Hyperlinks Are Dumb And Bleeding Money; How To Ensure Yours Aren’t
When an email hits our inbox, we know not only who it’s from but their entire web imprint. LinkedIn can point out the profile of the woman you interviewed for a sales role last week and the gentleman you spoke with earlier in the year at a conference. And rest assured that the dining room set you checked out over the weekend at CrateAndBarrel.com will haunt your online experience for the forseeable future. Data — its collection and manipulation at scale — has revolutionized how we interact online. Homepages, banner advertisements and what we see in our Facebook timeline are all tailored-to-fit the reader, and we don’t give it a second thought. But the hyperlink, the key feature that distinguishes hypertext from text has remained largely unchanged since Sir Tim Berners-Lee invented the web.

Editor’s note: Oliver Roup is the founder and CEO of VigLink, a service that makes it easier to use affiliate programs on your blog or website.

When an email hits our inbox, we know not only who it’s from but their entire web imprint. LinkedIn can point out the profile of the woman you interviewed for a sales role last week and the gentleman you spoke with earlier in the year at a conference.

And rest assured that the dining room set you checked out over the weekend at CrateAndBarrel.com will haunt your online experience for the forseeable future.

Data — its collection and manipulation at scale — has revolutionized how we interact online. Homepages, banner advertisements and what we see in our Facebook timeline are all tailored-to-fit the reader, and we don’t give it a second thought.

But the hyperlink, the key feature that distinguishes hypertext from text has remained largely unchanged since Sir Tim Berners-Lee invented the web.

Websites generally, and search and online advertising specifically, would be barely recognizable today by their younger selves. But hyperlinks — their structure, how they’re authored and how we use and track them — have barely changed in 20 years. Consider:

• Inserting links by hand is a labor intensive process and has few tools. How about a recommendation engine to augment our own efforts? (Note: companies like Zemanta are a first step in this direction.)
• If a link is never clicked (i.e. 0% of the world finds it useful), why does it remain in content, distracting from meaningful / useful links indefinitely?
• Keywords in referrer logs have been mined to great effect by companies like BlueKai. (Although Google is slowly but surely taking that information away.) Isn’t where a user clicked out to just as informative? Why are we almost always ignoring it?
• Why do website visitors in Asia see links to online merchants in North America they are unable to purchase from, let alone access?

Hyperlinks, in many ways, are dumb. And as a result, harming your user experience and potentially bleeding money from your company — when they could be a tool for better engagement, increased revenue, and deeper analytics.

Now, there are a cluster of companies innovating by recognizing the power of the link — Omniture, Vibrant Media and Yieldbot, to name a few. But, this isn’t a problem companies can hold off on thinking about until the perfect tech pops up to solve it. There was a time when SEO was considered a “pro-tip” — a way for startups to get ahead of the game. Today, it’s standard best practice — and companies that don’t think strategically about the way search engines view their sites are at a strong disadvantage.

Hyperlink optimization is similar. While link optimization might be a “pro-tip” now, it won’t be for much longer. Companies that aren’t thinking strategically about link placement, closely tracking results, and taking subsequent action, will find the companies that ARE doing these things at an advantage.

The most critical areas to spend time on are tracking outbound hyperlinks, building a linking strategy, and refining it based on results. Let’s briefly dive into each.

Track your Outbound Hyperlinks

The first step to optimizing a site’s outbound traffic is to understand what that traffic looks like. Where do visitors go when they leave your site? What do they do on those other sites?

While there is still a lot of room for growth within the outbound analytics space, Omniture (paid) and Google Analytics (free — but requires a modification to the standard Analytics code you add to your site) both offer tools to help you understand what happens when a reader leaves your site. VigLink (disclosure: I am the CEO there) also offers an outbound analytics suite as part of its content monetization solution.

Build a Hyperlinking Strategy

What do you want your outbound hyperlinks to do for you?

Do you want them to earn you revenue? Do you want them to serve an SEO purpose? Be purely informational? Should they be scarce (keeping readers on your site)? Or abundant (allowing readers to exit as it is helpful)?

Once you’ve answered these questions, you’ll have a plan for when your team includes a hyperlink, and when it does not — opening up opportunities for a better reader experience, and deeper engagement.

Refine, Refine, Refine

Combine a plan with data to track that plan’s performance and you’ve got a gold mine on your hands.  Notice a link that is never clicked and your plan requires that links must be useful to readers? Take it out. Or, a heavy percentage of links pointing to non-eCommerce properties, and your goal is monetization? Incorporate fewer links to those non-commercial sites. Refining your hyperlinks will improve reader engagement and overall site performance.

Do It, and Make the Web Better

Hyperlinks should make the web better — more connected, easier to navigate, and intelligent. Hyperlinks should make your site better — more actionable, insightful and profitable.

Today, hyperlinks are falling short. They’re static and largely untracked. Sometimes useful — but often not. As the web becomes ever more crowded, and an organization’s site optimization toolkit begins to produce diminishing returns, the hyperlink is obvious low hanging fruit.

