AdWords comes to YouTube?

Just as I thought: Google has started to monetise YouTube, by recontextualising AdWords for the video paradigm.

Everyone thought $1.65bn for YouTube represented a return to dotcom-era excesses. In fact, the purchase made perfect sense - when viewed through the lens of Google's main earner.

YouTube gets 100m 'visits' a day. Let's say the cost of the purchase capital is 8%, about $300K a day. If Google puts some sort of Adword/AdSense equivalent into each view, it takes only a bid of $0.30 to cover the COC at a clickthrough rate of 1% - both well within normal ranges for Adwords advertisers today. Monetising the consumer's view of content, the same way AdWords monetised other people's web pages.

Bad business sense? On the contrary, it makes perfect (ad)sense. Especially given Google's underlying strategy - to cut out middlemen and reach consumers directly. Just as giving away gmail, Google Apps, Earth and the rest also makes perfect sense - because the goal is to drive further value into Google's core product.

How to earn a £100,000 income from consulting

If you'd like a six-figure income without the fixed costs of employing people or leasing property, one business that can deliver it is consulting - using your intellect and experience to provide a solution to someone's business problem.

I'm not talking about the 'professional consulting' you buy from Bain or Accenture; slick-suited attaché-snappers with MBAs are only one slice of the business of providing advice. Consulting to me is anything where you can say: this is the business problem; this is a desired outcome; I offer you a way of getting from problem to outcome. And there are thousands of varieties of it.

If your skills are already there, it's perfectly possible to make £100,000 a year by following a few simple rules and putting in the numbers. Here's one way to do it.

Your first job is to decide what you're selling. Is it marketing consultancy? Management consultancy? Accountancy? Copywriting? Can you draw pictures? Write catchy tunes? To start out you've got to have at least one recognised skill that you've been using professionally to deliver value at work for five years minimum.

If you don't have one, get a job in the industry that interests you, then read this article again in five years.

Next, decide who you want to sell to. Open Excel and map out 12 profiles of companies that are in the market for your services, preferably the type of companies you've worked with over the last five years. Label these profiles Jan, Feb, Mar and so on in columns, then plot the criteria across the cells below.

A profile can be any clearly-defined set of criteria which would describe 100 or more companies in your catchment area. Perhaps advertising agencies of 10 or more people in London. Or medical clinics with 2 or more orthodontists. Or mortgage brokers with turnover above £500K. If you can't decide who's in the market for your services, you're probably not ready to be in business yet.

You've now got a clear idea of a) what you're selling, and b) who you're selling it to. Now onto the pointy bit: what you do to get customers. Here's the downer: to make this work, you've got to do it every day, without fail, no matter how early or late it is.

Each day, set yourself a your task of finding five companies in your market - five companies open to your pitch that'd benefit from your services but aren't doing so at present. Plan to approach the first of your 12 profiles in January, and so on. This will take about one hour a day, every weekday, forever. Some sort of CRM tool to keep track of who you're contacting is very useful - I use Salesforce.com.

(Five... and ONLY five, please. It's a figure low enough that you'll still treat each new contact as a valuable human being, not a piece of data. And treating them as individuals will show through in whatever you write or say to them.)

Next, write a letter to each of their five Managing Directors. It can be a form letter, but you must PERSONALISE each letter. And not just with the director's name. Make sure one paragraph and the PS is about his company alone. Mention his turnover, or a new product, or a recent quote he provided to a journalist. You're not broadcasting to 25 companies a week; you are addressing each Managing Director individually.

The letter must be absolutely honest about your abilities, clear about what you could bring to his company, and take up a single page of A4. Include a call to action - 'Can I visit you on Monday?' is the right sort of thing.

The target is to get one Managing Director of those five to agree to a phone conversation and one in five of those to agree to a visit. That's one visit a week.

Between one and two weeks after sending each letter, phone the MD. Not to sell, just to ask if they got it and remembered it. (Most won't; expect to send copies.) Only two in five will be available, ever; expect to make 6-12 calls to reach each. When I talk to them, I don't 'sell'; I ask what they thought of the letter - whether they think I talked about them in an appealing way. Let them talk, giving you insight. Then - if they seem a strong prospect for your services - ask if you can visit.

