Brands, Content & the LinkedIn Native Content Ad Exchange

I was at the Grow with Hubspot conference in London, where LinkedIn’s Jason Miller (Senior Content Manager and author of this huge guide) and Kipp Bodnar (Hubspot CMO) held a fireside chat about the future of advertising.

After so many years and given their struggle to bring more than 1 out of 4 members per Quarter on the site, you would expect LinkedIn to showcase some sort of innovation. Especially when the revenue growth seems to have slowed down and the past two quarters have been flat.

LinkedIn Native Content Ad Exchange

If you don’t have inventory on your own website, start expanding somewhere else. Like Google did with the Google Display Network, once it realized the potential beyond search engine marketing.

So why doesn’t LinkedIn do the same with content? Their revenue is driven by the Talent Solutions, accounting for 62% of the Net Revenues this last quarter and their Marketing Solutions account for only 19%. There is a huge untapped market here because marketers have a problem:

Millions of pieces of content are published every day, but there are very few trusted ad exchanges where brands can easily place authoritative content that positions them as industry leaders. 

LinkedIn has the brand and the influence to solve this problem as a Marketing Solutions product. Just imagine if you could bid for your content to appear on the Wall Street Journal, The New York Times, Forbes, FT.com all on the same exchange. LinkedIn would provide the platform for it, share the revenues with the publishers that insert the embedding code and the brands would pay for the exposure.

LinkedIn can build this as an iteration of Pulse or buy one ad exchange / native advertising company, but they need to grow their advertising revenue base because with it, they will grow their brand and with that, the users will return more often.

What do you think about this? Would it be something that a marketing person could benefit from or should we stick to the media agency contacting the media company model?

Later edit: Recent analysis points to the fact that LinkedIn needs to pivot towards diversifying revenue sources to hedge against labor market risks.

Photo via Michael Ruiz

Is the world purposely allowing piracy for a greater good?

Yesterday I was listening to the Quartz authored podcast called Actuality (it’s amazing, you have to listen to it!). The topic I had hit was piracy, Popcorn Time and movie industry disruption. For those who don’t know yet, Popcorn Time is a torrent based streaming app that allows you to see torrented movies like they would stream via Netflix or Amazon Prime. They were talking about how this is similar to the software piracy explosion in the 90s, to the music piracy explosion in the 00s and how both waves sparked an overhaul of their respective industries’ business models. And how companies & governments have stopped pursuing the individual.

popcorn-time-netflix

Maybe corporations were becoming too strong and they needed a competitor, maybe music producers had too much power over what artists sell, where, how and for how much. Needless to say, now both industries have pivoted into different pricing models, different revenue streams (SaaS, cloud, consulting for the software industry, concerts, merchandising, special events for the music industry) and new businesses continued to emerge in both fields. The same is planned for the movie industry. Too long have we been fed the same Time-Warner, 20th century Fox, MGM, (insert corporation here) content and we have seen too little mainstream independent content (well, Europe is an exception, we like them independent ones here, thanks to Cannes, TIFF and other film festivals out there).

Or perhaps there is a greater good behind this, too. Imagine a world freshly liberated from communism (Central and Eastern Europe) or transitioning from military / religious dictatorships to more open societies (Asia, Africa) where there was an insurmountable wealth gap between the people there and the ones in Western Europe, North America, Australia. How could these people get close to the culture of the western world? How could these people connect themselves to the up and coming digital economy that’s based on software? How could they unite the world youth under transcontinental hits?

One word: access.

And by access I mean piracy. Today’s millennials (yeah, I hate this word too) are the result of two decades of free access to Windows, Adobe, Office, Internet Explorer, countless games, music and movies that helped them develop a global mindset, skills and attitudes that makes it easier for them to work together regardless of nationality, race, gender that their older peers.

At first it was Kazaa, eMule and software download sites that were full of viruses, then there was the torrent revolution (Bittorrent, The Pirate Bay, Kickass Torrents etc), now there’s Popcorn Time with all its clones. Also, anons all over the world now have access to TOR, a hidden service that helps them protect their privacy when fighting against systems, governments and other entities.

What’s next? Which industry will go down? My bet is on the financial sector, with fin-tech and crypto-currency on the rise.