What that means to site owners:

• It’s time to plug the outbound data leak. Implement a tool today that will track your outbound traffic.
• Choose a hyperlinking strategy and share it with your team. This is at least as much a human problem as a technology one – deciding what you want is always the first step.
• Be on the lookout for technology that addresses these issues. There are already solutions to track your outbound clicks and the value they deliver but 2012 is going to be the year the hyperlink gets smart.

Microsoft Announces Its Back-To-School Promotion: Buy A PC, Get A Free Xbox
Microsoft, just like Apple, usually runs a major back-to-school promotion every summer that is meant to give students (and their parents) some extra incentives to buy a new computer. The company’s just-announced back-to-school deal for the U.S. and Canada is pretty much the same as last year’s. A year ago, Microsoft gave students who bought a new PC and Xbox 360 and this year it’s doing exactly the same.

Microsoft, just like Apple, usually runs a major back-to-school promotion every summer that is meant to give students (and their parents) some extra incentives to buy a new computer. The company’s just-announced back-to-school deal for the U.S. and Canada is pretty much the same as last year’s. A year ago, Microsoft gave students who bought a new PC and Xbox 360 and this year it’s doing exactly the same.

There are some differences to last year’s program, though. This time around, Microsoft isn’t just partnering with Best Buy in the U.S., but also with Dell.com, Fry’s Electronics, HPDirect and NewEgg.com (its own Microsoft stores, of course, will also honor this promotion. In Canada, students can buy their PCs from Best Buy, Dell.ca, Future Shop, Staples and The Source.

The program is scheduled to start on May 20 in the U.S and May 18 in Canada. To be eligible, students need to buy a Windows PC worth at least $699 ($599 in Canada).

Apple vs. Microsoft

Apple also used free products like an iPod touch as an incentive for shoppers. Last year, however, it switched to handing out $100 gift cards to its digital stores instead. Apple usually announces its annual back-to-school promotion in June.

By the end of last year’s summer promotions, some analysts noted that Apple handily beat Microsoft 8 to 2, with around 80% of incoming students opting for Macs instead of a Windows machine. This year, Microsoft hopes that Ultrabooks like the Samsung Series 5 ULTRA and the Dell XPS 13 will make students think twice about buying a Mac.

XKCD: Punch Me In The Face If I Use Klout
I don’t understand Klout. I’ve convinced myself that it’s best that way. I just avoid it, really. Grading a person’s social media influence on a scale of 100 seems like something popular girls would do in high school. Like Alexia said last year, nobody gives a damn about your Klout score. I honestly didn’t give a damn about my Klout score until I heard about the deals with airlines. That said, free perks do not outweigh worrying about a seemingly arbitrary scoring system. Today’s XKCD comic nails it. Please, Internet, if I ever write about Klout in any way, punch me square in the face.

I don’t understand Klout. I’ve convinced myself that it’s best that way. I just avoid it, really. Grading a person’s social media influence on a scale of 100 seems like something popular girls would do in high school.

Like Alexia said last year, nobody gives a damn about your Klout score. I honestly didn’t give a damn about my Klout score until I heard about the deals with airlines. That said, free perks do not outweigh worrying about a seemingly arbitrary scoring system. Today’s XKCD comic nails it. Please, Internet, if I ever write about Klout in any way, punch me square in the face.

But let’s not stop there! Join the movement! Follow XKCD and opt out of Klout!

Rakuten CEO On The $100M Pinterest Round: We Want Pinterest Users To Pin Images And Buy Using Our ID
Rakuten, the Japanese e-commerce giant leading a $100 million investment in Pinterest, will be making two major contributions to the image-based social network as it gears up for its next stage of growth: the funds to take the image-based social network into new international markets, and a business model. First up, Rakuten’s home market of Japan, where “Pinterest is growing very fast,” notes Rakuten’s CEO, Hiroshi Mikitani, in an interview with TechCrunch. He wants Rakuten to grow right there with it by using Rakuten’s services to become the basis for buying things off the site.

Rakuten, the Japanese e-commerce giant leading a $100 million investment in Pinterest, valuing the company at $1.5 billion, will be making two major contributions to the image-based social network as it gears up for its next stage of growth: the funds to take the image-based social network into new international markets, and a business model.

First up, Rakuten’s home market of Japan, where “Pinterest is growing very fast,” notes Rakuten’s CEO, Hiroshi Mikitani, in an interview with TechCrunch. He wants Rakuten to grow right there with it by using Rakuten’s services to become the basis for buying things off the site.

There are already some building blocks in place for this. First of all, Rakuten already pins on Pinterest through at least a couple of official accounts: Rakuten Commerce and Rakuten Travel.

On the other hand, there is Rakuten’s existing e-commerce presence in the country. Mikitani notes that 75 percent of Japan’s internet population — equivalent to about 80 million people — already have a Rakuten ID — this is similar to an Apple ID, or an Amazon ID, in that there are payment details associated with it.

