Archive for the 'telecom' Category

How NOT to Twitter if you are a corporation

Published May 26, 2009 media , telecom 43 Comments
Tags: , , ,

A little while back I praised Vodafone New Zealand for their excellent Twittering, inside an article on How to Twitter if you are a Corporation. They reached out to customers, solved problems, gently nudged opinion their way and generally were liked by everybody.

The account was run by Paul Brislen – who let his own account lie idle while he put himself into the Twittersphere.

And then something happened.

Vodafone decided to launch a campaign where “3G Guy” tours New Zealand giving away new net books. A great idea.

Unfortunately rather than using @3Gguy or similar to promote the tour, Vodafone instead passed the respected @vodafoneNZ account over to a pimply youth – 3Gguy.

The results are a fascinating case study.

Twitter

The audience split into three – those that liked the competition (including new followers), those who saw a corporate PR account turn into a spamming machine, and the silent.

Unfortunately the second category contains many opinion leaders, journalists, web industry stalwarts and telco industry commentators.

Twitter

While Paul Brislen re-opened his own account, and many people went off to follow him, many more have decided to unfollow @vodafonenz. The net goodwill is negative, and it now leaves @vodafonenz well behind the previously slightly less respected but still very well run @telecomnz team. As Twitter goes, so to the brands and companies.

Twitter

So what are the lessons here?

Lesson one:

Twittering is better done by individuals, but when those individuals leave and are replaced by folks that don’t get it, their followers may leave with them. If they are disgruntled then the damage could be severe. (So be nice to Paul)

Lesson two:

Keep the promotion and PR accounts separate from each other. The PR account should point to promotions, but not run them. People will find the account that helps them get free stuff very quickly.
Twitter

Lesson three:

When your audience reacts negatively – do something. The most frustrating thing about this promotion is the feeling that our Twitter friend, Paul Brislen, has been taken over against his will (my theory, not at all backed up by any fact) by out of control cluless marketing lunatics. It’s as if we now see the real Vodafone coming through – a Vodafone that doesn’t listen, that steamrolls over opposition and that has lost all the goodwill that Paul built up. It’s sad.

Twitter

What Vodafone should do is simple – accept and acknowledge the error, move the 3Gguy twitter stream to his own account and put Paul back on (exclusively) the @vodafonenz account. Vodafone also need to learn from Paul, and take his guidance on how to run his account going forward.

So let’s have a look at the Twitter stream damage. It’s pretty fun actually, like watching a slow motion train wreck* in action.  *one where nobody is on the train

Here’s a recent page of @vodafonenz mentions from my Tweekdeck. I’ve helpfully colour-coded the tweets. Orange refers to the competition website being broken, Green is a customer service request, and Red are negative comments about the campaign and Vodafone. I’ve named the boxes for the colour blind and those that don’t read this bit and just want the pictures:

But wait – there is more – a lot more, under the fold I have pulled out some of the latest (mostly) negative twitters about Vodafone.

<update – But first – an ad break!

>

There’s also @vfNZno3Gguy, which retweets all the @vodafoneNZ and @paulBrislen tweets that are not about the promotion. If that isn’t a cluestick enough then there is no hope.

Continue reading ‘How NOT to Twitter if you are a corporation’

The XT network debable – Winners and Losers

Published May 7, 2009 media , telecom 2 Comments
Tags: , ,

I was pretty angry at Telecom yesterday when I wrote Pay the $900,000 Telecom you cheap sods, but a day later it seems that they will do so. Good.

Now that the debacle is over, let’s check the winners and losers tally.

Winners – in order
Vodafone, for a well-timed legal action which created a major PR win and delay of a rival network

NBR – and Chris Keal for two excellent articles – one head and shoulders over the rest in summarising the court proceedings, and the other tipping that a settlement was likely today. Even their reporting of the final result is excellent.

Telecom – for capitulating in the end and continuing the journey on the long road back from purgatory

The Lawyers – they always win

Losers – in order

Telecom

  1. For not doing the right thing from the start, and installing the filters to prevent interference with Vodafone’s network
  2. For not understanding how this was going to play out early enough and letting it get to court
  3. For the resulting major PR loss, the delay of the new network and the wasted marketing spend
  4. and bonus for all this happening so soon after releasing a video that says how wonderful they are

All of us customers – To have to watch two giants playing silly buggers with each other while we cope with inadequate mobile and broadband infrastructure

Vodafone – for having released into the public domain information that makes us thing you are stretching your network’s capabilities, making us realise why our call and 3G connections are so lousy.

<update: Reynolds is unrepentant, and says that Vodafone will share the costs of Filters. He also says that there are already 1000 filters in place. Courtesy of the NBR – yet again.

Money quote:

Although Dr Reynolds sees his company in the right, Telecom settled the case, seeing a two-week delay in XT’s launch as a price worth paying to rid it of Vodafone’s High Court action, and to answer a request from the Justice, in Dr Reynolds’ words, for both sides “to sort it out”.

and

“there will be some circumstances in which we share costs”.

which has the ring of  Telecom paying almost all of the time.

Also

“Give me a break. The first I heard of it was late last week,” says Dr Reynolds, of Vodafone’s threat to go legal. “They finally came to the table two days ago”.

