jump to navigation

Going social: Recommendations engines need to factor in consumer reviews November 28, 2011

Posted by David Card in Uncategorized.
Tags: , , , , , , , , , , , , , ,
add a comment

Last week eBay announced it was buying Hunch, reportedly for $80 million. Even though it has its own recommendations system based on searches and popular items, eBay grabbed Hunch’s recommendations engine. The acquisition illustrates the trend of adding social media to the data-powered recommendations credited with increasing Amazon’s sales by 25 percent. But get ready, because the next stage of commerce recommendations will further mix in human-powered consumer reviews.

Pioneered by Amazon, the first wave of e-commerce recommendations engines were based primarily on collaborative filtering. That is, they compared a lot of data: “Customers who bought product x also liked product y.” As with most big data analysis, recommendations are not only about pattern matching but also about which patterns best predict future purchases. And like all pattern matching, the company with the most data usually wins. Social media, via open APIs from Facebook and Twitter, bring new data for analysis and lower the cost of entry for recommendations engines.

Game-changing social data from APIs

Hunch creates a “taste graph” of a user’s interests based on analyzing available social media data from Facebook, Twitter and others that is fine-tuned by user responses to a Q&A process on the Hunch site. That’s why it could deliver useful results without suffering from a “cold start,” or lack of enough data to be predictive.

Effective e-commerce and media recommendations will mix in big-data analysis of different information sources including product factors, observed purchase behavior, and social and interest graph data from APIs. They will create algorithm-driven engines from that data and present it alongside customer reviews that themselves can be filtered and analyzed by adding structure through categories, comparisons and ratings schemes the way Amazon and Best Buy do.

Another recommendations pioneer, Pandora creates personalized radio stations based on factor-based analysis somewhat like Amazon. Pandora programs based on mapping and matching song and artist characteristics, along with a user’s likes or dislikes. Its effectiveness makes it the leader in online radio, with 40 million active users and $75 million in third-quarter revenues. Lately, Pandora has been scrambling to build out social features to enhance its website and apps and get more inputs.

A startup with an MIT Media Lab background, The Echo Nest has begun licensing its music recommendations engine to online music programmers like KCRW and Clear Channel’s IHeartRadio. The Echo Nest automates its song-characteristic analysis by running each track through audio analysis. It also scans online blogs and music pubs for information that informs its audio analysis. This makes its approach more scalable — and cheaper — than Pandora’s engine.

A blended approach in the future

The established engine technologies still work, and social media data lets new players build them effectively. Last year, Amazon started experimenting with available social data. When connected via Facebook, Amazon remembers a user’s friends’ birthdays, suggests items popular among friends and makes recommendations based on favorites the user has listed explicitly on his Facebook profile. But so far, all of those results are on a separate, “beta” page of recommendations that Amazon links to from its personal recommendations page. They’re not mingled with Amazon’s traditional recommendations and user reviews on product pages — yet. Likewise, as it learns what social data is most predictive, I expect Amazon will incorporate the social signals it gathers from Facebook connections into its recommendations-ranking algorithms, the way Microsoft uses Twitter and Facebook in search.

Successful recommendations will take this approach of blending social and data. At GigaOM’s RoadMap conference, Wal-Mart sketched how its social commerce strategy, driven by its Kosmix acquisition, would focus on search, recommendations and local, in-store context rather than stores on Facebook. Wal-Mart is one retailer with serious data smarts. This is just one example of how, for commerce, it’s wisest to think of social media as data sources rather than shopping hubs.

Question of the week

Who do you think will build the best recommendations engine?

SoLoMo accelerates evolution of consumer review market November 21, 2011

Posted by David Card in Uncategorized.
Tags: , , , , , , ,
add a comment

Last week, venerable local consumer reviews service Angie’s List had a $100 million initial public offering the same day Yelp filed for its own $100 million IPO. Recommendations and reviews are a key segment of social commerce, but companies in the market face accelerated evolution and disruption driven by the social-local-mobile technology phenomenon.

