Category: Marketing

The Value of Luck

Few people are as good at framing ideas as Rory Sutherland. In a talk he gave at the SprintAd-dagen in March of 2019, Rory opened up with the following thoughts on the role of luck and experimentation under capitalism:

“You’ve got to leave enough money free and you got to enough eccentric things to give yourself the change to be lucky…

One of the reasons that a lot of people don’t like capitalism is that some of the people who do very well under capitalism are actually total idiots. They happen to stumble into a business at exactly the right industry at the right time. They got lucky.

And even spectacularly intelligent people, I think we can argue…I don’t think there is any argument that Gates and Jobs are hugely intelligent….they were both spectacularly lucky as well as being hugely intelligent…partly by accident of their birth.

If you notice, a lot of those people, Ellison, Gates, Jobs – the giants of the tech industry – were all born within about 18 months of each other. And there was a tiny moment where you had to be young to make it in tech. Five years earlier and they would have ended up working for IBM. Five years later and it would have been to late.

One of the important things about capitalism, interestingly, is that it is a mechanism for rewarding people simply for being lucky. And the strangest thing about that is that it is precisely that, that makes people so angry about capitalism.

But if you don’t have a mechanism that rewards luck, the majority of great discovery don’t get banked.

If you look at the history of science, there is probably as much you can attribute to lucky accidents… Penicillin, Viagra, for example…the two wonder drugs. Those were both a product of completely lucky accidents.

The discovery of vaccination was just one man that happened notice that milk maids didn’t get smallpox. It’s just those tiny things that can have huge effects and we need to leave enough space to actually be lucky.

And the very strength of capitalism is precisely that it rewards ideas that at first make no sense.“

Rory’s full talk at SprintAd-dagen

More on How to Value Stuff

Generic vs Brandable Domains

I recently listened to a podcast on Domain Wire with SparkToro’s Rand Fiskhin (better known as the founder of the SEO analytics company MOZ). He also wrote the book Lost and Founder.

You can listen to the Domain Wire podcast episode here. Below are interesting transcripted bits from the interview.

Connect with How to Value Stuff on Twitter

A Brief History of Domain Names

Asked about the history of domain names and on the importance of domain names, Fishkin said the following:

“In the early years of SEO and Google, and of search engines being the primary way of how we find everything, there was a good 10-15 year period, at least, where keywords (the words and phrases that people search for and how Google makes associations between those words), using those keywords in domain names could actually have a really positive beneficial impact.

These were sort of the gold mine days of these semi-ridiculous domain names. You want to rank for “best auto dealer Seattle”? Well, you should register best-auto-dealer-seattle.com.

And that ended somewhere between seven or eight years ago. It started getting much less powerful. And about three or four years ago it really dropped again. And today, it is very minimally beneficial. And I would actually argue that you lose out, even just in terms of just SEO.

You really lose out when you compare the value of a domain name like that, compared to something that I would call Consumer Brandable. A domain name and a business name associated with that domain name that people can say, speak, hear, remember, build an association with.

Keyword rich domain names are just not those.”

Is there still value in the one word exact match domain words (like clothing.com)?

Fishkin: “I personally wouldn’t do it. I would be much more inclined today to say… Look, there are people today who would invest in clothing.com. They think it has value. They think they could build a brand around it.

I would absolutely say that a short, pronounceable word that has no meaning but could be a memorable brand, is far better. So I would take Zappos over Shoes.com any day.”

What about actual words that are not the actual keyword that you are targeting?

Fishkin: “It’s plausible, but I think it is actually really challenging. I’ve seen a lot of challenges around this re-branding of a name that means something else. I don’t know if you remember, but Jonathan Sposato here in Seattle where I live, he was the founder of picnik.com. They struggled for years.

Picnik was a photo editing, storage and manipulation website. Sort of in the early days of Instagram and those kind of things. Picnik was a big player. They were bought by Google and probably integrated into Google Photos eventually.

The struggles over the years to get that domain name to mean the right thing to the right people. And to get over the cognitive dissonance between the slightly misspelled version of the word with the K at the end.

Lemonade (the insurance company) is I think a little bit more like Amazon where it can be brandable. It is definitely doable. I personally would not choose it, because I would not want to deal with the baggage and challenge of association. But I think a decent brand builder could use it.

