Port Fortune

Cause marketing is currently fashionable. But what really matters in purchase decisions?

While consumers say they are interested in social issues, this research shows that in actual purchase decisions they care most about a company's reputation for truthfulness, honesty and fairness.

Not surprisingly, older consumers value a product's utilitarian traits, such as value, function and durability. Younger consumers prize social/image-conscious traits more than older consumers, but still prefer utilitarian product traits to social traits.

Black Hat SEO

2010-04-06T10:55:00.001-07:00

Here's a good summary of "Black Hat" SEO techniques -- for those so inclined.

BI Scorecard

2010-04-02T16:16:00.000-07:00

This site provides an excellent independent evaluation of leading BI software.

Still More Analytics on a Budget

2010-04-02T11:18:00.000-07:00

Qlikview offers an approach to BI and reporting that avoids conventional data integration.

More Analytics on a Budget

2010-04-01T15:48:00.000-07:00

For the analytics back-end, Talend provides an open-source data integration tool to complement its subscription-based offering.

For Web Analytics, it's hard to beat the price of Google Analytics. It's free.

Analytics on a Budget

2010-03-25T07:15:00.000-07:00

There are many options for firms seeking to implement business analytics on a budget. Here is a brief summary of open-source and low cost software for business analytics. I'll evaluate and review some of these in future postings.

This site lists more than a hundred different free/low-cost packages for stats and quants. Here's another link. The most widely used open-source stat software is the R Project.

In the broader BI world, Jaspersoft provides a true open-source platform that supports BI, DI, reporting, analysis and dashboards. For up to one hundred users, MicroStrategy Reporting Suite is free. This product offers an interface to Microsoft SQL Server Analysis Services.

There are also a number of BI platforms available at relatively low cost. TIBCO Spotfire provides a wide range of functionality, and is offered as a hosted application at relatively low cost. Tableau Software offers an excellent server-based option; Tableau and Spotfire are both listed as Challengers in Gartner's BI Magic Quadrant. Dimensional Insight offers a third option, and is also available as an on-demand solution.

Postmodern Segmentation

2010-03-24T10:50:00.000-07:00

In the classic texts, such as those below, Market Segmentation is viewed as a discrete event. Once defined, the segmentation scheme drives Marketing tactics until it is replaced by an entirely new segmentation scheme.

Market Segmentation: How to do it, how to profit from it
Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms (Haworth Series in Segmented, Targeted, and Customized Market)

A "strategic" segmentation done in textbook style can easily take two years to complete, cost multiple millions of dollars, and brings with it a high risk of failure: if the strategy consultants are unable to gain consensus among executive stakeholders, or if the business landscape changes significantly while the segmentation scheme is under development.

At a conceptual level, the standard approach to segmentation assumes:
(1) "Natural" market segments exist(which we simply need to discover);
(2) Segments are stable and do not change quickly;
(3) We can acquire all relevant information about market participants, without real transactions.

But let's challenge these assumptions for a minute. What if:
(1) Market segments are situational;
(2) Consumer behavor is highly dynamic;
(3) Absent actual transactions and exchange of value, we do not know the consumer's real preferences.

If these alternative assumptions are true, there are several implications:

(1) Marketing managers should see segmentation is a business process, not an event;
(2) The key driver in and useful segmentation will be differential consumer response to actual messages and value propositions;
(3) Seeding a test-and-measure regime with a quick and rough segmentation based on management judgment is preferable to investing years and millions in a grand strategic study.

I'll develop these ideas in future posts.

Some Good Reads

2010-03-23T06:07:00.000-07:00

Buyology: Truth and Lies About Why We Buy

Fascinate: Your 7 Triggers to Persuasion and Captivation

Shopper Marketing: How to Influence Consumer Decision Making at the Point of Purchase

Latest Forrester Report on Data Mining

2010-03-23T05:42:00.000-07:00

The Q1 2010 release of Forrester's periodic assessment of data mining software is now available (the full report can be purchased here, and a free version is available here.)

Couple of quick comments on Forrester's assessment:

(1) Forrester believes that in-database analytics (IDA) is the wave of the future. This is a debatable point (which I will address in a separate post). Even so, it's hard to argue that SAS leads the pack in IDA. IDA at SAS largely consists of some visible partnership initiatives, press releases and R&D; SAS continues to promote its own proprietary data platform, which is used by the overwhelming majority of SAS customers. Products such as Oracle Data Mining, on the other hand, are designed and built around IDA.

(2) The functional parity of current offerings from Oracle and SPSS suggest that SAS will be increasingly challenged to defend its current market dominance.

(3) Forrester's assessment of vendor strategy is puzzling. Most customers would disagree that SAS deserves an edge over SPSS and Oracle on licensing and cost. SAS' renewal pricing is an outlier in the software industry, and a constant bone of contention with key customers.

