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What Local Social Commerce Needs to Really Take Off April 25, 2011

Posted by David Card in Uncategorized.
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Last week, a handful of local e-commerce and interactive marketing announcements from Groupon, eBay and others hinted at future accelerators for the already-hot social commerce space. Up to now, the biggest social commerce category has been more about marketing than selling: Local merchants use their advertising and Yellow Pages budgets on daily deals from Groupon and LivingSocial to attract new customers. But for social commerce to expand, suppliers must get local spending from big national brands, improve conversion with personalized offers and expand beyond customer acquisition into retention. Then they can get around to the actual commerce part.

Marketing will continue to drive social commerce for the foreseeable future. E-commerce is like catalog shopping and won’t likely account for anywhere near 15 percent of retail for some time. But there’s plenty of excitement over bringing social media and local retail together, as illustrated by the following announcements:

  • Groupon’s acquisition of Pelago: Pelago made Whrrl, a location-based service, and Groupon will absorb its team’s expertise in mobile apps for real-time local deals. Whrrl will be shut down, but its CEO, Jeff Holden, will head up Groupon product development.
  • LocalResponse’s launch: Formerly known as Buzzd, LocalResponse makes management and targeting tools that monitor check-ins from location-based services posted to Twitter, among other social media feeds, and enable merchants to send targeted, localized offers in real-time.
  • EBay’s acquisition of WHERE: WHERE’s mobile ad network will live under PayPal, which will integrate payments into geo-targeted offers initially, and may build out other marketing services over time.

Tapping National Budgets

Conceivably, eBay could sell marketers data analysis based on connecting WHERE purchase intent with PayPal purchase data. But eBay is turning into a commerce infrastructure company and PayPal has historically relied on third parties to create marketing services from its data.

That’s fine, because like the LocalResponse services, such sophisticated analysis is beyond the capability of local merchants who don’t even have a marketing department, let alone a bunch of quants capable of doing real-time targeting analysis. Most local small businesses don’t even advertise online yet. The best opportunity for this kind of services is to work with agencies and go after national merchants and retailers who target locally.

Personalizing Offers

Personalized recommendation techniques are gaining momentum. Location-based check-in service Foursquare just started making recommendations based on user’s and friends’ activities. Loopt is adding a Q&A feature to its location service that could get recommendations from friends in real-time.

Om recently wrote that “interest graphs” could supplant “social graphs” in commerce. In other words, purchase decisions depend more on what you like than whom you know. As Groupon gathers more data about its users’ deal purchases and combines that with collaborative filtering, it could blend that analysis with Whrrl-like interest groups to make highly personalized offers.

Expanding into Retention and Loyalty

Today, most merchants use Groupon or LivingSocial deals to attract new customers. Merchants would rather not offer heavy discounts to existing customers who have already proven a willingness to spend, so social commerce companies will have to develop loyalty programs that accommodate frequent buying points, access to exclusive products and cross-category points.

That means bringing together multiple retailers and merchants. Foursquare did a program with PepsiCo and Safeway’s Vons store loyalty program. Swipely has de-emphasized its credit-card based purchase-sharing social network in favor of a points program that ties multiple loyalty programs.

Watch for a secret new startup that’s launching this week to unite all three of these angles. It will feature personalized offers based on consumer preferences that tie into loyalty programs from national players via their affiliate networks.

Question of the week

What will it take to grow local social commerce?
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Privacy Legislation’s Potential Impact on Online Media April 18, 2011

Posted by David Card in Uncategorized.
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Last week, the bipartisan Kerry-McCain bill proposed legislation on a Commercial Privacy Bill of Rights that would put the Federal Trade Commission in charge of policing the online collection, sharing and use of personal information. Because the legislation is watered down relative to prior proposals, the Kerry-McCain bill will face the least industry resistance and is more likely to be passed this year. Passage would shift some power in online media, and force changes in the way online ad networks and other targeters work with content sites.

The proposed bill is relatively business-friendly, so much so that it’s drawing criticism from privacy rights activists. The bill:

  • Focuses explicitly on the use of personal information for behavioral ad targeting — and particularly on data sharing between companies — rather than information collection in general.
  • Mandates opt-out policies for personal information use, but only requires tighter opt-in permission for sharing “sensitive” personally identifiable information related to religion, health and finances.
  • Enables what some are calling a Facebook loophole that imposes lighter restrictions on web-wide information collection and use by companies where the user has an account. This would favor Facebook Connect over ad networks.
  • Is strict about data-sharing for behavioral targeting via third parties (data collectors and ad networks), but much looser on ad targeting done by a publisher that collects the data on its own site.
  • Does not address “Do Not Track,” the concept of a universal opt-out mechanism that users broadcast to sites popularized by the FTC last December. In February, Congresswoman Jackie Speier, D-Calif., proposed that the FTC create and manage a Do Not Track framework.

Although advertising industry groups are predictably resistant to any kind of regulation, their initial reactions to Kerry-McCain seem more muted than concerns they had prior to the bill’s introduction. Big tech companies like Facebook, Microsoft, eBay, Hewlett-Packard and Intel expressed support for the bill. The trade groups are probably relieved about the absence of Do Not Track, which they fear encourages users to block all cookies and customization indiscriminately, and requires potentially costly support from ad servers, ad networks and sites. Apple is the latest browser maker to experiment with Do Not Track support, after Mozilla and Microsoft; Google favors an alternative approach that maintains user opt-outs.

