I came to talk to you about actually a strategy. And the best place to talk about strategy if we’re going to start the conversation, really, is with the NHL. Here we are in the heart of Bruin territory, but what I really want to talk about is a period of time that happened in the 2012-2013 season, a period known by NHL fans as the lockout.
The lockout was 113 days of pure hell, which is represented an epic battle between rich people and other rich people about who was actually going to be richer. And the people who suffered the most were the people who worked for all the rich people, who themselves never did get rich out of this, who were the folks who worked at the concessions and the folks who worked at the stadiums. And probably most impacted were the folks who worked in the news agencies— the reporters— who were stuck having 113 days of nothing to report, which when you’re a sports writer is a miserable, miserable period.
Except for two guys. Two guys who happened to work at the Montreal Gazette, who they decided they were not going to take this anymore. And so what they opted to do was fire up their version of Madden’s EA Sports NHL 13 and play the games that were scheduled for that day with the teams that were scheduled for that day, and then write about them in a story.
This caught everybody’s attention. At one point, they got interviewed by other people in the press who also had nothing to do. In fact, Bloomberg wrote an article, an interview. The writers then told them, you know, when the Canadiens lose, it’s a lot easier to get quotes out of guys when you make them up rather than trying to find some guy who’s hiding. Journalism at its finest.
The fascinating thing about this was that this basically saved the sports section of the paper. Their readership numbers not only were back to where they should be, they were actually the highest they’d ever been. In fact, during the period where they were documenting their imaginary hockey games, they actually had their readership at the highest the newspaper’s ever seen for the entire paper. It actually brought more readers to the Gazette than any other time in history.
Meanwhile in New York City, another two guys start up their own version of journalism. They decided that the news was a little too depressing and a little too serious, so they came up with their own variation. They started something called The Gist. And the idea behind The Gist was to provide short synopsis of key stories with sort of an entertaining spin.
So for example, New Zealand passed a law that allowed permits for special types of technology, and the headline they wrote for that was, “New Zealand Makes All Other Countries Obsolete by Legalizing Personal Jet Packs.” When former Congressman Anthony Weiner decided to announce his run for the mayorship of New York, they wrote for him, “Amateur Genital Photographer Considering Return to Politics.”
But my absolute favorite was when American Airlines had a server software problem— because they don’t use Media Temple servers. I’ll just put that out there. They had an issue where their servers went down and they actually shut down their reservation system for almost an entire day. The headline that they wrote for that was “Computer Glitch Halts American Airlines Flights Until They Can Be Delayed for Regular Reasons.”
Now the thing about The Gist was that if you look at the core, what made it interesting, what made it fun was, in fact, just the story, just the copy, just the text. That was it. But we all know that you can’t just publish that on the web.
We have to do what we call this design thing. We have to do our user experience thing. And what we do when we do that is we take all these different skills and we apply them to the work that we do.
And when we do that, it takes that plain text and it turns it into something that’s a better experience, something that is a better feel. And this has to serve the purposes of the piece. What it ends up with is not an accident.
What it ends up with is intentional. It’s design. And that’s what design is. Design is simply the rendering of intent.
We as designers, what we do is we discover what we want for our users, what we want for our business. We come up with our intention. And then we render that. We create that in the world.
That’s what we do. This is the simplest definition I’ve ever been able to find for design. The rendering of intent.
This is the homepage of the New York Times. Now the thing about the New York times is it’s a site filled with content, but in order to make that content useful, we have to apply design. But that isn’t unique to a news site.
A bank site, for example, has transactions and information about your savings and your money that they have to then bring out through design. And an airline— an airline site basically produces itineraries and reservations, and they render that through design. And a charity— a charity actually has all its services and its capabilities, and that gets rendered through design.
And a university has its programs and its activities and all of the things that are happening there, and that gets brought out. And even a government agency has all of the services and elements that the constituencies need, and that has to be rendered in design. Everything that we make has content, and everything that we make has design.
And the thing is that for years, we thought of these as separate things. In some organizations, the design group and the content group are put in separate buildings far away from each other. They are not considered to be one.
But the trend that we’ve seen happening over the last few years is a merger where content and design start to show up, and the overlap becomes user experience. But I think what we’ve learned most recently is that that overlap is actually everything, that what makes a great user experience is the sum of great content and great design.
And we cannot separate these things out anymore. We can’t think of these things as being different. They have to be combined.
And we can see what happens when we don’t do this. We can see the effects of that. This is a map of Airfield, Ireland.