It is this ID that will pontentially become the lynchpin of a commercial service on Pinterest: “We want to enable our users to pin their own images with our ID,” he says. “Users can click and buy with it, and in the future we can create more new services.” He notes that the “rich, graphic social network” can be used for “so many interesting ideas using the Rakuten ID.” One other area, TechCrunch understands, is for users logged in with Rakuten IDs to pin images and then use those pins to buy items away from Pinterest, on Rakuten’s own Rakuten Ichiba site.

And because Pinterest is so buzzy right now, it can be used as a way of reigniting some of Rakuten’s legacy business. The company has a lot of “sleeping customers,” as Mikitani calls them. These are people who have IDs but are not regular users of Rakuten’s services. “This is a good way of getting them to start using those Rakuten IDs again.”

The other area where he would like to see more development is in the area of mobile commerce. Mikitani tells me that already, 25 percent of all Rakuten sales in Japan originate on a mobile device, and that proportion is growing. “There should be a huge synergy with Pinterest there,” he says. “We are going to promote their app using our presence here in Japan.”

International growth. The $100 million investment, which was led by Rakuten with participation from Andreessen Horowitz, Bessemer Venture Partners, and FirstMark Capital, as well as a number of angel investors, will also give Pinterest the financial muscle to extend its service into new international markets. Pinterest, perhaps above all social networks, has a lot of potential as an international product — one that can work across borders– because while sites like Facebook and Twitter are text-led, Pinterest is focused around images, and therefore less limited by language barriers.

Of course, a lot of Pinterest’s growth today and in the future will be non-commercial, but the potential for commerce is very much there, too. (We wrote just the other day about another example, Curalate, which has created a social marketing service for brands to visually track how and where their images are getting used across the site.) Within that trend, Rakuten is looking at how to leverage its Pinterest investment in its international business outside of Japan, as well.

Mikitani points out that while Facebook is an “extremely powerful social network”, when it comes to shopping and e-commerce, Pinterest’s image-led service “has stronger potential.”

Facebook and Twitter, he says, are about connecting you with your friends and contacts, while Pinterest is about connecting people with the same interests via graphic images. Apart from the fact that products are put right there for you to see, you can also imagine how that social set-up can be developed into a commercial model (group buying is one that comes to mind here).

Rakuten has holdings that extend well beyond Japan, and include properties like Buy.com in the U.S., Kobo e-reader and e-books, Priceminister in France — in all, operations based in 10 countries and extending to 17 countries in total. Mikitani says that he is hopeful that the kinds of groundwork it wants to lay in Japan will also be extended to the rest of its footprint.

For example, Mikitani points out that Kobo already has a “great partnership” with Facebook to encourage people to post excerpts and read more using Kobo, which it would like to extend to Pinterest, too: “Facebook is why Kobo is growing so fast right now,” he says. “We will see more of Kobo in Pinterest, too, I think.” And buy.com — which is slowly, gradually, getting rebranded as Rakuten — is another site you could imagine could get linked up more closely with Pinterest.

But this is not to rule out other partnerships with other e-commerce players. “We are totally open to other e-commerce partnerships,” he says. “Pinterest should work with them.”

Pearson Buys Certiport For $140M To Beef Up Its IT Testing Business Globally
Pearson, the educational publisher, today made a move to beef up its international professional IT testing business: it announced that it is buying Certiport, a developer, marketer and distributor of certification exams and practice tests for IT and digital literacy skills, for $140 million in cash from the private equity firm Spire Capital Partners. The deal will give Pearson’s VUE unit, where Certiport will sit, much further reach into the retail distribution of testing services in markets outside of the U.S. and UK: Certiport currently sells its certifications and assessments through a network of 12,000 testing centers operated by 70 partners in 150 countries, serving the range of skills in the world of IT. In all, it delivers 225,000 exams in 27 languages every month, and generated revenues of $48 million in 2011.

Pearson, the educational publisher, today made a move to beef up its international professional IT testing business: it announced that it is buying Certiport, a developer, marketer and distributor of certification exams and practice tests for IT and digital literacy skills, for $140 million in cash from the private equity firm Spire Capital Partners.

The deal will give Pearson’s VUE unit, where Certiport will sit, much further reach into the retail distribution of testing services in markets outside of the U.S. and UK: Certiport currently sells its certifications and assessments through a network of 12,000 testing centers operated by 70 partners in 150 countries, serving the range of skills in the world of IT. In all, it delivers 225,000 exams in 27 languages every month, and generated revenues of $48 million in 2011.

Certiport, which was founded in 1997 in Utah, creates certification programs for software from companies like Microsoft, Adobe, HP and Intuit. With Certiport having 60 percent of its business currently outside of the U.S., the deal will mean not only a stronger profile in IT educational services for Pearson, but a window on to a wider geographic footprint, especially in Asia and the Middle East. The existing testing network will also become a channel that Pearson can use to distribute testing and certification content already in its portfolio.

“Certiport is a high-quality company serving the significant demand for foundation IT skills. That need is growing fast and is truly international,” said Rona Fairhead, chief executive of Pearson’s professional education businesses, in a statement.”The combination of Pearson VUE and Certiport will strengthen both businesses and will give us a unique portfolio of technology assessments and certification, serving everyone from a basic word-processing users to technology experts.”

