Thoughts From The Cake Scraps

Recently within the #measure community there has been much talk about Google launching https://www.google.com which is an SSL version of Google search.  The big issue is that when a user clicks through a search result the referring site is stripped off and there is no way for the destination site to tell what keyword was used.  What will happen next depends on who you talk to.

Perhaps this means that businesses don’t know what is driving traffic to their site (via natural/organic search) so they will not want to spend ad dollars on keywords that may or may not be used frequently by their visitors.  Maybe businesses switch spending to a different service, such as Bing, where they can feel more comfortable knowing what they are spending on.  For the web analysts, like myself, there is the issue about where the traffic shows up in marketing channel reporting.  We will no longer know how much traffic Google is driving to our sites.  Since Google is such a major player in the search game this could be a huge issue.

But there is one problem with all of this.  While I -  as a web analyst – care about this,   I -  as a customer, as a searcher – don’t give a crap what a company does or doesn’t get.  That’s their problem to work out.  In fact, with all the talk about privacy from all the Facebook changes, as a searcher I would be happy with any new security Google can provide for me.  So this means that the users of search are not going to drive Google away from defaulting to SSL searches and perhaps do the opposite and attract more pepole.  That only leaves the businesses paying for advertising, but they hardly have any strength at all.  Really, it just means businesses will not spend money as efficiently as they could be so they would have to buy more keywords or risk lost revenue from lack of paid traffic.

That inefficiency is one of the smaller ways Google could make some money.  There is an even bigger opportunity that is revealed in Google’s own statement about the service:

Searching over SSL doesn’t reduce the data sent to Google — it only hides that data from third parties who seek it.

You see where I’m going with this?  Google could start charging for access to the natural search.  This is sold to senior leadership at businesses by stressing that without the data the company 1) won’t know what is driving search traffic to the site and 2) won’t be able to spend their search advertising dollars efficiently.  It is a grand slam for Google.  Furthermore, before you get up in arms about the thought of paying for this data, have you ever used Acxiom data to gather targeting information on customers you otherwise know nothing about?  If you’re not in the direct mail space, then what about Hitwise or Comscore?  All of that is the same thing. Nielsen Ratings? Same thing.  Just a company collecting (or buying) massive amounts of data and packaging and selling that data to clients.

At the end of the day businesses simply cannot afford to say “screw Google, we’ll buy ads elsewhere”.  They will pay for this data, and probably line up to do it (after the mandatory complaining about how they used to get it free).  We all know that Rupert Murdoch is changing the face of news on the internet by charging for it.  There were even talks about making Google pay to index it.  Google needs to keep looking for new ways to generate revenue; charging for search data may be it.  At the very least it could come free with Google Analytics, giving you one more reason to switch.  I bet that wouldn’t make Omniture / Adobe very happy.

I think things could get interesting.  What do you think?

This has been a Thought From The Cake Scraps.

It is no secret that virtual goods are a hard sell for me; I need to get something not easily duplicated for my money.  After my first post Fantasy7 made the argument that people buy a Facebook gift for the experience.  They buy it for the joy of giving and for the joy of receiving.  A similar argument was made for in-game items for games such as Word of Warcraft.  Again, I understand this.  Which is why I then wrote a second post to address these issues.

Again Fantasy7 was back, pushing for virtual goods.  That music and games could be passed on.  That an e-book had just as much value as a book on the shelf you don’t read.  If you don’t intend to resell it they have the same value.  While, for me, this is an argument that is on rather thin ice I at least understand where Fantasy7 is coming from.  But I am not convinced and today I will make another case against virtual goods.

I believe some of the views toward virtual goods are shortsighted.  In reality, one can never know how long they will want something.  This is why craigslist become a hit quickly and why rummage sales will never go out of style.  At some point in time you will have stuff that is either no longer of value to you either because it is junk or too worn/old for you.  At such a point one could just throw it away.  Or one could gift it.  Or recycle it.

Lets take one example most people can get on board with, a car.  A car is not something that one generally just throws away.  Nor is it something that is generally just gifted – though I do recognize that children may get one as a gift.  I think everyone can get on board with the idea that trashing or gifting a car is not the most common thing to do with it.  Even though the goal is to get rid of the car, people still sell it because it retains some value in some way, even if it is just for parts.  The physical item has value and always will, if only as scrap metal.  It may have too small of a value for the owner to do anything but trash it, but there is still value, however small.

Now to my point.  Digital goods only have value to the original seller.  If this is not the case, can someone please show me where I can sell my iTunes songs I don’t want?  Or where to unload my XBox Marketplace download of the original Halo?  Only iTunes and Xbox make money in these spaces.  Not the case with purchased games where I have a physical, non-easily reproducible copy of the game.  Yes it is a copy of some original source code, but there is the case, manual, artwork, etc. that are not easily copied.  If you buy an iTunes song or movie it does not take much to make a copy, copyright protected or not.

My larger point is that any virtual good that you purchase  is a sunk cost.  End of story.  This is simply not the case with physical goods.  Forget the arguments about worth and experience and all that.  Even Fantasy7 can’t argue with the statement that a virtual game or song is a sunk cost (it may be different for online game merchandise, though as soon as the multi-player server goes offline, the player is left with nothing, no matter how much real money they spent).  It is simply a fact.  And this is why I will always prefer a physical good with any purchase I make.  I cannot predict the future, nor can any of you, so why not keep my options open.  The physical will always retain value.

So what prompted this post?  I was going to throw away some old XBox games.  But, I checked online to see if they were worth something.  Anything I could get for them would be gravy since the plan was to junk them.  And believe it or not, Amazon is selling WWE Raw 2 for $89.94.  Others list it new at $29.99 and used at $7.76.

It’s not much but it is a free lunch.  Assume that you have just the download from Xbox Live Marketplace.  Who’s paying for your lunch?

