Flowtown Turns E-Mail Lists into Customer Networks; Acquires Who Should I Follow? to Boost Twitter Marketing

11/10/10Follow @wroush

It’s obvious, these days, that anyone who wants to sell things or build an audience on the Web should be tapping into social media channels like Facebook and Twitter, where interesting messages can spread virally and drive lots of free traffic back to a blog, site, or landing page. But knowing this and being able to do something about it are two different things. For small and medium-sized businesses with limited resources, there are at least four big stumbling blocks: 1) It’s time-consuming to build a strong network of fans and followers. 2) It’s hard to know which fans to single out for special attention. 3) It’s hard to come up with “retweet-worthy” content to share with these fans. 4) It’s hard to prove that any of this social media marketing activity generates a real return.

Flowtown, a two-year-old startup based in the Mission district of San Francisco, has come up with solutions for the first two problems, and co-founder Ethan Bloch told me in a conversation yesterday that it’s working hard on the fourth. As for the third, well, you’re still largely on your own.

A year ago last week, Flowtown launched a Web-based social marketing platform that automates several key steps in the process of connecting with potential audiences or customers on the social Web (more on how the technology works in a moment). This August, it announced that it had raised $750,000 in seed funding from a premier list of Silicon Valley angel investors, including Lotus founder Mitch Kapor, Mint.com investor Mark Goines, 500Startups founder Dave McClure, Baseline Ventures partner Steve Anderson, and Red Swoosh founder Travis Kalanick. And today, Flowtown shared a bit more news: the startup has acquired the technology behind Who Should I Follow?, a service that combs through the people in a Twitter user’s existing network and uses pattern-matching algorithms to suggest new people to follow.

Ethan Bloch

Ethan Bloch

Developed by Mike Champion, a vice president of engineering at Twitter app store Oneforty, and Gary Elliott, a software developer at UBS Investment Bank, the Who Should I Follow? service will be adapted to help Flowtown users identify potential customers among Twitter’s 175 million users. The terms of the deal, as the saying goes, were not disclosed. But Bloch said in an announcement that Who Should I Follow? is “the perfect complement” to Flowtown’s existing tools. The two cornerstones of marketing, he said, are “building stronger, more personal relationships with the customers you have”—which is what Flowtown does today—and “finding high-quality prospective leads,” which is where software for targeting specific Twitter users could come in handy.

The five-employee startup is one of dozens competing in the hot area of social media monitoring and marketing, from established players like Mzinga, Constant Contact, Radian6, and Visible Technologies to tiny startups like ViralHeat. But it’s made a name for itself—and racked up 25,000 businesses as users—by tackling a very specific problem: how to convert a simple list of customer e-mail addresses into a network of social media contacts spanning networks like Twitter, Facebook, LinkedIn, and Flickr.

Say you’re Hank, the retired Marine who runs Devil Dog Brew, a mail-order coffee roaster (and an actual Flowtown customer). You upload your customer list to Flowtown, and the service tells you which customers are Devil Dog fans on Facebook or Devil Dog followers on Twitter, and which ought to be ordered (oops, invited) to join. “With one click, you have an e-mail invitation that you can send out to take the conversation social,” says Bloch. “Nobody makes a better fan or follower than a past customer, so you start out building your social presence with people who already know you. That is step one.”

Step two is more time-consuming, but can really pay off, Bloch says. “We will show you the influencers within your customer base,” he says—the people who have the most fans or followers themselves, and who take pride in being trendsetters. That allows businesses users to be more efficient about the time they devote to one-on-one outreach, by picking out only the biggest and most influential fans for some special love. (If Ashton Kutcher got a free pound of Devil Dog coffee and then tweeted about it, Hank might be set for life.)

Those are the basics of Flowtown, though there are also ways to tie the service in with other Web-based tools such as MailChimp, a popular e-mail marketing service, or WuFoo, an online form builder. If you use WuFoo web forms to collect e-mail addresses, for example, then every time a site visitor submits an address, it can be automatically imported into Flowtown—which can, in turn, automatically send out Facebook and Twitter invitations and trigger an alert if the visitor is an influencer.

Flowtown charges according to the number of e-mail addresses imported and e-mail invitations sent out. Many of its 25,000 users are using a free version of the service, which limits imported e-mails to 50 contacts; above that level, users can pay a nickel per import or subscribe for $17, $37, or $197 per month, depending on how many invitations they plan to send out, plus 4 to 5 cents per import. (Bloch acknowledges that this pricing structure can come off as “confusing” and says it will likely be simplified soon.)

