SETH GODIN: ideavirus NEWSLETTER.
What to do after you create an ideavirus...
As marketers begin to realize that interruption advertising is no longer the best way to grow their businesses, their attention is turning to ideaviruses. Procter & Gamble, Kraft, Coke and the other fabled brand marketers built huge businesses optimized around the idea that you could make $105 in profit if you spent $100 on TV and newspaper ads. This simple equation led to billions and billions of dollars of advertising expenditures and the creation of entire industries. As the equation gets less and less effective, many of these businesses are getting more than a little nervous about their future. And rightfully so! After all, just because they're optimized around one business model, there's no reason to believe that they are likely to make the transition to a new one. I don't think Wisk or Tide or Coke or American Cheese Singles have much of a chance in interactive media. We're looking at a fundamentally different set of rules, and it's going to lead to a new range of products and services as well. That brings us to the topic at hand: presuming you can build an ideavirus around your business, how can you make money from it? Ideally, you'd figure that out BEFORE you launch the ideavirus, of course, because building it in from the beginning is essential. I want to talk about a few different models I've seen that have impressed me. The first is Paypal (all links are at the bottom of this email). Paypal is absolutely brilliant, and five million users so far is proof. Paypal lets you pay for an auction item or other online purchase with a credit card. So you go to the site, type in your credit card and the email address of the seller. Boom. You send them money. Sure, it spread. After all, in order to send money, you need a sender and a receiver, so it's viral. As sellers started accepting Paypal, they spread the word to ever more buyers, who spread the word to more sellers, etc. But viral isn't enough. After all, it costs 3% or more to process a credit card, so if they lose money on every transaction, it won't be long until they join the sock puppet in the dot com trash heap. That's where the brilliant monetization part comes in. First, Paypal limits your credit card only payments to $500 a year. That's about $15 in costs... a very small price to
pay for acquisition costs. Second, after you use up the $500 limit (but are hooked on the convenience and security), they make it easy for you to enter a checking account, allowing them to do electronic check debits. And that, my friends, costs them nothing. Third, they make money from the float. All the time the money is rushing through the system, they're collecting interest on it. And fourth, they're now charging the commercial users of the service, who are happy to pay because it's cheaper and more reliable than taking a credit card. Of course, the big question is why an American Express or other traditional marketer didn't figure this out. The answer is simple: it's 180 degrees from the old way. Instead of running a bunch of full page ads in the New York Times, Paypal unleashed an ideavirus. Good for them. Next up is Norh, a tiny high end stereo company in Thailand. They have one of the most--let me put this in the best possible light--unique site designs I've ever seen. Doesn't matter, though. In one year, with no ads, no long distance phone calls (it's all by email) and nothing but an ideavirus among the hive of high end stereo fans they've built a tremendous success. They're not making it as smooth as they could, but that's probably part of the charm. Given their location and the crowded market they're entering, their success is remarkable... all because they figured out how to turn site visitors into buyers and buyers into sneezers. Third is Vindigo. Vindigo, as you may know from the book, is a huge viral success on the Palm. If you don't have it, and you live in New York, LA or any of the other cities they now cover, you should get it. It's neat. So now they've got permission from hundreds of thousands of people to make location-specific recommendations to people about to spend money on food or shopping. How to monetize it? Clearly, the big win is to put the right ad in front of the right person at the right time. Pervasive local advertising, completely measurable, delivered on a performance basis. This is the dream of digital media, realized. But there's a problem. Selling local advertising is really, really hard. You can never find the decision maker. They rarely have a budget. It's hard to collect on your bills. In short, you need a ton of salespeople and a lot of time (the way the Yellow Pages did it) to build a monster of a business. But wait! Maybe there's another way. Maybe Vindigo could turn its biggest asset into a secret weapon. What if Vindigo said this to its users: "Become a promiscuous sneezer! Bring your Palm with you to your favorite restaurants. Ask the owner if she'll sign up with us to give a $5 discount or a free drink to people we drive to the restaurant. We'll measure the results and only bill
them for the business we create." (of course, Vindigo cuts off the restaurants that don't pay, so getting paid should be pretty easy). "And, dear Vindigo user, we'll pay you a sales commission--forever--on all the money we get from any restaurant you sign up for us." Now, imagine this for a second. The first person who walks into Ming Tuy Chinese Restaurant (Food at its finest!) and shows it to the owner and pitches the deal will get a frown. The second one will get a no. But the third or the fourth or tenth or the hundredth one will finally get the sale. The owner will have an Alice's Restaurant moment (if you haven't listened to Arlo Guthrie's song lately, I recommend it. Listen all the way to the end). and sign up. Imagine running a startup company with one of the biggest salesforces in the world... hundreds of thousands of promiscuous sneezers, proving the power of your virus all day. My last example is the one you're reading right now. It's much more subtle, but in the long run, pretty powerful. After you spread the ideavirus, turn that attention into permission, and then turn that permission, someday, into revenue. Make it easy for people to sign up for your newsletter. Encourage readers to forward the newsletter around and have their friends and colleagues sign up for the newsletter (consider yourself encouraged). And then, over time, deliver anticipated, personal and relevant news that furthers your marketing goals. It sounds simple and it is. Maybe that's why so few people are following through. In the next few weeks, I'll tell you about one or two ways you could monetize this sort of permission. Have a great holiday!