An Open Letter to the Sharing Economy
The sharing economy is not a passing trend. The potential for its rise among the ranks of consumerism is exponential; however as we all know, not enough people know about it. The obvious solution is to spread the word but one voice is nothing compared to a collective voice of Peer-to-Peer companies and leaders. Like many of you, we over at Trustcloud are focused on the development of our own site and bringing on passionate and knowledgeable talent. Obviously, each of us is responsible for our own successes and failures, but a certain amount of energy and resources must be spent collectively for the betterment of the entire ecosystem.
Our collective growth can be helped by our industry’s innovators forming a national, if not global, advocacy group. Together our peers can share best practices, drive community awareness, and plan events just as a starting point. Who knows what other goals will develop by putting great minds with a shared strategy in the same room. A company in Ohio should be encouraged to share its experiences with a company in Maine and that company could tell a friend who might have a company in Portugal. We’re all facing the same battle – why not learn from one another? It’s no different from fast food restaurants opening across the street from its counterparts because it simply would not succeed alone. The current leaders must collaborate to better our industry. Nothing can be more important than the rise of leaders in the sharing economy.
I applaud the sharing activity that is starting to surface – Shared Squared, a think tank for collaborative consumption companies and participants is hosted in New York. Emily Castor has been championing the @collabchats series in San Francisco. Furthermore, sites like meshing.it and shareable.net in the US and consocollaborative.com in France detail industry news. This is all fantastic for the sharing economy but as a whole, consumers are only exposed to a fraction of what the sharing economy has to offer. Everyone knows the big names, Airbnb, Wimdu, TaskRabbit, Relayrides, Getaround, Zaarly- we can’t continue working in silos. Until the leading sharing companies substantially support its younger peers, any attempt at organizing will lack the resources to make a real difference.
Let’s do it! You and your company will not only benefit but together, sharing companies will create a lasting and competitive environment. We all know if someone is willing to participate in a bike share, they will be more apt to choose another peer to peer service. As the local markets compete, developers will learn more about the community to offer better services. It’s a win – win situation.
I know I’m not the only person who believes we can grow traction and credibility with the help of our peer leadership. TrustCloud is doing our part by working with Shared Squared NY on their next event. The advocacy is starting to form… Who’s in?
Confessions of a Consumer (and a Mad Waster)
OK it’s time to fess up. Here I am trying to lead a company helping the sharing economy (which is arguably one of the most environmentally conscious business models ever to hit our consumer culture) and as I look around my own life, I’m a disaster. Now let’s get one thing clear. I am a huge believer in saving the planet and I live by the standard that actions speak louder than words. I absolutely live my life trying to leave the earth in a better place than I found it but I must admit, from a carbon foot print point of view, I need a lot of help. Let me explain-
I have been married for 15 years now and have 2 children ages 8 and 11. I also have a large basement with everything we ever bought for our children since birth and I mean everything. I’m talking cribs, clothes, bikes, scooters, breast feeding chairs, toys, stuff I don’t even know about, 2 TVs, an accordion, some furniture, a cello and lots and lots of plastic that is not exactly bio-degradable. We’re not pack rats, we just haven’t gotten rid of anything yet. (The faint hope that my nieces and nephews will take the stuff when they have children slowly retreats to the back of my mind, meanwhile they’re like not even close to being married)
So here I am in the middle of the Sharing Economy and as I look around it is quite obvious that it’s time to make a change. Children learn by watching their parent’s actions much more than their words and this is not the example I want to set for my children. Garage sale? Church? Good Will? They are all fine options but there’s this curiosity burning in my gut to see if I could take all the stuff in my basement, and instead of just giving it away, I could try to start to share it with trusted neighbors. So I’ve decided to start a neighborhood-sharing group so that the people in my neighborhood can essentially pool and ultimately lower a significant segment of our carbon footprint. It’s not about profit. It’s about living better and more responsibly.
We have a saying in our family that says, “Well, you can’t buy that at Walmart.” We use it mostly to describe non-material things like sunsets, time spent with family, reeling in a 20lb striper etc. I would like to think that this will fall somewhere into that place.
So I think that settles it. I will try to set up a neighborhood-sharing group. I mean how many lawnmowers, hedge-trimmers do we really need? I was talking to my dad last night (he’s going on 80) and he reminded me that when I was little the neighbors routinely got together to share things like lawnmowers. They even did one of the first task shares when one of the neighbors produced land surveys for all his neighbors in exchange for the use of a lawnmower and a snow-blower. Sites like www.ohsowe.com www.heyneighbor.com and www.neighborrow.com I’m sure will welcome me. And if no one else participates I’m sure the good will store will always be open.
