Let’s say an ad group has three ads. The ads have 100,000 impressions each. The CTR is 5% for the two top ads and 1% for the weak ad. Let’s assume they all have a 2% conversion rate (sales rate) (in reality, the strong ads will have a higher sales rate, but let’s keep this simple.)

That means the top ads have 5,000 clicks and the weak ad has 1,000 clicks. The 2% sales rate means the top ads produce 100 sales and the weak ad has 20 sales.

If the weak ad had been deleted, its 100,000 impressions would have gone to the two top ads, thus producing 80 additional sales. By keeping the weak ad, the campaign lost 80 sales.

Look at your ad groups. Create four or five ads (to test various ads). When they reach 1,000 impressions, compare the CTRs. As a rule, I don’t keep ads that have a CTR lower than half of the top ad’s CTR (i.e., if the top ad is 2%, then no ad should be less than 1%.)

No, it’s something else. It’ll have a big impact on Silicon Valley, but oddly, there’s been very little talk about this.

The JOBS Act encourages small business growth by removing restrictions on investment. Previously, an investor had to be “accredited”, which meant $1m in assets or $200K in income. Now, anyone can invest up to 5% of their income. A video clerk can be an investor now. The crowdfunding sites (such as Kickstarter or Indiegogo) allow thousands of people to fund projects. Sounds good, right?

Here we go again. Remember when Al Gore said he invented the Internet? It wasn’t far off. I was working in a telecomms startup and we knew about this. Netscape IPOed in 1995. In 1996, President Clinton signed the Telecommunications Act. Those two events were the key to the dotcom boom. The telecomms act was part of the deregulation craze of the 80s and 90s: it got rid of rules and allowed anyone to get into telecomms. When Netscape raised $2.9b, hundreds of Wall Street investment bankers (IBs) dashed out to Silicon Valley to see how they could make money like that. The Telecomms Act allowed them to create companies such as Enron, WorldCom, and Tyco with outrageous lies about customer trends, revenues, and profits. Morgan Stanley, Goldman Sachs, Arthur Anderson, and others participated by touting (fake) companies. Investors were so eager to get rich like Netscape so they invested. That’s how President Clinton’s Telecomms Act created the Internet, or at least, the dotcom boom.

And that boom became the dotcom bubble, which popped in spring 2000, because the numbers were fake. Those dotcoms weren’t profitable, heck, many didn’t even have revenues. VCs created shell companies, IPOed them on Wall Street, and took money from investors. After the IPO, they walked away. Was the company sustainable? Could it actually make money? Who cared? Wall Street got rich. Hundreds of thousands of workers got screwed; five trillion dollars vanished.

Okay, write this in your diary: April 5th, 2012: Obama signs the JOBS Act. May 17th, 2012: Facebook IPOs for $100b. Circle these dates with red lipstick (may I suggest “Colour Riche”?) One day, you’ll show those diary pages to your grandkids as all of you huddle under a bridge.

Here’s what’s coming:

- FB’s $100b IPO will turn VCs and IBs into freaks to create more companies with billion-dollar valuations (such as Instagram, which has zero revenues).

- The JOBS Act removes onerous regulations that require startups to report actual numbers. No more independent auditors. Startups can say whatever they want. (BTW, my cat is building a startup in my Palo Alto garage: it’s amazing. Not even three weeks and the cat already has $4.2 billion in revenues. What a cat! You can buy pre-IPO shares.)

Remember the national craze over that $500m lottery a few weeks ago? We’re talking $100b. That’s 200X more than that lottery. There’s going to be traffic jams of Ferrari and Lamborghini in Palo Alto.

Yes, it’s a bubble. Yes, they’re doing it again. But don’t you want to get rich this time? Of course you do! Hurry and buy pre-IPO stock in my cat’s startup! OMG! Cat just made another billion! Freaking incredible! HURRY!

FB offered cash and stock with a total value of $1 billion. The stock is most likely on a three year vesting schedule. That means three years X 12 months per year equals 36 months. Every month, they get 1/36th of the stock.

And I suspect they’re also in a six-month block: they can’t sell any stock for the first six months after the IPO (otherwise, they would sell at the IPO, thus crashing the stock.)

There are also targets and milestones: If Instagram reaches 50m users, they get a block of stock. If they reach 75m, another block. This also means if growth stops, they get no more stock.

