MIT Enterprise Forum Event: Rebuilding Wall Street in a Down Market

Following are my notes on last night’s MIT Enterprise Forum event on ‘Rebuilding Wall Street in a Down Market’.

PANEL:
Barry L. Ritholtz – CEO, Director of Equity Research, FusionIQ
Philippe Buhannic – Co-Founder, Trading Screen
Jacob Pechenik – Co-Founder, Yellow Jacket, acquired by ICE

MODERATOR:
Lili Balfour – Founder, Atelier Partners

Panel Speaker Biographies

Barry Ritholtz
FusionIQ

A frequent commentator on CNBC, Barry Ritholtz is a weekly guest on Kudlow & Company. He has guest-hosted Squawk Box on numerous occasions, and also appears regularly on Bloomberg, Fox, and PBS. Mr. Ritholtz was profiled in the Wall Street Journal`s Quite Contrary column (August 3, 2004; Page C3). His market perspectives are quoted regularly in the Wall Street Journal, Barron`s, Forbes, Fortunes, and other print media. He is deeply honored to be the dedicatee of The 2007 Stock Trader`s Almanac`s 40th Anniversary edition.

Mr. Ritholtz performed his graduate studies at Yeshiva University`s Benjamin N. Cardozo School of Law in New York, where he focused on Economics, Anti-Trust and Corporate Law. He was a member of the Law Review, and graduated Cum Laude. His undergraduate work was at Stony Brook University, where on a Regents Scholarship, he focused on Mathematics and Physics, graduating with an BA degree in Political Science.

Philippe Buhannic
TradingScreen

Philippe Buhannic is an industry pioneer who has brought TradingScreen to the forefront of global markets. With more than 20 years of executive management, technical and marketing experience in international markets, Buhannic founded TradingScreen with Joseph Ahearn on the premise of aiming to service both the buy and sell-sides as global markets became more electronic. Together, he and Ahearn established TradingScreen as a leading execution management system (EMS) of electronic trading, execution and order management. Prior to TradingScreen, Buhannic served as a Managing Director at Credit Suisse First Boston (“CSFB”) in New York.

Mr. Buhannic holds a Masters of Business Administration (MBA) with a specialization in international business from New York University`s Stern School of Business, a Masters degree in Finance and Taxation from Institut d’Etudes Politiques de Paris and has taught business and finance courses at both his alma maters.

Jacob Pechenik
Yellow Jacket

Jacob Pechenik is President and Chief Executive Officer of YellowJacket a wholly owned subsidary of IntercontinentalExchange (NYSE:ICE). In his role, Mr. Pechenik, who is also the founder of YellowJacket, is responsible for its overall strategic direction, and financial and operational performance. YellowJacket was acquired by ICE in January 2008.

Mr. Pechenik has nearly two decades of experience in the development and support of enterprise-class trading platforms for large financial services firms and Fortune 500 companies. Prior to establishing YellowJacket in 2003, Jacob founded and served as the CEO of TechTrader, a provider of business-to-business enterprise software for public and private trading exchanges catering to the direct materials markets.

A frequent speaker and widely acknowledged industry expert, Mr. Pechenik has been featured in numerous industry and business publications and conferences. Mr. Pechenik earned a Bachelor of Science degree in Chemical Engineering from the Massachusetts Institute of Technology.

Lili Balfour
Atelier Partners

Lili is the Founder of Atelier Partners, a bi-coastal advisory firm serving emerging industries.

Ms. Balfour earned her B.S. in Financial Management and International Management from Cal Poly, San Luis Obispo, where she found time to intern with Money Manager Jim Maino and polish her Japanese skills. Shortly after, her career brought her to Genesis Merchant Group where she worked on the private equity fund, Always Early, Often Wrong (AEOW), co-managed by Bernard Osher and Will Weinstein. While at SVB Alliant`s Technology Investment Banking Group, she worked on mergers and acquisitions involving both private and pubic companies, such as National Semiconductor, Cirrus Logic, PLX Technology, Allayer Technologies, Broadcom Technologies, Mattson Technology, and Sebring Networks. In addition, she has worked on debt financings for both non profit and for profit clients at Cain Brothers in San Francisco and New York. Upon building the infrastructure for Heller Ehrman Venture Law Group`s prospective client due diligence process, Lili spent her time traveling bi-coastally, working with Edison Group, Cisco Systems, and Lan-Mar Marina (a Traina Enterprises Inc. company) on acquisitions, which led to the eventual creation of Atelier Partners.

