Category Archives: Internet Strategy

User Generated eCommerce / eCommerce 2.0 / We-Commerce

Posted on by
Comments

Whatever you want to call it, eCommerce online is due for an upgrade. Marketplaces such as eBay created an easy place for people to trade and PayPal made it easy for merchants to accept payment and for consumers to pay each other. Yahoo Stores allowed any small business to setup a website and trade online. It all seems so complete – so then why do 72% of small businesses in the US still not have a website? What are we missing? For the tech savvy small business owner or individual, setting up an eCommerce presence online is relatively easy – but what about the scores of individuals and SME’s out there that can’t either can’t afford or don’t trust the Internet enough to move forward and setup a presence online?

People have been conducting peer to peer transactions online since the very early days of the Internet and sites like eBay & Craigslist have really made connecting with individuals much easier. My definition for “We-Commerce” is the point at which consumers coming online, do so with the intention of setting up their own web presence in order to become a commercial entity. This succeeds the current paradigm of just User Generated Content – it’s the next step forward.

User Generated eCommerce (We-Commerce) is really about consumers interacting and trading with each other using their own personal websites. Social networks are now creating the foundation for trust, and for a trusted community around prosumer ecommerce on the Internet. It’s easy to argue that people will much rather trade with people in their social network, than outside it. As Google & Facebook dabble in the realms of Google’s Friend Connect & Facebook Connect – it’s going to make it easy for website owners to create social networks around their businesses. Individuals will wield the power that trusted websites currently enjoy.

I’ve often argued the intrinsic value of Social Networks does not lay in the in the walled gardens that they have, but instead in the value of the data that they collect – no one has really figured out how to monetize that data, with respect to privacy. The default is to run advertising and turn a profit – the true monetization will come in time.

There is much to be said about the walled gardens of social networks – and in my opinion, they have their place. Much of the personal information that is collected by a social network is private and should remain as such – but surely the number of friends and connections that an individual has should be indicative of their integration and trust within society. Maybe I’m reaching here – but given that I have over 1,000 friends on Facebook – I’m pretty sure that if I was offering something for sale on this blog and that information was available, that it would infer some level of trust with me, especially for small transactions.

If we’re solving the problem of trust with SME’s & personal users – how do we get them online? We need to make it dead simple. Most SME’s won’t spend the money to build a website – and they will most likely to it themselves – this is what Microsoft Office Live, Google Sites (& SynthaSite :-) ) are banking on.

Ok, so let’s assume that we’ve made it easy to get a web presence and now social network users and other less initiated Internet users have their own websites – what does that mean?

For many people, buying and selling through sites such as eBay is a way of life and the liquidity in the eBay marketplace really justifies being there – and I won’t argue that point. There are some issues around having to be a power seller before you really become trusted in that network. As a new eBay user, although I have thousands of friends on Facebook & LinkedIn – I am not a trusted entity on eBay – so I would much prefer to have my own site, which is validated by the strength of my network – so that people looking to transact with me can look at my LinkedIn recommendations, for instance. Trust on the Internet has to got to reach the point where it’s transferable from one site to another. There are many companies working in this space on this problem at the moment.

My point really is that commerce on the web is and needs to evolve. The argument that consumers are Prosumers is now truer than ever. CafePress does a fantastic job of allowing consumers to become producers, and effectively retailers.

However, the web is growing so rapidly that as search evolves, so will content. As users search for you on the web – how do you want to be seen? Do you want an old article from high school being discovered at first position in the search engine results – or is it your own presence on the web?

Can you imagine a world where everyone has their own website which they use for content, collaboration & commerce? I can too…

Update (3 June 08): Michael Arrington wrote a nice piece today on where Social Media is heading. He refers back to his previous piece where he describes the “The Centralized me“. As much as I understand, and consumer services such as FriendFeed, I truly believe that the centralized me is about “One man, One Website!”. My blog is my central place for sharing my photos ( I have used FlickR), thoughts, Digg links etc – and for many people, owning their own personal website would fulfill all the requirements they would have for a centralized me. By using API’s and site builders that can easily call 3rd party data (yes, yes – Data Portability plays a part in this) – we are able to create websites which are essentially mashups. Personal websites are more likely going to fulfill the mass user’s requiredment for the “Centralized Me”. It will also fulfill Fred Wilson’s comment that “every single human being posting their thoughts and experiences in any number of ways to the Internet.”

Further Update Wed 25th June 2008: Another good post from TechCrunch on how commerce will move from firms to individuals.