Pearson notes that Certiport’s revenues have been growing at a compound annual rate of 20 percent in the last three years, with the integration costs for Certiport expensed in 2012 and the acquisition showing up in Pearson’s earnings from 2013.

Qype, The Yelp Of Europe, Claims Top Dog Status With 860,000 Places Reviewed, Expands Daily Deals
Just as we get news of some consolidation in the local content market in the UK, some news of expansion, too: Qype, the Yelp of Europe (and Yelp’s closest competitor in the region), today announced that the number of places reviewed on its site has reached 860,000, with the number of monthly unique visitors now numbering 25 million. It claims that this makes it the biggest reviews site in the region, about five times bigger than its closest competitor, the U.S.-based Yelp. And while companies like Groupon are trying to move beyond the daily deal to become the platform for local commerce, Qype is doubling-down on the concept, expanding its own deals offerings with a free service to attract more local businesses to the concept.

Just as we get news of some consolidation in the local content market in the UK, some news of expansion, too: Qype, the Yelp of Europe (and Yelp’s closest competitor in the region), today announced that the number of places reviewed on its site has reached 860,000, with the number of monthly unique visitors now numbering 25 million. It claims that this makes it the biggest reviews site in the region, about five times bigger than its closest competitor, the U.S.-based Yelp.

And while companies like Groupon are trying to move beyond the daily deal to become the platform for local commerce, Qype is doubling-down on the concept, expanding its own deals offerings with a free service to attract more local businesses to the concept.

Qype is selling this newest class of daily deals — available from next week in Germany and then rolled out “rapidly to the UK and France — as part of its “Platinum package”. Businesses pay a fee for a premium listing on Qype’s site, and in addition to that they are given the ability to send out a free daily deal through the site’s QypeDeals service. By free, Qype means the business gets to keep all of the revenues for purchased deals — rather than paying Qype a commission on each.

QypeDeals is the product of Qype’s acquisition of Cooledeals a year ago, CEO Ian Brotherston tells me. “This is now the completion of the process of fully integrating that business,” he says.

Over the last year, Qype has moved beyond offering basic user-generated reviews of restaurants, events and other local businesses, and has been growing the number of services it offers to business users. Revenues from advertising on the site has grown by 500 percent in the last year, Brotherston says.

Brotherston says that this move for more monetization is inevitable as reviews businesses like its own and Yelp’s continue to mature.

He also points out that this trend may have been part of the reason behind UpMyStreet getting sold on to Zoopla: “It seems to reflect a view that if you are in the local space now, you need to be monetising,” he says. “I always felt that UpMyStreet had good, interesting data, but was never sure how they made money – whereas Zoopla had a much stronger monetization proposition. Local businesses need to provide great data to consumers within their area; but they need to be real businesses as well.”

As for Qype, the number of paying business customers on its books is now 400,000 and is growing by 10,000 each month, and revenues have grown by 93 percent. Brotherston says that Qype is on track for similar growth this year, too — but the company is not yet profitable, and doesn’t report revenues in actual terms.

There are some other significant numbers that Qype is hitting, however. Qype these days says that it is seeing some 25 million unique visitors monthly to its site. And its mobile business now contributes one-quarter of all its revenues: its mobile apps now installed on some four million devices — about six times as many as Yelp has in Europe. Mobile is also becoming an important platform for users to contribute to the site, too: some 30 percent of reviews are now written from mobile devices, the company says. Its user-generated reviews are continuing to expand, with a new one posted about every 30 seconds across some 166,000 cities and towns in its database.

“The reality is that we are becoming a full-service provider for our small to medium businesses,” he says. That is being driven by QypeDeals but also includes other kinds of business promotions on both its web and mobile sites.

Brotherston says that a lof the interest in its own deals service comes from businesses that tried Groupon or another service but have found it lacking in functionality: businesses, he says, “want to have more control over how, when and what they promote through deals. [Our] approach gives them more control and is more efficient for us.”

Under QypeDeals, businesses can create a single a one-day deal, and can specify details like the number of deals available. The only requirement, Qype says, is a minimum discount of 50 per cent. Subsequent deals after the first are not sold on commission, either: businesses are instead charged on a fixed fee basis, Qype says, regardless of how many get sold.

Google Maps For Android Gets Google Offers, Business Photos & Indoor Walking Directions
Google just launched an update for Google Maps for Android that brings three interesting new features to the app: integration with Google Offers, support for Google Business Photos and indoor walking directions. With the new Google Offers integration, Android users will now be able to see which nearby stores currently offer deals. This, says Google, includes both offers that can be purchased, as well as “free” offers that are available immediately. Users can also opt-in to receive notifications when there are offers near them.

Google just launched an update for Google Maps for Android that brings three interesting new features to the app: integration with Google Offers, support for Google Business Photos and indoor walking directions.

