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Stick to Profits, Not Traffic

  |  August 8, 2001   |  Comments

You'd figure that if you were in Amsterdam, your attention would be on other things, but Chris says that he couldn't help but be struck by the parallels between online marketing and some of the practices he observed in Amsterdam.

"Stuck on you
I've got this feeling deep down in my soul that I just can't lose
Guess I'm on my way."

--Lionel Ritchie This past spring I spent a week on vacation in Amsterdam, completely cut off from the Internet. No Web, no email, nothing. First time I've done that since my honeymoon in 1998.

While I was missing my usual dose of information, I couldn't help but be struck by the parallels between online marketing and some of the practices that I observed in Amsterdam.

For example, restaurants and cafesin Amsterdam take forever to take your order, bring your food, and collect your check. For some people, this might seem like a pleasant case of Old World charm, letting you linger over mealtime conversation. For this busy American tourist, however, it was horrible.

The worst episode happened at The Pancake Bakery. For those of you who have never been to Amsterdam, the Dutch are huge pancake fans. Cafes all over the city serve pancakes that look like giant crepes, topped with every conceivable substance, from smoked salmon to chocolate (though, thankfully, not those two together). They're quite delicious, but I'll never understand how the Dutch avoid being the fattest people on the planet. Maybe it's all the smoking they do.

Anyway, my wife and I stopped at the Pancake Bakery for lunch (a Norwegian pancake with smoked salmon and creme franche and a Dutch pancake with ice cream, cherries, liqueur, and whipped cream), which was excellent. While we were eating, however, a massive crowd had built up, thanks to the popularity of the restaurant. At least 20 people were waiting, and they spilled out into the street, despite near-freezing temperatures.

When we finished our meal, I went up to pay and was told to return to my seat, that they would come with the bill shortly. I thought, "Oh, how nice," and sat back down to wait. And wait. And wait.

After 30 minutes, they still hadn't brought the bill! Now mind you, this is with 20 potential paying customers waiting in the freezing cold.

Finally, I had to force my way back to the cash register and insist on paying. Needless to say, I stiffed them on the tip.

Nonetheless, this bizarre behavior isn't restricted to our European friends.

Think of all the times you heard "stickiness" hailed as a panacea for Web sites. Well, the problem is that having stickiness without actual sales is like having customers hanging around your restaurant without you actually collecting checks.

The goal of a business is to make money. Yes, it's important to have all your tables full and to keep your customers happy, but at the end of the day what matters is what's in the cash register. Otherwise, your profits will head south faster than Lionel Ritchie's career.

One company that's figured out how to successfully transition from a sticky, advertising-based model to actually charging customers for sticking around is ezboard. The company had followed the trajectory of many Web companies: Backed by venture capital investors, it set about giving away free services, specifically message boards. This resulted in 700,000 message boards and 5 million registered users, which in today's advertising environment means that it might squeeze out enough ad revenue per month to pay for a Starbucks latte. What ezboard did next, however, was ingenious:

  • It created a paid version of its service, complete with premium features.

  • It pitched both Web sites and their patrons on the benefits of the paid "Community Chest" version by appealing to their desire to support their communities.

  • It increased the amount and intrusiveness of the advertising in the free service.
These actions accomplished several important tasks. One, ezboard spun its new premium service not as "paid" but as "community supported." The same cheapskates who wouldn't pay for individual access to a community would actually pay to help preserve that beloved community. Two, although the company's increased advertising might not have actually resulted in significant revenue, the annoyance factor served to segment its audience into two groups -- those who valued ezboard's services enough to pay for their convenience, and those who were using it only because it was free.

Now the company has 13,000 paying communities on which it can focus its marketing and development efforts. Perhaps even more valuable, it has a total focus on profits.

For more on stickiness, check out what my colleagues Greg and Emily wrote in March. And, for what it's worth, Lionel Ritchie's "Can't Slow Down" is still one of the seminal albums of the '80s.

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ABOUT THE AUTHOR

Chris Yeh Chris Yeh is a partner at Porthos Consulting, a sales and marketing consultancy that focuses on delivering measurable results in lead generation and telesales. Prior to joining Porthos Consulting, Chris helped start companies like TargetFirst, United Online Services, and Merrill Lynch's Intelligent Technologies Group.

Chris and his work have been featured in Fortune, the Financial Times, and the New York Times. He earned his MBA from Harvard Business School.

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