In the long term, Best Buy’s cloud API vision is to give consumers the power to buy products quickly and easily regardless of how or where they prefer to buy—on their smart phones, their tablets, their PCs, or their local Best Buy store.  To realize their vision, Best Buy started working a couple years ago with Mashery to tap Mashery’s cloud API expertise and technology.  With help from Mashery, Best Buy was able to launch their first cloud API’s in just a few months and with a lot of practical guidance from Mashery on best practices in cloud API design.  Since then, they have become experts in their own right with their own best practices for cloud API marketing in the retail industry.

Today, Best Buy offers cloud API’s that successfully serve two fundamentally different developer communities:  large enterprise developers and smaller “long-tail” developers.

Smaller long-tail developers join the Best Buy affiliate program to earn sales commissions by using Best Buy’s cloud API’s to build links into their apps that drive traffic to Best Buy’s site.  To serve these smaller long-tail developers profitably, Best Buy minimizes its support costs with self-service documentation, an interactive cloud API Test Console, an easy-to-use Widget Generator, and even a WordPress Plugin.  Developers power their applications with a full range of data from Best Buy’s systems, including stores, categories, products, offers, and reviews.

“Our off-line competitive advantage is our thousands of physical store locations where customers can get what they want without waiting.  Our API’s turn that off-line advantage into an on-line advantage, too.”

—Steve Bendt
Partner Acquisition and Business Development Manager

Larger enterprise developers like Citibank, Chase, and eBay earn a revenue share by partnering closely with Best Buy to get access to the Commerce API which includes all the cloud API’s needed to build a full-featured e-commerce system tightly integrated with Best Buy’s own internal systems.  Beyond just driving traffic, enterprise partners use the Commerce API to drive actual customer transactions.  With larger revenue numbers driven by enterprise developers, Best Buy can afford to go beyond self-service support and work closely with enterprise development teams to help them build and launch e-commerce systems on top of Best Buy’s cloud API’s.  These close working relationships with enterprise partners are now driving much of the innovation in Best Buy’s cloud API’s today, promising to improve Best Buy’s cloud API’s for both long-tail and enterprise developers alike.

But the most powerful part of Best Buy’s cloud API marketing strategy is not in how Best Buy segments developers to serve both enterprise and long-tail developers.  It’s Best Buy’s seamless blending of both the on-line and off-line activities in the customer’s purchase process that helps Best Buy stand apart from major e-commerce competitors like Amazon.com.

According to Steve Bendt, Best Buy’s Partner Acquisition and Business Development Manager, “Our off-line competitive advantage is our thousands of physical store locations where customers can get what they want without waiting.  Our API’s turn that off-line advantage into an on-line advantage, too—but not just for Best Buy, for every developer out there who wants to compete with pure-play Internet retailers.”

Regardless of whether a customer buys through a long-tail developer’s app or an enterprise developer’s e-commerce system, the customer gets instant gratification with in-store pickup at the nearest brick-and-mortar Best Buy store.  Customers don’t have to wait several days for a package to arrive as they would with a pure-play e-commerce retailer like Amazon.com.  Long-tail developers build apps on Best Buy’s cloud API’s that send traffic to the Best Buy website, which then offers in-store pickup directly to the customer.  But enterprise partners can use Best Buy’s cloud API’s to build in-store pickup as a purchase option directly into their own e-commerce systems without users ever having to leave the system to go to Best Buy’s website.  Best Buy’s vision is to offer long-tail developers the same Commerce API at some point in the future.

By exposing in-store pickup capabilities through their cloud API’s, Best Buy has extended its reach into Amazon.com’s turf.  With cloud API’s, Best Buy has empowered countless developers to make Best Buy’s products available on a limitless variety of devices, anywhere a customer may want to shop.  And by giving these developers’ apps the cloud API’s they need to offer in-store pickup to customers, even the smallest garage startup developers have a competitive edge letting them go toe to toe with pure-play e-commerce retailers like Amazon.com.  In this sense, Best Buy’s cloud API marketing strategy serves both to drive more revenues and to leverage Best Buy’s biggest competitive advantage against pure-play e-commerce retailers.

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A Quick Primer on Crossing the Chasm

As software and Internet companies boost revenues with cloud marketing, they’re effectively triggering a land rush of new and innovative applications that would not have been economically viable any other way.  Entirely new companies are springing up to grab their share of entirely new markets by building their core products on top of cloud marketers’ platforms.

