American Superior

For those of us not in know (I admit I had to look this up in Wikipedia) … an aphorism is defined as a universal truth expressed in an unusually pithy form, generally something that only someone with a lot of experience can express, not to be confused with an axiom. Whereas an axiom is an assertion that is generally regarded as true that it does not require a proof. And now you know. (My aphorism is below right after Milton Friedman.)

…

…that best portion of a good man’s life, His little, nameless, unremembered acts of kindness and of love.—Lines composed on the Banks of the Wye – 7/13/1798 by William Wordsworth [Poet, 1770-1850]

#21: If it is possible to bring about a cure by means of foods or healthful nourishment, do not administer drugs as these–especially those that purge–are contrary to nature and are her enemies.—Aphorisms of Abu Jacob Ishak ben Soleiman El-Israeli, also known as Isaac Judaeus [Physician, 830-932]

America’s #1 Killer? Retirement… no one gets out of it alive—Anonymous

A crowd is at the mercy of all external exciting causes, the slave of the impulses which it receives.—Gustav Le Bon, French social observer, psychologist, amateur scientist (1841-1931). Author of The Crowd, which cut a path for the creation of 20th Century political propaganda and racial superiority theories.

The largest shape is without border, the largest noise is without sound, and the grandest story is without words.—Chinese aphorism based in Taoism; a focus of Zhang Jie’s book “Without Words”

[The Japanese] are extremely good imitators – and so polite they even copy the mistakes.—Earl Scruggs (1924- ), Bluegrass musician, Banjo aficionado from North Carolina

In all games the difference between the amateur and the professional is that the professional plays the odds, while the amateur, whether he realizes it or not, is among other things a thrill seeker—John Train (1928- ), Foreword to The Craft of Investing, 1994

In a “winner’s game”, the player who makes the most points wins. In a “loser’s game”, the player who makes the fewest mistakes wins. The best strategy for winning a loser’s game is to lose less. In a loser’s game, you play conservative and give your opponent as many opportunities to blunder as possible.—paraphrased from Charles Ellis’ Financial Analysts Journal article “The Loser’s Game”, 1975

If a consumer finds he’s being sold rotten meat at the grocery store, he has the very best (consumer) protection agency available: the market.—Milton Friedman (1912-2006), 1973 Playboy interview

Ultimately, commoditization means competing on price alone, which isn’t really competing at all. It’s just an endless game of “who can make and sell it cheaper.” Commodity products have little intelligence built into them, and your customers have little loyalty. If the next guy can make it more cheaply, they’re gone. And so are you.—May 2004 weblog by marketing firm Firewhite (founder Marcia Kadanoff)

Related Links

• Original citation American Superior company site
• May 2004 article quoted

As published in Direct – January 1, 1996

This is the Regional Chauvinism edition of Agency Watch and we’re talking with East Coast and West Coast agency heads on their respective styles and sensibilities. The floor goes to the West’s Marcia Kadanoff.

“The East has more long-standing, traditional direct marketing accounts, such as Columbia House and Reader’s Digest, who focus on beating the control,” offers Kadanoff, principal of San Francisco’s Miller/Kadanoff Direct & Promotions Inc. By contrast, she says, the West is a breeding ground for entrepreneurial start-up companies like Apple, Microsoft and Netscape. “With no past history, sometimes anything goes, and the clients here – especially the technological ones – are more willing to take risks and think outside the box.” Two cases in point are Brierley & Partners – which invented the frequent-flyer business when it devised American Airlines’ Advantage program – and Hal Riney & Partners’ Saturn homecoming party. “Thinking 40,000 people would be willing to spend their summer vacation in Spring Hill, Tennessee, and then pay $35 to get into the event, was definitely thinking outside the box,” Kadanoff says of the Hal Riney project. Miller/Kadanoff went against the grain when it designed a program for 3COM targeting computer resellers – not a particularly brand-loyal crowd. The campaign netted a 25% response.

What do Easterners have to say to this? “It’s the needs of the client, not the work, that is different,” says Tom Burden, executive vice president for Baltimore’s TBC Direct, whose clients include Group 1 Software and America Online, both East Coast companies. “We do quite a bit of classic direct here because it works,” he says, “but we also swim in waters that haven’t been swam in before.” Phil Herring of Seattle-based Herring Newman argues that campaigns originating from his side of the U.S. map are more integrated. “More East Coast companies are in the mail order business or strictly use DM channels,” he says. “Clients here tend to require multiple distribution channels.”

We’ll close with an assessment from perhaps the ideal observer – Peter Blau of Barry Blau & Partners, who works out of Westport, CT, but sports a bicoastal resume. He notes that agency people in New York and Chicago are more cost-minded; creativity is important to them but tends not to be as trendy or flashy. “I believe every region has its own creative style,” Blau adds. “San Francisco, for example, is an art director’s town, so cutting-edge design is more important there than anywhere else. But packages tend to cost more because of it.”

Related Link
Direct, the bimonthly magazine for direct marketing intelligence

GO WEST. BE SMALL. THINK BIG
Bay area ad agencies, not Madison Avenue, lead the way in creativity

If you think Madison Avenue when you think advertising, it’s time to think again. Although New York – as the business capital of the world – still generates most of the commercial pitches we see and hear, the creative leadership of the ad industry has moved to the West Coast, particularly the Bay Area.

The critical reason behind this shift is the eagerness of Bay Area agencies to take chances with their advertising – which is what younger and smaller advertisers want. Such a culture lets designers and copywriters flex their creative muscles and produce product pitches that can break through a cluttered marketplace. And since artists and writers value nothing more than creative freedom, the risk-taking mantras at Bay Area ad agencies allow them to attract the best and brightest image makers.

Miller/Kadanoff’s work, which targets decision makers in high-tech companies, isn’t often seen by the general public. But much of the creative outpouring from Bay Area agencies is aimed directly at you. People who are creative don’t want to be restricted, says Marcia Kadanoff, a partner in Miller/Kadanoff, a direct marketing agency that works for Cisco and Oracle. “They want to be the same people at the office as they are at home.”

Miller/Kadanoff, headquartered in what once was a soap factory, might be the only office in San Francisco where you can find blue hair (digital artist Hoagie De La Plante), a Super Bowl ring (controller Bob Mischak once worked for the Raiders) and pierced nipples (c’mon, they can’t reveal everyone’s secrets.) in the same room.

Creativity isn’t a group grope, says Floyd Miller, president. You need individuality…

Let it flow
To make sure the creative juices aren’t inhibited, managers of area ad agencies try to nurture a culture where rules are kept to a minimum. At Hal Riney & Partners, the mothership of Bay Area independent agencies, security guards are cautioned not to disturb one woman, who, when seized by a creative frenzy, works through the night, sometimes napping on the floor. On days her muse is AWOL, she doesn’t even come into the office.