Barry Ritholtz
Intros self

Philippe Buhannic
Now 10,000 terminals, 135 employees. We did everything wrong: refused VC; opened in 3 venues simultaneously. Offered a very low price. We do all asset classes all over the world. ASP Model.

Jacob Pechenik
At 14 I got my first stock tip, and that hooked me on trading. When I finished MIT, I saw there was an opportunity to set up an etrade-type system, focused on more complex assets. Started TechTrader: enabled trading of pharm ingredients, specialty foils, metals transportation, other non-standard items. We took a lot of investor money, and then 9/11 happened and we had to cut a lot. Our model made sense, but was counter to human nature: companies didn’t like putting sensitive data online. Biggest customers didn’t like using this, because they were used to getting 20% off from vendors on the phone.

YellowJacket was an attempt to implement the lessons learned. Parties can fully control whom they share information with. We started it when Enron blew up. Then markets picked up and we grew. Sold to ICE a year ago.

Ritholtz:
our stocks ranked 1 (at lowest level of ranking) tend to either blow up and go to zero, or they survive and go back up.
On TV, if you don?t curse or drool, they?ll invite you back.

The big problem in market analysis is that it?s often so subjective.
P/E has zero forecasting meaning for stocks going forward.
Look at cheap P/Es of homebuilders, banks in 2005-06.

Philippe Buhannic
I saw huge amounts of money being wasted in IT on Wall Street. We were a vehicle to much more cost-effectively allow a bank to do development.
For many banks for many years, we were the only service that put all of their systems on one platform.

Jacob Pechenik
Our market is OTC energy derivatives. I started my original company with a solution, but not a problem. That?s a very bad way to start a company.
I started because I had lunch with a friend who was a weather trader. He spent 2-3 hours a day copying price quotes from IMs into spreadsheets. I asked him if he could use a system that automated that. There was immediate value seen.

Philippe Buhannic

We raised $8m.
We financed ourselves thru our clients. They prepaid for 3-5 year deals. 1.5 yrs ago we reorganized our capital structure. We took 1 private equity investor, which we were more comfortable with than the VCs.

Jacob Pechenik
At TechTrader we raised $20m and had big board with investors with all sorts of different agendas. Pushed us to expand too fast. With Yellowjacket, we ended up taking no money, because Enron blew up when we were raising $. I?m glad that happened because it forced us to sit on the idea for a while.

1st two clients, we asked to prepay. It was just enough to pay for 2-3 people working on the 1st product.

Once we had some traction, we took $0.25m from angels. Once we had more traction, we could pick our preferred VC partners and do due diligence on them.

Ritholtz
My partner was working at a firm which filed for bankruptcy. We bought all their IP, servers, etc. for $50K. $4m of development costs went into that. We self-funded for $2m, and when everyone?s wives screamed, we took in outside capital to hire more people. This kept us away from the VCs. Now the 3 partners still own 90% of the company.

In this environment, there?s a lot of great IP lying fallow in bankruptcy filings. If I weren?t too busy, I would be looking thru the assets of bankruptcy filings.

This is a great time to be hiring.

If you can?t field-strip a printer, you shouldn?t be an entrepreneur.

Buhannic
There?s so much peer pressure to be an ibanker; be a trader; etc.
We?re recruiting very talented people at a normal cost now.

Ritholtz
Our financial advisor business manages about $100m . That subsidizes the new business.

Buhannic
We are highly global in our revenue splitup. NY is our cheapest location. For the past 2 years, our European people were twice as expensive as the NY people.

We had to be in Manhattan to be at center of tech people, salespeople, etc.

Pechenik
You have to be where client is.

Buhannic
We got a lot of help from SIA in finding good office space cheaply.
You?ll see a lot of startup brokerage firms as a result of this turmoil, and they?re going to need technology. This can only happen in NY.

Pechenik
20-30% of our sales are results of clients moving from one company to another.

Buhannic

Same here.

Question: Where are opportunities?

Buhannic
Crisis of liquidity. More buyside to buyside trading, i.e., more exchange plays. This creates massive compliance risk. Do you realize we still clear in 3 days? That?s ridiculous.

FIX protocol is supposed to be a standard, but it?s not really a standard.

In life, nothing is normalized. This creates lots of opportunities to normalize data.

Pechenik
OTC trades are 8x volume of what?s traded on exchanges.

Buhannic
I really preferred the PE investors because they thought long-term, didn?t push us to do stupid things.

Ritholtz
We closed $0.5m oversubscribed round in Oct-Nov, in teeth of market collapse. This shows that there is demand for worthwhile companies.
Definitely I?ve seen growth in forensic accounting firms.