And the team is probably also tied to FB: they have to stay at FB for three or four years. If they leave sooner, they lose their stock.

What will be the value of FB stock three years from now? It could be the current (wildly speculative) $100B. It could be higher. Or (very likely) FB stock will have the same value as MySpace, Geocities, or Tripod, or the other 250 social media clones of FB, which are all worthless.

So what did Instagram really get? Perhaps $20m in cash and a whole lot of promises of unknown value.

An NFC Tag. These are stickers, about the size of a quarter (1" or 2.5 cm wide). They contain a small chip to hold data.

I have an Android phone (Galaxy IIS). I bought an HTC Amaze for Helen a few weeks ago (also Android) and while I was fooling around with it, I found it also had NFC capability. Within a few minutes, I turned it on in both phones and was able to send short text messages from one phone to the other via NFC.

In Summer 2010, I got a BlingTag for my phone: a little sticker on the back of the phone ties my phone and my Paypal account so I can pay at some 40-50 shops in Palo Alto. It was one of the first uses of NFC. We’ve come to the next step: the NFC is built into the phone.

NFC is “Near Field Communication“, which is like a kind of Bluetooth: it uses short-distance radio waves. Bluetooth works up to maybe 100-150 feet; NFC works up to about 4 cm (two inches). You touch your NFC phone to another NFC phone and the information is passed along.

The phone’s power lets it send and receive via NFC. There are also “passive NFC tags”: these have no power, so they send information only when a powered NFC device (your phone) is (very) nearby. You wave your phone over the NFC tag, it sends data, your phone picks up the data. Unlike Bluetooth, no pairing is required. Just hold the phone over the tag and the data appears.

What kind of data? The NFC tags vary in size. The smallest holds 64 bytes and these go up to 752 bytes. It can hold any kind of data: text, URL, telephone, email address, etc.

At Amazon.com, I bought a pack of NFC tags (Mifare Ultralight, 64 bytes, ten for $15). These are little stickers. Just use your phone to write info onto them and then stick them wherever you want. You use an app, such as NFC Task Launcher, by Joshua Krohn ($1.99 at Android Market) to write the tag. There are several of these, incl. free versions.

64 bytes can hold 43 characters (incl. spaces). You can use very long URLs by using URL compression, such as Bit.ly. For example, a URL plus tracking code (such as http://www.andreas.com/info-kpi.html?utm_source=google&utm_medium=cpc&utm_term=ltv &utm_content=september&utm_campaign=kpi-ebook ) (which is a real URL) can be compressed to http://bit.ly/A9pGKq (To do this, use bitly.com.) That long URL fits onto an NFC tag.

This means there is no practical limit to the amount of information that can be relayed via an NFC tag.

Unique IDs can be embedded in the link. The links are also trackable by analytics programs. This means the manufacturer can know exactly which product you’re looking at, not just the model, but the serial number itself.

What Can an NFC Tag Do?

• How to use your kitchen blender? Wave your phone over the NFC tag on the NFC logo on the juice blender. A short how-to video shows up on your phone.
• No more filters for your water filter? Wave your phone over the NFC tag to get an web page where you can order new supplies.
• Laptop is dead? Use the NFC tag to get the web page for support information.
• Christine’s cafe lets customers use free Wifi. They wave their phone over a NFC tag at the counter and logs them in, along with the password.
• Want feedback from your cafe customers? Put tags on every menu and ask people what they think. The tag opens a feedback form.
• Friends coming from Seattle? They wave their phone at your door lock. It recognizes them and the door opens. You can set this to expire on Monday
• Go to a concert. You use your phone to buy tickets online. At the concert gate, you wave your phone over the gate.
• How much is left on your NFC metro ticket? Use your phone to read the card and see how much credit you have.
• Helen wrote a new app. You want to try it; you wave your phone over her business card. The app installs.
• You’re downtown and you see a poster for a art gallery. How to get there? Wave your phone over the tag and a map opens with directions.
• At WallyWorld, you get wristbands that have NFC tags. Use these to get into places, on rides, and get food.
• Cop pulls you over. Your driver’s license has an NFC tag which sends your information to her device.
• At the supermarket, wave your phone over the checkout. It notes your customer membership and adds a bonus coupon.

NFCs can also carry out actions. An NFC tag can turn off/on the Android’s features. You come home and wave your phone over its docking station. The NFC tag turns on Wifi, turns on music, lowers the screen brightness, turns off the Wifi hotspot, and lowers the ringer volume. At your office desk, another NFC tag configures your phone for the work day. You can do this with the NFC Task Launcher app.

