Category Archives for Digital Marketing

Tracking, Filtering, Pricing

There are two developing incidents, which have caught my eye.

Incident One. Microsoft decided to release its new browser, Internet Explorer 10 with ‘Do Not Track’ option by advertisers as auto enabled. When such an option is enabled advertisers cannot use consumer’s browsing history to serve ads leading to consumers clicking less on ads because they may not be relevant to them. Microsoft’s proposal died a quick death to vociferous protests from online ad companies and industry groups.

Incident Two. Orbitz, a renowned travel site recently revealed that for the same hotels it charges Mac users more than they would for PC users. Their data revealed that Mac users on an average might spend $20-$30 more on a room and are more likely to book a four star or a five star. While Mac users have often been subjected to the Apple Tax, this PR misstep from Orbitz has revealed more than it should.

If one looks from a pure micro-economic standpoint, price differentiation provides a high societal welfare but here however one’s online behaviour is being tracked to an extent, which may not be in one’s favour. The litany of companies to track our behaviour looks more as an opportunity to lead us to act in manners we unknowingly do.

The whole mechanism on some occasions reeks of a lack of transparency that many consumers may find instinctively uncanny. Also there is a strong imbalance between the perceived benefits for the provider and the consumer. It is amply clear why this may appeal to large corporations but it may be of a little use to the consumer at the other end, sometimes. At the same time there are many examples of information asymmetry – lack of complete information at one end to arrive at a decision, that benefit the consumer too like offering personalized recommendations in an ecommerce site based on previous transactions or discounting off-peak inventory like offering discounts on the lesser known books of a popular author. The lesson one derives from this is – online behavioural tracking when done openly perhaps provide a benefit to both consumers as well as the large firms.

The prowess of technology is growing with every day and while the dystopian world depicted in the futuristic Minority Report may still be a few years away, it is important for us as a informed consumer to be in control of things around us. We consume content off the web for free. And in return we pay with our privacy in some instances.

So imagine your new personal assistant on the smartphone, Iris answering your question on a driving route:
“Hi, this is Iris – your personal assistant here. I see in your Calendar that you have an appointment with the doctor today, here is the suggested driving route to the hospital and by the way here’s some useful information about pancreatic cancer.”

Creepy, isn’t it?

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Ever heard of the internet filter bubble?

Here & There

Frenzy for the God particle or the font?

Leapy internet succumbs to the leap second.

Writing sojourns here and there.

On Hactivism

The Internet allows individuals to voice their opinions — I am able to reach out to so many people through this article, thanks to the democratisation of technology enabled by Internet. Everything is online. Your life. My life. The Internet plays an important role in every stage of our life — finding a job, deciding on what children should study and where, what car to buy, and so on. More here.

On multiple devices and the new Windows 8

Offices (read enterprises) –where Microsoft has always had it easy have drastically evolved as well. Our offices are beset with this new trend of consumerization of IT which means choosing the software we want to use over the ones, our IT department forces us to use or bringing our own devices (like tablets) to work. Given this situation why will I want to unlearn and relearn to use a new operating system when I can get my work done through other means. More here.

And some food for thought.

Image

[Via xkcd]

Keystrokes of the ‘faint-hearted’ closet economist: Group-buying

About a year and a half ago, group buying was a phenomenon unheard of. Groupon did not exist. Today it has some 700 million odd members in 500 different countries making (perhaps) more than a billion dollars a year . India alone has some 30-odd group buying portals now. There’s obviously something clever and innovative behind group buying. Given that customers with coupons or deals are saving lots of money on goods and services, how can this possibly be a win-win for all?

There are significant network effects at play here: the more people sign up on a group buying site, the more targeted its deals can be. A product or a service displays positive network effects when more usage of the product by any user increases the product’s value for other users (and sometimes all users). The microstructure of an underlying network of connections often influences how much network effects matter. For example, a good displays local network effects when rather than being influenced by an increase in the size of a product’s user base in general, each consumer is influenced directly by the decisions of only a typically small subset of other consumers, for instance those he or she is “connected” to via an underlying social or business network (instant messaging is a great example of a product that displays local network effects).

The idea that the deals or coupons only become activated once a certain minimum number of people have signed up for them; This is essentially a guarantee for the merchant that the needle will be moved, that their effort won’t be wasted. That kind of guaranteed engagement is hugely valuable, and more or less unprecedented in the world of marketing and advertising. Then there’s the twist in the “coupon” or “deal” part of the name. No longer do merchants pay money for the privilege of giving coupons away for free in newspapers. Instead, they receive money. There’s something extremely gratifying about being paid to offer discounts to new customers.

Also, the most important aspect of a deal is probably that it’s local. Before group-buying sites came along, there was no effective way for merchants to reach consumers in their area, while excluding everybody else. If you’re a neighborhood restaurant, you don’t want to entice people who live miles away: you want to reach locals. And while group-buying sites aren’t quite there yet — it’s orders of magnitude better at targeting than anything which came before it. And it’s improving every day.