Today's Most Popular Posts -

Web 2.0 – Beyond the Hype

Posted on by
Comments

I’m at the Nomadic Marketing course at UCT, and Mike Stopforth’s from Cerebra is doing a talk on Web 2.0 – “Beyond the Hype”.

Mike starts off with a story about how Dell was “giving” away free laptops with their broken e-Commerce platform. This was a good example of how the news spread through the blogosphere and Internet, virally. Importantly, Mike notes, Dell was paralyzed by the huge upsurge in orders – (2500 in 9 hours!), and they didn’t know how to deal with the Public Relations nightmare that was brewing, due to corporate paralysis (the US office had to approve any statements, etc).

The new Web Trend Map was put up – to show how everything is interlinked.

Mike also put a quote up from The Cluetrain Manifesto:

“A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter, faster than most companies.”

Now – it’s video time, produced by a professor of anthropology:

This video strikes a chord with what we are tring to achieve with Synthasite, in making the web an easier place to publish – regardless of all the complicated underlying frameworks & constructs.


The DNA of Web 2.0

Social Networking
Decentralisation
Diversity
Tagging (folksonomies)
RSS/XML

Mike spent a bit of time discussing Del.icio.us and what makes it work.

Mike is winding down, whilst discussing blog, blogging and aggregators such as Technorati, Amatomu & Afrigator.

Today's Most Popular Posts -

Incubators that incubate Incubators

Posted on by
Comments

Firstly, this post has nothing to do with incuBeta (which actually isn’t an Incubator!). I got this email from Nick Zaharias, brother of a friend of mine, Chris Zaharias. I had a good laugh, and hope you will too!

I don’t think we’re in a bubble, mainly because the Web 2.0 companies out there are mainly private and unlisted. The big guys are making money and spending it acquiring smaller companies, who’s cost of acquisition are almost insignificant in relation to their market caps. Regardless, it does become ridiculous when Incubators that incubate Incubators are born – it’s almost as sad as those people who are “Business Coaches” only because they can’t run their own businesses!

Anyways, here’s Nick’s email.

Hello. Hope you’re doing well. It’s me again and unfortunately, I am here today to rain on your parades, your fantasies, your business models, or your portfolios once again. It’s happening again and so I will put up or shut up as several of you said I must back in March of 2000.

First a little history……..In the lead up to March 2000, I saw a proliferation of signs that the end was nigh for web 1.0. Though painfully obvious at the time, hallucinations of the mass variety can exert quite a strong hold on one’s faculties – my RealNames IPO net-worth mental masturbation calculator stands as a testament to that fact. As the Launch-Party summer of 1999 became the Fall of RealNames withdrawn S-1 registration, I knew it was over and began to search for the perfect contra-indicator that would become that final stake in the ground upon which one could sell short the entire Nasdaq with impunity. To those of you copied on this email who were actively discussing tech stocks with me back then, you will remember those days well. To those of you who were not, welcome to Incubators that incubate Incubators, Part II.

One month before the march of 2000 Nasdaq crash I made an offhand, grabass comment to the effect that we’d know the top when a venture capital firm would fund an Incubator that would incubate other incubators, which in turn would incubate web start ups. I was really just talking trash as the idea was clearly too stupid for even the worst venture firm.

Fortunately, about two weeks before the crash, Bill Romans (who is once again a recipient of my usual blather via this email) sent me an email with a link to a CNET story describing just such an incubator that incubated other incubators, which in turn would incubate web start ups.

So that’s the history. So why do I bring this up today? Well, for those of you who haven’t noticed, web 2.0 has gotten pretty nuts again. Silly people, doing silly “socially-conscious” social networks. All sorts of crap. And to be honest, its really quite embarrassing. Lately i’ve found myself laughing at start-ups more than I ever have before. The names of these things…. I mean every time I read Arrington’s site I see names that sound as if they were made up by my 2 year old son’s play group. Its funny and sad at the same time.

So I’m reading the SF Chronicle this morning (which by the way, is seriously the world’s worst newspaper) only because I can’t read the web while I’m taking my morning doompha. And there it is – its happening all over again:

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/05/30/MNGHPQ3PST1.DTL&type=tech

I’ve got to take my daughter to school now so I’m going to let you all read this article first before I explain why James Currier and his Ooga Labs *is 2007′s version of the flashing “Danger Will Robinson, Danger!” signal that we got in March of 2000 with incubators that incubate incubators, which in turn would incubate web start ups.

Talk to you soon,

Nick

p.s. and if you think I’m wrong, please tell me why.

* I have not looked up the names of the VCs who funded Ooga Labs, so apologies to any and all who may have funded this turd.

