Announcing our investment in Tumblr

I’m super excited to announce Greylock’s investment in Tumblr.

We knew Tumblr was big when we started talking with David and John over the summer — over the last year or so, it’s practically exploded onto the scene — it seems like every piece of interesting content and expression you see today has been posted on someone’s Tumblr. The numbers back that up — last month the 30 million blogs on Tumblr generated 13 billion page views.

As we got to know the team there more, it became a more and more obvious decision for us to get involved. We love entrepreneurs who are product visionaries, who have a strong point of view and who want to build great products that affect hundreds of millions of users. David is clearly one of those — a founder with deep character and a desire to build a meaningful, enduring set of products and a company that users love.

What we didn’t know when we started, but learned as we went is that in addition to the ubiquity of Tumblr today, the engagement of users and posters and rebloggers is absolutely off the charts. Good content gets surfaced and spread incredibly rapidly — more quickly than any other network I’ve ever encountered. Lots of reasons for this incredible engagement — the team at Tumblr has done a wonderful job of figuring out some fundamental and novel avenues for self-expression. I’ve found so many interesting posts and perspectives on Tumblr that I never would have found without it — and it’s clear that that’s been the experience for millions of other users.

At Greylock, we’re always looking for the breakout companies — because we’ve each been involved in building and growing some of the companies with the broadest reach in history (Facebook, LinkedIn, Pandora, Mozilla, and more), we have a huge respect for founders and teams that have gotten to real scale like Tumblr has.

So Greylock and I are thrilled to be involved with Tumblr now, and we’re excited to help the company take the next steps forward into becoming an even more powerful platform for self-expression and discovery.

And you can find my own Tumblr at lilly.tumblr.com. :-)

John Lilly is a partner at Greylock Partners and former CEO of Mozilla.

Welcome Josh Elman

I’m very happy to announce here that Josh Elman (http://www.linkedin.com/profile/view?id=40349, @joshelman) is joining Greylock Partners as a Principal starting Monday. We’re super excited that he’s joining, because he both fits so well into the team and values that we have here, but also for the new qualities that he’s bringing to the team.

Josh is a product thinker first and foremost, even back to his time at Stanford in Symbolic Systems. He’s had an astonishing run of finding incredibly interesting social Internet products and working on them; his track record includes RealNetworks, Zazzle, LinkedIn, Facebook & Twitter — a run of amazing products and companies that I think is unmatched. Along the way, he’s been a developer, manager & product manager, and has run programs related to LinkedIn Jobs, Facebook Connect, Twitter Growth and more — and like a number of us at Greylock, Josh has already been integral in working on products used by hundreds of millions of people around the world.

So please welcome Josh to Greylock, where we’ll continue to build our culture of product oriented, operators who can help evolve the venture capital business and continue Greylock’s long history of finding and funding category leaders and great entrepreneurs. I’m really looking forward to working with Josh and learning from him in the coming years.

- John

John Lilly is a partner at Greylock Partners and former CEO of Mozilla.

 

Three Steps To Building The Right Audience Through Email

Many people (including me) have written about why it makes sense for business marketers to invest in producing high-quality, original content. But no author wants to pour his heart out, hit “send” and then hear nothing but crickets.

Once you’ve mastered the art of writing compelling email content, you need to get distribution. There are three steps to intelligently building your email following: promotion, deliverability and optimization.

Get some love from your audience

Step #1: Promotion

Distribution starts with making it easy for people to sign up to receive your emails. Sounds obvious, right? Yet most websites don’t promote their email newsletters in even obvious ways.

Check out your site and see if you’re promoting your email newsletter in the right spots. You might be surprised by what you find. A few basics you should have in place:

  • Put an email capture box on either the upper right or lower right corner of your home page and consistently throughout your site.
  • Provide sign-up opportunities on user profile or account management pages.
  • Offer this again at checkout and in transaction confirmation emails.

Social media is email’s friend, not foe. Promote your email newsletter content on your Twitter feed and Facebook page so that people who are following you can get a taste for the type of content you provide in emails. Build your email distribution through social channels by making sure your subject lines are conducive to sharing through Facebook and Twitter. Your subject lines should be short, creative and interesting (a few examples: “Ditch the denim and show some leg;” “What I learned about how the real estate industry really works;” “When bad companies do good things”). Pithy subject lines are fodder for tweets.