Well, Back to my old way of writing a quick intro and reposting some one else’s material only this time it’s our own Rebbeca Smith and her recent blog from Trustcloud on Shared Squared, a great new organization celebrating Collaborative Consumption here in NYC. Thanks Becca for a great post. You can learn more by visiting www.trustcloud.com or contacting Rebecca @ email@example.com
Till next time….
The recently established New York sharing community, Shared Squared, hosted it’s first meeting at the end of last month. Finally, the sharing savvy of the city have found a way to come together and talk about all things sharing and collaboration. The movement, which TrustCloud has been following and discussing for the better part of this year, is quickly building a large and passionate base. Many refer to it as collaborative consumption, others call it the sharing economy. Regardless of what name you prefer or hashtags you adopt, the movement is defined by the idea that sharing and collaboration can help people strengthen their communities, live more sustainably and develop satisfying relationships.
It’s no surprise that people are quickly rallying around this movement. At it’s core, collaborative consumption is all about giving people more enriching interactions –and it usually ends up being something that is good for your wallet and the planet. Collaborative consumption will undoubtedly mark a huge shift in consumer culture, and the NYC Shared Squared group is a collection of people ready to be pioneers in this industry.
The turnout for NYC Shared Squared’s first meeting was impressive and the numbers will likely grow. Some notable guests includeGuestvessel, the trusted network, no money involved roomsharing site; SnapGoods, which easily connects people online to share their stuff; Zaarly, the awesome peer-to-peer buy or sell anything site; Jointli, a site that let’s you share ownership of infrequently used items; and Hey Neighbor, a site that helps you connect to your neighbors and build connected communities.
Adam Black, CEO of KeyWifi, is one of the founders of Shared Squared. The sharing seed was planted in Adam years ago in Byron Bay, Australia where he created projects for community built straw bale houses to experiment with shared living. Talking about the experience, he says, “I was inspired by the efficiency of what happens when we all drop our own wants. When we start to work together, we get what we need.”
Later, when Adam was living in a small village in Upstate New York, he was again inspired by sharing. Because Internet in the area was limited and costly, Adam and his wife shared a wifi connection with their neighbor. Long story short, Adam had a eureka moment when he realized that wifi sharing could make much better use out of the underutilized excess of bandwidth within communities. Now KeyWifi is providing users with an easy way to access shared internet connections at a reasonable price.
While Adam’s story is unique, the sharing philosophy he has adopted is something that all the members of NYC Shared Squared have in common. Members have realized that New York IS a sharing city. Jenn Lackey, another member of the Key Wifi team agrees, “I think other parts of the world tend to think of New York as hustle bustle and not particularly community oriented –and I say that having recently moved to New York from Portland, Oregon. Since landing in New York, I’ve been overwhelmed by the friendly nature and community spirit of this city. Maybe it wasn’t always like this, but in a city of 8 million people – how can it not be community oriented? In general, people are typically wiling to share and help one another with their needs and resources.”
Everyone currently involved in NYC Shared Squared has great ideas of how we can tap into New York’s sharing potential. We’re excited to see how everyone in this group can work together to help one another prosper within this rapidly growing industry.
If you or your company would like to get involved with NYC Shared Squared, please contact Adam Black (firstname.lastname@example.org), Matt Matilla (email@example.com) or the Facebook group (firstname.lastname@example.org).
The Sharing Economy- A View From Above
Anyone who reads this blog knows that most of my posts consist of me pasting a link to something I find interesting, along with a few sentences introducing the topic. This week I decided to do something different. See, I have been a proud member of this new Sharing Economy for almost 4+ months now via my work with TrustCloud (I am also an investor), and here are some of my thoughts and musings from a look above.
A tipping point towards national recognition has certainly occurred with Airbnb leading the way. ($100M at $1B evaluation) Their first big mishap was bound to happen. All though they handled the situation poorly (should have just excepted responsibility and immediately begun restitution and addressing the problem), I saw this as a good sign. It was another chance for the sharing economy to get into the national news as most people still look at me with that “huh?” face if I mention the Sharing Economy or Collaborative Consumption in general. http://tcrn.ch/oSsZ3s
Another tipping point has occurred with the influx of cash into the arena. Companies such as www.getaround.com www.Zaarly.com www.neighborgoods.net and www.relayrides.com have all secured substantial Seed/A type rounds. Many more companies have also received funding, including the creation of a Collaborative Venture Fund. Wimdu www.wimdu.com (an Airbnb copycat from Europe) also secured $50+M.