At Goldberg Moser O’Neill, there are pool and pingpong tables to break the tension and give the conscious mind something to chew on while the unconscious mind grapples with ways to communicate a client’s message. For refreshment, there’s a freezer full of all-you-can-eat Dreyer’s Grand Ice Cream – a client – for inspiration.

Butler, Shine & Stern occupies a waterfront building in Sausalito that was used to build Liberty ships during World War II. Visitors often are greeted by the sound of barking dogs in the office.

Goldberg Moser O’Neill has 175 workers in its Maiden Lane offices in San Francisco, where the plush lobby features black leather chairs, fresh flowers, and copies of Fortune and Forbes. A penthouse bedroom is available for visiting clients. “At Young & Rubicam in New York I wore a suit and tie every day,” says Fred Goldberg, chairman and chief executive of Goldberg Moser O’Neill. “I thought it gave me an edge. Here, the only edge you have is the power of your intellect.”

“Advertising terrorists”
Then there’s Odiorne Wilde Narraway Groome, a 22-person ad agency on Battery Street in San Francisco. Founded by four drinking buddies on April Fool’s Day 1994, Odiorne Wilde is the sort of office where a necktie is about as easy to find as a free parking space on Union Square. A business lunch consists of Cheez Furls and Cokes. The leading industry magazine, Advertising Age, labeled Odiorne et al “advertising terrorists”. They did perhaps their most outlandish work in a low-budget poster campaign for Steel Reserve beer that features fornicating rhinos under the headline “Sex Sells Beer.”

Odiorne Wilde grabbed a slew of awards at the San Francisco Ad Club’s last show. It has also established what management guru Tom Peters calls a “renegade approach” to the ad business. Most agencies work on a commission basis, which can be abused by artificially inflating expenses. Odiorne Wilde charges a flat fee. It also opens its books to clients who want to see where their money is going. Billings – the amount clients spend on ads placed by the agency amount to roughly $18 million a year at Odiorne Wilde. By way of contrast, annual billings amount to $600 million at Hal Riney & Partners, San Francisco’s largest independent agency and the one that made San Francisco a national player in advertising.

Saturn’s rings
The success of Riney’s 1988 campaign to introduce General Motors. Saturn led the way to other companies choosing Bay Area advertising agencies. At the time, Riney was the smallest of 50 agencies from across the country to seek the $100 million account for GM’s first new domestic division in 70 years.

“Riney proved that the best ads don’t have to come out of Madison Avenue,” says Tom Bedecarre, a partner at Citron Haligman Bedecarre, a San Francisco shop, which Ad Week magazine recently named Agency of the Year in the Western United States.

Riney established his agency in 1986 after buying the San Francisco office of Ogilvy & Mather, which he had been running. His move to a small, entrepreneurial agency ran counter to the merger trend, which at that time was creating larger and more bureaucratic agencies.
Paradoxically, it was the very growth of the giant, worldwide agencies through mergers that paved the way for the success of the smaller boutique creative shops that have flourished in San Francisco. “The bigger the agency, the more opportunity for mediocrity”, says Harry Groome, a partner at Odiorne Wilde Narrawa. Groome, who spent five years at New York agencies before coming to the West.

What Riney wrought
Hal Riney has spawned more than a dozen Bay Area spinoff agencies founded by former Riney employees, including such leaders as Goodby, Silverstein (”Got Milk?”). In fact, it’s difficult to find any successful San Francisco agency without a Riney graduate. Bedecarre worked at Riney for six years before he and two partners formed Citron Haligman Bedecarre in 1990, which recently captured Macy’s western division.s $24 million account. “You work at Hal Riney to get an education”, Bedecarre says, “but after a while you get tired of living in his shadow.”

Riney’s folksy ads are credited with everything from creating a market for wine coolers (Bartles & Jaymes) to electing a president (Ronald Reagan), but critics say his range is limited and too often ads consist of ‘two guys on a porch. Riney stresses soft-sell ads that appeal to emotions rather than rationality. The billboard campaign for Saturn cars, for instance, doesn’t talk about engine size or gear ratios. Instead, it pictures the people who make and purchase the cars.

Riney didn’t single-handedly build the reputation of West Coast advertising. Jay Chiat, who now runs TWBA Chiat/Day in Los Angeles, for instance, established a reputation for his willingness to go beyond the ordinary, a la Apple’s “1984″ ad that introduced the Macintosh. And Dan Wieden of Wieden & Kennedy, Nike’s ad agency, showed that leading-edge work could come out of Portland, Ore.

Larger agencies have more to lose, ad executives say, so they are less willing to take creative chances. The big agencies tend to win the accounts of the conservative, research-driven companies such as Procter & Gamble that see advertising as a process that can be measured and controlled. “In New York, advertising is seen as more of a science”, says Jack Rooney, managing director of the recently opened San Francisco office of Leagas, Delaney. In San Francisco, advertising is seen as more of an art. That is why when Leagas, Delaney — Britain’s leading creative shop wanted to open a U.S. office to handle its Adidas account, it located in San Francisco.

Conservative companies insist on more testing of ads at various stages in the creative process. Many also put newly graduated MBAs in charge of whole brand lines, and these novices are more likely to muck with an ad’s design, ad execs say. The more advertisers try to create a step-by-step approval process for creative work, the more likely they will get so-so ads, says Burt Manning, chairman and chief executive of J. Walter Thompson in New York. “People hide behind the process”, he says. If the ads don’t work, they can say, “Well, we performed every test in the book”.

The creative departments of ad agencies prefer to work with young companies and smaller companies, because they usually impose fewer restrictions.

Silicon Valley influence
Another reason the Bay Area has become a creative center of the advertising business is the presence of Silicon Valley, which has nourished a cadre of ad agencies that are comfortable marketing the latest technology. When Microsoft wanted a second agency it turned to Andersen & Lembke of San Francisco, which at the time had only 45 employees. The increased workload provided by Microsoft created 100 more jobs, says Hans Ullmark, president of Andersen & Lembke.

Of course, says Bill Cleary, a founder of CKS Partners, Silicon Valley’s leading marketing communications agency, even the best ads can only lead consumers to a product. Once they open the box, the product must stand on its own. CKS devised an enticing promotional campaign that made many consumers rush to try out Apple’s Newton – a hand-held computing device – when it was first introduced. Once exposed to Newton, however, shoppers found they could live without it. “We killed the Newton in 30 days”, Cleary says. “It would have taken a less-competent agency 90 days.”

