I guess I shouldn’t be surprised, but it is disappointing when a company starts behaving like an incumbent politician. There are those who firmly believe that incumbents are heavily influenced by campaign contributors and special interest groups; often forgetting the needs of the constituents who they are truly supposed to represent. Similarly, there are established companies that lose focus on the very customers who made them successful. With their drive to maximize revenue and profitability, instead they find that slowly over the years they start spending more and more of their time catering to their advertisers. This is sadly ironic, given that those advertisers are only interested in the eyeballs and wallets of those very customers. Lose the audience, lose the advertisers.

Now, don’t get me wrong. I know that companies need to generate revenue to survive and thrive. I just believe that they should align their revenue models with the needs of their customers. In essence, happier customers should equal more revenue. Instead it seems that too many companies generate revenue by placing obstacles (i.e., often irrelevant ads) between users and their goals, hoping that they will click those ads along the way. They need to take a long, hard look at the performance of the advertising on their site, especially the traditional display CPM advertising. Would the click-through rate (CTR) on those ads be so low if they were really adding value to the experience, if they were truly targeted for the user, and if they were mapped more closely to what users are looking for? Please.

Performance-based advertising is certainly one way to improve the experience, since it is in the best interest of the publisher to target high-quality ads to the right user at the right time. And there has long been talk of Cost-per-Lead (CPL) and Cost-per-Action (CPA) slowly replacing CPM and CPC advertising. However, many feel that the pendulum swings way too far to the side of the advertiser with these models. In addition, the lower volume of campaigns and complexity of tracking and confirming transactions present challenges for both advertisers and publishers. A new hybrid model is in order for a better long-term solution, but it won’t happen overnight.

Dave McClure points out in this post that we’ve been living with this flawed model for too long (Caution: Rated TV-MA for strong language):

We have largely WASTED an entire web decade of time, energy & venture capital on extremely inefficient revenue models. There have been a few interesting examples of startups acquired in the 00’s for large amounts due to amazing growth (eGroups, MySpace, Skype, YouTube) or advertising potential (aQuantive, DoubleClick, AdMob, RightMedia). However, mostly the decade has been an uninterrupted string of uninspiring business models and small-time acquisitions of Web 2.0 startups filled with rainbows & unicorns, rather than those based on simple, transactional revenue models…. Gradually we are discovering that the default revenue model on the internet should probably be the simplest one — that is: basic transactions for physical or digital goods, and recurring transactions (aka subscriptions) for repeat usage.

So, certainly one path to increasing independence from this often unnatural relationship with advertising is to create and/or offer something of value that customers actually want to pay for. Wow. Imagine that. But, since the dependence on advertising revenue may never go away, we also need to invest in new marketplace models that incent both advertisers and publishers to truly cooperate to deliver high quality, highly-targeted, relevant advertising to consumers when and where it is appropriate, so that they knowingly engage and receive real value from what the advertising offers. Companies need to remember the fundamental reason they have achieved scale and success: Consumers choose to spend their increasingly precious time and dollars with them. The revenue they derive from selling that “attention” to advertisers can and will disappear if they forget that.

I dropped in on Barefoot Coffee yesterday to enjoy one of their fabulous Cubanos and noticed they had remodeled. It still feels cozy there, but it lost a bit of its independent spirit. I’m going to miss their quirky chairs. But, they still pull a great espresso drink and they still create nice latte art. And that, with a number of other touches, make Barefoot one of those sanctuaries that you seek out when you want a great cup of coffee that doesn’t come from the faceless corporate chains. I have a similar experience in one of my favorite dark little coffee houses in NYC, Caffe Reggio (image in this post). The funny thing is, I will go considerably out of my way to visit these places, when I could simply grab a drink at a place like Starbucks. Easy enough, since there is one within every quarter-mile radius.