Encourage email subscribers to like you on Facebook and follow you on Twitter. Several major ISPs are starting to rank emails within in-boxes based on social media signals. At some point your email will likely be prioritized up in consumers’ in-boxes if they’ve opted to connect with you through Facebook and Twitter.

Martin Lieberman writes a great blog about email marketing for Constant Contact. His writings have informed my thinking about email promotion and other topics. More from Martin and team can be found here.

Step #2: Deliverability

You can grow your email list through on-site and social media promotion but a large list won’t matter if all those potential customers aren’t getting your emails. Unlike the U.S. judicial system, ISPs presume all emailers are guilty (of SPAM) and need to prove their innocence. And ISPs are becoming even more stringent in trying to protect users from the deluge of unwanted messages overwhelming in-boxes.

Deliverability starts with making sure you’re white-listed across the key ISPs, including Gmail, Yahoo, AOL and Hotmail. You can do this directly if you’re operating at scale, or you can use a third party email service provider such as Responsys, ExactTarget or Constant Contact. You should manage to a 98% deliverability rate or higher (this means 98% of the emails you send are being received by users).

The other component of deliverability is formatting and display. You should know what your emails look like across different ISPs, browsers and mobile.

Deliverability can also vary by individual message. One early stage startup we’re invested in recently sent out an entertaining Viagra-focused video to their email subscribers. The video was hilarious, but unfortunately none of the company’s customers got the joke. Using “Viagra” in the subject line got the note tripped up in ISP spam filters.

Size matters–but only partly. If you focus too much on list size versus list quality, you’ll not only damage your relationship with customers, you’ll also shoot yourself in the deliverability foot. You should be clear on the email sign-up page how often subscribers will receive a message from you and make opting out an easy one-click process instead of a Mensa test.

It’s also important to actively manage your list and remove people who aren’t responding. Over the course of a year, a meaningful volume of your email will go to dead email addresses, and you should process and scrub these bounces out right away. Some ISPs are starting to use engagement stats like open rates as a factor for determining how reputable different email senders are and therefore where in a recipient’s inbox a sender’s message should go.

If you called a woman fifteen times in a row to ask her on a date and she never called you back, you’d stop calling right? The same applies to email. If someone hasn’t opened any of your emails in the past three to four months, you may want to remove him from your list.

Des Cahill, the former CEO of an email marketing company and an email marketing adviser to companies, is quite thoughtful on the subject of deliverability and beyond. Check out his blog here.

Step #3: Optimization

You should set up a few core metrics to track and optimize, including open rates, click-through rates and churn. Through cohort analysis, you can follow the trending click-through and transaction rates of a group of users who signed up in a particular month through subsequent periods, and then also compare how that group’s level of activity and attrition stacks up relative to previous groups of users.

Pete Sheinbaum, the former CEO of Daily Candy, shared a useful email scoring metric with me. By focusing on ensuring at least a 10-to-1 ratio between positive actions they want users to perform (click-throughs) versus negative actions (unsubscribes), companies can be conscious of monitoring both the good and bad results of each email sent.  So if one customer unsubscribes to a test email, you should effectively deduct ten click-throughs from your internal scoring. If that causes you to fall below your goal, pull the campaign.

In addition to tracking core metrics, there are a few ways you can optimize your communications to make sure the right message gets to the right person in the right way. Core optimizations include:

Segmentation: To whom are you sending the email? Send an email to the wrong segment of your file, and it may not matter what you say: your metrics will stink. While some traditional marketers obsess about creative, the biggest needle mover on performance is good list segmentation. Email marketers are increasingly segmenting their customers into buckets based on behavior (i.e. what they’ve clicked on, viewed or purchased) and are targeting communications accordingly.

Product: Are you offering a deal? If you’re an e-commerce company, what product are you showing? Does it look good?

Creative:  The copy and design in the body of the message matter. But more importantly, do you have the right subject line?

Timing: Are you sending at the right time of day and day of week, and with the right frequency? A nuanced approach is to alter email frequency for different customer segments. Perhaps your more active and engaged customers hear from you more often. You could also give customers the option to “opt down” or “opt up” in terms of frequency rather than just opting out altogether.

Email is still one of the most effective ways for you to build relationships with your customers. If you take a smart approach to building your audience, it can pay off big-time.

*Disclaimer: Greylock Partners is an investor in Constant Contact.

*This article also appeared on Forbes.com.

-James

James Slavet is a partner on the consumer technology team at Greylock Partners. James’ investments include Auditude, Groupon, High Gear Media, One Kings Lane, Redfin, Revision3 and TellApart.

