Internet Influencers: The Disruptors Get Disrupted

In Hayflower’s annual “Internet Influencers” perception study, we spoke to the top internet investors in the U.S. to rank, both quantitatively and qualitatively, the most influential internet analysts. As a byproduct of our in-depth conversations, we often discover emerging trends in the industry. This year, we found fewer all-around industry analyst experts and more expert analysts within these emerging sub-sectors:

  1. OTT, Media & Digital Entertainment—i.e., Netflix, Roku and Spotify
  2. eCommerce—i.e., Amazon, eBay, Stitch Fix and Wayfair
  3. Internet & Digital Media—i.e., Alphabet, Facebook, Snap and Twitter
  4. Marketplaces—i.e., CarGurus, Grubhub and Yelp

Online travel, martech, B2B and B2C subscriptions, digital gaming, and enterprise SaaS have further segmented the above sub-sectors while 13 analysts from the lending, restaurants, softlines and real estate sectors began publishing research on companies with internet-based models in the past two years. It’s still early for these analysts to have established influence over internet investors. When we asked investors if they read research published by analysts in other sectors, most said they were more likely to consult with their fellow buy side peers with regards to traditional sector expertise.

Today, the most influential analysts are those that have a deep understanding of internet-led business models and have focused on differentiating themselves within the industry’s emerging sub-sectors. Over time, as internet models become increasingly pervasive, the combination of sector expertise and internet-based business models may likely produce true sector experts, potentially disrupting the generalist internet analyst.

For more information and the complete results of this study, please contact us at Info@HayflowerLLC.com.

Using Key Metrics to Combat Data Demons

Barron’s cover story, “The Boom in Big Data” on December 3rd highlighted the rise of alternative data sources as investment tools. Alternative data sources might include website traffic, location data, social media sentiment or credit card data, among other 3rd party data and information. These “tools” are becoming more popular among investors to spot trends and optimal buying (or selling) opportunities. Buyers across multiple industries have been making decisions based on 3rd party datasources for years. Advertisers and marketers consult 3rd party data providers such as Nielsen or ComScore while financial services companies make lending decisions based on data from 3rd party credit bureaus, such as Experian or TransUnion. It’s not surprising than that investors would consult 3rd party or alternative data providers before making buying decisions too. In an increasingly digital world, the sheer volume of data is growing along with the number of companies working to productize and make a business out of selling alternative data. All of the alternative data providers mentioned in Barron’s cover story were founded within the last 10 years and many have recently closed additional funding. They are gaining traction among their customers as well. Investors’ spending on alternative data has increased 76% in the last year with an average spend of nearly one million dollars per year, according to a 2018 Greenwich Associates survey. Businesses, such as retailers are also leveraging alternative data before investing in future store locations. It’s likely that other key stakeholders, such as strategic partners, customers, or even prospective employees will soon consult 3rd party or alternative data sources before making important decisions too. As alternative data sources become commonplace, communications teams need to have a strategy to address their findings.

First, be proactive:

  • Identify alternative data sources that can be used or are currently used to gather information about your company, customers and competitors.
  • Understand how alternative data compares, correlates or differs from your own data.
  • Establish what information key constituents need but aren’t getting from you.

Second, identify key metrics:

  • Determine if you can adopt 3rd party or alternative data and integrate it within your communications. If your industry has settled on a standard measurement, such as Nielsen or ComScore, it’s imperative to work closely with the data provider to correct any errors, proactively communicate findings together, and speak the same industry language.
  • Be creative. Every company is unique, and key metrics used to measure a business should be too. While an industry may have standardized on a set of key metrics such as daily or monthly active users (DAUs or MAUS, respectively), consider them as guide posts and don’t rule out key metrics that are based on subsets or subsegments of standard key metrics.
  • Note that key metrics are different than financial metrics. What’s reflected on the income, balance sheet or cash flow statements doesn’t always tell the full story of how a business is progressing towards its goals.