Got me to thinking: How could this be extended to other products and services? Definitely easier with a local business, where you can create an atmosphere for your clients. Can also be more easily extended to services, where you can create that sense of comfort and trust through a personal connection. Much harder with other products and online services, but not impossible. Consider the latte art example. They don’t “need” to do that. It takes extra time. And they actually practice so that they can create some pretty incredible art and even enter competitions. It’s really about investing that extra time and, yes, costs to add delight and elegance to your product or service. Apple does it with their packaging and new buyers delight in the unpacking process. Heck, they even take photos and create videos of it to share.

Don’t you wish your customers did that? I’m sure you invest considerably in marketing and advertising, or you should be. Take some of that investment and roll it instead into making your product surprisingly delightful. Turn those customers into a grassroots channel whereby they are sharing their positive stories on Twitter and Facebook, uploading photos to Flickr, and sharing videos on YouTube.

The next time you’re streamlining and reducing costs, think really hard before you cut those delightful features and experiences or don’t even invest in them in the first place. View your product or service with “fresh eyes” or hire a research team to do it for you. Answer the really hard and sometimes intangible questions: Are you delivering delight? Do you add those extra touches that make someone smile? Are you creating a sanctuary from the chaos of your customers’ lives and the world around them, so that they feel comfort and pleasure in using your product or service? If you truly are, they are going to go considerably out of their way for you and pass right by your “Starbucks”, whoever that may be.

Well, we finally announced it. Yahoo Search is going way open very soon. We will be allowing publishers and site owners to provide us with additional information about their site. This will provide a next-generation search experience with results that can display some of the rich data that is today only available on the website after the user clicks through. For example, ratings and reviews, great photographs, useful site links, etc. The additional beauty is that users can control whether they want to see this additional info or not. Their choice. A picture captures the essence of this better than my description (see below).

An Open Approach to Search
The open theme continues today as we are announcing that we are opening up Yahoo! Search itself. That’s right — you heard it correctly — the Yahoo! Search experience will soon be open. This open search platform enables 3rd parties to build and present the next generation of search results. There are a number of layers and capabilities that we have built into the platform, but our intent is clear — present users with richer, more useful search results so that they can complete their tasks more efficiently and get from “to do” to “done.” Read full blog post…

Good coverage and comments on TechCrunch. Want to learn more about our Open Search Platform? Sign up here

Key Highlight
Yahoo isn’t afraid to shake up the traditional web search paradigm in order to give users what they need: More useful search results that will help them get things done more efficiently. The end result will be something that is not only good for users, but also good for web site owners.

Grinds Coffee & Tea House, Capitola, CA,
originally uploaded by Larry Cornett.

I have talked about the commoditization of the coffee business before. You can certainly get a good cup of coffee (or name your favorite coffee drink) at many of the coffee houses that sprang up over the past decade. So, when “quality” is no longer the differentiator that it once was, what is a coffee house owner to do? Well, as many industries are discovering, you start focusing on differentiating through the consumer experience.

I visit Santa Cruz, CA occasionally on the weekend when I need a break from Silicon Valley. For those of you who have spent time there, you know what I mean. Each time I am in the area, I go out of my way to visit the Grinds Coffee & Tea House in Capitola. Sure, I could just as easily hit Starbucks. There are at least five in that area. But, I don’t. Why? Because I’m in Santa Cruz and Santa Cruz has a very specific culture and context.

Grinds is a Santa Cruz experience. It is a bit quirky with the bright green exterior, but very authentic, unique, and pleasant inside. It is a treat to go there and get whatever coffee you want made fresh by the cup. Grinds is a differentiated experience and it certainly fits the Santa Cruz context.

Yes, there are economies of scale in providing the same menu and even interior decorating when you are a global business. And, yes, you will attract customers who want “the comfort of the same.” But, increasingly, consumers are starting to tire of the McDonald’s-Walmart-Starbucks effect and want to experience something unique, something new, something with “local flavor.” Sites like Etsy are yet more proof that the pendulum is starting to swing back.