How to Write Emails Your Customers Will Actually Read

Consistency is key: Don't be Sarah Silverman on your website....

Most businesses are dazed and confused about email marketing. I’m not talking about old school offline businesses. I’m talking about new school online start-ups. They’re completely dialed into social media marketing through Facebook and Twitter, but are under-investing in or misfiring on their email programs.

Private sale and local deals companies have figured out how to make some customers actually look forward to their email messages. These companies have built breakout businesses on the back of email. You don’t have to be in the private sale or local deals space to build your business through email. There are lessons other companies can learn from the email mechanics these companies have adopted and refined.

It’s not easy to stand out among the noise and clutter of the in-box. It’s like standing on the side of the highway in your underwear holding up a small, handwritten sign, hoping the cars whizzing past will read your message.

A few general industry stats to make you feel worse before you feel better: Eighty percent of commercial emails don’t get opened. Ninety-five percent of commercial emails don’t get clicked on. Half of all mailing list churn comes from people unsubscribing to a specific email sender–the other half comes from people periodically swapping out their email addresses. So if you think you’re standing still in building your email audience, the bad news is you’re actually shrinking.

...and Margaret Thatcher in your emails (photo credit Getty Images)

In spite of the challenges, email is still one of the most effective ways to attract and build customer relationships. Most marketers will tell you that their email subscribers are more engaged and more likely to convert to transactions than their Facebook fans or Twitter followers. Billions of dollars of transactions and value flow through email.

Building your business through email starts with writing content that your customers want to read. There are three elements to crafting good email content: subject lines, voice and timeliness.

Headlines Matter

Newsmen know this better than anyone: Headlines matter.  People decide in a few seconds or less whether they’ll open your email. So if your message doesn’t instantly attract, you’ve missed your chance. Subject lines should be brief, so that the recipient’s email client does not cut them off. And subject lines should also be social media friendly. When your email is shared on Facebook or Twitter, it’s the subject line that will most likely double as the status update.

  • Subject lines should be attention getting and action oriented. They should lure the reader to want to see what’s inside (“Fried chicken that tops the Colonel’s”) in a way that is not misleading (that chicken had better be good!).
  • Putting a number in your subject line makes what you’re saying quantifiable and gives readers a sense for what benefit they can expect from taking the time to click through (“Only four seats left!”).
  • Inserting a few recognizable and appealing consumer brands also helps to drive click through rates (“70% off DC Comics and Skechers”).

There is art involved in getting the subject line right, but there is also science. Subject lines lend themselves well to A/B testing. You should experiment with alternative approaches and see what generates the highest rates of click-throughs and conversions.

Martin Lieberman writes a great blog about email marketing for Constant Contact. His writings have informed my thinking.  I recommend you check out more of his stuff here.

Have A Voice

I recently caught up with my friend Pete Sheinbaum, who led the godfather of email businesses, Daily Candy, as CEO until early 2009. Daily Candy was to functional and entertaining email copy what Albert Einstein was to the field of quantum physics. “We wanted to have a voice, a personality – be useful, quirky and interesting,” said Sheinbaum. “We always felt that while our readers might not act on every one of our e-mails, at least we made you smile.”

Not every e-mail pitch has to be hilariously funny, but something about it has to give people a reason to welcome your e-mail into their crowded, noisy in-boxes. Otherwise, people will unsubscribe, label your e-mails as spam, or just let the message die, unopened, in their in-box backwash.

Totally commercial content becomes transparent to the consumer, and readers will quickly tire of content that is generic. Martin Lieberman from Constant Contact said it well when he said that you want to “make your customers want to date you.”

Don’t underestimate the value of hiring a great writer. It’s essential to bundle your useful information in a package of personality. It pays to keep it light–yet smart, funny content isn’t easy to create. In its early days, Groupon hired stand-up comedians as copywriters.

The same company should not sound like Sarah Silverman on its website and Margaret Thatcher in its emails. You first need to understand what your brand identity is and then stay true to that identity across all your channels of customer communication, including email, website, Facebook and Twitter.

Don’t Be Needy; Be Timely

It’s also important to be thoughtful about how often you communicate and about what. Don’t be too overbearing or too distant. If you communicate too often you risk wearing out your welcome. Too infrequently and you risk your customers forgetting about you.

