Mike Taber: This is Startups for the Rest of Us: Episode 7.
Mike: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about. I’m Mike.
Rob Walling: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing today, Rob?
Rob: Doing all right. I am recovering from a trip to Las Vegas over the weekend with some friends. That was some fun. I think it is the last time I will go in a while. I’m just getting old and gambling and drinking doesn’t have quite the same appeal it did 10 years ago.
Mike: Ah, come on! That’s the most fun! That’s why you go to Vegas!
Rob: That is why you go to Vegas, when you are 25! [laughs] I am 35, so, yeah. It was really cool to see some old friends. And we said, “Next time, let’s go to a beach house or a cabin or something.”
Mike: Cool. Cool.
Rob: Yeah. How about you?
Mike: I do have one interesting thing that I haven’t actually shared with you yet. And I don’t want this to sound too corny, because it is kind of odd to me as well. We each run our own businesses and do all sorts of different things. But this past weekend, I actually set up a website for my wife to start selling stuff. The website is called digitalartsilhouette.com, and we haven’t really gotten too far into it.
Essentially, what she does is she has been doing this for her mom’s club and other people who are in her mom’s club. What she does is she takes a picture of their kids and creates a black and white silhouette photo and gives them the file, and it’s like $15 or $20. I forget exactly how much she is charging. I think $20. And then just gives them the file and they can print out as many copies as they want.
And there are other places you can go online and you can buy these sorts of things — you upload a photo and someone will actually cut it out by hand, but you get one copy of it. And essentially, what she is doing is she is providing the ability to get a digital photo that you can print out to your heart’s content and hand out to grandparents and things like that, because it is kind of a unique gift. I mean you can send photos, but it is not quite the same thing.
Rob: That is really cool. I am at digitalartsilhouette.com right now. It’s awesome. It says, “Hello world. Welcome to WordPress. This is your first post.”
Rob: That’s nice! There’s not much of a call to action on this page Mike. [laughs] That’s cool. Is your wife doing that “by hand”? Like, is she doing it in Photoshop manually or do you have any type of automation?
Mike: It can be automated to some extent. And that was one of the things I asked her, because I was like, “Well, you know, if I could…” I said, “How easy would it be to build this into a completely automated computer program that just takes a photo and then does digital image processing, figures out where the different pieces are that need to be cut out and made black or made white?” And if it could be completely automated and just thrown up on a website and you could charge $15 and not take any time, that would be great.
But she said it takes her about half an hour or so to do each one, so it is not something that could be completely automated, which kinda sucks. But at the same time, it was just interesting to see that that was something that she was looking to do.
Rob: Yeah, I agree. I think the cool potential here, if this thing does take off and she has backlog, you could actually look….Because I bet you could automate part of it. And it would take a lot of time; you would have to get a Photoshop server component going, which I’ve actually seen done. But it is not worth doing now, because if you put this up and you find out that the market is too hard or it doesn’t sell, then there is no reason to do that. That is the beauty of her being able to do it manually, whereas some clown like myself, if I put this thing up, I wouldn’t be able to do it. So, that’s cool.
Mike: The unfortunate part was when I was looking for domain names. I wanted to get Digital Silhouette for her. And I checked and it was available, and you wait on a domain name every once in a while, and then you go to register it and its gone. I went to go register it and it was gone. I was like, “Come on. You’ve gotta be kidding me!” I looked at this yesterday, it was available. Today it’s not. I had misspelled silhouette the first time. [laughs]
Rob: Oh, man. That makes you feel better; better and worse. But, yeah. If it had been registered the day before, yeah, I would have been fuming.
Mike: That’s all that’s happening on my end.
Mike: So what are we talking about today?
Rob: The topic for today is how to increase conversion rates.
Mike: Ah, always fun.
Rob: I think first on our docket is to talk about: What do we mean by conversion rates? What do we mean by conversion rates Mike?
Mike: Well, for conversion rates, I believe what we are talking about is when somebody comes to your website, whether or not they are going to click on your calls to action, and whether ultimately they are going to come through and purchase whatever the product or service is that you are selling.
Rob: Exactly. So a conversion can be a sale when someone buys your product, or it can be someone entering their email or contact information into your form. Or, as you said, even if it is just a simple “click this link to get to our tour page”. You could feasibly call that a conversion — kind of any action someone could take you could measure and make into a conversion.