How to Squeeze Maximum Value from Business School

A little while ago, I gave a speech at NYU Stern Business School on “How to Squeeze Maximum Value from Business School: Leverage Your Education to Accelerate Your Career”. How can you maximize the benefits of all the years and all the money that you invested in your business education?

I prepared the Powerpoint for my personal reference, for my friends starting school, and for any of my future children who may go to business school. My main focus is business students, but the principles I discuss are relevant regardless of the exact subject you are studying.

To prepare this paper I interviewed many of my MBA classmates on what were the most effective uses of their time during school. I also probed to learn about what were the least effective uses of their time.

I thought that you might find the slides, below, of interest.

America Outdoors Presentation and Follow-Up

Thank you to those of you who attended my keynote at the America Outdoors annual conference last week. It was also a pleasure to meet and visit with so many of you after the session. I can tell social media is going to be a very hot topic in this industry in the coming year.

As promised, here are my presentation decks from both the keynote and the breakout session. As I mentioned, this whole thing happened on rather short notice, so I didn’t really have time to build out additional notes, but if you have any questions that the slides themselves don’t answer, feel free to email me (my email is in the presentation) or leave a comment below.

America Outdoors Keynote – How To Stand Out Online

View SlideShare presentation or Upload your own.

America Outdoors Breakout – Using Social Media To Drive Customers To Your Website

View SlideShare presentation or Upload your own.

A few more helpful resource links:

Dec. 16 Free Webinar: Best Practices in Private Equity Deal Origination

I hope you’ll join me for this Dec. 16 Free Webinar on ‘Where are the Deals?! Private Equity Funds’ Best Practices in Deal Origination’.
This is the sneak preview of the research I’ve been conducting with Evalueserve on this topic. My colleagues and I have interviewed over 90 private equity and VC professionals to learn their best practices.


UPDATE: The webinar is now posted on the AM&AA website: Where are the Deals?! Private Equity Funds’ Best Practices in Deal Origination

TIME: December 16 at 11am PST/2pm EST

REGISTER HERE: http://rs6.net/tn.jsp?t=asynvucab.0.0.6h66tbcab.0&p=https%3A%2F%2Fwww2.gotomeeting.com%2Fregister%2F588842200&id=preview

Sponsored by: Alliance of Merger & Acquisition Advisors

This event will be recorded for those who cannot make this time slot. Also, you can see the slides from this presentation here: http://www.teten.com/deals, and below.

I will discuss:
-> In the current tough climate, how can you lower your deal origination costs?
-> How are you positioning yourself to become your target’s preferred investor?
-> What are the primary sources of deal flow for institutional investors?
-> How can you use online networks and other “Web 2.0” internet technologies to increase your pool of sources?
-> What are the earmarks of a potential investment opportunity?
-> What best practices from sales and executive recruiting can you apply to the deal origination process?
-> How do you increase your inflow of useful referrals?
-> What is the best way to make warm cold calls?

Alliance of Merger & Acquisition Advisors 2009 Winter Conference: Jan 20-22, Orlando, FL

I look forward to speaking at the Alliance of Merger & Acquisition Advisors’ 2009 Winter Conference, Jan. 20-22, in Orlando, FL. Some of the highlights of the event: a private equity forum, for private equity firms that want to showcase lower middle market companies. There is also a Deal Expo for discussing active buy/sell engagements. Some of the topics that will be discussed at the event: post-merger integration; corporate M&A; and my area of focus, deal origination. I’ll be speaking on how institutional investors and investment bankers are using a wide range of technology to raise capital, win more clients, and identify attractive investment opportunities. I hope that some of you can join us there!

Keyword optimizing your personal profile/resume

Last night, I participated in a panel with Columbia University’s Center for Career Education. One of the ideas that came up was keyword-optimizing your personal profile/resume. Most obviously, to do this, you should study the resumes of your peers. Theda Sandiford also observed, “Google Analytics has a tool to suggest keywords. Once you put in all the keywords you have already thought of, run the suggestion tool and add those additional keywords to your [profile].” She added that theoretically, you could also add and remove topical keywords regularly based on popular news stories related to your professional expertise.

Notes from conference on NY Games community

Following are my notes from the first panel of Friday’s min-conference, “GAME THEORY/PLAY MONEY“, sponsored by DIGRA-NY. This is a new initiative to bring together the NY games community. The conference looked fascinating, but I unfortunately had to leave after the first panel.