I would be looking searchingly at the strategy and engineering folk in Telecom if I were Dr. Reynolds. How the heck could this threat have been missed?>

And for your enjoyment after the fold are some tweets from this morning: Continue reading ‘The XT network debable – Winners and Losers’

Spend the $900,000 Telecom – you cheap sods

Published May 6, 2009 Broadband , Internet Business , NZ Business , telecom 11 Comments
Tags:

Sigh.

And there I was praising Telecom the other day – praise it seems that was all too soon. I am concerned that recent behavior is indicating that Telecom is back to its old monopolist ways.

I write of course of the XT network interference with the Vodafone network. The facts laid out in Vodafone’s submission and the court case – ably reported by the NBR – are on the surface pretty simple:

  • Telecom’s new XT network interferes with the Vodafone network
  • Telecom has known about this for a while
  • Telecom could have removed this interference by spending $900,000 to install filters

There is a bit more nuance in the court case, but as a customer I am mad enough as it stands.

Yes Vodafone could spend some money to maintain their own service quality, yes Vodafone coverage is not close to perfect anyway, and yes Vodafone could have formally engaged with Telecom earlier.

But one the thing that has changed is Telecom’s new network.

The absolutely crazy thing is that the $900,000 to update all Telecom cells is chump-change in this context, and by not spending it Telecom is not only risking a lot, they making us all suffer:

  • Telecom suffers as they suffer PR damage, just as they launch a new network
  • Telecom suffers if their launch date is delayed
  • Telecom and Vodafone suffer financial costs of the court cases
  • Vodafone suffers as their network quality drops precipitously
  • We all suffer as we all have even more lousy phone services
  • The lawyers win – they always do

It’s positively juvenile, and the sort of behavior I would have expected from the old Telecom administration.

So please wake up Telecom – and behave in a way that shows you care about all New Zealanders. Demonstrate some of the values that you are trying to show in the video you produced.

  1. Fess up, say you will install the filters as quickly as possible
  2. Install those filters within a week. Nothing is impossible
  3. Settle with Vodafone so that their lawyers don’t run your business.

In the meantime those in the executive suites please ask yourselves How did this happen? Was this a decision made at the top or were you as blindsided as much as we were? If you were blindsided then how could your culture let that happen?

Until you fess up and move on we are back to the old promote one way and behave in an entirely differnt way – it doesn’t work for children and it certainly doesn’t work on us adults.

We’ll find out tomorrow at midday whether Vodafone is vindicated, but in the meantime I just want my phone to work properly.

Praise, yes praise, for Telecom

Published April 29, 2009 Broadband , media , telecom 3 Comments

This really is a stunning piece of work – even made this cynic think twice. Well done Telecom.

It’s important because it shows that Telecom increasingly gets it – they are getting that it is about delivering the right service to New Zealanders (fiber to the home rated a mention), they get that it is about the people that work there, and they get that Youtube (and twitter) are great mediums for spreading the news.They manage to say this while taking little digs at themselves and being very human.

It was uploaded yesterday Youtube time, and  had just 392 views when I saw it. It will be interesting to observe how far and fast the views go.

The cast list was telling – the boss is the eighth listed, which means he was the eighth person to appear in the piece. That’s leadership.

It’s so nice to be able to write something good about Telecom. Roll on the days when we can write a whole lot more.

How to twitter if you are a corporation

Published April 22, 2009 Business , Internet Business , NZ Business , Trade Me , media , telecom 16 Comments
Tags: , , ,

Twitter, for members of my family and those other 4 people that read blogs and have not yet discovered it, is a microblogging service that has just hit the main stream media. By definition it is therefore passé, but in the meantime we may as well use it well.

Examples: How not to twitter.

@NZStuff (sorry) sends through groups of news, either at 530am or during the day. The 530am news is from when the news is posted to the Stuff.co.nz website in an overnight process. The news sits unreleased until the morning so that the newspapers are not scooped. I don’t agree with this approach as to me news fails to be news when I can read it somewhere else first.
The ones during the day are the ‘most popular’ (I think), and also released by a bot (I think). By definition they are already out of date when they are tweeted, and almost by definition the audience of active twitterers will have already read them.
@nzstuff

Rather than @nzstuff’s automatically redundant articles, instead follow @NZStuffEditor, who is not very prolific but at least sends out news that is timely – and timeliness is a vital component of the definition of “news”.

Examples: How to Twitter
While the Wall Street Journal (@wsj) also twitters articles, it does so very rarely in groups of three, and most often the tweets are through the day. Almost invariably their tweets are before anybody else’s, and are therefore news in the truest sense. @NYTimes is not quite as quick, and will sometimes deliver in clumps, but they tend to beat the local alternatives and like the WSJ also link to longer articles on interesting and topical things.
@wsj

What all so far are missing is the human element.

I’d really like to see @NZStuff reply to people’s twitters, and to give a bit of extra juice that we don’t get from the website. Stuff and others need to remember that their customers are not just people that read the news, but people that evanglise their services and want some inside scoop, people that want to send them news (but need to know it will be looked at) and, most of all in these times, people that are thinking about buying advertising,

Rather surprisingly the best corporations at Twittering in New Zealand are the telcos. I’ve had conversations in public and private with @TelecomNZ, @VodafoneNZ and ISP @orcon. They reach out to customers and help them – often walking down to the customer service folk and asking them to resolve an issue. Indeed they have each helped solve (or at least help me understand) a personal customer service issue, and their corporate reputations with me are all a lot better for it. Here they are earlier today each helping someone out:

@telecomnz
@orcon
Vodafone

I’d like to see them extend this beyond the corporate communication people – especially to Customer Service and also to the real tech-heads.