When you make the first visit, you're not selling either. You're presenting a business option to the Managing Director that might be worth his while. The way you do this is to take along an example of something you've done for another company.

"Company X is about the same size as you. We discovered 1 in 100 visits to their website resulted in a sales call. So I proposed to add one web page on a useful subject to their site each week, with the goal of raising pageviews fourfold within one year. Their conversion rate was 25% and average sale £900, so that activity added 1000 visits each month, resulting in 10 fresh leads a month and 300 additional sales a year.... that's £270,000 added to turnover. That represented an ROI of approximately 300%."

Your goal for this meeting is to open the director's eyes to 2-3 activities or programmes of work you could deliver. Ask if it'd be okay if you costed up a couple of these activities to see what sort of ROI they could deliver; you're doing this because you're interested in his business. Once he agrees, leave with thanks. He won't call back, but he's demonstrated he's open to ideas.

Two weeks later, make a follow up call plus a costed example or two of the sort above, custom-created for that company. (You're recording all this activity in your CRM tool, so you can track how well your drive towards £100K is going.) If you're on track, one in four of the companies you've visited will agree to take you on. It will take several more visits and 5-10 days of unpaid work from you; there will be three months between that first letter and a new client.

When someone agrees to become your client, start thinking about what you'll charge them. And not before.

Your fees should always be based on what they'll get out of you, not what you'd like to charge. It's not your client's job to decide what's profitable for you. Start with the value you feel able to bring to the client, and work backwards. If handling a mailing programme for a kitchenware retailer will deliver 100 sales a month of £250, your fees and costs should be below £5K a month. Is that worth your while?

Here's one way to decide: use 'Chunk Theory' - what unit of output represents the minimum volume of work you'd get out of bed for? In this case, your chunk may be £1250 - the amount you're charging for mailing and managing 1000 or so kitchenwares buyers each week. Once you've decided on your chunk size, stick to it across all clients; decide what job of work you can do for them for precisely one chunk and use this as a constant in your projections.

If your chunk size is £1250, you need to complete 80 chunks a year across your client base to hit your sales target; maybe four clients worth 20 chunks a year each? You'll soon see if it's reasonable or not.

Keep at it. In six months you'll have made 600 contacts and visited 24 companies. You'll have three clients on your books and three more realistically coming online in the next three months. You'll also be attuned to thinking in terms of your client's ROI, not profit in your pocket; your profit is a consequence, not a goal.

So make your best effort to track the ROI for your client and report it monthly and honestly. If it'll take a year of segmenting and splitting to get to that 300% ROI, make that clear; after all, you want long-term client relationships, not quick wins. Act as if you're on their team and demonstrate your concern for THEIR business, not your own.

Lastly, remember that each client has a natural lifespan; for me it's around two years, after which they're capable of doing whatever I've done for them inhouse or they can no longer justify a budget for something that's working smoothly. I say goodbye, and stay on good terms with all of them. This isn't a bad thing; it keeps your business lively.

So keep mailing 5 new prospects a day, count your chunks, and make sure you're completing enough chunks a week to stay on schedule. And six months from today, your annual revenues will top £100,000.

When it'll be time to start thinking about £200,000.

New Labour: true colours starting to show

This makes a scary read... but not a surprising one. As New Labour turns gradually back towards Old Labour, its socialist tendencies are re-emerging. Here, the belief that the State has a right to basically everything you earn, and that anything left over is graciously granted to you by the State, rather than being yours to start with. Definition of a Socialist: someone who's really, really good at getting their hands on other people's money.

The Theory of Chunk Value

A thought popped into my head recently, which I call 'Chunk Value'. (The idea, not my head.)

Your Chunk Value is the smallest unit of money you feel good about working for. It's the minimum amount you'd consider for a given project or job of work without feeling slightly resentful. It's the get-out-of-bed-without-grumbling fee.

