Tide.com Social Media Case Study

Tide.com has a forums area of their website that's relatively active. No really big news there...but after reading through one particular thread about Tide Discontinuing the Simple Pleasures scented line, I had to blog about it. Essentially, this is the promise of social media. Over a period of months, a group of 45 incredibly passionate users piled up comments about this discontinued line of detergent creating a tsunami of Influence Instances. 

Right from the beginning, P&G Mandy Earnshaw (go Mandy, amazing!) was right there with them offering sympathy and alternatives. However, despite her pretty definitive early posts the community (if we can call it that) keeps building steam. No spoilers here though, you gotta' go read the thread for the cliffhanger ending. 

When you see this thread, you'll appreciate that social networking hubs - great as they are - are not the ultimate repositories for this kind of dialogue (yes, I appreciate that maybe some day the dialogue takes place in a 'destinationless' kind of way, but nevertheless). Probably not even ecommerce sites. Brand sites are. The engagement, recall & humanizing of the Tide brand from this one thread is simply off the charts. 


Kudos also to getsatisfaction who is powering the forum (coincidentally, Dave Knox mentioned getsat yesterday in a very good, even if he forgot to mention Expo, post on what great content sites should feature). As an early board member at PlanetFeedback a decade ago, this is the realization of a vision a long time in the making.

Moving Past The Honeymoon, Consumers and Brands Now in a Committed Relationship

eConsultancy came out with a survey yesterday on how unhappy customers are increasingly using social media to voice their complaints.

Here's a good little slideshow from the article:
Brands beware: the social media backlash

View more presentations from Dave Ewart.

While stories about consumers new-found power and ability to 'bite back' -- with The Consumerist leading the charge and even adopting that tagline -- never went away entirely, this is first story I can remember in a long time that quantitatively suggested an increase in consumer complaints through social media (read: the internet) versus focusing on how positive most consumers are in their product commentary. 


Which makes it worthwhile to take a trip down memory lane: how did it come to be that for so many years it was news that consumers actually like the products they use?

If you go back only 10 years ago, customer service, consumer engagement, feedback...these were all bad words with negative connotations. The only time a company heard from its consumers was when they called the customer service department and anyone willing to cross that hurdle (oh, and there were major hurdles even beyond dialing an 800 number) clearly wasn't calling to say, 'thanks for the great job!'  


It was so accepted that consumer engagement was a negative experience that social media guru Pete Blackshaw started a company in 1999 called "PlanetFeedback" (which I was lucky enough to sit on the board of). Read that name again slowly and think about it. Now translate it: "a world of people bitching about everything." No wonder we had trouble selling subscriptions to F500 clients. 


Pete learned, I learned, we all learned that the truth was a lot more nuanced and positive. Fast forward to 2009 and what we do at EXPO. Our open-forum consumer generated content is generally so positive (by which I mean, exactly in line with text reviews across the internet) that we feature the negative reviews just so product researchers can understand whatever trade-offs - or dare I say, shortcomings - are inevitably part of the product. 


So here's my relationship based analogy for the history of brands and consumers: 
Phase 1, 8th grade flirting: pre-internet, consumers and brands used limited tools to flirt in a notably adolescent way. The brands preened themselves around using one way marketing and consumers, although perhaps whispering to their friends about how cute the brand was, made sure every comment directly to the brand was absolutely nasty 
Phase 2, honeymoon phase: consumers started writing text reviews on the internet and low and behold after years of abuse, brands started to recognize, they love me! Gifts (contests, coupons and samples) rained from the sky & odes of love (blog posts fluffery) were written in return as the two lovers finally came together....to the point where the teacher (the FTC) decided to lay down some rules on all of this PDA
Phase 3, committed relationship: now, realizing that there's more to a real relationship than just mutual admiration, perhaps we're on the cusp of an era where consumers are starting to step up their "constructive comments." And brands are listening and taking action (more on that later this week). This is of course, is where the hardest work will be done. But it also smacks of being the most sustainable and rewarding for all parties. 

Expo Looking for New Sales Talent

And now a word from my sponsor J

We're expanding our salesforce. Looking to add a Sales Director in NY, Chicago, Cincinnati or Minnesota. Here's a link with all of the details: http://blog.expotv.com/job-openings-at-expo/. Best wishes to all applicants.

100,000 Facebook Fans! Now What?

I'm a big fan of Texas Pete Hot Sauce (I'm from Winston-Salem, NC and as everyone from W-S knows...that's where they make Texas Pete and always have).

Texas Pete is currently doing a Facebook Fan Page promotion (got to my newsfeed...from a friend from W-S) where if they get to 100K fans, everyone gets a coupon. Woo-hoo!!! I signed up immediately. If the link doesn't take you directly there, click on the 'coupon' tab. I like the campaign, executed by The Sales Factory. It's a simple, low-engagement, obviously low cost way to get coupons in the hands of interested people.

