Dave Jenkins

I really don’t like shopping.  It used to bring out my inner Marxist, but now it just incurs a low-level buzz in my head.  I’ve found I can keep it under control if I satiate my internet addiction every 10 minutes or so.  Many stores, however, are large window-less Faraday cages, which kills the 3G signal on my phone.  There’s wifi, but it’s not free (it’s usually the corporate offices of the store, and the days of poor security with open enterprise networks are over).  Free wifi in a retail environment is still a rare treat.  Some stores get it, but the vast majority do not.

So, here’s my case for offering free wifi in a retail environment:

• The percentage of customers with smart phones will only get bigger.  The share of people who will want to check prices, ask-a-friend, or otherwise tweet about their shopping choices will only get bigger.  Do you want to welcome those people, or frustrate them?
• The potential for data mining about what customers are doing on their smart phones is a huge opportunity.
• Cost is pretty minimal.  One wifi antenna should do for most stores; Macy’s might need one on each floor.

Risks are fairly minimal, and can be contained with some common sense policies:

• Put a standard anti-porn filter to mitigate the legal liability of perverts in the store.
• It’s doubtful someone would go down to the mall to download mp3s– the bandwidth is relatively poor compared to the land-line available at the public library (not that I condone that kind of behaviour).
• Someone may try to hack into NORAD from the store wifi, but again– internet cafes are better for that because they offer coffee and a table for all your blue-tooth voice encryption equipment (again– I’m not suggesting anything).  Barnes & Noble isn’t a hip enough place to hang out for that long anyway.

So, where’s the upside?  Where’s the money?  It’s in that second point in the first group: the data mining.  There are several forms of valuable bits of data flying around that the store would be well to catch:

1. Competitor Recon: if Barnes & Noble could know exactly which books people are looking up on Amazon, they could match it against their own conversion rates on those same books.  They would know where they’re losing the sale.  They would also know which books people are viewing on Amazon that B&N doesn’t stock.  This is great informaiton for gauging demand.
2. Brand Awareness:  how often are REI customers going to REI.com whilst inside the store?  Are they trying to get details on products that the floor peeps aren’t explaining well enough?  Should the floor manager and corporation welcome this kind of look-up? [yes]
3. Social network awareness: how often do customers ping Facebook that they’re about to buy / just bought a 60″ LCD or a $600 pair of boots?  How often are they tweeting?
4. Instant couponing: most free wifis have a ‘Conditions of Use’ short login page.  This doesn’t need to have a username and password, just a paragraph that tells the customer we are tracking web traffic anonymously (for all these rich data mining opportunities).  it’s a great opportunity to offer someone some up-sell and cross-sell offers, and maybe an instant coupon with a barcode for 10% they can take up to the register.
5. These same advantages apply for airports: people love to surf– a gold mine of surfing behaviour lying unexploited because some airport middle manager thinks there’s more money in trying to charge $9.99 for the 2% of people on expense accounts that will fork over that money. [stupid]

Some stores will understand this sooner than others, but in a pretty short window (the next 18-24 months), we should have pretty ubiquitous wifi signals in any urban or suburban environment.  The benefits for free and onmipresent wifi are legion.  The most apparent opportunity is the VoIP, and the chance to show some advertisements.

Google gets this second point clearly– they’ve chosen a target-rich environment (airports), and are handing out free wifi just to get people to surf, and maybe use Google, and maybe click-thru on some AdWords.  In this sense, they’re competing with the idiot box CNN.  If it pays off, I wouldn’t be surprised to see Google putting in free wifi anywhere there are more than p number of people waiting for an average of t amount of time.  The equation would look something like:

Demand (D) = p * t * p(sp)
Opportunity (O) = D * p(G) - wificost
where
p = number of people in a given location
t = average time of wait or lounging around that location
p(sp) = percentage of people with smart phones
p(G) = percentage of people who will go to Google and click on an AdWords
wificost = cost of installing and running wifi base station

In the market, I would not go long on telco stocks, unless they’re leading the pack on opened smart phones.  I would go long on Skype and Cisco, and business intelligence providers, and of course, Google.

Every few years someone re-invents real time chat.   Back in the 70s we had teletypes in the high school computer lab.  Internet purists had IRC to keep themselves entertained in the 1980s, while the early 90 gave us AOL chat rooms for the rest of us poseurs.    Soon, we all had ICQ numbers (I still have mine memorized),  then AIM aliases, which were soon replaced by jabber handles, Google chat IDs, and then came the facebooks.  All shared some basics: real-time typing, conversation windows, text-centric, and just below the speed of verbal communication.  Still, they’re all just variants on the real-time chat, a communication path that’s been around since The Beginning.