BIOGRAPHIES OF SPEAKERS:

James Grimmelmann is Associate Professor at New York Law School and a member of its Institute for Information Law and Policy. He received his J.D. from Yale Law School, where he was Editor-in-Chief of LawMeme and a member of the Yale Law Journal. Prior to law school, he received an A.B. in computer science from Harvard College and worked as a programmer for Microsoft. He has served as a Resident Fellow of the Information Society Project at Yale, as a legal intern for Creative Commons and the Electronic Frontier Foundation, and as a law clerk to the Honorable Maryanne Trump Barry of the United States Court of Appeals for the Third Circuit. He studies how the law governing the creation and use of computer software affects the distribution of wealth, power, and freedom in society. As a lawyer and technologist, he aims to help these two groups speak intelligibly to each other. He writes on such topics as intellectual property, virtual worlds, search engines, electronic commerce, online privacy, and the use of software as a regulator. Recent publications include The Structure of Search Engine Law, 93 Iowa L. Rev. 1 (2007), Virtual Borders, First Monday (Feb. 2006), and Regulation by Software, 114 Yale L.J. 1719 (2005). In 2007, he was named one of Interview Magazine’s “New Pop A-List: 50 To Watch (Age 30 or Under).” He has been blogging since 2000 at the Laboratorium (http://laboratorium.net/). His home page is at http://james.grimmelmann.net/.

Katherine Isbister is an Associate Professor of Digital Media at NYU-Poly, and also maintains an affiliation at the ITU Copenhagen Center for Computer Games Research. Dr. Isbister has written two books: Better Game Characters by Design: A Psychological Approach, and Game Usability: Advice from the Experts for Advancing the Player Experience. Better Game Characters was nominated for a Game Developer Magazine Frontline Award in 2006. Current research interests include emotion and gesture in games, supple interactions, design of game characters, and game usability.

Aram Sinnreich is a Visiting Professor at NYU’s Department of Media, Culture and Communication, where he teaches courses on video games, intellectual property and digital culture. He is also the Managing Partner of Radar Research, a media and technology consultancy. He has written about media, culture and technology for publications including The New York Times, Billboard, Wired News, Truthdig and American Quarterly. As a Senior Analyst at Jupiter Research in New York for over five years (1997-2002), he produced research covering the online music and media industries and provided hands-on strategic consulting to companies ranging from Time Warner to Microsoft to Heineken. Aram’s kicked World of Warcraft, and is now quasi-addicted to Spore.

Mary Flanagan investigates everyday technologies through critical writing, artwork, and activist design projects. Flanagan’s work has been exhibited internationally at museums, festivals, and galleries, including: the Guggenheim, The Whitney Museum of American Art, SIGGRAPH, The Banff Centre, The Moving Image Centre, New Zealand, Central Fine Arts Gallery NY, Artists Space NY, the University of Arizona, University of Colorado-Boulder, and venues in Brazil, France, UK, Canada, Taiwan, New Zealand, and Australia. Her projects have been funded by the National Science Foundation, the Pacific Cultural Foundation, and the National Endowment for the Arts. Please visit her site at: www.maryflanagan.com

Liel Liebovitz received his doctorate from Columbia University in 2007. His dissertation, titled “Thinking Inside the Box: Towards an Ontology of Video Games,” examines the personal and social processes of play. Liel also served as associate professor of communications at Barnard College, and taught at Marymount Manhattan College. He is the author of two books of non-fiction: “Aliya,” published in 2006 by St. Martin’s Press, and “Lili Marlene,” scheduled for publication by W.W. Norton in 2008.

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Sinnreich: There’s a land grab going on in academe: every department wants to own games.
Flanagan: A similar land grab happened with film studies. There’s also a lot of money involved in this for grants.
Sinnreich: Growing 30-40% YOY, while film is flat and music is down. Also, military is very interested in this.

Liebovitz: Can we formally define a game?
Sinnreich: No, not possible.
Flanagan: most innovative games don’t fit within clear definitions.

Liebovitz: Why are video games compelling?
Flanagan: there are many innovative ways to define games.
Sinnreich: there is expectation of transformability.

Question: Are video games as a medium likely to have any long term sociopolitical effects? (compare with longstanding debate about argument of impact of TV on crime/politics)

Grimmelmann: TV didn’t radically change human nature. Viewers kept on living their lives.

Question: What about idea of forming guilds in Obama campaign: “yes we can?”. Does this create energy that could be used towards sociopolitical goals?

Isbister: TV was an isolationist blip. Games move us back to doing things together.

