Posts Tagged Economics
Twitter economics
Posted by Bill McCollam in Economics, Marketing/Psychology, Potpourri on April 6th, 2009
Twitter is the latest big thing in social media and the digerati are all trying to figure out how to turn some of this popularity into money. Well - I can see the shape of it - if not the exact mechanics. But let’s level set first.
Twitter is a platform. It’s provides a way to transmit itty-bitty posts (<140 characters). That minimalist aspect is an important part of its character. But I think it’s the publish/subscribe model that’s really interesting. Basically you register, then tell them a bit about yourself. They you go looking for people that you care to follow. You can look for friends or you can look for people with interesting characteristics or common interests. You subscribe to (”follow”) them and maybe they follow you back. Then you er…. talk about stuff.
So far so good?
Okay. Now one more thing before we get to economics… All these ways of finding out who to follow and have them follow you - assume some kind of latent context. In other words - you have to know something about who you want to connect to before you connect to them. I can search for my pal Harry, or I can import all my contacts, or I can go looking for people that write about personal finance.
Now, here’s the good part. There’s also a convention called hashtags. This simply means ‘tagging’ your post with a code prefixed with a #. So I could create a tweet like, “brrr, sure is cold on this flight - wish the attendant would turn up the heat on flight #ac905″. Anyone can subscribe to a hashtag. So if, for instance, the flight crew were monitoring #ac905 - then they’d be able to fix the heat, or make an announcement, or ignore it. Here’s a whole database of tags.
So how to make money? I think of it as situational arbitrage. (Yeah, that’ll catch on…). Think of a situation where you want to exchange something of micro-value - but it’s just too inconvenient or socially awkward to actually do anything about it. I’ve talked about these situations before… you’re leaving a parking lot with 2 hours left on your ticket, or you’re getting tired at the driving range with half a jumbo bucket, or you’re at a supermarket with an unused coupon, or you want to get rid of an extra two tickets. What if everybody subscribed to twitter (and soon everyone will be walking around with devices able to), and there was a known convention around hashtags. So, when you go to the supermarket - you scan #Loblaw27 and see whose needs coupons, or #parkinglot3456 to see who needs an unexpired ticket.
There’s stuff to be filled in for sure…
- It’d be great if there was a micro-exchange function built into twitter so we could easily transfer a few bucks between tweeters.
- We need good way to make the context known. Short of just knowing that #flight number is the convention for airlines, how would we communicate that? I suppose the host location could put up big signs (This is #LOBLAW27 - but what’s in it for them?). What about a GPS mashup? What if we could simply open up a channel to anyone within a few hundred feet?
If you could figure these aspects out (and a way to skim a small value-add surcharge for the service) you’d have the thing licked.
The cost of kindness
Posted by Bill McCollam in Economics, Marketing/Psychology on March 15th, 2009
I experienced a random act of kindness this weekend. It was quite nice and made me ponder the economic implications.
Geoff and I were at the checkout line in the grocery store (…by an odd set of circumstances - Geoff at seventeen isn’t exactly the grocery shopping type). As happens on the odd time that Geoff and I go shopping together - the groceries included a few items that don’t normally make it into the cart when someone more responsible is in charge. So, as we’re waiting our turn, the lady ahead is going through a little file of coupons that she has with her. She selects a few applicable coupons and hands them to the clerk. Then she looks over our groceries on the counter, flicks through her coupons a bit more and puts a coupon for $1.50 off the frozen pizzas that the boy has added to our cart. She mumbles something, turns and leaves, almost before I had a chance to thank her.
The checkout clerk rings in our groceries, and applies the coupon. Wow, like finding money!
We’ve never really gotten serious about coupons in our household. Lyndsey’s quite careful about meal planning and pays attention to the weekly grocery specials. But coupons have always felt like a little too much work. (And to be honest, I can barely make out the fine print).
I’m not sure if this small incident will change our minds about using coupons - but the social and economic aspect of that lady passing along the coupon really interests me. I’m thinking she wasn’t a big frozen pizza fan. So she didn’t clip that coupon for herself. I’m thinking she clipped it because it was a decent discount and she wanted to get some utility from it. From her point of view, the value she got from providing that random act of kindness obviously was greater than the marginal cost of clipping and carrying the coupon.
Where it gets interesting is when the transfer of value becomes more about economics and less to do with kindness. Consider:
- My daughter was telling me the other day about an incident in a school parking lot where someone leaving a spot wanted to sell their unexpired ticket to someone coming in for half price. The other party thought they should get it for free and it almost came to blows,
- I’ve wondered about those refillable popcorn deals where you just present the empty bucket for a top-up (do patrons ever fill up on the way out and pass it on?),
- …and what about golf balls at the driving range. I don’t know about you - but half a jumbo bucket is usually plenty for me. I’d easily sell the second half to someone else.
Obviously the problem with transactionalizing these transfers - is that it subverts the economic assumptions built into the prices. Presumably parking lots make assumptions around pricing based on consumers utilizing less than the maximum utility available on their ticket. Same for coupons, popcorn and golf balls. I’m guessing that random “acts of kindness” are incidental and don’t signify. But imagine if you were to really leverage and transactionalize this.
What about coupon exhange sites and even gift card exchange sites? The latter is an idea that I think is fantastic. More on this later….
Free at last, free at last…
Posted by Bill McCollam in Economics, Marketing/Psychology on February 28th, 2009
Consider the perfection of zero. Marketers have long understood how powerful a concept ‘free’ is to consumers. In his upcoming book, Chris Anderson (author of the Long Tail and executive editor of Wired) examines zero and the implication of zero in a digital world.
The key point is that zero has always had a huge psychological attraction for consumers. We’d much rather pay nothing than something - even if the something is very small and even if the nothing has ’strings attached’. In his recent article, Anderson points to Gillette - the inventor of disposable razor blades. For two decades the invention went no where - until Gillette latched onto the notion of giving away the razors and selling the blades. Voila - a market is born.
Anderson turns from razors to the 21st century, where huge companies like Google and Yahoo have built enterprises on zero. Free searches for free content. With the diminishing cost of storage, bandwidth and computing power- it’s approaching a point where it’s cheaper to give it a way than to meter it. Anderson contemplates the existing business models built on free - and how these are evolving.
I was thinking about all this in regard to Financial Services.
The mutual fund industry was founded on a brilliant application of zero. That’s precisely what many consumers believe they are paying for fund management, record-keeping and associated financial advice. (Maybe at some level some consumers are aware of MER’s - but usually only in the same limited way that razor owners are aware that the blade refill they’ll need are a little pricey). In fact, the industry has been so good with promoting the ‘free advice’ model - that it’s made it very hard for the ‘fee for advice’ models to lift off.
Could there be an advice analog for the Google model? Google works by helping consumers find content and charging advertisers for the opportunity to get access to these consumers in the moment. So could advice be provided to consumers (for free), and be supported by sponsored, contextual advertisement of a more robust kind of advice. Or for products that meet the needs being advised? I think so. You’d need to work out a way to provide and compensate for the advice - and you’d need to create some kind of reputation management around the providers. But that’s doable. And I’m thinking many many consumers would prefer advice in this mode than the traditional.