It is clear there are significant money making opportunities in sharing space and cars. A recent tweet announced a person almost making her entire car payment each month. If you can make $50 a day while using your car one less day a week- that’s $200 and basically a small car payment! As the economy weakens and the next generation enters the work force, who says it won’t become the norm to share your car? Sounds like something I would even do.
Companies such as www.snapgoods.com www.taskrabbit.com that are in the thing (tools, ladders, cameras, etc…) and task sharing (laundry, gofor this/that ) space also have an opportunity to succeed. They could almost be a want ad press for the underground economy. After speaking with a bunch of CEOs it seems like items worth over $100 but less than $500 work well. Things like baby clothes are also a natural fit. How bout WiFi? I would think many people would share their WiFi connection for an extra $50-$100 a month. www.thredup.com www.keywifi.com Clearly technology continues to lead the way allowing these companies leverage.
Then, of course, there is the plain and simple truth that it’s a good thing to do. Meeting your neighbor, www.heyneighbor.com lowering the carbon footprint, basically making the world a better place by sharing instead of consuming. It just makes sense.
When will the next tipping point for adoption occur? Everyone seems to have inventory but not enough adopters. I would argue that it is more of a question of when will these companies be able to actually bill for their services as opposed to who will become the winners is a bigger question.
I used Airbnb for a recent rip to San Francisco and had a great experience. It was painless, less expensive, and my “landlord” was a nice gentleman who kept the apartment spotless. Sounds like good fodder for a future blog…
Has anybody out there used any of these sites? What was your experience?
Should you invest in a mobile app? Should I jut optimize my site for the mobile web? What is HTML5? Should I care? Will it replace Flash? If you have any questions like this then read on as here is a great article by Aaron Mawwell that appeared on Mashable.
Almost every business is gearing up their mobile strategy. No secret why: Mobile is really taking off. There are already more people on the planet who communicate with text messages than with e-mail and more people who own phones than have credit cards, according to the latest statistics.
The difficulty is that there are many facets of mobile technology. Apps, websites and SMS form the broad foundation. But mobile payments and advertising are rich topics on their own. Where do you focus first?
For many companies, the answer has been “an iPhone app” (notice I said iPhone app, not mobile app. More on that later). But people have also been looking into mobile-optimized websites. That has led to a kind of debate in some circles about which is more important. If you’re going to only do one, is it better to make a mobile app or a mobile website?
Apps have one clear advantage. In general, a well-made app can provide a far better user experience than even the best mobile websites are capable of right now. I don’t think this is controversial.
Really, though, what I often see missing from such discussions is cost. It’s often not that hard to make a web app that will work well on most smartphones (depending on the nature of the app — things like graphics-intensive games being an exception, etc.).
But making just a native iPhone app is usually harder than making an equivalent cross-platform web app. And if you want Android and BlackBerry users to be able to have a native app, too, you often have to build each platform from scratch.
Types of Apps
Let’s make an important distinction here. Apps can be divided into:
▪ Those that are meant to directly generate income, and
▪ Those that are built for purposes of marketing, branding, or customer service.
The first type is the topic of all those heartwarming stories about some enterprising developer creating an iPhone app in his spare time, from which he is making more than enough to quit his job coding TPS report generators at BoringBigCo. There are also real companies that do create and sell apps, quite successfully. The income comes from charging for the app directly, in-app purchases, and subscriptions, or less directly, through advertising (think Angry Birds on Android).
If you’re charging for your mobile product, a native app is the way to go. A mobile website can’t integrate with iTunes billing, which — in addition to providing a ready market of 125 million mobile users — makes payment a snap. Charging for access to your mobile website will require rolling your own payment solution… a tall order on mobile right now.
While interesting and exciting, this category of mobile app is not really what we’re talking about in this article. What’s relevant is when companies produce apps in the second category, for the purposes of marketing, branding or customer service. Good examples are the Starbucks or Target Stores apps.
These are normally free, since the whole point is to get them distributed as widely as possible. And that changes the discussion completely. If we make an app, how many prospects and customers will it reach? That puts a ceiling on the potential success of the app as a marketing channel.
