Thoughts From The Cake Scraps

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?”

This post digresses a bit from web analytics but the business concept of Swoopo is so brilliant – but not endorsed by myself – that I had to post on it.  Before I get into this post I want to make one thing clear:

DO NOT USE SWOOPO!  YOU WILL LOSE MONEY USING THIS SITE!

Now that I have made my position clear I can get into how brilliant this site is for making money at the expense of others.  It is not customer service oriented and it is probably not going to have a ton of repeat customers.  What it will have is a huge pocket book as long as P.T. Barnum’s phrase holds true: There’s a sucker born every minute.

First I will lay out for you how the site works.  It is a ‘auction’ site…sort of.  Swoopo sells bids for $1.  Each time you use a bid on an item the price is increased by $0.15 for that item.  So here is an example:

Person A buys 5 bids from Swoopo for $5 total.  Person A sees an auction for $1000 and places the first bid.  The auction is now at $0.15.  Person A now has a sunk cost of $1 (the cost of the bid they used).  There is no way to get that dollar back, win or lose.  If Person A wins they must pay the $0.15.

Person B also purchased $5 of bids.  Person B sees the same auction and places the second bid.  The auction price is now $0.30 (because each bid increases the cost by exactly 15 cents).  Person B now has a sunk cost of $1.  If Person B wins they must pay the $0.30.  Swoopo now has $2 in the bank and the auction is at 30 cents.

This can happen with as many users as there are suckers to start accounts.  Why are they suckers?  Because everybody that does not have the top spot just loses the money they spent on bids.  *Poof* Gone.  If you think this sounds a little like gambling or a complete scam you are not alone.  People get swept up into the auction and don’t want to get nothing for the money they spent on bids.  I think you will understand it better if I show you an example of people getting ripped off on the site.

Please note that while the math in the laptop example assumes that the winner has to pay for the item, Swoopo has different types of auctions which are described in my post on types of Swoopo auctions.

An auction for a laptop that says on the auction page, and I quote, “Worth up to $1,399.99″  The winning bidder, as stated on the site, placed 2020 bids.  That is $2,020!!  And the auction page proclaims “Savings: 0%”  when it really should read negative!  So Swoopo made like $600.  BUT WAIT!  The auction started at $0.00 and finished at $3,353.85.  Now read that again.  They were already up $600 from the winners bids alone.  The winner sucker still had to pay $3,353.85 because that was the price of the auction.  Okay, so Swoopo walks away with a cool $4,000 pure profit.  (Like a bad TV commercial) BUT WITH THERE’S MORE!  Remember that bids are placed in 15 cent increments.  That means that if the auction finished for $3,353.85 you take that divided by $0.15 which equals $22,359 in bids!!!!  That brings total profit to $22,359 (bids) + $3,353.85 (auction) -$1,399.99 (retail cost of laptop, probably not their cost) = $24,312.86

This is not to say that there are no good deals on Swoopo.  The auction for $1000 finished at $568.20.  The winner of that auction placed 218 bids ($218 dollars worth) for a savings of 78%.  Why is it 78%?  because it is a 100% off auction  – see my post on types of Swoopo auctions– meaning that you don’t have to pay the final value of the auction (how sketchy is that).  In theory, if no one else would have bid, you or I could have spent $1 on one bid and won the auction.  If we would have won the other guys $218 would have been for nothing.  Now keep in mind that if this were not a 100% off auction that the winner would also pay $568.20 in addition to the $218 for bids.  Total investment: $786.20.  Is that really worth the risk of getting nothing?  I think not.

There are 2 kickers that I have to throw in yet.

1. Every time a bid is placed the length of the auction increases.  Therefore if a bunch of people “snipe” it at the end, the auction can go from 5 seconds left to 20 min.  Yeah.
2. And in case you were worried about the one who got away, Swoopo provides a “BidButler” that auto bids for you up to your set amount when someone out bids you.  If you are going to spend $1 a bid, please don’t let some BidButler do it for you.  After all they don’t call it “entertainment shopping” for nothing.

All said and done this seems like a little bit of a scam, praying on people that either don’t get it or are stupid.  If one were to use this site the only smart thing to do would be to research what auctions of stuff goes for and then place a single bid when it gets to that price and hope you are not out bid.  Anything else is just a waste of money.  That is, of course, if you ignore the fact that everybody else who has bid gets nothing.  It is a combination of eBay and gambling – more gambling (in that you must pay to bid but if you don’t win you don’t get anything).  Think of betting on red in roulette, you only get something if you win otherwise it is gone.  At least if you win there others can win as well.  If it were Swoopo roulette if you won everybody else would lose.

It is just amazing – and yet totally understandable once you get the mechanics – that this site made money selling $1000.  $3788(bids) – $1000 (cost of item) = $2788 profit.

Paraphrased Swoopo business plan in short: find 10 people to give us $10 each and one of them will get this $20 gift card.  Repeat.  Official Song: I Get Money

What do you think?  Scam?  Brilliance? Awesomeness? Just another web site?

10/6 UPDATE: Check out my new post on PennyCave, a Swoopo look-a-like!