And so when we talk about conversion rate, that is the number of people who clicked it as a percentage of the total unique visitors. So one out of 100 would give about a 1% conversion rate.
Mike: Mm-hmm. Yep. So what is so important about conversion rates? I mean why does it matter if you are getting one out of 100, or two out of 100, or 1.5?
Rob: conversion rates are just critical to your whole business because they tell you how many people are responding to your marketing and to your sales message that you are putting out there. So you can actually have conversion rates with an ad, right? If you have an ad that displays a thousand times and you get two clicks on it, then you have a two tenths of a percent conversion rate on your ad.
And if you can increase that to four tenths of a percent, then you have essentially doubled your traffic without spending any more money. And likewise, with someone making a purchase on your site, if you can increase your conversion rate from 1% to 2%, then you double your income with essentially no investment. You have to make an initial investment, but it is not a linear investment. It is just a one- time thing.
So this is why I blogged a lot about this, and I just hold so firmly that conversion rates are as important or more important than traffic generation. Now, obviously, you need some traffic. You can’t just have no traffic. But once you hit a certain critical mass of ongoing organic traffic, improving conversion rates just has to be at the top of your list.
Mike: I think one of the things that people tend to overlook or not pay too much attention to is the fact that because your conversion rate is such a low number, you will get 1% or 1.3%, somebody who is a developer will look at that and say, “Well, realistically, what’s the difference between 1.0 and 1.3? It’s not a whole lot.”
But the fact is that is a 30% difference. And if you are talking…Let’s say you get $1,000 in sales. 30% takes you from $1,000 to $1,300, and that is kind of a big deal. And as those numbers go up, you can see how that 30% is going to make a huge difference.
And if you were to take your incoming traffic and you increase your conversion rate from 0.5% to 1%, you are doubling your sales. And it is a lot easier to double your sales than it is to double your traffic. And I think that is one of the most important pieces of paying attention to what your conversion rate is.
Rob: So if that is the case, as we have just discussed how important conversion rate is, you and I deal with entrepreneurs a lot, and most entrepreneurs and most bloggers, most markets, just a lot of stuff you see online, doesn’t talk about conversion rates. There are so many more people focusing on traffic. Why do you think that is?
Mike: I think because people look more at the traffic as an absolute. And it is easier to understand that going from 1,000 visitors to 1,500 visitors gives you 500 more visitors. But it is a little bit more difficult to take a percentage of, say, 1% and say, “I am going to try to increase this from 1% to 1.5%.” And in and of itself, that half a percent means absolutely nothing. But if you are spanning that out over, let’s say, 100 million people, half a percent is a huge, huge number. And it is a lot easier to look at that absolute number and understand exactly what it means. And I think that the percentages just make people misinterpret what they are actually looking at.
Rob: Yeah, that’s interesting. I’ve actually never thought about it in terms of percentages versus whole numbers. I mean you are kind of going to the psychology of human behavior, which I think is very valid.
I have a few other theories. I think that people don’t focus on conversion rates because good marketing looks easy. When someone throws up a website, you know, a software developer builds a website, they put it up and just figure, “Hey, this thing is going to sell just like every other website I have ever seen; just like every 37 Signals website.” And they don’t think that you have to tune and change a website over time.
So it is just not on a lot of people’s radar that you have to measure and track what people are doing on your site and actually prove it. And I also think that there is a big push in, kind of, the blogosphere. It is maybe a lowest common denominator of things to write about. It is like generating traffic is something everybody talks about; it’s so popular. So you hear about it 10 times more than you hear about conversion rates, and that, of course, just perpetuates itself.
And I think the other reason is that generating traffic does tend to be kind of fun. You do it, you go out, you either write a blog post, or you write some link bait, or you go on a podcast. I mean these are kind of fun things to do to get people to come to your site, and it is exciting that new people are coming. Whereas measuring conversion rates and making these tiny, little mechanical tweaks to your page, and changing button colors, and moving an image here, and changing an image, it is just not that interesting to most people. It is more mechanical and less exciting.
So, I don’t have any data to back those up, but those are kind of my impressions in talking to a lot of people.
Mike: Basically, what you are saying is it is just not sexy to look at those percentages.