From the San Jose Mercury News, Sunday, August 25, 1996, Business Section, Page 1, by HAL KAHN, Mercury News Staff Writer

A policy discussion sponsored by Northwestern University Library back in 1996(!)

BUILDING A WORLD WIDE WEB SITE
With millions of World Wide Web home pages to choose from, how will your company’s site stand out?

The newsletter Marketing Computers recently conducted a survey of over 160 World Wide Web sites from Fortune 500 companies which demonstrated that not all are taking full advantage of the Internet medium and its high potential for interactivity. Author Marcia Kadanoff states that the sites which were surveyed could be categorized as: (38)

1. 37% were sites for viewing
   Produced for your viewing pleasure with advertising for support; like high-tech billboards or television.
2. 50% were sites for talking
   Allowed e-mail feedback. The survey found that up to three weeks was sometimes required to sluggishly fill routine information requests.
3. 9% were sites for doing
   Created a better environment for the customer to do business with you. The survey found that only 12% of sites provided enough information for customers to make an informed decision.

4. 4% were sites for thinking
   Had the potential to deliver a personalized “value stream of information” to a customer using intelligent agent technology.

Planning is essential…
—Extracted from an article authored by Renee E. McHenry, M.L.S., Librarian, Northwestern University

ADVERTISING ON THE INTERNET, 2ND EDITION, by Robbin Zeff and Brad Aronson

Chapter 9 – Buying Online Ads
This chapter is a guided tour through the ins and outs of running an online advertising campaign. It begins by discussing the steps you need to consider before you spend one dime on Internet advertising, and then spells out the step-by-step process of buying and running an online ad campaign.

About The Companion Site Resources
The resources provided below will help you hone your skills at buying online ads by giving you links to everything from rate cards to media planning guides.

Articles and Must-Reads

• “On The Fly Before You Drive, Know The Rules of the Road” (Marcia Kadanoff) from ClickZ
• “Getting Yours: How to Get Media Buyers to Take You Seriously” (Laura K. Mitrovich) from ClickZ
• “What’s in a Buy? It Depends What You Are Looking For” (Lawrence Peryer, Jr.) from ClickZ
• “The Nuts And Bolts of Advertising Online” 3 parts from ClickZ
• “Fun With Numbers: the Combination Buy.” (Rob Frankel) from ClickZ
• “Internet Advertising V: Buying Advertising” (Gary Welz) from Internet.com

Related Link
Original Source Article – Online

Interview: Mobio Brings Mash-Ups To Mobile To Power New Lifestyle Portal

Branding Unbound
by Rick Mathieson, award-winning writer, author, speaker and frequent media commentator on the converging worlds of marketing, media and technology.

Mobio’s on the move.

On the heels of its Mobile Movie Times application launched last November, the Cupertino, Calif.-based startup today announced the availability of GetMobio, a new lifestyle portal that gives users instant access to over 50 dynamic applications, widgets, and RSS feeds.

Though still in beta, GetMobio’s mix of Web service mash-ups will soon enable you to whip out the mobile phone and make dinner reservations, flag a taxi, buy movie tickets, view maps and do myriad other things. Not by wading through an endless number of screens, mind you. But in three clicks or less.

As a result, Mobio has earned kudos from Business 2.0, which named the company to the pub’s Next Net 25, and IDC, which has named Mobio one of 10 emerging wireless entertainment companies to watch in 2007.

I spoke with Mobio marketing VP Marcia Kadanoff to find out more:

Click to start podcast

Related Links

• Original article on Branding Unbound site
• Mobio press release announcing the product release referenced

Mobile 2.0: Building Mobile Apps

Dr. Dobb’s Journal
By Jonathan Erickson

Adam Blum and Marcia Kadanoff define what Mobile 2.0 applications are, and they explain how to build and deploy them. Click to listen to the podcast.

Relevant Link
Original podcast by Dr. Dobb’s Journal dated 12.06.06

Published in CFO Magazine in October 2004
When costs have been cut to the bone and revenue growth is still shaky, a company naturally turns to thoughts of pricing. Many are thus moving from cost-plus pricing to value pricing or variable pricing. But the new models can be tricky, so more companies are turning to price consultants to get it right.

For example, when Concentra Preferred Systems, a Naperville, Ill.-based provider of health-care cost-management services, was recently renegotiating with one of its top clients, it called in pricing expert Strategic Pricing Group Inc., of Waltham, Mass., to assess what it should be charging. “Our next-biggest competitor prices well below us, so we have to be able to explain why our pricing is higher,” says Concentra CFO Steven A. Flack. Thanks to the new pricing strategy developed with Strategic Pricing, Concentra should be able to retain more-profitable business, says Flack.

The Professional Pricing Society, a national association of pricing experts, has increased its membership from 600 to 2,000 in the past three years. The services offered by its members are also expanding. Firewhite Consulting Inc., in Burlingame, Calif., for example, conducts large Internet surveys, testing different product offerings at different price levels.

Firewhite president and CEO Marcia Kadanoff says the firm uses a “science-driven approach, exposing potential customers to various value propositions.” Different features and benefits are tested in different combinations. “From that we can tell the customer how to optimize its pricing to get the most revenue or market share,” she says.

— Claire Aiden

Related Links

• Link to complete article on CFO.com site
• To learn more about Firewhite’s demand planning and profit optimization work
• For a discussion of choice modeling from our thought leadership series

Offering mobile device support services add to company’s one-stop approach to meet business customers’ needs

CHATSWORTH, CA (February 11, 2003) — MobilePlanet, a leading multi-channel direct reseller of mobile computing and wireless products has acquired Ubiquio, a mobile computing services provider that deploys, supports and manages fleets of mobile or wireless devices for businesses throughout North America. With this acquisition, MobilePlanet significantly expands its existing mobile deployment and management services and extends its leadership role with enterprises that choose to invest in mobile and wireless technology.

Ubiquio is well known in the mobile industry as one of the first providers to focus exclusively on mobile computing support services. The company has deployed nearly 10,000 devices in its three years of operation, and supports over 3,000 mission-critical devices for nearly 50 customers. Ubiquio helped pioneer the concept of prepaid mobile support services, and was the first provider to offer hosted solutions for remote software distribution and asset management of deployed mobile devices. Ubiquio has been working with MobilePlanet for nearly two years, when they jointly introduced mobile support “incident packs” in the MobilePlanet catalog. By acquiring Ubiquio, MobilePlanet is even better positioned to meet the rapidly growing demand for mobile and wireless services.