SAS leads this market because of its legacy, breadth of product line, a large and engaged community of users and because switching costs are high. Press releases and analyst relations aside, SAS' approach to technology is conservative, which is something that SAS loyalists consider a feature and not a bug. Buyers seeking cutting-edge technology and value in this category will generally do better with the Leaders that aren't SAS.

Influence on Twitter

2010-03-21T08:43:00.000-07:00

Interesting blog post summarizing recent research measuring user influence in Twitter. Click through to the research paper for some interesting insights. Quoting from the abstract:

First, popular users who have high indegree are not necessarily inﬂuential in terms of spawning retweets or mentions. Second, most inﬂuential users can hold signiﬁcant inﬂuence over
a variety of topics. Third, inﬂuence is not gained spontaneously or accidentally, but through concerted effort such as limiting tweets to a single topic.

Chordiant Cash Crisis

2005-08-09T17:30:00.000-07:00

On August 9, CRM vendor Chordiant released earnings for the quarter ended June 30, 2005.

On the positive side, Chordiant announced a business process automation deal with Wachovia. Financial terms were not disclosed, but the customer made an advance payment of at least $5 million. Earlier in the quarter, the Boston Globe selected Chordiant Marketing Director, closing a sales cycle that began in 2002.

License revenue for the quarter increased from 5.4 million to 9.2 million. Management attributes the increase to timing factors in revenue recognition. Chordiant software takes considerable time to implement, and under GAAP accounting the vendor recognizes license revenue each period according to the degree of completion.

Unfortunately, the increase in revenue was more than offset by increased overhead, deepening Chordiant's net loss per share. Spending in all overhead categories increased, reflecting increased selling costs, higher costs to cover outsourced tech support, consulting fees to comply with Sarbanes-Oxley and accounting fees to cover restatement of 2004 results.

Chordiant's line of credit from Comerica, scheduled to expire on July 27, was extended through September 30 with additional conditions. The most stringent of these conditions requires that the entire amount borrowed remain on deposit with Comerica. On June 30, Chordiant was in violation of certain terms of the loan covenant and required a waiver from the bank.

Chordiant's situation is dire:

Continued restructuring costs and compliance costs elevate overhead spending for the rest of the fiscal year;
Progress accounting and long implementation cycles mean that a few sales now will not resolve losses in the short term;
Restructuring and headcount reduction mean increased costs for functions such as outsourced technical support;
Lack of credible partnerships and labor intensive implementations mean limited ability to scale even if sales reps can close some deals in the next quarter;
Bank financing hangs by a thread.

Management must be hoping that by landing some quick deals and building a backlog, the company will attract an acquirer. Prospective customers should take note.

Q2 MSP Topline Roundup

2005-08-08T16:21:00.000-07:00

Port Fortune presents a roundup of second quarter revenue reports f0r Marketing Service Providers (MSPs).

Most MSPs report strong revenue trends. This is a bullish indicator for Marketing Automation software spending, as it reflects pull-through demand in the channel and strengthened arguments for in-house investment.

-- Acxiom: $310 million, up 7% from prior year (U.S. business up 13%).

-- ADS/Epsilon: $146 million. Prior year comparison unavailable due to mid-year acquisition of Acxiom. Management has increased EPS guidance due in part to better-than-expected performance in Marketing Services. Revenue figure includes Epsilon plus ADS' previously owned businesses.

-- ChoicePoint: $23 million, flat vs '04.

-- Digitas: $88 million, up 44%. (Partially reflects acquisiton of Modem Media).

-- Experian (subs. GUS plc): Revenue not reported, but GUS reports "strong organic sales growth from email marketing, database management and the automotive business" for Experian North America.

-- Fair, Isaac: Does not report Marketing Services revenue. Aggregate revenue of $115 million for all process outsourcing ("Strategy Machine Solutions", or SMS). According to 2004 10-K, Marketing Services revenue was 12% of annual SMS revenue. If percentage does not fluctuate through the year, implies about $6 million in Marketing Services revenue for the quarter. 10-Q shows $6 million decline in Marketing Services for CQ2 vs '04.

-- Harte-Hanks: $284 million, up 12%.

-- Valassis/PreVision: $17 million, up 3%

Exit e.Piphany

2005-08-07T18:05:00.000-07:00

On August 3, e.Piphany announced weak Q2 earnings and an agreement to be acquired by enterprise software vendor SSA Global.

e.Piphany reported just $3.9 million in software license revenue for Q2 (versus $7.6 million in Q2 2004). The vendor's license revenue has declined steadily since peaking in 2001. Since recovering slightly in 2003, license sales have steadily declined, with the rate of decline accelerating in 2005. Competing vendors have largely written off e.Piphany as a threat.