If we were to graph a spectrum of communication forms, spreading them out along the x-axis in terms of speed, and y-axis for quality of information, then email would be somewhere to the left and slightly higher than chat: It’s not real-time (you send something, and an answer comes back whenever the other person feels like it), but it can contain pictures and video, so it’s arguably better quality.  Below and to the left, we would have twitter: asynchronus, poor quality (short).  To the right of chat we would telephones (real-time verbal), and above that we would Skype: real-time verbal communication with the bonus of your friend’s beautiful face on your screen.  Skype’s real-time video conferencing should be superior (above and to the right) of all of them, right?
Why do we still have the other forms around?

• Is it because we don’t necessarily always want to see the other person? [yes]
• Is it because we sometimes don’t want to deal with the other person (your boss or girlfriend or bosses’ girlfriend or boss-you-wish-was-your-girlfriend) in real-time? [yes]
• Is it because we want to spew something out of low-quality and not have to burden ourselves with the responsibility that comes with actually having to put forward a cogent logical position? [yes]

So, it seems there is room for something that can land in that flexible in-between the safe distance that asynchronous  email gives us, but the conversational flow of chat.  If it were an open platform, people could start grafting on the higher-quality content elements like music and videos and pictures of cats eating cheezburgers.

Enter GoogleWave.  I’ve had it for a little while now, and I see some promise if people understand the construct.  Google is betting that people will want to sometimes be real-time, sometimes not-so-real-time, sometimes lo-fi, sometimes hi-fi.  I bet they’re right.

My GoogleWave ID is tokyodave@googlewave.com.  Hit me up.

We’re seeing a pattern, in political town halls, industry conferences, and even award shows: the concept of a ‘panel of experts at the head of the grand ballroom dispensing wisdom to the masses’ is dead.  I blame mobile phones, but we’ll get to that in a minute.

In August 2009, congressmen and senators scattered out of Washington back to their home districts like so many rats carrying plague.  They had to get Health Care Reform passed, and it was time to bring in the proletariat on the deals they had already been cooking.  The problem is that the prols didn’t play ball.  The quick reaction was to chalk it up to sour grape astro-turfing by the GOP– and once it showed up, I have little doubt they did amplify it wherever possible– but I think that people are just as upset with the Town Hall format as they are with the actual message trying to get preached at them by their “representative”.  Thanks to the internet, the masses are much more connected and have their opinions (right or wrong) much more set before they go to the meeting; thanks to social networks, people now have the baseline expectations to participate in a two-way conversation, not get lectured at and told what to think.  The worst representatives actually yelled at their own constituencies to “shut up and listen“.  Ah, irony.

I saw this same pattern at a recent ecommerce conference in Las Vegas.  Each morning had the usualy Big Name Keynote address which was jsut as much show-n-tell as it was informative, but then the afternoon sessions consisted of smaller breakout sessions with a small (3-4 people) “panel of experts” sitting at the front of a long ballroom pontificating about some facet of ecommerce chellenges (customer usability, mobile commerce, social networks, etc.).  Here’s the thing– very few people actually listened, I think.  Most people had their heads down checking their email, tweeting out what they were hearing in the meeting, or even tweeting out how they’re not getting anything out of the meeting about how to use Twitter.  Ah, irony.

On the flight home, I downshifted with a Newsweek magazine, and saw an article about the Emmy Awards for TV, and how the awards shows seem increasingly out of touch with the will of the people.  “That makes sense,” I thought to myself: awards shows depend on panels of experts, and that model is becoming increasingly flawed.  Anything that is perceived as a one-way street of information transfer, or has a significant amount of time-lag between the chosen opinion coming down from above and the feedback going back up will lose attention with an increasingly twitchy, real-time community.

So what to do?  Here’s some cheap shots:

• For political town halls, obviously not everyone can talk, and even then not everyone has a cogent thought, but everyone wants to participate.  What if everyone was handed a chit or poker chip as they came into the room, and each person could either ask their friends for their chips because she wants to speak, or she could hand her poker chip to someone she trusts to voice her opinion.  The microphone would then be ‘auctioned off’ to those with the most poker chips, and passed around as time allowed.
• For conference meetings, the panels must absolutely integrate real-time tweets, polls, and feedback.  As topics become more tightly defined, the likelihood that smarter people are sitting out in the audience increases.  The poker chips might work here as well.
• For awards shows– I have no remedy.  They really were just a money-scam from the Big Studio era anyway, it seems, to put butts in seats a second time in November, while allowing actors to negotiate higher salaries because they had won something.  With the social networks, rotten tomatoes, and Mr Dynamite, we all have sufficient information to judge they good films, music, and TV from the dreck.  Those that cannot discern quality content deserve what they get.