What makes Airfield, Ireland, most notable is that nowhere in Airfield, Ireland, is an airfield. At least not until iOS 6 Maps came out.
iOS 6 Maps added an airfield to Airfield, Ireland— or at least in their representation of it. And everybody found this to be incredibly amusing except for the Irish version of the FAA, who found this to be really problematic because they had this scenario in their heads that they could not get out of their heads, which was that someone would be flying in a small plane, have some sort of engine problem, need to make an emergency landing, pull out their iOS device, go to iOS Maps, and think that there’s an airfield in Airfield, Ireland, where there is none. This was an awful scenario from the Irish FAA’s equivalent perspective. And as a result, they were very upset and Apple had to change it.
This was not the only problem with iOS 6 Maps. As you remember, there were all sorts of issues, like the post-apocalyptic view of Manhattan that they created, the amazing flattening of the Eiffel Tower, the re-destruction of the Tacoma Narrows Bridge, the dipping of the Hoover Dam, or my personal favorite, the discovery of a Swedish castle for the home of the Burger King.
What the iOS 6 Maps failure taught us was that we cannot separate content from the delivery of the content. Delivering the content— while iOS 6 Maps did a fabulous job— is just as important as the quality of the content itself. We cannot separate these two things out.
So now what we can do is we can look at these things, and we can assign wins and losses, right? We can say, OK, the Montreal Gazette upped their readership. That was a huge win. And The Gist, they did really well. They were a win. iOS 6 Maps, they were a fail.
And we can start from this to sort of put together that thing that everybody seems to want to do, that thing that we call strategy. Now “strategy” is a word that, in the UX world, we use a lot. We use it to talk about all sorts of different things. We use this word all the time.
I don’t think this word means what we think it means because strategy is not about collecting up a bunch of tactics and just executing them. Strategy is something bigger than that. Strategy, in fact, is achieving a desired outcome.
iOS 6 Maps was not the desired outcome that Apple had for that release. So something about their strategy was not quite right. Let’s dip into that for a second.
Building maps turns out to be really complicated. It’s not just knowing where the streets are. There’s a whole bunch of data that you have to have in the right place at the right time to make that system work.
And if we compare how Apple built versus how Google built, we can see some interesting differences. In order for Apple to make the switch and provide their own mapping system— which they needed to do for what many argue were really solid business decisions— in order to do this, they put a strategy in place. That strategy involved acquiring three top of the line mapping companies, some of the best folks out there.
And then they went and hired 10 different data services to provide the data necessary and integrate that into what they had in order to produce the maps that they had. And that seemed like it would be exactly what you should do. What Apple didn’t know, what nobody knew until all this blew up was what Google had done.
Google had built their own mapping solution, but they did that out of 1,300 different data sources. And they took 1,000 people and put them to work for 10 years. So 10,000 people years’ worth of effort to correct and make the data accurate.
We don’t remember this, but when Google Maps first came out, it regularly would put your house in a river. Right, it was crappy. It never knew where anything was. You couldn’t trust it. It was the butt of jokes.
But after 10,000 people years’ worth of effort, they got it pretty good. Apple didn’t have that 10,000 people year advantage. That was the difference between the strategies.
That difference between the strategies changed the outcome, and one of the outcomes was Apple’s outcome— a complete decline in the stock price, one worth $279 billion worth of market cap. Or as The Gist put it, “Apple Unveils a Smaller Version of Stock Price.” Apple did not desire this outcome.
This was not what they wanted. They did not go for this. This was not the strategy they wanted to have.
Interestingly enough, though, the Montreal Gazette didn’t predict this outcome either. Had they predicted this, they would have put this into play way sooner than they actually did. They didn’t know that fake hockey games were going to become a hit. Nobody did.
So the prediction value of their UX strategy wasn’t any better than Apple’s. And this is the problem with those of us who say we want to work in strategy, is that the strategies we come up with, we’re not very good at predicting outcomes. And if you can’t predict outcomes, your strategy is broken.
So how do we fix this? We have to look in the world of business models. If you go to the Apple store, apple.com, you try and buy a iPad, iPod Nano, they will sell you one for $149.
You can go to target.com and buy the same device for $145. Best Buy, who will not let Target beat them, will sell it to you for $144.99. And Amazon will sell it to you the cheapest at all at $139, $10 off the Apple price.
