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Commerce in the Time of Social September 29, 2011

Posted by Bipul Sinha in business models, Consumer internet, social media, social networks, Uncategorized.
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The fabric that underlies the social Internet is essentially a new web where people are the nodes, connected through a social graph. This ubiquitous people to people connection with real identities has significant implications for commerce and how we transact in the real world. The reduction in information asymmetry in the marketplace and the ability to mobilize people, through the social graph messaging and data, have the potential to unleash peer to peer commerce in a way we have never seen before.

The Rediscovery of Direct Selling Businesses

Everyone has heard stories of Tupperware parties where a group of people gathered in someone’s home for product demonstration, buying and socializing. The social media is giving a new boost to this old business model by enabling the entrepreneurial hosts to invite friends and friends of friends, and gather offline to socialize and transact, using online tools such as Facebook and Twitter. The online and offline recommendation, feedback and validation

reduce the social approval anxiety and the friction in the buying decision. The social graph-enabled direct selling business model is especially interesting for highly demonstrable products such as handbags, jewelries, shoes, home accessories, etc. These products tend to be discretionary and highly correlated with emotions, impulsive buying and discovery orientation. The innovators in this space would foster entrepreneurship by enabling individuals to participate in the value creation and get the rewards.

The Overcapacity Marketplaces

The social Internet is enabling new kinds of peer to peer marketplaces where people can transact on overcapacity. The overcapacity can be in their belongings or skills. Since the articles involved in transactions tend  to be

personal in nature, the social graph acts as a lubricant to reduce the friction and cost of transaction. The living space sharing marketplaces such as Airbnb, personal car sharing marketplaces such as RelayRides, meals marketplaces from local chefs such as Gobble, etc. are some of the examples of the overcapacity marketplaces. In each of these, participants are leveraging overcapacity, be it in their homes, cars or skills utilization to create value. These marketplaces empower individuals to run their own business models and make profits accordingly. We will witness the rise of the overcapacity marketplaces as the peer to peer commerce takes off on the back of the social Internet. The unleashing of entrepreneurial imagination and the resulting innovations would help usher in an era of collaborative consumption.

The Anatomy of a Social Product August 2, 2011

Posted by Bipul Sinha in social media, social networks, startups, Uncategorized.

The social Internet is fundamentally a game changer. Unlike the web-link driven Internet, the social Internet connects people directly to one another and the resulting social graph essentially provides for a brand new, highly scalable distribution mechanism. The early adopters of the Facebook platform such as Zynga leveraged the platform’s social distribution to reach scale relatively quickly. However as the platform is restricting notifications to the users, a number of newer applications are finding it hard to get user traction and sustain engagement. In the competitive world of Facebook and other social platform applications, applications have to be fundamentally social to survive and get user attention. My acid test for an application leveraging social graph – “is the application useless in the absence of the social graph”. A “No” answer indicates a mere social layering on top which is not sufficient.

The Hierarchy of Social Interactions

A social application’s user interaction model should be around discovery and handholding users from “lookers” to “doers”. The discovery is essentially bringing together emotional, impulsive, curiosity, and other inherent psychological needs, and delighting users every time they engage with the application. The discovery aspect of a social application is what brings users back into the application and sustains engagement levels.

The hierarchy of interactions from lookers to doers is core to the discovery mechanism. A well designed social application must provide value to users who are just lookers and make no input. Such users make the majority of an application audience. The next up in the hierarchy is “one click” interactions. With this mechanism a user can vote up or down on any object created by other users. This kind of low-touch interactions help users get over the hurdle by reducing the cognitive dissonance arising out of “what to write or comment”. The next step up is “responding” to a question or comment from other users. This, again, is low hurdle activity since users have the needed context to respond with. Users who ask or comment in the first place are still next level up in the interaction hierarchy because they are dealing with low to no context resulting in higher level of cognitive dissonance. At the top of the hierarchy are users who upload or generate content. The effort needed to generate/upload content and the social approval anxiety make this step the hardest for the users. A successful social application essentially handholds users up the social interaction hierarchy and creates stickiness and high level of user engagement. As a general rule of thumb, the distribution of users in different position on the hierarchy are 80% lookers, 10% clickers, 5% responders, 3% askers and 2% creators.

