LivingSocial brings yield management to small businesses

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

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

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

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.

Heading toward the Facebook recommendation engine

Image representing Facebook as depicted in Cru...
Image via CrunchBase

There’s an interesting thread over at Mike Blumenthal’s blog on the effect of Facebook Places on the local reviews space.

My view is that reviews and updates will coexist, much as blogs and Twitter coexist. People who were less committed to reviews will migrate their activity to Facebook Places updates. But Places could lead toward the ultimate recommendation engine.

In the local space, there’s really only one review site that matters: Yelp. They’ve got a strong set of tools and an active and engaged community. New restaurants and bars, which are often of the most interest, will have a dozen reviews on Yelp a year before they even show up on many Yellow Pages sites.

There are three big challenges with Yelp:

  • It’s been too successful. Many restaurants have hundreds of reviews. Although Yelp provides great tools for analyzing the data, it can still feel overwhelming. It also discourages participation from more casual users. In the early days of Yelp, I was an active reviewer. That’s tapered off substantially — what’s the marginal benefit of me writing the 426th review of a place?
  • These aren’t my real friends. I don’t know how compatible their tastes are with mine. It also affects the propensity to write reviews. People are more likely to do something that helps their friends than something that helps a generic audience.
  • Skewed demographics. Yelp primarily caters to a young, urban demographic. If you’re a mom in the suburbs, its value is more limited.

Facebook Places lowers the bar to participation and ties it into real-life social networks. Instead of writing out a long review, a few clicks is all it takes. Combine that with Facebook’s large user base on mobile devices — its monthly uniques on mobile devices is 4x Yelp’s monthly uniques on the Web — and we’ll see a tsunami of local data. (For more on importance of massive amounts of data, watch Google’s Peter Norvig’s talk.)

While each blip may not be as rich as the data in Yelp, you could build a recommendation engine to infer a lot from that data.

If I see that a place I am considering visiting is regularly frequented by my friends with families, I can infer that it is good for kids. Positive reviews can be inferred by friends going back to a place regularly. There are some friends who I have negative taste relationships with. If I know that they’re regulars somewhere, I know not to go there. Facebook can also make recommendations based on places I’ve visited and the overlaps with places my friends have visited. Facebook also has real demographic information which could be used to tailor recommendations.

Status updates in the social network also prompt discussions. Even if the original poster doesn’t write a review, it may be followed up by “hey, I was thinking of going there. what did you think of it?” Facebook could also close the loop by prompting people to add star ratings, Like or add comments a few days after a check in.

When it comes to restaurant reviews and recommendations, most people are looking for “good enough”. While you could spend hours reading every Yelp review of several restaurants and possibly get a better answer, a recommendation based on your friends’ activity is probably nearly as good. Facebook has done really well with good enough; Facebook Photos dominates online photo sharing, despite many functional weaknesses when compared with flickr.

I built a prototype of this when I was at AOL Search and even with a few users in the system, it worked really well.

More on: Facebook, local search, Yelp

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Checking in with foursquare at SFO

SFO is a hotbed of foursquare activity
SFO is a hotbed of foursquare activity. Creative Commons image by Håkan Dahlström.

With the increasing use of mobile applications such as Yelp and foursquare, it’s becoming possible to pull ideas from thin air. Users of these apps can leave tips for others to find that are linked to a specific location.

In most places there aren’t enough tips yet to make filtering an issue. San Francisco International Airport, with more than 57,000 checkins on foursquare, is an exception. It offers a glimpse of what we can expect as these services become more popular. The airport is the perfect petri dish for tips: it serves a technically savvy audience and people often find themselves there with plenty of time on their hands.

The SFO tips page contains dozens of notes including places to eat, complaints, ground transportation, wifi and power availability. Mixed in to all of this are ads, other spam and random observations. Some examples:

have a corned beef sandwich at max’s if you’re flying southwest. the best! well, really good

When you enter short term parking do it as far to the right as you can (lvl 2) & then immediately head to lvl 1. There is always parking next to gate and that is the lvl that connects to the terminal

Free wifi at the Continental lounge in Terminal 1- be warned, it’s located outside Security

Smoking hot brunette woman at gate 20. Stop by and smile at her. She is so lovely!

Bart to Millbrae gets you within 1 block of an in n out burger. Great for 3+ hour layover!

Heading to wine country? Take a moment to stop by St. Supery in the heart of Napa on Hwy 29. Mention this to get a 2 for 1 tasting.

Sorting through the volume of tips can be overwhelming. As the volume increases, we’ll need ways to filter them. Among the ways to filter:

  • Timeliness. Some of the tips, such as wifi at the Continental lounge, are evergreen. Others, like the smoking hot brunette are very timely. Tipsters should be able to flag their tips to self destruct. As I wrote earlier, being able to identify tips by timeliness would allow for new applications, such as sharing rides. (“Anyone want to split a cab to Moscone?”)
  • Social network. Among the tips were tips from people I follow on Twitter, including Danny Sullivan and Adam Lasnik. Being able to surface these would increase relevance.
  • Ads vs. not ads. Sometimes people want ads, especially if it can save them money.
  • Keyword search.

Places like airports are especially complex because they’re really collections of places, sometimes with other groupings and physical restrictions. Being able to filter tips by terminal would also be useful. But then maybe that’s best left to GateGuru.

Now we're going Places

I’ve been writing about Twitter and location since my first post about Twitter in 2007. This week, Twitter launched Places, which allows users to add their location to a tweet.