Air New Zealand’s  @flyairnz does well – sending out specials, but also being a human – replying to questions and making comments – such as welcoming @johnkeypm to Twitter.

Trade Me has  unleashed a few people – with twitter names like  TradeMe_Ross , TradeMe_Jay, TradeMe_Jobs along with Trademe_NZ and Travelbug. The latter has a combination of background tweets and specials. Kudos for this topical tweet:
@travelbug

This stream from TradeMe_Jay is an exemplary example of how Twitter can extend your corporate PR reach well beyond what a PR team can do. In four tweets Jay helps a member (and ex Trade Me employee admittedly), personalizes the continuous development work that Trade Me does and links to an ‘expose’ video that most corporations would cringe to see appear on YouTube.

However Trade Me’s main twitter account is dormant, and we have yet to see Motors, Property or Customer Service make an appearance.

Google allows their staff (it seems) to twitter as they like – here’s Webstock speaker Pamela Fox announcing the release of Google’s new analytics Data Export API – something that I think has tremendous potential to change the advertising scene in NZ and elsewhere.
pamelafox

I’ll point to @powershop and @lingopal as two other examples, but to be fair I am involved as a supplier to the first and shareholder with the second. That shouldn’t stop you following them though :-).

Enough of the examples – what should you do if you are thinking of twittering?

How to take advantage of Twitter

The real power of Twitter is the 1-1 interactions, and yet there are only so many people that sit in corporate relations units. Moreover their job should not be to look after every tech nerd’s customer complaint, nor to understand every bizarre happening on the internet.

To me a great corporation would have three things on Twitter:

  1. A corporate voice – run by the corporate relations unit and staffed by a person. They would tweet press releases, reply to tweets that discuss the bigger picture (investor, employee relations, big stories) and generally have a slower beat but positive and official response.
  2. An active Customer Service voice – this would be staffed 24/7 but owned overall by a single person. That means that while a number of people will answer the tweets, the owner would make sure that there is consistency, speed and humanity behind it. The CS twitterer would continuously search for good and bad experiences from the organisation’s products and give thanks or help accordingly. They are the front line and so would have a very quick response time. They would deal with problems in public, take them to Twitter direct messages and ultimately call the customer directly.
  3. Unleashed individuals. Great companies would unleash everybody inside their organization to tweet about what they are doing, engage in conversations and show a genuine human face (warts and all) to the company’s customers and the public.This last one is scary.

    However if you are concerned that some employees will somehow destroy your company and brand then perhaps instead you need to do some serous internal navel gazing – and ask yourself “why would they do that?”. Even if some employees do tweet negative things, then see it as a fine way to take the pulse of your staff – and also fix the underlying problems.

    While I would put in place simple guidelines, most of those would already be in any employee contract. The main things not to tweet would be things like investor-level commercially sensitive information, competitively sensitive pricing and Apple product development news.

The progress made by the companies above is pleasing – and I hope we will see more of this as the use of Twitter and other tools expands.

Vodafone 3G Coverage misses the money

Published March 31, 2009 NZ Business , telecom 10 Comments
Tags: ,

I really should have checked the SSC Broadband Map before signing up to Vodafone 3G coverage.

It appears that Roseneath, one of NZ’s wealthier suburbs, and where I live, is barely covered by Vodafone’s 3G service.
roseneath
Actually there are plenty of gaps across Wellington – including Karaka Bay, Worser Bay and Seatoun, where many of the folks from the Miramar movie industry live.

broadbandmap

You can forget about Vodafone highish speed mobile broadband if you have the time and money to ski Ruapaheu this year – there is not a whisker of Vodafone 3G
broadbandmap

While in Auckland the wealthy suburbs of Mission Bay and St Helliers seem to partially miss out as well. Is this a conspiracy against the wealthy?
broadbandmap

This is not great from Vodafone – either the map is wrong, or they are missing out on a segment of the market that can easily afford to pay for 3G, and one that travels around New Zealand a lot. Don’t start me on the huge posibilities of revenie from international travel – at least not until the global roaming rates fall a few of orders of magnitude below $30,000 per GB.

Around New Zealand coverage is pretty sparse, with State Highway one uncovered for much of the journey up the North Island, and many towns simply missing out.
broadband

The South Island is worse.
si

But Vodafone still wins here – as there is no Telecom 3G coverage for those maps. In fact their own coverage maps are hard to find – there are only links on that “coverage map” page. Here’s the Wellington one (pdf)  – too low resolution to be of any use, and vague as to what goes where.

However in Australia Telstra Clear went from dodgy last to being the best 3G service by far – and they did a similar thing to what Telecom is doing in NZ right now – upgrading their vast existing network and leapfrogging everyone else.

While I would like to see a pre-emptive coverage response from Vodafone NZ, I’m pretty sure they won’t invest – they have got a good percentage of the population, and it is hard to justify hitting the sparsely populated rural areas. In Australia though there was a tipping point, where it became obvious that Telstra has coverage in say, Leonora, and the others simply did not. so going forward, if you ever find yourself needing data in the middle of nowhere, skiing on Whakapapa say, then Telecom will look increasingly viable.