I watched Amazon’s acquisition of Zappos with some interest last week.  I am certainly not the first one to blog about this, and I am no doubt one of thousands of armchair pedants on the subject, but here’s my take: Amazon is becoming the new EDI for online retail, and will continue to acquire front-end retailers– the real money is on the back-end (the real money is always on the back-end, it seems).  Amazon is becoming the new EDI.

For those of you who may not be familiar with EDI, it’s a system for all those coal-burning AS-400 mainframes and other legacy computers to share data with each other in a standard format.  Through a series of arcanely formatted pre-set protocols, computers send invoices, inventory levels, sales requests to each other, and then send back all the acknowledgement messages.  It’s efficient, but klunky.  I would bet that Amazon sees this klunkiness, and thinks it can do better, and make a little bit of cash by providing a better service.

Retailers will come and go, but they’ll always need to do a few things: store their data securely, talk to vendors, track customers, and sell stuff.  Look at Amazon’s trajectory: they offer all of these things either freely, or for a small percentage-type handling fee.  They have the A9 search/merchandising platform, a cloud computing offering, most of their sales comes in from vendors, they have millions and millions of customers tracked in real-time, and they offer a method for small vendors to sell goods fairly easily.  Prediction: Amazon.com will continue to be a front-end website, but more and more, we’ll see Amazon showing up as the “retail platform” for other branded websites (like Zappos.com).

The ice is getting thinner for conglomerated pure-play online retailers.  If they don’t offer something uniquely value-add, customers will simply go directly to the brand’s own website to buy their stuff.  Where would you buy your Adidas?  Zappos.com, Shoes.com, or Adidas.com?  It depends on what you need and what each one offers, right?  The end product is the exact same, so it comes down to the free shipping, the search engine, and the eye-candy on the website.  Amazon was never that glamorous a website to start with–  a very utilitarian look and feel (but very information-rich) experience overall.  We all know that Amazon does usability research, so all that data must be worth something, right?

Zappos has built a great base of user loyalty through its mix of customer-centric activities and transparency.  Their back-end has always been first-rate, but also probably very expensive (call centers are pricey).  If all that IT development and warehouse operations can be folded into the larger Amazonian Empire, then Zappos can concentrate on giving away free pizzas to the customers, or tweeting about Tony’s sushi dinner, or whatever.

Amazon will pick up a few more “major” retailers.  My short list of predictions includes: NewEgg.com, Overstock.com (hostile takeover likely), Etsy.com, and maybe even Target retail to finally “go cross-channel”.  They’ll likely buy out BillMeLater or even Mastercard to get the financial end covered.  Afterall, Amazon needs to watch out for Walmart.

So, the Internet is everywhere.  Times was (back in the day), that we used to surf around to websites just to see the design or some cool functionality, but we are no longer enamored with the technology (well, almost).  Futurists no longer spend their time pontificating about capacity, bandwidth, or the extent of data that could be recorded in their great computers– all of that is assumed to be in place.  Rather, these seers spend their time in two activities:

a) Blowing their own horn on twitter — not worth watching

b) Showing insights on the social interaction of the great online hive that has now come into being — these are what I’ll call  “Network Biologists”, and are worth your time.

The network biologist will spend his/her time researching the strange interactions between people, and the even stranger medium that is created as a result.  They are not sociologists, because it is more than the interactions of the humans; there are robots, scripts, and crude AI influencing the mix.  The environment itself is ever changing– and the actors change as a result– but the center of focus has shifted to the behaviour of the fish, not the mechanical workings of the reef: hence the term ‘biologist’.

The usability managers in ecommerce companies were an early manifestation.  Now, everyone in the online marketing department, merchandising, and even finance is trying to ascertain how the huge mass of people will react to the online environment.  This is different from standard “retail science” or “catalog management” because of the constant arms race in online functionality as well as the multiple-variable equation where customers will influence each other in real time, as well as try to get in on the deal with some sort of affiliate, coupon, or recommendation in exchange for a slice of the profits.

