Archive | 2011

Relative scale of mobile products

9 Nov

Earlier tonight I asked about mobile monthly unique users for various products.

Here is a compilation of that data along with some others:

  • Facebook – 350 million – publicly announced
  • Google Maps – hundreds of millions – estimate
  • Angry Birds – 30 million daily uniques - Mashable via Anil Dharni
  • Twitter – tens of millions – estimate
  • Pandora – 20-30 million – based on 37 million total in SEC filings
  • TripAdvisor – 10 million – tweet from TA employee
  • Yelp – 5 million – from Yelp PR
  • Where – 4 million – announced at time of eBay acquisition
  • foursquare – 400,000 – tweet from Rabois
Others likely above 5 million:
  • ESPN
  • Instagram
Others smaller:
  • Discover (1MM app installs reported)

Why the foursquare and American Express deal is really big

23 Jun

Screenshots from foursquare's AMEX integration

Foursquare’s new deal with American Express will allow AMEX cardholders to save money on purchases at select retailers including Sports Authority and H&M. As important as the deal is, I think the technology is more important.

We’ve heard a lot about NFC lately. Products like Google Wallet can talk to the payments network and transmit your credit card, loyalty program and promotion information.

I’m sure it will happen over time, but the benefits are marginal at best. Yawn.

What’s really exciting is what you could do if you flipped the model and had the payment networks talk to your phone. That’s exactly what foursquare is doing. When you redeem an offer, American Express sends a confirmation to your phone.

The payment network can reach out and touch your phone. That’s huge. That enables a lot of possibilities:

  • Risk reduction and increased convenience. If you’ve ever been traveling and had a card rejected because it was flagged as suspicious, you know how frustrating this can be. Instead of declining the transaction, it would be routed to your phone where you could authorize it. This also saves a phone call to unblock your account. Fraud reduction, more transaction volume and operations cost reduction. A credit card company’s trifecta.
  • Online transaction authorization. Similar to above, a notification to your phone could be used as secondary verification of online transactions.
  • Parental authorization. Parents could provide a restricted prepaid card to children. On every transaction, they could remotely approve or deny it. Some merchants could be automatically authorized. This would be a great addition to American Express’s PASS product line.
  • Promotions. Offers based on your recent purchases and location could be sent while you’re in a shopping mood. If you just made a purchase at mall, you might get an offer for discounts on dinner and a movie.
  • Access for the blind. A text-to-speech engine on the phone could provide an overview of the merchant and amount to help the blind.

An application like this also eliminates the two-sided market problem that NFC has. As much as Google would like to have NFC terminals everywhere, that will take a long, long time. Merchants don’t have to do anything to the installed terminal infrastructure to make this happen. It’s all between the backend and your phone. It also works with a much broader base of phones than NFC.

This type of integration also eliminates the need for training retail employees and doing POS integration. These are both significant hurdles to running promotions.

Loopt’s u-Deals offer an interesting twist but with many challenges

22 Jun

Loopt today announced a product called u-Deals that turns the Groupon model on its head.

Instead of a large team of sales people who go out and sell businesses in anticipation of consumer demand, Loopt is trying to collect the consumer demand and use it to generate merchant interest.

It’s an interesting twist, but it has a lot of challenges. The biggest challenge is cannibalization. People are going to want discounts on places they already frequent. Businesses generally don’t want to offer huge discounts to regulars. If they want to reward someone, they don’t need to pay a hefty cut to a deals provider to do it.

Here are some others:

  • The places that come to mind to most people are the popular places. Those places typically don’t have an incentive to discount. If you’ve already got a 1-hour wait for tables on a Friday night, why would you lower your prices? That would be silly. I would really love a discount to flour+water, but I’m not getting one.
  • Groupon and LivingSocial have set unrealistic expectations for people in terms of discounts. Many businesses can’t afford to offer such steep discounts. I would expect that consumers would ask for similar steep discounts and the businesses would refuse.
  • The businesses that typically need to offer deals are businesses that people haven’t heard of. The deal is a mechanism of creating awareness of a business. Obviously this doesn’t work with the Loopt model — in order to create the deal you have to be aware of it.
  • Consumers are generally passive and reactive. u-Deals requires consumers to do too much work in exchange for an uncertain payoff. Even if you could get all of your friends excited and wound up about it, there’s a good chance the business doesn’t accept the deal. I don’t want to risk my social capital like that.
  • The model doesn’t work for many categories. Restaurants don’t generally offer group discounts. (Despite the name, Groupon isn’t a group discount.) It may work for things like amusement parks.
  • There is a lot of latency. With Groupon and the other daily deal providers, you can use your deal within 1 day of seeing it. With Loopt, you’d have to request a deal, encourage your friends to request it, wait for Loopt sales to close a deal and then redeem it. This could take days, if not weeks.