The Reach Of Different Mobile Channels
From a pure “how many prospects can I reach” perspective, the best mobile marketing tool is text messaging. About 68% percent of American cell phone subscribers sent a text message in late 2010, according to comScore’s mobile market share report.
Of course, you can do things with apps and websites that you can’t do with SMS. So how many people can you reach with an app? And how many with a mobile website?
For mobile websites, it’s easy. The best indicator is how many people actually browse the web on their mobile phones. As of late 2010, it’s currently over 36% of all U.S. mobile phone subscribers. So, about one half as many people as you can reach with a text message.
There is more to the story for apps. I was at the San Francisco de Young museum a couple of weeks ago. They threw a little shindig to celebrate the release of their official mobile app.
The only hitch: You could only install it if you had an iPhone. Those of us with Androids and BlackBerrys couldn’t play. That reflects a current reality with apps. An iPhone app only works on, well, iPhones. Your app has to be made separately for each platform.
In North America, the most important smartphone platforms right now are iOS, Android, and BlackBerry. How many mobile users are on each? Here are the ratios in the U.S., as a percentage of all mobile phone users, for the last quarter of 2010:
▪ iPhone: 6.75%
▪ Android: 7.75%
▪ BlackBerry: 8.53%
▪ TOTAL: 23.0%
In other words, if you decide to only make an iPhone app, fewer than 7% of all mobile phone users will be able to use it. If the app’s primary purpose is marketing, you’ll need to decide whether this reach is big enough to be worth it.
And if you develop three different apps to cover these three most common platforms, you’re going to potentially triple your cost. All so you can reach only a fraction of the number of people you can get with a mobile website.
To make things worse, I’m ignoring Windows Phone 7. A year from now it may have a very significant market share, thanks to Microsoft’s joint venture with Nokia. Most mobile websites will work fine on the new Nokia/WP7 phones the day they are released. But creating and pushing out a Silverlight mobile app is no small task.
Apps Aren’t Free
The costs for this can add up. There’s no such thing as a “typical” app, so it’s hard to give a meaningful average cost. But as a general working figure, we can say it costs at least $30,000 to design, implement and deploy a brand-quality iPhone app. I haven’t found published studies for the equivalent costs for Android and BlackBerry, but since the device fragmentation is greater, it would makes sense that the costs are at least similar.
All the above means that, at the end of the day, creating a set of mobile native apps that reach, say, 80% of smartphone users is going to be far more expensive than creating a mobile web app that reaches 90% of smartphone users. I don’t even mean twice the cost; I mean more like five, maybe even ten times the cost.
In many situations, that’s acceptable. As noted, sometimes you want to do things that just aren’t possible with a mobile website, at least with good quality. Or maybe it is possible, but you know you can create something of better quality with a native app, so that the result is more engaging. For enterprise-scale organizations like consumer banks and nationwide retail stores, they have the capital, and the ROI justifies it. But if your budget for mobile is under $100,000, it may not be a good approach.
How does a mobile website compare in cost? I haven’t found any published study of the typical cost for mobile web design and development. But from my experience running a company that does just that, I can tell you that it’s almost always less than the $30,000 for an “average” iPhone app.
What’s the ROI?
Given all this, how many prospects will a venture reach per dollar? At a conservative estimate of 234 million U.S. adults with mobile phones, here’s the breakdown:
In other words, you can reach nearly five times as many people per dollar invested with a mobile website rather than a native mobile app. And that’s conservative, assuming it costs just the same to create the BlackBerry app as it does to create the iPhone app (it doesn’t), or that a mobile website will cost the same as an equivalent iPhone app (generally, not even close).
Does this mean you shouldn’t do an app? Of course not. There are many other factors involved. If an app user converts 10 times more frequently, for example, the difference is more than justified. But that’s a big hurdle to clear. And if you want to reach users across more than one mobile platform, you have to consider the extra capital investment as well.
Whether you go with a mobile website, a native mobile app, or both, you’ll probably benefit. The continued mobile explosion will make sure of that. Just take care that you get the most bang for your buck by doing what’s best for your business.
This is a repost of an article from The New York Times on February 14, 2011. We thought this article was so interesting that we spoke about it at length at our weekly meeting. Hope you enjoy.
Someone types the word “dresses” and hits enter. What will be the very first result?
