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On VRM, Facebook, and being misunderstood for long periods of time

I simply love this post at RWW.  The post is about how FaceBook could turn on the power of their userbase to the benefit of consumer power.  I have long been a fan of VRM and at the same time at something of a loss to see how it could be initiated.  Then I read this post, and new lights went on.

The post is about FaceBook, but it is less about them, than it is about business models for companies with large userbases who insist on following tradigital advertising models. The whole ‘We have lots of eyeballs so lets monetise’ thing.

[disclaimer]  I have long believed that adwords, adsense, and any such interruptive advertising model has only a limited online lifespan, and represent a termproary interlude that keeps SEO types busy in these formative internet times, until we get to the next level whereby the consumer is truly in charge.  Only then will I accept a Web X.0 increment.

I look at myself and my online behaviours, and maybe I am in the minority, but maybe thats because the tools I use are not well understood.  My online experience sees almost no ads except when I choose to do so, and I do so choose.  I see them in emails I deliberately subscribe to, I see them when I seek them out, but my standard web experience is protected by pop up blockers and AdBlock Plus.  If in doubt how many have PVR’s at home, and skip tv ads?

Its not that I don’t want to lknow about products and services.  I just don’t want to know when I am reading, listening and watching things on the web.  This is the power and the promise of the internet medium;  it has the power to be better.  I listen to Sirius Radio for similar reasons; I want to hear music not ads.

Enter Vendor Relationship Marketing (VRM).  Terrible title, but in essence VRM says you will decide when a merchant (vendor) may contact you, ie advertise to you.  Until then stay away. Here is one of the more provocative catchphrases from “The ClueTrain Manifesto” which forsaw this problem and solution 10 years ago.


The challenge is how to move from an interruptive model in radio, television, phone, mail, and now internet to VRM which would require a seismic and complete shift.

“be prepared to be misunderstood for long periods of time.” – Jeff Besos

Back to the RWW post.  Bernard does a nice job of pointing out that FaceBook is taking too long to develop a business model, and is taking longer than Google did.  He notes that it will take a radical shift in order to do that, and that shift will be misunderstood, but give it time.

I agree with Bernard.  The reason FaceBook and traditional advertising doesn’t work is because no-one wants to hear an ad in the middle of a conversation.  However FaceBook has the other benefit (some say weakness) of being a walled garden and Google cannot see inside.  He notes this is the perfect oportunity to turn that walled garden into a powerful tool on behalf of the consumer.  When they feel the need for a product, service or information on them, FB users could, through an RFP (Request for Purchase) process make it known to vendors, even to the point of naming their price or price range.  Vendors could respond.

This turns the ad model on its head.  The playing field is levelled between the merchant and the consumer.  If the merchant comes on stronger than the consumer wishes, or tries to return to old ways, the consumer can ignore them.

Relevance to Bankwatch:

Consider banking – every day thousands of RFI’s emanating from VRM services, and the banks can compete on them, all electronically.  Clearly this requires formats, standards, and defined processes but it makes an interesting future world view, and one that FaceBook could kick off.

Written by Colin Henderson

June 26, 2009 at 12:47

Applications, platforms, and VRM

Nice analysis, and context setting here from Joe.  I continue to watch the concept of VRM, and agree that the directions being set by platforms such as F8 and related tools will be useful in helping someone to narrow down tools that allow people to own and lever their preferences to get better service, and more simply locate what they want to buy. » Blog Archive » Marc Andreessen hits three nails on the head…

… the most powerful platform of all: platforms that are completed
distributed and designed to run on other peoples platforms. This “Level
4″ Platform is something Marc is intimately familiar with. …

Vendor Relationship Managment (VRM)
is working to create a Level 4 platform that turns CRM upside down,
providing tools for individuals to manage their relationships with
vendors. As such, we aren’t attempting to build one particular
application, we are building a framework for which any number of
service providers could offer applications and hosting platforms. It’s
not a small challenge, but we think its the right way to do it.