Rob: Yeah, in essence.
Mike: Yeah, and I would throw my hat in that boat as well. I think the developers like to have concrete problems to solve. I mean it is a lot easier, for example, to say, “This button doesn’t work. It just doesn’t do what it is supposed to,” and then go into the code and fix it. And if you don’t have traffic levels that are up to what they should be, the answer to that problem is fairly straightforward. I mean you have to do something to drive traffic to your site.
If your conversion rates aren’t high enough, then people aren’t really sure what to do, because you have so many different options regarding what you can and can’t tweak. I mean you could change button colors. You could change page layout. You could change the way that the pages are arranged. You could change the text that is on the pages.
I mean there are just so many different things that you could try that it seems to me, like, just increasing your traffic would be the easier scenario. I meant that is just something that is quicker and more straightforward to address than it is to try and increase your conversion rate, especially when you are talking about conversion rates that are, let’s say, 1% and you have got 1,000 people coming to your website on a monthly basis. Well, if your conversion rate is 1% and you have got 1,000 people, you are making 10 sales on a monthly basis.
Well, how do you get to 20 sales? “Well, let me double my traffic and triple my traffic,” so you get 2,000, 3,000 visitors when there are fundamental tweaks that you can make to your site which would probably make people buy whatever your product or service is that you have. And those things would be a lot…I don’t want to say they would be easier because I don’t think that they would be to find out. But they are certainly less drastic than what it would take to double or triple your traffic. And I think that that is probably why people don’t necessarily focus on the conversion rates, because the answers are nearly as intuitive. It is not nearly as obvious what you need to do to increase your conversion rate.
Rob: Yeah. I think that is a really good point, actually. So most people probably already know what a sales funnel is. If you are listening and you don’t know, go to Wikipedia and look it up. It is much easier to see in an image what this means rather than me trying to explain it on a podcast.
But essentially, a sales funnel just dictates that most people on the Internet are never going to see your website. And most people who come to your website are never going to click on a single link. And most people who click on a single link are never going to buy your product.
And that sounds really depressing, but it is the facts of life. It is the reason there are 1% conversion rates on purchases. It is the reason that 99% of people who click on a Google ad that you pay for by the click will never buy your product.
So that is really what we are talking about today, is how to start turning that to where it is 98.5% of people don’t do a certain thing.
As I’ve thought about this, I’ve realized that the vast majority of people will never buy your product. And an even larger majority of people will not buy your product the first time they visit your website. And this is a very common myth that I believed and most people who I’ve talked to, especially beginning developers and markets, they have this image in their head that someone will find your website through Google, click a link, and come and buy your product then.
They don’t realize that you have to figure out a way to get people to come back to your site multiple times, because the vast majority of people who buy are people who have been to your site multiple times. Unless you have a very low-cost product in a consumer market that is an impulse purchase, any other category or product you are going to need multiple visits.
And so the first thing that I’d like to throw out to improve conversion rates is to get some kind of sticky content on your website.
Mike: Something like blogs, or mailing lists, or anything that offers valuable content — something that people are going to find valuable but not necessarily have to pay for, because they are not going to sit there and read everything that you’ve put on your site immediately. They are going to make a mental note of it and say, “Hey, I am going to have to come back to this at some point because there is a lot of good stuff here.” And then they will leave and hopefully will come back based on the fact that you’ve offered them this valuable content for free.
Rob: Right. And I think that the key to what you said is the word “valuable”, because there was this whole movement a few years ago to get blogs on every corporate website. And so you see blogs everywhere with RSS feeds, and they are just junk. They are like company news; they are stuff that no one cares about.
And so you really have to, if you are going to take this approach, and this is not the only approach, but it is one that you and I both found works very well, and a lot of other people, such as Joel Spolsky and Eric Sink and a bunch of entrepreneurs that you and I work with, they have found that creating a blog or a compelling email newsletter and getting it so people have given you some permission, a little bit of permission, to contact them every once in a while, and that you provide enough value that they’ve subscribed, this is a huge deal. It builds a relationship with them and it means that over the next year, if you contact them maybe six times, you know, if you send them emails, or if you just blog once or twice a month, that when they need that invoicing solution, or that closet organizing solution, or whatever software it is you are selling, that you are at the tip of their mind.
