Archive | February, 2011

How the battle for local search will be won

24 Feb

Part 1: Local search is starting to get more social
Part 2: How the battle for local search will be won
Part 3: Google Hotpot a strong competitor to Yelp
Part 4: Statistics on business and consumer engagement in local search
Part 5: Foursquare 3.0 takes mobile ball to a whole new level

Local search has changed dramatically in the last decade. Gone are the days when you could buy a generic database from a mailing list provider, slap maps on it and have a local search solution. Social networks, mobile phones and businesses themselves are changing and enriching local search.

These are the key factors that will define success in local search going forward:

User generated content and engagement

Yelp and foursquare's mobile apps allow users to add photos.

Yelp and foursquare's mobile apps allow users to add photos.

The best local search databases are content rich. They include attributes such as hours of operation, friendliness of the place to kids and pets, whether there is outdoor seating, etc. Many of these attributes are collected by users themselves. Increasingly, this is being done on mobile phones — people can update data before they’ve even left the place.

Users also help to maintain the quality of the databases. In my research, there wasn’t a single case where Yelp or foursquare didn’t have a place I was looking for. There were quite a few that I couldn’t find in Google Places and Facebook. For the U.S., the best database of restaurants and bars is at Yelp. New places are often in Yelp’s database as soon as the place opens. (Sometimes even before the official open, as people participate in friends and family dinners and soft launches.) Foursquare’s data are also comprehensive, but are cluttered by users who try to exploit the service’s game mechanics by creating extraneous venues.

Users can also report businesses that have closed, helping alleviate the frustration of driving to a business only to find out that it is no longer around. Check in data on foursquare and Yelp can also identify anomalies. (e.g. a check in stream that suddenly stops can indicate that a business has closed.)

Photos are key components of some of these databases. The growth of smartphones will only further this trend. Some venues on Yelp have a hundred or more photos. Yelp reports that its users are uploading a photo on average once every 30 seconds. Foursquare recently introduced photos. Google is sending professional photographers out to take pictures of top places. Specialized applications like foodspotting have small but loyal audiences who upload pictures of specific dishes at restauranst.

When it comes to mobile data collection, Google’s Hotpot is weak. New places can’t be added and photos can’t be uploaded. It supports ratings, reviews and identifying problems such as closed businesses and duplicate venues.

But providing tools isn’t enough; it’s important to provide the right incentives.

Yelp has done a great job of providing ordinary users incentives to contribute to the maintenance of its database. It uses both social reinforcement and more tangible rewards. Yelp makes it easy for members to thank and compliment each other for reviews. Selected reviews are featured in weekly newsletters. Review often enough and you become a Yelp elite and have a badge on your profile.

Yelp employs community managers in its markets to help reinforce the community. Frequent events (including Yelp-hosted parties) provide more incentives to review and create adhesion among the community. Only a small proportion of the Yelp user base does any of these things. But you only need 1 person to provide value to millions. Yelp’s dedicated, engaged user base will be a significant barrier to other competitors in the space.

Business engagement

It’s taken a long time, but small businesses are finally engaging with consumers online. 60% of the businesses I looked at had Twitter feeds. (See my earlier posts: Why don’t local businesses use the Internet? and Twitter and foursquare: the tipping point to getting local business online.)

Businesses are using these tools to communicate specials, announce closings (e.g. for private events), run promotions, have contests and just engage with their customers. I’ve even seen businesses helping businesses; one business had electrical problems and another business offered her electrician’s number in response. Here is a snippet from a Twitter list I created of restaurants in Portland:

A snippet from a business list in Portland.

A snippet from a business list in Portland.

Beachwood BBQ

Beers on tap at Beachwood BBQ. Click the image for a live version.

This sort of real-time information can help sway a decision or prompt users to go out on a night when they would otherwise have stayed in. Radio Room in Portland does a great job of this with their Twitter feed.

The image to the right is an image from the Hops Cam at Beachwood BBQ in Seal Beach, Calif. It allows users to instantly see what’s on tap now. What spot now?, an iPhone app, allows users to see real-time cameras from various restaurants.

Although Google, Yelp and foursquare allow businesses the opportunity to claim their page, there is no mechanism to communicate with customers through their platform.

Businesses are claiming pages and providing enhanced attribute information. Nearly 2/3 of businesses I looked at have claimed their Google and Yelp pages.