Businesses looking to roll-out a mobile computing project to their workforce increasingly outsource services such as device selection, vendor selection and pricing. Once purchased, they need to configure, maintain, repair, support and manage every device. Having a vast selection of products to choose from, plus value-added mobile device services in-house allow MobilePlanet to offer businesses products, customized deployment and support solutions at competitive prices, helping lower a company’s total cost of ownership. From mobile device consultation and fulfillment; to mobile help desk support; to device management such as inventory maintenance, remote software distribution, exchange/replacement programs, asset management and more, MobilePlanet is a one-stop resource for rolling out any mobile computing project.

“In keeping with our corporate growth strategy, this acquisition complements our company’s business,”said Philippe Pastor, Chairman & CEO of MobilePlanet. “These services are a strategically significant addition to our existing B2B offering and position us well to further strengthen our value proposition to our existing customer base and in the ability to successfully pursue new markets.”

Further, Pastor mentions, “We believe businesses need a full-scale mobile device support service that they can rely on. Our new services, combined with our product expertise, exceptional customer and technical service and wide-selection of competitively-priced products are extremely valuable elements that businesses look at when rolling out a mobile computing project, effectively and efficiently. We’re excited about being able to offer these services to our customers on a more direct level.”

About MobilePlanet

As the leading multi-channel direct reseller of mobile computing and wireless products and services and a complete resource for businesses and mobile professionals, MobilePlanet offers name-brand products through its award-winning Web site, www.mobileplanet.com, European Web site, www.mobileplanet.fr and its catalog by calling 1-800-675-2638. In addition, as a company expressly targeted to the mobile computing industry, MobilePlanet’s team of product and solution experts work directly with businesses and mobile professionals to help create efficient and cost-effective solutions for their mobile computing needs.

MobilePlanet is a member of Pinault-Printemps-Redoute (PPR, www.pprgroup.com), a Paris, France-based, publicly-traded international leading specialized distributor with sales of $24 billion in 2001.

MobilePlanet is a registered trademark of MobilePlanet, Inc.

Contact Information for MobilePlanet:

Jennifer Johnson
818/718-6700
jcamargo@mobileplanet.com

Relevant Link
Original press release online

CEO interview as published on Ubiquity

UBIQUITY: Tell us about yourself.

KADANOFF: I am a CEO of a pre-funded company. Maybe the first thing we should talk about is pre-funding versus self-funding. I used to think that “pre-funded” was the right way to describe a company like mine, which has raised about $450,000 from private individuals. In fact, the right term is “self-funded.” The terms are subtly different and both have problems. Pre-funded suggests, number one, that you’re definitely going to get funding, and number two, that this is just a temporary period. Self-funded suggests that only rich people can start companies — people who have made it before who are serial entrepreneurs. Of course, the dirty little secret is that a lot of the serial entrepreneurs didn’t make their money because they were fabulous entrepreneurs. They made their money because they were in the right place at the right time. So it’s very disconcerting to me that we seem to have an environment right now where it’s so difficult to get funding that the only people who can get funding are those who self-fund themselves to a certain point. I am worried about Silicon Valley and the level of innovation we’re going to see in this kind of environment.

UBIQUITY: What are the signs that there’s a problem?

KADANOFF: Among other things, if you go through the “VC Letters” of VC funding vehicles, you see that the venture capital community is still funding stuff, but if you go through with a finer-tooth comb you see that it’s mostly Series B and Series C. Series A has become the tough round to get. Some companies, if the founders have their own money, are actually self-funding Series A, and so they’re getting all the way to Series B on their own cash flow. By self-funding I don’t mean bootstrapping to bring in revenue. I mean actually saying, “OK, it’s going to take us $5 million to get to the first set of milestones, so we’ll put that in because we have it.”

UBIQUITY: Give us a one-minute tutorial.

KADANOFF: In classic terms, there are different rounds of financing. The seed round is generally before you have any real financing, before you have a corporate structure, and essentially what people do is give you money to be exchanged for stock later. The first real round of funding that you can raise in exchange for stock, preferred stock generally, is called Series A. Each subsequent round of financing is given a letter: Series B, Series C, Series D. And so Series A is your first real round, and Series B is your second round. Typically, in the past, you get Series A to take you through getting to a product. More typically today you don’t get Series A until you have a product, and so Series A is to take you from a product to the beginning of revenue. So you’ve already got much of the product built out but you don’t have necessarily the services and infrastructure around the product to start charging for it. Series B is typically to take you from, “I’ve got a product, I’ve started selling it, but I’m not on a revenue ramp yet.” Series C is mezzanine, or what some think of as interim financing, before you get to a liquidity event. Nowadays it’s well recognized that it takes about $20 million to get an enterprise software off the ground.

UBIQUITY: Is there any way of breaking that down into components? What does the $2 million buy?

KADANOFF: It really varies in terms of where the money is spent. Typically, there are four sets of milestones. The first is, “I’ve got an idea.” That’s obviously before you get any financing and oftentimes used to correspond with the self-funded or pre-funding situation. The second milestone is, “I have a product.” That’s pre-revenue but you have a product, and so typically that corresponds to Series A, although nowadays as I say, people have the expectations that you have the product done before you get to Series A. Now you have a product but you need revenue, so that’s where Series B comes in. That’s where you start to hire sales and business development people. You may hire your first professional marketing person. You’re really ramping up the business side. Up until that point, your company’s been more development focused. Then Series C is, “OK, I’ve got revenue, but now I’m on a race to profitability.” You know your breakeven point and you’re trying to build critical mass to get profitable. How the money is spread out varies so much that it’s not worth giving rules of thumb. In today’s environment, the focus is on smaller Series A, somewhat heftier Series B, and Series C can be anything. It can be the most difficult round to get if you don’t have a path to profitability and that’s why you see companies going out business.

UBIQUITY: You mentioned that the successful entrepreneurs tended to be at the right place in the right time.

KADANOFF: My point was that they might not be skilled entrepreneurs, even though they were successful. They might have only been at the right place at the right time.

UBIQUITY: Are you, as a skilled entrepreneur, at the right place at the right time?

KADANOFF: I think now is a great time to start a company because four years from now it’s got to be better than it is today. We certainly feel like we’re at a local trough, if you will, in terms of the numbers and the financial markets. The notion that it takes four years to create a credible company is a return to the days prior to the new economy.

UBIQUITY: What was the four-year plan for creating a company?

KADANOFF: I’ve been in the Valley now for over 15 years and in the old days it always took four years to build a company. The first year was all about product, the second year was about getting to revenue, the third year was about getting on a revenue ramp and getting closer to profitability, the fourth year was profitability, and somewhere between year four and year five you typically have a liquidity event. It’s only been in the very recent past that we’ve had these “six months and you’re ready to go public” phenomenon. I feel like I’m in the right place at the right time because there’s a real return to basics. The companies that get funded now clearly have jumped through major, major hurdles to get there, and I think they’re going to be very successful companies.