A social application by its very definition involves social approval, recognition, and emotional fulfillment, and application developers should focus on reducing social approval anxiety and cognitive dissonance by creating an easier path for users to convert from lookers into doers.

Internet/Media: 5 things that will define 2011 December 8, 2010

Posted by Bipul Sinha in advertising, Consumer internet, social media, social networks, startups.
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Some observations from Bipul Sinha about the internet and media industry in 2011.

1.  Year of Social Utilities

With over half a billion users and open graph integration, Facebook is the Internet with social graph at its core. This is as much of a game-changer (due to a new distribution model based on the social graph) as going from offline to the Internet was in the 90s. A number of startup companies, I call them social utilities, are leveraging the social graph to potentially disrupt traditional online businesses such as dating, e-commerce, travel and recruitment. Yardsellr, Branchout, and Mertado are examples of such companies and we will witness a few scale companies emerging out of this space in 2011.

2.  Display Advertising Enters a Golden Era

Innovations in media transaction platforms along with a better understanding of target audience have brought an amazing level of scale and efficiency in display advertising market. The use of data and technology will disrupt the premium, guaranteed media buying segment in the coming year resulting in an open, transparent marketplace for audience-based transactions. This marketplace will help bring price equilibrium to media supply and demand thereby further increasing the marketing budget spent on this medium. Startups to watch in this space are Legolas Media, Krux Digital, and BrightTag, among others.

3.  Social Media based Discovery Traffic Breaks Out

In the traditional marketing parlance, Google directed web traffic represents bottom-of-the-funnel users who are ready to take an action now. The aggregation of such high-intent traffic is what makes Google a formidable force on the Internet. However, the emergence of social media in the past few years has created a new web where people are the nodes, connected through the social graph. The traditional advertising formats such as display lack both context and intent to be effective in the social media environments. New advertising platforms are emerging to enable advertisers to leverage engaged followings and connections on social media for brand and discovery advertising. The resulting web traffic represents top-of-the-funnel users who are interested in learning more about the products/services, but not ready to commit just yet. This discovery/intent web traffic will grow fast in the coming year to become a significant source of users/customers.

4.  TV Goes Social via Mobile Devices

Since the advent of the Internet, media has been abuzz about web-connected living room. There have been several unsuccessful attempts to bring the web to TV, but the user experience hasn’t matched the lean-back, simple remote controlled TV watching. The new-generation mobile devices such as iPhones and iPads could bridge the gap between the web and the TV, and make TV watching a truly social experience. A number of startups including Peel, Umee, and Miso are attempting to turn this vision into reality and the implications are huge since the winner would essentially influence the content promotion and consumption. I believe that TV will finally go social in the coming year and we will witness a breakout company in this space.

5.  Online-Offline Commerce Accelerates

The astronomical growth of Groupon and LivingSocial* in the past two years heralded the integration of local businesses into the efficient marketing machine of the Internet. This online-offline commerce trend will accelerate in the coming year as more startup companies figure ways to leverage location capabilities of the smart phones to drive foot traffic to the local businesses. This acceleration would largely be driven by discovery via location based social experience sharing. The explosive growth of Instagram is an early sign of the experience sharing trend and we will witness a whole lot more in the coming year.

The New Year will create tons of opportunities. Are you ready?

*A Lightspeed Portfolio company

$200 off Engage – Virtual Goods, Games and Social Media conference August 10, 2009

Posted by jeremyliew in conferences, games, games 2.0, social media, virtual goods, virtual worlds.
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I’m speaking on the VC panel at Engage Expo next month, Sept 23-24 in San Jose. I’m on at 1pm on Wed Sept 23.

The agenda is shaping up well – I’m looking forward to the social media and virtual goods tracks especially. This conference used to be called Virtual Worlds Expo, and I think the intersection of virtual worlds and social media is particularly interesting. Zynga’s Yeoville is the best example of a port of a virtual world to a social network, but arguably games like Restaurant City, Rockyou Pets, Farmtown and Farmville are all examples of asynchronous virtual worlds with a strong single player component overlay.

If you’re thinking about attending, use the discount code SPEAPERVIP SPEAKERVIP to save $200, and if you’re sure you’re going register before Aug 14th to get the early registration rate.