Third, develop a communications plan:

  • Integrate key metrics and other data into your communications as part of your communications style. This may include presentations, press releases, earnings scripts and other corporate communications.
  • Determine optimal timing. Some metrics may be disclosed annually or quarterly, while others referenced from time to time. Ideally, the timing should be proactive and based on a predetermined schedule, rather than reacting to news or the data provider’s schedule.
  • Anticipate questions that will arise from alternative or 3rd party data sources.

Key metrics demonstrate an intimate knowledge of a business. They serve as a helpful guide for investors, analysts and strategic partners to understand how a company is progressing towards its goals and that the company’s strategy is working. More broadly, identifying new and unique key metrics and data can help a company create a thought leadership position within an its industry.

It’s critical to have a communications strategy that includes key metrics and addresses 3rd party data and alternative information, because if you don’t use data and key metrics to tell your story, others will.

Hayflower’s U.S. Digital Ad Forecast: 2016-2021

I’m excited to publish Hayflower’s 5-year U.S. digital advertising forecast. The U.S. report accompanies Hayflower’s 5-year global digital advertising forecast published earlier this year. As a former Gartner analyst focused on interactive advertising technologies and a sell-side research analyst, forecasting digital ad spend was a favorite part of my job—and still is. I love analyzing data and hope these reports serve as a valuable reference for everyone reading them, particularly those readers that are part of the digital advertising market.

A few words regarding methodology and approach. The U.S. digital advertising forecast sizes the market based on estimates contained within publicly available market research provided by IDC, MAGNA and Zenith. In addition, the report includes forward estimates from consensus bureaus such as FactSet and financial analysts covering Alphabet, Amazon, Facebook, Snap and Twitter. Both Hayflower’s U.S. and global forecasts employ the same methodology. I believe this approach helps provide a balanced view from three different perspectives: market research firms such as IDC, internal ad agency resources such as IPG’s MAGNA, and financial research. Should readers want to reference data or information, the source box at the bottom of page three includes the exact language for attribution.

I’ve created these reports by way of demonstrating Hayflower’s capabilities. Understanding the market forces driving your business opportunity is critical both in terms of making strategic decisions and in communicating the value of your business to customers, employees, investors and partners. A leadership position cannot be built or communicated without context. Hayflower helps clients measure, understand and integrate data into their unique stories to build stronger narratives and build thought-leadership. Measuring the market opportunity is one of many data-driven capabilities that distinguishes Hayflower from a communications firm to a strategic business partner. The Hayflower name and logo is a symbol of our belief that data enlightens every business story.

 

 

20/20 Vision

How does a company create a vision that is inspiring yet realistic? A good place to start begins with measuring the market opportunity.

Too often companies wait until the IPO process to measure their market opportunity thinking the TAM (Total Addressable Market) is a metric only interesting to investors. Until that time sales strategy, knowing their customers, and measuring sales activity were synonymous with measuring the market opportunity. Yet, broader market dynamics that shape the size of the market impact customers and ultimately drive sales. The market opportunity encompasses all of the underlying market forces impacting a business, its customers and their shared market dynamics.

In addition to revealing the overall size of the market opportunity, the exercise exposes which segments are growing fastest, slowing in growth or stagnating. Understanding the dynamics impacting each segment helps management teams prioritize product development, allocate resources and refine their strategies for long-term success. Both investors as well as management teams benefit from sizing the TAM to identify growth opportunities or gating factors.

The most common approaches to sizing a market are top-down, bottom-up and value theory.