Sinnreich: I just wrote on my blog that Barack Obama is the first mashup candidate. He’s black and white, foreign and domestic. Instead of being a flat neutral candidate, he’s more than the sum of his parts. He’s like “Careless Dead” (mashup of “Careless Whispers” and “Dead or Alive”).

Isbister: Constants include: people like to be social. People have emotions.
Flanagan: We do a lot of social activist games. A game is a framework of action/agency. If we frame that so certain types of actions are allowed (e.g., certain types of communication in WoW are allowed) we impact the culture. Must think about how games create epistemological systems.

Question: What is the role of ‘glory’ in video games, e.g., the high scorers list which motivates people to join it?

Flanagan: you have the creatives, who re-skin; come up with new clothes; reengineer the structures. You also have disrupters, who like to vandalize.

Sinnreich: Games are a model for the free agent economy.
Isbister: I tell my students that eventually on their business card, they’ll put on their business card which guild they were in; what their high scores were.
Grimmelmann: rack of medals on a uniform is just a score, in the ‘game of killing people’

Sinnreich: football, soccer are martial games.
Liebovitz: There’s a huge misnomer in games, which is the idea of interactivity. However, when you actually study the game, you learn that you’re operating within a very tiny window of what the designer allows. However, the game is designed so that you think that what YOU are doing is driving your choices.
Sinnreich: Video games are information spaces which can be explored. One of the biggest questions of the era: if you give someone the tools to explore/discover the space, are they exercising free will /agency, or are there actions being overdetermined? Jon Zittrain’s new book is about that.

The first video game I fell in love with was Atari 2600 game, called Number Crunchers. You drive your car over numbers, and whoever goes over the biggest numbers wins. However, there was a bug: if you slid on the number sideways, you got stuck on the number, and you would go to 100 very quickly. That to me was compelling; I had to buy that game.

Grimmelmann: you have to balance between being entirely passive, and giving someone too many options. It’s like dancing, and the tension between being in the lead and the follower role.
Liebovitz: Cheating has become so common in video games, and is written into the code. This is a major subindustry in the code. It’s the “invisible towrope”: you look like you’re skiing but there’s really an invisible towrope.

Sinnreich: there’s a dance going on.
Grimmelmann: one of my favorite children’s books is “There’s a Monster at the End of this Book”, in which Grover tries to stop you from flipping the pages of the book. It subverts the medium.
Flanagan: In Animal Crossing, you can stop and get coffee. There’s a pleasure of discovery in doing that. This is a machine-operated diagetic space. The computer does stuff when you’re not there, to convince you that the world is bigger than just you.
Liebovitz: nothing suggests agency in a game like the ability to stop playing. Question for Isbister:, please comment on relationship between player and character. Games enhance your own powers.

Sinnreich: When I was playing GTA 4, I had to choose whom to kill, but had 2 perspective: my own moral sense of values, and the game’s values.
Isbister: I feel the tension of wearing the narrative suit which doesn’t fit
Flanagan: In the video game “Eve” (?), you start out as a debutante in heels and a ball gown at the opera. The singer turns into an opera singer, who then turns into a monster you must chase..in high heels. There were many blog posts I saw about how this impacted game play?”I really felt like I knew what it was to be a woman.” (laughter)
Flanagan: “Values at Play” is a collaborative effort between a game philosopher and me. We’re exploring what it means to make human values the center of the design. We’re not trying to make decisions about which values are ‘better’, but to think about design issues.
Flanagan: Big theme of game developers conference was growth of independent games, which were winning a lot of the awards.
Flanagan: Values are embedded in a game whether we acknowledge it or not. I just did an interview with Salon.com. They asked, “Do all games have to have shooting?” I recently went to a school to look at a dance game. One of the kids said, “This isn’t a game, because you can’t kill anyone.” What a strange generation to think play=killing someone.
Isbister: bestselling games are always simulation and sports. The key values of these games are novelty and consumption. They make a new version of the sports game every season, and you can’t play the old game.
Sinnreich: Casual games are the way out of the box of ‘you have to kill someone’. There are more adult women than teenage boys playing video games in the US right now?especially Nintendo.
Sinnreich: For the first time, all the mainstream console games are truly networked, and all the major games integrate that network functionality into the games. So we’re not tied to games that are stored on little metal disks.

Question: What are challenges of ‘governing’ the economy of a game?
Grimmelmann: Eve Online has a very tolerant attitude to money changing. It’s based in Iceland. I wonder if it’s being used as a channel for currency.

Howard Bloomfield is looking at doing tests of different regulatory regimes in games.

Question: The video game Rock Band recently beat out itunes for music rights to Beatles catalog. Aram, you wrote that the music industry is shifting to getting revenues mainly from licensing.

