Thoughts From The Cake Scraps

I have previously posted on Swoopo (Pure Profit: A Look At Swoop) and on the types of auctions they have. And as you can probably tell from the title, they are making a ton of money. Well apparently one Swoopo wasn’t enough so enter PennyCave.

PennyCave operates on the exact same concept as Swoopo. You purchase your bids from PennyCave and then you use the bids on various auctions they have going. But, they can’t outright copy Swoopo so they have their own set of what I call gimmicks to sucker you out of your money. If you don’t have any background on either Swoopo or PennyCave read my post on Swoopo which describes in detail how the sites work.

Gimmick 1: All Penny Auctions This is the most glaring gimmick that PennyCave has. By having each bid raise the price of the auction by only a single cent it makes the total price look very attractive. Consider seeing something worth $100 going for just $11.53. Then remember that that is 1,153 bids each at around $1. Swoopo has this style of auction but not each and every auction.

Verdict on Gimmick 1: Fails to help the customer or be less of a scam.

Gimmick 2: Discount On Bids If you buy bids in bulk you can save money. Since you waste the money anyway I don’t see that as a huge bonus, just a ploy to get you to buy more bids. I am guessing the thinking here is that while it is true that you will pay less for an individual bid, ultimately you will bid more than you would have with a standard cost bid ($1). Therefore, overall you will spend more money because you know your bids were cheaper, but who is going to calculate by how much? This also makes it difficult to see how much you really have into the site in bids because each bid may cost something different if you buy bids at different times.

Verdict on Gimmick 2: Fails to help the customer or be less of a scam.

Gimmick 3: Shipping Included This one is pretty self explanatory. In reality it is just another ploy to get you to think that you are not really spending that much. The real trick here is that in your mind you will look at an auction for $4.20 and think it is not so bad because shipping is included. That would be good logic if it didn’t take (at minimum) $315 in bids to get to that price.  And that is using a rate of 75 cents a bid, the lowest possible rate when buying bids and you have to buy $1000 worth of bids to get it.

Verdict on Gimmick 3: Fails to help the customer or be less of a scam.

Gimmick 4: ‘Auctions Live’ Time Frame This is another great example of ‘helping the customer’ meanwhile ‘robbing them blind’. By limiting the time the auction is live from 10 AM to 12 AM what looks a perk to you, the bidder, is really a scam by PennyCave to not let the auction end during an off peak time. By having bidding during a time that ‘you won’t miss the end’, guess what, neither will anybody else. That means that you will get to bid against everybody else and drive up the price and waste your precious bids. Time to celebrate this great customer service.

Verdict on Gimmick 4: Fails to help the customer or be less of a scam.

Gimmick 5: Fewer Live Auctions Clearly this is to minimize risk. Less live auctions means that more people will be bidding/betting on those auctions. On the plus side, you have less things to lose money on.

Verdict on Gimmick 5: Helps the customer control betting but ultimately fails to be less of a scam.

As you can probably tell I am not enamored by this site. It is very easy to get in over your head. Currently it looks like there are actually some good deals in the finished auctions section, but that is because the site is so new. Once more and more people start using the site it is only going to get worse and the deals with it. Just look at eBay and how they are moving from auctions to fixed price. It is not that you can’t get good deals, it is just that it is a lot harder to get the deal for the amount of time you invest.

The bottom line is to stay away from these sites – so called “entertainment shopping” sites – unless you go into it with a set amount of money that you are willing to lose. If you don’t plan ahead like this you are bound to end up over investing in the auction and come out way behind. Just look at this auction where there is over 900 bids (at almost $1 each) and the thing retails for just $280. Not smart.

This has been some Thoughts From The Cake Scraps.

In a recent article by the Wall Street Journal Activision’s CEO, Robert Kotick, hinted that instead of the current structure for the Guitar Hero franchise – where Activision must pay for the use of an artist’s song – the tables should be turned. The idea being that Guitar Hero is such a great channel for distribution of songs that it is actually saving rock ‘n’ roll.

It is worth noting that Activision – and video games in general – are different from radio in that Activision has a contract with the owners of the song whereas in radio royalties are paid.

This seems like a classic game of chicken. As you may have guessed, the argument of promotional value is not new to the industry. A band needs to get play time to become famous, though the internet is changing that slightly, and the radio station needs bands to make music otherwise the radio station has nothing to play. They both depend on each other to make money.