There are, of course, a lot of possibilities. Macy’s comes to mind. Maybe a specialty chain, like J. Crew or the Gap. Perhaps a Wikipedia entry on the history of hemlines.
O.K., how about the word “bedding”? Bed Bath & Beyond seems a candidate. Or Wal-Mart, or perhaps the bedding section ofAmazon.com.
“Area rugs”? Crate & Barrel is a possibility. Home Depot, too, and Sears, Pier 1 or any of those Web sites with “area rug” in the name, like arearugs.com.
You could imagine a dozen contenders for each of these searches. But in the last several months, one name turned up, with uncanny regularity, in the No. 1 spot for each and every term:
The company bested millions of sites — and not just in searches for dresses, bedding and area rugs. For months, it was consistently at or near the top in searches for “skinny jeans,” “home decor,” “comforter sets,” “furniture” and dozens of other words and phrases, from the blandly generic (“tablecloths”) to the strangely specific (“grommet top curtains”).
This striking performance lasted for months, most crucially through the holiday season, when there is a huge spike in online shopping. J. C. Penney even beat out the sites of manufacturers in searches for the products of those manufacturers. Type in “Samsonite carry on luggage,” for instance, and Penney for months was first on the list, ahead of Samsonite.com.
With more than 1,100 stores and $17.8 billion in total revenue in 2010, Penney is certainly a major player in American retailing. But Google’s stated goal is to sift through every corner of the Internet and find the most important, relevant Web sites.
Does the collective wisdom of the Web really say that Penney has the most essential site when it comes to dresses?And bedding? And area rugs? And dozens of other words and phrases?
The New York Times asked an expert in online search, Doug Pierce of Blue Fountain Media in New York, to study this question, as well as Penney’s astoundingly strong search-term performance in recent months. What he found suggests that the digital age’s most mundane act, the Google search, often represents layer upon layer of intrigue. And the intrigue starts in the sprawling, subterranean world of “black hat” optimization, the dark art of raising the profile of a Web site with methods that Google considers tantamount to cheating.
Despite the cowboy outlaw connotations, black-hat services are not illegal, but trafficking in them risks the wrath of Google. The company draws a pretty thick line between techniques it considers deceptive and “white hat” approaches, which are offered by hundreds of consulting firms and are legitimate ways to increase a site’s visibility. Penney’s results were derived from methods on the wrong side of that line, says Mr. Pierce. He described the optimization as the most ambitious attempt to game Google’s search results that he has ever seen.
“Actually, it’s the most ambitious attempt I’ve ever heard of,” he said. “This whole thing just blew me away. Especially for such a major brand. You’d think they would have people around them that would know better.”
TO understand the strategy that kept J. C. Penney in the pole position for so many searches, you need to know how Web sites rise to the top of Google’s results. We’re talking, to be clear, about the “organic” results — in other words, the ones that are not paid advertisements. In deriving organic results, Google’s algorithm takes into account dozens of criteria, many of which the company will not discuss.
But it has described one crucial factor in detail: links from one site to another.
If you own a Web site, for instance, about Chinese cooking, your site’s Google ranking will improve as other sites link to it. The more links to your site, especially those from other Chinese cooking-related sites, the higher your ranking. In a way, what Google is measuring is your site’s popularity by polling the best-informed online fans of Chinese cooking and counting their links to your site as votes of approval.
But even links that have nothing to do with Chinese cooking can bolster your profile if your site is barnacled with enough of them. And here’s where the strategy that aided Penney comes in. Someone paid to have thousands of links placed on hundreds of sites scattered around the Web, all of which lead directly to JCPenney.com.
Who is that someone? A spokeswoman for J. C. Penney, Darcie Brossart, says it was not Penney.
“J. C. Penney did not authorize, and we were not involved with or aware of, the posting of the links that you sent to us, as it is against our natural search policies,” Ms. Brossart wrote in an e-mail. She added, “We are working to have the links taken down.”
The links do not bear any fingerprints, but nothing else about them was particularly subtle. Using an online tool called Open Site Explorer, Mr. Pierce found 2,015 pages with phrases like “casual dresses,” “evening dresses,” “little black dress” or “cocktail dress.” Click on any of these phrases on any of these 2,015 pages, and you are bounced directly to the main page for dresses on JCPenney.com.