We are being watched now

Published March 28, 2009 Internet Business , NZ Business , Politics , telecom 1 Comment

Via the NBR I hear that ISPs can snoop on us from April the 5th.

S92 was nothing. The Telecommunications (Intercept Capability) Act, coming into full force on April 5, will let the Police, SIS and the GCSB (Government Communications Security Bureau) execute search warrants on internet service providers to grab users’ data

Right now the law applies to voice calls, and April 5th sees that extended to everything passing over your ISP. That means email, VOIP calls, blogging, torrenting, facebook personal messages, intra-company communications, emails to your lawyer – and so on.

As the NBR helpfully points out, the spy base at Waihopai “has been able to tap internet communications systems for years” and from ISPANZ President Jamie Baddeley we hear

“some Ispanz members have already engaged already in legal interception. The police have been very pragmatic. I don’t think it’s a big issue.”

So nothing has changed really. Wire tapping can only be in place with a court order, it seems that this is happening already and that is how it should be. We just have to, as a society, make sure that the overall number of cases is low, and that tapping isn’t retrospective or go on for too long. Find the bad thing that you got the court order for then make an arrest, find nothing (or something else only) then turn it off.

But, along with section s92 of the NZ copyright act, the Australian Government’s somewhat clueless efforts to censor their internet and the NZ libel laws, we have an increasing chilling effect on our online behaviour, and expensive unwieldy compliance for our ISPs.

The ISPs are struggling merely to get us connected, let alone at a decent speed. Now they are being asked to police content, place surveillance capability in line and (in Australia) censor. All this adds cost and complexity, and ultimately degrades the service that we get in our homes and businesses.

Keith Locke from Green Party has the last word

“No one is denying we may catch a few more criminals through these powers, but there is a huge downside for us. The big downside has two aspects. One is our privacy, and the other is how these powers could be misused by agencies of the government.”

Final Ferrit: The governance failure

Published January 26, 2009 Broadband , Internet Business , NZ Business , telecom 5 Comments

Part four of  a four part take on the end of Ferrit. We started with Market Space, then  site idea and execution, and business economics. This is hopefully the last Ferrit post, but the most important in this series

The Governance Failure

There were failures at a number of levels from Telecom, including poor strategy, poor execution, but to me most of all it was a failure of governance.

Strategy
The strategy failure was at the highest level – and not only in the way Ferrit addressed the perceived space (see above). The failure was at clearly articulating and following a vision of “What does Telecom do“. The answer is that Telecom NZ delivers telecommunication (& IT) services, and until they can demonstrate that they can do that well, anything else is a distraction.

The launch of Ferrit meant that Telecom moved focus and resources away from its core broadband and mobile business lines, and so NZ slipped even further behind the rest of the world. It is heartening to see in the press release that the main reason for Ferrit closing was to move back to the core business.

Branding
The branding of Ferrit was brilliant as a case study in ineffective branding. Beyond ineffective, Ferrit’s brand equity managed to plummet from day one. From the choice of rodent name, to the sleazy and intelligence insulting advertising, to the Ferrit.com website which was a porn site domain that Telecom was forced to purchase. Perhaps they could sell it back now.

Meanwhile New Zealanders are smart, and can see through branding campaigns that seek to portray an image that is clearly inconsistent with reality. Telecom itself suffered from this approach for years, and Ferrit was another example of just what not to do.

Simply put – Ferrit may have done everything they could to create a poor brand, but the failure to gain traction was caused by the poor site and flawed strategy, not by the poor brand.

It’s easier to describe how successful web (and other) companies go about building credibility, or brands. Trade Me, Google and Apple all followed a similar path. They start small, they make a great product and they grow slowly and organically through word of mouth. Only after they have established a strong beach-head do they contemplate an advertising campaign.

Torpedo7 is a Kiwi success story that has out-performed Ferrit by using this method. The bicycle and sporting goods site usability is fantastic, their fulfillment stunningly quick and their advertising spend is very hard to see. The result is traffic to their sites that is larger than Ferrit’s, and no doubt revenue figures that dwarf Telecom’s folly.

Ferrit turned this approach upside down, launching a wildly extravagant and misguided campaign months before the site was able to do anything useful. Anybody that visited the site had a poor experience and thus moved on, often never to return. By the time the site became mildly useful it was too late – the brand was in ruins.

Execution
Telecom took a corporate approach to the development and launch of Ferrit. They did the equivalent of buying and adapting SAP rather than just using Xero. That’s not how things work in the web-world.

They could have done it well – here’s how:

  • The leader of the team needs to be someone that completely “gets” the internet, someone that had no legacy power internally and someone that understands the technologies.
  • The number of staff needs to be tiny – obeying the two pizza rule, where two pizzas can feed the development team.
  • The software should be open source, or developed internally using the newer tools and never outsourced.
  • The marketing team should not exist until well after the soft launch and early market acceptance, (they just spend money) and external advertising agencies should never be contacted in the first few years.
  • The budget should be small – making the team work smarter with what they have and preventing any expensive follies.
  • The location should be away from the corporate parent (it was), and in a lean environment (it was not)
  • The team should be interconnected with the local web community, be that on the latest social networking tool, conferences such s Webstock or simply through blogs.
  • The early scope should be small, with more features (and dollars) added only after the concept is proven

Telecom and Ferrit failed on all of these levels. Sadly I’ve seen corporates fail consistently at building their own businesses – Pfizer’s recent laying off of research staff was an admission that they are just too big to innovate, while Trade Me is the classic example of a start-up taking away the corporate incumbents’ businesses.