Roundup of my Groupon and daily deals coverage

20 Jun

If you have experiences — good or bad — that you’d like to share, email dailydeals@agrawals.org.

Start here

For businesses

For potential investors

For consumers

My stories on TechCrunch

My series on local search

The importance of staff training and POS integration

12 Jun

foursquare offer at RadioShack

I stopped in at Radio Shack last week to take advantage of foursquare’s 20% off newbie special on an iPod Touch. (It’s a great deal. 20% off a current generation Apple product is tough to find.)

The clerk I talked to had no idea what I was talking about. He reluctantly brought over the manager. She had no idea what I was talking about. She stared at the offer on the screen and couldn’t figure it out. She tried calling another store. Again, no idea what was going on. Then she called Radio Shack’s POS support line and was on hold for about 20 minutes.

If I were an ordinary customer, I would have been fed up and left. But I like to see how these things play out and consider it market research, so I let it go on. I amused myself as the manager spent her time on hold trying to sell me batteries, extended warranties, screen protectors, armbands and pretty much anything else that was within reach.

I asked if she could just override the system and add the discount. No, store managers don’t have that discount. Finally, she randomly entered promotion codes and figured it out.

Thirty minutes after I entered the store I left with my iPod. During that time she couldn’t help other customers. It was’t a great experience for me, the other customers, the store or foursquare.

Clearly the offer code was not a single use code or she wouldn’t have been able to guess it. Either Radio Shack needs to get much better at training or they need to put POS instructions right on the foursquare offer. (They also need to better staff their POS support desk. No one ever picked up.)

This isn’t limited to foursquare or Radio Shack. I run into this all of the time when trying to redeem mobile offers. My default expectation is that it won’t go smoothly.

That’s one thing that appeals to me about Square’s Card Case and Register. Because the POS system is integrated with loyalty rewards and promotions, here shouldn’t be a disconnect between the offer that I see on my screen and what the merchant sees on hers.

Opt in vs. opt out in tipping

31 May
To tip or not to tip

To tip or not to tip?, that is the question

The tip line. A somewhat passive-aggressive solicitation for money. It’s long been the norm at full-service restaurants, but it also appears at many places where I wouldn’t ordinarily tip. If I order and pick up my food at the counter, a tip seems unnecessary. If I pay cash, there is no default expectation of a tip. (Though there might be an easily ignored tip jar somewhere.) But paying by credit card, the tip is closer to an opt out. I have to explicitly draw a line through the tip line and write in a total. I’ll admit to tipping at places I wouldn’t ordinarily tip because of the subtle pressure. Sometimes I’ll pay with cash to avoid the situation.

Changes in payment systems are changing this dynamic. Increasingly, credit card companies aren’t requiring signatures for low-value transactions. With MasterCard’s Quick Payment Service, transactions under $50 can be processed without a signature. It’s faster for the consumer, moves the line quicker, but removes the opportunity to tip on plastic.

Square’s payment service offers a tip option:

Square's tip button is off to the side

This implementation is the equivalent of the physical tip jar: if you go through the normal transaction flow and just sign, there is no tip. You have to explicitly click the box in the upper right corner to add a tip. (I haven’t seen what the tip experience is like with Square’s new Card Case.)

Is that the right experience? It depends on whom you ask.

One merchant I talked to would prefer that the tip was part of the default transaction flow, as it is with a credit card slip. On a $5 food cart transaction, even a $1 tip is huge. As a consumer, I prefer the opt in experience. As a product designer, this is a great example of how even small changes can have big impacts.

Either way, the customer doesn’t have to do math. That’s already a huge improvement over the paper experience.

