Online Advertising: Test, Test, Test

It’s been a while since I actively ran an online banner ad campaign. Mostly I help companies get started in search engine marketing (pay-per-click first, then SEO), then email and affiliate marketing, and at the end of my list of tactics is online banner ads. They always seem to underperform the other tactics, at least until you find the perfect combination of creative, landing pages, offers, and sites that perform well. This can take months if not years, and it requires constant testing.

I remember sending one of my marketers to a conference where Seth Godin spoke. He said if you’re not testing 5 new banners per day, you’re not doing your job. What we learned was that little tweaks could make a big difference. When we finally stumbled on the perfect wording and creative that worked extremely well, we were able to profit from it for years with only slight modifications. But finding banners that generate enough clicks, and landing pages from banner traffic that converts, is extremely difficult. just released a study that reinforces the need to test color, size, and most importantly, use calls to action in online ads.

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Online Marketing Works has seen significant growth in its web site traffic in the past few weeks as its online marketing efforts start kicking in.

The company was waiting for its deal with Deseret Book which will provide users access to hundreds of audio books, talks, and songs before accelerating its online marketing effort.

In addition to its pay-per-click effort, some search engine optimization, and the free audio Book of Mormon giveaway, the company is launching its affiliate program this week. The affiliate manager will be contacting hundreds of potential affiliates. One free way to track online marketing success (visitors, but not revenue) is to use Alexa shows the site traffic growth at

It’s easy to build a web page (maybe only for you to see) to keep track of the Alexa rankings of all of your web sites or your competitors’ sites. Here are two links:

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WebSideStory Completes IPO

WebSideStory began trading today on the NASDAQ. Symbol is WSSI. This company has wanted to IPO for nearly 4 years. Last year it had revenues of more than $16.3 million and losses of just under $2 million. It turned profitable in the first six months of this year. The stock is trading above $9, up from its opening price of $8.50. They apparently sold 5 million shares in the IPO. My rough research shows about 15 million outstanding shares, giving this company a market cap of $135 million.

WebSideStory’s competitors include Coremetrics and Omniture. Coremetrics (Austin, TX) got a new CEO in March 2004 and had 60 employees at that time. Websidestory reported in its S-1 that it had 120 employees as of June 30, 2004. Omniture has the strongest story by far of the three companies–with faster revenue growth and more marquis customers, including eBay and AOL.

The largest company in this space may be NetIQ, which acquired WebTrends in 2001. NetIQ had revenue of $68 million in the quarter ended June 30, 2004 and a narrowing loss of about $7 million, but it offers many more services than just web analytics. It’s hard to tell how much of its revenue comes from WebTrends. The company had more than 1,200 employees in mid 2002.

Every serious internet business must use powerful web analytics services. Web developers and marketers rely on these tools to determine how many visitors your site has, where they are coming from, the ROI of marketing campaigns, what products are selling, what paths customers take before purchasing, and how site design changes impact revenue. There are free and cheap web stats packages everywhere, but once you’ve used a high-end package, you realize they are the key to eliminating guess work from your marketing and design decisions and turning your web site into an optimized revenue generating machine.

Many of our (Infobase Ventures) companies use Omniture SiteCatalyst.

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Term Sheets and Valuations

I blogged a few months ago about the book Term Sheets and Valuations. Now, while one of our companies is negotiating a term sheet, I’m finding this resource very helpful.

The author is Alex Wilmerding, a VC for more than 10 years. He explains many of the sections that can be found in a typical term sheet from a venture capital firm or sophisticated angel investor. “A term sheet serves as an outline of a transaction, so there are usually 8-15 sections.”

He explains how each section can be written to favor the investor, the entrepreneur, or be balanced. (I actually tink that most of his “balanced” examples are actually quite investor-favorable!) He gives sample language for 16 possible sections of a term sheet.