Bulk Use of NFC

The real use of NFC is in bulk application: not just 10-20 or 1,000. It’s when a company puts NFCs on all of its 400,000 blenders. Or when WalMart obligates every manufacturer to use NFC on every relevant product in the store. And every phone can read NFC.

NFC vs QR Codes

QR codes (QR: “Quick Response Code“) are those little squares that you can scan. There’s little practical difference between QR and NFC: Both can send data (URLs, commands, etc.) to your phone. The difference is in how you scan them: you scan QR codes with the camera and you scan NFC tags by holding your phone close to it. As for cost, QR codes have the advantage: they can be created and reproduced for free. The biggest problem for NFC is the limited presence (only a few smart phones, no iPhones, etc.)

(Example of a QR code. This points to my personal contact page. I also created NFC tags with this URL. Instead of having to type my email address, you can click the links.)

Limitations to NFC

At the moment (March 2012), only advanced HTC and Samsung phones have NFC chips. Some of the carriers, such as ATT, block NFC. It’s in the phone, but it’s blocked, because if NFC will enable transactions, then ATT wants a percentage. None of the Apple iPhones have this yet. Apple tends wait for new technologies to become established. But it’ll be in iPhones soon. Once again, the US is years behind Japan and other countries, where NFC is developing quickly.

Companies that add NFC tags to their products (kitchen blenders, desktop printers, etc.) will draw attention from consumers with smartphones, who are the most desirable customers (they’re affluent, etc.). This will help to accelerate adoption of NFC.

What’s Important About NFC?

NFC ties your phone to things. Your phone can pick up data from stuff. It increases the power of mobile devices.

Because NFC enables encrypted data transfer, it enables the digital wallet. NFC can replace paper and plastic ID cards and add new functionality, incl. payment, check in, and so on. Your phone becomes your wallet.

Google is developing Google Wallet. VISA is setting up ISIS, a global standard for digital payments. WalMart, Target, and 22 other large retailers are also setting up their own standard.

To keep up with NFC, visit NFC-Forum.org/home/.

What Is Yahoo’s Claim?

FB is using pay-per-click (PPC) advertising. When a visitor clicks an ad, they are sent to the advertiser’s website. Yahoo has the patent on that. FB has been using this without paying. Very likely, they have been notified of being in violation and they’ve chosen to ignore Yahoo.

Has Yahoo Won on this Issue Elsewhere?

Although this is probably the single most valuable patent of the last ten years, very few people know about it. In 1998, there were many kinds of search engines. GoTo.com came up with a crazy idea: a search engine that was also the Yellow Pages: companies paid to be listed. When you click the listing, you go to the company’s site. It was “pay to be listed”. I heard about this and a number of us thought it wouldn’t go anywhere; why pay if you can show up in Yahoo, Dogpile, and many other search engines?

Google was started in 1998 with a few hundred thousand dollars in venture capital. By early 2002, it had run out of money. Nobody wanted to licence the search engine. They tried to sell Google, but nobody wanted that either. Looking for ways to make money, Google met with GoTo. They signed a nondisclousure agreement (NDA) and GoTo showed Google how to place ads for a fee. Sergey Brin famously ran out of the meeting and demanded a bucket of gasoline so he could set himself on fire to cleanse himself of the filth of advertising.

But Google wasn’t paying salaries, the food had run out, and they had only a few months of rent left. So the engineers reverse-engineered (copied) GoTo’s idea and placed ads on Google. They figured this would be a temporary solution until they could figure out how to make money.

The months went by and the advertising grew. The money problem was solved. But they ignored GoTo.

GoTo changed its name to Overture and a year later, it was bought by Yahoo for about $1.6b.

Google set its IPO for 2004. Before the IPO, Yahoo sued Google for violation of the patent.

Google had two choices: settle the lawsuit or go to trial. The trial would take time and happen after the IPO. If Google lost the trial (which was very likely: copied the tool, signed NDA), Yahoo would collect damages. Worst yet, Google’s new investors would then sue Google for the amount because it was a liability that had been passed on to the investors. If Yahoo won $3b, the investors would sue for an additional $3b. Google would have to pay twice.

So Google settle just before the IPO. Yahoo got 2.7 million shares of Class A stock. With the IPO, this became worth a billion dollars.