Recommendations

Hotpot recommendations

This screenshot shows a recommendation in Hotpot based on other places I've rated.

To date, no one has done a great job of making recommendations based on a user’s preferences or social network. Local search has required users to sift through mounds of data or just go for serendipity (like in UrbanSpoon). Yelp and foursquare have had some form of social recommendations. Both will highlight recommendations from friends, but their social graphs haven’t been large or relevant enough.

This is a key focus area for Google Hotpot.

When you do a search, you might see recommendations based on other places you’ve rated.

Or you might see that a friend has rated the place. Unlike recommendations from strangers, this provides immediate context. I know some friends whose tastes are similar. If they like a place, I know the chances are good that I will like a place. Negative affinity can be helpful, too. There are a few people whose tastes are so divergent that I know not to go someplace they rate highly.

Pictures also play a big part in decision making. Local search has long relied on textual data because it’s been easy and available. But visuals are a key part of the experience when it comes to dining and nightlife. They can answer questions like “Is this place fancy or a dive?” and “Would this place be a great place for an anniversary dinner?” much quicker than text reviews can. See Picturing a new vision for local search. Pictures are also much easier to go through on a mobile device.

Making intelligent recommendations requires having a lot of data. The easier you can make it, the more participation you will have. Few people will go through the trouble of writing detailed reviews, but 1-click ratings can provide important signals and will have a higher participation rate. See more on recommendation engines for local search.

Distribution

No matter how good your content is, it doesn’t matter if you can’t get it in front of people. Here, Google has an indisputable advantage. Google sites serve 170 million people in the U.S. Yelp reaches 26 million. (Many of these come through the help of Google’s search results.) Foursquare claims several million downloads. The difference in scale is enormous.

Google’s distribution advantage extends to mobile with prominent applications on iPhone and deep integration within the Android OS. Facebook is also a large player here, with more than 150 million unique mobile users worldwide. When they set their eyes to local, they will be a big player to watch.

Sharing

Local search often involves a shared experience. Plans are made and coordinated. So far, no one has really provided a great solution for this. Here’s a simplified version of how the process often works:

Step 1: Person A looks up a place on a local search site.

Step 2: Person A sends the place name via SMS to Person B (and C, D…).

Step 3: Person B gets the text message and looks it up in a local search site to find the address and look up information.

Step 4: Person B responds to Person A that it’s acceptable. (Or not, back to Step 1.)

Step 5: Person B then uses the site to generate driving directions.

This could be greatly simplified. Again, Google’s deep integration into Android provides an advantage. Person A could find and text the place information. The receiving phone would identify that the link is specially formatted and instead of presenting it at as an SMS, would present a Places page with pictures and reviews and an accept/reject button. Such sharing could also help Google build out a social graph.

Local search is starting to get more social

21 Feb

Part 1: Local search is starting to get more social
Part 2: How the battle for local search will be won
Part 3: Google Hotpot a strong competitor to Yelp
Part 4: Statistics on business and consumer engagement in local search
Part 5: Foursquare 3.0 takes mobile ball to a whole new level

Social search has been talked about for several years now as the wave of the future. We’ll get better information with the help of our friends. Local is the ideal place to prove that out:

  • Most people tend to have a lot of friends in their immediate area.
  • Local search revolves around everyday experience.
  • The “answers” are based on opinions.

Google’s entry into the space is Hotpot, a local ratings and recommendations tool. It is spending a significant amount of money to promote Hotpot in the Portland and Austin markets.

Hotpot is clearly meant to compete with Yelp. To a lesser degree, it competes with Facebook Places and foursquare. (It’s funny how much the local search space has changed in the last few years. AOL, Mapquest, CitySearch and newspaper Web sites have largely dropped off the local map in recent years.)

It’s important to set the context in this fight: Google is already the undisputed leader in local search. Despite the attention that other sites get, Google is the number one place people go to get local information. More than 20% of Google queries are local in nature. Google Search serves about 170 million users. I bet 99.99% of them have done a local query. Yelp serves 26 million users in the United States. But many of those users come through the Google front door. (Partly because Yelp is one of the best SEOs out there.)

There are two core problems to be solved in local search. Providing someone additional information on a business whose name they know and providing guidance to those who are open to suggestions on a business.