Here’s the thing— Amazon could go lower. In fact, they could go so low that they basically sell it at cost. Now lots of companies sell loss leaders at cost or below cost, but Amazon can sell all their products at cost and still make enough profit to stay in business.
I’m going to say that again. They can sell all their products at cost and still make enough profit to stay in business. How do you do that?
Well, it’s this magical thing called the cash float model. To understand the cash float model, you have to understand some basic financial ideas. The first one is that Amazon turns their inventory every 20 days. What that means is all the products they buy from their distributors, they sell within 20 days of buying them.
To put that in perspective, a company like Best Buy sells all the product they buy from their distributors in 74 days. The other fact you need to know to understand the model is that both Best Buy and Amazon use the industry standard terms of paying those distributors every 45 days. So when you combine these three things, you see a really interesting effect.
Let’s start with Best Buy. Best Buy buys all their product on day zero. It turns out that they have to send a check off to their distributor on day 44. But they don’t sell all the product that they have until day 74, and the way credit cards work, they don’t actually collect all the money until day 76. This means between day 44 and day 76, they are actually running slightly in dept. They are a little in debt because the cash flow model has caused them to require a loan to pay for that product. This is called cash debt.
Amazon is different. There are lots of similarities, though. For example, Amazon also buys all their products on day zero. It turns out it’s the best day to buy them.
And they pay their distributor on day 44. But on day 20, they’ve sold everything that they bought. And on day 22, they’ve collected all the cash.
That means they have 22 days where they just sit on the money and they invest it. And that float actually is enough to keep the business running if everything else were to go south. They can lower their prices to the same cost that everybody else gets and still make a profit. Nobody else can do that. They can out survive all their competitors.
This is not an accident. This is intentional. This is design.
And what’s interesting about this design is that this is representative of all great business models. Design— the same thing we do, you need to do with business models. This is absolutely key.
And every time I get to this point in the presentation, I have someone sort of raise their hand and say, but I work for a nonprofit. We don’t have business models because we don’t have profits. First, there is a difference between a nonprofit and an unprofitable company.
Unprofitable companies don’t have profits. They have losses. Nonprofits just don’t distribute their profits back to shareholders. They reinvest them.
Business models are relevant to nonprofit organizations. There’s no way you can run a successful nonprofit without having a way to make enough money to pay for the delivery of your services along for with the services itself, and have some money left over to expand your services. That’s a sustainable business model, and business models are just as relevant for nonprofits as they are for for-profit organizations.
OK, so then what are the options that we have? I don’t know if you’ve seen, there’s a television documentary series. It’s been on for a few years and it sort of talks about different aspects of business and life and stuff. And recently they had an episode that was focused on business.
The series, by the way, is known as South Park. And in this particular episode, the boys are discovering that in the night, it feels like their underwear keeps disappearing. And so they put on a vigil and they discover that gnomes are coming into their bedroom at night and stealing their underpants. And they can’t imagine why gnomes would do this, so they launch an expedition to follow the gnomes to their cave and discover that they’ve been doing this for quite a while. They have amassed a large amount of underwear in the cave, only to question the gnomes as to why they might do this.
And the head gnome comes forward and says, well, we have a business plan. Said, really? What’s your business plan? He says, oh, let me show you, and he pulls back this curtain to reveal the gnome business plan, which has three phases.
Phase one, they collect the underpants. Phase two they’re still working on. But phase three, profit. Turns out this is a popular business plan, particularly in places like Silicon Valley.
You’re looking at Twitter’s model right here. Get people tweeting— profit. We’re still working on that middle part.
This is hard to take back to your management, so let me show you what the Wharton School says about it. They have a slightly different perspective. They will tell you that every executive at every institution has basically five things that they are most concerned about. They call them the executive strategic priorities.
These five things are pretty straightforward. The first is just getting more money into the business, increasing revenue. The second is decreasing all the costs. The third is getting more new customers to participate in the product or service . We would call that increasing market share.
The fourth is getting your existing customers to give you more money for services and products that you sell. This is growing your business. And the fifth is increasing shareholder value, which is a fancy way of saying making sure the company is long term sustainable, that this business will weather whatever economic conditions and continue to produce more growth and more profit over time.
These are the five executive priorities. If you know what these are, you can talk to executives about the things that they are most concerned about. You can listen for them to talk about each of these things and you can design specifically for that.
Let me explain how you do that. Zappos is a company that’s been very good at this sort of thing. One of the things they did early on was they decided to send a shockwave through the e-commerce world by making the shipping on returns absolutely free.