Sinnreich: The dominant form in which people listen to music now is the playlist. It’s not a question of ‘album’ vs.’ single’. There is not an ipod user who hasn’t experimented with making his own ‘greatest hits’ record. The Beatles catalog is perfect test case for merging the interoperability of video games with a pure consumption oriented medium.

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Audience questions
Question: Can a game not be Calvinball by definition?
Grimmelmann: The contextualizing of Calvinball in regular games is critical. Calvinball doesn’t make sense unless you know croquet, baseball, etc.

Question: “America’s Army” was a video game developed specifically as a recruiting tool. Comment.

L :We’ll never have a truly successful propaganda video game, because it’s too interactive a medium.
Teten: What can managers learn motivating power of video games?
Sinnreich: the Chinese gold farmers who work in WoW, they play WoW in their off-hours because they’re with their friends. When I was at a dot-com, we played Age of Empires on the company’s LAN.
Liebovitz: Heidegger said humans are different from all other animals because they know they’re mortal. Games free us of that onus.

Question: Who’s doing interesting research in games.
Flanagan: Esward Costranova
Liebovitz: JL Sherry, who’s found little correlation between games and violence.
Isbister: ‘pencil test’. Researchers asked people to study a certain interface in which you manipulated a pencil with your mouth?either clench your teeth (frown) or hold a smile. The people who had to hold a smile liked the interface much more.

Notes on BRITE Workshop on Online Communities, at Columbia Business School

Following are my notes on the BRITE Workshop on Online Communities, at Columbia Business School

Community as Part of Your Site Offering: Strategy from 50,000 Feet and Tactics from the Trenches
Sylvia Marino, Executive Director, Community Operations, Edmunds.com

3 person staff running this. I’m the Executive Director of Community Operations. I have my own P&L. We get profitable quite early in the year. I have a community manager, who deals with moderators and members. Senior Product Manager who makes sure community is integrated throughout the site.

We sit in the media group, separate from editorial, but equal to them

Our membership agreement is one of the most copied on the Web

We’ve banned a user and sued him to do that

Consumers engage with others, editors, industry experts, manufacturers, experts

General rule: no soliciting

A: Why do you have both Forums and Social Q&A?

A: Q&A is for quick response.

Forums is for longer-term dialogue

Our customers engage in Edmunds, Carspace, and also elsewhere: YouTube, Twitter, Facebook, widgets, mashups, RSS

Our community tools (e.g., Twitter) have empowered editors.

We have lots of moderators, most of whom are part-time

Consideration Marketing strategic placement based on what the contest is.

Advertisers used to worry about seeing their ad next to negative conversation but that’s now rarely true. Most advertisers are doing packages.

We’re #3 automotive info site, after General Motors (whole network) and eBay motors . So we’re the only neutral information site.

We use NetworkedInsights, which measures your ROI on your community activity.

Every page and every product is a community opportunity

Read customers.com by Patricia Seybold. First figure out the customers’ needs, and then see if you really need Twitter, blogs, podcasts, Facebook, etc.

We’re a private family-owned company (Steinlauf family)

Dealers tried to co-opt our service to promote themselves. Customers didn’t like having them in forums, but wanted to know about good dealers. So we added dealer ratings/reviews, and now local auto repair service ratings /reviews.

We decided that thinking that our users could spell was a really radical assumption.

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Interactive: Creating Experiences For Online Communities
Bernd H. Schmitt, Professor, Columbia Business School, best-selling author, “Big Think Strategy”, with Aliza Freud (CEO Shespeaks), Sylvia Marino, and Olivier Toubia

Q: Who participates in these communities?

Marino: it’s people with needs. Although I often wonder if these people have jobs. For support , to give & receive information, and entertainment. I have a federal court judge, to a woman with 9 kids. I have people who are in every day, and people who come in once every 3 years when their lease is up.

Freud: People of all ages are online, but their purposes vary widely. Moms often go online to monitor what kids over age 13 are doing.

Q: Comment on manufacturer-owned sites.

Marino: User will always have suspicion that negative comments are edited out. When we get complaints from car manufacturers about what is written on our site, our response is always, ‘make better cars. Treat your customers better.’

Marino: some years ago L’Eggs launched an online community for pantyhose members. Real women said, ‘women don’t want to talk about pantyhose’. But it turns out, there were people who wanted to talk about pantyhose: duck-hunters and cross-dressers.

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Integrating Online Communities: From service and product forums to a holistic approach to customer communities
Richard Binhammer, Conversations, Communities and Communications, Dell, Inc.