I think that the main difference in Activision’s situation is that they are not worried about bands trying to ‘make it’. They are giving new life to bands that were fizzling out in the next generation. This puts them in the unique position to make this work. The Guitar Hero brand is heavily, though not fully, dependent on good songs. People love the concept of the game and having classic rock songs is just a perk. Therefore, I would argue that while it may be difficult to have the next release of Guitar Hero be a smash hit with no headliners it would not be impossible. They could easily release some sort of “Tomorrow’s Rockers” edition that featured unsigned bands and sell plenty of copies.

Overall, this is a great move on Activision’s part because they know what their distribution channel is worth. The tricky part is to state your worth and not overstate your worth and be caught with your pants down. I think the music companies are dangerously close to the latter. The resurgence of some of their artists is because of Guitar Hero and more artists want a piece of the action.

This is why the music companies are in such a tough spot. They want to get paid for the songs, but I’m sure there is pressure from the artists just to get them in the game. They see it as a great avenue to get a new fan base. Now you also have Activision pushing back to the music companies and saying “why should we be paying you for promoting these fizzling bands?”. The music companies are being pressured from both sides and they don’t really have solid ground to stand on.

This is going to be very interesting to watch. Who’s going to win and who is going to chicken out?  And can you really apply this to your blog writing?

Thanks for reading the thoughts of The Cake Scraps.

Microsoft is trying yet another approach to get you to use Live Search.  Previously they have tried everything under the sun, including giving miles for flights such as Midwest Airlines.  Sadly the games there are nothing to write home about and it isn’t surprising that Microsoft went back to the drawing board.

This the aptly named SearchPerks is set up to give away tickets that you can the trade in for stuff (the perks).  Sounds alright in concept, but it is poorly structured.  Right off the get go you notice to win anything worthwhile takes forever (though they say during the promotion they will give away extra).  Here is a simple breakdown from Search Engine Land:

• 105 tickets (4 days worth of searches) = 1 ringtone
• 250 tickets (10 days worth of searches) = 100 frequent flyer miles
• 5,500 tickets (7 months worth of searches) = xBox wireless controller

The length of time is determined because you can only get 25 tickets a day.  Oh, and the promotion only runs until April sometime.

I wonder if they are taking the wrong approach to this altogether.  I really liked Yahoo’s “Search For A Cure” program.  The money is going to breast cancer research.  I also noticed that on a survey at Banana Republic the reward for filling out the survey was not a percent off or dollar off perk.  Rather it was some amount would get donated to a charity of your choice -from a list of 5 or so.

The fundamental question here for me is what are you really trying to do with these programs and who are you targeting?  It seems like with a program that rewards the individual user that when the perks end they will just stop using it.  When I consider the promotions that donate the money I think that the user gets to feel good about doing it.

Why is this such a big deal?  Easy, because when the promotion ends and the user was getting the perks they now have no reason to continue to use the service.  But if the perk goes to a charity, the user was not getting anything, but rather giving something, when using the service.  When the perk ends they are no longer ‘giving’ anything but also there is nothing that will make the user feel like something is being taken away from them – as is the case in a perk that rewards the user.

Another important point, in my view, is that the perk for charity is more likely to be picked up on a larger news site because the company is giving to a good cause rather than greedy users (from a public perception standpoint).  I think that promotions that give stuff away on the web generate a big surge of people trying to play the system and then just fall off.  No loyalty.  No long term PR to point to for the company.  Compare this to a news story about how the company is “doing their part” to help the world.  The company can use the promotion as a platform to point out that they helped while also promoting whatever service they were trying to get you to use.

So is this going to work this time?  I don’t think so because there is no long term perk for the user and I don’t see any reason to switch other than to “watch out for number one” and the stop after the promotion ends.  That is the thought from The Cake Scraps.

10/4 UPDATE: While I never said that Live Search was a failure – just that Microsoft is trying everything under the sun – there is evidence from Hitwise that shows that the Cashback promotion Microsoft is running may be increasing Live Search’s use.  Extra information can be found here and here but I still stand by my post that these are short term gains and use will fall off if/when these promotions are discontinued.

I just had the opportunity to watch Episode 97: “Airplane on a Conveyor Belt” and it was very interesting.  The question they were out to answer was “Can an airplane take off if it is on a conveyor belt that is moving the opposite direction from where it is trying to take off?”  Without much thought a person would say no.  I sure did.  My thoughts being that with the conveyor belt moving in the opposite direction the plane would just sit still.

WRONG

This brings us to 2 questions “why is it wrong?” and “how is that related to marketing?”