Today's Most Popular Posts -

Web 1.0 De Ja Vu

Posted on by
Comments

Web 2.0 is merely next generation Web 1.0 (duh!). Isn’t it strange how many Web 1.0 business models are resurfacing and calling themselves Web 2.0! Many of the social networks today, are successors to websites from the Web 1.0 era. Cnet covers the Top 5 Dot Bombs of the late 90′s boom. It’s scary to see how many of these models are resurging! Cnet also has Top 10 list to go with the video.

Along with the boom of the Web 2.0 economy, guess what’s now come back into action : First Tuesday! Investors, still kicking themselves for not investing in companies such as Skype & YouTube are now waking up to the smell of fresh cash and First Tuesday provides that platform, as it did back in the last boom! I have the pleasure of being the keynote at next month’s event in Johannesburg.

Not only is First Tuesday back, but there is a new gathering, known as Open Coffee Club – basically similar to FT, and it was started by Saul Klein in London. There will be a Cape Town meeting tomorrow so check it out. Eric Edelstein (incuBeta co-founder) also has some coverage on his blog.

I wrote a post a while back on Web 1.0 vs Web 2.0 and what I didn’t add was the similarity been FuckedCompany & TechCrunch’s Deadpool (which also came as an April Fool’s hoax this year).

People often ask me whether or not I think we’re heading for a bust or not. Let me try to answer this as succinctly as possible by stating facts:

1. Online media has grown into a $20bn+ a year business
2. Advertising chases audience
3. Companies building user bases now have sustainable monetization streams
4. In any boom, there are often a large number of startups, some successful, other not. The winners usually outweigh the losers in the long term.
5. If there is a bust, it will be because of large irrational sums of money being thrown at startups. Peter Rip covers the point of “Fail Fast, Fail Often” very nicely in his blog post.

So – are we in a Boom/Bust cycle? Yes & No! Yes – we are in a boom & yes it will bust. Will the bust be as bad as before – no, as there is still a healthy amount of skepticism in the marketplace, which is good!

The million dollar question: How long will it last? I think that for the next 5-7 years, we will see a long sustained boom, (barring WW3), but after that, the pace will slow rapidly. What am I basing this on? Thumbsuck to an extent, but also, from a global perspective, countries like South Africa and Australia are just getting into this cycle (Web 2.0) right now – arguably a bit late, but there is still plenty of domestic opportunities around and I see that most countries that haven’t caught on will take 5-7 years for this cycle to peak and then drop off. Thumbsuck – yes, possible – definitely!

What will it all mean? As with any drop off (aka Bust) people who have no passion for the industry and were just in it to make a buck are going to go back to whatever profession they were in before joining the bandwagon, the industry contracts and a whole new era begins…

Today's Most Popular Posts -

AOL Only Adwords – Marketplace & Revenue Impact

Posted on by
Comments

So, if you haven’t heard by now, AOL is receiving their own version of Google Adwords (Private Label deal).

I’m not going to rehash the background and deal info, referenced at SearchEngineLand, but instead, I’ll try to explain what I see the market impact as being.

I’ve long argued the point that we should be able to price keyword by partner on all the major search engines, as they all have quite different conversion rates and “Not every click is created equally”, to paraphrase. The AOL deal has forced Google to make this move, and I think it will probably hurt their margin numbers and not just their revenues. Overall, it’s probably close to a zero sum gain as the money will flow to AOL, but their cut will just reduce. I haven’t done the math, but they might be just slightly worse off on revenues, but definitely down on margin.

Also, this impact will hurt many of Google’s partner sites that relied on high conversions from AOL to “slip” clicks through the door at higher than market value (respective earning or value per click), because of the fact that marketers cannot price each partner differently.

This is quite a complicated post, so please bear with me – I’ll try to explain this as simply as possible.

Currently, when buying Adwords ads, you pay a single price for a click & keyword that goes to Google’s distribution network.

For example (and I’m using hypothetical, BUT REALISTIC numbers here), let’s say that a keyword received 100 clicks and the breakdown by partner is as follows:

25 Clicks from AOL – 5 Conversions
50 Clicks from Google – 4 Conversions
25 Clicks from Google Partners – 1 Conversion

Total Clicks = 100 x CPC of 25c = $25 in costs
Total Conversions = 10 divided by $25 in costs, leaves us with a $2.50 CPA (Cost Per Acquisition)
Assume an average position of 3 and as you can see from above, AOL has the better conversion rate.