Business name searches

The first problem is largely solved, despite the fact that the scope of the problem has increased. Just a few years ago, it meant providing someone the name, address, phone number and a map for a business. Today, it increasingly includes providing hours of operation, attributes such as romantic, kid-friendly, links to make reservations and menu information.

Distribution and integration helps Google capture business name searches. You can use the browser’s search box and Google.com to get your answer. With an Android phone, it’s even simpler. Press a button, speak your search and the answer appears.

Google can answer most of the basic questions about many businesses in the United States. Yelp has the best data out there for restaurants and bars in the United States. I’ll get to the reasons why later.

Google has difficulty with non-standard venues. For example, in Portland, it does poorly with food carts. In most cases, I don’t advocate manually updating a database to address localized concerns. But given the amount of money that Google is spending on promotion in Portland and the importance of food carts in the city’s dining scene, they should follow the advice of an Oregon company and “Just do it.” A basic effort could be done in a day by using online resources. A street team could hit all of the major food cart areas and provide enhanced data such as hours and pictures in a few days. (While also handing out Google stickers.)

Discovery searches

The other core problem in local search is discovery — helping to find an appropriate answer when they only have a few parameters or no clue what they’re looking for. These are the questions like “I want a kid-friendly pizza place nearby.” “I want to go to some place fancy,” “I’m looking for a special night out on the town.”

This is an area that Yelp excels at but Google generally sucks at.  The problem with Yelp (and the opportunity for Google) is that getting the most out of Yelp requires a lot of work from the user. Yelp has an incredible amount of rich data on local businesses. But it’s too much. It’s overwhelming to see hundreds of reviews. Using Yelp also means trusting people you don’t know, whose tastes may be very different from yours. And it means dealing with the snarkiness of reviewers who often spend more time talking about their life stories and girlfriend problems than the business they’re supposedly reviewing.

Yelp has introduced a number of tools over the years to alleviate this problem. It does data summarization across reviews so that you can see at a glance what are the things most frequently mentioned about the restaurant (e.g. popular menu items). You can see a distribution of the ratings to see how consistent a restaurant is. You can also see ratings trends to see if the restaurant is getting better or trending downward.

But often, people just want a few options. Too much choice and too much data is overwhelming. People don’t want to spend 30 minutes figuring out where to go. We’ve been getting recommendations from Amazon and Netflix for decades. “People who liked X also liked Y.” “Based on your previous ratings, here are places we think you’ll like.” This is especially important in mobile, where people are often more hurried and the screen real estate in which to read is limited. That’s what Google is trying to do with Hotpot.

In some ways, this is an easier problem to solve than Web search. If you’re looking up answers for Jeopardy, there is usually only one right answer. And if Google can’t find it, you know right away. For a discovery-oriented local search, there is more than one right answer. And if the answer isn’t what you were expecting, you won’t know for hours and you might not blame Google. (The restaurant might have had an off night.) For more details, see my earlier post about making intelligent recommendations in local search.

Picking the right social graph

In order to make the best recommendations, you need data. You need data from the user about their preferences and you need a good social graph from which to present options. The more data the better.

This is a significant challenge for Google. Other companies in the social space such as foursquare, Gowalla, Quora and Instagram, have piggy-backed off Facebook’s social graph. That’s not an option for Google. And I’m not willing to spam all of my friends to invite them to use Google Hotpot. The advent of Facebook Connect has made such spamming less socially acceptable. As a result, I have exactly one friend on Hotpot — and he’s a Google employee.

Foursquare’s social graph is OK, but it’s a bit small given the current focus on check ins. The number of people who I want to be able to see where I’m at in realtime is fairly small. But I’d be comfortable sharing historical data on reviews and ratings with a much larger audience.

Facebook’s social graph is ideal for this application. It has a lot of personal connections, including both close and loose connections. The loose connections are important because they help provide coverage that you might not have in your tighter friend circle. For example, the data to make recommendations for Indian restaurants in Paris might be from a former colleague who now lives in Paris.

In the next part of this series, we’ll look at some of the key success factors for local search.

Part II: How the battle for local search will be won

Google Hotpot takes a stand in Portland

19 Feb

Google isn’t known for its consumer marketing. If anything, Google is known for not doing much consumer marketing. Given its strong brand and the attention its products get, it hasn’t really had to do much. Put out a product, blog it and sit back while media fall over themselves to cover the launch.

