Monthly Archives: February 2011

Social Media Driving the Venture Capital World

Reading the WSJ this weekend I saw an interesting Social Media article entitled: A Have and Have-Not Venture World. Top venture capital firms like Acccel Partners and Kleiner Perkins Caufield & Byers are all riding the “frenzy” around companies like Facebook inc. and Groupon Inc. to raise billions of dollars in new funds.

These Venture capital firms have to ride the Social Media bubble because there are not many bright places in the economy to invest.

Venture capital firms have been hit hard by the current financial predicament. In 2010 only 119 new venture funds were raised, totaling $11.6 billion in assets. That is down from 215 new venture funds totaling $40.1 billion in 2007, according to research firm Venture Source.

Today’s fund-rising marketing is about a have and have not market,” says Christopher Douvos, co-head of private –equity investing for the Investment Fund for Foundations, an organization that invests in venture-capital funds on behalf of non-profits. “The capital is really focused on accessing the best-performing funds.”

Like always venture capital firms are trying to focus on the best performing funds. And low and behold Social Media ventures are returning big for venture capital firms. For instance Accel, the Palo Alto, California, venture firm alone has raised four new funds based on Social Media. These finds alone have been targeted at more than $2 billon.

Reading the whole article one can see that the best performing funds are those that have anything to do with up and coming Social Media companies similar to Facebook, Twitter, Four Square, and Groupon…

Not only is Social Media driving the Venture Capital market. Social Media is also driving the mobile phone market.  My next blog post will discuss how social media communities  like Facebook and Twitter are influencing cell phone development.

Naked Pizza first and foremost a “Social Media” company

This is part II of our look at Naked Pizza and their Social Media marketing.

I just love the fact that the ownership calls Naked Pizza first and foremost a “Social Media” company.

Naked Pizza went a step further and sent its business plan to billionaire Mark Cuban. He invested in the business and made introductions to other investors, including The Kraft Group, owner of the New England Patriots.

He [Mark Cuban] also began delivering business advice, including one insistent tip: Start using Twitter to promote both the pizza and the mission behind it.

Naked Pizza rented a billboard in New Orleans to announce its Twitter handle. It started tweeting about topical issues involving food, health and policy, as well as special promotional offers. It set up a Facebook page to gather more fans. It began posting videos on YouTubeintroducing viewers to the store, the food and the founders’ desire to change the world through pizza.

“Whether we’re right or wrong, we have an opinion and a perspective, and we put it out there,” says Leach. “That little kick makes all the difference in the world when you aspire to scale.”

By the time they started to offer franchises in October 2009, Naked Pizza had more than $500,000 in annual revenue from a single store–and thousands of online followers around the country.

“Some people have a mission in life, and that’s a very interesting thing to be a part of,” says Augie Ray, senior analyst for social computing at Forrester Research, an independent company that studies the business implications of changing technology. “Naked Pizza wouldn’t be as interesting if [it] just used [social media] to broadcast marketing messages. It’s an organization that’s…engaging people in things they care about, offering a mix of promotional messages within the context of relationship-building.”

Social Media in Action-Naked Pizza

People always tell me they love the idea of social media but don’t see how it can generate business. The social media example that I like the most is Naked Pizza.

New Orleans-based franchisor Naked Pizza announced last week that it has signed multiunit area contracts in four more U.S. cities, is opening two test stores in Dubai by the end of the year, and plans to expand into Abu Dhabi by 2011.

That gives Naked Pizza more than 300 stores under development in 18 markets just 10 months after launching its franchise operations. Yet the grand opening of its first franchise location, in Miami, is still several weeks in the future.

It’s true that takeout and delivery pizza is a proven business model that’s made to scale. It’s also true that Naked Pizza has fueled its expansion by choosing to award franchises only to experienced multiunit developers willing to operate at least five and as many as 50 locations in their area. Yet at this writing, its only store is a test kitchen in New Orleans.

So what’s behind Naked Pizza’s explosive growth? If you consider it “going viral,” you’re not far from wrong.

Co-founders Jeff Leach and Randy Crochet are frequently quoted as saying that Naked Pizza isn’t a pizza company, but a social media company that sells pizza. In fact, their entire business plan is based on using social media and rapid expansion to promote a healthier version of a popular fast food, one with no sugar or trans fats and about half the calories of the competition’s products.

Here are some ways check-in apps can help your marketing


Here are some ways check-in apps can help your marketing.