Let’s assume that your breakeven point is $2.50 CPA. Now, because Google runs a single blind marketplace, there is no price discrimination, which means that there is cross subsidization of keyword value (you pay an average price for everything, yet some clicks are worth more and others are worth less).

For the record, our logs indicate that AOL has the best conversion rate across all Google partners, and this simple means that if there is a separate marketplace for AOL, that prices across the Google Adwords network (especially direct) should fall, IN THEORY (see conclusions).

Now, let’s assume that we removed the AOL numbers:

50 Clicks from Google – 4 Conversions
25 Clicks from Google Partners – 1 Conversion
25c CPC x 75 Clicks / 5 conversions = $3.75 CPA

By AOL moving out of the marketplace, this would effectively mean that the remaining traffic would become too expensive, because AOL would not be cross subsidizing it (and obviously, they know this already, and that’s why they want their own marketplace). This would mean that prices would drop in order to offset the drop in traffic quality.

What would this mean for AOL?

$2.50 CPA x 5 Conversions = $12.50 / 25 Clicks = 50c CPC – almost DOUBLE what Google was raking in for them by cross subsidizing, is what the merchant would be willing to pay direct on AOL, because of the higher conversion rate.

Now, here are the possible conclusions vis a vis Google CPC’s:

1. Google CPC’s will drop as marketers move their spend directly onto AOL and adjust ROI’s according on Google. This will impact Google’s financials, as they will have to pay out a lot more money to AOL.

2. Google CPC’s will increase as dumb money floods the market because marketers are either too lazy or overworked to load AOL campaigns (highly unlikely in the long term) and instead they make it more profitable for Google to show Adwords direct ads for AOL, than AOL marketplace ads. I doubt this would occur though, but it’s a possibility.

3. Google CPC remain unchanged as AOL take-up rates are too low to impact the overall conversion number in the short to medium term.

So, logically speaking, by removing the “bane of mankind” *according to me* (Cross Subsidization) from the Adwords system, we as marketers will be able to align ourselves far more closely with the value per click.

Where do I get this insight from? Well, as an affiliate marketer, we have to watch the earnings per click very closely. EPC is a key metric and we are also able to distinguish (using our proprietary technology) the different conversion rates and therefore effective EPC’s per network partner for all the search engines. This data allows us to derive very accurate statistical models and also understand how the market is interpreted (well, as best as possible) by other players.

Every cent we spend is our own, so we have to ensure that we’re as closely aligned to value per click or EPC as possible, and therefore we’re very excited about the AOL prospects, but realise equally that it’s a lot of work.

I think this is a great move by Google and I applaud them. They’ve thrown the gauntlet down to the other search engines, and let’s see how they respond!

Today's Most Popular Posts -

Google Launches Pay Per Action (CPA)

Posted on by
Comments

I’m not going to rehash my previous post on this topic (still highly applicable – I highly recommend reading it before continuing with this post), but Google has finally launched Pay Per Action across their Adwords Network for US advertisers onto Adsense (not Search Network yet). I still believe that there are severe problems with the model, and Google will discover that it is not sustainable.

Search Engine Watch believes that Commission Junction’s days are numbered – I don’t think so! Andy Beal also has a similar view. We’ve been running CPA campaigns through Google for nearly 4 years now, and I think Google vastly under-estimates the risks and relationships at play with CPA marketing. The biggest concern though, is that Google’s internal arbitrage of CPC to CPA (which is what they’re doing, effectively), pushes prices CPC prices up in the short term, while they make mistakes that we’ve forgotten how to make, in our Clicks2Customers business.

Also, from the Inside Adwords blog, it’s not clear how they will deal with chargebacks – I’m guessing that the merchants have to factor this in? Can you imagine what’s next? Click-Order-Return (COR) fraud (i.e. Website owner clicks a merchant, places an order – merchant pays Google, Website owner returns goods – Google doesn’t refund merchant and Google pays Adsense site share of CPA). What if I’m a Google stockholder and I make a $1m purchase in order to boost the earnings, and then return or cancel the order – in theory, Google still gets paid and their stock goes up, but the merchant is out of business – just summising here, but I still don’t think CPA is viable for Google.

As I said in my previous post on this topic – Google has a smart bunch of guys, and I’m sure they will figure it out!

Today's Most Popular Posts -

My Summit TV Interview

Posted on by
Comments

For those of you that didn’t catch my Summit TV interview in November 2006 on DSTV, after incuBeta won South Africa’s Top 100 Technology Award, here it is…

Also, my brother recorded the following clip on his cellphone on the night of the awards – he’s understandably quite excited:

Today's Most Popular Posts -