For a coffee shop owner, chunk value is low - £2 or so, the price of a latte. For a car dealer, chunk value is higher - £10K or more (or £1K or more if you look at profit margins rather than sale price.) For a venture capitalist, chunk value may well be £10m and up.

Deciding on a business's Chunk Value (even better, determining it) can be useful, because it gives you a solid indicator of which projects to take on and which to turn down. For example, I never work for family businesses or private individuals... and doing a few quick calculations from the past, I notice those projects are ALWAYS the ones that carried low/zero profit, providing a concrete justification for something that, until now, has been just a personal preference.

I prefer to have a few solid clients rather than a writhing mass of them, so my 'Chunk Value' is quite high - £2000. That's the value of project where I start to actively chase and 'want' it, the point where I start feeling good about what I do, rather than just being a worker ant.

The Chunk Value Theory also part-resolves a business problem I have right now: growing my biz beyond an upper limit (I hit what appeared to be an earnings limit a year back, so I've spent the last few months re-evaluating the way I work.) For years I've been selling days, when I should have been selling chunks.

Recontextualised, it defines a longterm goal: complete a chunk a day!

I am a bit worried about private equity

Private equity is growing - now owning over a quarter of British industry, I believe. While it's great that sources of capital are available to entrepreneurs, the trend for major buyouts of established public companies is growing. And I'm a bit worried.

Here's why.

1. Private equity buyers aren't really using their own money. They generally finance a big deal by loading their target's balance sheet with debt so it can buy its own shares back. The imbalance - VCs essentially mortgaging the company's cashflow and not needing to pay it back themselves - creates an imbalance of risk, risk almost entirely taken on by the company's staff rather than its new VC owners. New financial instruments are now coming into play to mitigate such risks; I just hope they'll be well used.

2. Private equity drains cash needed for investment. With an eye on profits, companies owned by private equity firms tend to use over-optimistic assumptions about plant lifetimes and investment cycles; just look at Rover. When new models were needed, their answer was the CityRover - a car that looked good in Excel (cheap to produce, required minimal factory retooling) but in marketing terms a 7-yr old design that drove like a crate and fooled nobody.

3. Private equity doesn't think long term. With a horizon of 3-5 years max, the objective is to maximise margins and sell out, rather than build a sustained business. When they re-enter the market, VC-sold companies seem to have clapped-out assets and higher staff dissatisfaction than other companies. Their balance sheets will look similar, but all the things that don't appear on balance sheets but we all know are essential factors in business success - staff happiness, pent-up wage demands, freshness of equipment - give the company a hidden disadvantage.

With giants like Vodafone and British Airways now talked of as takeover targets, perhaps it's time to look again at takeover rules? (BA for example has a massive pension fund - in fact, it's basically a pension business with a small sideline flying planes. BA's staff may have paid into this fund for decades, yet a buyer would have few obligations to maintain it at appropriate risk levels; think of the pressures loading £20bn of debt into the business would put on a major line item like its pension fund.)

Here's an idea: what if private equity buyers of public companies weren't allowed to factor in the debt capacity of their targets when making their bids?

It'd mean they at least have to use their own money - which might make them a bit more interested in the actual companies, rather than the cash on their spreadsheets. Food for thought...

Bleeaaaaaurgh.....

To paraphrase a line from the great art-house classic 'Dude, where's my car':
"Whoa. I was really wasted last night!"

What I've learned about Customer Relationship Management

"Good and bad, I define these terms, quite clear, no doubt somehow,
But I was so much older then, I'm younger than that now." - Bob Dylan

A couple of months back I stopped taking on plain-vanilla copy jobs (mostly) and positioned the 'pump as a resource for executing SME marketing plans, acquiring and retaining customers with a managed conversation across media backed by CRM software like Salesforce. And the grey hairs are starting to show already. Here's what I've learned so far.