So you buy a product from Zappos, you get free shipping coming to, and if you decide you don’t want the product, you get free shipping going back to them when you return the product. Up until that point, nobody else had done that. Everybody else charged you for the shipping and maybe even a restocking fee. But Zappos did not do that.
And this is because they were selling shoes, and the deal with shoes is that you don’t always know what size is going to work. So what you could do is if there was a shoe pair you like, you could get it in three different sizes, try them all on, keep the one that fit best, and send the other two back. And of course, this caused people to buy shoes. This was a really successful program for them.
Now to make this work, they had to put some infrastructure in and they created an amazing set of instructions that anybody could use. And they even let you get a UPS shipping label online that you could just print out, slap on the box, and send back. Now let’s look at these two design elements in detail, and let’s talk about how they map into those strategic priorities that I talked about.
If we looked at those instructions— the instructions, by careful design, usability testing, making them work really well— they were able to dramatically decrease the number of people who called the support lines. And because the number of people who call the support lines is really expensive, a dramatic decrease there is really key. So they were able to bring those costs right down.
The shipping label also decreased the calls to the support line, but it actually saved more money for the company because by contracting with UPS to not only send the products out but to get the products back, UPS gave them a better price, a bigger discount off their shipping services. So suddenly, all their shipping was much cheaper all the way around.
But not only that, people started buying things that they were considering buying but not actually ready to purchase. And therefore, they would buy a whole bunch more product, thinking they would keep maybe one or two of them and ship them back, but then they would actually keep more than one or two. They’d keep a lot of it.
And so these customers were spending more money than other customers. The average sale was much higher for Zappos. This, in turn, caused new revenue to come into the business, which, in turn, boosted their shareholder value, bringing their stock up so high that Amazon just decided to buy the company outright. And all of this was because of the design of how they handled those free returns.
And we can do this with most design elements. The Vanguard is an investment company, and on their website they have all sorts of design stuff. They have articles that they’ve written. They have videos that they’ve produced, all to try and entice you to invest more.
So what can we say these videos do with regard to these strategic priorities? Turns out we can’t say much. We don’t actually know what they do They’re basically phase two.
Here we are with underpants gnomes. Content marketing in general and a lot of the things that we do, we can’t tie directly to how it’s helping the business. And that’s why we struggle so much with our executives trying to get our value in the world. There probably is some value to it, but because we can’t put it in solid terms, we can’t get the attention of the executives because the executives always focus on the priorities.
Now whenever I talk about this, I have someone come up to me who says, well, I work for a university. I don’t have these types of priorities. Except that’s not true, right? Because universities have to exist in a world where they have to have enrollment, they have to get alumni donations, they have to get fees. So anything we can do as designers to encourage those activities, that’s good.
Universities have to decrease costs constantly, just like everybody else. Universities have to reach out and get new people to sign up for their programs. A good university these days is also trying to get existing people to sign up for programs and services that they’re offering. It’s people who’ve been through the programs before to take on more stuff.
And finally, universities have endowments. That’s the equivalent of shareholder value. So all of these things exist in a university setting.
I was in DC a few weeks ago and somebody said, well, I work for the government. OK. One of my favorite government programs is a program known as Women, Infants, and Children— WIC. And the amazing thing about the WIC program is that it’s actually funded by the feds but it’s operated at the state level. So the feds give money to the states, the states actually execute it.
And the states get their funding based on the number of people enrolled in the program. So the number of constituents they get involved, the better you can attract people— women and children— into the program to participate in this great benefit, the more likely that you’ll get the funding to do more. Of course, there are costs to reduce.
Similarly, they’re trying to reach out and get new women and children to participate who don’t even know the program exists. And they have so many benefits that many of their existing members— constituents— don’t know all the things they do, so getting them to use some of those ancillary programs is key. And finally, their shareholder value— that’s appealing to the Congress. Showing the benefits of the program, making sure that the funding continues to flow.
So these five priorities exist in any type of institution and we can take advantage of them. We can look at these five priorities and we can make sure that we are designing to these things. We can talk to our executives, find out what that means, and actually make that happen.
So what are our options to do that? Unfortunately, the place we often start is with advertising. This is one of the most traveled pages on the web. It’s dictionary.com. You go here to find content.
Let’s play a game. The game is called Where’s the Content. I’ll give you a hint— it’s down here.