Governance
This is where I am truly perplexed, and concerned not just for Telecom but also for many other large corporate businesses in New Zealand. The total failure of Ferrit was obvious to any external observer right from the start. How could the leadership of Telecom let this happen? And if this was really was a pet project of the then CEO, then how did the Board of Directors let this start and keep going for so long?

Was there anybody on the board that gets the internet? Was the board able to reconcile the tens of millions money being poured into Ferrit with their fiduciary obligations to shareholder to maximise value? Was the board able to reconcile their obligations to other stake-holders with not only Ferrit’s poor performance but the resulting internal distraction from the core goals?

Who was asking the hard questions? Telecom.co.nz has pages and pages of corporate governance material on their website, but I can’ help but observe the board failed dismally in their obligations to shareholders.

All is not lost – they did exercise their biggest power and bring in Paul Reynolds as CEO. He is slowly turning around Telecom, and is doing it well. We could argue that the Ferrit closure happened about a year to late, but really it is a small amount of money to the giant corporate.

Paul has managed to change out his management team and now drop Ferrit without acquiring a nickname such as “Neutron Jack” or “Chainsaw Al”. Credit to him for that, but I hope that his current board is asking him the tough questions.

It’s a sad interlude for Telecom that needs to pass into history. The great news is that this closure is yet another sign of a resurgent Telecom that puts customer needs first and understands that shareholders benefit when you create value for all.

Final Ferrit: The business economics

Published January 25, 2009 Broadband , Internet Business , NZ Business , telecom 1 Comment

Part three of  a four part take on the end of Ferrit. We started with Market Space, then  site idea and execution, and governance failure will finish things off.

The economics

The business result had to be razor thin commissions, if any. The site depended upon the larger stores providing volume of products, which they really had no incentive to do. There was also real internal cost to those businesses of providing the feeds to Ferrit, and the power of their brands were also being diluted. It just wasn’t a good deal for retailers, and the resulting revenue for Ferrit was never going to be significant.

I (wildly) estimate that the average commission paid by retailers was 2-4% – that’s a guess really, and it is a critical number that I would dearly like to hear from an insider.

The shonky revenue model was overlaid with a cost structure that was inexcusably large. We all saw how much money that Ferrit blew on often appalling advertising, but what didn’t really come out was that that spend was only a third of total spend. The development and operations/sales spends were also inordinately high, and also fraught with error.

Apparently a lot (or substantially all? – need sources) of the development and marketing was outsourced, which increases costs substantially and reduces control. Telecom would have paid top dollars for top firms, but clearly failed to manage them well, and gave them a technology burden that was just too much to handle. A lot of people made good money from the Ferrit debacle, but they are not necessarily proud of their involvement.

Meanwhile the end game team of 24 employees and another 13 contractors was huge – and I suspect that most of these were in sales/operations.

All of this was simply unsustainable on top of a revenue model that never had any industry credibility.

At the beginning of 2007 Ralph Brayham said that Telecom had spent $24m to date and was going to spend another $12m in the next financial year. It’s now two years later, and so, if nothing changed, I would estimate Ferrit’s total spend in the range of $40-60m. Others have estimated more – around $70m.

The overall economics of Ferrit was pretty appalling. Some numbers flying around twitter and here guesstimate that Ferrit was unlikely to have made more that $500,000 in gross profit throughout its existence, and was in fact more likely to have made substantially less than that.

If we estimate that Ferrit spent $70m then we see that the return on that investment was about 0.7% – a pathetic number. My own estimate of all-time revenues is between $200,000 to $400,000, or a return of 0.28% – 0.56% of a $70m investment. That’s a very rough estimate, and again I would be fascinated to see actual facts.

More commentry on Ferrit’s rise and demise

Published January 14, 2009 Internet Business , NZ Business , telecom 2 Comments

Perhaps we will never know, but some details are emerging on the likes of Twitter and personal emails. I’ve also had a conversation with Ralph Brayham, which is sadly confidential. All I can say that I won’t be purchasing Ferrit.

Let’s start with the most interesting ones:

Telecom’s own press release

Telecom has decided to close its online shopping mall Ferrit as part of the company’s focus on the delivery of its core services.

This is the critical news – it’s what we have been asking Telecom to do for years, and finally the moment is here. The core services are the upgrading of broadband to the home/business and the roll out of the new high speed & compatible mobile network. It’s a very clear signal from CEO Paul Reynolds that businesses that are not core and that are not generating income can expect to go.

Now let’s go anonymous:

“There’s been a lot of bullshit smokescreen spoken about the retail trading conditions causing Ferrit’s demise.  The fact is that they had a flawed model, executed it poorly and had shit customer service”

anon.

Ralph Brayham and his crew were the only optimistic ones.

Telecom insider

Kiwiblog commenter “the deity formerly known as nigel6888″: “Its like some MBA looked at Amazon and trademe and said we could do that, but make it harder, offer no real bargains, and no reason for anyone to ever use the site. Now lets make it expensive to run and maintain too.”