UBIQUITY: You’re still in stealth mode, but tell us what you can about your company.

KADANOFF: Sure. We are like a lot of companies that are coming up these days. We have some real assets, one of which is that we do our development offshore in Bangalore, India. The reason that’s important is because it gives you a much lower breakeven point. Salaries and operating costs have escalated in Northern California a great deal so it’s harder for a company to get to profitability here. By doing offshore development we can reduce our burn rate dramatically and get to profitability that much faster.

UBIQUITY: What is the name of your company and what does it do?

KADANOFF: The company is called Firewhite. We’re focusing on the remote access problem for the enterprise using small format devices over a wireless connection. How does somebody using a PalmPilot or a Pocket PC or a Blackberry dial in and get more than their e-mail? There are solutions that are fairly well developed to get e-mail and to synchronize with your calendar, your contacts, and your task list. But enterprise computing needs so much more. How do I get access to my documents, my co-workers’ documents, or to transactions that I need to take through the big enterprise system? That’s what we’re focusing on.

UBIQUITY: How did you get the name for the company?

KADANOFF: Firewhite comes from a Carl Sandburg poem from 1917 called “The Four Brothers” and he’s talking about wireless. Of course, he’s talking about wireless radio, which was not that new. Radio was developed in the 1800s. But he’s talking about the allure of wireless at that time. And it’s a URL that was available and easy to spell, so that’s the name.

UBIQUITY: Is the key to your business plan the idea that enterprise computing and enterprise communications needs are qualitatively as well as quantitatively different?

KADANOFF: There is a lot of discussion and talk about the post-PC era, the era of pervasive computing where you can do your computational tasks, or I should say check in with your office, from anywhere at any time. What the enterprise is interested in doing is deploying these very low-cost devices, such as a PalmPilot or a Pocket PC or a Blackberry device from a Canadian company called RIM, Research In Motion. We’re interested in deploying those for two reasons. The first is that they can reduce the dependence on laptops, because laptops turn out to be very expensive relative to desktop computers on the total cost of ownership basis. The second is they can get the productivity gains that come when your employees can do business from anywhere at any time. And the third, compelling advantage that’s coming, although I wouldn’t say it’s here yet, is be able to leverage public infrastructure.

UBIQUITY: What new networking technologies do you find interesting?

KADANOFF: We have two new networking technologies coming up: one on the LAN side and one on the PAN (personal area network) side. On the LAN side this year you’re really seeing wireless ethernets, sometimes called WIFI or 80211B standard, becoming very ubiquitous. Because of the standard where you can use any wireless ethernet card, you can go into a Starbucks say that’s running wireless ethernet, plant yourself down with your small format device and a wireless ethernet card, and sit and drink coffee and be online and get your e-mail. With our technology you’ll be able to communicate in a very free and easy manner with your enterprise resources on the enterprise LAN. What that means is that when you’re at Starbucks you’re taking advantage of their infrastructure. They have a DSL connection and have chosen to share it with their patrons. That’s very compelling to enterprise because it’s essentially free and enterprises like shifting their infrastructure costs onto other people.

UBIQUITY: What is the other new networking technology?

KADANOFF: The other kind of connection we’re going to see a lot of is called a personal area network, and it’s enabled by a technology called Bluetooth. Bluetooth enables you to do a very ad hoc form of networking where you don’t have set IP addresses and you don’t have to be a techno-genius. You can just walk up to any IP addressable device – it could be a printer, a monitor, or a workstation — and connect just for one purpose. What that means is that you’re going to not need to lug around, say, a whole projection system just in order to make a presentation. Instead, you’ll be able to connect to a monitor on the wall. That’s going to be very compelling for the enterprise because it’s going to reduce equipment costs and hassles, and also allow mobile employees to leverage infrastructure at their clients, at their vendors, at their suppliers, and at their trading partners. Again, the enterprise loves being able to leverage somebody else’s infrastructure whenever possible. So we’re very excited about those two trends.

UBIQUITY: What other trends are you excited about?

KADANOFF: We’re also seeing a whole rise of service providers for fees so that you’ll be able to go into a laptop LAN and take advantage of their infrastructure for a very low cost in business hot spots such as airports. The infrastructure isn’t all there from a software perspective, but it’s a great idea, which is don’t lug your laptop. Take advantage of the fact that we’ve got Internet cafes or for-pay places — hot spots where you can use PCs and access your data through a remote access connection.

UBIQUITY: You said that this was a great time to start a new company, but do you not worry that the mood of Silicon Valley and the tech mood has been deflated?

KADANOFF: What’s interesting about that is that it’s not a bunch of kids, all of whom want to make over six figures and work out of the most glamorous offices in the world, which was what we saw over the past three or four years, at least in San Francisco. Now we’ve got a return to basics and the people in technology companies are there because they want to be in technology companies. They love the pace. They love the innovation. They connect with technology. They’re willing to get down on the floor and scrub the grout in the bathroom if that what it takes to get the company off the ground. I think that it’s a good thing, not a bad thing, and it doesn’t worry me at all.

UBIQUITY: You mentioned earlier that many of your people are in Bangalore. Is the programming done in Bangalore?

KADANOFF: Yes, all our development’s done in Bangalore.

UBIQUITY: That’s certainly part of a much larger trend. You’re not the only one.

KADANOFF: Yes. A lot of these technologies allow us to do business from anywhere. You can submit code into the source code control system located in Mountainview, and your developers can be located in Bangalore. You can do development around the clock if you set up your R&D centers properly from a geographic perspective. More importantly, we can’t hire enough qualified Java engineers here. We simply don’t have the talent base, which is why you see a flood of people coming from other countries, including India, getting their H1s and working here for technology companies. Even so, we have a net shortfall even with the kind of economy we have today. It’s exciting to be able to set up an R&D facility in Bangalore. Not only do we have access to the talent there, but also there is a whole group of people who want to stay in India. They don’t want to be forced to go the United States in order to find compelling work. At some level, companies that create offshore development facilities are doing something good for the societies there, creating jobs there as opposed to creating jobs here.

UBIQUITY: Thinking about that global trend, do you foresee that 20 or 25 years from now the whole industry will shift toward other countries, that Silicon Valley will be a memory?