Right, now there are three distinct business models for recommendations and reviews:

Social, local and mobile disruptive forces

Social technology businesses often attract investor and developer interest for their potential network effects, where the value of the network increases with the number of participants, creating potential lock-in and winner-take-all outcomes. The three models exhibit only modest potential for network effects. Although the software companies can develop data analysis services for merchants using massive volumes of reviews and users, their partners “own” the reviews, so syndication opportunities are limited.

If any of the models achieve local market scale via volume in users, reviews and advertisers, that scale increases the value of the whole. That is, more advertisers or merchants will want to reach more viewers, who in turn will be able to evaluate more choices. But review quantity does not guarantee quality, and neither Angie’s List nor Yelp seems to have algorithms that are sophisticated enough to help. And while becoming the go-to place for local reviews could lock in advertisers, there is too much competition for either to own that role. Even then, they are still dependent on building big ad sales forces. Meanwhile, the software companies are not necessarily focused on local markets, and their technology platform approach will enable them grow more cost-effectively than the other models, leading to faster profitability.

Mobile access is critical for product and venue reviews, less so for an Angie’s List type of service. Yelp has good mobile distribution on iOS and Android, though it may face increasing competition from Foursquare, which just beefed up its site with Yelp-like content. The software companies are dependent on their partners for mobile access. Real-time mobile reviewing is probably less important than access, although check-in behavior can support loyalty programs for advertisers.

In other words, the recommendations space is vibrant but challenging. The two local-focus models face Groupon-like costs in marketing and sales but with fewer opportunities to use customer data to build new services. Angie’s List has no direct competitors, but I would like to see it shift its advertising from national branding to lower-cost and better-targeted social media like Facebook and Twitter promotion. Rather than a stand-alone company, Yelp might be better off as part of a search engine or daily deals company with a big ad sales force and more services to sell to merchants. The software players are the only ones with traditional tech startup growth and profit potential.

Question of the week

What other forces might disrupt the ratings and reviews business?

Paging Google+: The race for company pages continues November 14, 2011

Posted by David Card in Uncategorized.
Tags: , , , ,
add a comment

When Google introduced its Google+ social technology platform last summer, I was surprised at its lack of company or brand pages. After all, Google runs the biggest advertising business online, and Facebook — its archrival in social media and obvious Google+ target — sells tons of ads to companies that want to drive traffic to their Facebook Pages. Then, last week, Google introduced Google+ Pages for companies and with big companies set to make that feature an element of their social media marketing programs, Google could have a jump on Facebook.

Facebook’s main advantage over Google is ubiquity. The former has offered brand pages for several years, and its huge audience ensures that most consumer marketers have one. Over the past couple of years, an ecosystem of companies offering marketing tools and agency services has grown up around Facebook Pages. Companies like Buddy Media, Efficient Frontier and iCrossing help marketers integrate Facebook Pages into their advertising campaigns. That’s necessary in part because as a product, Facebook Pages is pretty bare bones. The service doesn’t enable much customization in terms of layout or design, and the pages are hard to find with Facebook’s search.

But marketers like Dr PepperWarner Bros. and Nike can and do take advantage of core Facebook platform features. Updates and activities appear in users’ news feeds, although their frequency is at the mercy of Facebook’s algorithm whims. And marketers can deliver interactive experiences, shopping, gaming and sweepstakes via apps housed on their pages. In fact, companies like Ford spend more money off Facebook — e.g., buying online ads elsewhere, sponsoring video promotions — in support of Facebook Page–hosted apps than they spend on Facebook itself.

So can Google make up for four years of marketers’ experience with Facebook Pages? A few observers have been critical of Google+ Pages. Some have griped about minutiae, but there were other, more legitimate critiques of missing management tools and a lack of integration with Google Places for local businesses. But Google is wisely focusing on key aspects of company pages that differentiate it from Facebook and that many marketers will value. Just as with its overall Google+ strategy, Google is integrating its pages with services where it has industry leadership:

  • Search. Google is introducing a new search feature: “Direct Connect” will send a searcher directly to a company page. This is a lot like AOL Keywords, which were powerful marketing mechanisms back in AOL’s heyday. Even more important, Google+ Pages can reduce paid search costs for marketers.
  • Advertising integration. Google will make it easy for marketers to integrate pages into campaigns using its industry-leading search and display ad networks. Google’s +1 Like equivalent in ads and on Google+ Pages will boost organic search results, an appealing feature for sites and marketers. While Facebook Connect’s Like button is widespread, it doesn’t affect search results.
  • Analytics. Facebook’s own analytics tools are pretty mediocre, creating a need for third-party tools and services. Google is a force in analytics tools, and it typically gives them away for free to encourage adoption.