With the new Google Offers integration, Android users will now be able to see which nearby stores currently offer deals. This, says Google, includes both offers that can be purchased, as well as “free” offers that are available immediately. Users can also opt-in to receive notifications when there are offers near them. Google, it is worth noting, also offers a dedicated Google Offers app for Android as well.

The Google Maps for Android app now also lets users in the U.S. and Japan (the two countries where venue owners can already upload their own indoor maps) get indoor walking directions. This is clearly an area Google has been working on for a while. Earlier this year, the company, for example, launched an Android app that allows venue owners to help Google improve its indoor location accuracy.

The app now also features support for Google Business Photos (a.k.a. Indoor Street View). With this feature, users can get access to 360-degree panoramic images from inside local stores and restaurants. These images are now highlighted on every participating business’s Place page in Google Maps for Android.

Gamification Startup SessionM Raises $20M Led By Charles River Ventures
SessionM, a startup led by Quattro Wireless co-founder Lars Albright, just announced that it has raised $20 million in a Series B round of funding. The round was led by Charles River Ventures, with participation from past investors Highland Capital Partners and Kleiner Perkins Caufield & Byers. CRV partner Jon Auerbach is joining the SessionM board. The company declined to comment on the valuation, but apparently VentureWire is reporting that the round values SessionM at $100 million.

SessionM, a startup led by Quattro Wireless co-founder Lars Albright, just announced that it has raised $20 million in a Series B round of funding.

The round was led by Charles River Ventures, with participation from past investors Highland Capital Partners and Kleiner Perkins Caufield & Byers. CRV partner Jon Auerbach is joining the SessionM board. The company declined to comment on the valuation, but apparently VentureWire is reporting that the round values SessionM at $100 million.

Quattro, of course, was acquired by Apple and became the basis of the company’s iAd program. Albright led business development on iAd until he left to start SessionM, initially raising a $6.5 million round from Kleiner’s iFund and Highland.

When SessionM launched in March, Albright told me his goal was to improve engagement and retention in mobile apps, by adding a lightweight game layer. As users perform different activities in an app, they can unlock different achievements and earn rewards through the company’s mPoints program. The technology also provides a new advertising opportunity for brands.

In the funding press release Albright says that SessionM is increasing app usage by nearly 2x and seeing ad clickthrough rates that are 20x the industry average.

Evine: Former HSN CEO Takes On The Bigs, Launches Interactive Shopping Platform For Women
For over a decade, if you were to say “home shopping,” you were likely referring to the experience of viewing products on your TV set, and ordering over the phone. After launching in the ’80s, it wasn’t long before television networks like QVC and The Home Shopping Network (HSN) had become synonymous with “home shopping.” The Web and eCommerce changed that. Today, QVC and HSN both have active online shopping experiences, and HSN, for example, does 35 percent of its sales on the Web, which alone represents a multi-billion-dollar business. As the CEO of HSN in the late ’90s and early ’00s, Mark Bozek oversaw the launch of HSN.com as well the network’s expansion overseas, which doubled the networks revenue. Having served as HSN’s CEO for four years, and having served as VP of Broadcasting at QVC, Bozek knows the business — and its target customer — well. That’s why he and team are today launching Evine, a commerce platform that aims to create an engaging and online-only version of the HSN and QVC model.

For over a decade, if you were to say “home shopping,” you were likely referring to the experience of viewing products on your TV set, and ordering over the phone. After launching in the ’80s, it wasn’t long before television networks like QVC and The Home Shopping Network (HSN) had become synonymous with “home shopping.” The Web and eCommerce changed that. Today, QVC and HSN both have active online shopping experiences, and HSN, for example, does 35 percent of its sales on the Web, which alone represents a multi-billion-dollar business.

As the CEO of HSN in the late ’90s and early ’00s, Mark Bozek oversaw the launch of HSN.com as well the network’s expansion overseas, which doubled the networks revenue. Having served as HSN’s CEO for four years, and having served as VP of Broadcasting at QVC, Bozek knows the business — and its target customer — well. That’s why he and team are today launching Evine, a commerce platform that aims to create an engaging and online-only version of the HSN and QVC model.

For those unfamiliar, the two giants of televised home shopping offer products and merchandise are exclusive to the network’s audience, which is, by and large female and over the age of 35. The products are often sold at specific times, for limited durations. In this sense, QVC and HSN are the progenitors of the flash sales model now employed by Gilt and so many others. As Bozek sees it, there’s an opportunity to bring the same appeal of exclusivity and discounting that’s inherent to flash sales to the same demographic that is so loyal to QVC and HSN.

Of course, the problem, Bozek says, is that the Web doesn’t really have a platform that caters to this customer in a way that’s engaging, or that focuses on creating a social shopping experience, especially online. That’s why Evine aims to offer value-driven merchandise in fashion, beauty, accessories, fitness, and food, for women over the age of 35 through a platform that offers a variety of shopping-centric entertainment.