KADANOFF: I am worried about the fact that if only repeat entrepreneurs can start companies, then that’s going to give a bias towards Silicon Valley. I think what we’re going to see, as we’ve seen in the United States, is a great leveling effect. It used to be that real estate was very expensive on the two coasts, and in between the coasts, because there weren’t jobs and because there wasn’t the demand for housing, real estate prices were quite soft. We’re now seeing that real estate prices are starting to average out and be much closer all over the United States. I think that’s because you can work from anywhere. All of the sudden you have somebody who used to live in Northern California moving to some little town in Illinois and they’re driving the real estate prices up in that little town. I think you’re going to see the same phenomenon, which is, as we get a more global workforce and people can work from anywhere, pricing is going to go up, and so Silicon Valley will not be the most expensive place on the planet to hire engineers. There’ll be lots of other expensive places as well and all of the sudden you won’t have the cost advantage that you get today from offshore facilities. So I don’t worry about Silicon Valley at all. I do worry about our ability to attract and retain young people because it’s gotten so expensive, but I think this is something that will shift back in the other direction eventually.

UBIQUITY: Back when you were an undergraduate at Harvard, what did you think you wanted to do?

KADANOFF: Oh, I wanted to save the world. I graduated in psychology and social relations. Then I went off to the State Department of Public Welfare, where I was a budget analyst. At the time about two-thirds of Massachusetts’ budget was spent on welfare and so I was there figuring out how to improve programs and reduce costs at the same time. I did that for three years before I went to business school.

UBIQUITY: Did you go to business school thinking of technology?

KADANOFF: That’s why I came out to Stanford. My roommate in college had the first microcomputer on campus and I was very excited. The only thing you could do with a microcomputer at that time was to program it to play Pong. Computers were huge at that point but I was very excited by that phenomenon, had done a lot of analytic work on big mainframes as part of my undergraduate thesis, and found that I was fascinated by technology. Of course, the place to go to business school was Stanford, in Silicon Valley’s backyard, and so that’s what I did.

UBIQUITY: What did you do after Stanford?

KADANOFF: I graduated in class of ‘85 and wanted to go into technology, but ‘85 was not a great year for a technology companies. It was another local trough. So I went off to get my “second MBA” at the Clorox Company. It’s called the second MBA because consumer products companies were known for doing a very good job of training folks in brand marketing and patch goods marketing. I was there for about two days and realized I had made a terrible mistake, that the company was not the right place for me, largely because it’s very regimented. It’s like being in the Army, and that’s fine if you’re very open to that. It’s not so fine if you rebel against those kinds of structures and are creative about getting around rules, which I am very creative at doing. I stayed there for 14 months, not loving any of it, but it was a good experience in the sense of toughing it out. I learned some great stuff and it’s good background.

UBIQUITY: But then you move on to, first, Apple, and then Sun?

KADANOFF: At the end of 14 months I was recruited away by Apple Computer where I became the marketing communications manager for the Mac II and the Mac SC, and about 200 other products that I launched over my five years at Apple. That was a very exciting time. Being at Apple is like being part of an evangelist’s mission. I met a lot of great people and my co-workers were all really smart and interesting. I stayed there for five years and then was recruited away by Sun to be first their director and then VP of marketing.

UBIQUITY: And what led you to become an entrepreneur?

KADANOFF: I had a child in the interim and decided that I wanted to start my own business. We started a business called Miller Kadanoff Directive Interactive, which was a marketing agency, built that to about $20 million in sales, and then sold it in a three-way transaction to one of the Madison Avenue holding companies. I got the startup fever as we were showing the business and went to Flycast, the first direct-response advertising network, now part of CMGI. From Flycast I went to a small promotions company in Silicon Valley called iq.com , and from there to Everypath, the wireless Web company, and now I’m the CEO of Firewhite. So that’s my career path in a nutshell.

UBIQUITY: What would you tell young people who are interested in being entrepreneurs in technology?

KADANOFF: Today I would tell them, when you graduate from college go into a big company for a few years and get the big company disciplines under your belt. Do essentially what I did, with the combination of Clorox and Apple. There’s no substitute for being in the best practices companies and learning from them. I would definitely bite the bullet and do that. It doesn’t have to be something you hate. It doesn’t have to be a Clorox. It can be an Apple, which is exhilarating and tremendously fun, but go out and get that learning because it’s going to make you a better entrepreneur. The best entrepreneurs are people who have been there, done it before, and can apply a lot of experience to the problems at hand. When you’re an entrepreneur, you’re really working without a net, and you can’t be afraid of failure. The best way to build non-fear of failure is by having been there and done it before in a safer environment. And a big company is a very safe environment, because there are typically lots of checks and balances to make sure that spending doesn’t get out of control, that you don’t bet the company without sort of management behind you, et cetera, et cetera.

UBIQUITY: And after they’ve built non-fear of failure?

KADANOFF: Then they’re ready to take on the world — and need to go do it.

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Association of Computing Machinery

News Release
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION contact Cathy Castillo, News Director, 650-725-3238, Fax: 650-725-6750

August 30, 2000
Committee of 200 Cosponsors Women’s Conference

STANFORD BUSINESS SCHOOL — Top women entrepreneurs and corporate leaders will share insights when they convene at the Business School this winter for the 2001 Women’s Conference.

The Chicago-based Committee of 200 (C200), a group of preeminent businesswomen, is cosponsoring the event, titled “Perspectives: Views on Women in Business,” on February 3, with the School’s Alumni Office and the student group Women in Management.

Founded in 1982, the Committee of 200 added an outreach foundation in 1986 and now has more than 400 members from 70 industries. They include entrepreneurs whose companies generate an annual revenue of $15 million or greater and U.S. corporate executives managing divisions that produce more than $100 million annual revenue or international managers of divisions in excess of $30 million.

“In my eight-year association with this broadly diverse group, I have benefited from hearing how other women are dealing with business situations similar to mine,” said Nancy Mueller, a C200 organizer of the conference, founder of Nancy’s Specialty Foods, and a member of the Business School’s Advisory Council. “I have made some wonderful friends from all over the country who, like me, have precious little time for socializing with other women at the top.”

The conference will bring together Stanford MBA candidates and alumnae with other successful businesswomen to discuss such topics as women’s roles in the new economy of e-business, changing perspectives on the service industries of consulting and investment banking, planning a career for balance, support for minority women in management, and giving back to the community, Mueller said. Students cochairing the conference are Christy Thomsen, Alkha Khetan, and Christa Beckner.

Four C200 members hold MBAs from Stanford: Mary Bechmann, MBA ‘85, a private investor; Deborah Coleman, MBA ‘78, chairman of Merix Corp./SmartForest Ventures; Marcia Kadanoff, MBA ‘85, CMO of Everypath; and Ellen Lapham, MBA ‘77, president of Innovation Ventures. Six others attended Stanford executive education programs, and two other members besides Mueller sit on the School’s advisory board.