Some of the 2,015 pages are on sites related, at least nominally, to clothing. But most are not. The phrase “black dresses” and a Penney link were tacked to the bottom of a site called nuclear.engineeringaddict.com. “Evening dresses” appeared on a site called casino-focus.com. “Cocktail dresses” showed up on bulgariapropertyportal.com. ”Casual dresses” was on a site called elistofbanks.com. “Semi-formal dresses” was pasted, rather incongruously, on usclettermen.org.
There are links to JCPenney.com’s dresses page on sites about diseases, cameras, cars, dogs, aluminum sheets, travel, snoring, diamond drills, bathroom tiles, hotel furniture, online games, commodities, fishing, Adobe Flash, glass shower doors, jokes and dentists — and the list goes on.
Some of these sites seem all but abandoned, except for the links. The greeting atmyflhomebuyer.com sounds like the saddest fortune cookie ever: “Sorry, but you are looking for something that isn’t here.”
When you read the enormous list of sites with Penney links, the landscape of the Internet acquires a whole new topography. It starts to seem like a city with a few familiar, well-kept buildings, surrounded by millions of hovels kept upright for no purpose other than the ads that are painted on their walls.
Exploiting those hovels for links is a Google no-no. The company’s guidelines warn against using tricks to improve search engine rankings, including what it refers to as “link schemes.” The penalty for getting caught is a pair of virtual concrete shoes: the company sinks in Google’s results.
Often drastically. In 2006, Google announced that it had caught BMW using a black-hat strategy to bolster the company’s German Web site, BMW.de. That site was temporarily given what the BBC at the time called “the death penalty,” stating that it was “removed from search results.”
BMW acknowledged that it had set up “doorway pages,” which exist just to attract search engines and then redirect traffic to a different site. The company at the time said it had no intention of deceiving users, adding “if Google says all doorway pages are illegal, we have to take this into consideration.”
J. C. Penney, it seems, will not suffer the same fate. But starting Wednesday, it was the subject of what Google calls “corrective action.”
Last week, The Times sent Google the evidence it had collected about the links to JCPenney.com. Google promptly set up an interview with Matt Cutts, the head of the Webspam team at Google, and a man whose every speech, blog post and Twitter update is parsed like papal encyclicals by players in the search engine world.
“I can confirm that this violates our guidelines,” said Mr. Cutts during an hourlong interview on Wednesday, after looking at a list of paid links to JCPenney.com.
He said Google had detected previous guidelines violations related to JCPenney.com on three occasions, most recently last November. Each time, steps were taken that reduced Penney’s search results — Mr. Cutts avoids the word “punished” — but Google did not later “circle back” to the company to see if it was still breaking the rules, he said.
He and his team had missed this recent campaign of paid links, which he said had been up and running for the last three to four months.
“Do I wish our system had detected things sooner? I do,” he said. “But given the one billion queries that Google handles each day, I think we do an amazing job.”
Mr. Cutts sounded remarkably upbeat and unperturbed during this conversation, which was a surprise given that we were discussing a large, sustained effort to snooker his employer. Asked about his zenlike calm, he said the company strives not to act out of anger. You get the sense that Mr. Cutts and his colleagues are acutely aware of the singular power they wield as judge, jury and appeals panel, and they’re eager to project an air of maturity and judiciousness.
That said, he added, “I don’t think I could do my job well if in some sense I was not offended by things that were bad for Google users.”
“Am I happy this happened?” he later asked. “Absolutely not. Is Google going to take strong corrective action? We absolutely will.”
And the company did. On Wednesday evening, Google began what it calls a “manual action” against Penney, essentially demotions specifically aimed at the company.
At 7 p.m. Eastern time on Wednesday, J. C. Penney was still the No. 1 result for “Samsonite carry on luggage.”
Two hours later, it was at No. 71.
At 7 p.m. on Wednesday, Penney was No. 1 in searches for “living room furniture.”
By 9 p.m., it had sunk to No. 68.
In other words, one moment Penney was the most visible online destination for living room furniture in the country.
The next it was essentially buried.
PENNEY reacted to this instant reversal of fortune by, among other things, firing its search engine consulting firm, SearchDex. Executives there did not return e-mail or phone calls.
Penney also issued a statement: “We are disappointed that Google has reduced our rankings due to this matter,” Ms. Brossart wrote, “but we will continue to work actively to retain our high natural search position.”
She added that while the collection of links surely brought in additional revenue, it was hardly a bonanza. Just 7 percent of JCPenney.com’s traffic comes from clicks on organic search results, she wrote. A far bigger source of profits this holiday season, she stated, came from partnerships with companies like Yahooand Time Warner, from new mobile applications and from in-store kiosks.
