Well, I can’t be sure beyond a reasonable doubt, so you be the judge. On Feb 2, I published this post entitled Viral Growth Trumps SaaS Churn, which makes the simple case that the best way to fight churn (exponential decay) is with virality (exponential growth). About two weeks later on Feb 15, Seth Godin published this strikingly similar post on viral growth entitled Viral Growth Trumps Lots of Faux Followers, which makes the simple case that the best way to fight faux followers (exponential decay) is with a viral idea (exponential growth).

Hmmmm…great minds must really think alike!

First I should say, I love Seth Godin’s stuff. I’ve snagged way more of Seth’s stuff than vice versa, for example SaaS Do #4 Craft a Compelling Story is completely Seth Godin’s and is the main topic of his book All Marketers Are Liars (and, is listed in the Chaotic Flow Worthy Reads blogroll). Believe it or not, my wife Christy is currently reading Seth Godin’s latest book Linchpin as I write this (and highly recommends it). But, IF Seth Godin really is reading Chaotic Flow, I think at the very least a pingback or comment is in order. C’mon Seth, share the love.

As an avid admirer of all things ironic and self referential (like…uh…viral growth), I couldn’t pass on the opportunity to examine this particular case study in light of itself. So, I am proposing a second order derivative viral growth vs. big followers principal of Seth Godin’s first order derivative viral growth vs. faux followers principle of the original viral growth vs. churn principle.

Highly Connected Followers Trump Viral Growth

Seth’s principle that Viral Growth Trumps Faux Followers claims that it is better to spread a good idea to a small group and rely on the strength of the idea to move it along through viral growth than it is to spread a mediocre idea to a big group of faux followers by brute force, because their interest will soon wane and your idea will eventually die out. I’ve recast Seth’s depiction of this principle in the chart below.

Seth’s viral growth vs. faux followers chart shows how many people are talking about your idea at any given time. This version, which is more in line with the original viral growth vs. SaaS churn post shows the total number of people who have heard of your idea.

There is an underlying assumption in Seth Godin’s viral growth model that when removed is the source of this new principle. Seth assumes Read more »

Quiz: What is the most successful enterprise SaaS application to date?
Hint: It’s not Salesforce.com

It is ironic, but the unfortunate fact is that most SaaS vendors see the Web as little more than the browser through which they deliver an enterprise software application. In fact, the phrase itself software-as-a-service, creates a subtle bias toward viewing the business as simply a piece of traditional software delivered on-demand over a network. Connecting an application to the Web unleashes disruptive economic forces that go far beyond multi-tenant architecture and reduced TCO. It enables viral organic growth, low cost customer acquisition, business productivity gains across-the-firewall, and new monetization models to augment simple license subscription. That is why the most creative SaaS vendors are realizing that the real opportunities for business innovation lie outside the firewall and are transforming their SaaS offerings into Web 2.0 businesses.

Below is a list of principles that can help you transform your low-cost, commodity SaaS into a high-value Web-based business.

Accelerate organic growth

• Master “free” online marketing tactics
• Streamline and automate the entire customer life-cycle

Reach out and become a hub on the Web

• Links, links, links
• Encourage community

Build the business into the product

• Automate the customer lifecycle
• Crowd-source new capabilities

Reach across the firewall to unleash disruptive economic forces

• Re-engineer external processes
• Integrate through the cloud

Monetize creatively

• Leverage the network
• Look beyond subscriptions

After I’ve had a chance to elaborate on each of these ideas in a separate post, I’ll provide the answer to my somewhat trick question above.  However, I’m hoping that the solution will emerge as obvious.

For better or for worse, I am old enough to remember the reengineering craze of the early nineties.  For those of you that are under 30, this was a monumental hype cycle throughout the technology consulting industry centered on redesigning business processes for order-of-magnitude gains in productivity by leveraging new client-server technology.  It was codified in the famous book:  Reengineering the Corporation by Michael Hammer and James Champy.