Local is a different beast. Reaching people in local markets takes more effort. And Google sure is making it. Google has put on a full-court press in Portland since December for its Hotpot product. The results are mixed: I like the effort, but it needs more local flavor.

It’s the largest consumer marketing effort I’ve seen Google undertake (the 2010 Super Bowl ad notwithstanding.) It incorporates out-of-home, joint promotions with small businesses, event marketing, social media and online advertising.

It’s also the largest local marketing effort I’ve seen by an internet company since I was at washingtonpost.com in the late 90s. We hosted frequent community events. The Post bought an SUV, expanded it, put in computers (with a satellite internet connection) and drove it around to events at places like the MCI Center.

What is Hotpot?

Hotpot is a ratings and recommendations engine that sits somewhere between foursquare and Yelp. Instead of focusing on getting people to write rich, in-depth reviews like Yelp, Hotpot is trying to get people to quickly rate places and write short reviews. It doesn’t have check in functionality (that’s in Google Latitude), but the space provided for reviews is more similar to foursquare tips than it is to Yelp reviews.

One of my longstanding complaints about local review sites is that they require users to do too much work to figure out where to go. Google hopes to change that by providing recommendations based on your ratings and presumably the ratings of your friends. This post is focused on Google’s marketing activity; I’ve also written a detailed product review of Google Hotpot.

Out-of-home

Google is using a variety of out-of-home advertising channels. The marketing assault begins the moment you step off a plane at Portland International Airport.

A Google places banner at PDX

(This banner is no longer up.)

There’s a transit campaign with wrapped light rail vehicles:

Max light rail vehicle with Google wrap

Max light rail vehicle with Google wrap

Google has also purchased billboards around town promoting various small businesses. I’ve seen a couple of them. They feature photos of the business as well as a Google map.

Split Google places billboard for Pulse Salon

Split Google places billboard for Pulse Salon. Each half is a full-size billboard.

I’ve also seen ads run before movies. It’s been a while, so I can’t remember the creative. Here’s the call to action at the end:

Theater advertising

Getting local businesses onboard

A new-style Google sticker

A new-style Google sticker with an embedded NFC tag. But there's no call to action.

Google has hired local teams to approach businesses and explain Hotpot. They provide businesses with NFC-enabled stickers. I’ve seen these popping up all over town. These stickers have no Places, Maps or Hotpot branding — just Google.

While Google has been effective in getting businesses to put them up, the stickers themselves are ineffective. There’s no call to action — not even an URL. The vast majority of users can’t interact with them because they’re only NFC-enabled. In the U.S., that pretty much means having a Google Nexus S phone. But even if you had an NFC-capable phone, there’s no indication that this sticker can be scanned. Most NFC-enabled cards and devices have an icon with emanating radio waves. Not only does that give people a clear indicator that NFC is present, it inspires curiosity and serves as a subtle call to action.

Ideally the stickers would have both NFC and QR codes. QR codes can be used by millions of devices. NFC is currently used by virtually no one in the U.S. (Including Google’s Hotpot community manager; her Nexus S didn’t have a data plan.)

Compare Google’s sticker with this sticker for Facebook deals. Although Facebook’s sticker is much busier, it has a clear call to action.

The street teams also help businesses claim their own Places page.

Small businesses can also order a variety of Google schwag online for free.

Business giveaways

Google is giving away pints and custom pint glasses at Deschutes Brewery. Just show the bartender the Places app on your Android or iPhone.

Free pints (and pint glasses) at Deschutes

The pint glasses have Google branding on one side and Deschutes branding on the other side.

According to one bartender, they had 2,000 of these to give away and the promotion continues until they run out. One of the challenges with running such promotions is staff training. As a consumer, it’s frustrating when staff isn’t aware of a promotion. That hasn’t been an issue at Deschutes; everyone seems to know about it. I’ve even seen bartenders explain Google Places to customers. One missed opportunity here: the pint glasses should come with a promotional flier explaining Hotpot to new users.

The free pint is restricted to the Red Chair Northwest Pale Ale. (I’m guessing Google gets a break on the retail price for promoting a newer beer.) Deschutes tracks pints given away in its point-of-sale system. It shows up on the receipt as “Hotpot special”.

Oddly, the Deschutes Place page makes no mention of this promotion.