Privacy Legislation Impact Scenarios

The promise of online advertising has been the potential combination of television-like reach with precision targeting. Passage of the Kerry-McCain bill or something similar will have the following effects on the online media landscape:

  • Online content sites: Don’t call me a conspiracy theorist, but some traditional publishers like the Wall Street Journal might be perfectly happy without web-wide behavioral targeting. They could tout the value of their online/offline audience and promote contextual targeting and sponsorships. As noted, publishers would able to follow and target a user within their own site, which would benefit portals like Yahoo and AOL, which have huge audiences and broad variety of content.
  • Online advertising ecosystem: The bill’s restrictive approach to behavioral targeting favors search advertising over display ad formats. It also weakens industry efforts to deliver attribution, i.e., understanding and valuing the longer-term effects of seeing brand advertising. The data sharing guidelines could force data miners (Experian, Audience Science, BlueKai) and ad networks (DoubleClick, ValueClick, 24/7 Real Media) to secure more formal contractual relationships with content sites that have registered users. And the legislation seems to leave room for third parties to take user info and create anonymized groups of targetable customer “types” based on demographics and behavior.
  • Social targeting: Today, most third-party social targeters (Lotame, 33Across, Media6Degrees, Rapleaf) base their analysis on tracking user behavior with their own cookies, rather than getting access to API data from Facebook or Twitter. Legislation may make them pay for access, and even then, Facebook to-date has been stingy about data sharing. Likely it’s saving that targeting opportunity for itself.

Question of the week

How could potential privacy legislation affect online advertising?

Predicting Twitter’s Best Business Opportunities April 5, 2011

Posted by David Card in Uncategorized.
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Last week, Twitter’s original CEO, Jack Dorsey, confirmed he was re-joining the company to head up product development. Dorsey returns to Twitter to correct some mistakes and address backlash from vocal digerati and, more importantly, from members of the Twitter ecosystem. Blogger complaints killed Twitter’s QuickBar, an iPhone app feature with a badly executed advertisement. Soothing the companies trying to build businesses around Twitter APIs will be more difficult. Twitter partners and competitors alike want to see how Dorsey will align Twitter products with its best business opportunities.

Dorsey laid out some of his early thinking at a Columbia University appearance. He conceded Twitter needs to be clear about its platform and product direction, and advised third-party Twitter developers to stay away from mainstream client apps. Rather, they should focus on integrating technologies like geolocation, recommendations, filters and mobile sensors. Actually, Dorsey acknowledged that Twitter client maker TweetDeck was great for a minority of high-value Twitter power users. Twitter itself, he said, should focus on attracting and serving more mainstream users — the ones that are consumers of Twitter content rather than creators.

Serving Mass-Market Consumers

Developing for the masses will help Twitter continue its evolution from an incestuous microblogging tool for techies, journalists and social media professionals into something a lot like a broadcast medium. ComScore tracks about 20 million U.S. monthly users of the Twitter site (undercounting mobile and client access, perhaps by 20 percent). One API watcher says the vast majority of Twitter accounts follow fewer than 10 others. Twitter must fix that if it’s going to bring value to mainstream content consumers.

Twitter’s history leads it to focus too much on connecting users to other users, rather than users to topics. Its first-screen promotions to “see who’s here” and view “Top Tweets” link to people or brands, or to individual tweets. Popular “Trends” displayed through a local filter on a user’s personal page is more topical, and more in line with mainstream online media approaches, where current headlines, “most popular” and local news/weather/events lead. Mass sites tell me “most popular” is far more effective in generating clicks than “related items.” Dorsey should prioritize collaborative filtering over complicated content management taxonomies.

But Twitter should also collect channels of topics to help unsophisticated users follow more relevant feeds. Twitter already partners with Sulia to deliver curated topic channels to other media companies based on Sulia’s editorial and algorithmic analysis of expert content. It should use those topic and time-driven channels itself. Twitter could promote recommendations with a smarter version of Twitscoop’s real-time topic cloud.

What About Advertising?

Though its ad platform is a product, Dorsey didn’t say much about revenue generation at Columbia. He admitted it was a challenge for marketers to tie together Twitter’s three current ad formats: Promoted Trends, Promoted Accounts and Promoted Tweets. Lately, Twitter has been telling advertisers to concentrate on Promoted Accounts and Promoted Trends at the expense of Promoted Tweets that run in a user’s feed.

In theory, the site takeover approach of a Trend could mimic timely, mass-reach advertising used by portals like Yahoo and AOL to great success for movie studios and holiday-themed sales. But a Promoted Trend now is a barely highlighted little text unit. Twitter’s attempt to feature it on the QuickBar attracted derision from digerati, who complained of its lack of relevance (and who probably use TweetDeck on their desktops, anyway). A smarter play would be a flashier ad unit on the Twitter.com site, where mainstream users congregate.

Better contextual targeting could alleviate some of the complaints about relevance. (Promoted Tweets show up as a result of Twitter searches.) If Twitter doesn’t want to manage a targeted ad marketplace, it could draw on the expertise of OneRiot, a company that’s trying to build a real-time ad network for other Twitter clients.

Question of the week

How should Twitter prioritize product development?