Management blames weak sales on weak CRM spending. But focused vendors such as Aprimo, Business Objects, Cognos, Informatica, Microstrategy, SAS, SPSS and Unica all report positive sales trends. Corporate customers are investing in software, they are just not buying e.Piphany.

e.Piphany was the darling of the CRM community when it went public in 1999. The vendor's web architecture was perfectly tuned to the late 1990s meme, and the vision of a single-vendor CRM solution was compelling to many analysts. The product demoed well, and prospective users found it attractive.

The stock peaked above $200 in early 2000, but declined to $4 by 2002. There it lingered with a huge IPO-funded war chest, trading just slightly above net cash per share. The company has never earned a profit. With sales in a tailspin, company management had little recourse but to sell.

SSA Global describes itself as a "leading global vendor of extended enterprise solutions and services". The firm is a bottom feeder that specializes in acquiring the assets of failed software vendors -- Baan, most notably -- taking costs out of the business and cross-selling into the stranded customer base. e.Piphany's Sales and Service applications will give SSAG's sales reps product where they have none today, but the Marketing applications will languish; SSAG's customers fall into mid-market and B2B verticals where Marketing Automation has limited appeal.

Unica Goes Public

2005-08-04T16:06:00.000-07:00

On August 3rd, Unica successfully offered 4.8 million shares at $10; in next-day trading, shares closed at $12.

According to Unica's press release, net proceeds of the issue will be around $36 million. One million of the 4.8 million shares were offered by selling shareholders, and $1 million of the net proceeds is earmarked as a special dividend for preferred shareholders. The prospectus shows that net of a one-time dividend and conversion of preferred stock, the offering adds about $21 million to Unica's working capital.

Founder Yuchun Lee retains his investment at just under 30% of the company. Venture capitalist Summit Partners and related parties significantly reduce their stake from 34% to 20%.

The offering and other transactions may dilute earnings. The combined effect of the IPO, exercise of stock options and conversion of preferred stock increase Unica's common shares outstanding to about 18 million shares. Due to an increased effective tax rate and other factors, Unica needs a huge fiscal fourth quarter to increase earnings at the same rate.

For Fiscal 2005, Port Fortune projects earnings in the range of 17-23 cents per share (fully diluted). At $12, the current valuation significantly exceeds Port Fortune's benchmark of small-cap growth companies in the business applications software segment.

Unica is a well-managed company with a stable record of growth and good financial management. Through a combination of technical finesse, domain expertise and hard work, the firm has established leadership in the Marketing Automation software category.

The growth story for this firm is not clear. Unica benefits from its leadership position in its category, but that alone will not produce growth sufficient to justify the current market valuation. Port Fortune deems it unlikely Unica will successfully attack either the MRM market (led by Aprimo) or the high-end customer analytics market (led by SAS).

For customers, the IPO should have little or no impact. The transaction adds working capital to Unica's books, but the firm's liquidity was not in question prior to the IPO.

Public ownership presents company leadership an entirely new set of challenges, including the mandate of quarterly performance and the siren song of "deal-making". Customers and prospective customers should watch carefully to see how well Unica's leadership meets this challenge.

Latest Unica Earnings

2005-07-24T13:18:00.000-07:00

Unica has filed an amended S-1 showing earnings for the quarter ending June 30, 2005.

Key highlights:

License revenue for the quarter is up 3% over the comparable quarter in 2004; for the twelve month period ending June 30, license revenue is up 24%
Maintenance and services revenue is up 43% for the quarter and up 51% for the twelve month period
Revenue for maintenance and services has exceeded license revenue in each of the last four quarters
Due to a high level of maintenance renewals and a shift towards term licenses, Unica reports that 45% of revenue is recurring.

Unica has clearly established itself as a profitable steady-growth software company with strong financial discipline. Comparison to e.Piphany is intriguing:

Unica shows sustained growth in maintenance revenue, while e.Piphany does not -- which suggests a higher level of loyalty among Unica customers
Unica leverages three dollars of license revenue for each dollar of services revenue, while e.Piphany leverages a little over one dollar -- which suggests that Unica's product is more easily implemented. It also suggests higher confidence among delivery partners, since service revenues and costs for implementation projects primed by partners do not appear on the software vendor's financials.

The other intriguing difference between Unica and e.Piphany is the level of investment in R&D. e.Piphany invests about the same amount in R&D as it earns in license revenue, while Unica invests about half that much. Unica has earned a reputation as a highly efficient development shop, able to consistently stay ahead of competitors in the feature/function and usability race.

The question facing investors (if Unica brings its IPO to market) will be whether or not the firm can maintain that edge.