Mike: And I don’t want people to get the wrong idea about what Rob just said. It is not just blogs. I mean you can certainly offer valuable content….For example, you could offer tutorials, or additional documentation, or resources, links to other resources. They don’t even have to be yours. I mean if you provided a link or a set of links to additional things that people might want to do that are related to what your service is or what your product does, people are going to remember those things. They are going to come back to your website and they are going to use that. They are going to come back to your website and use that as a launching point. Maybe they will bookmark it.
But the point is that you want them to come back. And that is the fundamental thing that you need to get them to do is to be able to come back to your website and have it in their mind that they want to come back.
One of the things you mentioned earlier was the conversion rate of 1%, and I think that that is interesting just because when people first start selling their first product, they don’t have any idea what they should expect in terms of percentage.
You know, you’ve got this range from zero to 100%, and post people, I think, then to overestimate what their conversion rate should be by quite a lot. And their expectations are that they are going to get anywhere from 5% to 20% of the people who come to their site to buy their product or service, and it is just not realistic in any way, shape, or form.
Rob: Yeah, I agree. I’ve seen this a lot. I’ve even seen this 1% number thrown around all over the place, and that is even a bad estimate of conversion rate, because it really depends on your product price point, because if you have a product that is $10, you are going to have a much higher conversion rate than a product that is $100 or even $300, as well as high optimized your site is; how much AB testing you’ve done on the site. We will get into AB testing a little later, but how much you’ve honed your marketing message.
So the rule of thumb that I throw out when people ask is: When first launching a website, I would expect between a tenth of a percent and a half percent conversion rate, and that is visitors to sales. So those are sales conversion rates. So that is the number of people who buy versus the number of people who visit the site.
And again, that is just kind of a wide estimate. You can see that you will get five times more sales at 0.5%, but that is a reasonable range I’ve found. And then, once you start optimizing, you can typically get between 0.5% and 4%, again, depending on your price point. If your price point is over, about, $40 or $50, you are going to tend to be between 0.5% and 1.5%. And as you drop lower, your conversion rate can feasibly go up into the 2% to 4%.
I personally haven’t seen a conversion rate over 4% on any of my sites, but all these numbers that I’ve given you are from both my experience and the experience of entrepreneurs who I’ve worked with.
So those are kind of general ranges that I threw out, and I’ve found them to be reasonably accurate. Obviously, those are wide ranges, but they at least give you an idea, and they make you realize the value of improving conversion rates, because going from 0.1% to 0.5% and then shooting it up to 1% or 1.5%, that can make or break a business.
Mike: Eventually, at some point, you are going to max out in the amount of traffic that you get to your site. And if it is a small niche market, you are only going to get, say, 1,500 or 1,000 visitors. And at that point, you absolutely need to pay attention to your conversion rate because that is the only way you are going to increase sales. If the maximum number of people on the entire planet who are interested in buying your product is only about 1,000 people and you get those 1,000 people to your site every single month, you are going to get 10 sales. And the only way to get to 15 sales is to increase your conversion rate from 1% to 1.5%.
So let’s talk for a couple of minutes about how to increase conversion rates, because, like we said at the beginning of this podcast, people don’t really pay attention to conversion rates as much as they do about overall traffic. And I think it’s important for people to probably give some consideration to the types of things that they can do to increase their conversion rates.
And obviously, these things are going to be different for every single product. Every service, every product, every website, you are all going to have different things that you should probably try to tweak in order to get your conversion rates up. But let’s just talk about a couple of them. What are a couple of things that you’ve tried in the past?
Rob: Some things that have worked for me that I’ve found to be very repeatable and that work in a lot of scenarios, and these are general rules, of course. We will go into, later, about how to test them. Having a single call to action on every page of your website has made a tremendous difference in the number of people who I get to go to the next page of my site.
And having a single call to action means removing all your extraneous links. It means that at the bottom of the page, when someone scrolls down, if they are reading your page, at the bottom of the page you have some links that say, “Next, go to our tour page,” or, “Read our testimonials.” You can see this on 37 Signals—all of their product websites do this. You can see this at dotnetinvoice.com. It is just amazing to see the number of page views on our site, when we implemented this on DotNet Invoice, to see the number of page views increase, because people are getting to the bottom and they don’t have to go back up and think about what is next. You are almost like guiding them through.