Search experts, however, say Penney likely reaped substantial rewards from the paid links. If you think of Google as the entrance to the planet’s largest shopping center, the links helped Penney appear as though it was the first and most inviting spot in the mall, to millions and millions of online shoppers.
How valuable was that? A study last May by Daniel Ruby of Chitika, an online advertising network of 100,000 sites, found that, on average, 34 percent of Google’s traffic went to the No. 1 result, about twice the percentage that went to No. 2.
The Keyword Estimator at Google puts the number of searches for “dresses” in the United States at 11.1 million a month, an average based on 12 months of data. So for “dresses” alone, Penney may have been attracting roughly 3.8 million visits every month it showed up as No. 1. Exactly how many of those visits translate into sales, and the size of each sale, only Penney would know.
But in January, the company was crowing about its online holiday sales. Kate Coultas, a company spokeswoman, wrote to a reporter in January, “Internet sales through jcp.composted strong growth in December, with significant increases in traffic and orders for the key holiday shopping periods of the week after Thanksgiving and the week before Christmas.”
There was considerable pressure from investors for Penney to deliver strong holiday results. It has been struggling through one of the more trying times of its century of retailing. The $17.8 billion in revenue it reported last year is the exact same figure it reported in 2001. It announced in January that it would close a handful of underperforming stores, as well as two of its five call centers and 19 outlets that sell excess catalog merchandise.
Adding to the company’s woes is the demise of its catalog business. Penney has phased out what it called its Big Book and poured money into its Web site. But so far, the loss of the catalog has not been offset by the expansion of the Web site. At its peak, the catalog brought in about $4 billion in revenue. In 2009, the site brought in $1.5 billion.
“For the last 35 years, Penney has tried to be accepted as a department store, and during unusually good times, it does very well,” said Bernard Sosnick, an analyst at Gilford Securities. “But in bad times, it gets punished by shoppers who pull back after having spent aspirationally.”
MANY owners of Web sites with Penney links seem to relish their unreachability. But there were exceptions, and they included cocaman.ch. (“Geekness — closer to the world” is the cryptic header atop the site.) It turned out to be owned and run by Corsin Camichel, a chatty 25-year-old I.T. security analyst in Switzerland.
The word “dresses” appears in a small collection of links in the middle of a largely blank Cocaman page. Asked about that link, Mr. Camichel said his records show that it turned up on his site last April, though he said it might have been earlier than that.
The link came through a Web site, TNX.net, which pays Mr. Camichel with TNX points, which he then trades for links that drive traffic to his other sites, like cookingutensils.net. He earns money when people visit that site and click on the ads. He could also, he said, get cash from TNX. Currently, Cocaman is home to 403 links, all of them placed there by TNX on behalf of clients.
“You do pretty well,” he wrote, referring to income from his links trading. “The thing is, the more you invest (time and money) the better results you get. Right now I get enough to buy myself new test devices for my Android apps (like $150/month) with zero effort. I have to do nothing. Ads just sit there and if people click, I make money.”
Efforts to reach TNX itself last week via e-mail were not successful.
Interviewing a purveyor of black-hat services face-to-face was a considerable undertaking. They are a low-profile bunch. But a link-selling specialist named Mark Stevens — who says he had nothing to do with the Penney link effort — agreed to chat. He did so on the condition that his company not be named, a precaution he justified by recounting what happened when the company apparently angered Google a few months ago.
“It was my fault,” Mr. Stevens said. “I posted a job opening on a Stanford Engineering alumni mailing list, and mentioned the name of our company and a brief description of what we do. I think some Google employees saw it.”
In a matter of days, the company could not be found in a Google search.
“Literally, you typed the name of the company into the search box and we did not turn up. Anywhere. You’d find us if you knew our Web address. But in terms of search, we just disappeared.”
The company now operates under a new name and with a profile that is low even in the building where it claims to have an office. The landlord at the building, a gleaming, glassy midrise next to Route 101 in Redwood City, Calif., said she had never heard of the company.
Mr. Stevens agreed to meet in mid-January for a dinner paid for by The Times. Asked to pick a “fine restaurant” in his neighborhood, he rather cheekily selected a modern French bistro in Palo Alto offering an eight-course prix fixe meal for $118. Liquid nitrogen and “fairy tale pumpkin” were two of the featured ingredients.