Some of the issues he addresses include:

  • The need for a cap table in the term sheet (showing ownership before and after the transaction)
  • The desire for investors to permanently have board seats; and why they desire them
  • Dividend requirements, and the difference between cumulative and non-cumulative dividends
  • Liquidation preference and typical multiples
  • Redemption rights by which investors force a company to achieve liquidity or pay back their investment within a certain amount of time
  • Conversion and automatic conversion
  • Dilution protection: full ratchet vs. weighted average conversion
  • “Play or lose” provisions
  • Voting rights of various classes of stock
  • How investors can increase their control of a company by requiring board approval on many issues, such as compensation, debt financing, leases, stock option plans
  • Information Rights
  • Registration Rights
  • Right of First Refusal

One of the authors main points is that entrepreneurs should never start negotiating any single item with investors until they have a solid understanding of the deal in its entirety.

From my experience, it is very easy for sophisticated investors to slip in language into any one of the above sections which will completely skew the deal in their favor, at the expense of the entrepreneur or of all the common shareholders.

Sometimes investors insert terms that might sound harmless (like cumulative dividend rights or liquidation preferences with a multiple of 3 or 5) but these terms might end up giving the investor all the return of the entire deal and leave nothing for the entrepreneur and common shareholders.

Sometimes investors just like to handcuff entrepreneurs because they can. It doesn’t really give them any financial benefit, but it gives them more control.

CEOs should not only study books like Term Sheets and Valuations but they should seek counsel from experienced legal and financial professionals before negotiating and signing a deal that might jeopardize other shareholders.

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Harnessing the Power of Photosynthesis

From Forbes:

. . . researchers at the Massachusetts Institute of Technology say they have used spinach to harness a plant’s ability to convert sunlight into energy for the first time, creating a device that may one day power laptops, mobile phones and more.

A few weeks ago I read about the bacteria that can convert sugar into electricity, and now scientists are capturing the power of photosynthesis to create electricty which may some day power portable electronic devices, with no waste.

Both technologies are years away from application. Cool stuff.

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The Power of PR: go SearchGuy go

For months, I’ve been watching with interest the publicly traded search engine company headquartered in Mountain View, CA, just miles from where I lived during the dot com bubble. went public in May through a reverse merger. For, the bubble is not over. The company runs from press release to press release as it tries to grow into its valuation.

The company had 100 million outstanding shares and at one point had a stock price of $0.75, giving it a market capitalization of $75 million. Today, it is trading at $0.589, but last week it “retired” 50 million shares, so now it has only 50 million outstanding shares and a market cap of just under $30 million. Sill, that’s not bad for a company which has never announced revenue and whose company headquarters in Mountain View are actually just an executive suite. (To keep overhead costs down.)

Today, in an exciting announcement, the company announced it is partnering with Valueclick’s Search123 for paid search results. This is significant because it isn’t just SearchGuy announcing something it is thinking about doing, or telling us what it is going to work on next, like so many past press releases. This time, it’s an actual partnership with a good company.

Searchguy’s traffic is still extremely low, but a couple of times it has broken into the Alexa top 100,000, usually after a good press release or two.

I may sound a bit sarcastic, but I’m actually extremely hopeful that SearchGuy will grow into its valuation through execution and deals. I want to see small startup companies be able to access capital from public markets.

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Attention Entrepreneurs: Search for Angels, not VCs!

I recently blogged about the book Angel Investing, which I think every entrepreneur should read. The book, written by two Harvard Business School professors in 2000, claims that thirty to forty times more ventures get funded each year by “angel investors” than by venture capital firms.

I don’t think entrepreneurs get this.

I’m testing a new search engine optimization service from one of my companies called Searchability(TM). It helps me select keywords that I can easily get a top 10 ranking for in major search engines and then helps me build pages and recruit links until my ranking is high enough.

One of its features is to calculate how many total queries are performed on the internet for any keyword that I’m interested in.

I typed in “venture capital” and “venture capital firm” and found that about 150,000 searches are performed each month on these two terms combined.

I then typed in “angel investor” and found that only about 10,000 queries per month are performed on this phrase.

I’m sure people besides entrepreneurs are using search engines for these particular search terms, but the ratio here is interesting. Does this mean that entrepreneurs are 15 times more likely to look for venture capital firms to fund them than angel investors? If so, they’re “looking for love in all the wrong places.”

