Internet platform. This category includes obvious players such as MySpace, YouTube, Flickr, Wikipedia, and Digg. A less obvious example is eBay, a sort of social commerce site where reputation determined by other users plays one of the key roles in the platform’s success.

But what are the factors that differentiate a successful social web venture from a bust? Our user participation hierarchy provides the beginning of a framework for this sort of analysis.

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