What Square’s new Register and Card Case means for small businesses

23 May

Square today announced its Register and Card Case products to complement the existing Square reader and smartphone applications. While Square has been focused on the merchant experience, this move expands its role on the consumer side. (Consumers have been able to receive receipts by email or text message when making purchases at Square merchants.)

With the new application, customers will be able to search for nearby Square merchants, see what’s on their menu and view receipts for previous transactions. Customers can also pay right from their mobile phone and the payment is confirmed on the merchant’s iPad.

Merchants will have the ability to accept a payment without swiping a card. They can also keep better track of what they’re selling. A loyalty program allows businesses to reward loyal customers. Unlike check in based systems which involve users to self-report, this system would be harder to cheat.

One open question is whether these transactions will be treated as card present transactions for Square. I expect that Square will charge merchants the swipe rate for these transactions. If they’re paying out the card-not-present rates, this will eat into their margins.

What we’re seeing here is only the beginning. There are a lot of important problems that can be solved with the data that Square will be collecting:

Consumer problems

  • It’s 2 a.m. and I’m hungry. What’s open? This is a problem that search generally handles poorly. Yelp has done the best job of collecting this among anyone I’ve seen. (Google tries, but its data is less comprehensive.) Even when the data are collected, they are often inaccurate. (Holidays, business was slow so we closed early, etc.) The Square Register could contain a virtual Open and Closed indicator that is visible to consumers.
  • I have a craving for a dosa. Where can I get one? With menu item data, Square could answer that question — at least for its merchants.
  • I have a receipt, but I can’t remember who I was with. The Square app could allow users to flag tax-related transactions and record notes like who you ate with.
  • I want to tell someone about a place I ate at, but can’t remember the name. (And want credit.) People are generally bad at remembering place names. Merchants could also offer rewards for new customer referrals, much like online merchants do.
  • I’m in a hurry and I need an order to go. Consumers could order right from their mobile phones, the order would pop up on the merchant’s screen and the merchant could select an estimated pickup time. For the merchant, this also reduces the risk of nonpayment for phone orders that aren’t picked up.

Merchant problems

  • Updating Web sites is hard. Most local business Web sites I go to are horribly out-of-date. Menu items and pricing can be more than a year old. Hours are often wrong. Maps are hard to find. Square could take the data from the Register system and generate Web pages with dynamic information, including today’s specials and hours. Some card issuers and payment processors have offered Web site creation, but these have mostly been low quality efforts.
  • I don’t have a mobile presence. Very few local businesses have dedicated mobile sites. At best, you get a hard-to-read version of the main site. At worst, you see sites created by incompetent flash designers who knew nothing about user experience. These render blank on an iPhone. Square-generated mobile Web pages would provide easy access to key info such as location, hours and menus. Google says about 40% of searches on mobile devices are local in nature — as a result, this is becoming increasingly critical.
  • I don’t have time to enter data multiple times. Square could also generate a PDF that could be printed for in-store menus. Data entered once gets used for POS, paper menus, Web site, mobile site and promotions. This not only saves on work, it eliminates inconsistencies which can cause customer service problems. Getting a bit crazier and thinking further out into the future, a Square app on an Apple TV could show promotions in store.
  • I want to get people to try new items. Square could use transaction history to entice regular customers to try things on the menu that they haven’t tried before. With promotions, you want to spend your promotion dollars on transactions that wouldn’t happen otherwise. Paper coupons are dumb in this regard. Say you’ve got a raspberry tart that you think is amazing. You could find all of the customers who haven’t ordered it and send them a promotion.
  • I want to know what my customers think of me. An email after the fact could prompt users for feedback and generating a net promoter score. It can also be a way of drumming up more business. For example: “Would you recommend us to a friend?” If the customer says, no, you can ask why. If yes, you can ask for friends right then and there. “Whom would like to recommend us to?” The referral can be coded so that the business can thank the original customer for the referral. A Square app could also provide more actionable data than the typical Yelp review — a restaurant would know when they ate, what they ordered, etc. This would make it easier to identify problem employees or dishes.
  • I want to know how I’m doing compared with other businesses in my area. I charge $3.50 for a slice of pizza. How does that compare with others? How does my revenue compare? Of course, this all needs to be done in a way that protects business anonymity. Data would only be available when there is enough participation so that a single businesses’ information can’t be identified. Participation should be opt in, with the carrot being access to data. The key here is that data needs to be in a meaningful context. I’ve seen many startups that just want to throw data at businesses. That’s not good enough. Square will also need to answer the “So what?” What decisions should I make based on that data?