How to use popularity lists to influence your users behavior May 20, 2009

Posted by jeremyliew in Consumer internet, product management, social media, user generated content.

Two years ago I asked if crowds generated wisdom, or simply crowdiness. Today’s WSJ has a really interesting article on the same topic, concluding that popularity is self fulfilling and that arbitrary top 10 lists can meaningfully increase the popularity of the items on that list:

A more-recent study demonstrates that popularity in the music world, even unearned, breeds more popularity. Researchers enlisted more than 12,000 volunteers to rate and download songs from among 48 chosen for their relative obscurity. Some of these volunteers were lied to: At a certain stage in the experiment, popularity rankings for this group were reversed, so the least-downloaded songs were made to appear most-downloaded.

Suddenly, everything changed. The prior No. 1 began making a comeback on the new top dog, but the former No. 47 maintained its comfortable lead on the old No. 2, buoyed by its apparent popularity. Overall, the study showed that popularity is both unstable and malleable.

I think music and other entertainment sources are an interesting case study because in these industries the problem of discovery is quite difficult to solve for many bands/movies/writers etc, as well as for consumers, and these top 10 lists can help solve that problem. However, it isn’t just improving discoverability that is important, but also the perception of popularity of the discovered items as another study found:

Another group of researchers demonstrated this with restaurant diners in Beijing. Table cards at Mei Zhou Dong Po, a Szechuan restaurant chain, touting the five most popular items boosted ordering of these items by 13% to 20%, according to a forthcoming paper by a team from Peking University and Duke University. “Part of it is reassurance that something is good and worth buying,” says Bill Paul, a restaurant-menu designer.

Calling these items popular is crucial, the researchers found, because other table cards that highlighted five sample items but made no claim on their popularity had little effect on sales. And the diners liked following the pack: “Diners who were exposed to the popularity information treatment are more satisfied,” says co-author Hanming Fang, a Duke economist.

These findings are consistent with one of Cialdini’s principles of persuasion, social proof.

The WSJ article mentions another study where a hotel tried to get customers to reuse towels. Claiming that 75% of people who stayed in the same room as the customer reused their towels increase towel reuse rates by 300% over the control message as you can see in the left hand column of the chart below.

Like the hotel, social media sites, e-tailers and other companies that are trying to influence their users’ click paths can use claimed or actual popularity to get their users to do more of what they want.

Performance advertising success stories in social media April 24, 2009

Posted by jeremyliew in advertising, facebook, performance, social media, social networks.

On Wednesday I moderated a panel at ad:space (an ad:tech satellite conference centered on performance advertising) focused on how performance advertisers can be successful in social networks. The discussion from panelists Ro Choy (Chief Revenue Officer at Rock You, a Lightspeed portfolio company), Seth Goldstein (CEO of Social Media) and Tim Kendall (Director of Monetization at Facebook) was very enlightening.

Comscore recently noted that performance advertising adopts online media faster than brand advertising because it is easier to measure results over short time periods. The knock on social media ad inventory has been that CTRs are low. This is less relevant for performance advertisers who only pay on the click or the action anyway. We heard about some terrific success stories for performance advertisers in social media on the panel who are seeing ROI on their ad spend comparable to Google.

The panelists called out two particular examples of advertisers seeing real scale results. Seth highlighted mobile services as a category that has seen terrific success in customer acquisition in social networks (if you’ve seen the “crush” or “IQ test” ads on Facebook or Myspace you’ll know what he is referring to) and is generating hundred of millions in incremental revenue from this channel. Ro mentioned that Rockyou generated 1.5m new users for an online game advertiser in just one month. Although not represented on the panel, MySpace is selling hundred of millions of dollars worth of performance advertising per year. These are impressive numbers.

The panelists highlighted one key difference between social media performance advertising and Google AdSense style performance advertising. AdSense uses contextual targeting to improve performance. Social media uses demographic, behavioral and social targeting to improve performance.