Beyond that, there’s an uncommonly large number of ways in which participating in a deal can benefit a restaurant or other merchant. For one thing, the offer will go out to a targeted group of people in exactly your neighborhood or a specific area in the city — which means that even if none of them sign up for the deal, they’ll still have seen customized advertising for you, from a company (group-buying site) which they trust. And when a few hundred people have signed up for your deal, you get a huge amount of mindshare from them. Many will redeem the deals or coupons very quickly, but a lot of them will wait a while, thinking about you in the back of their minds all the time. If a friend asks whether they know a good local restaurant, they might well think of your name even if they haven’t been yet. And after they’ve been, they know exactly where you are and what you serve — information which you want locals to know but which can be very hard to broadcast.

More generally, of course, it provide an important nudge to jolt people out of their day-to-day habits and try something new. A lot of us might see a new place open up and think to ourselves that we should try it some time; a group-buying site turns that vague sense into something we really must do if we don’t want to lose the money we spent on the deal or coupon. By forcing people to pay for their coupon or deal, restaurants lock in new customers in a way that old-fashioned coupons never could.

In that sense, from the consumer’s perspective, group buying is a commitment device: it’s a way of forcing yourself to do something you really want to try at some point, but know that you might otherwise never get around to. The merchant persuades the consumer to make that commitment right now by making sure that the offer only lasts a very short time — usually only a day or two. The consumer knows that if they don’t buy the deal now, they’ve missed their chance.

Deals and coupons can very good at driving traffic during slow periods. For any kind of business which needs a certain amount of volume to keep ticking over in fallow times, group buying can be exactly what the doctor ordered.

In the popular imagination, then, the idea behind group-buying is that it attracts new customers to a restaurant, some of whom become regulars and therefore very profitable. Long-term profits from the few, in this model, make up for short-term losses from the many who will never return.

And that is indeed a central part of how group buying works — it’s just not the only way that restaurants get value from the site. In that sense, restaurants are much like a discount deal or coupon itself. It makes money on every sale — but it will only see its margins start to rise impressively if and when its merchants start coming back on a regular basis. At that point, the cost of setting up and selling a new deal comes down dramatically, and the site’s profits on the deal — after accounting for the cost of their salesperson’s time — rise substantially. The group buying site itself, as much as its merchants, is counting on repeat business. And that comes from having a positive reputation which can spread like wildfire over social networks.

PS: A shorter version of this article appeared in Bangalore Mirror last month.

Has social media played a significant role in the recent uprisings?

Extolling the virtues of ‘the medium is the message’, social media platforms have clearly played an important role in helping people vent out their grievances,get the word out, and in helping organisers plan their protests. In the end, I don’t think it is not as much about a social platform as it is about the power of real time communication.

The social media tools can be incredibly powerful, both for spreading the word as well as generating external support thanks to the power of the network. And hence to deride all elements of cyber utopianism, social media may not have been a cause but it definitely has been a catalyst, a very powerful one.

So, to come back to the question. Social media did play a significant role in building the cause for the revolution but they did not necessarily let the people to revolt. They did help activists organise the dial-up and satellite phone connections that created a quasi-internet after Egypt turned the real one off – which, of course, it did in large part to try and prevent demonstrators from using the social media to strengthen their voice of dissent.

My response to: Has social media played a significant role in any revolution? on Quora.

Key-strokes of the ‘faint-hearted’ closet economist: Auction & Clicks

The number of ads that the search engine can show to a user is limited, and different positions on the search results page have different desirabilities for advertisers: an ad shown at the top of a page is more likely to be clicked than an ad shown at the bottom. Hence, search engines need a system for allocating the positions to advertisers, and auctions are a natural choice. Currently, the mechanisms most widely used by search engines are based on auctions.

In the simplest such auction, for a specific keyword, advertisers submit bids stating their maximum willingness to pay for a click. When a user enters a keyword, he receives search results along with sponsored links, the latter shown in decreasing order of bids. In particular, the ad with the highest bid is displayed at the top, the ad with the next highest bid is displayed in the second position, and so on. If a user subsequently clicks on an ad in position p, that advertiser is charged by the search engine an amount equal to the next highest bid, i.e., the bid of an advertiser in position p + 1.

A combination of several features makes the market for Internet advertising unique.

First, bidding takes place continuously. For example, the advertiser with the second highest bid on a given keyword at some instant will be listed as the second sponsored link at that instant. But any other advertiser can revise his bid at any time, and the order of sponsored links and prices will change accordingly. These changes can be very rapid because advertisers can employ automated robots, including commercially available software, in responding to others’ bids.

Second, the search engines effectively sell flows of perishable advertising services rather than storable objects: if there are no ads for a particular search term during some period of time, the “capacity” is wasted, much like in electricity markets.

Over time, the search algorithms undergo multiple iterations to reflect the changing consumer perceptions and the landscape. At the same time technology has empowered consumers and businesses to preempt information and beat the machine. As things come a full circle, the information loops back making the system stronger and better. Search engines of the future will be better in part because they will understand more about the individual user. Maybe the search engines of the future will know where one is located, maybe they will know what one knows already or maybe they will fully understand our preferences and hence, throwing up information which is more needed and advertising which is more relevant.