If I actually take away the content and leave everything else, you barely notice the space the content was supposed to go. Everything that’s left is stuff whose job it is to keep you from getting to the content you wanted on the site. People have paid big bucks to keep you from getting there. And when you refuse to do anything but go to get the content you came for, they get pissy about it and they insist that the site give them even more space and more distraction.
Advertising is a business that’s about disrupting you as the reader, as the viewer in order to get their agenda across. They don’t care why you’re there. It’s about disrupting the user’s experience in order to benefit them.
And here’s the crazy thing— it doesn’t even work. The average website user will see 1,707 banner ads a year. The average ad is clicked on less than one out of every 1,000 times. The most popular ad format— the 468 by 60— we’ve become so blind to that that’s only clicked on less than four out of every 10,000 times.
A whopping 31% of the ads that are in inventory are charged to the advertiser yet the user will never see it because the user will never scroll there or the page will never show up or there’s some other thing. 50% of mobile ads are clicked on purely by accident. The advertisers are paying for that.
But my favorite statistic is that you are actually 475 times more likely to survive a plane crash than to click on a banner ad in your lifetime. Banner ads or advertising on the web doesn’t work. Yet people, companies still invest in advertising. They love to invest in advertising.
And frankly, we love a good ad. We love a great ad, like this one.
[VIDEO PLAYBACK]
Ship my pants? Right here? Ship my pants? You’re kidding.
You can ship your pants right here. You hear that? I can ship my pants for free.
Wow. I just may ship my pants.
Yeah, ship your pants. Billy, you can ship your pants, too.
I can’t wait to ship my pants, dad.
I just shipped my pants and it’s very convenient.
Very convenient.
I just shipped my drawers.
I just shipped my nightie.
I just shipped the bed.
If you can’t find what you’re looking for in-store, we’ll find it at kmart.com right now and ship it to you for free.
[END VIDEO PLAYBACK]
I have watched this ad 1,000 times. I crack up every time. I will never ever shop at a Kmart. This is the most viral ad campaign that Sears Holdings, the owner of Kmart, has ever had. Ever.
It was fabulous. Their internet numbers went through the roof. Kmart did not see a single tenth of a percent increase in revenue as a result of it. Not a bit. Nothing. It didn’t work to increase sales. But it was a very successful ad so the ad execs are very happy with it.
So let’s look at this when we map it into our priorities. What happens? Well, what happens is we get increased revenue from advertising. That’s it. When we host ads, we get the revenue from advertising.
But we get none of the other benefits. And frankly, just increasing revenue at the sake of a great experience for the users, that’s not a sustainable model. And it’s not a sustainable model because even though users want things for free, when they don’t pay for the product, they are the product. It is them that’s being sold.
And the more and more the consumer realizes this, the more and more they don’t like it. It’s not sustainable. And it’s not just third party ads that are the problem. Take something like the Walgreens home page.
It’s a home page. It’s a very typical type of home page. But let’s look at how people use this site. When we monitor the traffic of the site, one of the things we notice is that one fifth of all the people who visit go straight to the photo link at the top of the page.
Their goal in life is to get to the photo department because that’s one of Walgreen’s best services. Another 16% who come to it actually go straight to the search box. They’re looking for something that’s not on the home page in order to find what they need. 11% will try to refill their prescription, and when we combine that with the 6% that go straight to the pharmacy, we now have 17% of the people who are using the pharmacological capabilities of the website.
And finally, the last of the top five uses is that 5%— one out of 20 people— who are actually trying to find the physical store, aren’t interested really in the site at all. Yet all these top five elements are responsible for 60% of the traffic, whereas the total area that they take up in the design is less than 4%. Anyone who knows anything about basic human factors— Fitts’ law, any of those things— knows that your most important stuff should be the biggest and easiest to find, yet what we’ve done is made the most important stuff really tiny.
What do we put in its place? Stuff the users don’t want— advertising. And it’s not just these sites. We see this all over.
Words with Friends. You can get it for free but it comes with ads. Yet millions of people have spent upwards of $5 to get a version without ads. Same exact functionality, no ads. Millions of people.
Imagine you work at an agency that produces the ads that go into this game. One of those ads might cost tens of thousands of dollars to produce. And the user, with a simple $5 purchase, can eliminate your work completely. And for them, that’s priceless.
But we know that advertising works sometimes. Years ago, one of the first sets of usability tests we ever did on the web, it was a study where what we were looking at was just how people found the information they needed. So we would go out, find people who needed information about a topic. We’d bring them into the lab. We would give them a websites to find that information on, then we would just sit back and watch them.