1. You can't be a CRM guy and a copywriter at the same time. It's like a kleptomaniac applying for jobs as as store detective. Since I started managing the whole kit and caboodle instead of just the wordy bits of a campaign, my £1000 a month Google budget has produced ZERO fresh leads. When people want a copywriter, they know what to look for, and if the site at the end of the AdWord doesn't smell of inky fingers, they're outathere. Whoosh.

2. CRM customers don't come to you. Copywriting customers do; when you're selling something that's limited in supply to fewer than 30 a month (days) and there are 16,000 prospects within 10Km of you, it's not too hard to stay busy. But tracking down CRM prospects needs proper salesy stuff like cold-calling and pavement-pounding; the clients that understand it are already doing it with someone else and those who don't understand it don't think it's useful. Bleah.

3. There's no opportunity for bullshitting. If you're on a day rate or project fee for a creative execution, there's always scope to apply creativity to your timesheets or dash off 1000 words of text in two hours (hypothetically). No such luck doing CRM. When you're selling a campaign on the whole basis of measurability, clients use any deviation from projection as a stick to beat you with. Ouch.

4. CRM budgets start small and get smaller. If a campaign projected 2% response and £150K sales in a £1.5m pipeline and the response came in at 1%, that's a reason to slash your budget by 50%. There can be no arguing, because you've given them that reason. Conversely, if it gets DOUBLE the expected response, that's... also a reason to slash your budget by 50%, since it proves you could have got the original planned response rate with half the money. Measurability and accountability, right? Doh.

5. CRM has nothing to do with software. Actually, I've known this since 2001, but it's always worth mentioning again. Since anyone with a remotely technical background will immediately think you're talking about the latest release of GoldACTForce.com and the conversation will swing away from customers and towards database standards. If you're designing a CRM campaign, forget the software and think about the customer needs and values. Aargh.

6. Software to assist CRM is only 10% as effective as you think it'll be. Unless you're marketing purely online - usually a bad idea - your software's usefulness decays on contact with real-world problems like white mail, job moves, project ownership and client conventions. There are economies of scale but it's damn hard to scale them. Huff.

That's what I've learned so far. But hey, at least it's more like having a 'proper' job!

Wheeeeee!

Dying for a Wii: a woman has died after drinking too much water in a radio competition to win a Nintendo. (What? An American guzzling something without any calories in it?) Just goes to show there's rarely any point in getting into a pissing contest...

The scorching days of winter

Red meat is bad for you. At least it is when you're tossing a steak into a pan and a cupful of oil leaps out and scalds your forearm.

Two days after the interesting spectacle of seeing a £2 coin-sized area of flesh simply peel away, it's still a raw mass under the bandage, so decided to ask a chemist's opinion. Explaining that I'd spilled some hot oil on my arm, she asked what kind of oil is was.

"Well, it was sort of a peppery Tuscan, nice with rocket salad and a bit of sea salt thrown in..."

Pause.

"No, I meant was it motor or cooking."

A case of giving too much information. Is this why they call bandages 'dressings'?

Dylan Nichols launches book

There's a new book on the way from Dylan Nichols, the coolest Australian I've ever got bombed in a southern Egyptian irish bar that didn't serve Guinness with.

(OBJECTION YOUR HONOUR! That sentence should be taken out and shot.)

That's what friends are for

I'm a really bad friend. I don't return calls, forget to answer emails, cancel nights out and never follow up invitations.

Then I thought: so what's wrong with adopting a formal approach to 'Friends Management', the same way I do prospects and customers? Actively scheduling followups and tickle dates etc as you would at work?

After all, a friend relationship is no different to a customer relationship - they're both meetings of minds, between people who like each other, and you both want something out of it. (And if you reformat the idea for friends of the opposite sex, 'tickle date' can be much more interesting than merely contacting someone on a specified day.)