The goal is to not just give women a platform where they can shop, but where they can interact and share content and merchandise with friends. Evine plans to offer both live, streaming video content as well recorded video programs, which will be hosted by former QVC personalities and more. Bozek says that Evine will also offer games, but as of now, it remains unclear whether the site will be integrating existing games, focusing on social, Facebook-hosted gaming experiences, or simply offer a gamified viewing and interactive experience.

The entertainment content will initially be created by the Evine team, with plans to eventually open the platform up to user-generated content — all with the goal of adding depth to the shopping so that it’s not just about coupon clipping and products, but engaging and interactive. Bozek says that he wants Evine to be appealing beyond those times when its users are in the mood to shop.

What’s more, Bozek sees the opportunity for much higher margins in the online-only model. While QVC and HSN are both wildly profitable businesses, they come with the costs of having to operate expensive television studios and call centers. Evine not only does away with those significant costs, but Bozek believes, with the right product mix, it can attract a large, scalable customer base without having to pay to acquire those customers.

He hopes that this will be Evine’s valuable differentiator with flash sales and subscription-based models that focus on acquiring customers, and then later have to figure out how to monetize them. By creating entertainment content and brands that have long-term value, the CEO thinks that Evine can have high margins right from the start. And with cosmetics and ingestibles (vitamins, etc.) coming with margins between 35 to 65 percent, Bozek says, there’s plenty of opportunity for profitability.

Of course, Evine will need scale to get there, so he has recruited his co-founder Russel Nuce, former QVC merchant and current President of its Accessories Council, Karen Giberson, as well as former QVC host, Kathy Levine. The startup’s advisors include Thom Beers of Original Productions, Kim Caccavo of Steelpoint Capital, Jim McCann of 1800Flowers, Greg Renker of Guthy Renker, Joan Solotar of the Blackstone Group, and Fred Siegel of Fred Siegel Partners. Evine has also raised $500K in seed financing from these investors, and others, to get the platform off the ground. In the coming months, the team will begin raising its series A.

Leveraging new brands with personalities, whether they’re famous or not, Evine is setting out to create a fun, interactive customer experience that engages customers in realtime to make the shopping experience that much more enjoyable. Of course, there are a lot of elements already in place that could make Evine a big business, but it’s all about execution. And it also remains to be seen whether an older customer base is ready to spend more time online than it is offline, or in front of the TV.

The site officially launches to the public today, and includes a complementary “coming attractions” platform on Facebook, which invites members to join for free and learn more about what brands Evine will offer beginning this summer.

For more, find Evine at home here.

Strategic Healthcare Investors’ Investment Thesis
This is the second part in a two-part series on strategic investors in healthcare. Healthcare IT departments have focused much of their attention on the $19 billion portion of the stimulus bill that is providing billions of subsidies for the adoption of electronic health records. While this is logical given the available money, it is paying for health IT systems optimized for the “do more, bill more” model of reimbursement that is rapidly being replaced by a value and outcomes based – a 180 shift in focus. It’s hard to argue with modernizing the record-keeping in healthcare that isn’t far beyond how medicine was recorded in the time of Hippocrates. Thousands of lives are saved as a result of this modernization (e.g., avoiding frequent, deadly prescription errors). On the other hand, most companies benefiting from the stimulus have two massive gaps that will need to be addressed for health systems to thrive in the new environment they are facing.

Editor’s note: Dave Chase is the CEO of Avado.com, a patient portal & relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.

This is the second part in a two-part series on strategic investors in healthcare.

Healthcare IT departments have focused much of their attention on the $19 billion portion of the stimulus bill that is providing billions of subsidies for the adoption of electronic health records. While this is logical given the available money, it is paying for health IT systems optimized for the “do more, bill more” model of reimbursement that is rapidly being replaced by a value and outcomes based – a 180 shift in focus.

It’s hard to argue with modernizing the record-keeping in healthcare that isn’t far beyond how medicine was recorded in the time of Hippocrates. Thousands of lives are saved as a result of this modernization (e.g., avoiding frequent, deadly prescription errors). On the other hand, most companies benefiting from the stimulus have two massive gaps that will need to be addressed for health systems to thrive in the new environment they are facing.

1. The core of the legacy healthIT systems was optimizing the reimbursement model where the “patient” isn’t much more than a vessel for billing codes. For entirely rational reasons given the legacy reimbursement model, their success was measured by their ability to get as big of a bill as possible out as fast as possible. The shift to a value and outcome based model of reimbursement literally flips provider incentives on their head (e.g., hospital readmissions are penalized rather than rewarded).
2. These systems were designed for a static healthcare system with rigid technology architecture not known for its nimbleness. There is one area of consensus about the future of the U.S. healthcare system — it’s destined to go through radical transformation. Nimble systems will be required to respond to a rapidly changing landscape.