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Written by Colin Henderson

September 18, 2007 at 11:26

Strategy Question – VRM for Banks

 I love these cross diagrams which are used as a means to promote strategic thought in scenario planning.  We used them at LIFT at Bill Cockayne‘s workshop on designing future cities.  The trick is to get the right items at each end of the line – not just opposites (High/ low, cold/ hot etc), but opposing concepts that generate debate and new thought.

So I was ecstatic to see this one from Christopher over at the Social Customer Manifesto.

So, the two big questions:

  1. Q1: Who controls the interactions between vendor and customer?
  2. Q2: Are the interactions focused on transactions or relationships?

Source: The Social Customer Manifesto: VRM Scenarios

This is relevant to Banks.  Online Banking is way over on the transaction side, and Banks (online) are really no-where on the relationship side.  Similarly on the vertical, (Vendor means Banks here), control is on the Bank side. 

So that places Banks in the lower left quadrant.   Remember Minority Report?  Tom Cruise walks into the Gap, and is instantly recognised, and an ad is spoken to him based on his Gap profile.  the Gap decided on that ad .. Cruise had no control over it – this is ‘facist’ marketing with all control divested to the corporations.  Marketing that is intended to shape you and tell you what to think.

Anyhow, Christopher does a fantastic job of describing the four quadrants, that I can’t improve on.

Where is the optimal quadrant?  To me the answer is clear – upper right!  Reason:  Here is Christopher description:

The customer owns her own information, and does with it what she pleases. In some cases, anonymous transactions are conducted, but most interactions happen with trusted vendors with whom the customer has dealt over time. The customer chooses vendors based on interpersonal empathy and affinity, as well as technical capability

To me this is the only vision that works.  The problem is that customers do not own their own information.  The opportunity for Banks is to fill that void by giving control of information to customers as if they did own it.  This would be responsible, and would gain enormous customer credibility.


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Written by Colin Henderson

February 14, 2007 at 20:16

Posted in Pinkomarketing

Microformats as information brokers – the intelligent agents to support VRM

I have been thinking a lot about Vendor Relationship Management (VRM) over the holidays. Doc latched on the the concept as the the corollary to Customer Relationship Management (CRM). He spoke of VRM finally delivering the Cluetrain promise, and that got my attention. CRM places all the power in the hands of the vendor (Bank, telecom, retail store ) and that’s why you get annoying phone calls at dinner time, junk mail, or those annoying “can I put you on hold” comments while the poor call centre rep reads up on your history. CRM does nothing for you as a customer.

VRM is your software, you the customer. The concept (its just a concept right now) would allow you the customer to control your interactions, and effectively manage the vendors based on what you require. CRM allows vendors to manage you based on what they think you need, which is of course ludicrous.

However one of the constraints I see in the current thoughts on VRM is that it does not recognise how customers think. I would like to see this picture evolve to reflect the stages of customer purchasing. Consider your own behaviours. If you need a chocolate bar you go to the store with no thought and buy it. If you need a car, you go through stages in the purchasing process. So depending on what you need, and generally if you are buying it online, this will apply, its more than a chocolate bar purchase, and you want to control the entire process, not just the act of purchase.

Similarly for a new bank account, which is my focus here, but I hope this can be applied to VRM more generally. Brad and Cathy at Forrester have done much research on this topic, and come to realise that the web highlights the way that people think. In the old world it appears that customers walk into a Bank to buy a bank account. This doesn’t take into account the thought process and events that preceded, the discussion with family members, and friends, the picking up of brochures from several banks. In the new world, these events are exemplified on the web, including reading (brochures), discussion and email, (family and friends), web browsing (thinking).

Forrester concluded in the case of mortgage purchase there were several general steps:

We can abstract these steps into five general steps:

  1. research: sources, research product types
  2. education: the process and ways to get a loan
  3. quotes: obtain quotes, perform calculations based on the quotes. consider how it fits with customers expectations, decide what I will specifically apply for, how much, interest rate, terms required etc.
  4. apply: apply to one or more locations, and receive offers
  5. acceptance: accept one offer, and make final decision

Returning to the VRM information flow, the “request for proposal” is an amalgam of 3 & 4. In the consumers mind, these are two discreet steps. In some cases the decision will between 3 & 4 will be made almost instantaneously, but they are two separate processes. #3 is a ‘what if’ analysis, a simulation to consider life after the new service is in place (e.g., I have this great new car, but can I afford the payments, will it fit my garage, will my wife like it, etc). Whereas #4 is after the decision is made, and the consumer is ready to deal.