So that can be a call to action. Another call to action is if you want someone to sign up for an email newsletter or a blog that you make that the prominent thing on the page and that you focus all your energy to try to get them to do that.
And the same goes with purchasing your product. Typically, on your homepage you don’t want a “buy now” button. You may want one somewhere on the page, but you don’t want that to be the primary call to action, because again, a bunch of people are going to come to your site and the first thing they want to do is not “buy now”.
The first thing they typically want to do is either see a tour or view the demo. So typically, the demo, with a software product, especially a Software as a Service app, the demo is going to be your primary call to action on your homepage and that’s what you want people to do.
How about testimonials?
Mike: I think for testimonials, if you can provide a couple basic elements of information for that testimonial, you are going to be a lot better off. So you have to do it correctly, and by correctly I mean you include the person’s name, the company that they work at, and the URL to that company. If you can get it, a picture would be great; not absolutely necessary, but certainly helpful.
Rob: Right. And I think there are a lot of ways to go wrong with testimonials — if you have ridiculous testimonials. Certainly if you are using fake testimonials, that is just an absolute no-no. I really think especially among software developers, there is a lot of aversion to putting testimonials on websites. And I think, number one, it is hard to get them because you actually have to ask someone for them and a lot of us feel kind of awkward about doing that. But in my experience, I’ve found that people are more than willing to do this. If they are happy with your product, they love to help you out by writing ac couple of sentences.
Another reason is it might feel kind of weird, like you are trying to get other people to brag about you, or like you are marketing yourself to hard or your product too hard. But there is nothing like coming to a website and looking at a product and having it just feel anonymous and like it is just this black hole website that talks about some great product but no one else is commenting on it, right? When the Internet is silent, when there are no reviews, when there are no testimonials, it just feels weird.
It is like when you go to an Amazon product and there are no reviews on it. I always just feel a little bit weird about buying that product, because really? No one else has bought it? That is totally how a software website without testimonials feels to people. They can’t quite describe what is wrong, but it just feels odd.
And as soon as you get testimonials there, especially with hyperlinks and pictures, those are big deals because it personalizes — someone else is vouching for you. It really is a huge deal and is totally underestimated by people who don’t have testimonials on their website — how much it is actually going to impact the sale of their product.
Mike: If there is nobody who is willing to endorse a service or a product, then something is fundamentally wrong. And as a customer, they might not be able to quite put their finger on exactly what it is, but it is going to turn them away. And they may not be able to say exactly why, but they are going to be less inclined to buy.
Rob: Yeah, I agree. Testimonials, these days, are one of the first things that I try to get for a new product that I launch. Because I feel like a website without them is really losing out on a lot of potential customers.
OK. So our last topic for today is to talk a bit more about AB testing. And I mentioned this earlier, but this really is the crux — one of the key points of improving conversion rates. So, Mike, why don’t you tell us a little bit about what AB testing is?
Mike: Sure. With AB testing, what you are essentially trying to do is you are trying to find out how many people prefer one UI element or a specific way that you presented some information to a different way of presenting that information.
Take, for example, let’s say that you’ve got a homepage and you are selling some product and you have a blue button that says “Buy Now”. What if you swap out that blue button with an orange button? Does that make a difference? And if it does, how much of a difference does it make? Is it quantifiable? Can you definitely say that there is a significant difference between what the blue button conversion rate was versus what the orange button conversion rate was? And if there isn’t, then you need to find other things that you need to tweak.
And, like I said, there are a lot of different things that you can tweak on a website. You can tweak headlines, you can tweak the size, color, and locations of buttons, you can add images, you can subtract images, you can add video or remove it. There are all these different things that are on a website that you can tweak.
And the important part of doing AB testing is to be able to measure everything. And when I say that, you really want to be able to say exactly how many people saw something and clicked through on it versus saw item B and clicked through on that instead. And those are the numbers that you need to compare.
It is not that you are trying to compare the total number of visitors to the site who went through, because there is a difference between the conversion rate itself of the button versus the conversion rate of one button versus another. That is the one piece that is probably the most important. It is not the raw number itself that you are trying to look at. You are comparing item A versus item B.