Here’s a screenshot from 2007:

Twitter location 2007
Embedding location in a tweet the hard way in 2007

and today:

Embedding location in a tweet in 2010

In 2007, I used a third-party application from Where to include my location. Clicking on that link would take you to a map on Where’s site showing the address. (The link in the original post no longer works.)

With the launch of Twitter Places, the search is done within the Web browser (and soon in Twitter’s mobile applications). You can select where you are from a list of nearby places. Clicking on the place name brings up the map above and the option to view tweets about that place.

Although the difference between the two may seem subtle, they are significant:

  • Because the place is metadata, it doesn’t count toward the 140 character limit.
  • Place names are human readable, unlike addresses and latitude/longitude. Knowing the name of a place makes it much easier to find than just a street address, especially in dense metropolitan areas.
  • Places are unique to a specific venue. Doing a pure location-based search would return tweets from surrounding businesses or businesses that have since disappeared.
  • Integration in to the main Twitter experience means broad exposure and eventual standardization of place identifiers. That has been a longstanding challenge in the local space.

Twitter’s geo APIs have been available for several months and third parties like bing have created interesting applications like Twitter Maps. With the availability of places across the Twitter platform, we can expect to see more interesting applications including both real-time applications (ride sharing and ticket exchanges) and historical (restaurant reviews, past events).

Once Twitter allows owners to claim their Place and associate it with a Twitter account, we could see official tweets of announcements and offers incorporated into a Place’s search results.

When pictures are tagged to a Place (instead of a lat/long), we’ll have the ability to visually browse a venue in Twitter.

Geo-enabled Twitter comes alive on Twitter Maps

Bing's Twitter Maps show you what's going on
Bing's Twitter Maps show you what's going on

I’ve been playing with Bing’s Twitter Maps lately and it’s one of the better implementations of Twitter’s geo APIs that were introduced last fall. It shows tweets and foursquare checkins within the last 7 days plotted on the map. Google Maps recently introduced a similar feature, but it seems to only show items that are fed through Google Buzz (including tweets that people have configured to send to Buzz).

Some future applications of geo-enabled Tweets:

  • Events. For last-minute party goers, a real time view of what’s going on around town, complete with pictures and real-time reactions.
  • Ticket scalping. Rather than walk around for blocks talking to scalpers about what they have, glance at a list of tickets posted. The information transparency would result in a higher price to sellers and a lower price to buyers than what scalpers typically offer. (In my experience at baseball games, scalpers usually ask at least 3x what they paid.)
  • Finding a place to go. When in new cities, it’s often hard to figure out where to go — what are the lively neighborhoods at night. By looking at a map of recent tweets, you could quickly discover where people are still awake.
  • Read reviews from friends. Geo-enabled tweets filtered by those you follow would provide socially relevant recommendations.
  • Offers from local businesses. These could be persistent or distressed inventory. Slow night? Tweet an offer to draw in customers.
  • News. Twitter has long been used for user-generated breaking news. With geo-enabled tweets, breaking news could be aggregated by location in addition to hashtags. The biggest stories could be identified by an increase of tweets from a location (versus normal) and retweet frequency. News from media outlets could also be plotted.
  • Construction and accident information. Avoid bottlenecks by seeing tweets from fellow drivers, DOTs and news sites.
  • Trip sharing. Find others at the airport headed your way, cutting costs and reducing pollution.

And, of course, there’s friend finding, which is the most talked about use of geo-enabled tweets.

So far, the percentage of tweets I see with geo information is tiny (>1% of those I follow). But as more and more geotagged data is put into Twitter, the key will be applications providing the right tools to filter all of that data. At a minimum, we’ll need the ability to filter by time of tweet, people we’re following, hashtag and application (e.g. foursquare).

Unfortunately, bing’s Twitter Maps doesn’t seem to be available where real-time information would be most useful — on mobile devices.

More on: geotagging, social networkingTwitter

Twitter and foursquare: the tipping point to getting local business online

Crepe cart in Seattle
Crepe cart in Seattle

Getting small local businesses to go online has been the holy grail of the Internet. I’ve written before about some of the reasons local business don’t go online and suggested several ways that they could use emerging technologies to get online with minimal effort.

That finally seems to be happening. Whether it’s a crepe cart in Seattle, ice cream store in San Francisco or a restaurant in Sedona, businesses are using the simplicity of Twitter for their virtual presence.

Most local businesses are too busy running their business to exert a lot of effort maintaining an online presence. If it’s not easy, it won’t get done. My favorite example of a small business reusing their existing work is the Webcam pointed at the wall of Beachwood BBQ where they list the pints on tap.

The challenge is that these businesses are only announcing their presence to existing customers or passersby. While this can help drive repeat visits through specials, notices of new arrivals, etc. it does little to bring in new customers.

That’s where foursquare comes in. This location-based social game allows users to “check in” to places they visit. Check in often enough and you become the “mayor” of that place. Savvy businesses have latched on to this and begun offering discounts to their mayors.

It has also been incorporated into the foursquare check in process. When I checked in at a restaurant in Seattle, I was presented with an offer at a nearby bar: happy hour all day for the mayor or $1 off well drinks for anyone else who checked in. (Checking in updates your social network status, providing further exposure for the business.) It’s one of the first examples of location-based mobile advertising that works. The process is a bit cumbersome now, but it provides a glimpse into where the technology is headed.

In addition to providing exposure to businesses, it solves a user problem that local search has long failed at: discovery. People often don’t know what they’re looking for when they’re out. Suggestions, even if they’re sponsored, help fill the discovery gap.

Foursquare offer
foursquare mayor offer