“Dell has been a leader in using social media to engage its customer community in tech support, product development, and public relations. Initiatives have included corporate blogs, customer-to-customer support (C2C) forums, IdeaStorm for idea generation, online videos, and ratings & reviews. Richard Binhammer will discuss Dell’s current community initiatives and future plans to integrate these diverse programs into a holistic approach throughout the company.”

Launched online communities since 1996.

There are 4000+ conversations about us every day.
We decided to listen, learn & participate.
We estimate we have 2b interactions with clients evey day. IdeaStorm has 9800 customer ideas so far.

Main channels now:
– resolve dissatisfiaction
– Join conversation
– Share content & collect ideas: StudioDell, IdeaStorm, Blog roundtables, Second Life, Digital Nomads (powered by Dell but not officially a Dell site), Regeneration.org (powered by Dell but not officially a Dell site)
– Tell our story: Direct2Dell blog

We’ve done $0.5m in revenues on twitter (from DellOutlet.com)

Our premise: we are a listening company.

When there’s a dispute, we try to take it offline, because of our privacy policies. To solve your problem, I need your Dell ID and other information. We then cross our fingers that the customer will acknowledge that we solved the problem. 90% of the time they will do so.

We are evolving to a model where we don’t treat online as a special type of media. Core group of 40 people in conversations with community team.

Social media is a phenomenal early warning system.
I can name 3 issues (e.g., laptop batteries) where social media warned us 3.5 weeks before anything else of a major issue.

I’ve probably covered half my salary in computer sales.

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From BarackObama.com to AT&T: Using online communities to engage, energize and mobilize constituents
Thomas Gensemer, Managing Partner, Blue State Digital

“With nearly a million members, the My.BarackObama.com social network has helped to win a presidential primary, raise enormous funds online, and reshape the role of the Internet in political organizing. The company behind the social network, Blue State Digital, has worked with more than 100 clients in politics and business, to develop new media strategies to grow relationships with customers and advocates. Managing partner Thomas Gensemer will discuss how they have worked with the Obama campaign and clients such as Stonyfield Farms and AT&T to energize and mobilize constituents on their behalf.”

Our tools & programs: the basics. Easy signup. Email broadcast. Fundraising. Event management. Surveys, quizzes, polls. Petitions, tell a friend.

1.6m active profiles.
Over 50K groups & circles
Over 250K user-organized events

List power:
Active users (about 5% of active signups)
One-time users
Profile owners
Low-level actions
Basic signup (deadbeats >35%)

93% of Americans expect companies to have a presence in social media.

Why network?

– self expression & ego
– utility
– Exhibitionism/voyeurism
– Reputation (Linkedin)
– Altruism (actblue, my.barackobama.com, angie’s list)

If you had 10 of your most loyal customers in a room, what would you have them do?

I don’t believe that everyone should have a social network.

1/10 of Best Buy employees have created a profile on BlueShirtNation.com

BMW’s site on Facebook makes sense. It doesn’t require people to join a new network.

Al Gore’s “We” social network hasn’t taken off, because it’s not tied to face-to-face local events. What can people organize around?

Analysis: why doesn’t Whole Foods have a real social network? There’s real affinity, real physical presence.

Key Lessons

Not all networks utilitarian; in fact, most won’t offer utility.
Need shared affinity
Need low barrier ‘ask’
Need ongoing engagement tactic (e.g., local meetings)

If you’re a ‘deadbeat’, you get a ‘thank and spank’ message saying, ‘0.5m people have signed the petition; why not you?’. We work with an organization called Wal-mart Watch.

If we had done what Kerrey did, focusing on MySpace / Facebook, we would be very limited in our ability to message people. We wouldn’t own the data.

110 people now work in new media for MyBO, including people in all 50 states.

Dr. Eric Clemons, Wharton Professor, on FirstWivesWorld.com/Online Networks

I recently attended a private talk by Dr. Eric Clemons, Professor of Information Management at The Wharton School, at the offices of www.firstwivesworld.com, the first social network and community dedicated to women transitioning through divorce. He is currently creating a case study on the site. I definitely love their name!

My notes:

He avoids being an investor in companies he profiles/analyzes.

Quoting a panelist from a panel he moderated: “We may not do the deep analysis of traditional journalists, but we’re so wired. We’re a collective mind.”
“We don’t need fact-checkers. We don’t need editors”.

Is the internet a breakthrough in human communication?

Social networks still have norms, which constrain what you can do.