Google may not be able to instantly add 750 million highly engaged Google+ users. But its initial implementation of Google+ Pages is focused on delivering marketing benefits that play to existing Google strengths and have a few advantages over Facebook Pages. Facebook can depend on its ecosystem to counter some of those, but Google looks like it has a solid offering. Many marketers will jump on it. Now it needs to get back to work on Google+ APIs, so apps developers have more to work with.

Question of the week

How can Google convince big companies to use Google+ Pages?

How to build the ultimate identity management service November 7, 2011

Posted by David Card in Uncategorized.
Tags: , , , ,
add a comment

Identity is an industry. So wrote my GigaOM colleague Mathew Ingram, and it will be a hot connectivity topic at our GigaOM RoadMap event this week. Mathew is compelled by the argument that Twitter is set to be the main supplier of identity, as put forth by Mark Suster of GRP Partners. But I wouldn’t be so quick to anoint Twitter. An identity management service needs to have a variety of features beyond “follow me” and sign-in, and those related to unified communications and commercial functions are better served by an authenticated identity. Companies like Facebook and Google are making big investments in identity, and these services will play important roles in marketing, communications and e-commerce.

By “authenticated” I mean one that is closely associated with a user’s “true” identity rather than a potentially anonymous public persona. The ultimate identity management service might well consist of these features:

Follow/find me. As Suster points out, posting an email address doesn’t work for the Oprah Winfreys of the world. He likes Twitter for its asymmetrical approach: Friending and following can be one-way. Big deal. Google+ has always supported asymmetrical following, and Facebook recently enabled the feature. Both Google (if not Google+) and Facebook have a far broader reach than Twitter. While Apple’s iOS Twitter integration may increase Twitter usage, that’s still unproven.

Sign in/connect. Single sign in is much easier than registering individually for every site and app. There’s a healthy debate over the value of anonymity in the service of comments and general privacy. The “true identity” suppliers value the interest and activity data they can get from tracking users, but they don’t have to sell individuals. Most advertisers want to market to big groups; actual 1:1 marketing isn’t cost-effective for most products. Identity suppliers already anonymize and bundle targets for marketers.

Authenticity. Business transactions like hiring, credit card purchasing, contract signing and the like depend on actual identities. Reputation scoring that is built on anonymous identity works pretty well for user reviews and comments. But it doesn’t work in assessing for-pay skills or job applications, the core business of LinkedIn.

Presence. A key feature of unified communications is the ability for a user to express his availability for different types of communications (email, chat, voice) in real time. Instant messaging and chat — integrated with email by Facebook, Google and others (Microsoft, Yahoo) — handle presence management, while Twitter does not.

Groups. Right now, sophisticated users expose their presence to select groups of contacts manually, by logging into or lurking on different communications applications. As with presence management, group management would be most effective if tied to real identities rather than pseudonyms.

A well designed identity management service would have authenticated identity at its root, but it would support anonymized personae that a user might want to use for different functions: business, shopping, talking trash. The user would have to trust the identity supplier to protect his privacy as needed.

The company that can build such a powerful, flexible service will still have to teach consumers how to use it. Think of the number of variables a user would have to manage: personae, groups, communications mediums, degrees of commercial access, etc. That will be a barrier to mass adoption.

So who’s in the game besides Twitter? Facebook has mass adoption and widespread third-party Connect usage. Google search and mail have reach; Google Voice is richly integrated, and Google+ is promising support for pseudonyms. For professional purposes, LinkedIn has an established, trusted user base. Adding communications brings in the telcos and Apple, which is doing a good job of integrating communications and contacts from multiple sources on iOS. Given the challenges of integrating all of those features and teaching consumers how to use them, plus the possibility of additional entrants, identity services will see further fragmentation for at least the next 24 months before any leaders emerge.

Question of the week

Who do you think will win in identity management?