Filling these gaps present an opportunity for investors of all stripes — particularly strategic investors such as those associated with health systems and pharmaceutical companies. It is becoming crystal clear to healthcare providers that what they thought was going to be their 100% solution is really best optimized for just 25% of where healthcare money is spent (hospital-based care). Critically, 75% of healthcare spend is directed towards chronic disease. Legacy healthIT have their strength in automating internal workflows of hospitals and other clinical settings. In those high intensity settings, healthcare providers make the decisions that drive the patient health outcomes. With chronic disease, it’s an entirely different story. The decisions a person (or their family) make drive the health outcomes. For example, does the patient fill a prescription and take it properly (more than half don’t)? Traditional healthIT does virtually nothing to ensure that people make the necessary lifestyle choices to optimize their health.

“Getting patients to adopt healthy behaviors represents a tremendous economic opportunity for life sciences companies and health care systems.” Ernst & Young Perspectives 2012

Manufacturing vs. Service Orientation – The Difference Between Throwing Rocks or Birds at a Target 

Healthcare providers who have demonstrated the most impressive positive results with challenging patient populations recognize that there are two main care approaches. Many leading hospitals have adopted a manufacturing-based model borrowed from Toyota. In contrast, with chronic disease, a service-based approach is necessary to effect behavioral change. In a manufacturing setting, with enough practice a machine will do what it is intended to do and doesn’t have a mind of its own. However, as anyone who has been in a service-based business knows, human interaction frequently leads to the best outcomes if there is any complexity.

The following is an analogy from Dr. Douglas Eby who is a leader in one of the health systems that has the most impressive results in a very tough environment (click here and see video at the end of the article for more). Think about throwing a rock at a target. Similar to a manufacturing scenario, with enough practice a well trained professional can hone their skills and hit the target most of the time. Now imagine rather than throwing a rock, you are throwing a bird at a target. Perhaps you can impact 10-20% of whether that bird hits the target. However, the other 80-90% is going to be driven by understanding the bird’s motivations. Perhaps putting food or the bird’s babies at the target would be necessary to drive the bird’s behavior.

Like the bird example, doctors push patients toward a desired health target. However, only those healthcare providers that have systems and processes optimized for engaging patients have had significant success with chronic conditions.

Rapid Iteration Imperative  for Disruptive Innovation in Care Delivery

“Necessity is the mother of Invention” Aesop

As highlighted in The Rise of Nimble Medicine , the healthcare providers driving breakthrough results aren’t tweaking an existing model. Rather, they have developed new models that are repeatedly tested and optimized. As one who has implemented traditional healthIT systems at healthcare providers ranging from small rural facilities to large inner-city hospitals, the process is very involved with months of planning before go-live. During that process, there is a boatload of process planning and re-engineering before configuring the system to reflect what has been decided. The process is weighted 80-90% toward pre go-live with 10-20% focused on post go-live to deal with go-live issues and further training.
Contrast that with highly dynamic environments where the pre and post live weighting needs to be flipped on its head (i.e., 20% planning, 80% analyzing, refining, testing, etc.). While some areas of healthcare will be stable, the most critical area to manage is where the greatest costs reside — chronic disease. Best practices have begun to emerge, however one can expect rapid iteration to address the various areas of chronic disease management. Some of the legacy systems such as Epic have strengths in its ability to address different workflows after significant customization (this is why even small to medium sized health systems spend north of $100 million on their implementations. However, healthcare providers report that if they need to reorder workflow, the system has to be reconfigured with significant time and expense involved.

Eric Page of Amplify Health has shared his experience doubling the national average for outcomes related to sleep disorders. Page described their experience as one that involved repeated testing and re-ordering of steps in the process. Changes were made day by day. I expect that rapid iteration will become the norm for the leaders of the next generation of healthcare delivery as they hone their craft.

In a piece for the New Yorker, Dr. Atul Gawande outlined how, early in the 1900s, more than40% of household income went to paying for food and food production consumed roughly half the workforce. Beginning in Texas, a wide array of new methods of food production were tested. After many pilots, tests and information dissemination, food now accounts for 8% of household budgets and 2% of the workforce. As a wide array of small innovations ultimately led to the transformation of farming, so too is a rapidly building wave of innovative new care and payment models leading to similar breakthroughs in healthcare. I call this Nimble Medicine.

Human Centered Design Trumps Procedure Centered Design

“Listen to your patient, he is telling you the diagnosis” William Osler, M.D.

Health systems have begun with modest efforts to weave in patients into the care process. Amazingly, simple secure messaging has been held up as a great breakthrough in medicine. That a technology (email) that has been around for 40 years is held up as a breakthrough, in and of itself, is a statement. I liken the limited efforts to invite the patient into the process to sipping from a muddy puddle of water in the Sahara Desert — it’s a welcome improvement but far from arriving at the promised land. Healthcare organizations that will thrive (not just survive) recognize that a tweak to systems (both healthIT and business process) that were designed around the patient as billing vessel will fail miserably. As we’ve seen in many areas, tweaks to an architecture designed around a different model never succeed in the new paradigm.  If they did, AOL and Yahoo would be the leaders in social media and Siebel would be leader in CRM. Before long, you will see the equivalents of Facebook and Salesforce.com emerge in healthcare.