Well, the biggest consumer-facing change to the Yahoo! Search experience has arrived. We just launched our new Search design this week, which features an incredible amount of great new improvements including:

• Search Assist – suggestions and related concepts that give users a new way to explore a subject area they may be unfamiliar with. Try a search for the United Nations.
• Multimedia integration – video, Flickr photos, etc.
• Enhanced Shortcuts – music artists, movies, travel destinations, and athletes

It is all about improving the experience for consumers who are trying to get things done. No one wants to struggle with a search engine when they need information. Search just shouldn’t be so hard. With our new Search experience, it just got a whole lot easier.

To learn more, visit our Yahoo! Search Blog or you can check out my recent television interview with CBS 5.

Search Engine Land just published my article: Search & Serendipity: Finding More When You Know Less. Here is an excerpt:

Where do you go to get your daily fix of fresh information? If you are like millions of other users out there, you hit sites like Digg, Delicious, Techmeme, or just open your favorite RSS reader. Or, you tap into your Stumbleupon toolbar to see what your fellow Stumblers have found interesting lately. Most people don’t automatically think of search as a place for serendipitous exploration. Search is best when you have something specific in mind, right?

Actually, search has been evolving a lot lately. And, as we seek new and better means of disambiguating intent, the search engines are increasingly offering richer media and information that feels a lot more dynamic and exploratory.

Read full article…

It has been a while since I have posted. If you head on over to Yahoo! Search, you will see why I’ve been a little busy lately. We’ve been working on a ton of great new ideas for our Search experience and some of them are now ready for you! It is all about giving consumers a much better experience when they are searching, so that they find exactly what they are looking for faster and are happier with the results. Check out what we’ve been up to and I think you will agree.

A new Travel Destination Shortcut

A new Music Artists Shortcut

A new Audio preview feature

An exciting new Yahoo! Search Assist feature (image from Danny Sullivan on Flickr). Danny has a great article about it on Search Engine Land titled Search Suggestions on Steroids: Yahoo! Search Assist

I’m sorry that I can’t provide you with a link to our new Search Assist technology yet, since it is currently in testing. But, stay tuned!

If you want to read more about Yahoo! Search, you can check out our blog.

When I attended the IA Summit a few months ago in Vegas, one interesting theme captured my attention: A number of my user experience (UE) colleagues were busy founding their own product or service companies. Mind you, UE professionals have been running design agencies and consulting companies for a long time now. However, these UE professionals are founding new businesses that offer products and services outside the traditional realm of design and research.

Folks often talk about 37signals as the poster child of a design firm that morphed into a product company. But, I’ve been in Silicon Valley since 1993 and watched the boom and bust and boom. Most of the startups were founded by engineers and MBA’s. UE professionals tended to only be brought in much later to make it “pretty” and clean up usability messes. So, I find it quite refreshing and interesting to see UE professionals as successful founders and I think it bodes well for our profession and the industry. Why? Because they understand the power of fulfilling user needs with compelling and useful experiences. It will be interesting to see if they track to similar success as 37signals.

Luke Wroblewski over at Functioning Form describes what he calls “The Shifting Role of Design“. In essence, the roles of design and design thinking are becoming increasingly critical for success in today’s shifting economy. He states:

When Markets mature faster, function is increasingly assumed and no longer a core differentiator. As a result, design becomes a key differentiator sooner.

Let me wrap up with sharing some examples of startups that have been founded by UE professionals recently:

Rashmi Sinha, one of the founders of SlideShare, has a well-known reputation in the field of User Experience. What is SlideShare? Basically, it is a great web application and service for hosting and sharing presentations. One of the biggest benefits is that this means no more sending (and receiving) those monstrous emails with PowerPoint presentation attachments. TechCrunch had a nice writeup on it last year.

Lou Rosenfeld, founder of Rosenfeld Media, is another well-known figure in the UE community. Lou spent most of his career as an information architecture consultant. Rosenfeld Media is a publishing house dedicated to developing short, practical, and useful books on user experience design. One unique aspect of Rosenfeld Media is that they have opened a nice 2-way dialog with readers by soliciting ideas for books, how to improve the books being published, and even how to improve the company itself. Boxes and Arrows has a good interview with Lou from last year.