Sol, who naughtily cross posted the same comment to a number of blogs, linking to his site:

I have had personal, insider experience of both 1-day and Ferrit. Both have ambitious e-commerce models, except that 1-day has a fabulous business model and a very user friendly, simple site, and Ferrit does not.

jonmac807 on Aardvark

Th(e) fact that it was Telecom is also an issue. As I travel around fixing computer in peoples homes I note that the telecom customer base seems to be an older person/persons rather than younger folk so pushing “geek” advertising to their market place is patently offensive!

On that subject, being a Telecom Free person, I find it most annoying that when I log into my Yahoo mail account, which I have had for around 10 years, I am confronted with Xtra stuff. If I wanted Xtra as my service provider I would use them. I don’t so please get out of my face!

Twitter as always seems to bring opinions and facts to the surface:

@nzben Fun Ferrit Facts: Guesstimate of spend: $70m. 125k orders based on retailer order numbering. Therefore $560 cost of each sale.

@barniclebarnes Average order price was around $85 last Xmas. That means $10,625,000 in sales. Ferrit Rev (at 10% com) $1,062,500

@barniclebarnes My $85 was based off their live sales screens at their offices pre-xmas 2007.

I estimate that the average commission paid is more like 2-4%, as the biggest players would not pay the retail commissions. That would give trivial all-time revenues of $200,000 to $400,000, or a return of 0.28% – 0.56% of the amount that @NZBen estimates they invested.

@matt_mcmahon Much as I’d like to blame mngmnt incompetence, Ferrit was Fubar from conception. Logistics f’d as well… same PM’s as Bubble?

@stevebiddle: You didn’t try and buy flowers and find the price difference between Ferrit & the retailer. I did! :-)

@bataglia At least we won’t have to watch those annoying TV ads anymore.

@armsultan : not surpried they never turned a profit

@toxaq: Saying goodbye to ferrit, actually, we were never introduced… a sadly predictable waste of money.

@rosswell: “FERRIT” the new “FAIL”

@intrepid101:  Ferrit. I did a small dance of “I won’t have to see those annoying adverts anymore” joy. Sorry about the jobs though.

@PaulColes: So we have seen the demise of Ferrit.co.nz no surprise there! Trying to be all things to all people is just not an option.

Ferrit should not close down

Published January 13, 2009 NZ Business , telecom 21 Comments
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While it is very clear that Ferrit has failed as a business, I do not believe it is as clear that it should be closed down.

The reasons for the business failure are usability, costs and strategy. All three can be worked on, and from the evidence, I don’t think any have been given a fair chance.

The change required is enormous, and perhaps Telecom doesn’t have the appetite, which as a giant corporate focused on greater things, is probably right.

I do, however, believe that a clean break under new management could make something work. It would mean starting again in a way, and based on much lower traffic, but organic growth.

Here are four things I would change to try to make Ferrit work:

Dramatically lower the cost base

Shut down advertising completely, fire the external developers and marketers and reduce staff numbers from 37 to, oh, about three. Those three should include say 2 developers and one business oriented person. The focus would change to attracting and retaining customers through word of mouth marketing and a great site experience.

Improve site usability

Systematically identify issues, prioritise them and change the site to make it easier to use. Be very open about what you are doing, and ask your visitors for feedback in a forum/blog. There is plenty of work to do here, but nothing that a couple of great programmers couldn’t handle.

Find a strategy that works for suppliers and customers

Lower the commissions payable by retailers so that they don’t feel pain when selling through Ferrit. Meanwhile offer discounts that eat into but never exceed the commission for other products. Keep the retailers happy by being pain free, and by driving results. This is the hardest part to get right, and without seeing the inner numbers I cannot say whether it is even ever possible to achieve.

Move to Wellington

Wellington is the design, usability and web development center in New Zealand. Moving Ferrit means access to the great local talent, great feedback from the community and a complete break with the old culture. The rents are cheaper, the talent is better and the community is simply stunning. If you are in the internet in New Zealand then come to the home of Trade Me, Ponoko, Plan HQ, Big Ears, Silverstripe Xero and many many others. It’s all tied together by several communities, including the internationally acclaimed Webstock.

What do you think – can it ever work?

The mainsteam starts to hear about web 2.0

Published December 15, 2008 Business , Internet Business , media , telecom 3 Comments
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Bugger – now they are letting the CEO’s know about the Web 2.0 marketing techniques. The WSJ has published The Secrets of Marketing in a Web 2.0 World,  which has the not so SEO friendly url of http://online.wsj.com/article/SB122884677205091919.html, but contains plenty of Web 2.0 buzzwords in it’s  text.

The article is from MT Sloan review, which the WSJ appears to publish in their Business Insight section. They have plenty of other articles of interest, as well as  discussions for each.

It’s yet another sign of the changes the WSJ is making – becoming more and more useful every time I go there. It is certainly gaining on the NYTimes. Do red the article, or if you are lazy, then the headlines below. Read it and think Vodafone & Telecom:

For marketers, Web 2.0 offers a remarkable new opportunity to engage consumers.

If only they knew how to do it

Don’t just talk at consumers
work with them throughout the marketing process.
The conversations consumers have with each other, he adds, result in “some of the most interesting insights,” including gift ideas for specific occasions, such as a college graduation, and the prices consumers are willing to pay for different gifts.

Give consumers a reason to participate.
The moderator can also see to it that consumer input is seen and responded to by the right people within the company.