In the open web much demographic targeting is inferred from behavior. For example a user who visits ESPN.com, Nascar.com and NFL.com might be inferred to be male. This is often, but not always, correct. Social networks take a different approach. On their profile pages, users declare many key aspects of their demographics, including age, gender and location, the three key elements for targeting. Targeting based on these self declared demographic elements can be very effective for performance advertisers within social media. Ro related the example of Rachel’s yoghurt, an advertiser that targeted coupons to women living within 5 miles of Whole Foods in 10 cities through Rock You. The campaign delivered 0.20% CTRs to the Rachel’s Yoghurt site, with a 35% coupon download rate. These are impressive numbers, and led the advertiser to renew the campaign for an additional 12 weeks. Doing such a high level of targeting can result in relatively small numbers of impressions, but this is one area in which social media excels. Because of the high reach and high number of pageviews, social media sites can still deliver sizable campaigns to even highly targeted campaigns.

Behavioral targeting also benefits from the scale of social networks as even tightly targeted campaigns can still deliver meaningful reach. Retargeting works well, as it does for the open web, but once again this can be combined with declared interests on user profile pages. Tim described a very detailed campaign that a politician, Patrick Mara, ran on Facebook to defeat a 16-year incumbent in a DC city council primary last year. Mara was in favor of allowing gay marriage, so he pushed information about his stance out to DC Facebook users who’d listed their sexual orientation as gay. If Facebookers had kids, he targeted them with ads about the school system, and if they were Republicans, he hit them with information about taxes, school vouchers and similar conservative favorites. Very clever! And apparently quite cheap for the results — Patrick found Facebook advertising to be a great way to recruit volunteers. Future local campaigns, take notice.

Social targeting is one area that is unique to social networks. Integrating knowledge of social ties into the creative of the ad can really lift response rates. Seth described one campaign that Social Media ran for Live Nation, the concert promoter. Seth himself saw an ad with the name and picture of a friend of his saying “Dan is going to see Cold Play at Shoreline this summer. Do you want to go with him?”. This is a great example of an ad that takes advantage of knowledge of behavior (Dan is going to see Coldplay), location (the concert is near where Seth is) and friendship ties (Dan is a friend of Seths) to build a very compelling piece of creative.

The theme of customizing ad creative for social media came up repeatedly during the panel. While good results could come from running standard web creative and using the targeting that social media provides, the best results came from building campaigns that appeal to behaviors that are native to social networks. Often this had to do with identifying friends (names and pictures) in the creative, as well as integrating a compelling social call to action. Ro described a campaign that Rockyou ran for Pentel Pens that asked users to enter “their smoothest (pickup) line” into a sweepstake. The rich media with video campaign led to real engagement with a 22.5% engagement rate (2x av performance for the category), a 0.6% CTR and 60% of users watching at least half of the video. The campaign drive over a million entries into the contest and worked well to drive high engagement with an “unsexy” CPG brand because it was well crafted for a social environment.

It is clear that social networks provide a real opportunity for performance advertisers. Smart targeting allows the first level of performance lift, and custom campaigns and creative that are “native” to social media can deliver even further lift. I think we’ll see much more adoption of this channel by performance advertisers over the coming months

Best practices in contextual and performance advertising in social networks. April 15, 2009

Posted by jeremyliew in advertising, performance, social media, social networks.
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I’m moderating a panel at AdSpace 2009 next Wednesday. The conference is focused on contextual advertising and is in partnership with ad:tech at Mosconne in San Francisco.

My panel is at 5pm on social media strategies for contextual and performance advertisers;

Social Media Strategies
Social media sites are garnering billions of page views a month, yet many advertisers have yet to dip their toes into social media advertising. Find out how advertising on social media sites differs from contextual advertising and whether social media advertising will drive ROI for your business.

Jeremy Liew, Managing Director, US, Lightspeed VP

Ro Choy, Chief Revenue Officer, RockYou

Seth Goldstein, CEO, SocialMedia

Tim Kendall, Director of Monetization, Facebook

If you’d like to come, use the code 25ADSPACE to get a 25% discount at registration.

Google’s three new patents to improve targeting in social media December 15, 2008

Posted by jeremyliew in advertising, google, social media, social networks.

IEEE Spectrum notes three new patent applications from Google that suggest how Google hopes to improve targeting for social media advertising:

The patents—Open Profile Content Identification, Custodian Based Content Identification, and Related Entity Content Identification—and the algorithms behind them would let Google find patterns in users’ profiles, pages, and friend lists in order to better target ads to them. Ideally, they would make the users more likely to click through.