Deschutes also has Google coasters. These don’t seem to be in widespread use. I happened to catch one out of the corner of my eye and asked the bartender to see more. The coasters only have Google Places branding. Unlike Yelp, which punishes businesses for soliciting reviews, Google seems to be encouraging it.

A more recent promotion with Powell’s Books wasn’t as seamless. Google is offering free Klean Kanteen water bottles to anyone who shows up at Powell’s, makes a $10 purchase and shows the Hotpot app. Unfortunately, no one told the Powell’s airport store about it. The staff spent about 20 minutes trying to figure it out, calling corporate and other stores. This is a bad use of staff time and not a great customer experience.

Event marketing

Hotpot community manager Vanessa Schneider at Beer and Blog

Hotpot community manager Vanessa Schneider at Beer and Blog

Google is doing a variety of events in market to promote Hotpot. The events target various audiences including mass market, tech influencers, the young and hip.

Google sponsored an event at a Portland Trailblazers game where it gave away 22,000 T-shirts.

Google had a team at the Mt. Hood Meadows ski resort giving away hats and mittens.

Google picked up the tab for drinks at a beer-and-blog event focused on the Portland tech community. I estimate that 100 people showed up for that. Google’s Hotpot Community Manager, Vanessa Schneider, was at the event. She is based in Mountain View and flies up for the events. I also met several people who live in Portland and are part of Google’s street team. (Technically, they work for a staffing agency.)

Google was actively soliciting feedback on the product. It also announced its free Best Ever concert series in Portland. Google will be showcasing local bands at a rollerskating rink, on a boat and at a university chapel.

Next week, Google is hosting at least 20 people in a box at a Portland Traiblazers game. Tickets were given away using a trivia contest on Twitter. You had to be faster than Watson on the draw; someone usually won right away. (I just missed out.)

Social media

Blogs, Twitter and Quora have been an integral part of the campaign. @Tweeting most Google accounts is like talking into an abyss. Schneider has been active on the hotpot blog, Twitter and Quora. Questions are usually answered very quickly. She also curates and retweets activity by Portlanders related to Hotpot. She also provided a definition of her role.

Social media is also how they’re managing giveaways. For the concert series, concertgoers will need to get wristbands. Locations for picking up the wristbands will be announced on Twitter.

The blog includes guest posts by Portlanders talking about their favorite places in the city.

Print media

Google has been advertising its concert series in the local alternative weekly:

Google Hotpot concert print ad in Willamette Week

Branding is a mess

Google is using a variety of different brands in the campaign: Google, Google Places and Google Hotpot.

  • Google appears on the NFC stickers and pint glasses.
  • Google Places appears on the coasters and some of the OOH pieces, including the airport signage.
  • Hotpot appears on the Deschutes receipts (yes, I consider that part of the branding) and the hats given away.

I haven’t seen it as part of this campaign, but Latitude is another related Google brand that adds to the confusion. Latitude recently added check-in functionality.

While Hotpot has a dictionary definition related to community and sharing, most people I talk to think Google just misspelled hotspot and it’s a service related to WiFi.

The whole thing is a mess and should be made consistent. As I wrote this post, I struggled what to call the thing. If you were confused, blame Google.

Missed opportunities

Food carts in Portland

Food carts like this are a staple of the Portland dining scene. Unfortunately, Google Places has the worst coverage of food carts in its database among the major local players.

Although the campaign isn’t over, there are a few things that I haven’t seen done yet. (It’s possible that I just missed them, but I haven’t seen a record of them.)