See also:

Shop talk: Square and Groupon

10 May

Today I had the opportunity to talk with Dave from Chili Inside / Chili Outside a food cart operating in Portland. Chili Inside recently ran a Groupon and also uses Square to take credit card payments.

The key takeaway here is that simplicity sells. The credit card acceptance market has been complicated to understand, with setup fees, monthly fees, minimums, upcharges for certain types of cards, etc.

Not only does simplicity make the initial sale, it makes it easier for those customers to evangelize your product because they’re comfortable explaining it to others.

Square

  • Dave found out about Square when his son, Alex, spotted it at another food cart in Portland.
  • Other providers “seemed more daunting to even look into.”
  • “When Square came along and it looked easy and simple. It was.”
  • Before Square, he would try to get customers to pay with cash on hand or direct them to a mini-mart to get cash. One of Chili Inside’s older Yelp reviews says, “Only cons were they are not set up to take cards which cost me $2.50 around the corner to use the ATM.”
  • Customers have reacted very positively to seeing the iPhone with the Square reader. “Most everybody is pretty dazzled by it. It’s really fun to show it off.” Dave also showed me his technique to get it to swipe the first time every time.
  • He uses the Square reader daily. About 1/3 of his transactions are by credit card. During the time I was at the cart, at least three people paid with Square.
  • Square’s pricing was lower and less complicated than other vendors.
  • He is pleased with the real-time reporting capability. “We’ve got real time feedback virtually on every credit card swipe we take.” He showed me the screen with transactions that had just happened.
  • He was pleasantly surprised that a Square representative gave him a phone number to call with questions.
  • He would like to see the tipping option more prominent in the interface.
  • He has evangelized Square to other businesses locally. Square sent him a bunch of readers and he has been handing them out.

Groupon

  • Chili Inside ran a Groupon promotion on the same day as several as other Portland food cards.
  • 533 Chili Inside Groupons were sold. A normal day is 20-30 customers. Groupons were about a month worth of business.
  • In the week since the Groupon ran, about 35 have been redeemed. Dave estimated that 20 of them were from people who hadn’t heard about Chili Inside before.
  • Dave’s primary goal in running the Groupon was to introduce customers to his food and inspire repeat business. As a new business in the area, it was important to reach an audience. (See 5 cases when it makes sense to run a Groupon.) “Most of the people that purchased the Groupon didn’t know we were here and they live within blocks. We believe when people have our food, they’ll come back.”
  • Chili Inside uses an iPhone to scan the bar code on Groupons to redeem them.
  • He had approached Groupon months ago and never heard back. Then a rep called him about the food cart day.
  • Groupon has approximately 500,000 people on its mailing list in Portland. Chili Inside sales were 0.1% of that.
  • He has been approached by other deals sites, including LivingSocial.
  • Dave wouldn’t disclose the terms of the Groupon deal.

Google

Other

  • His wife monitors Yelp reviews and updates Facebook and Twitter pages.
  • Dave wasn’t aware of foursquare.

Note: As with most such research, when I mention that someone isn’t aware of something, it isn’t a criticism. It’s meant to highlight that even though people in the industry talk regularly about services like they’re ubiquitous, they aren’t.

See also:

Amazon offers up a new Kindle

2 May
A Kindle ad for Oil of Olay

A Kindle ad for Oil of Olay. The creative looks splotchy on the Kindle's e-ink display. Why this ad shows for a 30-something male is another matter.

I received my Kindle with Offers on Friday. It’s Amazon’s latest attempt to take on a somewhat new market. The name “Kindle with Offers” is a bit misleading, but it sounds better than “Kindle with Ads”.

Many of the ads aren’t offers at all. Here is the initial set I’ve seen:

  • An ad for Buick.
  • An ad for Oil of Olay.
  • An ad for the Amazon VISA card touting 3x rewards points on Amazon purchased. (This is their standard rate.)
  • An offer for a $10 credit if you register your VISA card as the default card for Kindle purchases and buy a Kindle book from a select list.
  • An offer for a $20 Amazon gift certificate for $10.