Healthcare Soon to be Driven by Deflationary Economics

All men are prepared to accomplish the incredible if their ideals are threatened. -Maya Angelou

Behind virtually every business model in healthcare delivery has been an assumption of real estate bubble like perpetual healthcare inflation. It’s not hard to predict that deflationary economics will drive healthcare in the future given the government budget crises from Main Street to DC that are largely driven by healthcare costs. While one expert warns of health care bubble another calls the upcoming period The End of the Third Bubble (PDF). Unsurprisingly, those who thrived after past bubble bursts were those with lower costs structures and systems that were nimble.

The diagram below is one of the drivers for why employers such as IBM have aggressively changed their healthcare buying approach.

Cost-cutting isn’t limited to the government. Why? It is employers who foot most of the ever-expanding healthcare tab and are starting to flex their muscle. For example, IBM has shifted from thinking about healthcare as an employee benefit to a large cost driver that will impact their profitability. IBM recently made a decision as to where to locate 4,000 new hires based on their analysis of where they received the best value from their healthcare expenditure. Consequently, they determined that Dubuque, Iowa was the best location to expand their employment. With wide cost differentials, it’s conceivable that CFOs and CEOs will believe that their fiduciary responsibility to shareholders will necessitate the kind of analysis IBM acted upon. If they don’t, they are liable to get lambasted by Wall Street.

This kind of analysis is a scary prospect for communities that are high cost locations for healthcare. It may shift how communities think about economic development. Having a great ROI for healthcare may be of greater benefit than a tax break. Conversely, communities with expensive healthcare have what amounts to a healthcare “tax” that will push businesses away.
Many health systems operating at a loss or a razor thin margin, may wonder how they can deal with these changes. Smart healthcare providers are taking painful lessons from the failings of another industry that consisted of local monopolies and oligopolies that seemed protected by capital infrastructure barriers to entry — the newspaper industry. The few newspaper organizations that have thrived realized that it can still be profitable to operate on a lower cost structure. With the majority of hospitals operating as non-profit, mission-based organizations, they should have a relatively easier time making the transition. Non-profit organizations don’t have to explain to public markets why a flat or declining top line revenue figure can be a good thing (assuming they get costs optimized for the new normal). As an example, already forward-looking organizations have already bucked conventional wisdom thinking they need to acquire practices to develop an accountable organization. I have seen both non-profit and for-profit health systems recognize it is more capital efficient to create strong physician networks via open software solutions than acquiring practices and mandating a closed system.

The New Normal
Given where most revenue comes for a health system, their optimization has been focused on hospital-based care. Even there, the new reimbursement framework takes into account what happens after a patient leaves the hospital. That is, there will be large and ongoing penalties for hospital re-admissions. In the old world, hospitals have been rewarded when someone was readmitted. Consequently, there was little focus on addressing post discharge patient engagement…until now.

However, the biggest changes are coming with the shift from a reactive to proactive model when it comes to chronic disease management. In the old reimbursement model, health systems waited for someone to present themselves at the hospital and that was viewed as more revenue to add to the coffers. Going forward, health systems will be accountable for people even when they leave the facility, and so will face an entirely new set of information technology demands. It’s why you see some hospitals going around floors with iPads ensuring patients about to leave have a scheduled visit with a doctor after they leave. The healthcare providers understand that is one of the best ways to avoid re-admissions.

To get a feel for the scale of change, you can look at the change from a reactive, hospital-centric model to a proactive, human-centered model that took place in Denmark. These figures were provided by IBM’s Director of Healthcare Transformation that has been actively involved in Denmark as well as leading a large employer coalition actively driving the reimbursement model changes. The following are a few examples from what happened before and after their change in Denmark:

• Before, 84% of people died at the hospital. Today, 90% die at home which is greatly preferred by most people. This is enabled, in part, by video conferencing, remote monitoring, etc.
• Before they had 157 hospitals. Today they are down to 21 (with corresponding reductions in hospital days).
• 80% healthcare encounters are asynchronous which better fits people’s schedules for non-emergent item.

To sum it up, to support the array of new demands, healthtech will need to be human-centric, affordable and nimble. These aren’t the adjectives typically applied to traditional healthIT systems. Just as we have observed the military frequently spending money on capital built for the last war such as aircraft carriers and other slow moving military tools. Over time, the military learned that it was as much or more important to focus on the hearts and minds of those they were trying to work with and that remote intelligence tools have been highly effective at winning battles. When it comes to managing chronic disease, winning the “hearts and minds” of patients and remotely monitoring health are similar skills not factored into systems developed for the legacy reimbursement model.

Therein lies opportunity for healthcare investors to look to innovative approaches from startups experienced in engaging consumers. Strategic investors, in particular, have extremely high motivation as their traditional businesses get disrupted. As we saw with the shift from analog to digital media and landlines to cellular technology, entire new categories of software emerged that trumped tweaks to legacy systems. The early customers and partners of the new categories of software were the ones that were able to manage the industry shift. The shift from the “do more, bill more” reimbursement model to the value and outcome based reimbursement model in an industry larger than any other creates an opportunity strategic investors seek to capitalize upon.