  • Portland has a unique food cart culture. While food carts have become popular in many cities, Portland is their Mecca. There are more than 300 of them — many of which never move. A lot of them serve gourmet food and they cover a wide range of cuisines. It would be easy to use Twitter to organize flash mobs at a food cart pod, e.g. “Free youcanhascheeseburger! at Brunchbox for the next 30 minutes.” Other promotions could involve scavenger hunts/ratings-based promotions at food carts. Unfortunately for Google, it has a real product problem here. Google Places coverage of food carts is the worst I’ve seen in the space. Foursquare, Yelp and Facebook all have much more comprehensive listings. Bing even has a dedicated food cart finder.
  • Events targeting small business owners. Local is a two-sided market. You need businesses and consumers. Engagement on one side will encourage engagement on the other. I would like to see Google educating businesses about how to use the Internet and Google’s tools. While Google has thrown quite a few events, I haven’t seen anything specific to the business community.
  • OMSI Science Pub. The Oregon Museum of Science and Industry hosts frequent events where speakers talk about technology. The technology behind Google Places is impressive and would make a great topic. (One of the best tech/business talks I’ve heard was John Hanke of Google speaking at Berkeley.)
  • Cycling. Cycling is huge in Portland, with many miles of bike lanes. Reaching out to that community seems like a sizable opportunity.
  • NFC. I’m not sure why Google is placing such a big bet on NFC right now. But if that’s their path, they should consider distributing NFC microSD cards to Android users in Portland so that they can experience the technology.
  • Social interaction among participants. One of the reasons that Yelp has been so successful in getting people to review places is that they’ve built a rewards system that engenders community among Yelp users. They encourage each other to review. Yelp events further this interaction by providing additional glue. It would be interesting to see Google design events that try to do the same.
  • A customized landing page. Google is promoting the “google.com/places” URL heavily in its Portland advertising. What’s the first thing you get when you go there? A giant marker pinned to a map… of San Francisco. Details like that matter.

I have no inside knowledge of how Google structured its campaign, but it feels a little like Google algorithmically determined what businesses to target and developed the campaign without understanding the unique things about Portland. The strategy seems generic and the tactics could be applied in any market. That may be the point, but I think that misses an opportunity to make something really special that exudes “getting it.”

This reminds me of HSBC’s long-running campaign about the importance of local knowledge. They emphasize that despite being an international brand, they understand each of their local markets and how things may seem the same can vary across markets. Google’s efforts could show more knowledge of the local market. This actually doesn’t take as much effort as it sounds — spending a week or two in Portland would have provided the types of ideas I listed above.

HSBC ad

HSBC ad illustrating the value of local knowledge

Cost and effectiveness

Google is clearly spending a lot of money in Portland relative to other marketing efforts in the local space. Based on what I’ve seen so far, it’s probably in the $700,000-$1,000,000 range. A single promotion like the Deschutes giveaway is more than the entire marketing budget for some Google product launches.

Despite Google Maps providing the infrastructure for many of the Web’s local efforts, Google has gotten trounced by Yelp when it comes to ratings and reviews. Unlike Yelp, Google doesn’t have a person in each local market. Campaigns like this are one way to help move the needle.

How effective has it been? It’s too soon to say. But here are a few indicators:

  • The Hotpot Twitter account has about 1,100 followers. A small portion of these are local businesses.
  • When Google tweeted questions for the Trailblazers game tickets, the first answer usually came in within seconds. Each question had around 12-24 unique responders.
  • The pint glasses at Deschutes don’t seem to be flying off the shelves. Even after they added more signage about the promotion, I don’t see a lot of tables with Google pint glasses on them when I visit.
  • When I ask my non-technical friends about whether they’ve seen any Google advertising around town, the answer is no.

Overall, it’s exciting to see Google spend this much effort on consumer marketing and specifically on local. Their efforts will not only help Google, but all of the players in the space.

See also:

Disclosure: I have several good friends who work at Google and went to high school with co-founder and CEO Larry Page. I’ve benefited from free drinks and other Google schwag at various Google promotions in Portland.

<a href=”http://www.flickr.com/photos/asmythie/5460349242/&#8221; title=”Split Google places billboard for Pulse Salon by asmythie, on Flickr”><img src=”http://farm6.static.flickr.com/5300/5460349242_8f00575b9a.jpg&#8221; width=”500″ height=”237″ alt=”Split Google places billboard for Pulse Salon” /></a>

Maximizing the value of deals on Facebook and foursquare

14 Feb

Facebook Places punch card

I was walking down the street the other day and did a search on Facebook Places. Up popped up a deal for Boyd’s Coffee: get 10 punches and get a free drink. As a potentially new customer, this was not the least bit attractive. I had no idea what their coffee tasted like. In order to get a deal, I’d have to visit at least 10 times. It may work as a retention tool, but not as an acquisition tool. A better offer for new customers would be 50 cents or a dollar off a drink.

Likewise, many of the mayor offers on foursquare aren’t appealing to the casual user. As foursquare has gotten more popular, it may take visiting nearly every day to win a mayorship at popular venues.

Most traditional marketing tools have focused on either acquisition or retention. Coupons (including Valpak and Groupons) get people in the door. Loyalty programs (like punch cards) entice existing customers to come back.