The bank in Portland, Simple. They have been moderately successful I would say, building up a brand around it. It helps that the word is a adjective rather than a noun.

For you to rank you need to outrank the other meanings of the word

Fishkin: “Right. You have to get some serious traction and then outrank a lot of other things. There is almost certainly going to be other brands that also use the term simple. The same thing is true with Lemonade, right? You’ve got to outrank a Beyonce album?! Oh, man.

For that reason alone, I wouldn’t take Lemonade.com. Especially because there would be the natural and perhaps very reasonable accusation that you were trying to [piggyback of the album]. Especially so close to that albums release.

If it were talking 10 or 15 years on, its a different story. If you want to registered Thriller.com today, I don’t think anybody is going to complain that you are stepping on Michael Jackson’s toes. But if you registered Lemonade.com today, I could see a lot of Behive fans being…

The value of anchor text and exact match domain names?

Question: What about the value though, if I do have that exact match domain name – lets say I was selling shoes on Shoes.com – the anchor text that people would use to link to the website is shoes.com. Do you think that still has some value?

Fishkin: “Some, but it is declining every year. And it is much much smaller than it used to be. The really interesting thing today is that Google has got this system that has structure whereby the algorithm builds entity association with keywords and phrases.

I registered SparkToro.com and over the last couple of years, Google has come to associate SparkToro.com with audience intelligence and market research. all the things that the company does. So, the words and phrases that whatever press and reporters cover us with. And every journalist mentions.

I’m on you podcast and you are going to say something about that Rand Fishkin is the founder of SparkToro an audience intelligence software platform. I hope you are going to say that. In the text on theweb page that this podcast lives on.

From that, and hundred of thousands of others, Google is going to build up this entity to keyword association database. They know how to associate, whatever it is, Barack Obama with 46th President. They know to associate Harrison Ford with Indiana Jones. They to associate Andrew Altman with Domain Name Wire Podcast.

From that entity association build-up comes much of the value. In fact, sometimes even greater value then what you saw ten to fifteen years ago with anchor text and exact match keywords. And using shoes.com to link to shoes.com, which told Google that shoes.com was all about shoes and gave them a rankings boost.

It’s not to say that this is completely gone. There is still a fragment of that value left. It is just that you can achieve a lot of the same algorithmic input and value from essentially the entity graph then the anchor text.”

More about Domains and Brandable Names

The Value of Making Up Brand Names

In a recent episode of the Invest Like the Best podcast, Patrick O’Shaughnessy asked Rich Barton about his thoughts about coming up with brand names. His reply is a great guide on the value of brand names. 

Here is the gist of what Rich Barton said (this is paraphrased as I didn’t have much time to transcribe, but you can find the section on minute 56 in the podcast):

Rich Barton: “I love to make up words for companies. I love to make up brand names. It’s just a classic example of thinking long-term versus short-term. 

If you are thinking short-term, you think of the easiest most recognizable words. Put a dot com after it and that’s the name of your company. Blood.com. I don’t want to insult anybody by giving you the name of a real company. But a lot of companies have done that. And that’s great. The SEO is really great in the short term. Everybody knows what you do. It’s easy. 

What’s harder is to make up a word. But if you can do it and fill that empty vessel of a word with meaning and emotion, then long-term you will have invented something that actually enters the language.  And it is yours. It’s much better in the long-term. 

So, my rules of making up words – and I don’t think that every company should do it, but most I think) – but when I’m thinking about consumer brands, which is kind of my space. 

I have a few rules. 

  1. The first one is High-Point Scrabble Letters. For the Scrabble players out there […] you know that the highest point Scrabble letters are z and q. Those are 10. Why is z worth 10? Z is worth ten because Z is the least used letter in English. Which means that when you see it on a page, it stands out and is memorable.  
  2. Two syllables is good. I think fewer syllables is better. I think the sweet spot is two. Expedia was too long. It had the X which was great. It kind of invoked speed and expedition. But it was four syllables and was just too long. 
  3. Does it make a good dog name? That is rule number three. 
  4. Something interesting about the letters. Palindromes are really interesting. Double letters are interesting. Zoom is a really terrific one. They actually repurposed an existing word and then refilled it with a new definition. Zillow filled all of these goals so maybe I’m doing a kind retrofit. 

