Putting numbers on the Scoble Effect

As sure as night follows day, Rackspace contacted me last week to discuss my Scoble Effect post. It was a highly informative call. Robert La Gesse, Scoble's immediate superior and Chief Disruption Officer for Rackspace was prepared to offer plenty of detail about how the company markets using social tools and the impact Scoble is having on its business. Before discussing that, we need to contextualize this by explaining how Rackspace is going to market.

Rackspace traditional customers are small businesses that need hosting capability. In recent years it has refined that to concentrate on attracting startups. As a developer with 25 years' experience under his belt including start up time and as a former Rackspace customer, La Gesse has specific insights into what this type of customer needs.

Over the last 18 months, Rackspace has been refining its offering to start ups. That might for example include some free hosting, advice on load balancing or helping them understand what's needed to build databases at scale: "VCs like it because it means their start ups are getting low or in some cases no cost help on infrastructure. That leaves them more time to spend on growing the application. We like it because it gives us a structured way of reaching the market and providing them with help."

This approach is low risk to Rackspace because as physical costs fall, the company is able to get higher server utilization at a marginal cost of nearly zero.

I questioned whether this is worthwhile given that most startups fail - either they run out of steam or they become acquired: "I'm a lot less concerned about the inevitable churn than you might imagine. YouTube was hosting with us until they were acquired by Google so we had a a good long run with them committing to many servers. You need surprisingly few YouTubes to make this into a good business. But it's no good unless you're constantly filling the funnel."

This is where Scoble comes in. "As an Internet celebrity with a geek following, he can draw people to events. An example: some folks were having an event in Omaha Nebraska and needed 500 people. A couple of weeks out and they had something like 192. We asked if they'd like it if Scoble turned up. They jumped at the chance and sold out. He has that kind of effect."

In hard dollar terms it means Rackspace can offer event organizers the opportunity to have Scoble at an event instead of the company paying out up to $30,000 for a stand. "We will do something like 80 events this year. When organizers call up I ask if they'd prefer to trade their fee for Scoble's appearance. Most want Scoble. That's saved us well into six figures, his and my salaries."

In addition, Scoble is able to help Rackspace find new prospects. "You are right. He hardly ever talks about Rackspace when he's out visiting startups. That's not his job. But we know from our inbound measures that he has generated into seven figures of revenue value. Is it a large part such that will move the stock price? If you're asking me whether it moves the stock price from $22 to $30 then the answer is no. But that's not the point. We want to be seen as a helpful company. We want be seen as a company that nurtures and mentors startups and small businesses through the early stages of building their business. We have plenty of programs to do that, we send Linux geeks to shows and the like but Scoble is instrumental in both getting the name out, helping us find leads and making our team successful."

But there is more. "Open sourcing our Open Stack makes a big differences as well. Open source is a big plus point for geeks. They know there is no fear of lock in to a single provider. From our side it gives us an advantage because we get hundreds of developers prepared to help improve the stack at no direct cost to us. That matters when you're based in San Antonio, Texas and are competing with large companies with big budgets based out of Austin." It is a virtuous circle of help and helping that La Gesse and his team are in a unique position to understand. "Being helpful is our entire social media strategy."

I asked whether Scoble specifically goes out to Rackspace customers. "It doesn't really work like that. If it happens to be a Rackspace customer and he knows that at the time then he might film a testimonial story. Otherwise, we have other videographers that can go do that."

I asked what other social components are added into the mix: "We use Twitter but we killed most of the accounts. Why? Our Twitter accounts should only be there to help not act as a stream of retweeting or self promotion. That's not what I want. It wasn't popular but I wanted my team to have control over all of that. It's far more manageable and consistent with our being helpful and not adding to the noise. The same goes for the blogs. We're killing those that are not adding value to the idea of story telling."

On PR, La Gesse says he has stopped outsourcing PR. "We have grown our internal team from two to I think it is now 14. What's the point of having third parties tell stories you are much better at articulating?"

La Gesse makes a specific point of calling up customers. "I love nothing more than to spend 30 minutes on the phone to a pissed off customer who at the end of the call says we've been helpful. If we're doing that day in and out then we're winning."

As we came to the end of our conversation I could but admire La Gesse's candor. Very few in our industry are prepared to put dollar values on the things they do. This was the exception. Even fewer are prepared to share the detail of what makes them successful. I was however left with wondering whether Rackspace's go to market can be replicated in other parts of the IT landscape.

Certain elements can be replicated, others are harder. Here are the takeaways. All are obvious but few deliver.

1. It should go without saying but having a clear understanding of what the market looks like is critical. La Gesse is one of only a handful of people I know who have transitioned from what I call 'do-ers' to marketers. They often stand head and shoulders above professional marketers who have little or no understanding of the solution portfolio. You can usually tell the latter a mile away. They're the ones who tell you it is too hard to measure the impact of marketing campaigns.
2. The attention to consistency in a single message that resonates with the market across all social aspects makes a lot of sense. Too often we see enterprise companies try match their marketing around a single word or phrase that sounds funky yet struggle to make that relevant to the market they wish to reach.
3. Consolidation of Twitter and blogs is another no brainer. Way too many companies have multiple accounts that are used to do little more than endlessly retweet the same message. It's a turn off.
4. Customer advocacy through the idea of being helpful and having that permeate every action the marketing team takes builds the kind of authenticity that fosters trust. Even as in Rackspace's case, that comes at a premium price. If they can make it work in the ultra competitive hosting world then anyone can. I wish I could say the same in the enterprise apps space where beating up on customers is the order of the day.
5. The burning question in some people's minds is bound to be: are there other Scoble's out there? The short answer would appear to be 'no.' He is a one of a kind where his style of videography dovetails well into the start up and geek community. At least most of the time. He identifies with them and Rackspace knows that VCs like this approach so in theory at least, everyone is a winner. I'm not convinced that works for every type of business or other parts of the IT landscape in the same way. However, I note for example that Intel is using Hugh MacLeod's cartoons as a talking point.