Rob: Yeah, and I think we saved the best for last here. AB testing really is the answer to almost every question you can ask about having a sales websites. I get questions all the time. People say, “Hey, should I use testimonials on my site?” And I say, “You know what? I recommend it. I’ve found it to be good, but test it.” People say, “Should I have a video screencast?” I think it will help you, but test it. And people say, “Should I have a header or should I have a left or right sidebar?” I don’t know. Test it.
AB testing is the only way to know for sure what your prospects and customers prefer.
Mike: You sounded like a consultant there. “Well, I think this, but maybe you should check it yourself.”
Rob: Yeah, right.
Rob: No, I know. I mean there are general rules. We’ve laid a few out here. That is what you read when you go online — all the blogs and all the marketing books that we read are general rules. They are guidelines that people have found through years of AB testing. Those are great to get you started. They are best practices and you can build a good site that converts reasonably well with those. But your customers and your site are always going to be more unique than these general rules can handle.
And so you are leaving money on the table if you don’t AB test your website. And I’ve actually done a talk on AB testing. I’ve talked about it on my blog quite a bit. Everyone agrees it is a good idea, but so few people actually go to the headache of AB testing. That is just the way it is. I mean I think people who do AB test yield great results from it. I certainly do. I AB test stuff all the time.
And a tool that we’d like to recommend is, of course, Google’s Website Optimizer. Google has made it very easy to AB test. You can set up an AB test in like five minutes. As long as you have two versions of a web page already created, you can just set it up in five minutes. If you have a Gmail account, you already have access to this tool. You just copy a couple snippets of Java Script to a few pages and it is incredible. It really is. I don’t want to sound too dramatic, but I was amazed the first time I used it.
Up until they released Google Website Optimizer, as far as I know, there were no free tools for doing this, and even the paid tools, it was questionable if they were this good. Google Website Optimizer has really raised the bar for both free and paid AB testing tools.
So I highly, highly recommend it. It is hard, especially for developers; we don’t want to do ongoing marketing efforts. We think that marketing is a onetime thing — you build a site, you build a product, and then you just improve that product. But you can’t. You have to improve the product and your site. And that is where an ongoing time investment in marketing and using AB testing is a huge deal and will make the difference.
As we said before, if I launch an unoptimized site, I am getting, potentially, a tenth of a percent conversion rate. And you can absolutely bring that up to a 1% conversion rate through AB testing and just tweaking little things. I’ve seen it happen. I’ve seen it happen on my own websites.
Increasing your conversion rate by 10 times, it is the difference between making a car payment’s worth of revenue each month and a house payment’s worth. I mean it is just…it’s incredible.
Mike: Yeah. And I think the other point that you kind of embedded into that was that marketing isn’t something you can just do once and then set it on cruise control and expect it to work. Marketing is not like writing code. You write code, and as long as it is done well the first time, the code is never going to break. But with marketing, things don’t work that way. People’s perceptions change over time. The search engines change over time. So you really need to go back and continuously optimize your website and your search engine optimization, because otherwise, things will just fall apart. And it is very easy to get dropped off of Google, Bing, or whatever search engine people happen to be using to find your website.
Rob: So some questions that might be running through people’s head are: So what do I AB test? If I have this Google Website Optimizer, I have a single version of my homepage, what do I create for the B version?
And the typical things that we test are your headline, the location, size, and color of buttons, critical buttons like the “Buy Now” button or the “Try the Demo” button, not little, insignificant buttons. As you mentioned before, adding an image or video or trying a different image or video; you can AB test them against one another.
The length of a web form. I see this all the time. I see forms to try out a demo, and the form is first name, last name, email, zip code; so there are four text boxes. And how many people are going to fill that out? What if you remove “Last Name” and you just put “Name”, or just “First Name?” What if you remove that and remove zip code and suddenly, all you have is an email? It’s a single text box. I guarantee you, you will get more people. You will get a higher conversion rate.
But what I can’t tell you is how many more you will get. And if that information is valuable to you, that you really need it, you can judge for yourself if you AB test a form with four elements versus one and decide, “Hey, I got 20%, 30% more people with the one, but the information, we need it. It is critical.” So you may decide, but at least you’ve made an educated decision.
And I think that is about it. There are a lot of other things that you can AB test, but just getting started, these are the things that I typically target on a page.
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