Chordiant Cuts Again

2005-07-23T11:24:00.000-07:00

In an SEC filing today, Chordiant announced a 10% reduction in the company's workforce. According to the filing, the goal of the reduction is:
To create better alignment of functions within the Company, to make full utilization of the Company's India development center, to develop a closer relationship between the Company's field operations and customers, to review the sales and implementation models, as well as the organization model to flatten management levels, to review the Company's product line, and to enhance the Company's business model for profitability and operating leverage.

Since acquiring Prime Response in January, 2001, Chordiant has reported steadily declining revenues together with workforce reductions in each of 2002, 2003 and 2004. Chordiant's most recent 10-Q is here. A line of credit from Comerica expires on July 27. At the current burn rate, Chordiant's cash in the bank can carry it through the current fiscal year.

In the quarter ending March 30, 64% of Chordiant's revenues came from services. 43% of Chordiant's total revenues came from two customers, Capital One and Time Warner. For the comparable quarter in 2004, 58% of total revenues came from Barclays, CIBC and Royal Bank of Scotland. This revenue profile -- highly concentrated and non-recurring -- is closer to that of a systems integrator than to a software company.

For the Marketing segment (the old Prime Response product, now branded Marketing Director), Chordiant reported $600K of software revenue and $2.6 million services revenue in Q1 2005.

On July 1, analysts at JMP Securities upgraded Chordiant to "Strong Buy" on rumors of a "significant" contract with a major U.S. bank.

UPDATE: Here is a puff piece on Chordiant 5.5.

Great Moments in Marketing

2005-07-21T14:47:00.000-07:00

The DMA has announced an opt-out list for dead people.

Acxiom Takeover Fight

2005-07-18T16:59:00.000-07:00

On July 13, Acxiom Corporation announced a shortfall in earnings for the quarter ending June 30, 2005. (Read more here). The company also announced a cost-cutting program, including a 4% reduction in the workforce.

Acxiom had previously disclosed receipt of an offer from its largest shareholder, ValueAct Capital Partners LP, to buy the entire company for about $2 billion. (ValueAct is a San Francisco-based hedge fund; for background on ValueAct's investing style, read this).

Although Acxiom has a "poison pill" defense against hostile takeovers, an Indiana pension fund (and leading shareholder) has sued Acxiom, asserting that "...through his domination and control of the other members of the Acxiom Board, [Company Leader and board Chairman Charles] Morgan has been permitted to run the Company like his own private fiefdom to the detriment of shareholders".

Since 2002, Acxiom has grown more quickly than competing MSPs, but most of this expansion comes from acquisitions and Acxiom's troubled international operations. Operating margin and return on equity are well below that of competing firms such as Harte-Hanks, who have chosen slower growth and a strong balance sheet.

Still, Acxiom is an unusual target for ValueAct. At 27 times earnings, the firm is not cheap. The domestic MSP business is highly competitive and flat overall, which is why Acxiom sought to grow overseas in the first place. And Acxiom's problems outside the US require an operational workout, not a quick financial restructuring.

UPDATE: Acxiom's board rejects ValueAct's bid.

MORE: Acxiom Finance "Leader" stresses expense reduction.

STILL MORE: Arkansas Business reports that the lead attorney in the lawsuit in paragraph 3, above, is under Federal investigation.

Alterian

2005-07-16T13:54:00.000-07:00

Analysts report recent interest in Alterian, an eight-year old British software vendor with recent momentum in North America.

Alterian offers a suite of software supporting marketing tasks, including discovery, visualization, segmentation, predictive modeling, campaign management and reporting. Other components support campaign management and list management. The suite is built around an analytical database engine (Alterian Engine 3.1) which is supported on NT, W2K and XP. Alterian OEMs predictive analytics from SPSS.

Alterian Studio is a Visual Basic and .net application that demonstrates well. Look and feel of the application is well integrated across tasks. Functionality is a little less sophisticated than "best-of-breed" tools, most real-world Marketing users should be able to do what they need to do. Remote users are supported through Citrix.

Alterian exclusively targets MSPs, a strategy which enables the firm to focus resources on core software development. MSP partners verticalize, enhance and (in some cases) rebrand the software to meet the needs of end users. The partners handle all implementation, hosting and first line technical support tasks.

Q4 financials released 3/31/05 show global annual sales at a little less than $15 million, of which a little less than $5 million comes from North America. About 70% of annual revenue is recurring revenue under long-term contracts. Q4 results show breakeven operations and plenty of cash on hand. Alterian claims 12 new MSP partners and 60 new end user organizations in FY05.

Alterian's proprietary data backbone make it a tough sell for deployment in an open standards best-of-breed environment. MSPs, on the other hand, are less demanding about feature/function and more concerned about cost and deployment time. Alterian's solid functionality, value-oriented pricing and flexible branding strategy all align well with MSP needs, and suggest opportunities for growth.