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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.

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.

How Google could dramatically improve local search

20 Jan

A lot of companies have been spending a lot of time and effort in location-based services over the last couple of years. Whether it’s local search or check ins, the race to get people connecting with local businesses is on.

One ongoing challenge has been identifying where consumers are.  GPS has issues with power consumption, time to first fix and doesn’t work indoors. Cellsite-based location is not precise enough. Even WiFi triangulation, which is the most effective way currently, isn’t precise enough given current deployments. In densely packed urban areas, you can still come up with a hundred or more businesses that you would have to pick through.

One way that Google (or Facebook or anyone with a strong brand) could solve this problem is to send WiFi beacons to local businesses. This is roughly how it would work:

  • Routers are sent to businesses. The MAC address of the router is recorded and correlated with the address that it’s shipped to.
  • The business receives it and plugs it into a wall outlet.
  • The router then transmits its information to nearby phones.
  • Those phones can narrow the list of potential businesses based on that information.

This doesn’t even require the business to have an Internet connection. The only requirement is that the device be powered. At scale, the device could be custom designed to eliminate the Ethernet jacks on routers. This reduces costs and makes the device look less intimidating to folks who aren’t tech savvy. If you wanted to get fancy, you could shape the device so it didn’t look like a router at all — maybe something like the Open sign that Google is giving away. This would have the added benefit of branding to the business’s customers.

With a per device cost of approximately $15 and a service life of about 3 years, we’re looking at a cost of $5/year. If you sent them to 500,000 businesses (the focus should be bars/restaurants in high density urban areas), it’s still a modest cost of $7.5 million to tap into the local market.

The pitch to local businesses would be something along the lines of “make it easier for Google users to find you.” It could be presented as part of a small business starter kit, complete  with Google Places window decals, a guide to online advertising, personalized information on how the business is currently rated on Google and online advertising credit for use on Google. It could also serve as the validation mechanism for businesses to claim their Places page. In my experience, packages are more likely to be opened than typical direct mail pieces.

While there has been a lot of talk about NFC for searching or tagging, it would require a change in user behavior and is likely to take 2-3 years before a sufficient number of NFC-enabled phones are in use in the United States.

Not only would this sort of network enable easier local search and check ins, it could be used to generate real time maps of where the most popular places in a city are. People could also use it to generate automatic check ins when they reach selected favorite places.

If this sounds crazy, consider that Google is already testing giveaways for businesses in the Portland area as it tests its Hotpot product. Businesses can order free sugar packets, mints, magnets, billfolds and more.

The biggest challenge with this approach is the risk of bad press given the kerfuffle regarding StreetView vehicles capturing WiFi data by mistake. Although this is in no way equivalent, the media have a hard time understanding that. (Not to mention that the original issue was really blown out of proportion.) This could be offset if Google made the database open to the public. Not only would this improve results for Google applications, but could be used by a wide range of devices to improve position accuracy. It would be the equivalent of Google launching satellites for the public’s benefit.

Target’s mobile apps hit the bullseye with store integration

22 Sep

As smartphones proliferate, integration with mobile devices will be a key part of the offline retail experience. While many businesses offer a simple store locator, Target’s iPhone and Android apps and mobile Web site tie much deeper into their stores.

Among the key features:

  • Weekly deals. Browse through the current week’s specials by category.
  • Product availability. Scan a bar code or enter a product and it will tell you whether the item is available online or in stores. If it’s in store, availability is displayed along with the aisle that it’s located in. No more wandering through the store trying to find something. (In all of the times I’ve tried it, it hasn’t been wrong.)
  • Payment.* If you have Target gift cards, you can enter the information and store it on your phone. When you’re ready to pay, pull up the bar code on the screen and show it to the cashier.
  • Gift registry.* Look up a gift registry and find item locations.
  • Store locator.

*Not available on the Android app.

Target has long been among the most innovative retailers. Four years ago, it offered an MP3 player gift card at Christmas. It has also offered a standalone gift find finder app that suggested Christmas gifts.

In the future, I’d expect to see integration with previous in-store purchases and tighter integration between the mobile apps and the Target Web site.

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Mobile ordering puts the cash register in your pocket

21 Sep
All the ballpark food you can want, delivered right to your seat.

All the ballpark food you can want, delivered right to your seat.

Next time you’re at the ballgame, your phone might get you some peanuts and Cracker Jack. I was at a Mariners game at Safeco Field earlier this week when an announcement encouraged the crowd to order concessions using their Android phones.