Superficial monetization of a social network with advertising is a failure, because it doesn’t fit the social norms.

In beginning of radio: there was no programming because there was no one listening. RCA owned a radio station and made radios. They solved the chicken & egg program by giving away thousands of radios in NY which were tuned to only 1 station, theirs. Then they could go to media guys, and tell them 100% of NY radio market is listening to RCA. Now we can go to Colgate and sell advertising.

Have you ever noticed that all the ads on the different channels run all at the same time? Because you agreed to be captive in exchange for free content.

BUT the net is entirely voluntary. It’s like showing up at a medieval faire.

Most attempts to monetize the net are ill-conceived at best to offensive.

British Airways used to have a promotion: if you buy a 1st class seat, you could bring your wife. Problem: people would bring their mistresses.

Facebook Beacon is making the same mistake. If I buy black lacy lingerie, 3 possibilities:
1) bought it for myself
2) bought it for wife
3) bought it for another woman

In all of these scenarios, I don’t want my wife / network to know about this.

My first wife left (rightly). She said, “During the day, I’m first in my class at Cornell Law. I come home and I do your cooking. Do your own cooking!”

Ultimate terror: 2:45am. If I need to whine, the only person who will listen to me whine is the reason I’m whining.

When I was 25 and my wife left, I was disoriented. It had been my life, my car. When she left, my network fell apart. We have a group that is in need but too embarrassed to ask.

I had grad students whom I paid to play Second Life, and another whom I paid to play World of Warcraft. One was a jock, who created a character called Sweetie. He would send her to bars, salsa with other characters, and then watch her be violated.

No one on a dating site wants ONLY a virtual relationship.

3 P’s of a successful online network
1) Personally relevant. If it’s not relevant, it’s just bad TV.
2) Participatory
3) Physical transition

The hard part of a social network is monetizing it.

How would you feel if a woman you met on First Wives World said, “I’m a therapist, and I want to be paid for providing you some counsel.” You have to be careful about violating norms.

I have a freshman, who has a company. You send him a text message, and he’ll forward them to everyone you know. E.g., when Heath Ledger died, I got 70 messages. Some other faculty said, they had to cancel classes, because everyone was either texting or crying. The students say they get 10 messages/hour, except Friday/Saturday night when they get 40 messages/hour.

The people we’re trying to capture are ‘digital virgins’. I want them to become digital residents.

A lot of people freeze halfway through the registration process on First Wives World. As soon as my activity online is linked to my real identity, I’m nervous.

We’ve done studies of the depth/loyalty of the average 19-year-old employee. They’re both cocky & ignorant.

The alternative to advertising is letting users design it.

Here’s what FirstWivesWorld should do. Tell ETrade: we won’t take your ads. But give us $0.5m to do research on needs of divorced women with money. Because we did the research together, you have an exclusive on this relationship. You cant get this knowledge from anyone else. This is not giving an exclusive on banner ads.

Bud spends $.75b on promotion. Kraft hasn’t gotten past the model of: we’ll sell a product the buyer doesn’t really like, but he’ll buy it if the price is low enough . We call this promotion, even though neither the buyer nor the seller is happy with the transaction.

Companies have both a promotion and an advertising budget. There’s not as big a pressure to justify ROI on the promotion budget.

The flush toilet and the elevator made cities possible.

The iphone may be as big as the automatic transmission.

If YouTube collapses the public broadcasting system, the culture goes away.

We are teaching people to use itunes as a coping mechanism. That is emerging spontaneously from the community.

Jason Fried, 37Signals, at the NY Web 2.0 Expo

My notes from Jason Fried of 37Signals at the NY Web 2.0 Expo:

Software business is a great place to be . You can build anything you want. Don’t have to worry about physics, raw materials, regulation, cost of change, geographic locale

You do have to worry about some issues most people don’t worry about:
– lack of feedback loop. Water bottle is immediately apparent as a quality design. Software is too nebulous. Doesn’t have edges or weight. Can expand infinitely.
– If software were physical, what would it feel like?

Versions 3 or 5 of software tend to be the best. If you say yes to too many customers, you look like MS Office.

You should think of yourself as a curator. Curator’s job is to say ‘no’.

Listen to customers, but innovate on behalf of entire customer base

Tend to bloat over time. Hard to go back over time from bloat.

Customers only represent what they know is possible, not what is ultimately possible.

When you get a request, attach a cost to it (dollars, time, etc.).

Q: How would you redesign Microsoft Office?
A: Make it much more social. It’s fine.

Q: Who should be the curator?
A: Steve Jobs is the ultimate curator in business.