So thinking about how to manifest those steps online is what I have been thinking about. I recall back in the mid 90’s conjecturing during an IT strategy session, for the concept of intelligent agents, bots that would somehow (we had no idea how), scour the internet for the right service based on the customers preferences. I see VRM manifesting that concept.

Then I read some more on microformats today – (Hat tip to Read/Write, and Alex Faaborg of Mozilla) and this picture.

Link to informationBroker.jpg_large.jpg (JPEG Image, 1481×699 pixels)

The diagram is restricted to contacts, and calendar entries, but the part that caught my attention is the ‘information broker’ bit at the bottom. That information broker could represent the buying process I outlined above.

Consider the consumer who is at stage 1 of my buying process above, and he wants to buy a car. He has in mind a used model, something in the 2002 – 2004 range, and about $25,000, of which he estimates he will borrow $12,000. He instructs his financial services microformat with these facts, and as he browses, it gathers data based on his requirements. In fact, it could gather from sources without him actually visiting those sites, if he chose to instruct it accordingly.

Once he has enough information, the consumer can choose to instruct his microformat to move to stage 2, etc etc.

Part of stages 1 and 2, would include seeking advice and information from trusted social networks. Splogs need no apply, and would be blacklisted. In this view the notion of a splog black list service, similar to phishing black lists would be powerful. Trusted sources that eliminate spam/ splog information. Power would be truly transferred to the customers.

If I was a smart bank I would offer such a microformat for my customers, and it would pull in the best of breed, not necessarily my own products. Who has the nerve to try that? As a Bank I would be building trust with the consumer. If I do a good job there may be a business model there … a referral fee even?

Relevance to Bankwatch:

In this view the consumer is not restricted to Banks. Banks would have to re-architect their CRM systems to lookout for VRM requests, and recognise the stage the customer is at. But Prosper, Zopa and others will be doing the same thing, and can probably react faster than the Banks. Also, if the customer is researching (stage 1, do not press them to close the deal (stage5), or they risk losing the right to bid in future. This customer could blacklist them from their VRM tool.

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Written by Colin Henderson

January 2, 2007 at 11:20

A mix of new entrants and traditional companies invest in online information management for you

Marketing online has fallen into step with other marketing in traditional channels in major respects.  Just as you receive those supposedly targetted catalogs and direct mail, you also have online page ads, email offers, and offline offers based upon online signups which may have included your address or phone.

Some people however feel differently.  They see online as a fresh frontier for actually controlling your own information and managing how it is used.  Sounds like a pipedream, and of course traditional marketers are resisting.  However some new leaders, and some traditional companies see ways to harness the power of the web, and use it to improve online commerce for consumers.

A Vault for Taking Charge of Your Online Life | NY Times

While governmental efforts inch along, companies like are forging ahead with new services that promise consumers more insight into the data collected about them. This month, for example, the direct-to-consumer division of Equifax, the credit information services company, plans to begin offering its customers a separate personal data report from in addition to their credit report. Some Equifax customers will also be offered the option to have delete personal details, like home addresses and phone numbers, from certain information broker databases.

“We see broadening consumers’ understanding of what’s out there about them online as a very natural extension of what we do today,” said Trey Loughran, the president of Equifax Personal Information Solutions.

Next spring, TransUnion Interactive, the consumer division of the TransUnion credit information company, plans to offer its customers similar services from

Vendor Relationship Management (VRM) for consumers remains largely a theory.  However these initiatives might be the germ of the first at scale implementation of something like VRM.

Personal Data Locker Vault

Written by Colin Henderson

December 8, 2012 at 19:16

Posted in Uncategorized

Where are the “Intelligent Agents” to bring what I need to me?