So we had a woman come in who was pregnant, and she was looking for information about pregnancy. We brought her to about.com, and she immediately found this page about being 14 weeks pregnant because, coincidentally, she was 14 weeks pregnant. And she devoured the content on this page. One of the fascinating things about this study is that when the websites did well, what we ended up doing was just sitting and watching people read.
They read. All that conversation about people don’t read anymore? Not true. We just sat there watching them read.
They would read and they would read and read. She read this whole thing that told her what was happening with the baby and what was happening with her what was happening with the dad. At 14 weeks, apparently they go shopping for sporting goods.
And she gets to the bottom of this thing, and in a little text block hidden at the bottom of this wonderful piece of information about being 14 weeks pregnant is this ad— a little text ad that talks about a book Your Pregnancy Week by Week. And she did something we’ve never experienced before. She turned to us and she said, I want to buy this book right now.
I said, OK, well, we’re not really set up for having you do that. This is a study about watching people read, and so we don’t know what to do. You know, you could go home and you could find this page and you could buy the book.
And she looks at me and she goes, I don’t think I’ll ever be able to find this page. I actually believed her. It took her a while to get to it the first time. I said, OK, but we’re not really set up for this. And she looked at me and she goes. I want to buy this book now.
I was young back then, but I wasn’t so young that I didn’t know that you should never argue with a pregnant woman about something she wants to do right then and there. So I said, OK. And so she went on to buy the book, and she went in and she clicked on the link and it brought up a page with a form and she put in her name and her address and her billing address and her credit card information. And we were videotaping the entire thing and we realized you could fund research this way.
The thing about that ad that had it appeared at the top of the article, she would have never clicked on it. Had it appeared on the home page of the site, she would have never clicked on it. She clicked on it because it was at the bottom of this content that she loved, and that has a name. We call it a seducable moment, and that is, as far as we know, the one instance where advertising truly works, where it actually gets really good returns.
And I’m not talking the 1.7% of conversion rate that most ads get. I am talking double digits, high 40s, 50% type conversion rates. Right, it worked really well, but the problem is you have to have an exact match of the thing you’re selling to the content you’re providing. It’s really hard to do well, and it’s definitely hard to do with a third party inventory system that doesn’t understand content or the product. Everything has to be bespoke matched up, so it’s a really hard model to pull off.
And the reason is is because advertising is seen as this broadcast thing whereas experience design, that’s where we think about what that user is going through at that moment and we’re thinking about those elements. And because of this, advertising needs to be the business model of last resort. It is not what we should gravitate to first. It’s what we should only go to in the last dredges of nothing else works.
So that means we have to have a whole army of other things to use, things that go beyond advertising. Recently, the New York Times redesigned their site, particularly their article pages. And one of the things that’s most notable about the article pages is the complete lack of ads that are there. There are a handful. They’re very small, but not nearly the amount there used to be. They’re certainly not the amount you see on other news sites.
And instead of having advertising, they’ve replaced that with something else— a little pop-up that comes when you get to the bottom of the article, after you’ve read nine or 10 of them, that tells you that you only get to read 10 of these articles a month. 10 articles a month means that you’re visiting more than once every week— twice a week, even. You must be an avid fan of the site.
If you only come once a month, twice a month, you will never see this pop-up. But this thing slides into view when you are actually using this site quite a bit. And for $0.99— that’s the initial price— you can then get access to everything through the site.
This is known as a metered paywall. This is an alternative to advertising. It turns out it is such a good alternative to advertising that within a year of operating their metered paywall, the New York Times found that it was making more money from the metered paywall that it was from their advertising, therefore it could reduce the amount of advertising it was putting on the pages, making a better experience. It could do things like instead of breaking the article up into five different parts that you had to click through in order to get more ads to show, they could put it in one long convenient piece, and people read the whole thing.
And so metered paywalls— we can plug them into our strategic business priorities. And it turns out that customers who had never bought from the New York Times before were now signing up for this service. And their existing paper people were also signing up for the digital service for this. And their online folks were now signing up for the physical paper through this, which increased their revenue overall, and the New York Times stock price has never been higher.
Andrew Sullivan was a blogger at Business Insider. He decides he’s going to try this, goes out on his own, builds a site, makes it a metered paywall, and within 24 hours earns $330,000. Within the first three months, he makes $660,000.