The first question takes some getting used to.  The Straight Dope has a good explanation and I will attempt to summarize it here.  The answer is in short that the speed of the conveyor belt does not matter.  A plane forces itself through the air via the engines.  The wheels spinning on the conveyor belt merely provide a way for the plane to have less friction with the ground.  The plane is not using the wheels to push itself the way a car does.  Essentially, the plane will move forward no matter what.

The best visualization I can give you is this: Picture a plane flying in the air.  Now imagine that its wheels are down.  Now put a conveyor belt in your picture moving in the opposite direction the plane is flying.  Does the plane slow down?  No, the wheels will just spin like crazy.  It has no effect on the plane flying in the air because the wheels are free spinning and are not a means of propulsion.  Get it?  The dynamics don’t change on the ground.

Here is another way to think of it.  If you were on roller skates and moved yourself by only pulling on a rope you would not have to exert any more effort to pull yourself forward on standard ground than on a conveyor belt.  The reason is that you are moving because of pulling on the rope and therefore even with a conveyor belt on the ground you will not move backwards, the wheels will just spin and you pull yourself forward as normal.  Replace you with a plane and the rope with an engine and you have this one all wrapped up.

So now on to the second question, how this has to do with marketing.  It reminded me of a simple fact of marketing: things are not always as they seem.  And beyond that even when you have the information it might be difficult to understand.

This all revolves around one thing: what is driving this?

The reason the plane example is hard to understand is because people think a plane moves like a car – which uses the ground to propel itself – when it, as obvious as it may seem, moves like a plane – which is not driven by the ground.  Understanding what is driving the plane is fundamental to understanding the answer as a whole.

This is the same as with marketing and web analytics.  It is great that people are coming to your site or people love your marketing, but finding out why they love it is the only way you can repeat it.  If you sell clothing and a particular ad drives people to the site you have success.  But what if the reason isn’t the product but who the product was on or what the setting was of the photo shoot.  Trying to turn that into a campaign – which you should be tracking – is going to be impossible if you don’t know what is driving the sales.  If you feature the same product but on a different person does it still sell?  Or perhaps is was the combination of all 3 that did it and you can’t reproduce the same thing no matter how hard you try.  You will be left spinning your wheels.

Whenever you start to read data coming in from your various campaigns, remember that that is all it is – data.  Data does not become information until you have context.  And context is only actionable if you know what is driving the whole thing.  The answers may not come easily, and it may be a ton of work, and even then you yourself and/or others may question the results, but if you have solid reasoning and understand what is driving it you are in a very powerful position; the position of having not data or even information, but knowledge.

I try and follow Jeremy Schoemaker over at ShoeMoney and was reading the ShoeMoney Biography and loved his “Coke Theory”.  Here is the Coke theory from that biography:

Maximum and diverse revenue streams are built on fairly narrow marketing concepts that are then diversified. This is what Jeremy Schoemaker calls, “The Coke Theory. If you are already making Coke then you can make Diet Coke, Cherry Coke, etc and turn a profit on those as well. A company can achieve growth through small degrees of separation between sites, maximizing diversity within a small industry.

That is so true.  Really you can substitute almost any major brand in there.  I don’t even know how many types of M&Ms there are now but it is the same concept.  Skittles even tried it with Chocolate Skittles.  Okay, bad example.  So it may not work everywhere but it is still a great idea.

Basically the Coke Theory is all about branding.  What can we do with the brand or how can we leverage it?  That is the question(s) the companies are always asking.  But it is also perfect for a brand you may not always think of, yourself.

This can be a difficult thing to grasp.  I mean think of how most of us go through college.  If you are like me, you just want a job coming out of college and you are not too concerned with where, so long as it is in the general area of where you want to be.  I constantly struggle with balancing technical skills with strategic skills.  How narrow should I focus my development to become a stand-out in my current position?  How do I balance that with not wanting to corner myself because it is the only thing I am good at?

I have found that the Coke Theory helps strike a balance.  It is alright to focus on one thing as long as you are not afraid to branch out later on.  Take on risk!  These things will not always fall onto your plate.  You have to request them and find them; ultimately you branch out.  That is a great way to grow your skill set because even if you fail at one of these activities you still have your core skill set to fall back on.

You are a brand and a core competency is critical, but taking risks to find new activities and responsibilities is where you will really learn.  So when you get back to your job take a second and ask yourself: “What flavor of Coke can I create next?”