Where does Flowtown flow from? Bloch, a 25-year-old Baltimore native, co-founded the company after the recession put a premature end to his career in the financial industry. In August 2008, after a few years as a financial accountant at Lockheed Martin, Bloch joined Cake Financial, a San Francisco-based social site where investors could compare stock portfolios. But just three months later, in the midst of the economic collapse, Cake laid him off, along with almost everyone else at the company (which was later bought by E-Trade and shut down).

Fortunately, Bloch had a sideline: since early in his Lockheed days he’d been producing a weekly video show called WSYK, for What Should You Know. In spirited three-minute video podcasts posted to YouTube or Vimeo and published via RSS and iTunes, he would summarize the week’s important current events, based on his reading of multiple newspapers and magazines. “We did stuff on the credit crisis, the Dalai Lama, the Federal Reserve, honey bees, spy pigeons—anything I felt was interesting,” Bloch says.

Each week, Bloch would also devote considerable time to promoting the show—not just tweeting about new episodes, but identifying its most loyal viewers and striking up online relationships with them via Facebook, the now-defunct Pownce, and other channels. Bloch’s social media efforts propelled the show to a peak of 12,000 downloads per week and eventually got it picked up by the San Francisco-based online video network Revision3.

The day he got laid off, Bloch called Dan Martell, a social-media acquaintance who had moved to San Francisco that fall after selling his IT consultancy, Spheric Technologies. “He said, ‘Don’t go looking for another job, it’s time to start a company,’” Bloch recalls. “We both moved to the Bay Area, in our heart of hearts, to do that. We didn’t know what it would be specifically, but we knew our strengths were understanding social and marketing.”

The pair started Flowtown that month, and spent about a year doing social-media consulting work while developing prototype Web-based systems. They abandoned their first product, a system for creating website landing pages to capture e-mail addresses, after it turned out to be harder than they’d realized to make the pages compelling. “You can create a landing page, but then what do you put in for copy?” Bloch says. “We just weren’t that passionate about that problem. But now there are tools out there that create great landing pages.” (He points in particular to Unbounce and Performable.)

Helping customers figure out how to capitalize on existing e-mail lists turned out to be a more interesting challenge for Bloch and Martell. With colleagues David John, Andrew Ng, and Assaf Arkin, they unveiled the first working version of Flowtown on November 1, 2009.

Now the startup’s challenge, before its angel cash runs out, is to prove that there’s a major market for its services—which will depend in part on providing to customers that there’s a reason to pay for them.

There are strong arguments, in the big picture, that social media marketing is a good investment: a study last year by Seattle-based Wetpaint and Altimeter Group, a San Francisco-based consultancy, showed that the companies that are the most active on Twitter and Facebook, such as Starbucks and eBay, saw an average revenue increase of 18 percent between 2008 and 2009, while those that were the least active saw a revenue decrease of 6 percent. (Of course, companies that are doing well are going to have an easier time justifying spending staff time on Facebook than those that are doing poorly, so this study doesn’t prove causation, just correlation.)

But if you run a small company, it’s hard to gather any statistics to demonstrate the value of your own social media activities. So one of the biggest improvements in the works at Flowtown is a set of tools that will track and quantify the effects of specific social media marketing actions. Say Bob sees a tweet from Alice, retweets it, then comes to Alice’s site and opts in for an e-mail newsletter, or, even better, buys something. Those are the kinds of causal connections Flowtown will soon be able to trace, Bloch says.

Even without tools for measuring the return on users’ investments, Flowtown is gaining customers fast—its user base is growing 20 percent month over month, according to Bloch. And by ingesting plenty of its own dog food, the company has built up a respectable following: 11,000 fans on Facebook and 16,000 followers on Twitter. But I asked Bloch whether he ever worries that social media is a fad—or that the shine could eventually come off Twitter and Facebook the same way it has for companies like AOL or MySpace.

“I think it’s undeniable that social is here to stay,” Bloch answers. “Maybe it won’t be Twitter and Facebook that are dominant in the future, and we as a company are agnostic to the platform, but social is very real. Businesses using only social as a channel have been able to acquire really big audiences. They are building an asset—this perpetual social presence—that will continue to give them repeat customers forever.” Or at least for a few years, which is forever in Internet time.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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