For people used to Web ads that flash, blink and otherwise overwhelm content, the Kindle ads are barely present. One appears on a small portion of the home screen, similar to a banner ad. The other format (shown in the picture) takes over the entire lock screen of the device if you haven’t been reading for a while.

The ads are disappointing. Amazon hasn’t done anything unique or interesting with them. Some of the ads on the Kindle were clearly repurposed.  Ads for Oil of Olay makes extensive use of gradients, which look terrible on the Kindle’s e-ink display. I thought my screen had become defective until I cleared the ad.

I really shouldn’t even see the Oil of Olay ad (not female) or Buick ad (not old enough). Amazon should know that neither ad provides value to me or the advertiser. The ads I see on Amazon.com are much more relevant than these.

In terms of offers, VISA is trying hard to be at the forefront of mobile payments. A similar promotion ran when Starbucks launched payments on the iPhone; if you registered your VISA card and bought Starbucks credit with it, you received a $5 bonus. VISA also recently invested in Square.

The $20 Amazon certificate is similar to the promotion that LivingSocial ran earlier. Except this time Amazon is footing the bill for the promotion.

Acting on an offer is a bit clumsy. After selecting an offer, you get an email with all of terms and instructions on how to redeem it.

Kindle with Offers is priced at $25 less than the comparable Kindle. The discount on the Amazon gift card is effectively another $10 loss. That brings the Kindle with Offers discount to $35. For comparison, Google makes less than $20 per year per user (on average) for its massive advertising engine.

For a media play, Kindle will need a lot more advertisers. Or it will need an aggressive revenue share on real offers like Groupon has.

Otherwise, it’s just a way to get Kindles in the hands of more price sensitive customers without repricing the base product. That itself is not a bad goal.

6 cases when it makes sense to run a Groupon

24 Apr

There has been a lot of discussion of late on the pros and cons of running Groupon offers for businesses. Here are five cases where running Groupons make the most sense:

  1. You have a new business. If you’re a brand new business and don’t have existing connections in the market, Groupon can help introduce you to your local community. A good example of this is the Globe, a pizza place in Portland that recently opened in a troubled location. A new business also avoids a significant cost that many businesses forget when doing the Groupon math: margin lost on existing customers who instead use a Groupon, turning a full-price sale into a 75% off sale.
  2. Your business has a subscription model or high lifetime value. This category includes gyms, yoga studios, flight schools. Many of these businesses already regularly run introductory specials, such as the first month for $30 (regular price $120). Converting a onetime flight lesson into thousands of dollars in ongoing schooling makes a lot sense. In cases such as gyms and yoga studios, the incremental cost of serving customers is small. Even in these cases, you need to be sure to cap the deal at a manageable number. You don’t want overcrowding that frustrates your loyal full-price customers.
  3. You have fake pricing to begin with. Many businesses have fake pricing. If you shop at FTD, furniture stores, mattress stores or the Gap and pay full price, you’re a chump. The regular discount levels at these sorts of outlets run 30%-50% off. Starwood Hotels offers a 50% off certificate that you can buy with 1,000 Starpoints. But the discount is valid only off the “rack rate,” not the prevailing rate. In 12+ years, I’ve only found the “discount” to be valuable once or twice. Even then, it amounted to 5-10% off the regularly offered rate. If you have fake pricing, Groupons can work for you. But don’t push it too far — FTD wound up not smelling so good when Groupon customers discovered that in order to use their discount, they had to go to a special site which had even higher prices than FTD’s regular site.
  4. You have a third-party really footing the bills. Magazines and newspapers fit into this category. The real goal here is to sell eyeballs to advertisers. For newspapers, auditors will count it as paid circulation if the customer pays even one cent per issue.
  5. You are running an event with excess capacity. If you have an event like a theatrical performance, concert, etc., with a fixed cost of production and you’re unlikely to sell out, Groupon or other deal providers can help fill the audience.
  6. You are going broke anyway. A Groupon can be the ultimate Hail Mary. With Groupon, you get your share of the deal within 60 days. Maybe the extra cash flow will help you smooth over tough times. If it works, great. If it doesn’t, well, you were going out of business anyway.
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