This has been a Thought From The Cake Scraps.

Advertising.  That is the motto of seemingly every business you hear of today.  They will provide a service that is free to the customer and it will be supported by advertising.  Even Twitter said today that they will be launching an advertising business soon.  Fine.  I get it.  There is tons of money to be made with advertising.  Look no more than the post on Shoemoney where Jeremy says that:

We allocated them a small budget of like 100k for a week and they did incredible.

A SMALL budget of $100,000 per WEEK.  Yeah, there is money to be made in advertising space on your product/blog.  It is a great idea.  I have ads on this blog to help offset the cost of running it.  Hey, if it works that is great.  And best of all?  The consumer gets the content free.  Right?

Well, that really all depends on your definition of free.  You get a discount at your local supermarket when you swipe your shopper card.  You earn rewards on your credit or debit card.  You get to use a product and it costs you nothing.  But one must stop for a moment and think about what is really happening.

Business are generally not in business to be a charity.  Otherwise they would be a charity; that’s how these things work.  So that means that whatever strategy they are employing at the current moment is probably set up so that the company makes money.

Now of course there are two sides to every coin.  You swipe your shopping card to get a discount.  The company collects the data and learns from it.  They place things near each other to cross sell.  Is this a service – they want to make it easier to shop.  Or is it trickery – you will buy both items even though you only need one item.

The same is true with credit card loyalty programs.  Of course you get rewards so you are happy, but the company is also collecting data on you buying habits – maybe to send you offers in the mail.  Like the stuffers that come in some bills.  You don’t really think that stuff is all random do you?  (well, it might be, but not if the company is properly leveraging the data)

And of course the ads for free services.  Even if you never click them, you see them.  They are the billboards of the internet.  You just have to trust that the display advertising works (or test into it).  They are impacting your perception of the brand or at least keeping it top of mind.

Perhaps these are trade-offs that you willingly make.  Maybe you think you are the exception and don’t see it all.  That may be the case, but there are lots and lots of ever increasingly sophisticated way to trick your brain.  What our brains react to, how they work, what areas are activated when image A is viewed vs. image B.  Really, there are places doing consumer research where they are actively scanning the brain of the volunteer while they participate in the study.

It is a very interesting, but possibly scary field – for the consumer.  So when you see all of these ad supported things and think it’s just free, consider what you are actually selling to get it.  Yourself.  And as the techniques get increasingly intelligent, the idea of ads everywhere gets increasingly uncomfortable.

What do you think about all the ads?

This has been a Thought From The Cake Scraps.

I may be in the minority or maybe I just don’t have enough money to throw away or maybe I just don’t get it.

Viximo is a purveyor of virtual goods, more commonly called gifts.  While I would not say that they are common on Facebook, Facebook is the largest platform that they exist on (to my knowledge).  To be fair, while I might not think that they are common, Facebook is counting on it for revenue and not in small amounts.  It is estimated at $30 to $40 Million a year.

I don’t know how much Viximo is planning to make but when I first read about them over at TechCrunch I knew they would make money.  To be clear, I still don’t get it.  I know they will make money, and lots of it since their cost is fixed and it does not matter how many of a particular gift they sell, but why do people buy?

The value of something is defined by two things – supply and demand.  There is nothing more to it.  If you had 1 ton of gold and nobody wanted it you may as well have 1 ton of gravel.  In contrast you could have that ton of gravel in a place where no quarry exists and everybody wants it and it could be worth lots.  It is all supply and demand.

How does this relate to virtual goods?  If someone buys a virtual gift who really owns it?  If Facebook goes under – work with me here – where is your virtual gift?  Gone.  Do a google search on what happens to DRM protected music when the issuer goes under.  The sites going under will actually tell you to burn your songs to a CD and rip them back to your hard drive because you can’t transfer them or have the DRM validated after the site shuts down.  Why risk it?

I guess my point is that I understand that it can be fun to give a gift, it doesn’t really make sense.  Just e-mail them some clip art.  The only thing that I think makes sense is the free gifts.  The gifts that are sponsored by a company.  If the company takes its time, makes it clever, and makes it interesting then it can be a great marketing tool and a fantastic way to generate some buzz around the brand.  So it makes sense to a company to pay Facebook to offer their ‘gift’ but can someone explain why I should pay for one?

This has been a Thought From The Cake Scraps.

Previously I have covered how a site’s internal campaigns track you and how a website should track you but Fitbit tracks you in a whole new way.

I originally read about this a few weeks ago and just saw another post about it over at TechCrunch and I still think that it is pretty sweet.  The device claims to be able to:

help you determine how much exercise you’ve been getting and how many calories you’ve burnt. It can also tell you how many steps you have taken and how well you’ve slept, all based on its internal motion detector.

I have heard of a device that can track calories you have burned, or at least take a guess at it, but what I found to be really interesting is the claim that it can tell how well you have slept.  I am a pretty light sleeper and I would be really interested to know how often I really wake up during the night.  I also think that it is a great way to remind people the importance of exercise.  Besides, who can not love something that basically seems like Nike + iTunes on speed.

The other really cool thing is that

All data gets automatically synchronized to your computer and then the web through a wireless base station, so you don’t even have to plug it in. Once synced, you can view your health reports online. -TechCrunch

There is something awesome about graphs, charts, and numbers that I generated myself that just seems better than graphs, charts, and numbers that I didn’t.  The only problem is that all this sweetness is $99.  Is that really worth it?  I’m not sure but I signed up on their website to get an e-mail as soon as they get some in stock.

I wish Fitbit the best of luck on creating a business that makes money.  The road is littered with those who have tried, but I think this one has a chance.  I suggest you go check it out for yourself.

This has been a Thought From The Cake Scraps.