What Warcraft’s wool cloth should teach you about marketing

Posted by Christopher S. Penn on Jul 23, 2009 in Marketing, Money, World of Warcraft | View Comments

I’m an avid gold-maker in World of Warcraft. Like real life, the amount of gold you have in the game is a direct measure of how much value you bring. If you quest like mad and rack up thousands of gold, you’ve got the skills and the time to complete lots of quests. That’s value. If you farm materials like in-game consumables, you’re generating value for other players who don’t have to spend their time farming, and the gold pours in. If you play the Auction House, knowing your markets and trends, you can arbitrage items that are sold for unusually low prices by players that don’t know better and resell them at market prices – and the gold pours in.

What I want to highlight today, though, is an important aspect of the gold making game. Take a look at the top 5 items I’ve sold in game recently:

The first and fourth items are rare cloth that can be made only once every 4 days. Scarcity makes them incredibly valuable. The same is true for item 3, the Hat of Wintry Doom, because it’s made from rare items.

The second item is an in-game pet that can only be acquired in a little-loved backwater part of the world that takes ages to get to. People pay a price premium for it because they don’t want to burn up the time and effort it takes to get there.

What’s really important is item 5, wool cloth. For anyone who does not play World of Warcraft, wool cloth is a commodity. Not only is it a commodity, but it’s an especially plentiful commodity that most early players encounter by the bucket before moving onto more challenging parts of the game. If chess pieces wore clothing, pawns would be the ones sporting wool cloth – it’s common.

So why is such a mundane commodity the #5 seller? Two reasons: first, it’s used by several professions in game, which means there’s consistent demand for it. Second, most players run right past the stage of the game where they’d accumulate a significant amount of the cloth in their pursuit for better, shinier objects. Thus, while it’s plentiful, most players forget about it and move on rapidly, long before they accumulate any significant amount of it.

Consistent demand. High potential supply, low actual supply. This is a profit engine.

So what does this have to do with marketing? How many people are searching for the shiny object, the rare, the Ebonweave cloth of marketing? Social media currently holds this crown, though a few years ago it was SEO, and before that it was email. Everyone wants into the new, the shiny, the really glittery with the high potential payoff, and for those few that do succeed in making the Ebonweave of marketing, the payout is handsome.

But.

But there’s more than enough money in the marketing equivalents of wool cloth. In the rush to social media, people forgot search optimization. In the rush to search optimization, people forgot email marketing. All along the way, there are lots of valuable methods that generate real results and real income, and those rushing to reach Grand Master Social Media Marketer are leaving money and opportunity on the table.

Remember your wool cloth. Revisit the things that used to be hot and see, now that they’ve reached maturity, just how quietly profitable they can be. Some things won’t be any more, but some things perceived as a commodity could still be one of your best sellers if you’re good at it and the attention deficit crowd has moved onto whatever new shiny has appeared for the day.

Good luck farming your wool cloth.

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The only green shoots are the ones you’re smoking

Posted by Christopher S. Penn on Jul 9, 2009 in Economy, Money | View Comments

I present two charts.

First, via Blytic, a look at food stamp usage and unemployment.

You don’t have to be a rocket scientist or an economist to figure out that this recession still has legs and a long way to run before we even begin to approach “normalcy”. Anyone talking about recovery is being a little on the premature side, don’t you think?

Second, via Barry Ritholtz:

Again, you don’t need a Ph.D. in economics to figure out that the housing bubble still has a long way to come down. A 4 year old with a ruler and a crayon could diagram out the long term mean and see that when it comes to reversion to mean on a multi-decade basis, we are still far, far away from the mean, which indicates that housing prices still have a long way to drop.

When you strip away the spin of government press flacks and media outlets desperate to gin up advertising revenue by getting consumers to spend unwisely, when you reveal the data as opposed to the opinion, the news is less than good, and the calling of a bottom, recovery, and green shoots is premature at best.

So what does this mean for you?

If you’ve been getting by, keep doing what you’ve been doing, only moreso. Thrift is the new black. Keep watching the fridge and the toilet paper.

If you’ve not been getting by, I’m sorry. There’s not much advice or counsel I can offer that hasn’t already been thrown at you a dozen times over. Consider putting a few hours into setting up some affiliate stuff, knowing that a payout if successful is probably 30-60 days away, but it might be a little supplementary help. If you’re job hunting, take what you can get.

Above all else, if there’s a single concept you must get sooner rather than later, it’s that positive cash flow means everything in this environment, whether it’s your business or personal life. Positive cash flow is pretty much all that matters for the short term. Get more money coming in than going out.

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I was on a boat called PAB09

Posted by Christopher S. Penn on Jun 22, 2009 in Conferences, Economy, Marketing, Money, New media, Podcasting, Rant, Video | View Comments

Podcasters Across Borders 2009 has wrapped up and the team of Mark Blevis and Bob Goyetche threw yet another impressive event. This year’s PAB theme was ostensibly bringing outside knowledge into the podcasting world, but the general subject of many of the presentations was on story more than anything – ways to more effectively communicate your story from Six String Nation to a Hollywood career. There were some spectacular new tools and techniques debuted which I look forward to integrating into my shows, the Financial Aid Podcast and Marketing Over Coffee, ideas that I think will, if they work well, bring things up a notch. Also picked up some great new photography techniques I’ll be trying out soon.

Along the way, I presented an 18 minute talk on monetization and why it’s vital to new media. Longtime readers of this blog will find many of the themes to be as familiar as old friends.

I also did my usual Sunday morning semi-improv presentation, My Top 20 Social Media Tools. Unlike the other presentation, I’m not publishing this presentation in any context, and here’s why: you had to be there and ready.