Listen to — and join — the conversation outside your site.
In one case, a company found a popular blogger who had spoken highly of the company’s brand. Just prior to launching a new product, the company sent the blogger a free sample, inviting him to review it with no strings attached. The end result: The blogger wrote a favourable review and generated a flood of comments

Resist the temptation to sell, sell, sell.
“not to do anything about marketing, because we weren’t about selling; we were about conversing.”

Don’t control, let it go.
“You have to let the members drive. When community members feel controlled, told how to respond and how to act, the community shuts down.”

Find a ‘marketing technopologist.’
“I’d want to see someone with the usual M.B.A. consultant’s background, strong interest in psychology and sociology, and good social-networking skills throughout the organisation.”

Embrace experimentation.
One Web 2.0 strategy does not fit all, and sometimes the best way to find out what’s best for a given company is to try some things out and see what happens.

I wrote a response in the forum.

Great article

However  don’t keep it within the marketing department, but unleash all of your weapons – your employees. Let them  blog, twitter, talk on facebook, myspace, orkut and bebo about what they do, the company they work for and the products they sell. And as the article says, take the negative stuff on the chin and use all of the feedback, positive and negative, to improve your products.

Your newer employees are used to exposing their lives online for all to see – winning friends as a result. The web 2.0 challenge is how to open up your company in the same way.

Oh – and the technology moves so fast that you won’t keep up with it. Are you Twittering yet? Your employees are, and if you let them they’ll do the twittering or you

Organic Torpedo7 beats inept inorganic Ferrit

Published December 15, 2008 Internet Business , media , telecom 7 Comments
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A mentioned, we’ve covered Torpedo7 before on this blog. That was the surprising finding after Ferrit had been beaten by Torpedo7 in domestic unique browsers for the week to July 20, 2008.

Organic versus Inorganic growth

It turns out that comparing Ferrit and Torpedo7 is an excellent way to compare organic (Torpedo7) and inorganic (Ferrit) growth. Organic growth is growth that is based on word of mouth, supported by a growing community and perhaps light advertising. Inorganic growth (and I am making this up) is growth that is generated by spending big amounts of money on advertising campaigns.

My theory is that inorganic growth is actually a fallacy – while you can buy traffic,  you cannot buy growth. Moreover, I also believe that purchasing inorganic traffic suffers from the law of diminishing returns – the more you do, the more it costs.

Let’s have a look at our case study traffic numbers.

Ferrit and Torpedo7 attract about the same amount of Domestic (NZ Sourced) traffic. Here’s the total time spent on each site over the last year, courtesy of Net Ratings. Note that December is a partial month.

NetRatings

Those red spikes are clearly advertising campaigns that Ferrit has used to boost traffic and hopefully sales.  If you ignore the spikes then there is a trend, and that trend is even more noticeable in the Unique Browser chart below. The arrows are mine:
NetRatings

Torpedo7 is showing consistent growth in Unique Browsers over time, while Ferrit’s core traffic is actually decreasing. Notice also that the spikes for Ferrit are also falling, though Dec08 should beat out at least Nov 08, and the height should be a function of ad spend, which I don’t have.

The amount of time spent on each site is telling -  roughly the same amount of total time come from a much smaller number of UB’s on the Torpedo7 site than the Ferrit site.

So what are the lessons?

Spend for traffic now, not later

The first is that if you are going to drive traffic to your site using massive advertising campaigns, then you should base the financial decisions about how much money to spend on the immediate results from that campaign, and not on any supposed future benefit.

Inorganic beats organic

The second is that, although big corporates struggle to believe it, an organic growth path creates a far more value in the short, medium and long runs.

In the short term the inorganic sites spend huge amounts of money on advertising to launch the sites, and this dwarfs any margins that the companies are making as a result of sales. Meanwhile the organic sites keep things small and lean, not selling much but spending very little as well.

In the medium term the inorganic sites need to continue to spend to show growth  (I’d classify Ferrit as at this stage right now), and probably still do not make money. Meanwhile the organic sites start to make solid revenues and profits, and the owners are making money – much like Torpedo7.

In the long run the inorganic sites are very low margin or do not exist, while the organic growth companies make strong revenues, have good margins versus their peers and make extraordinary profits for their owners. Trade Me is NZ’s finest example of organic growth, while Ferrit and Flying Pig (which I was not here for) are perhaps the worst.

Target a community or a category, not everyone

Torpedo7 targeted a small community/category – bicycle fans – and built their success from there. (Miki commented about this on the previous post) Many bike fans are also fans of other sports, and so they are able to move across. Nike, Adidas and Icebreaker started in the same way – target a niche and then expand out. Ferrit tried to target all New Zealanders and all categories, and so didn’t generate or appeal to a small group of fervent fans. Trade Me’s community built itself on the site, and grew as the site grew, to the extent that the community is now essentially all New Zealanders.

It’s usability, and it’s products

This could all be completely wrong, as the sites are actually quite different. I’ve commented about this before plenty of times, but the devil is in the results.

As part of the research for this post I browsed to both Ferrit and Torpedo7. (Torpedo7 has no google ads that I could find, whereas Ferrit has ads everywhere) On Ferrit I moved the mouse around, saw massive complicated menus pop up, didn’t see any products that I can recall and quickly left.

On Torpedo7 I purchased something within 1 minute of arriving on site. That’s found, added to cart and paid for. And that just about sums it up.

What do you think?