While the daily deal and private sale companies are an exception to this rule, most email marketers send messages weekly, with occasional additional emails tied to special occasions. Given that you’re pushing information to people, it’s smart to send them information they might not otherwise have known about, something that has changed, or something that they might want to know about first–similar to the way smart mobile apps send push notifications. For example One Kings Lane alerts customers that a sale is on, Expedia notifies customers about fare changes to popular destinations and Mint sends personalized updates to customers on the value of their financial portfolios.

The key question to ask yourself before hitting “send” on that customer email: Is what I have to say useful and new?

Getting the content right is a necessary but not sufficient step to making email marketing work. I’m going to follow up with additional thoughts on the mechanics of growing your email list and driving email customer engagement.

*Disclaimer: Greylock Partners is an investor in a number of companies mentioned in this post: Constant Contact, Groupon, Facebook and One Kings Lane.

*This post also appeared on Forbes.com.

-James

James Slavet is a partner on the consumer technology team at Greylock Partners. James’ investments include Auditude, Groupon, High Gear Media, One Kings Lane, Redfin, Revision3 and TellApart.

Stanford GSB Talk on Mozilla and Scaling

Last week I got to attend a class at Stanford Business School taught by one of my favorites, Huggy Rao. The course is on “scaling” — an over-used word, but one that Huggy’s been really digging into lately — resulting in some great insights. This particular class covered a case study authored by Huggy with Bob Sutton on the rise of Mozilla and Firefox, so it was fun to participate in.

Huggy asked me to do a quick 10 minute introduction to the class. I chose to talk about the differences between then and now — how much has changed in the 5.5 years since Firefox’s initial 1.0, and what the new challenges of scaling are. So, naturally, my first comment to the students was that most of the case was irrelevant to today’s world. That Mozilla was amazing and unique and special — for lots of reasons that include (1) breaking the MS/IE monopoly distribution and usage of the browser, (2) doing it in a way that enabled lots of innovation and competition that we’re seeing now, and (3) finding our own way through the journey — not behaving like anyone else in the market ever really has. So that’s cool. In that battle, though, access to users was probably the biggest challenge — it looked impossible when Mozilla started, and it’s remarkable — incredible, really – that we ultimately have gotten the reach we have.

But fast forward to today’s world, where we have more than 600M users on Facebook, more than 400M users of Firefox, and networks like LinkedIn and Twitter with global reach of a hundred million or more. Combine that with the rise of the Apple App Store and mobile devices — with something approaching 200M user accounts that all have credit cards associated with them. (And if there’s any doubt, these numbers are truly huge. I put in some cultural references in my talk — about 100M people will watch the SuperBowl. And only about 20M watch the nightly news in America; 30M listen to NPR. We think of these institutions as huge, but they’re nowhere near Internet scale at this point. The new networks have left them behind, quite handily.)

So now a huge part of the world is accessible, a huge part of the world is ready and able to download an app or click on a shared link. Which means that access is no longer the chief initial obstacle to scaling. That means you can see companies like Zynga or Groupon rise from nothing to massive practically overnight. Clearly, the initial challenge is about rising above the noise of an increasingly crowded field of ways for people to spend their time and money, but it’s very, very possible to get to tens or hundreds of millions of users quickly. Which means that now you’ve got companies that are dealing with huge, complex, global user bases at an extremely early point in their history. My view is that scaling successfully — which means sustaining that scale over time — will be dependent on figuring out how to make the teams and processes in rocket ship organizations operate effectively.

I know not all the analogies in the slides are apples-to-apples, but what’s clear is that we’re living in an era of hyper-distribution, where things can change very, very quickly. I’m really glad that smart people like Huggy and Bob are thinking about how to help us all learn how to manage these in the future.

Fun conversation, thanks to Huggy for the invitation! My few slides are below — they’re very incomplete and mostly served to provoke some interesting discussion. (PS — the deck is sort of a tweener deck graphically between my Mozilla-style slides and what I’ll use here at Greylock — haven’t been here long enough to monkey with the Greylock slides yet. :-) )

-John

John Lilly is a venture partner at Greylock Partners and former CEO of Mozilla.

 

 


Why We Invested in Groupon: The Power of Data

Groupon's Andrew Mason, CEO, and Rob Solomon, President

Groupon has been written about a lot in the media. Most of the coverage has been extremely positive, like a Forbes cover which called Groupon “The Fastest Growing Company Ever.” Other articles question whether Groupon is a defensible business built for the long-haul.

Late last year we boarded a Chicago-bound plane, along with a couple of our colleagues, for an initial meeting with the company to form our own opinion.