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The Committee of 200 the most influencial women’s group you’ve probably never heard of

Part of a guide to new technology distributed to Global 2000 Chief Executives

Leading your company into e-commerce means thinking totally differently about how you do business. The world economy is undergoing a fundamental transformation at the start of the 21st century, one that raises both challenges and opportunities for companies and their CEOs. According to the Progressive Policy Institute’s (PPI) Technology, Innovation and New Economy Project, some of the most obvious outward signs of change are, in fact, among the root causes of it: revolutionary technological advances, including powerful personal computers, high-speed telecommunications and the Internet.

Hence some of its nicknames: “Digital Economy”, “Knowledge Economy”, “Weight-less Economy”. This New Economy, however, is about more than high technology and the frenetic action at the cutting edge, says Robert D. Atkinson, director of the PPI project. “Most firms, not just the ones actually producing technology, are organizing work around it. It is also as much about new organizational models as it is about new technologies”.

Embracing technology and capitalizing on the benefits it has to offer are challenges and opportunities that virtually all CEOs are facing. The analogy of “bricks to clicks” has frequently been used to describe this transition. But “bricks and clicks” probably is more to the point, because New Economy technology is going to enhance, not supplant, Old Economy values.

As CEOs manage the transition to the New Economy in their own companies, they can expect to face challenges in several areas. One of the most important is providing the vision their companies need to succeed in a world now doing business on Internet time….

Extract from article follows

— Michael J. McDermott

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You’ve heard of a “lifestyle” story? Well this is the equivalent, except for the workplace, also known as a “workstyle” story

Techheads find their quest for a spiritually rich life can both feed and confuse their professional development
In the hyperkinetic world of ecommerce, the word “spirituality” rarely rears its hallowed head. But throughout this whirlwind, get-rich-quick world an increasing number of techheads are turning to a rich spiritual practice. While skeptics might find such pursuits dubious or threatening to professional productivity, those on the spiritual path say that regular meditation, prayer, and work with spiritual guides actually makes them more efficient, clear-headed, and focused.

Whether out of desperation, a desire to increase concentration and productivity, or a long-term yearning to nurture the soul, the number of high-tech professionals seeking more meaning in life than just catching up with the billionaires is escalating.

“Mindfulness teachings are becoming more mainstream,” says Gil Fronsdal, a Buddhist priest and meditation teacher who leads several meditation groups that are peppered with tech professionals in Palo Alto, Calif. “There’s more need or demand now for applicability in daily life or at work.”

Such pursuits can ultimately turn a life upside down, spurring people to change their lifestyles “” or quit their high-stress jobs. The worst danger is when people postpone or dismiss long-term work for the soul in order to focus short-term on material development, says Howard Schechter, a psychologist and author of Rekindling the Spirit in Work. “It’s the fire syndrome: feeling you have to put out the fires, so you’re not able to do preventive work,” he notes.

Among those working hard on both fronts “” professional and spiritual “” while neck-deep in the frenetic Internet culture are Walter Cruttenden III, co-founder and CEO of E*Offering, an online investment bank aligned with E*Trade, and Marcos Sanchez, head of brand marketing at iQ.com, which provides a merchandising platform for online sales promotions and loyalty marketing.

…

No touching
For Marcos Sanchez, it is undoubtedly tougher to seamlessly integrate his spiritual practice with his professional work. He is director of brand marketing at a young and rapidly growing Internet startup, iQ.com, an online marketing venture. But his religion dictates that he can’t touch or be touched by anyone except his wife and priests (even to exchange business cards), he can’t drink alcohol, he can’t be in crowds (one consolation: no more Comdex), he must eat on the ground on a straw mat off a designated plate, and he must always wear white and keep his head covered, even while sleeping. Oh, and no looking in a mirror. (”Shaving is a bit difficult but I’m getting used to not looking,” he says, gesturing how he methodically strokes from the cheekbone downward with a razor.)

On a warm afternoon in October, Sanchez, 30, greets an unexpected potential business partner who had dropped by to visit iQ.com executives. The man holds up his hand with his business card, expecting to be met with a customary shake. But Sanchez instead places his business card before him on his desk, retracts his hand, and explains with an attempted no-big-deal smile that he is suffering from carpal-tunnel syndrome and can’t use his hand. (He doesn’t feel like explaining his religious beliefs to strangers, for fear it might turn them off “” particularly potential customers.) The man says he’s sorry, then while taking a step back casts a curious glance at the floor. “What about the half-eaten burrito on the floor?” Sanchez meekly explains it’s part of a ritual. The man looks increasingly quizzical but continues to talk business.

This all might sound like some sadistic cutting-edge form of high-tech hazing, but for Sanchez, it’s part a willing religious journey to become a santero, a priest of Santeria, an Afro-Cuban religion derived from the African Yoruba religion. A central tenet is that god created orisha, demigods similar to patron saints in the Roman Catholic popular tradition, and gave them the authority to act as his emissaries, watching over and guiding humans. It is believed that everything has an effect on everything else, so adherents try to maintain balance through prayer, offerings, and deeds.

Sanchez started studying Santeria for several reasons: to grow closer to his Latino roots (his mother is from Panama and his father is Puerto Rican), to practice Spanish, and to gain a more spiritual perspective, something he has found lacking in the high-tech world.

“People tend to be very concerned with your startup pedigree, what options you have, and who you know,” he says. “While I can get caught up in that too, occasionally, I try to limit it. Staying in touch with my spiritual side really helps me with perspective sometimes…. And I think it helps me to realize that whatever crisis is the latest, it’s not the end of the world.”

Delicate balance
His perpetual white attire aside, Sanchez looks and acts more like a polished, ambitious Net startup junkie than a self-contemplative priest-in-training. Since he began his high-tech career in 1994 with a stint at a San Francisco public relations firm, Sanchez has jumped to four Internet-related companies “” at each one hoping for the big IPO. One company, NetObjects, a Web development software and service company in Redwood City, Calif., did go public last May but its stock has hardly shown an instant-retirement promise.

In July Sanchez began a three-month training process with a seven-day purification ceremony, during which he stayed in one room under the supervision of his spiritual godmother while Santeria priests made seashell readings, called ita, to divine his future. For those three months, he had to eat on the floor, avoid mirrors, and keep his head covered. After that, some strictures were lifted but some, such as to avoid touching people, wearing jewelry, and being in crowds, and to eat off a designated plate, will continue for another nine months. Once Sanchez becomes a priest at the end of the 12-month training, he will be able to start overseeing rituals, ceremonies, cleansings, and spiritual readings, while learning other spiritual practices.

Luckily, Sanchez and his colleagues treat his spiritual commitment with both respect and humor. “He can’t take documents out of my hand,” says Marcia Kadanoff, chief marketing officer at iQ.com. “So sometimes I throw them at him. You’re supposed to put them on the table, but what if you’re passing him in the hallway?”