A customer who calls you every day is less profitable than one who pays on time and never calls you

coins-163517_640Managing customer profitability

As business models and contexts have evolved, companies have had to shift their view from ”by all means” customer retention to a new type of approach to customer relationship strategies: divestment. This was considered unacceptable in the past, due to customer acquisition cost and the race for market share. However, due to a different approach to segmentation and the technologies that aid customer value return tracking, divesting has become viable when the strategy is to focus on the right kind of customers.

Divesting is appropriate when a customer or a group of customers generates more cost than the value the company extracts from the relationship, deeming the entire business contract unprofitable. The downside, of course, is loss of market share (to competitors), reputation and distrust among remaining customers (sensing the potential of being divested next), if the process is not done in a correct way. What’s more, a smaller customer base means that the financial risk increases, due to the smaller spread base, if the company radically divests. Companies must also not overlook the legal and ethical implications of divestment, depending on the customer relationship and on the type of commercial contract they have in place at the time of the divestment.

Even with the many risks of divestment, as described above, a company must consider divestment if a specific customer segment is either unprofitable to begin with or if it has a significantly lower profitability, compared to the rest of the customer base. A shift it business strategy or a capacity constrain could also be the basis of a divestment strategy. What’s more, the company must also consider the morale of the employees directly involved with the divestable customer segment, as they become less motivated if their work does not produce the desired profitability, potentially affecting bonuses or promotion opportunities.

In order to correctly implement such a divesting strategy, the company must take certain steps in order to precisely determine the customer segment that requires a rebalance in the commercial relationship. The first step should be a thorough reassessment of the current customer and their financial potential (future spending, potential for growth). Then, the company must try to educate the unprofitable customers, manage expectations in order to restore the equilibrium. Of course, this is easier for B2B businesses than in B2C cases, as the volume difference requires different approaches and their inherent costs (human capital, communication budgets etc.). The next step is actually renegotiating the entire value proposition, in an effort to balance the value invested vs. customer value return. Once renegotiation has been attempted and failed, another approach would be to migrate the current unprofitable customer segment to other partners, providers or channels, retaining a portion of the value and keeping the customer in the business ecosystem, but with a reconfiguration of the service level. If this also fails, then the only option left is to divest, but in a way that minimizes negative fallout, through appropriate personal communication.

The direct effect of the internet and the entire technological revolution is that customers are becoming more informed, active and connected. This is a fact to be considered when devising the marketing philosophy of the company.
Companies must now migrate from the traditional, product-manager, approach, where marketing was a one-way, impersonal process and the segmentation, pricing, promotion and mass media communication needs was activated a posteriori. The new approach is a customer-manager one, focusing on multi-way communication and long term relationships, through direct interaction, data collection and analysis and solution tailoring in order to maximize the value extracted from every customer relationship.

This new approach requires the company to rethink its organizational structure, transforming the marketing department into the customer department, where a customer centric Chief Customer Officer constantly seeks to find out the real wants and needs of the customer. He is accountable for customer profitability via the CLV (customer lifetime value), customer equity and customer equity share metrics, reports directly to the CEO, pushes marketing leaders to interact with customers as often as they need and provides a framework for free information flow throughout the organization to facilitate data interpretation.

Managerial implications

But what are the general implications and potential improvements or spinoffs of the customer divesting strategy as an approach to maximize customer equity share and overall profitability?

In the effort to grow one’s business, some managers overlook the segmentation profitability analysis and tend to compare their success in respect to the overall customer pool and the company’s profitability as a whole, blocking potential boosts in profitability by focusing on just the high value customers. If this high value approach is not possible in the early stages of business development, managers must take into consideration the deployment of a flexible, fluid customer business relationship, in order to have the leverage needed to increase value as the relationship strengthens.

They should be able to monetize more service components according to load (charge the high maintenance customers more) and offer premiums to customers who are less cost intensive (never call and pay on time). This means that companies must allow a consultancy approach to business, rather than just a product/service delivery, diversifying revenue streams. This type of mixed approach also diminishes the risk of expectations misalignment, as customers know from the beginning what they get for what they pay (one time – product, periodic or on demand – post-sales services), influencing pricing policies company-wide.