This is one of the better posts from Scoble.  This is a hard dose of reality.  Nearly everyone is on twitter, Facebook and Linkedin.  As those services grew over the last 5 years, many people challenged the Dunbar rule, suggesting that smart technology interfaces could expand the maximum number that you can keep up with.

The war on noise | Scobleizer

  1. Marketers suck. Including me. Look at my big tech company list over on Facebook. Do you actually learn much?  A little, but marketers push themselves too much, and say too little.
  2. No one is focused on what you want. Including me. I have a list of tech industry investors. Rich people. I want to hear from them about when they talk about investing, the economy, starting companies, trends, that kind of stuff. But do they stay focused? No. They talk about movies. Their vacations. Their kids. And more.

Scoble himself topped out on technology hardware to solve it.  No.  The one thing that does not change is the human  capacity to absorb, and the amount of time available in the day to absorb it.

Back in the day, when we all began speculating about where this internet thing would take us, the one piece that always intrigued me and that never showed up is the idea of Intelligent Agents.

These Agents would be constantly roaming the internets on your behalf giving out just enough information to get answers, and gathering what you want, when you want it. This could be a financial product I need, a coat I need, or a new bike.  The Agent needs to know when I need it, and not to bother me when I don’t.

We see glimpses that try to work around it such as Quora where the intelligence comes from Social interaction and sharing.

But this goes right back to the problem that Scoble articulates.  Its just more noise and not direct to address what he wants and when he wants it.  Despite Scobles comments I always find Twitter quite interesting, but that’s because I deleted everyone a long time ago, then reselected a few sources in the spaces I was interested. (very few).

The Vendor Relationship Management (VRM) concept describes much of what I want at least for commercial purposes, but not built yet.

The challenge cries out for a standard that everyone buys into.  Unlikely.  Analysts of Twitter thought that feed would provide the answer, but with majority of tweets being retweets and not original, I am not sure that’s the answer.

As a company, FaceBook has as much chance as anyone to solve this challenge, but they are still falling into the trap of advertisement placement.  I see Twitter is doing that now too.  Annoying.

Where are my Intelligent Agents!

Written by Colin Henderson

November 20, 2012 at 21:11

Posted in Uncategorized

FaceBook stock decline is a business model and management issue

This is an important piece at the NYT.

When the Network Effect goes into reverse | NYT

James Stewart covers Facebook, as well as Yelp, Groupon, LivingSocial and Linkedin.  The title is somewhat provocative and the article notes that the network effect has not yet reversed.  But he makes two main points that are possibly related:

  1. Revenue growth is not as rapid as user growth
  2. Mobile usage is the most rapid growth, yet traditional advertising on mobile is not clear given the small screen size

He also speaks about the FaceBook employee shares coming up for sale in November and notes others comments that this is a red herring relative to the share price decline.

I believe that FaceBook stock decline is a business model and management issue, and goes to the core of my beliefs about internet and marketing.

Lets look deeper.

Relevance to Bankwatch:

I have always been bearish on internet as an advertising medium, and especially social media for advertising and continue to to believe that.  This comment is in the NYT piece comments, and sums it up for me:

Stu’s Law: Over time, most of the value created by network effects will be captured by the users of the network, not by the builder of the network.


Everyone I know is active on FaceBook.  They use it to both observe their family and friends activities and to stay in touch.  For that use it is brilliant and fills a voice that letters and even emails cannot.  With pictures, stories and comments people can asynchronously and conveniently follow each other.  When we layer on the advent of apps smart phones with location and photo capabilities, that convenience factor grows exponentially.

But then what.  As the user base enjoy that convenience and new found access to their friends and family the network owner is increasingly pushed into the background and the winners are the users.  The idea that their convenience would be interrupted by intrusions such as ads flashing across the screen is considered ridiculous.

By the same token the network owner finds it ridiculous they must spend all this money developing the network with no benefit.

So we have a stand off, and meantime the stock is dropping and P/E ratios are brought in to question and stock prices will align with traditional media unless some creative thinking is brought to bear.  That would price FaceBook stock at $6 +/- just to put the problem in perspective.  But that speculation is for other blogs.  My concern is business model related.