Now over time, the revenue has dropped off a bit, but he’s still able to make enough of a living to pay for him and a couple of helpers to run his own site. But here’s the deal— you can only pull this off if you have great content. The Financial Times is doing this. There’s a bunch of magazines, trade presses that are doing it, one of which is Advertising Age.
Advertising Age has switched to a metered paywall model. A trade magazine whose job it is to promote advertising has decided that advertising isn’t as good for them. The only way you can pull this off is if you have excellent content or, as The Gist reminds us, “The New York Times Wins Four Pulitzers for Whatever’s Going on Behind Their Paywall.”
That’s the deal, right? You have to have content that no one can get anywhere else. You cannot do this with commodity news.
You cannot do this with stuff you can get anywhere else for free. It has to really add value. It’s got to be really good content. But there’s other ways to make money off your stuff. The New York Times sells prints and old articles. Conde Nast is selling New Yorker cartoons.
A friend of mine, Mignon Fogerty, who runs a website called Grammar Girl, she was publishing articles about good grammar and she ended up recording them and making podcasts and then putting them up there. And for a long time, she sold advertising like everybody on the web did. Today, she’s selling zesty Italian salad dressing sold by half-naked men, like you do.
But she found out that if she took her podcast and made a CD and she took her writing and made a book, she actually makes twice as much money from the podcast and CDs than she does from the advertising. And this has a name. It’s called repurposed content.
Similarly, there’s a site out there called ifixit.com. ifixit.com will tell you how to repair your MacBook or your iPod or whatever, swap in new memory, put in a better hard drive. It’s got all sorts of lovely step-by-step directions.
But it turns out the manufacturers sort of don’t want you to do this, so they don’t let you do this with household tools. You have to have specialized tools to do that type of maintenance to your equipment. So ifixit sells you the tools at a premium price.
And they’re not the only ones doing this. Etsy, who’s a crafts site, will sell you the tools and the patterns to make your own crafts. And this has a name. It’s called supporting product sales. This is another type of business model.
Our friends over at Zynga discovered that you can sell small children for a small price new ways to cheat with their product. And we get this idea of in-app purchases, another type of business model. In-app purchases— for games, at least— basically teach our teenagers that for just $3.99, it’s OK to cheat. It works.
The folks at public radio discovered that pledge drives could be augmented and, in fact, dramatically enhanced by taking their best shows which have real celebrity status and filling theaters with it. NYC Radiolab can fill 2,500-seat theaters at $60 a ticket and raise more money in one night than entire pledge drives do throughout the whole drive by just making their shows live.
And it’s not just public radio that’s doing this now. It turns out that the folks over at Mythbusters have realized they can make more money by filling 5,000-seat stadiums and doing their crazy antics there than they get from the advertisers from the TV shows. So this is called alternative channel revenue. ITunes was really the first to get us to think about business models when they went to the $0.99 music sale. And really, what was happening there was they were breaking things up and making micro payments a reality.
Amazon didn’t want Apple to have the full boat on this so they came out with their own platform and allow you to buy books really cheap, and now other people are getting into this business. For instance, UK supermarket chain Tesco has come out with their own Android tablet, the Huddle, whose entire purpose is to let you buy books and movies but also to order groceries online and get delivery services and subscriptions to diapers and all sorts of things. And this whole business model is a content distribution model where you make money by distributing the content and being in the distribution chain.
And I could go on. There are a ton of these business models. They go on and on and on and on. And we can continue to talk about them.
And frankly, we need to know about them. We need to catalog them. We need to know what all of them are. We need to know what these things are as well as we understand our CSS descriptors and our user research methodologies.
We need to be able to talk about all of these things, including advertising. But please don’t do advertising. And take those things and map them into the strategic priorities. And if we can do that, we can talk to our executives and give them ways to really retain value, get them to actually rethink the way the business works, bring a better experience to our users.
And again, we have to continue to go back to the content. A couple of researchers in Michigan created a project called the Significant Objects Project. And basically, what they did is it’s insane what they did. They went out to eBay and they bought junk.
They bought crazy things that had no purpose in life. And then they found at the university some writers, and they would take these things that they bought— this one cost, like, $3— and they would take that item and for that, they would write a story. And the story would be something about the piece.
In this case, it talks about how this was a family heirloom passed down from generations. It was considered a good luck charm because her great grandmother had it and was convinced that this little item, this token saved her house from burning down when the village caught on fire, and that was because this little dude represented a guy who faced the czar who was coming through on a pogrom and stopped his village in Russia from being destroyed by dancing and setting the tree stumps on fire. And there was this whole story that they wrote about this. And they took the item and they took the story, and they put it back on eBay and it sold for $193.50.