Facebook, Foursquare and the like offer the promise of doing both — if offers can be adapted for the user. As long as I haven’t checked into the venue before, I get a $1 off coffee coupon. Once I’ve redeemed that, it becomes the punch card.

Because Facebook and foursquare use persistent identity, they are less susceptible to abuse than paper coupons. This allows merchants to make richer introductory offers if they choose: the merchant could offer a free coffee the first time.

The platforms could also be adapted to support refer-a-friend promotions. For example, Tristan Walker recently tweeted about an incredible banana beignet dessert at Tamarine. I added that to my to-do list. Businesses could use these data to recognize and reward key influencers.

While the existing platforms are somewhat limited, they could quickly evolve into tools that give small businesses CRM tools that the big guys have.

A Facebook deals sticker at Boyd's Coffee

Picturing a new vision for local search

7 Feb

I frequently tout Yelp as the company that has the best local database in the United States focused on restaurants and entertainment. With thousands of Yelpers around the country who aggressively review businesses in their cities, Yelp manages to stay well ahead of their competitors. Where a new restaurant can take months to make it into Google Maps, it’s often listed on Yelp before it opens thanks to devoted Yelpers who keep an eye on what’s going on in their neighborhoods.

Yelp also has another key asset, which has long been hidden: a large volume of pictures uploaded by Yelpers. While these have been available on the Web site, they haven’t been the focus. Yelp’s iPad app puts them front and center.

Local search has long been optimized around the data sources that are available and the way computers best process information, not the way consumers look for information. Looking for the address of Lovejoy Bakers? Piece of cake. Local search will find it for you. Looking for a romantic restaurant that’s not too crowded but has a modern feel? Good luck with that.

Here’s where pictures can play a big part. Solving such queries is incredibly hard because they require value judgments and computers aren’t good at making such judgments. Even among different people, those judgments vary. Romantic, crowded and modern mean different things to different people. If you read dozens of reviews, perhaps you could get a good sense for whether a business meets your definition of these words. But that’s work that very few people are willing to do.

It’s much easier (and more fun) to flip through dozens of pictures.

Pictures provide easier and faster answers to:

  • Is this place a dive?
  • Does this place cater to people like me?
  • It this place kid friendly? I never would’ve guessed that a brewpub near me was kid-friendly until I flipped past a picture of a play area with kids in it.
  • What does this place feel like?
  • Is the food pretentious?

Pictures also help with another problem that many user reviews have: too much time spent talking about the reviewer rather than the place being reviewed.

Popular venues in major cities such as flour+water and 21st Amendment in San Francisco can have more than 100 pictures. In smaller cities, it might be just one or two.

We’re just at the beginnings of truly using images in local search. I imagine that we’ll soon see image recognition algorithms that will sort the uploaded pictures into categories such as food, interior, exterior, etc.

Cell phones are increasingly becoming data collection devices and Yelp users are at the vanguard. Yelp claims 3.5 million monthly unique users on mobile devices. If only a small fraction of them are contributing content, that’s still thousands of people providing ground truth. Yelp reports that a photo is uploaded every 30 seconds via mobile devices. With check ins, photos and real-time data corrections, local search is becoming a much richer experience.

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AT&T’s 180,000% markup

3 Feb

One of the challenges of international travel is getting access to communications. I’ve gotten used to being able to check email, look up restaurants, find maps and communicate with friends from anywhere in the U.S.

Take your iPhone overseas and all of this can get really expensive, really fast.

At AT&T’s pay-per-use rates, you’re charged $19.97 per MB. It’s cheaper to buy and send a physical post card to friends than it is to send a digital picture.

The only way around that is to buy a local SIM and use it on an unlocked iPhone. This process varies from country to country and can be quite a challenge if you don’t speak the local language. It also means that you don’t have coverage the moment you step off the plane.

I got lucky on my recent trip to Italy. The first store I walked into had a clerk who spoke English and understood what I needed. For 2 Euros ($2.76) a week*, I got up to 250 MB of data usage. At AT&T’s a la carte rates, that same usage would run $4,992. If you plan ahead, you can get 200MB for the low, low price of $199.

Even ripoff hotel minibars only charge 3x-4x street costs for convenience.