Then there’s the mirror that had to be moved from the wall in front of his office and replaced with a framed print. Kadanoff admits that if she had not worked with Sanchez previously, before his priesthood decision, she might not initially have been as accommodating of his special needs.

Carl Meyer, co-founder and CEO of iQ.com, says his initial worries that Sanchez’s highly visible religious practice might affect his performance have faded. “We call him Minister of Buzz,” he quips. “He can spin it the right way.” Adds Tony Hoeber, co-founder and chief technology officer: “It’s good what he’s doing. It reminds us that there’s a commitment to the sacred. It’d be more of a problem if there was a perception that someone’s not [professionally] committed.”

Sanchez appears as committed to the goal of professional success as he is to becoming a priest. And he has no plans to renounce his current career even once he does enter the priesthood “” with or without the Great IPO in the Sky.

— Susan Moran

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… though privacy issues still loom large

You don’t often hear about massive legal and legislative action against the online sweepstakes industry — and online sweepstakes companies are working hard to keep it that way. However, like many Internet-based businesses, online sweepstakes need to avoid the wrath of privacy advocates. To stay on their good side, practices such as selling personal information to third parties or sending unsolicited e-mail to customers are becoming taboo.

While a direct-mail sweepstakes is a promotion designed to sell products, an Internet-based sweepstakes is supposed to collect information, and that distinction helps protect online sweepstakes companies from the barrage of lawsuits filed by states alleging miscommunication and outright fraud that have plagued their snail-mail cousins.

“The bad press and regulatory activity has not affected online sweepstakes at all,” says Marcia Kadanoff, chief marketing officer at iQ.com, a Saratoga, Calif.-based company that provides the software running many online-sweepstakes games. “First of all, the average online sweepstakes is not promising $100 million. They typically run for an hour, day or week so they have more winners (of smaller prizes). They are usually run to collect (personal) data, so there is no confusion about buying products. People are quite willing to give up an e-mail address if the (sponsoring) company is reputable and the prize is something they want.”

Online sweepstakes so far are only a drop in the bucket when compared to the traditional sweepstakes industry, but observers expect rapid growth in the next few years as consumers grow ever-more comfortable with e-commerce.

“A lot of the Web-based companies are up-and-coming, so they are not at the status of the real-world ones,” says Scott Kurland, president of Windough.com, a Boca Raton, Fla.-based online sweepstakes company. “But more attention is being paid to the online ones (by customers and media). I would guess (the industry) should probably be able to outgrow anything in the traditional industry.”

Meanwhile, traditional sweepstakes companies have been the attorneys generals’ preferred targets for years; they have filed lawsuits accusing companies such as Port Washington, N.Y.-based Publishers Clearing House and Jersey City, N.J.-based American Family Enterprises of deceptive advertising. The lawsuits allege that mailings from the sweepstakes companies have given consumers the impression that buying a product, such as a magazine subscription, would increase their chances of winning multimillion dollar prizes. (American Family Enterprises, which runs the American Family Publishers sweepstakes promoted by Ed McMahon and Dick Clark, recently filed for bankruptcy protection to help settle dozens of state lawsuits.) The traditional sweepstakes’ online cousin, by contrast, has so far remained free of the bad-press and state-lawsuit stigma.

Indeed, Florida — one of the more aggressive states in prosecuting traditional sweepstakes companies — recently dropped an inquiry into online sweepstakes. A sweepstakes, by definition, must be free to enter, and the state initially was looking at whether the money people paid for their Internet Service Provider accounts qualified as a cost to enter. The Florida Department of State and Attorney General’s office decided to drop the matter, however — without a shot fired — since most people can now access the Internet for free through public libraries, according to Linda Goldstein, a partner with Hall Dickler Kent Friedman & Wood LLP, a New York-based law firm specializing in advertising and marketing law.

Partof what saves an online sweepstakes from such uncomfortable inquiries in the first place is that they typically are demographic information-gathering tools, not product sales-centered operations. Participants trade personal information for the chance to win cash and prizes. Little chance, then, that online sweepstakes will generate stories of elderly people waiting for the prize patrol amid a garage full of yellowing magazines.

“I advise clients to use the Web to develop a database for eventual one-on-one communication via e-mail,” says Andy Batkin, CEO of Interactive Marketing Inc., a Manhattan Beach, Calif.-based online promotion marketing company and co-chairman of the New York-based Promotion Marketing Association’s Interactive Promotions Council. “Initially, everyone was doing promotions as a way to sell things and drive traffic to a revenue site,” because they used the same business model as the traditional direct mail-based sweepstakes. However, with the Internet’s ability to foster two-way communication between marketers and consumers, they saw the ability to create databases for use in later, more-personalized sales efforts.

That is not to say the online sweepstakes companies have no worries; as with many Internet ventures, the key consumer issue is data privacy, and online sweepstakes are especially vulnerable on that count because their entire purpose is collecting data. As a result, online sweepstakes companies have to walk a fine line to reassure their customers the data will be kept private.

“We don’t sell the consumer data. We ask for permission every time they enter to win a promotion. We establish trust and loyalty with the customer,” says Steve Krein, CEO of Webstakes.com Inc., a New York-based company running online sweepstakes promotions for e-commerce retailers. “The negative stigma (of traditional sweepstakes) is actually helping to drive our business. Philosophically, the way we deal with data gives marketers a great deal of comfort.”

Online sweepstakes marketers have two options to conduct business and remain under the umbrella of privacy protections: Permission-based marketing lets the customers decide whether to receive information on a specific offer, usually in the form of a personalized e-mail, while the second option is an opt-in program asking permission to use personal data in various marketing campaigns. “Either is politically correct,” Kadanoff adds. “The consumers on the Internet realize they are not going to win a new Palm Pilot for nothing. They know personal data is valuable,” and they trade that information for entry into the sweepstakes.

For example, Windough.com runs a sweepstakes promotion in which registered members — those who already have provided their e-mail addresses — check in from time to time to play. When the members enter, a separate screen opens up with a banner ad at the bottom either announcing an instant win or a link to the Web site of one of the companies involved in the sweepstakes drawings. In addition, each week, Windough.com sends members an e-mail hosted by a character named “Joe.” The e-mails are part of a game, and they include advertising.

Windough.com has been around for two years and has 300,000 registered members so far. The company never sells the names or e-mail addresses of members, according to Kurland.

“Unless companies have an opt-in policy, we won’t even do the promotion (with them),” Batkin adds. “People get really annoyed if you bombard them with e-mail that they haven’t requested. It’s important to change these strangers into friends, then customers.”

— James Heckman

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