Here are some ways check-in apps can help your marketing:
1) They can drive branding. We all need ways to sand out within our market space. If you have interesting services and products, people will naturally want to follow you and learn more. You will have succeeded in gaining their attention and notice. Sometimes getting noticed in the online environment can be the hardest part. Once a business has the attention of potential customers a rapport can be developed and used for business transactions that can benefit everyone involved.
2) They can drive relationship building. The apps let you in on the daily routine of a person’s life and this can help you get to know them better and seek common ground. For instance if you see that friends are flocking to a restaurant or store you are more likely to check-in as well. Foursquare is really good and cost effective way to drive buzz for new services and products.
3) People are attracted to movement and action. If they see you moving about the world, taking part in different events, different activities, you are automatically seen as a “mover and shaker” – this can position you for opportunities and contacts.
4) You can build greater influence. You  can use your check-in status to make recommendations and suggestions for those on your friends list. These can help you be seen as conscientious and helpful.
5) Finally, they are fun. I love to see what other people are doing and to make note of the places I’d like to try too. Again, the first part of all marketing is to get attention- and the check-in apps can help you do this well.
So if you have been reluctant to start checking-in you might  want to reconsider. And yes, I’d love to be Foursquare friends.


Social Media Check-in Apps “Who Cares?”


Social Media Check-in Apps “Who Cares?”

Ok, It’s true confession time. When I first heard of the check-in applications, such as GoWalla or Foursquare, my initial thought was, “Who Cares?”. Now having used Foursquare for a few months, I’m actually enjoying it! And I believe there are some great reasons to use check-in apps as part of your Social Media marketing strategy.
So, for those who might not know, these check-in applications allow you to update your status with an indication of your current place and location. So, let’s say for instance that I’ve gone to dinner at my favorite Italian restaurant, I can “ckeck-in” here, and all my Foursquare friends will know that I’m there. You can, optionally, also choose to update your Twitter or Facebook status as well. And you can add a comment like great garlic bread.
On foursquare, you are awarded points for your check-ins, and they increase in value the more frequently you check in. You get +1 point for checking in, and +5 points for checking in from a new location. If you check in to multiple places in one day, you are awarded additional points. You are then awarded badges based on your activity. I have found that they are generally clever and fun. On a recent trip to Maui in checked-in at the airport and unlocked the swarm badge- which you get when 30 or more people check in from the same location. So the playful nature of this process is very appealing. It’s also fun to see what badges your friends have unlocked, and to use the application to gain a location and place based sense of what your friends are doing that Day.
Great, you say- sounds like fun. But how can this help me in my Social Marketing strategies…


In addition to the rivalry between Groupon and Living Social there is the problem of fatigue.


In addition to the rivalry between Groupon and Living Social there is the problem of fatigue.

Is this couponing a trend or does it truly bring value to brands? With couponing there is a population of about 30-40 percent that are really interested in the discount. Other people have signed up to experiment or for the novelty of the experience. Some people are going to jump from restaurant to restaurant or from spa to spa. These customers don’t really have loyalty to a brand. They are just motivated by the next big coupon. Does this process add value for the retailers once the novelty wears off? This process also dilutes the ability of retailers to do their own promotions. In the end the coupon business that survives the war could be left without much in the way of business partners.

When Groupon and Living Social first started they were hailed as ways to get local and enhance internet search in a local market. It was all about the local business and providing a way for retailers to enter locally. Now that Groupon and Living Social are big and in the super bowl things seem to be changing. The things that are being touted is Living Social’s deal with Amazon and Groupon doing a deal with Barnes and Nobel. IT seems like not things have gone back to the big boys. In the end are Groupon and Living Social really effective at getting to the small brands locally?

As larger businesses figure out the couponing strategy will the reach that Groupon and Living Social have diminish? I certainly hope not. Both brands are an enormous help to smaller local retailers.


Are Groupon and Living Social in a race to the bottom?

Are Groupon and Living Social in a race to the bottom?
Both coupon services are trying to attract new users with better deals from bigger retailers. Does this create a classic race to the bottom? Groupon and Living Social are in a war and glutting the market with better and better offers. With everyone rushing in are Groupon and Living Social going to run out of people who want to buy coupons? From a business stand point that could be a real problem.
Both Groupon and Living Social advertised during the super bowl. First Groupon reserved a spot during the big game. Then Living Social was a last minute addition for the pregame. The rivalry is turning into a full fledged Pepsi vs. Coke war. Both are cutting their margins to become the bigger player in the space. Eventually someone will win after the other goes out of business. Who will be left and what will they look like? This reminds me of in the 1990’s and Value America that offered items at a discount. Both had slightly different business models but the mentality was the same. Unfortunately, neither business really took off. And that was without stiff completion.

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