Lack of creative thinking:

Online advertising has grown little since the original banner ads in the ‘90’s.  There is a host of sophistication in the back end designed to place the right ad for you based on your implied preferences, implied location, and implied demographic but at the end of the day its just a banner ad that intrudes on your time and screen space.

Is a banner ad really the only way to get attention from people?  This is is old thinking that comes from newspaper, radio, billboard and television.  I would have thought that by 2012 and 20 years after the first graphic internet web page, that someone would come up with new models.  In fact with the user base and smart people, why has FaceBook not accomplished that, instead falling back on the ancient advertisement interruptus model.

I do not even pretend to know the answer, but it has to have its roots on some co-operative model that engages users as part of the process.  The ubiquitous “Like” and “G+” buttons go some way but not very far.  The outcome will still be a banner ad, an email or some notification.  Where is the sophistication that takes the Likes and engages users without interrupting them.

Is internet even the appropriate place for advertising as we know it?  I have always been chastened by the idea that internet was designated ‘media’.  Somehow the marketers took over web site management in the 90’s, something I was not happy about but that’s another story.  Internet is a tool that provides utility.  I do not expect to see an ad on my hammer.

That’s why I believe this is a problem that will not be solved by marketers.  Sorry folks to all my marketing friends.   The tools and training just do not allow for a solution, and that’s why Groupon, and Facebook fail at advertising.  the more people they drive ads to the larger the ad supply and the prices drop.  What happens when ad prices drop to zero FaceBook.  That day is coming.

No, this is a technology problem that involves, algorithms, big data, site design, page design, different user engagement and more.  There are some clues in Vendor Relationship Management (VRM) which is a concept I believe in but has yet to manifest itself successfully.  The idea is that you, the user, control your advertisers (Vendors).  This is the correct line of thinking.  While as extreme as traditional advertising is on the other end of the scale, it should drive a better line of thinking that will allow for a model that produces revenue for network builders, and satisfaction for users.  VRM says that users decide if, when and how they will interact with merchants.  I can hear aghast marketers crying foul, and they will lose their 0.001% penetration rates.  Really?  How do you know you would not get better and more meaningful penetration?

Business model considers all alternatives for revenue, including subscriptions, freemium charges, and others.  Being stuck on advertising and advertising as currently structured is a losing proposition.

Meantime FaceBook is a short sell, and it is not because of all those employee shares coming on the market in November.  This is a business model problem, just as was Groupon.

Written by Colin Henderson

August 18, 2012 at 15:39

Posted in Uncategorized

The coming media crisis and parallels with the financial crisis

A general thread that has been building for me for some years now is highlighted in a few things I have seen recently. The thread is my hatred of advertising and in particular online advertising. For me it lies in the same category as junk (paper) mail except worse. I can simply throw paper junk mail out as one package, so it is not intrusive. Online advertising is horribly intrusive because it is pervasive. I use lots of things to ensure my online experience is minimally interrupted by ads

In 2004 people were asking about blog business models. Now it is social network business models. I have suggested other ways to deal with business models, but the mob continues to aim directly at advertising as the answer. It will pollute the web, and result in the opposite result than what is desired. It will not bring sustainability for them using advertising.

So what happened this week.

  • twitter volumes are already dropping. Pick any topical topic and search it on twitter – result 80% of the tweets are re-tweets of the topic. Its a gigantic echo chamber. In fact the next question – how many of those re-tweets were someone with a vested interest, a professional marketer, or a PR company? The theoretical value of wisdom of crowds does not allow for gaming the system. The black swan of twitter search.
  • the volume of requests to me at this blog for linkbacks, blogroll links and outright requests for ads is increasing significantly. That will never happen btw. However it is indicative of the desire for ‘social media’ results
  • A good friend who despite my recommendations still uses hotmail (now windows live). This persons entire contact list and archive of emails were deleted and it turns out this person not alone. Some kind of scripting virus inside hotmail launched by making the wrong click and signing up for something let the virus in. The clue was emails to all the contacts notifying my friend was happy with some TV or the like. Needless to say my friend is now using gmail exclusively but its a bitter lesson.
  • techcrunch reported on the real evil of ad networks online and the significant money being made. Its a long post, but the key is that no-one is generating any real value here. Individuals are getting rich and that is all.