But what I like more is what Texas Pete has done with the rest of the their fan page. There's a 'Recipes' tab. There's a 'Legend' tab. These are the things that will sustain Texas Pete's Fan Page after the coupon campaign is over (and when they need something more, we've got about 20 great video reviews of Texas Pete products). I also love how they are twittering like crazy for all of 85 followers. Hmm. I...wonder...what...the...next....campaign...will...be???

A couple of years back, it seemed like every brand was doing a 'user generated' 30 second spot campaign. One of the many problems with these campaigns was that there was no follow-up with the people who participated. Can you imagine making a commercial for a brand, losing and then never hearing from them again? Gives new meaning to being dumped & it was one of the reasons we avoided the trend.

What we're seeing now is smarter, more sustainable engagement (hard as it may be for most agencies to adjust). If you lower the barriers enough, the 'continuous steam' of user generated content opens up, even for brands. That creates infinite engagement opportunities and influence instances and that's where real insights will occur.

Finding Co-Founders

As long as we're talking founders, here's a good post from TechCrunch on what to look for in co-founders

Founder Shares and Equity Distribution

With the nuclear winter in financing starting to loosen up just a bit (although there's a couple of questions where I talk about some fundamental changes in the financing landscape in Michael Dunlop's interview that might make for interesting perspective), I've started getting questions about start-ups and founding companies again. I recently published a post Founders vs. Employees and now this post will address founder shares. If you just want to see all of my posts on general topics about startups and early stage financing, click the "startup" or "financing" labels to the right.

Of all of the start-up topics I get asked about, I think founders shares must be the most common. What are founders shares? Who should get them? And, within founders shares, who should get what percentage? The key to teasing this apart is to understand that there are three distinct types of 'players' in a company's equity capitalization structure and we'll address each in turn:
1. founders
2. funders
3. employees

The fundamental insight of this post is that most of the confusion and problems in setting up a company come when these roles aren't kept distinct. Which isn't to say that one person can't actually be all three things...it's just that they are three separate roles and should be treated as such.

The core essentials of a company are an idea and common stock. A founder (or founders) has an idea, he starts the company and he owns 100% of the common stock. If the company doesn't require equity funding and its employees don't require equity incentives, the founders can continue to 100%. Otherwise, founders get diluted as they build value. We'll come back to this and the division of founding shares below.

The first place dilution usually comes from is equity funding. Although occasionally investors will take common stock, I think it's a bad idea. Capital from investors should come in as preferred stock, which keeps it senior to common stock so that investors get their money back before there is a payoff to the "intellectual" capital. As a corollary, a founder who "writes a check" should get preferred stock (or in some cases, straight debt). A founder should never get talked into allowing a capital contribution to get counted toward "sweat equity".

The grey area in this is that many founders work not just for a low salary, but for no salary at the beginning. That's generally still sweat equity. But if you actually write a check for expenses, put it in as preferred stock in the first capital raise.

Employees get options and a salary. Of any of the players, they are the most likely to effectively get anti-dilution protection, although that should never be contractual. Senior managers will get options that are measured in percents of the company (.2% to up 6% for a rock star CEO) and generally there are new grants every year or so or around the time of capital raises.

Back to founders. They don't get dilution protection...not from capital raises, not from the employee option pool. So the problems come when you have a "primary" founder (to borrow from my previous post) who comes up with the core of an idea and then wants partners. People call me up and say, "I've been asked to be a co-founder and the main guy has offered me 5%." For someone who probably at most had .5% of a company in options in the past, it sounds potentially ok. But its not. That 5% will be 1% after about 2 capital raises and an option pool...and it will be headed further south. If you read the post on founders vs. employees, you'll realize 1% isn't a good trade-off for sleepless nights, writing checks to cover payroll and the other sacrifices founders make.

How do you tell someone who just offered you 5% of a company that it isn't good enough? My advice is to put it into the appropriate context by saying, "5% implies I'm a founding employee, not a co-founder. I'm willing & ready to be a co-founder and that suggests I should start at at least be at [30% if only 2, 20% if a total of 3 founders, and so on]."

If "primary" guy balks at giving up such a large stake, make some / more of your shares subject to vesting. That should get him / her over the fear that you'll take the shares and bolt. Vesting in this case shouldn't have a cliff and should vest quarterly or monthly. Don't go overboard on this...any VC who sees that you're "open-minded" on vesting is likely to re-restrict shares for all of the founders.

That should get you started. Feel free to ask questions.

Consumer Collaboration

Great blog post by Dave Knox on Consumer Collaboration

What’s the Difference Between a “Founder” and an early “Key Employee”?

One of the key things entrepreneurs need to think about is their co-founders. Who’s a co-founder and who is a “key” or even “founding” employee. It’s a highly subjective topic and there are tons of opinions on it that can be found around the web. The subjectivity starts with the fact that a “founder” doesn’t have any real legal implications (unlike “directors” or “employees”). If forced to define a founder, lawyers would probably say it is an individual who was issued common shares at the business’ inception for which the received consideration was not solely monetary.

That’s still a broad definition and in our entrepreneurially-charged culture, the phrase has become an honorific. So the question of the actual role becomes personal to the company…what do you want it to imply? Let’s assume that you are the “primary” founder who conceived the animating idea. How do you decide who is a co-founder and who is an employee?