  • The top-down approach is based on industry research and reports. For example, “IDC estimates there were 21.03 million software developers in the world at the outset of 2017.” The top-down approach is most often used when speaking to potential investors, as it generally presents a larger market opportunity in support of a premium valuation. Approaching market size from the top-down relies on industry analysts observing the industry from the outside. Those analysts may obtain information from companies that self-report their share of market, pricing or other metrics that could be inflated or unreliable, particularly from privately-held companies. Sizing markets that have mixed pricing models are also difficult to accurately capture via the top-down approach.
  • The bottom-up approach is based on unit price and volume of units purchased by segments of buyers. For example, “According to IDC’s Gaming Tracker, worldwide server shipments increased 10.8% year over year to 2.84 million units in 4Q17.” The bottom-up approach generally imagines a growing customer base whose adoption rates can be difficult to estimate, but unlike the top-down approach it includes tangible, relatable data on current pricing and product use. Market sizing using the bottom-up approach is more likely to be conservative given today’s pricing and volume levels but is often preferred by companies to determine realistic approach to developing their vision.
  • The least common approach to sizing the market opportunity is value theory. Value theory is based on the increased amount of value a business is able to add to an existing market. For example, “Goldman Sachs estimates that the ride-hailing industry will be 4X the size of the taxi market and reach $485B by 2030.” Value theory is more theoretical and scientific than other approaches, as it reflects in-depth market knowledge of buyers and sellers and requires solid market, industry, pricing and population data that can be difficult to find, particularly in international markets.

Once the market opportunity is understood, management teams can create a vision that not only inspires support from investors but creates a basis for building a solid strategy. The TAM should become part of a corporate narrative that outlines a strong position in a developing marketplace that makes sense to prospective clients, partners and employees. Everyone wants to be part of a company that understands the market, has a clear vision for its future and the opportunity to be part of something bigger.

Hayflower has been actively involved in helping companies size their market opportunities in digital media, software and emerging technology. For more information, contact us at info@hayflowerllc.com.

Customization vs. Exploitation

GDPR takes effect today. Although it’s Europe’s new privacy law, its impact is reverberating worldwide. I’ve already received dozens of updated privacy policies and read countless news articles in the context of change within the Internet sector and beyond, including finance, health and travel.

GDPR is based on two primary principals:

  1. Companies need consent to collect an individual’s data
  2. Individuals should be required to share only the data necessary to make those services requesting access to data to work

The Cambridge Analytica scandal brought to light how our data can be collected and exploited for the worse. Yet for many of these applications to work, they need access to data we may feel uncomfortable providing, such as our contacts. Facebook Messenger is a good example. In order to connect and to put us in touch with our contacts, the application needs access. I’m grateful to have been connected and keep in touch with friends I’ve lost touch with via Facebook and I enjoy using free platforms such as Google, OpenTable and Yelp. Yet today, I feel a sense of responsibility to read through the legalese and think through the various applications of their business models before catching up on friends, getting directions or even finding a new restaurant.

Will others feel similarly obligated? I suspect the majority will not, but they should. Early in my career, I sold internet advertising. Perhaps I’m more positive in believing that advertising relevant to me can actually be useful but I also understand the need to share some data in exchange for the opportunity to use free services and get the most out of them. I know I am the product and nothing is entirely free. Rather than close our accounts, GDPR offers us the opportunity to better understand this exchange, the value of privacy and perhaps even get more out of the time we spend on these platforms. Today, we have the opportunity to turn exploitation into customization. If we aren’t careful stewards of our data, the consequences can be severe—impacting our elections, leaders, laws and ultimately our freedom. I’m making a pact today to myself and my readers to protect my privacy, to call out abusers and to share what I learn–good and bad–with my social media friends and followers. I hope you will too.

What is Data-driven Communications?

Hayflower was created to help companies of all stages—public and private, early and mature—benefit from the successful communications strategies leveraged by strategic corporate communications and investor relations (IR). For more than seven years spent as an IR advisor, I worked closely with dozens of management teams to develop their strategic business and financial communications strategies and execute on our communications plans. During this time, I worked on 20 Internet IPOs, seven mergers or acquisitions, three shareholder activist campaigns and over 120 quarterly earnings calls. Our ultimate communications goal was to build credibility, enhance reputation, and increase market value. We did this by strengthening our narrative with proof points, such as key metrics, customer insights, product data, research and information—this is data-driven communications.