The advantages of building a product on top of another company’s cloud marketing platform can be quite compelling.  You tap into an existing market that doesn’t require early evangelism, and your product development costs plummet when you focus on your unique value proposition, letting other companies build your product’s not-so-unique back end systems.

Just as engineering departments get budgetary leverage by reusing platform technology built by another company for cloud marketing purposes, marketing departments also get revenue-boosting leverage in the form of market awareness, interest, lead generation and the inherent value already baked into the cloud marketing platform itself.

“We’ve been able to focus nearly all of our development effort on functionality that adds value for our users.”

—Simon Stanlake
CTO, HootSuite

One great example is HootSuite Media, a social media SaaS company founded in 2008 and based in Vancouver, Canada.  Their namesake product, HootSuite, is an on-line application that makes it easy for professional marketers to collaborate as a team to engage prospects and customers through social media.  A team of marketers can use the same group of social media accounts in a coordinated fashion using HootSuite.  And HootSuite combines every major social network into a single, uniform interface, including Twitter, Facebook, LinkedIn, Ping.fm, WordPress, MySpace and Foursquare, not to mention general RSS integration.

By focusing exclusively on the application layer, HootSuite’s engineering team didn’t have to invest in reinventing the wheel by building their own messaging networks to compete with Twitter, Facebook, LinkedIn and other social media networks.  Instead HootSuite could leverage those existing networks through APIs and focus their development efforts on the unique value of their core product.  The social media firms benefit from exposing their APIs as part of an overall cloud marketing strategy, because it means more traffic and usage for them, which in turn increases the overall value of their networks.

According to Simon Stanlake, HootSuite’s CTO, “We’ve been able to focus nearly all of our development effort on functionality that adds value for our users.  We let the social media companies do what they do best while we do what we do best.  In the end, it’s the user who comes out on top.”

“[Our users] already know social media has value.  They just need a way to tap into that value.  That’s where HootSuite comes in.”

—Ryan Holmes
CEO, HootSuite

When it comes to adding value for users, both HootSuite and the underlying social media networks add to the total value users receive.  The social media companies provide the network for users to communicate on, while HootSuite provides users with a streamlined, collaborative, team-based approach to interacting with those communication networks.

And just as HootSuite drove down development costs by leveraging external technology, so too has HootSuite tapped into the benefits of externally funded marketing efforts.  Instead of going through the risky startup phase of evangelizing a new solution, HootSuite has inherited the preexisting market awareness and interest already surrounding popular social media networks.

As HootSuite’s CEO, Ryan Holmes, put it, “We’ve seen overwhelming demand among Internet marketing professionals who need an application like HootSuite to help them develop an organized, team-based approach to handling social media.  They already know social media has value.  They just need a way to tap into that value.  That’s where HootSuite comes in.”

“It seems all but inevitable that great companies over the next 30 years will also be building great products on top of Internet-based platforms driven by a cloud marketing strategy.”

But HootSuite is by no means the only company leveraging cloud marketing as a platform on which to build innovative, new products.  The cloud marketing initiatives of companies like Google, Twitter and Facebook have prompted countless developers to build applications on top of a platform built for cloud marketing purposes.  One need only browse through app directories like Google Apps Marketplace, oneforty or the Facebook Platform Showcase to find numerous companies building cool, new applications on top of these companies’ cloud marketing platforms.

Of course, the benefits of leveraging cloud marketing platforms must be weighed against some serious risks, especially if you’re relying on such a platform as an essential part of your core business.  All the usual question marks about any cloud computing service still apply, including data security, performance and scalability, service level agreements (SLA) and even the long-term solvency of the company you’re relying on.  There are also strategic risks.  For example, if the company offering the cloud marketing platform later decides to build a competitive application, you may find it impossible to compete effectively.

But just as great companies have been built by selling software products that rely on Microsoft’s operating system “platform” for nearly 30 years now, it seems all but inevitable that great companies over the next 30 years will also be building great products on top of Internet-based platforms driven by a cloud marketing strategy.