Google’s Related Entity patent, for one, involves prying information from a user’s list of friends or user groups. But Google is not alone in this field. In June the social ad firm SocialMedia Networks said it had invented an algorithm called FriendRank that also scours a user’s friendship lists for friends whose names might be dropped in a targeted ad.

The Open Profile and Custodian patents would mine data from, say, a MySpace user’s profile and the profile of the MySpace page the user is visiting. The Open Profile patent, for instance, would consider a user profile like “I really enjoy hiking, especially long hikes when you can camp out for a few days. Indoor activities don’t interest me at all, and I really don’t like boring outdoor activities like gardening.”

Using smart language-processing algorithms to detect the user’s sentiments (“enjoy” or “don’t like” near “hiking” or “gardening”) and other linguistic cues, the system would then potentially serve up active outdoor sports-related ads to this user but avoid ads about more hobbyist-oriented activities.

Google is continuing to apply the adsense paradigm of contextual targeting, but expanding the definition of “context” to include the friend networks and the declarations of interests that are common to social network profile pages. MySpace’s hypertargeting is a similar approach.

Facebook’s engagement ads are a markedly different approach, charging for actions rather than using targeting to lift CPMs within display advertising. I think engagement ads could be a very interesting approach that takes advantage of the native behavior of “user affiliation” withing social networks.

I’m indifferent to which standard wins, but I do want a standard to emerge. We need a standard in social media advertising to unlock further scalable growth in this industry.

Facebook’s engagement ads could be the standard we need for social media advertising November 11, 2008

Posted by jeremyliew in advertising, engagement, social media, social networks.

The WSJ today notes that Facebook lags Myspace substantially in ad sales, despite having surpassed MySpace in usage:


[Facebook] … says 70 of the U.S.’s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1%, according to market research firm comScore Inc., in its most recent report in June.

News Corp.’s Fox Interactive Media Unit, which includes rival MySpace.com, is the market leader with 15.9% of display-ad spending, according to comScore.

I believe that this is because most of the ads the Facebook sells are not standard units, unlike most of the ads that MySpace sells. As I’ve mentioned before, new forms of advertising are hard.

However, I am excited about the new engagement ads that Facebook is now selling:

The Palo Alto, Calif., company is rolling out a new ad format called “engagement ads” that further blurs the line between marketing and social networking.

The new ads appear on the main screen when a person first logs in to Facebook. They prompt a user to do something within the ad, such as comment on a movie trailer or RSVP for the season finale of a TV show.

This could be the first move towards a new standard for social media advertising. As I said previously:

The thing that differentiates social media sites from other forms of online media is not just user generated content, it is also that users are willing to affiliate themselves with brands. This takes many forms, from friending Scion on Myspace to putting a Natasha Bedingfield style on your Rockyou photo slideshow, to buying one of your Top Friends a Vitamin Water. These willing user affiliations/endorsements of brands are clearly valuable to marketers of those brands. Right now though, these deals are being negotiated on a one off basis; they look more like business development deals than selling ads off of a rate card. It will take a while for the social media industry to establish standards for selling this incredibly valuable inventory to brands, but I suspect that this will happen over the next 12-36 months.

Facebook’s engagement ads are potentially the first step towards defining what the ad unit will be (prompting a user to take an action that affiliates themselves with a brand). Flixster has had good success with this concept in many of its campaigns with movie studios. I think this concept could well be the basis for a new standard unit for social media, and I hope that the rest of the industry gets behind it.

If you don’t “get” Facebook and Twitter, read this NY Times article September 8, 2008

Posted by jeremyliew in facebook, microblogging, social media, social networks, status, twitter.

The NY Times is often considered the US newspaper of record, and it lives up to its reputation with an excellent article in today’s Sunday NY Times Magazine about the ambient awareness enabled by Facebook status updates, Twitter and other microblogging tools.

Even readers familiar with both popular microblogging tools and their history should read this article. High points:

Microblogging enables ambient awareness of your broad friendship group:

In essence, Facebook users didn’t think they wanted constant, up-to-the-minute updates on what other people are doing. Yet when they experienced this sort of omnipresent knowledge, they found it intriguing and addictive. Why?