Here’s how I think about it: there is a legal concept called fiduciary duty, which is vested in the board of directors and requires that they take care of the company and its stakeholders. But in a start-up, typically the board will be inadequate to fulfill this role. Founders, to me, are the people who practically (although not legally) step into this void and protect the stakeholders and fight for the existence of the business.

Their commitment is so complete that they will make significant personal sacrifices with little short-term regard to their own well-being. While it may sound discriminatory, they should come to the business with personal financial wherewithal to be chronically underpaid, occasionally unpaid and sometimes to even pay payroll or a vendor. The thought of a founder leaving a company prior to funding is, to me, the equivalent of a soldier going AWOL. Why? Because even the smallest company quickly develops other stakeholders and they have almost certainly acted based on their faith in the founders. I talk more about this duty in another post, especially with regard to angel investors.

By contrast, a key employee might be more experienced or talented than a founder and they may even work harder, but (despite the best efforts of lawyers everywhere to draft employment agreements) they are not morally committed to the business in the same way. They have a right to get paid on payday and they should not be expected to ensure the viability of the entity. Note that I’m implying that issues of compensation, prestige, title and even credit can, at least theoretically, be separable from the question of ‘founders’ vs. ‘employees’. Put it this way…employees can be indispensable because of what they can do, founders are indispensable because of what they choose to do.

As noted at the top, others emphasize different things and I recommend the reader chase down multiple perspectives. I’ve seen commentary emphasizing determining who a founder is based on a person’s intellectual capacity, their willingness to work long hours, their ability to attract capital based on their experience and personal brand, making sure that the collective founders have a broad set of skills and even using the title as a recruiting tool. I’d never question the strategies other entrepreneurs have successfully applied.

My definition of a founder has meaning for me because my experience, and the experience of the entrepreneurs I advise, is that building a business is so hard that the role of “founder” typically violates personal boundaries that “employees” shouldn’t be asked to suffer through (not that every founder doesn’t owe a debt of gratitude to every employee who subjects themselves to the unavoidable sacrifices of working in a start-up environment). In my world, those violations create strong co-dependencies between founder and company that transcend legal niceties (sort of like a marriage is more than the certificate). I have a feeling that my description is a bit esoteric for anyone not living it. Maybe I should have just said, “you’ll know it when you see it.”

More thoughts on the new FTC Regs

Shelly Palmer published on the new FTC regs this morning. His basic take was that it was irrelevant. A gnat in the face of a tsunami, but that all will be well because the law of large numbers will prevent anyone from changing the world by paying off a few bloggers. It's a good addition to the dialogue. So far we've got:
1. Adotas says its unenforceable because they have no one to enforce it (see previous post). Which no one's really debating
2. Eric Goldman of Santa Clara says its pre-empted by existing legislation (47 USC 230) before it even gets out of the gate
3. And Shelly effectively saying its an answer looking for a problem

Unlike Shelly, I thought the regs were actually relatively easy to read....frankly, I thought they were too simplistic, almost as if they were targeted to be read by the bloggers or other lay people themselves. On the other hand, they didn't strike me as broadly, researched well-thought out legal doctrine. Which is a bit stunning for something 30 years in the making. For example, I spent 10 minutes looking for the definition of a "network marketing program", since those seemed to be entities that the FTC was interested in. I never found a definition - again, stunning when important, non-obvious terms go undefined in a 'legal' document - but I found its first use in a footnote referring to BzzAgent's brief...apparently it was a term BzzAgent used and the FTC adopted.

Following through on that thought, it was remarkable actually how much of the statutes referred to the briefs that had been filed. Yet they didn't extensively address, to Goldman's point, other existing legislation or practice. Further evidence of this...at Expo we've already had multiple legal opinions essentially that, "this doesn't even come close to applying to what you do." Yet because its tangential and vague all at once, we *have* to think about it.

The debate will continue (I have more thoughts I want to post myself on, but need more consideration) but one pretty quickly starts feeling like the bottom line was that the FTC basically just wanted to say, "Hey everybody, do the right thing because we're watching." Granted, that's not really the way governments do things and a simple press release to that effect would have engendered a lot of derision, but this alternative reality is that we're all wasting a lot of energy talking about 81 pages that doesn't hold any more water than "Hey everybody, do the right thing because we're watching."

Sponsored Tweets Stands Bold in Face of FTC Challenge

I'm sure this won't be the last time I post about the new FTC regs...but it might be the funniest. Adotas sniffed at the regulations today, but what was really classic was the ad for "sponsored celebrity tweets" that showed up for me. In case you don't get the same ad, here's a screen shot. You go guys! (can't wait to see how one does endorsement & disclosure in 140 characters!!)

If I stay quiet long enough, someone drags me back out into the light

Michael Dunlop, the founder of IncomeDiary, tracked me down and posted a nice interview of me yesterday. Michael puts the "e" in entrepreneur and so don't waste much time reading the interview, check out everything else on his site. Thanks, Michael.