We went in positively inclined towards the Groupon management team. James had worked directly with Rob Solomon, Groupon’s president, years ago at Yahoo. Reid had gotten to know Andrew Mason, the company’s founder and CEO, after they struck up a conversation a while back at an industry conference. Groupon is targeting a market that is huge and broken. Local advertising is a $100 billion annual business in the U.S. and consumers spend something like 80% of their disposable income within a couple miles of their homes. Many local businesses still try to attract new customers through that heavy yellow book that gets dropped on your front doorstep until it rots or gets tossed in the recycling bin. We were interested in the team and the market and we’d also read the publicly available estimates about Groupon’s almost inconceivable growth in new markets, subscribers, business customers and revenue.

All those things were enough to get us on the plane, but it takes a lot of conviction in the future of a business to pull out your checkbook when the pre-money valuation has this many zeroes.

We knew that Groupon had a sense of humor. We emerged from our time with Groupon and our subsequent sessions together convinced that this is also a very serious business. Our discussion was data rich, unusually so. The team had a clear point of view on the consumer and merchant experience, as well as the key drivers of the business. They pre-empted and then dug deeper into our questions about Groupon’s operations and strategy by walking us through the data they look at on a regular basis. They talked us though the obvious data such as customer acquisition costs and lifetime value and the economics of entering a new region. But they also dove into some unique metrics we’d never seen startups track before.

We started really leaning forward in our chairs when the discussion turned to strategy, including the ways to use data to power Groupon’s future consumer- and merchant-facing products. Groupon is the clear market leader in the local deals market. Their scale advantage on both the consumer and merchant side enables them to offer the greatest number of high quality deals. It’s the company’s commitment to investing in personalization and relevancy that will drive deeper relationships with both consumers and merchants. Similar to markets owned by Google such as search and search advertising, this will likely become a “winner take most” market, and smart investments in driving scale plus relevancy will help propel the winner.

Groupon’s technology is there, just not where people usually look for it (on the website, which is visible to consumers). Instead, that technology lies deep in Groupon’s databases. We think the technologies visible to consumers will be increasingly commoditized, while the data used to understand consumers better will become increasingly proprietary and valuable. Groupon hired a Chief Data Officer from Netflix to help drive this effort.

Offers to consumers can be intelligently served up based on a person’s demographics, buying history and location. The merchant side of the equation is just as interesting. Local businesses need to be able to do more than just run a sale once or twice a year. The theater on Main Street or the children’s museum across town should have the ability to revenue optimize, like United Airlines or Hilton, by appropriately pricing and marketing unsold capacity. When the theatre is showing “The Tourist” to a half-empty house, it should be able to sell discounted tickets for $5 a pop.

Groupon will not be the first or the last organization to compete and win on the power of data. It’s happening everywhere around us. Turn on your TV on Sunday afternoon to watch football. Behind the scenes the coaches are relying on data scientists and proprietary algorithms to decide which players to draft or trade for, and whether to kick a field goal or go for it on fourth down. At least that’s how the New England Patriots work, and they’ve done pretty well. Closer to home, we see deep data initiatives at Greylock companies. Facebook, Pandora and Redfin use data to connect you with friends you’d forgotten about, recommend songs they know you’ll love or help you figure out when a home is over-priced.

We believe Groupon is the break-out leader in the massive local commerce space and its investment in data will be a critical ingredient in its long term march to build a meaningful and foundational company. We love to spend our days with entrepreneurs who have the ambition and skills to build break-out businesses that will endure. Sometimes that means we make a $100,000 seed-stage investment out of our Discovery Fund, and sometimes it means participating in a financing round that’s, like, a billion dollars.

-Reid and James

Reid Hoffman is Co-Founder and Chairman at LinkedIn and a partner at Greylock Partners. He is a member of the founding team at PayPal and has been an angel investor and adviser to dozens of organizations including Facebook, Zynga, Flickr and Last.FM.  He currently serves on the boards of LinkedIn, Zynga, Shopkick, Kiva.org and Mozilla. His complete profile can be found at www.linkedin.com/in/reidhoffman.

James Slavet is a partner at Greylock. His primary areas of investment focus are e-commerce, online advertising, and Web-enabled business services. James serves on the boards of Auditude, High Gear Media, Redfin and Revision 3 and TellApart. Before joining Greylock, James was a VP/GM in the Search & Marketplace business unit at Yahoo! and was the co-founder and COO of Guru, a services marketplace acquired by Unicru. His complete profile can be found at http://www.linkedin.com/in/jamesslavet.

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