The app, from iConcessionStand.com, allows you to select food, drinks and team merchandise and have it delivered to your seat. When you launch the app, it asks for your seat location. It uses GPS to verify that you’re at the ballpark; you can’t order if you’re not there.

Pricing for the service is relatively modest. There’s a 99-cent service charge and a required tip. That’s well worth it to avoid long concession lines. (Pricing for food and drink, however, is the standard astronomical ballpark rate.) A $10 minimum purchase is required, but one beer gets you most of the way there. Delivery is quoted at 30 minutes. Selection was more limited than what was available on the concourse, but wide enough.

The big sticking point is payment information. After loading up my cart, I was prompted to enter my billing information, including credit card number and full billing address. For a one-off event, this was too much work. (Using a PayPal login is also an option.)

The ballpark isn’t the only place your phone can feed you. Chipotle offers ordering through an iPhone app. Build your order, pick a store for pickup, and enter payment information. When I arrived at the store, they’d received the order but it inexplicably had a delayed pickup time.  Pizza Hut has its own iPhone ordering app and Snapfinger offers ordering from a range of chains, including Outback, Baja Fresh, California Pizza Kitchen and Subway.

This integration from the virtual to the physical world will become increasingly common over the next couple of years as point-of-sale systems become better integrated with the Internet.

Facebook Places is at the beginning of a long road

20 Aug
Facebook Places on the iPhone

Facebook Places on the iPhone

Facebook’s much awaited Places product finally launched this week. It’s the first step toward bringing friend finding to the masses.

People have been using Facebook to do this for years; posting their location in freeform status updates that their friends can read and comment on. (e.g. “heading to Cambridge for dinner.”) By turning that freeform text into structured location data, Facebook can make that data more useful.

From an iPhone or HTML5-capable mobile device, you can check in to a place, such as a restaurant, bar, movie theater, airport. You can also leave a message with the check in. The check in is posted to your wall and may appears in friends’ news feeds. On the mobile side, you can see a list of your friends and where they’ve checked in. Clicking on a place will show you details of the place, including a map and who has checked in.

The initial release is fairly simple. In fact, it’s not that much more useful than the freeform status updates.

Facebook is entering a very crowded space with competitors such as foursquare, Gowalla, Loopt, Google Latitude, Whrrl and Twitter. Many of those products are much more robust. Facebook’s key advantage is the size of its social graph: within the past 24 hours, 18 of my friends have checked in.

There are many opportunities for improvement to Facebook Places:

  • Basic UI. Check ins are sorted by time, not distance. A friend checking in 2,000 miles away 2 minutes ago is less relevant than someone checking in 2 miles away 5 minutes ago. This problem is exacerbated by the fact that the city isn’t shown. Considering that many people use Facebook to keep track of friends all around the world, this is a significant issue. Foursquare has a separate bucket of “Friends in other cities.” Update: Facebook now has a separate grouping of nearby friends.
  • Map view. Often, visualizing your friends on a map is much easier than scanning a list. Foursquare already offers this.
  • Visiting friends. Out of town friends who are in town aren’t indicated. One of the big potential values of social friend finding is discovering when friends are in town. If a friend from far away is visiting, I’m more inclined to want to get together than someone who lives in town.
  • Pictures. There is no way to associate a picture with a check in. Given the difficulty in typing on mobile devices, often a picture gives a lot more information. These pictures could also be used to build a much more robust Place page.
  • Pushing location. Sending people your location via SMS is tedious. You have to address the message, type out where you are. If they don’t know where it is, they have to pull up a map or text you back for directions. With Places, it would be easy to push a notification to friends with where you are, complete with map. This could be sent as a push notification on iPhones or as an SMS with a URL for other phones.

As with most Facebook product launches, questions of privacy come up. In general, I think Facebook has done a good job with the default privacy settings on Places. You must explicitly check in; there is no background tracking.

Only your friends can see where you’ve checked in. Unfortunately, my social graph on Facebook wasn’t designed with location in mind. When I decided whether or not to accept friend requests on foursquare, I used a tighter filter than on Facebook. Now, I’ll have to go back through Facebook friends and create a list of who should have access to location. (See Post technology columnist Rob Pegoraro’s piece on how he classifies his friends.) Yes, old high school friends have been known to burgle homes based on Facebook updates. If that worries you, watch Rob’s video on how to adjust your privacy settings for Places.

The one big complaint I have with the privacy defaults is that your friends can check you into a location without your permission.

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