The best results so far have been to segment and clasify online users into their various behavioural patterns.  Oddly enough, people don’t mind surrendering them willingly.  The current spate of “what [blank] are you?” viruses circulating on facebook are a segmentation maker’s dream: people are happy to tell us exactly what drives their brightest fears and darkest hopes. The most successful websites out there have tapped into the hive behaviour that humans portray when given just the right mix of anonymity and self-aggrandizement: Google’s page rankings are a canopy of dominant players and ground-dwellers in their shadow; Amazon’s entire merchandising catalog for millions of products is an expansion of fecundity like salmon spawning; Facebook is basic tribalism that proves Dunbar’s number, De.licio.us is our own pollen-finding wiggle dance; twitter is a sea of iridescent jellyfish desperate for attention; there is a flavour of pr0n out there for every strange perversion you could imagine (and a few you don’t want to).

I would imagine that colleges will soon have some sort of degree in Network Biology: it will be a combination of sociology, crowd biology, and basic network mechanics, to show how it is all wired together.

I am not sure if it is a show of weakness, or just another table-upsetting play by our old friend Son Masayoshi, but Softbank is now offering a Free 8GB iPhone as long as you sign up for the two-year data plan.  We’ve seen this model before: Japan pioneered the ‘free crack pipe’ model almost 10 years ago with game consoles and cell phones.  But as functionality, swiveling screens, and other doohickeys made their way into the small devices, prices started to creep up.  Hardware prices took a real hike as the portable chips made jail breaking the phones an assumption, and as all signal carriers standardized.  (In fact, most electronics stores will transfer your chip into your new phone right there when you buy it.)

But Softbank has two things going for it: 1. jailbreaking the iPhone is possible but not easy, 2. the 3G network is still somewhat proprietary.  With these, Softbank can go back to the market-share giveaways that made them famous.  Earlier, I didn’t see the iPhone taking off so strongly inside the Empire.  Now– maybe we’ve got a real race.  In response, competitors could go either way:

a) Use Android to lower the cost of the hardware (also offer for free), and then use VoIP wherever possible to lower radio costs.  However, this doesn’t work because– believe it or not– open wifi networks are not that common in Tokyo

b) Use Android or another OS platform to out-app the iphone (weak strategy)

If the iPhone can get sufficient marketshare, it will be fascinating to see what unexpected apps the Japanese developer community comes up with.

My good friend has decided to look for a new job.  Today, she brought in some good Mexican food for the crew as a thank you.  It was, however, not a free lunch.  In return for the tacos, we were supposed to go to the white board in the conference room and suggest where she might work next.  For the price of 2 dozen lunches, my friend tried to crowdsource her next job.

Soon enough (if not already), everyone will be connected to everyone else in their immediate market segment.  We’ll all have a Kevin Bacon number of 3 or lower.  Linkedin, which originally provided value as the “inside connection” to a given company or executive, now has become the ubiquitous contact folder for everyone.  Where recruiters used to thrive on Linkedin because it complimented and extended their most valuable asset: their rolodex of contacts, it now threatens to replace that rolodex completely.  The Recruiter still has value, as someone who knows how to interview a candidate and get at the soft chewy center of a person to see if they are a good match for the company with an open position, but not as a simple nexus of resumes in one hand and job openings in another.

Given that Linkedin has given us all that magic rolodex, why not try to crowdsource positions?  How could one simultaneously incent the armchair recruiter in all of us, yet invoke enough friction to keep out the spammers and robots?

Here is my idea:

1. Vigorously pursue companies to list their open positions on the network
2. Invite people to recommend people in their network for the open positions, with a standing bounty of 10% of first-year salary (still leaving room for the recruiter doing the actual interviews to make 10-15%)
3. If Andy is going to recommend Betty to C Corporation, then Andy needs to pay $5 to Betty (she’s the one looking for a job, and probably needs the $5 anyway)
4. C Company would see that Betty is recommended by 7 of her friends (all willing to stake $5 on it), and therefore she is probably worth a look.  If Betty is hired, the 10% is split amongst the 7 people who recommended her.
5. Andy just profited $1423 for his work (assuming 10% of $100,000 job, spilt 7 ways, minus the $5)

Hmmm.  This might work.  I should ping Harry or Alex or my old friends at Daijob.

The haters are out, there is no profitability on the horizon.  Facebook is definitely well on it’s way to Stage 5 of the cocktail party: the cool kids are leaving, only the hucksters and sham artist are left.  This party is no longer cool.

At the same time, we have a new administration that owes its existence and success to a mass movement of online communities binding together around key issues.  That same administration is now trying to rally an even larger group– all 310 million of us– around key points of its agenda.   Back in the 50s, the Feds would have duped Jimmy Stewart into making a propaganda film.  That won’t work anymore.  Thanks to those hippies over at the ACLU, the government cannot invade our privacy.

If only there were some way to get down to a majority of the citizenry, and find out their known associates, their political and sexual preferences, and their GPS coordinates.  If only there were some network out there where people were ready to hand over all this information in exchange for some cheap games and zombie bites.