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Amazon offers yet another example of how cloud marketing is changing the nature of marketing on the Internet.  Instead of the classic model of driving traffic to the Amazon site and then converting that traffic, Amazon is increasingly bypassing the need for traffic and conversion altogether by driving revenues directly into their business through cloud-based APIs and configurable widgets.

The original Amazon affiliate marketing program made it easy for anyone with a website to create a link to any of Amazon’s products and earn a commission check for site visitors who clicked through the link to Amazon’s site and bought the product.

Today, the Amazon affiliate marketing program now offers website owners a chance to keep their visitors on their own site while still selling Amazon’s products.  The newly released Amazon aStore now lets website owners embed Amazon’s entire shopping cart functionality directly in their own websites.  With aStore, a website owner can now attract site visitors, show them a wide variety of Amazon products, process their credit card and complete their purchase on-line without the visitor ever leaving the site to go to Amazon’s site.

Affiliates can also embed a variety of highly interactive widgets on their websites that will make product recommendations, search Amazon’s product inventory, showcase hot deals or just promote the site owner’s personal wishlist.

Amazon even offers a Product Advertising API that lets developers build their own custom software and websites integrated directly into Amazon’s back end systems.  Developers can tap into Amazon’s database of products, sellers and reviews.  They can even code their applications to interface with Amazon’s search and shopping cart functionality.

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For as long as startups have been on the cutting edge of technology, they’ve struggled to win large, marquee accounts.  With a critical mass of well known reference accounts, startups boost their credibility and expand beyond early adopter markets into mainstream markets.

“Cloud companies” selling any kind of new tech over the Internet–from SaaS to PaaS to IaaS–face the same challenges startups have always faced when pursuing those all-important marquee accounts.

But now Windows Azure appliances promise to knock down some of the greatest barriers cloud companies face when selling into large, enterprise accounts.

One of the greatest barriers to selling cloud technology to enterprise prospects is the fear, uncertainty and doubt that executives at these companies have toward the Internet and the loss of control that the Internet demands.  Executives who might otherwise want the economic benefits of offloading their tech to a cloud provider stop short of signing on the dotted line when they consider the security implications of their data flying around the public Internet and being stored by third party cloud providers.  They would rather pay more to have their IT departments build and manage all their tech in-house, just to keep direct control.

That’s where Windows Azure appliances come in.  If we are to believe Microsoft’s claims, these appliances will offer a turnkey hardware and software solution for any company to build and manage their own private cloud.  Now executives at large companies will get a chance to have their cakes and eat them, too.  Their own IT department will be able to deploy a cloud technology without ever having to touch the unwashed public Internet.

Startups looking to knock down sales barriers in high-end enterprise markets will devise “complete solutions” that include their public cloud offerings running on private clouds powered by Windows Azure appliances.  The right Azure-based solution could instantly neutralize sales objections based on security concerns and lack of direct control.

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In a recent post on aligning content marketing with your customer lifecycle, you may have noticed that every micro-transaction in a good content marketing plan requires a prospect to make some commitment in time and attention.  The customer lifecycle begins with trading companies’ content for prospects’ attention and then gradually transforms into trading companies’ products for customers’ business.

“To stand out from all this background noise, pack as much value into every word as you can.”
Jill Konrath

In the early stages of the customer lifecycle, the prospect’s time and attention is the most important asset the company seeks to get from the prospect.  This is the stage when the company needs to communicate its brand messages to convince the prospect that the problem the company solves really exists, that the company is uniquely positioned to solve that problem, and that the problem is a high enough priority that it should be solved now.  All of this education requires the prospect to donate time and attention to the company’s messages.  If the company’s content marketing cannot compel the prospect to spend the time and attention to get past the earliest stages in the customer lifecycle, the prospect will never become a paying customer.

At the same time, the early stages of the customer lifecycle are exactly when prospects are least likely to donate their time and attention.  They’re already inundated with information overload from countless other companies pushing their messages.  They don’t know your company from the hundred others barraging them every day.  And your company has not yet established any credibility or trust to justify spending any time listening to your marketing messages.  B2B prospects don’t make impulse buys.  They’re not lounging on the couch or in line at the store wondering what to buy.  They’re busy people with hectic schedules and they’re only willing to spend time and attention on something that will help them accomplish their missions.  Everything else is noise.