Last, but not least, Christina Wodtke is one of the founders of Cucina Media, a web software company focused on collaborative publishing. Christina is also a very well-known UE professional in the industry. PublicSquare is one of their first products “created out of the need for a multi-contributor publishing environment”.

Facebook held a press and developer event today to officially launch their Facebook Platform. CNN Money has a pretty decent summary of the implications. Supposedly, these are screenshots on SplashCast of some sample applications on the new platform.

Basically, imagine adding a social layer to any online experience in a way that makes it more useful or more enjoyable, since that layer is composed of people that you know and presumably trust more than some random stranger.

• Shopping – What laptops do the people in your social network own and recommend?
• Concert tickets – What concerts are your friends going to this weekend?
• News – What stories can you trust?
• Video – Not just watching funny monkeys, but actually using video to communicate with friends.
• Money – Negotiated lending and borrowing in your network.

By becoming the central social platform for using these services, Facebook places itself in a very powerful position. The key is that they aren’t just acting as some sort of portal for launching into online services. They are opening up access to developers to redefine these services with the addition of a social layer that will completely transform the experience. No longer will you have a series of fragmented social interactions with strangers as you buy a book on one site, tickets on another, and read product reviews on yet another. Your personal social network will be omnipresent and accessible through all of these experiences, much like real life.

If this succeeds, they will truly transform these services. Sure, each of these businesses could certainly add a social layer to the experience on their own site and many do. However, recreating or importing your social network over and over again rapidly becomes tiresome. By opening itself up as a real social software platform for developers, Facebook has dramatically increased its utility and appeal.

Commoditization. It happens in every industry as it matures. As companies struggle to compete and differentiate themselves, they succumb to pricing pressure and feature wars. We’ve all seen it happen with both goods and services. And, we’ve seen it happen in the technology industry too. Software with even more features than the competitor with the requisite feature chart on the back of the box. Internet access pricing being driven down to almost “free” levels. Web hosting for absurdly low monthly fees with an ever-increasing set of available features.

So, what is a company to do? Well, some have spent time understanding their customers and what it is that creates loyalty. Those companies have learned that earning the loyalty of a customer goes way beyond offering the lowest prices or the most features. In fact, loyal customers will often spend more for less. As a very loyal customer of Apple Computer, I can attest to that. Why? Because we value the holistic experience of that brand and what it provides us.

An excellent book on this trend is “The Experience Economy” by Pine and Gilmore. Published many years ago, it foretold this current shift to more and more compelling experiences to win loyal customers. The following chart shows this trend as we move from an economy of goods and services to one where companies differentiate themselves through what they call “transformational experiences.”

I can personally speak to this shift, as I have experienced it during my current trip to Bangalore India. I have flown on a number of airlines during my career, but only a few airlines have stood out from the crowd and inspired my loyalty. Yes, they all try to compete on price, services, and destinations. But, only a few seem to really understand the value of the in-flight experience. Many claim that they do, but they fail to actually deliver a complete end-to-end experience. To name only one airline that I feel has succeeded: Singapore Airlines. They get it. The attendants are amazingly friendly and attentive. The food is excellent (for an airline). The seats are very comfortable, with a full recline that allows actually sleeping. And, their entertainment system is expansive. I always end up watching way too many movies on my international flights with them. So, when given the opportunity, I select Singapore Air every time. Not always the cheapest and not always the most convenient, but the experience makes it worth it.

I cannot begin to cover this topic as deeply as the book below does, so check it out for yourself. The main take away? The world is changing, as it always does. If you find yourself competing on price and features, as many of us have been, you’re behind the curve. The key is going to be understanding, really understanding, what your customers need and what will inspire their loyalty. Understanding that will allow you to offer a complete end-to-end experience that will change the game for you.