Brainstorming and out-of-the-box thinking were the order of the day, because creativity was the key ingredient to realizing the potential gains. However, creativity has not been the mantra of the SaaS revolution, the mantra of SaaS has been lowering TCO (total cost of ownership). Basically, take what you do now, make it multi-tenant, outsource it, and pay less.

While this is a great business proposition for customers, it places SaaS vendors squarely into highly-competitive, price-sensitive commodity businesses.  If you want to differentiate your offering, you must look beyond the client-server application you are replacing and ask yourself: How can I revolutionize the current business processes of my customer by connecting my SaaS offering to the larger Web? Or, more concretely by connecting it to users and applications outside the firewall. Read more »

If you are a software-as-a-service (SaaS) provider and deliver your product over the Web, then by definition you are Web publisher, so act like one. Web publishers, whether their business is news, games, e-commerce, or a simple blog, are obsessed with increasing site traffic and converting it to registered users. On the Web, there is one and only one source of site traffic: links.

Links from search results, links from search ads, links from banner ads, links from websites, links from blogs, links from feeds, links from widgets, links from bookmarks, links from toolbars–links, links, links.  Becoming a hub on the Web means creating a nexus of incoming, high quality links to your website from sources that are relevant to your business, and most importantly relevant to your prospects’ needs. There is nothing else online as cheap or as effective in generating demand.

Links come in two categories: paid/transient and free/permanent.  The more free links you have, the fewer paid links you need.  Most SaaS vendors immediately jump on the SEM bandwagon to get paid search traffic.  They also apply SEO techniques to optimize keywords on their websites, but only obscure keywords are useful without high PageRank, and high PageRank requires (that’s right, you guessed it!) links.

What is your link strategy?  Links opportunities abound and arise naturally from your online business, but you have to be conscious of their critical improtance to captialize on them. For example, who is part of your potential online community e.g., customers, partners, investors, employees, colleagues, expert blogs, social networks, events, associations, directories, etc. and have you engaged them in a manner that generates online content and discussion that results in links? Do your traditional online marketing and PR activities generate tons of effective links?

Clicking on a link is often the first step in the online sales cycle.  Understanding and improving your Web presence is as important as (more important if you are a startup) improving your sales pipeline close ratios, because you have to get the leads in order to close them. So, are you measuring your Web visibility as acurately as your pipeline? Can you identify a qualified link as effectively as you can identify a qualified lead? Do you have a concrete plan to get more links and increase your PageRank?  If not, it is almost certain that the ROI on spending your marketing dollars to increase your organic web presence will be much higher than increasing your budget for SEM or banner ads.

This is post number 3 in a series of 5 on transforming SaaS for Web 2.0 success.

I spend about half my time working with SaaS companies and the other half working with Web 2.0 startups, and it disturbs me greatly when I see just how little interaction these two communities share.  The two things that I see again and again that disturb me the most are  a) most SaaS vendors are embarrasingly Web-unsavvy and b) most Web 2.0 vendors prefer to cobble together their own internal business systems out of open-source rather than sign up for really cheap, really good SaaS products and focus on their core business.

OK SaaS vendors, here is a Web-savvy self-test…

(questions in order of increasing difficulty)

a) Can your customers find you on the Web, learn about out on the Web, try you on the Web, and buy you on the Web without any help or physical intervention whatsover?  I’m not saying you shouldn’t sell or offer help if it speeds up your pipeline; I’m asking if you didn’t offer help, can they can buy without it.  If they can’t, you have inserted unnecessary offline obstacles into online your sales process.

b) All your qualified prospects are on the Web.  Are you an expert at online marketing?  Are you actively using your Web-based product to increase your organic Google juice?  Or, simply paying for SEM. Do you have a real blog and social media strategy?  Or, just a lame, uncomfortable attempt at a corporate blog.
Read more »

Why is Google so successful? Most people reply to this question by saying that it is the company’s superior search technology. This is why Google is so popular, but this is not why Google is such a successful company. Google is successful for one simple reason: it made advertising invisible, thus creating huge value for users and web publishers simultaneously. I believe this is the fundamental business challenge for platform makers of social media (social networks, blogs, rating systems, media sharing, etc.) and syndication (rss, widgets, toolbars, personal home pages, etc.), i.e.,. simultaneously delivering high value for web publishers and their communities without being intrusive.