So on Jan 1 I started putting my 'friends database' into salesforce.com. From now on, I'll be building 'friend relationships' in the same way as running a sales pipeline, charting the progress of a friend from first contact to breakup in analogous stages to customer acquisition & retention, as follows:

Identify new opportunity - see someone at the bar or gym etc you'd like as a friend
Initial contact - get name and other data from friend of that friend
Pre-approach - start nodding 'hi' to friend prospect when you see him/her
Initial communication - start chatting to friend prospect
Initial response - listen to friend prospect's chatting
Fulfill initial response - smile brightly and press for further info to make friend prospect more responsive
Further contact - phone or email friend prospect to say hi
Analyse opportunity - see if friend prospect will add value to your friends database, for example, if he/she is a low-maintenance 'work friend' or potential Best Friend
Needs assessment - is friend prospect likely to be the sort of friend who'll call you at 3am with a problem, or will the relationship be more equal?
Develop solution for customer - decide what kind of friend role this person would best fit into, for example the Sports Club Friend, the Drinking Friend, or the Friend who's a Friend of Someone Else and you Only Know his/her First Name
Present solution - propose an informal basis for a friends relationship, for example a monthly beer session
Customer evaluation - guide friend towards deciding if you can deliver him/her a long-term value add, such as introducing them to your friends (if female) or being the cool person everybody wants as a friend (if male)
Negotiation - the informal banter that goes on when splitting a bill or buying a round - valuable 'friends insights' can be gleaned from this behaviour
Revised solution presentation - decide if the friend is turning out as you expected, and revise your own appeal to this friend if not
Commit to buy - after 2-3 months, assign the friend a category (Best Friend, Good Friend, Friend of Opposite Sex) as a basis for your future relationship
Deliver solution - maintain programme of contacts and outings
Follow up sales - learn about friend's interests, hopes, and dreams, and be a good listener so Friend will consider the relationship worth maintaining!

As each Friend Prospect travels down the funnel towards Friend status, I will maintain momentum with a 'relationship management programme' of scheduled phone calls, text messages, emails, and face-to-face meetings, each planned to build on the existing relationship and offer the Friend Prospect value at each stage. Never again will I call someone up I haven't seen for a while, and discovered they've moved house, got married, and had two children in the meantime.

And that's what friends are for!

Condi's manoevrings

Hmmm. So US Intelligence head Negroponte shifts to the State Department. Could this be the first overt sign that Condi Rice is considering a presidential bid?

She's a wily one, that Condi - her judgement is an impaired as any neocon, but her intelligence is off the scale and her resolve and self-discipline are equally sky-high. (I doubt her rumoured lesbianism is anything more than whispers. I mean, if you were a black woman who'd climbed so high in life, the average black American male isn't exactly going to impress you, is he? Let's face it, the choice is between dating Colin Powell or staying single.)

She's never stated any interest in the Oval Office. But this makes me think she's gathering power around her in order to go for the nomination. Lot of northeasterners in her department now, and don't they hold meetings about this stuff in New Hampshire first?

Anyway, that'd be a real turnup in 2008: a waspish white (Hilary) for the rainbow'd Democrats, and the white-bread Republicans fielding a black woman as their candidate. What a contest that'd be.

Google's not the competition, it's the environment

Really enjoyed this article (thanks Paul, although not for posting the URL in the one part of my desktop where it can't be clicked or copied - the intro line of MSN IM).

Quote: "Yahoo could add an extra $1.5B to their revenue overnight by conceding monetization to Google and becoming a distribution partner for Adwords, as Ask Jeeves did."

We're definitely in the Age of Google: search as the start page of the Internet I mean, when did you last bookmark a URL? I haven't used my browser's bookmarks list in years. I think I'll enjoy it for now, because like IBM and Microsoft, the era has a certain natural length and in a decade or less something else will take over. But just in case, I'll continue using Anonymizer and disabling cookies, so Google's file on me won't be quite as voluminous.

Dreams again

Bit of a shattered one last night, actually. Dreamt that I was kissing TMBGITW (still in my thoughts, although no longer on my client roster) and she PINCHED me in the dream to wake me up! It worked, too; didn't drift off again for hours. What's all that about? My own subconscious is rebelling?

The hardest New Year's Resolution of all

I'd just like to say that when you're on a self-imposed one-month alcohol ban post-Xmas, evenings at home seem RIDICULOUSLY LONG.