So what’s a content marketing professional to do?  The whole customer lifecycle depends on getting early-stage prospects to take that first step.  A prospect’s time and attention is critical to achieving that goal.  But the prospect places the heaviest premium on time and attention at this early stage in the relationship.

I was recently discussing this very dilemma with Jill Konrath, author of the blog Selling to Big Companies and the new book, Snap Selling, which focuses on the topic of getting your message through to prospects whose scarcest asset is time and attention.  So I asked Jill for a quick summary (yes, putting her to her own test) of what content marketing folks can do to break through to time-sensitive, early stage prospects.

Here’s what she had to say:  “You’ll speed up sales and convert more customer if you offer a simple message that’s aligned with your prospects’ top priorities, put high priority decision points in front of them in a timely manner, and become the person your prospects can’t live without.”

In case you’re still reading past the hook, she went on to offer more insights into exactly how you can put her advice to good use:

“Today’s decision makers have less time than ever.  Their inboxes and smart phones are filled with useless marketing messages.  Getting their attention is more challenging than ever.  To stand out from all this background noise, pack as much value into every word as you can.  Keep your message simple so it can be read quickly.  Make sure it’s relevant to their top priorities.  Once you’ve got their attention, don’t lose it.  Make sure you’re always on topic with what matters to them most.  That’s the  path to being the one person your prospects can’t live without.”

Although Jill’s advice seems like common sense in many ways, I’d be wealthy beyond all measure if I had a nickel for every time I saw a marketer fail to execute on what Jill is describing.  Jargon replaces message simplicity.  Product-focused marketing content fails to focus on the top priorities of prospects in favor of feature-oriented “show up and throw up” content.  And sales reps rarely reach the status of trusted advisor.

So if you’re looking for ways to get early stage prospects to donate their coveted time and attention, I’d recommend listening to Jill’s advice.  She’s nailed the key points right on the head.  In my own quick summary of her key points:

• Keep the message short and simple.
• Focus your content marketing from the point of view of the prospect (not your company or products).
• Frame your content marketing within the context of solving the prospect’s highest-priority problems.
• Create content that positions your sales reps as trusted advisors.

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Conversely, good content marketing is like a good date.  Buying from a company with good content marketing feels easy and natural, never pressured or hurried.  To practice good content marketing, guide your prospects gently through the customer lifecycle, building credibility, trust and perceived value gradually, so that they never feel like they’re the target of a sales job.

“Think of each content marketing step as a micro-transaction.”

Good content marketing makes buyers feel like it is virtually effortless to buy from you.  Your content marketing starts prospect relationships with minimal commitment required.  As prospects gain more interest, your content marketing escalates the relationship one step at a time, gently escorting your prospect along the road to becoming a paying customer.  Once the relationship has grown to maturity, buying from you becomes little more than just a small step up from the relationship your prospect already has with your company.

To align your content marketing with your customer lifecycle, just think of content as steps on a stair case.  Measure the height of each content step by the amount of commitment your prospects must make and the amount of value your content must provide.  The first content your prospects encounter should mirror the first step on a stair case, requiring minimal commitment from the prospect.  But that first content step should also lead to the second content step, which should require only a little bit more commitment and lead to the third step and so on.

Think of each content marketing step as a micro-transaction.  The prospect commits something of value to the relationship and your content provides something of value in return.  At first, prospects won’t be willing to offer much, because they don’t believe your claims, they don’t trust you yet, and they’re not even sure they care about what you’re offering.  So start with a simple content marketing micro-transaction that asks them to commit to something easy for them to give up, and return the favor by giving them content they value substantially more than what they must give up.  As one content marketing micro-transaction leads to the next, gradually increase the commitment they must make to get to the next step, but also increase the value of the content you offer, always making sure that they feel the commitment they made was well worthwhile.

Here are some examples of gradually escalating commitments to ask for from your prospects in return for your valuable content:

• Spending time and attention
• Clicking a web link
• Providing contact information
• Replying to an e-mail
• Taking a phone call
• Meeting in person
• Providing billing information
• Paying money
• Agreeing to a yearly contract
• Providing valuable content of their own

Here are some examples of the value your content marketing can deliver while gradually ramping up the relationship with your prospects:

• Entertainment
• Educational information
• Useful information
• Demos
• Freemium product use
• Low-cost introductory products
• Advanced add-on product features
• Full featured products
• Volume discounted pricing
• Sense of importance
• Influence over future product direction

Let’s take an example of a gradual, step-by-step content marketing plan that supports a typical customer lifecycle.