When people call me and ask me about making up words, then this is the checklist I go through.

Are you looking for a brand name? Make sure you have the .com domain ending. Check out available .com domains for memorable and readable names at Dragon Value.

10 Ways to Profit by being Less Logical than Anybody Else

Here at How to Value Stuff, we are all great admirers of Rory Sutherland. Rory is the head Ogilvy Advertising – founded by David Ogilvy, another man we greatly admire. David wrote a legendary book on marketing and sales, called Ogilvy on Advertising – and one of the most influential advertising professionals in the world today.

Rory has a fascinating view of how we perceive the value of the products and services we enjoy. In 2019, Rory published a book called Alchemy: The Surprising Power of Ideas That Don’t Make Sense, which was a follow up on a book he published the year before, Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life.

Here are 10 rules you can adopt which will help you profit by being less logical than everybody else:

1. The Opposite of a Good Idea can be another Good Idea

Nobody can blame you for getting at a single right answer regardless of the materials you used to get there. Conventional logic uses the idea of a single right answer. This is mostly needed where your job is in the line and you need to make everything right.

When it comes to driving at a single right answer, no subjectivity is involved in decision making and what you decide is what you deem right.

2. Don’t Design for Average

Solving a problem with an average person in mind is very difficult. Some models in conventional logic require you to solve a problem for people in aggregate. This can make problems very difficult to solve.

Do not limit yourself to the average person and focus on the fringes. That way, it is easy to find things that will be adopted by extreme consumers.  They can then be ploughed back in the mainstream.

3. It Doesn’t Pay to be Logical if Everybody Else is being Logical

Being logical in business will get you to the same place just like everybody else. In business strategy, it does not pay to be logical because being logical will get you to the same place where your competitors are going. In business, you need to be differentiating yourself away from your competitors.

Find out what your competitors are logically wrong about. If you find out what is wrong with their model, you are in a position to exploit it. Adopt contrarian thinking.

4. Our Attention affects Our Experience

The nature of our attention affects the nature of our experience. Quality is relative. The perception of quality is determined by the difference between expectations and experience. It is more difficult to change how a person experiences something than the expectation of that experience.

Rory gives an example of one of the best hotels he has stayed in. The hotel had previously been a prison or a police station. Everything from the bed and bathroom to the TV and wall hangings was very spartan nature.

Under most circumstances, you normally would have experienced this as a lack of quality. But the hotel was in East Berlin and the experience came across as authentic East Berlin. It fit the circumstances. It met what you would have expected from an authentic East Berlin hotel.

5. If there were a Logical Answer We would have found it Already

If a problem becomes persistent even after discussing it with every person who can relate to it, it means you are giving it a logical explanation. There is a solution somewhere to be found through conventional linear rationality approach.

Exposing everything to logic and the problem persists, it indicates that logic is not the answer to that problem. Gather some courage and test less rational solutions. Context is a marketing superweapon.

6. The problem with Logic is it Kills off Magic

Logic and magic cannot coexist. There is no magic where logic is involved. The rules of logic demand that there can be no magic.

Logic requires that you change your product instead of improving the perception of the product in order to enhance the customer experience. This confines you into doing exclusively objective things because you think that people perceive the world objectively.

7. A Good Guess which stands up to Empirical Observation is still Science

You should not let methodological purity restrict your capability of coming up with multiple solutions. It is good to allow solutions that come in randomly rather than being restricted to explainable solutions. The latter will hold you captive and will monopolize your progress.

8. Test Counterintuitive Things because Nobody Else will

Since you do not want to put your source of livelihood on the line, create a space in your business where you can test things that do not make sense. This will be an advantage to win over your competitor because your experiment will land you in a lucrative business idea that will make you outdo your competitors.

9. Don’t Solve Problems using only Rationality

Solving problems using only rationality is like playing golf using only one club. Using rationality as the only way of solving a problem will get your solution based on a very narrow path.

Solving problems by using only rationality will generate solutions that restrict themselves to a very narrow definition of human motivation and how they think, act and decide.

10. Dare to be Trivial

Sometimes big problems do not require huge intervention. On the contrary, a small thing can have an enormous effect. You do not have to do things in the correct order simply because it is the way they should be done. Small changes, such as alternating the order of options or changing relative scales, can yield an order of magnitude in results.