AT&T’s data markups are even way out of line with its international voice roaming rates. With voice,  AT&T actually provides some value in that phone calls to your number get routed by AT&T to your phone overseas. With data, the only convenience over a local SIM is that you don’t have to seek out a local provider.

The pricing is so absurd that the only people who would do this are business travelers who must be connected at all times, the fabulously wealthy or everyday customers who don’t understand the charges and will further resent AT&T when they get the bill.

AT&T’s the company that pioneered Digital OneRate, which eliminated nationwide roaming charges. I’d like to see them do something rational for international roaming.

* For comparison, this is also much less than AT&T charges for domestic data usage. With a contract, AT&T charges $15 for 200 MB of data. This works out to about $11 for 5 times as much data.

How to pay at Starbucks using your Android phone

2 Feb
Android-enabled Starbucks mobile payment device.

Android-enabled Starbucks mobile payment device.

Starbucks made a lot of noise recently with the launch of mobile payments in the United States for iPhone and Blackberry users. As an Android user, I felt left out (as is often the case.) But there’s a way to use your Android phone to pay for your coffee. Here are the steps:

  1. Borrow a friend’s iPhone or iPod Touch.
  2. Set up your account and enter your Starbucks card information.
  3. Go to the “Cards” screen and click “Touch to Pay”.
  4. Take a screenshot of the bar code that appears. (Hold the power and home buttons.)
  5. Email the screenshot to yourself.
  6. Print the screenshot. (I printed it at 35% zoom to get the right size.)
  7. Cut-and-paste (physically) the bar code to the back of your Android phone.

Viola! Mobile payment device.

It’s even better than the iPhone app: it’s quicker (no need to find and launch the app and click a button) and it works even when the battery is dead.

It lacks a lot of features. You can’t find the nearest Starbucks, reload your card or see your transaction history. But for the most common task of paying for coffee, it is the optimal experience. It would be nice if Starbucks stored your preference on whether to print receipts, but that’s an issue with either method.

This illustrates one of the key challenges facing mobile payment systems that are emerging: in their desire to get our money, banks and retailers have already made paying for things incredibly simple. Swiping a credit card is just.not.that.hard.

Any digital wallet will have to be just as simple. Launching various applications, digging through menus and entering security codes are all steps that add friction to the purchase process.

Apple, Google and others entering the NFC/mobile payments game would do well to have standardized interfaces to flip among payment, library, transit and access cards versus having every app developer design interfaces as he sees fit. These could be tied to location — if you’re at Starbucks, the Starbucks card automatically shows up first.

LivingSocial brings yield management to small businesses

1 Feb

LivingSocial is testing a new product that allows businesses to offer real-time discounts to local consumers, according to AllThingsD.

LivingSocial’s existing product works much like Groupon. You sign up for a deal and typically purchase goods or services for half off the retail value. These deals can be redeemed over a 3- to 12-month period, depending on the deal.

While some have called these deals yield management tools, they’ve actually just been customer acquisition tools. In fact, some businesses have been so overwhelmed by these offers that they’ve had to hire extra staff to handle the influx of new customers. Some undoubtedly have had to turn away full-price customers to service the discounted customers. One of the challenges businesses have faced is that although they’re seeing new customers, those customers are getting a bad impression because the business is overwhelmed.

The key to effective yield management is to shift demand to when you have excess capacity and to charge a premium for the times that are at highest capacity.

Many small businesses already do this. Happy hours at bars are a simple example of yield management. Come in from 3 to 6 and drink for half price. There’s a high fixed cost (staff is already there, rent, electricity). As long as you cover the marginal costs of food and drink, you can generate extra profit during that otherwise dead time.

This could prove to be a boon to businesses who need to generate extra business quickly. For example, a spa that finds itself with massage therapists with a slack appointment book could send out a 1-day only deal.

While the details of Living Social’s implementation aren’t out yet, here are some things I’d like to see:

  • Ability for the business to control the amount of offers that are available. You don’t want to go from a situation where you’ve got a lot of spare capacity to one where you’re overwhelmed by demand. A limit would also create incentives for users to claim an offer quickly.
  • Ability to more narrowly target customers. The current regions are too large to ensure that the customers reached are likely to be repeat customers.
  • Ability to target specific products. Chicken moving slower than beef tonight? Half off chicken dinners!
  • Ability to exclude customers who are too close. You don’t want to offer discounts to people who are already at your business.
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