While these steps probably don’t reflect your own customer lifecycle perfectly, they serve as just one example of how to use content marketing to create a series of micro-transactions that gradually ease prospects along your company’s own unique customer lifecycle.

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If your product strategy doesn’t already consider the impact of cloud computing, you might just want to keep a close eye on your lunch, because someone’s about to eat it.  If you’d rather hold on to your lunch and maybe even eat the other guy’s lunch, then here are 3 ways a cloud computing product strategy could boost your revenue growth.

1.  Turn infrastructure into products

If you’re selling an application—whether enterprise software or Software-as-a-Service (SaaS)—pop open the hood and take another look at the engine.  You just might have a few modules hidden within your application’s infrastructure that could be of value to other application companies.  Expose these value-added modules as cloud computing products and charge for them on a subscription basis.

2.  Sell data

Do you collect data that might be interesting to someone?  Offer your data through a cloud computing web service and charge a subscription fee.  Is the data sensitive, or does it belong to your users?  No problem.  Aggregate the data into interesting metrics instead, and then productize the aggregated results as your cloud computing product.

3.  Generate leads with viral promotional products

Offer free cloud computing products such as widgets to website owners and include a tasteful attribution link to your own website.  Widely distributing simple widgets with attribution will drive traffic directly to your site, generating leads.  Handle the attribution just right and you’ll also gain significant SEO benefits from adding countless back links to your site, driving up your page rank and getting better organic search results placement.  Then even more leads will flow directly from search engines.

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“Today there is one emerging trend in high tech which is promising (or threatening) to shake up the technology stack for countless high tech companies:  Cloud computing.”

In world of high tech product strategy, we have a third option I like to think of as “stack integration.”  Much like vertical integration, a stack integration product strategy means you plan to expand upstream or downstream in the technology stack.  Since products at higher layers in the stack often generate demand for lower layer products, the product strategy implications of stack integration are very much like those of old-school vertical integration.

For examples of successful stack integration product strategy, look no further than Oracle’s move from the database business—its core business for about 10 years—into the enterprise applications business, and eventually into every nook and cranny of the entire enterprise software stack.  Or take a look at Microsoft’s expansion from the operating system business into the office productivity application business.  More recently, witness Google’s expansion from the ad-sponsored B2B2C application business into the mobile operating system business.

Although the “technology stack” might be defined differently depending on your personal corner of the high tech industry, you can think of it in general terms as looking something like this:

• Services: Integration services, training or consulting
• External Applications: Public or customer-facing applications, such as websites
• Internal Applications: Productivity-boosting applications, such as CRM, SFA or ERP apps
• Infrastructure Software: Software products embedded into the guts of other software, such as databases or data integration middleware
• Data: Exactly what it sounds like:  the foundational tier of any n-tier software architecture.
• Operating Systems: Software that talks to hardware so that other software doesn’t have to
• Hardware: Any tech you can touch

Some of the advantages of a product strategy of moving higher up or lower down the technology stack can include:

• Higher price points
• Higher sales volume
• Lower cost of sale
• Less commoditized products
• Newer, less competitive markets
• Market leadership opportunities in newer, growing markets
• Closer access to the purchasing decision makers for your current market

Just as with good old-fashioned horizontal integration, the right product strategy for you may be to dominate your own niche within one layer of the technology stack.  Or, more like a vertical integration strategy, your best product strategy may instead be to expand by offering products higher or lower in the technology stack.

Today there is one emerging trend in high tech which is promising (or threatening) to shake up the technology stack for countless high tech companies:  Cloud computing.

Whether your company sells SaaS, enterprise software, consumer software, ad-based B2C apps, mobile apps or any other high tech products, your product strategy should consider the opportunities and threats cloud computing poses to your business.

In a future blog post, I’ll go more in-depth on exactly how you might have an opportunity to define a product strategy that leverages cloud computing to expand your market share, reach new markets you didn’t even know you could tap, or just pummel your competition into a pulp.  Subscribe by e-mail or by RSS now so you don’t miss a single blog post.