In return, Google got a perpetual licence to use GoTo’s PPC patent.

This is Google’s deepest secret. Google prides itself as a technology company, run by engineers, based on innovation. Over the years, Google has spent close to $30b in innovation and research. Not a single one of those hundreds of projects has produced money. Nothing at Google has ever made money. 98% of Google’s revenues come from advertising, an  idea that was stolen from GoTo and for which Google had to settle a lawsuit. If it wasn’t for GoTo’s advertising, Google would have disappeared in 2002, just another startup.

What about Facebook?

And now we come to Facebook. The same situation: FB made $3.7b in 2011. Most of that was from advertising: yep, PPC, the same as Google, the same as GoTo. The same patent.

Therefore Yahoo is suing. FB wants to IPO for a $100b valuation. Sweet!

FB will have to pay, and they will have to pay before the IPO (probably in May 2012). Otherwise, they will pay double or more after the IPO.

How much will Yahoo get? If FB thinks it is “bigger than Google”, then Yahoo will ask for more. Can FB get out of it? This is business. Yahoo will not let them out of it. Watch for a very quiet announcement that FB and Yahoo have settled the issue.

Up to now, FB has tried to be an advertising platform. Companies placed ads in FB to reach their target audience. But FB performs poorly compared to Google, Bing, or Yahoo. If you show 100 ads in Google (i.e., 100 impressions), you could count on average to get two clicks (a 2% click-through, or CTR). In FB, you need to show 4,000 impressions to get two clicks. That’s a 0.00005% CTR. The CPLs (cost-per-lead) was correspondingly poor: FB CPLs were generally 10X more expensive than Google Adwords CPLs. FB doesn’t work for advertising.

The same with ecommerce. FB also tried to be an ecommerce platform, where companies build online stores in their FB pages so customers could buy products. A year ago, many of the large brands had ecommerce sites within FB. These are all gone now. The revenues don’t justify the expense. FB doesn’t work for ecommerce.

Up to now, there were fan pages in FB, which were mini-websites for companies. Companies could create a landing page, where not-yet-fans arrived and were encouraged to click Like (get a discount, a gift, a coupon, etc.). These were called “fan gates” (the fan had to enter via a gate). FB also allowed companies to create additional pages as tabs, where companies could place games, widgets, videos, photos, contests, polls, etc. A number of companies sprung up to create software for those tabs.

This was all great fun, but it didn’t produce sales for companies nor advertising revenue for FB. Companies and social media strategists tried many things but these didn’t work. FB’s IPO is coming up, which means FB has to show an actual revenue model that also works. So it was time for Plan B.

In short, FB abandoned the advertising model. FB has switched to an entirely new model.

FB noticed that people like to follow their favorite companies. Many people also interact with those companies: post messages, add photos and videos, etc. In return, a number of companies interacted with their fans: they wrote postings, they replied to people, and so on. FB’s new strategy builds on this model of interaction based on messaging.

Gone: Fan Pages and Tabs

• FB removed fan pages. Tens of thousands of fan gates, built at a cost of millions of dollars, are now irrelevant.
• Tabs: FB lowered the significance of tabs. Few people clicked on those tabs anyway. There still are tabs, but they don’t matter. This means no more polls, contests, games, etc. Buddy Media’s tools are now irrelevant. The vertical list of tabs is now a row of three boxes which looks like decoration. Most fans will not know they can click on these. (You can change the order of the boxes. Click Edit and then the pencil icon at the top of each box. You can swap its place with other boxes.)
• Photos and videos also fall off the table. Few people clicked on those.

The New FB World: Messaging

FB changed the fan page layout to match the Timeline layout. The goal is encourage companies to post messages and interact with their fans with postings. This is important: You post messages. Your messages get pushed into your fans’ news feed. They comment on your message. You encourage engagement with messages. You pay to get your message distributed. Here are the new tools for this:

