RonAmok!

Last August, I wrote a post called The Value of a Retweet, where I performed an analysis of a NewBlue, Inc. marketing campaign that offered 1% storewide discounts for every retweet that the company’s messages received. Through the power of “the internets,” my analysis found its way to Lisa Girolamo, NewBlue’s VP Marketing, who left a comment on the post. That comment initiated a little online discussion between Lisa, me and reader David Jacobs, who wondered if NewBlue, Inc. would be willing to share the results of their campaign. Long story short, Lisa agreed; I exchanged contact information with her; and we entered into a series of interviews.

Although it has taken much longer than I would have liked, I am pleased to announce the release of my most recent case study called “Awesome August: How NewBlue Inc, used social media to increase sales and add new customers during its slowest month of the year.” Please feel free to download the case study and share it with your friends.

Lastly, I’d like to thank Lisa for her time, candor, and patience as this project dragged out much longer than I had expected.

I’ve come to accept the fact that professional communicators have short-term memories. In the past, I’d raise an eyebrow when some marketing or public relations person would scoff at a corporate video being viewed 350 times on YouTube. “Only?” I’d ask. Ah, how quickly we forget.

Less than eight years ago (when YouTube was founded in 2005), if a company wanted to distribute 350 videos, it had to record them (in standard definition), copy them onto magnetic tapes, package them, and then pay postage for each package sent. If each video cost $1.00 to copy and $1.00 to distribute, those 350 videos would cost $700 to deliver. At a variable cost of $2.00 per tape, every incremental video would cost the company additional money. Today, these same companies can record in high definition videos, upload them to YouTube, and then sit back and watch the service deliver them at no incremental cost per view.

This past fall, YouTube added an interesting new measurement to its Insights dashboard that helps put this “Zero Variable Cost” into perspective. The metric, called “Estimated Minutes Viewed,” demonstrates how many minutes people have spent watching video content. With only 24 hours in a day, this measurement reveals how much time your prospects and clients are loaning to you.

Consider the costs associated with a Superbowl commercial. According to Neilsen, last year’s rate sheet required advertisers to pay $100,000 per thirty-second spot to be seen by up to 111 million people. Assuming that all 111 million of these viewers decided to watch the ad rather than leaving the room to get more guacamole, viewer would have loaned 55 million minutes (916,000 hours) of their attention to the advertiser.

Yet, after 30 seconds, the experience would be over–finished as the audience’s attention was drawn elsewhere–either to another ad, back to the game, or more likely, back to the refrigerator for more guacamole.

Now consider an online video service like YouTube, where the video sits waiting to be viewed. Unlike the restrictions of a live sporting event like the SuperBowl, access to the content isn’t limited by time zone or time of day.

In the example above, we can see that between October 7th and the 13th, this company’s online video catalog was viewed 35,281 times. Until YouTube added timing information, this was all the information that content marketers had access to. However, we now have an alternative way to view the data by translating those 35,281 views into time invested by our viewers: 292,046 minutes (~4,800 hours) or 202 days 19 hours…for only one week!

But this number holds even greater meaning if one considers:

• The week before, prospects and customers invested 3,800 of their hours to viewing the content
• The week before that they loaned 3,550 hours
• and the week before that, 35,000 views translated into 4,300 hours of loaned attention.

It’s important not to lose sight of the fact that:

• digitized video stored in the cloud is a gift that keeps on giving.
• corporate videos on video sharing sites continue to rack up more and more views as time goes on.
• For every additional view, the total cost per view gets smaller.
• The longer a video resides on a site, the more impressions it gets, and therefore the CPM goes down over time.

How much would you have to pay traditional media to average 4,000 hours of content viewed per week?

In December 2011, Amazon opened the Kindle Owner’s Lending Library (KOLL), an innovative program that allows Amazon Prime members to borrow up to one book per month from a list of those enrolled in Amazon’s Kindle Direct Publishing Select (KDP Select) program. The lending library is unique because even though borrowers pay nothing for access to a book, authors are still paid by Amazon every time their book is borrowed. In addition, rather than setting a per-borrow price, Amazon left that decision to marketplace demand by promising to fund the program with at least $6 million during the course of the first year. Since the program began, final payment per borrow has been calculated by dividing each monthly allocation by the number of books borrowed in that month.

On KOLL’s first birthday, Amazon appears pleased with the results:

• Amazon Prime members have borrowed over 3.5 million books
• Authors have been paid $7.3 million (21% above Amazon’s annual commitment), which translates into an average of $2.04 per borrow.

Taking a closer look at allocations over the past year reveals that Amazon may be modulating the monthly amount in an attempt to keep author royalties above $2.00. After opening the program with $500,000 in December 2011, Prime members borrowed 295,000 books, which translated into $1.69 royalty per borrow. The company then increased its January 2012 allocation to $700,000, but the authors only received $1.60 for each borrow due to a 50% jump in borrows, as Christmas Kindles needed to be filled with content. For the next nine months, however, Amazon has held its monthly allocation steady at $600,000, resulting in 2.4 million books borrowed and an average royalty payment of $2.19 during that period.

In November 2012, the company demonstrated confidence in the business model by expanding KOLL’s reach beyond the United States to include Europe. Anticipating a jump in sales, Amazon increased its monthly allocation for the first time in 9 months, growing it from $600,000 to $700,000. If my assumption is correct, and $2.00 is indeed the magic royalty number, the company came pretty close to predicting European demand as 368,421 books were borrowed bringing the average royalty per borrow to $1.90.

Finally, Amazon appears to be anticipating another borrowing surge with the announcement that it is committing an additional $1.5 million to the fund over the holidays. The company has decided to add the first of that $700,000 to its December baseline of $700,000–bringing the monthly total to $1.4 million. If Amazon is trying to hit a royalty goal of $2.00 per loan, the company is expecting Prime members to borrow 700,000 books in December 2012, which would highest monthly figure to date (January 437,000) by more than 60%.

It looks as if Amazon’s experimental business model is paying off for both authors and the company. What do you think?