Social media and syndication sit to the right and left of search. Search is great for catching people when they are already looking for something, i.e., in the middle of a purchase process. It is less effective in creating awareness, facilitating a decision and building brand loyalty. These are the strengths of social media and syndication, because these technologies leverage the organic, local connections of the Internet (as opposed to search which adds them up and presents the aggregate results). As such, they have the ability to reach out and engage the single individual, allowing him or her to discover your content surreptitiously, spread it virally and subscribe to it permanently.

This is enough to make businesses based on these technologies immensely popular. It is not sufficient to make them successful. Becoming an integral, useful and most importantly invisible part of the users purchase process will.

I like to think of Web syndication technologies today (RSS, podcasts, gadgets, toolbars, etc.) as analogous to HTML in the early 1990s. Revolutionary,incredibly useful, competing standards, gathering steam, and very difficult to commercialize.  This won’t last long.

More than once I’ve pointed out that marketers of B2B SaaS applications should look to the consumer side for inspiration to lower costs of sales by automating the sales and marketing process and integrating it thoroughly into the product itself.

However, after sitting on a panel on social media platforms at Digital Hollywood last week, I realized that there is considerable wisdom that can be transferred in the other direction. I’ve often maintained that B2B marketing is actually harder, or should I say more like pulling teeth, than B2C marketing. The reason for this is that B2B marketers have always had the luxury (or burden) of having deep access to the customer’s decision making process. B2B marketers have been engaged in the development of demos, white papers, reference accounts, referral programs, user groups and conferences, influencer marketing in the form of analyst relations, press relations, evangelist/advocate programs, and lead customer pilots, etc. etc. for decades (if not centuries!).

Whereas consumer marketers have been largely restricted to the two A’s of the well known AIDA model, i.e., generating awareness at the beginning of the buying cycle and providing promotional offers toward the end to motivate purchase—until the advent of social media. Unfortunately, the advertising practices and institutions for plugging into the two A’s are so well established Read more »

If there are two areas of cross-disciplinary study I would recommend for every Web PR and Marketing professional it would be linguistics and postmodernism.   The reason is that Internet marketing (and branding/marketing in general) is driven by forces described by these disciplines…and the ideas have been around for 50 years, so there is no need to reinvent the wheel by figuring it out for yourself.  I’ve seen a number of blog posts triumphantly delcaring that The Medium is the Message, and while true, I personally didn’t learn much from them that I didn’t already know from postmodern theory.

I’d like to try and clarify an idea that I think is creating great turmoil for most PR firms and media outlets in general, from blogs to wikipedia to cnet.  The difference in Web 2.0 is not that the medium has suddenly become the message, the medium and the message have and always will be fundamentally inseparable, the difference now is that a) anybody can create a message and b) anybody can modify the media.  This change is blurring the lines between PR and marketing, and IMHO to be successful in PR 2.0 and Marketing 2.0 you have to get these two fundamental shifts.

Old school PR adhered to a certain set of ethical rules designed around a certain media structure.  News was FILTERED by experts in the form of reporters and editors who controlled access to FIXED media channels, e.g., a magazine, a newspaper, a TV show, etc.  This was the world of broadcast media.  The ethical PR person followed this model by making sure the message being offered was newsworthy and by pitching this newsworthy story to these ordained few.  While this paradigm still exists, it is being rapidly eroded by user generated content and the Web’s inherent fugibility.   Now there is a spectrum of credibility caused by variable filtering that extends from MySpace to Wikipedia to the New York Times.  And, the medium itself changes every nanosecond with each new link that is created.

Depending on your product or service, your news credibility requirements take on different flavors.  Read more »