The federal government should nationalize Facebook.  It’s not seeing any profit, yet it is sitting on top of an incredible amount of personal information, all surrendered willingly.  The Obama administration could forward its plans at the grass roots level.  Anyone who doesn’t play ball could be outted to their friend list.  Together with Twitter for up-to-the-minute updates on terrorist threat levels and natural disasters, the Federal Government could finally achieve the true Jeffersonian democracy mass movement that has stood as an idealistic utopia since– well– Plato’s Republic.

Nationalize Facebook Now!

Every year, the geeks declare ‘Year of the Linux Desktop‘.  So often, in fact, that’s it’s become a running gag.  In fact, Apple has made in-roads, and Ubuntu is more popular than ever.  Progress comes in small steps.

We actually may have taken a relatively large step this week: the new Obama adminstration has declared a very open information policy, and their IT structure shows promise in moving this same direction.  While not running Apache and Red Hat yet, they’ve certainly adopted some open social interaction structures.  It would be safe to say that the Obama administration is the best so far at “getting it“.

The missing element here, and the biggest specific step the US Government could make next would be to demand that all documentation be saved in an open format.  Want proof that Microsoft still has a monopoly?  Try sending someone your resume, proposal, or memo in something other than .DOC format.  If the government simply declared that all archives and transactional documents must be saved in .  The ODF is a deeply-flawed, but acceptable good start.  Ultimately, I am not sure the document format will matter.  Within the next 3 years, I bet that words and numbers and tables and figures and images are simply kept in the cloud.  I know I am not the first one to say this– but I can hope that the government would take an active role in pushing documentation into the common external places.  Cloud computing is not a technological hurdle, it’s a social acceptance problem.  I still encounter many people that resist putting things “out there”.  When pressed, there is no specific reason, other than people think the hard drive on their laptop is somehow safer than the huge servers tucked into concrete bunkers somewhere along the Columbia River.

I would hope that the transparency issue continues to gather steam.  I would hope to see the day when the government simply insists that all documentation: project bids, meeting minutes, deliberations, and especially lobbyist efforts, get published in a format that is easily remixed, chewed up, and boiled around in ways that slightly scare the powers-that-be.  We’ve seen a steady march forward with DARPA since the 60s and 70s, early gopher scientific info in the 80s, and then Thomas in the 90s, but the government certainly has dropped the ball in the last 5 years.  If the government can resume its Jeffersonian role in pushing new things for the republic, and allowing the market to fill in where advantageous, then maybe someone’s next interaction with the government will force them into putting things out there for scrutiny (policy or code), and they’ll realize that privacy ultimately depends on open scrutiny, not secrecy.

No home wifi firewall will protect us from an opaque government.

A good friend of mine (Let’s call him Sam Rothstein) is just finishing up a stint in the hedge fund business.  He is a bit of a quant and an overall critical thinker, so I ran the Keyword Derivative Market idea by him.  His verdict?

“It won’t work”

“Why not?”

“The risk– there’s no way to calculate the risk.  You think you’re all smart and have worked out the percentages on the bell curves and all the possibilities of what might happen that would wreck your prices, then wham! That one-in-a-billion thing that could sink your risk hedges actually happens, because it turns out to be a one-in-a-thousand thing.”

“Yeah, but that’s why I pad the keyword bids a little.”

“By how much?  What amount?  That padding is your determination of the cost of the risk– you cannot calculate it, therefore you cannot come up with a price.”

“shit.”

Sam went on to describe the basic flaws in risk-based hedge funds.  He complimented me on coming up with a business model that had recently bilked billions out of the market, but simultaneously reminded me that there are thousands of people trying to figure this out– many of them much smarter than me.

In the end, a keyword is an expungable commodity, but it also has something what I’ll call “high sucker elasticity“: Retail companies calculate the price they are willing to pay for a keyword position, usually based on some determined cost-of-acquistion equation.  If the price of a keyword bid gets pushed too high (according to a rational cost/revenue calculation), there is always another sucker to buy that irrationally high keyword postion.   Google’s profits are intrinsically linked to the irrationality of the market.

Keyword management software providers like efficientfrontier, kenshoo, marin, and others are making great headway in bringing rationality to this market, and are good for the long haul or large corporate spends– but the little man will always make keyword purchases with snap decisions based on insufficient information.  He’ll get suckered.

To their credit, Google tries to explain this out as much as possible: they make their API open to the keyword management companies, they give away performance statistics for free, they try not to be evil.

The odds on craps are written right there on the green felt, too.