Torpedo7 NZ’s fastest tech grower

Published December 15, 2008 NZ Business , telecom Leave a Comment
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Congratulations to eCommerce sensation Torpedo7, the 87th fastest growing tech company in the Deloitte Technology Fast 500 Asia Pacific this year. We’ve covered Torpedo7 before on this blog, and it’s great to see their traffic numbers are being converted into dollars -at a growth rate of 571% over 3 years. It’s even better that they are doing this without pouring millions into a nation-wide ad campaign.

Congratulations also to Trade Me for growing at 134 percent, and making the list for six years straight.

And congratulations to Deloitte for owning the “fastest 5x…” space

Paul Reynolds on Ferrit

Published November 3, 2008 Internet Business , NZ Business , Trade Me , telecom 11 Comments
Tags:

The nationwide embarrassment. The site we love to, err, dislike. Ferrit.

Paul Reynolds answered two questions on Ferrit (they were not mine but from BarnacleBarnes). How did he do?

Ferrit
Q. One word: Ferrit. With an investment north of $30 million dollars and traffic that is less than a deal-a day site and only slightly more than a shop selling parallel imported sports gear how can Telecom keep supporting Ferrit?

Dr Paul Reynolds: Telecom is investing in Ferrit as part of a longer term strategy. The growth and potential revenue opportunities from online retail and for Telecom are significant if New Zealand follows trends in the US and UK. In the UK online retail is in excess of 15% of all retail and is expected to grow an additional 50% this year. By helping to develop New Zealand’s online retail market from around 1% to US/UK levels, Ferrit believes it can establish itself as a valued partner to help bring a large portion of New Zealand retailers online in a trusted one-stop online retail mall for consumers. A key challenge to achieving this goal is educating New Zealand retailers (other than the handful who already do online exceptionally well) about what is needed to succeed online and providing tools to help them do this.

Q. With a charging structure that can hardly bring in much cash at current traffic levels and no sign of any forward momentum it doesn’t seem to add up. I would be really interested to know how you think Telecom can make Ferrit profitable in the medium term.

Dr Paul Reynolds: By helping equip New Zealand retailers to succeed online, Telecom helps open up worldwide retail opportunities for these retailers, as well as helping them effectively compete with overseas sites who have invested millions if not billions of dollars on their online capability and who are quickly growing their share of New Zealand retail spend (at the expense of New Zealand bricks and mortar businesses).

The one thing Dr. Reynolds did not answer was the question of profitability, and probably with good reason. Dr. Reynolds does say three things:

1: Potential retail revenue for NZ & Telecom is strong if NZ follows trends in USA and UK

2: Educating NZ Retailers is the key challenge to getting from 1% to 15% of all retail online

3: Ferrit will help NZ Retailers sell to the world by “equiping NZ retailers to sell online”

I have a different point of view.

Firstly, the potential revenue question. I agree that the online market in NZ is, Trade Me aside, poor.There is no Amazon, no Best Buy, no Yahoo shops and so forth. However Trade Me is a standout – delivering far beyond eBay would be, including elements of Amazon, match.com, along with the  motors, property and jobs sites.

On the number side I find the online share of retail sales in the USA, according to to US Census Bureau, to be just 3.3%. That excludes “Online travel services, financial brokers and dealers, and ticket sales agencies” which are are not classified as retail. Notwithstanding the popularity of sites such as Amazon and eBay this feels about right. It’s just numbers though, and as long as we stay consistent then that’s ok.

Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total Quarterly Retail Sales:
4th Quarter 1999–2nd Quarter 2008: Source Census Bureau4th Quarter 1999–2nd Quarter 2008

Secondly in NZ we are not doing so badly. Trade Me has 1.23 million items for sale right now. If the average time to sell is a week, average sale price is $60 and sell through rate is 20% (all top of head without looking at any real numbers) then Trade Me has about $64m in sales each month, or $770m per year. That’s excluding cars (55,000 cars listed, at say $12000 each and say 3 months to sell that’s $220m per month) and Property (57000 @ say 400,000 and 4 months = $5.7 billion per month).

The last twelve months NZ rolling retail sales were about $66 billion (Stats.govt.nz), or $58 billion excluding motor vehicles. At $770m Trade Me there for would have about 1.3% of NZ’s non motor vehicle retail. At ($770m+$220m*12 = $3.41 billion) Trade Me would have 5.2% of total NZ retail spending including motor vehicles. Both are staggering numbers. How much is Ferrit selling?

Meanwhile my guess is that if we include air travel in the stats then much of it (80%+) will be through online, lifting the overall online sales percentage even higher.

Thirdly, Ferrit is not really equipping NZ Retailers to sell online, nor educating them, nor competing overseas. The retailers should ideally be  putting up their own sites and marketing to the world, but they are trapped behind Ferrit’s branding and technology. Ferrit does not offer shipping outside of New Zealand so there is no international sales potential. It would retailers much more good to not only create their own site, but also to get on eBay, Amazon or Yahoo! shops for international sales and of course Trade Me for domestic sales.

Happily there are plenty of other efforts going on in New Zealand to help eCommerce aside from Trade Me – Torpedo7 shows how it can be done, Silverstripe provides free tools, FishPond is grabbing the Amazon space, there are some great design firms, excellent search and SEO companies and even Telecom has been doing some good things.

We are seeing some interesting stirrings at Telecom. Fixing Ferrit will be a sign that things have really changed.

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