To the rescue comes the viral coefficient, just the magic elixir you need.  With the viral coefficient you now have a trusty compass guiding your every step toward that Holy Grail of viral marketing.  All you have to do is point your viral coefficient to any number greater than 1, and you’ve officially “gone viral.”  Congratulations! Viral bliss awaits you.

“Like a rear view mirror, the viral coefficient shows you where you want to go only after you’ve already gone there.”

Snap out of it!  If you’re focused on the viral coefficient, you’re probably living in a fantasy world.  Although it may be useful to help a VC determine if a portfolio company’s viral marketing is resulting in viral growth, the viral coefficient is virtually useless to marketers.  Instead of helping a marketer discover how to make a marketing campaign go viral, the viral coefficient only tells the marketer after the fact that the company’s overall viral marketing efforts have already succeeded.

Just to be clear about definitions, the viral coefficient is simply the number of new customers your average existing customer generates.  If your average customer generates more than 1 new customer, then your customer base will grow exponentially—or “virally.”

The real trick is not measuring success after you’ve achieved it, but figuring out how to succeed repeatedly at creating viral marketing campaigns.  Like a rear view mirror, the viral coefficient shows you where you want to go only after you’ve already gone there.

To figure out how to get viral marketing growth, it helps to break down the viral coefficient into key components that we can either control or at least estimate.  To do this, it’s important to understand the viral coefficient’s limitations which we need to overcome.

Sales Process Bliss

The viral coefficient is blissfully ignorant of the sales process.  By measuring the number of new customers generated by existing customers, it looks at the entire customer lifecycle as a single event.  The viral coefficient ignores the viral marketing opportunities that can exist within sub-processes within the total customer lifecycle.

The Time Value of Viral Marketing

The viral coefficient has no measure of time.  If you achieve a viral coefficient of more than 1, but you have a 9 month sales cycle followed by an 18 month implementation time, followed by 6 months of customer usage before your average customer starts generating referrals which then take another 3 months to warm up new prospects, and if you win an average of only 10 high-priced deals per year…then, well, you can expect your revenues to explode from viral marketing sometime in the next by the year 2100.

All Alone in the Universe

The viral coefficient assumes that only customers create a viral feedback loop.  The reality is that most viral marketing relies on viral campaigns that are not driven by customers at all.  Even the classic example of Hotmail, which made the term “viral marketing” itself go viral, demonstrates this simple point.  Hotmail went viral because its users spread the word about Hotmail every time they sent an e-mail through the Hotmail service that included a link encouraging all e-mail recipients to sign up for a free Hotmail account.  Hotmail’s customers were not the people sending e-mails.  Hotmail’s customers were the advertisers who wanted access to users’ eyeballs.  By the standards of the viral coefficient, it’s debatable whether Hotmail—the progenitor of all viral marketing—ever went viral at all.

Eternal Bliss

Nothing lasts forever.  This is as true of viral marketing campaigns as it is of deodorant, puppy love, and the center of a tootsie pop.  But the viral coefficient seems to defy the laws of physics with no known expiration date.  The viral coefficient assumes that a viral marketing campaign can continue growing a customer base ad infinitum.

Old Fashioned Direct Marketing

The viral coefficient gives no consideration to the number of Patient Zeroes initially infected by direct marketing.  Although the initial pool of Patient Zeroes infected by direct marketing instead of viral marketing might have no effect on how steep the exponential growth curve is, the size of the initial pool of Patient Zeroes can certainly have a big effect on how long it will take before that exponential growth curve becomes significant enough to matter.  And, given that viral marketing campaigns don’t last forever, a good jumpstart from direct marketing can make all the difference between a viral marketing bang and a viral marketing whimper before the viral coefficient dips back below 1 again.

Gee, Thanks for Being Such a Downer, Chas.

If I’ve harshed your mellow by dashing your faith in the viral coefficient, well I’m sorry, but the first step on the road to recovery is admitting you have a problem in the first place.  So now that we’ve gotten the bad news out of the way, I promise to dedicate a series of blog posts to restoring your faith in viral marketing.  I’ll replace the viral coefficient with a relatively simple mathematical model that is truly useful to marketers, not just VCs.  I’ll also show you a simple process for using that model to find plenty of viral marketing opportunities.  Unlike the viral coefficient, I’ll show how to create viral marketing rather than just recognizing it after you’ve achieved it.