So what is the point of these seemingly unrelated observations especially as I am a devout proponent of the value of internet. What I am against is traditional interruption advertising coming online. It pollutes the medium and hinders the genuine creation of new and valid business models.

Today I read Umairs post at Harvard and that solidified it all for me (Umair does that). He points to the coming online crisis that is the online version of the subprime crisis. Readers of this blog get the sub prime crisis. The coming online crisis is one of trust, and realisation that online activities require security and protection yet something more which is still to be invented – control. It will be a crisis and it will be a broad based internet crisis of confidence. The result will be serious and cause serious grief for banks and others who have come to rely on online for servicing.

The parallels with the financial crisis are interesting. The financial system was getting better and better at recycling money and the convoluted networks that were built lost sight of the origin of the credit instrument, and the underlying risk. Causes were lack of transparency, shadow markets, rapid expansion, and mis-allocation of risk amongst others. In the case of the online advertising market, there are similar attributes. Transparency is non-existent in most cases, because there is no way to know who is behind those ads. Shadow markets and rapid expansion – ditto. Mis-allocation is interesting. I avoid online ads because they are interruptive. At a deeper level, they are mis-allocation of resources away from user experience and towards the requirements of a stupid ad server that is busily collecting data on you. The value is highly one-sided – worse the server is gather data that may or may not be of any value. Internet is simply clicks – do clicks imply desire, need and future purchase patterns?

Relevance to Bankwatch:
Smart banks and others will look at the embedded value in the customer base they have and define models that add value to those people, not spam them. What is known about your customer base, and what do your customers actually want. Traditional advertising models assumes customer needs – internet models will (I believe) enjoin the customer to participate in the definition of what they need and in return protect them (the customer) from spam advertising. One example is the promise of VRM. But it is only one – others will be developed, and will be supported by powerful authentication tools.

Innovation is another loser in this coming crisis, or as Umair notes unnovation. In advertising land, innovation is all about finding ways to get inside peoples click patterns and drive ad revenue. There is not value created for the majority of consumers (90% + who do not click), nor for merchants who actually desire long term client loyalty.

This has turned out to be a negative post, but really it is intended to provoke thinking beyond online advertising and ad servers. Which innovations will align customer advocates and merchants in a genuine and trusted manner?

Written by Colin Henderson

November 12, 2009 at 21:57

A market test alternative for credit cards

This is a variation on the theme I cover periodically called Vendor Relationship Management (VRM).

The variation here is that the Vendor must place the consumers product up for bif from competition when they are considering changing the terms, such as interest rates.  The consumer would then have the choice of accepting the change, or accepting one of bidders. (HT Payments News)

A Market Test for Credit Cards

We have an alternative solution, employing a market test of a proposed change. At the time when the lender proposes a unilateral change, it would be required to put the existing account balance up for auction on a LendingTree-like service that would allow other credit card issuers to bid for a chance to issue a new card and take over the existing balance.

Borrowers wouldn’t be forced to switch to the auction winner. They’d just be given the option. When an existing credit card issuer proposes a rate increase, it would be required to pass on the terms of the winning bid and a comparison with its own terms, and the borrower would decide whether he wanted to make the switch.

Written by Colin Henderson

July 11, 2009 at 14:46

Retailers have improved the online shopping experience as far as they can

Once in a while Doc Searls comes up with a classic statement, and this is one of those [emphasis mine]. 

The buyer’s envelope, please

In the meantime, consider this thesis: Amazon and other excellent online retailers have improved the online shopping experience as far as a retailer can. Yes, there is always room for improvement, but there is only so much improvement you can carry out only on the sell side, even if you’re equipping buyers to do a better and better job. At a certain point the improvements need to happen on the buy side. You need better buyers, not just better sellers. You need to improve the tools available to buyers — tools that help buyers with all sellers, and not just within each seller’s walled garden or silo.

Therefore… At a certain point the problem is no longer scale but scope.

This is the argument for Vendor Relationship Management

Written by Colin Henderson

September 11, 2008 at 00:02

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