The Sunday morning presentation is always a tough one for people to make. It’s at 8 AM, which, after a night of partying, only the hardcore attendees can usually make. Delivering a super-tight, all-meat presentation that many have expressed a desire to see is my way of thanking them for making that extra effort to show up.

It’s also part of a martial arts lesson my teacher, Mark Davis of the Boston Martial Arts Center, is constantly reinforcing with us. Very often in the black belt class, he’ll show a technique only once as a way of helping us train our minds to capture and catch as much information as possible, to be vigilant about paying attention.

Social media in some ways makes us reliant on the crowd, reliant on the tools, reliant on waiting for someone to retweet or blog or podcast an important event. That laziness – and it is mental laziness – softens our ability to capture vitally important things that happen which may never happen again. Think about your own life. Have you ever had the experience of missing a child’s first important event, missing a news story break on the street right in front of you, missing a key piece of information at a conference? I know I’ve missed information, especially in the dojo, because of a lack of focus. I know I’ve missed some terrific photos due to inattentiveness.

Thus, that presentation will never happen again, at least not like that. The slides won’t be posted, the video won’t be uploaded, the information never shown again. If you were there – fully and wholly there, meaning you were paying attention and not twittering, blogging, chatting, etc. – then you got some information I hope you find useful. If you weren’t there, then please make the effort to actually show up at events like Podcasters Across Borders or PodCamp rather than hoping someone will live stream/live tweet/live be there for you. You’ll find that there are many more gems from the weekend which will probably not be published from other presenters and attendees as well.

Also, big shout outs to all of the longtime friends and fabulous conversations from the weekend, from Marko Kulik’s photo advice to intense debates about the future of media with Whitney Hoffman, Tod Maffin, and Julien Smith, to the many other great conversations over the weekend.

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How do you reconcile openness and secrecy?

Posted by Christopher S. Penn on Jun 17, 2009 in Economy, Money, Social networks | View Comments

Here’s another serious topic for discussion: how do you, in social media, reconcile openness and secrecy?

Let me give you an example from World of Warcraft. One of the side parts of the game (a very big side part for me) is the in-game economy. You make gold by creating stuff, by killing stuff, or by trading with other players for their stuff. In the game, there are “secrets” – great spots for earning gold through killing things or great tactics to use in the Auction House (an in-game eBay of sorts).

These secrets are powerful, capable of generating hundreds or thousands of gold a day, compared to the average player who earns perhaps a few dozen gold a day. The catch is this: their value decreases in direct proportion to the number of people who know and use the secrets, because the server’s economy is a zero sum game – if I know the secret and you learn it, at best our earning potential is halved, unless you’re truly incompetent.

There are lots of similar examples in real life – in the world of search engine optimization, Google Juice is more or less a fixed sum game. If I learn a powerful SEO tactic, the more people who know it, the less value it has.

Contrast this with the social media world of sharing everything (from the mundane to the powerful), openness, and transparency. If you share something of value, your social currency increases among those you share it with.

Here’s the questions I have for you: how do you value a secret vs. the social currency earned for sharing the secret? Which is more valuable to you, and in what context?

Please leave your thoughts in the comments. Yesterday’s discussion was especially good to read, so I look forward to hearing less from me and more from you.

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The eye of the storm

Posted by Christopher S. Penn on Jun 1, 2009 in Economy, Money | View Comments

A couple of years ago, I posted a graphic of the mortgage resets from Credit Suisse First Boston. Let’s see where we are now.

Congratulations to all. We’ve made it through the subprime crisis and only lost GM, every investment bank, nearly wiped out the FDIC Deposit Insurance Fund, put 1 out of 8 homeowners late or in foreclosure on their mortgages, and sent the economy into a tailspin. Otherwise, we made it through the subprime crisis.

We’re ready to start growing again, right?

Except… except the pool of alt-A and option ARM mortgages (all of which is defaulting at the same or higher rates of default than subprime 2 years ago) is still ahead, and it’s 50% bigger than the subprime mortgage market ever was.

If you’re thinking the worst of the storm has passed, it’s more like the eye of the hurricane. The second, stronger wall of the storm is arriving shortly. If you’re thinking that now is the time to spend a little more freely, to open up your wallet, think again and batten down the hatches. If anything, now is the time to increase your financial conservatism, to tighten spending if you can. Only once the storm has fully passed – in a couple of years – will it be time to go outside and start planting anew.

For more detailed charts, check out this post on Mish’s blog.

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Turning this economic ship around

Posted by Christopher S. Penn on May 10, 2009 in Economy, Money | View Comments

Take a look at these three charts.

Bloomberg’s commodities index of indices:

Commodities, or commodity futures, are investments in the future value of things like rice, gold, oil, cattle, and other tangible goods.

Baltic Dry Index:

The Baltic Dry Index is an index of costs to ship things on cargo ships. As BDI goes up, the price to ship something goes up. Unlike most investment metrics which are based on future value, BDI measures what it costs now to ship something. BDI is important because you don’t buy shipping if you’re not moving stuff to sell.

New Jobless Claims:

This is the number of new unemployment claims, measured weekly.

All of these charts show stabilization in the economy – arresting the freefall. Is it because of sound economic policies, stimulus, or the natural course of time and the business cycle? Hard to say. Certainly anyone promoting their own interests will claim that they’re the key influencer, but I suspect it’s all of the above with an emphasis on natural market dynamics. Even the largest forest fire eventually runs out of things to burn and snuffs itself out in time.

Once the fire has passed, it’s time for the forest to regrow. Small, tentative steps at first, little sproutlings and seeds, but regrowth always happens.

I still think there’s other parts of the forest just catching fire now – commercial real estate, credit cards and last-resort consumer credit, etc. – that will burn for some time to come. That said, there is cause for optimism, however cautious. Be on the lookout for areas of regrowth that you can partake in and carefully wade in.

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