Including data and facts to legitimize and strengthen a story is not new—but what amazed me throughout my time spent in financial communications and another eight years as an analyst, was how few companies provided insightful data within their corporate narrative. Most companies’ data-driven communications consisted of a few case studies and ROI metrics created for sales. Gaining support from the broader market, as well as signing larger clients and multi-year deals, required proof that they had the leading product, vision and were without a doubt THE best company in the market. I worked with many companies whose growth and profitability were sub-par relative to their peers, but their company drove a premium valuation. Why? We were able to articulate their vision and prove they were the leader or had the winning strategy because we had data to back it up. Companies with the most insightful data and justifiable market position performed the best—their success was not always the result of their financials.

Every company can apply these communications strategies to increase their value to customers, prospective customers and partners as well as investors. However, most companies lack a dedicated person to identify key metrics, market research, product or customer insights with an understanding of how to integrate that data throughout marketing and communications. Hayflower specializes in identifying and integrating data throughout the corporate narrative, including public relations, sales and marketing communications.

Tactically, data-driven communications drives efficiencies in marketing, with the flexibility to integrate and distribute singular findings, insights and data points throughout all communication formats and media channels. It is naturally optimized for search, sharing and distribution. Data-driven communications is part of a virtuous cycle where data drives value, value drives demand, and demand builds a platform from which our clients can create their thought leadership position.

Strategically, data-driven communications represents an educational approach to increasing revenue, building reputation and market leadership. Our clients are resources not marketing machines for their customers, partners and the broader marketplace.

At Hayflower, we understand the power that numbers and data have in building and legitimizing the corporate narrative, and we help our clients create their thought-leadership platform. Our passion is blending art with science to create powerful messaging and valuable information that resonates. In fact, the Hayflower name and logo is a symbol of our belief that data has the power to enlighten every business story.

The Hayflower Name

Almost everyday I’m reminded of where I came from and what inspires me by a poem framed in my office. It’s called “In back of the real” written and signed by Allen Ginsberg. In college, I worked at the San Jose Center for Poetry and Literature and had the privilege to meet Allen and several famous poets. As a student, I envisioned a day when my writing might also transform how people see the world and inspire change. Living in San Francisco during the 90’s, my job in publishing quickly led to the Internet. The burst of the DotCom Bubble (see graphic below) prompted a move to New York City and a career as an analyst covering digital marketing technologies and companies such as Google that were rapidly disrupting traditional media.

Most of my time was spent helping businesses and then investors understand the competitive threat, future market opportunity and business models of emerging technology companies and how they might reshape our future. I quickly understood that research and data are critical to understanding new businesses and building influential narratives. Communications backed by research and data created new opportunities, opened minds and transformed traditional perceptions.

Having recently relocated back to San Jose, I hung the framed poem in my new office and read it with a fresh pair of eyes. The poem refers to the hay flower as the “flower of industry” which many interpret as an allegory for the working person. It’s also called a “tough spiky ugly flower” but a “flower nonetheless.” (No wonder the name and URL were available!) Reading further, the poem ends on a positive note for the hay flower, which I interpret as the power of perception “…with the form of the great yellow Rose in your brain! This is the flower of the World.” I believe it’s our perception, the great yellow rose in our brain, that represents the beauty we choose to see in the world. Even as the flower of industry lays on the “asphalt highway,” a flower nonetheless, there is promise. While industry can be tough, spiky and even ugly, we have the ability to change our perception and our place in the world.

There is no better way to change perceptions than finding and communicating the truths we discover through research and data. There is promise in changing how we build and perceive the future of industry and our place in it. Research and data help translate the vision of emerging technology into reality and empower us to shape a better future, drive fundamental change and inspire action. This is where the poem ends and where Hayflower begins.

 

In respect of U.S. copyright & artists’ rights in general, In back of the real can be read here:

https://www.poemhunter.com/best-poems/allen-ginsberg/in-back-of-the-real/