My advice to first-time entrepreneurs: find angel investors to back you. It’s easier, it’s faster, you’ll get a better valuation, and more help from your investors. Start with an “advisory board” of 6-8 seasoned business people who are well connected and willing to help you find investors and build your company. Give them some equity in return for their help. (I think 1% equity for 2-3 years of assistance is good for an early stage company). Some of them may end up investing in your company; others will open doors for you that lead to capital.

Later on you can graduate to venture capital, but only after you have a track record and a team and a clear exit strategy that can be accelerated by the largest investments VCs make.

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Google is likely working on a Mozilla-based browser

ZDNet broke this story today in the UK and Australia–but I can’t find it on the US web site yet. Google registered in April. They’ve hired some browser developers and hosted the Mozilla developers meeting last month.

Meanwhile, Google’s stock price continues ticking upwards as more and more people realize how search dominance can springboard Google into so many other business opportunities. And unlike the first generation search engines, Google is too smart to clutter up their search results. But they can keeping launching and acquiring other services (Gmail, Orkut, Blogger, Picasa) and end up with a huge number of successful web properties.

I’ll be very surprised if Google’s market cap doesn’t exceed Yahoo’s by the end of Q1 2005; and I’m sticking with my earlier prediction that it will exceed Microsoft’s before 2020.

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Web on Cell Phones

More than 1 million people have installed the Opera browser for cell phones. In addition millions of copies have been pre-installed. It won’t be too many years before a billion people will have access to the web from their cell phone. What will this mean for your life, and for your business?

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How Much Would You Pay For An Extra Hour Every Day?

I’m an efficiency freak. I take great pleasure in learning a new Windows or Internet Explorer shortcut that might save me a few seconds a few hundred times a year. In my working hours, I try to pack as much communication and research in as possible. I type emails as fast as I can. I get headline news and stock quotes on my MSN Direct Watch. I get my daily news from the best aggregators, like, and MyYahoo. I take a book or magazine with me wherever I go, so that I can steal a few glances whenever I have a moment. I’m an Audible subscribers and listen to audio books that can keep me sharp. (I only wish I could listen in "fast-motion.") I use Google News Alerts to notify me of breaking news on all the topics and companies that I track.

But the most valuable tool I have for increasing my productivity is my RIM Blackberry 7230. I’ve been a Blackberry user for about 5 years now. I’m on my third model, the blue Blackberry. This one has a built in cell phone as well.

Why is this so valuable for me? Because it literally buys me an extra working hour every day. I get about 100 emails per day, and send about that many as well. Before Blackberry, I had to sit at my desk for an hour or two to get through all my emails.

Now, I usually stay caught up during the day, in near real-time. My Blackberry vibrates when I get an email message. In between meetings, or during other down time, I can type out a few email replies. Fortunately, I’ve mastered the thumb keypad, and can type between 50-55 words per minute! (I also use the Blackberry to take notes at church and in other meetings where I want to remember what is said–sometimes I have to whisper to those around me that "I’m not playing games, I’m taking notes!")

I attended a Jupiter Conference in October 2000 in Napa Valley, CA, where Mark Andreesen, founder of Netscape, was the keynote speaker. I’ll always remember him holding up his Blackberry and saying that it was his near exclusive email client. He predicted that humans would evolve smaller thumbs as a result of this technology.

If a person makes $100,000 per year, and spends one hour (or 1/8th) of every work day just sending and receiving emails, then the company is paying them $12,333 just to do email.

For between $30 and $50 per month you can have unlimited email service on your Blackberry. If you carry this with you wherever you go, and learn to type fast with your thumbs (new idea: Mavis Beacon Teaches Two Thumb Typing), you can literally reduce your time tethered to your desktop by an hour or more per day, for less than $600 per year! Companies should pay for Blackberrys for any employee with sufficient email volume to justify it–and I would say that would be 10 or more emails per day.

So many times I shake my head in disbelief that companies will pay $50,000 or $100,000 or $150,000 salaries for talented employees, but they won’t invest a few thousand dollars in training (sending them to key conferences, trade shows) or a few hundred dollars in simple tools that can increase their productivity by 10-20% or more.

My advice? Buy Blackberrys for all your key employees and train them on how get more out of each work day.

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