They’re not the only ones doing this. It turns out that we can see this happen all over the web. We were doing this study where we were bringing people to electronic sites and actually having them by electronics that they needed. So the people we were bringing into the study— this was years later. We had figured out how to do e-commerce sites by now. And we were watching people who needed to buy digital cameras actually buy the cameras they were interested in.
And when we brought them to sites like Walmart, they would go and read the descriptions. And the descriptions were all different for every product they looked at because what Walmart does is they take the manufacturer formation and they copy it out of the document the manufacturer sends them, and they paste it into the CMS, and that’s what goes there. So whatever the manufacturer says, that’s what goes up on the site.
So every product had a different description, a different format, and it was hard to get details out of it. But there was one company that we were looking at, a company called Crutchfield, and Crutchfield didn’t do that. Instead, Crutchfield would take their cameras and they would give them to their very senior experienced customer service reps who were also hobbyists in photography and things like that, and those guys would create little videos talking about what they loved and didn’t like about each model of camera.
And they would also put together these massive cables to let them do comparative attribute studies of what each product had and didn’t have, and they wrote these extensive research notes, including a large document that explained exactly what you got in the box that none of the other manufacturers or retailers actually add on their sites. And it was really quite useful. And what we found when we watched people shopping on sites like Walmart versus Crutchfield is that the people who went to sites like Walmart, we would give them a budget to buy their camera with.
This was the money we gave them to actually participate in this study. And they would go out and they would spend approximately 89% of the budget we gave them, which was right in target with what we were hoping for. That’s what they were spending on the site.
But what we found was the Crutchfield site was different. On the Crutchfield site, they would spend all the money we gave them and another 137% of their own money on the products and services on the site in order to complete their sale. And the only difference between the Crutchfield site and their site was content, the content on the site. Everything else was basically the same.
So we can map this into our strategic priorities and we can see that Crutchfield basically fires on all cylinders. They hit everything. By creating great content and a decent design, they actually were able to sell way more product to their customers.
And so now we can do this. We can look closely at this and we can see that, in fact, those underpants gnomes’ plan, we now know what that phase two thing is. There’s a whole list of things we can do here. We can put in metered paywalls or we can repurpose content or we can do purchases in-app or we can figure out a new content distribution mechanism or maybe we do some lead generation or possibly we look at the value of the content and figure out how to promote that or maybe we increase the flow of the user through the design or maybe we reduce calls to support.
All of these things we can start to measure. And depending on the priorities that the executives have, we can tailor it to the thing that they need. So we can use the strategic priorities to map exactly what we need to be able to sell the value of design and to come up with a strategy that will actually have the outcome we intend.
But really, the best UX strategy right now is really about how we get strategists to work in the intersection of business and design. There is probably no bigger priority in our community right now. Some of you may know that I’ve got this little side project called Center Centre. It’s a school that we’re creating in Chattanooga, Tennessee, to teach designers to be great designers.
It’s a two-year bricks and mortar program. It’s crazy. It also goes by the name the Unicorn Institute. And we are committed to actually incorporating business classes— I’m talking about these business models— to those designers because we think this isn’t a senior UX thing, this is even a junior UX thing. They need to be able to understand how the work they do maps into the organization’s strategy, so they have to be familiar with this.
We all have to be familiar with this. So that means that the business that we do, we have to understand how it works. So here’s the deal.
Design is the rendering of intent. We can design business models just like we design websites and apps. If we understand the five strategic priorities, we can talk to executives. We can find out what they need, design to that. And more importantly, we can give them ways to achieve their intention through our designs.
And finally, we really need to understand business models in an extensive way. We should not shirk away from this. If you found this to be the least bit interesting, you can come to our currently non-responsive but soon to be responsive UIE.com website because we figured out the business model for that.
If you’re not on LinkedIn, please, by all means, sign up and connect with me on LinkedIn at [email protected]. I would love to talk with you that way. Turns out that’s an easy way for me to connect with folks. So please, by all means, do that. And you can also follow me on the Twitters if you are inclined to do so at @jmspool where I tweet about business design, design education, design strategy, and the amazing customer service techniques of the airline industry. Ladies and gentlemen, your moment of zen.
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Thank you very much for encouraging my behavior. Enjoy the rest of the conference.
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