• “Pin a Story”: This lets you move a message to the top of your page for seven days. After that, it goes back to messages. You can use this to feature new products, sales, events, etc.
• Highlight a Message: You can expand a message to fill the width of the screen so it stands out better.
• Private Messaging: Your fans can send private messages to you. Customer support issues can be handled quietly. To do this, go to Manage | Edit Page | Turn on “Messages:Show “Message” button
• Message Moderation: You can turn on moderation, which means a fan’s postings have to be approved by you in order to appear. This will stop negative comments. However, it will also stop the conversation when fans post and it doesn’t appear. To do this, go to Manage | Edit Page | Turn on “Post Visibility” (“Show only posts by…”)
• If you want, scroll to the bottom of your Timeline and write about your company’s beginnings. You can set this back to 1800.
• Write up to three lines of text, but not more. Data shows that two or three lines of text works best.
• Add photos or video. Data shows you’ll get 2X response.
• On average, your posting will be seen by 16% of your fans. If you have 100,000 fans, only 16,000 will actually see your posting. FB’s algorithm shows your message only to fans who interacted with you or are likely to want to see your message. It won’t annoy your other 84,000 fans.
• To reach your remaining fans, you can use “Reach Generator” (i.e., you pay to use Reach Generator.) If you have a large fan base and you have significant spend, you can pay so your message will go out to 50% of your fans weekly and 75% of your fans monthly.

Reach Generator has a downside. Many companies have paid hackers to add tens of thousands (or millions) of fake accounts in order to inflate the company’s reputation. As much as 80% of fans of the major GOP candidates are fake. If a company bought a million fake accounts, they will now have to pay to send messages to those fake accounts just to reach the few real accounts.

There is also “Facebook Premium”, which allows you place your messages as ads on the side of your fans’ page. FB promises a 10X response improvement.

Modify Your Fan Page’s Layout

About the only thing that you can do in terms of layout is the banner image at the top of the page. You can add a large image at the top of the page (see e.g., facebook.com/harley-davidson). You can also turn this off (as I did at my page facebook.com/andreas.work)
You can also add your logo, your face, or your cat.

• The banner image (also called the Cover image) should be 851×315 pixels
• The banner image is NOT allowed to have text. This means No call-to-action, offers, ads, information, nor text. I suppose FB teams in India will review banners and block the offenders. It’s interesting that they’ll block banners with text. They are pushing companies to use messaging.
• The portrait photo can be 180×180 pixels or less.

Change/Update the name of your page

By now, many companies want to rename their pages. Use the following URL to request a name change: https://www.facebook.com/help/contact_us.php?id=262629790471076

The Log Out Splash Screen

You can also pay to have a splash image appear when people log out of FB. However, most people don’t log out; they simple shut down the browser page. I doubt this will have any impact.

Rapture Day: March 31st

Companies have until March 31st to switch over. Until then, the old display is still active. At the end of March, all fan pages will be switched over.

In Summary

• The change is radical. FB has abandoned pay-per-click advertising and switched to interaction based on messages. This makes sense: Social media is engagement, so the new model works with that. And FB advertising didn’t work anyway.
• Companies and social media experts are going to have to change directions (and horses). It’s no longer about polls, games, contests, and other gimmicks. It’s no longer how to get the most fans. It now becomes a matter of writing messages that engage.
• It’s a good question as to what this means for other social media companies. Their results were also equally bad. Will they continue on a ad-based model? Or switch to FB’s new strategy?
• And how will the users react? FB is going to post many more company messages in their feed.

Don’t abandon FB. Millward Brown found that Facebook was the most efficient form of media at driving desired brand perceptions and overall brand equity when compared to other online, out-of-home and television advertising. It’s just not clear on the best way to do this.

Finally, this is the perfect example for why you should not use FB as your main digital platform. FB, which is run by kids, owns your company’s presence in FB and they can do whatever they like and they won’t even notify you. You spend hundreds of thousands of dollars, hire people, etc., and then FB changes everything. Build your own website. Don’t rely on FB.

Here’s the current chart from Google Insight. This shows the amount of interest in Google+.

Google Trends also reports the same drop for G+. Search volume peaked at 15 points and is now down at 0.5 (or 3% of its peak).

Google+ continues its descent into the abyss. Interest in Google+ is a mere 20% of what it was at the peak, which was only 30 days ago. The trend is clearly steady downwards now.

Is there any hope for Google+? Maybe they’ll release something major. Business pages are coming soon. Or they’ll pay Justin Bieber $10m to switch.

Today’s Chart: The trend for interest in Google+ peaked upon release and is now downwards. It hasn’t moved up. There is no acceleration. Not looking good.

This sad situation underlines reality: The USA no longer has the ability to bring people to earth orbit. The Russian (i.e., Soviet) Soyuz, first launched 45 years ago, is reliable and will continue to service the space station.