Social scientists have a name for this sort of incessant online contact. They call it “ambient awareness.” It is, they say, very much like being physically near someone and picking up on his mood through the little things he does — body language, sighs, stray comments — out of the corner of your eye.

Ambient awareness comes not from any single tweet or status update, but from the aggregation of the data.

Haley discovered that he was beginning to sense the rhythms of his friends’ lives in a way he never had before. When one friend got sick with a virulent fever, he could tell by her Twitter updates when she was getting worse and the instant she finally turned the corner. He could see when friends were heading into hellish days at work or when they’d scored a big success. Even the daily catalog of sandwiches became oddly mesmerizing, a sort of metronomic click that he grew accustomed to seeing pop up in the middle of each day.

This is the paradox of ambient awareness. Each little update — each individual bit of social information — is insignificant on its own, even supremely mundane. But taken together, over time, the little snippets coalesce into a surprisingly sophisticated portrait of your friends’ and family members’ lives, like thousands of dots making a pointillist painting. This was never before possible, because in the real world, no friend would bother to call you up and detail the sandwiches she was eating. The ambient information becomes like “a type of E.S.P.,” as Haley described it to me, an invisible dimension floating over everyday life.

“It’s like I can distantly read everyone’s mind,” Haley went on to say. “I love that. I feel like I’m getting to something raw about my friends. It’s like I’ve got this heads-up display for them.” … And when they do socialize face to face, it feels oddly as if they’ve never actually been apart. They don’t need to ask, “So, what have you been up to?” because they already know. Instead, they’ll begin discussing something that one of the friends Twittered that afternoon, as if picking up a conversation in the middle.

“It’s an aggregate phenomenon,” Marc Davis, a chief scientist at Yahoo and former professor of information science at the University of California at Berkeley, told me. “No message is the single-most-important message. It’s sort of like when you’re sitting with someone and you look over and they smile at you. You’re sitting here reading the paper, and you’re doing your side-by-side thing, and you just sort of let people know you’re aware of them.” Yet it is also why it can be extremely hard to understand the phenomenon until you’ve experienced it. Merely looking at a stranger’s Twitter or Facebook feed isn’t interesting, because it seems like blather. Follow it for a day, though, and it begins to feel like a short story; follow it for a month, and it’s a novel.

Ambient awareness helps maintain “weak ties”. Sociological research has shown that a large network of weak ties is more likely to be helpful than a small network of strong ties when trying to do things like get a job, find a mate, and other socially tinged objectives

Many maintained that their circle of true intimates, their very close friends and family, had not become bigger. Constant online contact had made those ties immeasurably richer, but it hadn’t actually increased the number of them; deep relationships are still predicated on face time, and there are only so many hours in the day for that.

But where their sociality had truly exploded was in their “weak ties” — loose acquaintances, people they knew less well. It might be someone they met at a conference, or someone from high school who recently “friended” them on Facebook, or somebody from last year’s holiday party. In their pre-Internet lives, these sorts of acquaintances would have quickly faded from their attention. But when one of these far-flung people suddenly posts a personal note to your feed, it is essentially a reminder that they exist.

Microblogging, ambient awareness and maintaining weak ties has the sideeffect of making it impossible to move away and “reinvent yourself” as your past will always be with you.

This is the ultimate effect of the new awareness: It brings back the dynamics of small-town life, where everybody knows your business…

“It’s just like living in a village, where it’s actually hard to lie because everybody knows the truth already,” Tufekci said. “The current generation is never unconnected. They’re never losing touch with their friends. So we’re going back to a more normal place, historically. If you look at human history, the idea that you would drift through life, going from new relation to new relation, that’s very new. It’s just the 20th century.”…

“If anything, it’s identity-constraining now,” Tufekci told me. “You can’t play with your identity if your audience is always checking up on you. I had a student who posted that she was downloading some Pearl Jam, and someone wrote on her wall, ‘Oh, right, ha-ha — I know you, and you’re not into that.’ ” She laughed. “You know that old cartoon? ‘On the Internet, nobody knows you’re a dog’? On the Internet today, everybody knows you’re a dog! If you don’t want people to know you’re a dog, you’d better stay away from a keyboard.”

Again, read the whole thing.