Mr. Stevens turned out to be a boyish-looking 31-year-old native of Singapore. (Stevens is the name he uses for work; he says he has a Chinese last name, which he did not share.) He speaks with a slight accent and in an animated hush, like a man worried about eavesdroppers. He describes his works with the delighted, mischievous grin of a sophomore who just hid a stink bomb.
“The key is to roll the campaign out slowly,” he said as he nibbled at seared duck foie gras. “A lot of companies are in a rush. They want as many links as we can get them as fast as possible. But Google will spot that. It will flag a Web site that goes from zero links to a few hundred in a week.”
The hardest part about the link-selling business, he explained, is signing up deep-pocketed mainstream clients. Lots of them, it seems, are afraid they’ll get caught. Another difficulty is finding quality sites to post links. Whoever set up the JCPenney.com campaign, he said, relied on some really low-rent, spammy sites — the kind with low PageRanks, as Google calls its patented measure of a site’s quality. The higher the PageRank, the more “Google juice” a site offers others to which it is linked.
“The sites that TNX uses mostly have low PageRanks,” Mr. Stevens said.
Mr. Stevens said that Web site owners, or publishers, as he calls them, get a small fee for each link, and the transaction is handled entirely over the Web.
Publishers can reject certain keywords and links — Mr. Stevens said some balked at a lingerie link — but for the most part the system is on a kind of autopilot. A client pays Mr. Stevens and his colleagues for links, which are then farmed out to Web sites. Payment to publishers is handled via PayPal.
You might expect Mr. Stevens to have a certain amount of contempt for Google, given that he spends his professional life finding ways to subvert it. But through the evening he mentioned a few times that he’s in awe of the company, and the quality of its search engine.
So how does he justify all his efforts to undermine that engine?
“I think we need to make a distinction between two different kinds of searches — informational and commercial,” he said. “If you search ‘cancer,’ that’s an informational search and on those, Google is amazing. But in commercial searches, Google’s results are really polluted. My own personal experience says that the guy with the biggest S.E.O. budget always ranks the highest.”
To Mr. Stevens, S.E.O. is a game, and if you’re not paying black hats, you are losing to rivals with fewer compunctions.
WHY did Google fail to catch a campaign that had been under way for months? One, no less, that benefited a company that Google had already taken action against three times? And one that relied on a collection of Web sites that were not exactly hiding their spamminess?
Mr. Cutts emphasized that there are 200 million domain names and a mere 24,000 employees at Google.
“Spammers never stop,” he said. Battling those spammers is a never-ending job, and one that he believes Google keeps getting better and better at.
Here’s another hypothesis, this one for the conspiracy-minded. Last year, Advertising Age obtained a Google document that listed some of its largest advertisers, including AT&T, eBay and yes, J. C. Penney. The company, this document said, spent $2.46 million a month on paid Google search ads — the kind you see next to organic results.
Is it possible that Google was willing to countenance an extensive black-hat campaign because it helped one of its larger advertisers? It’s the sort of question that European Union officials are now studying in an investigation of possible antitrust abuses by Google.
Investigators have been asking advertisers in Europe questions like this: “Please explain whether and, if yes, to what extent your advertising spending with Google has ever had an influence on your ranking in Google’s natural search.” And: “Has Google ever mentioned to you that increasing your advertising spending could improve your ranking in Google’s natural search?”
Asked if Penney received any breaks because of the money it has spent on ads, Mr. Cutts said, “I’ll give a categorical denial.” He then made an impassioned case for Google’s commitment to separating the money side of the business from the search side. The former has zero influence on the latter, he said.
“If you asked me for the names of five people in advertising engineering, I don’t think I could give you the names,” he said. “There is a very long history at Google of saying ‘We are not going to worry about short-term revenue.’ ” He added: “We rely on the trust of our users. We realize the responsibility that we have to our users.”
He noted, too, that before The Times presented evidence of the paid links to JCPenney.com, Google had just begun to roll out an algorithm change that had a negative effect on Penney’s search results. (The tweak affected “how we trust links,” Mr. Cutts said, declining to elaborate.)
True, JCPenney.com’s showing in Google searches had declined slightly by Feb. 8, as the algorithm change began to take effect. In “comforter sets,” Penney went from No. 1 to No. 7. In “sweater dresses,” from No. 1 to No. 10.
But the real damage to Penney’s results began when Google started that “manual action.” The decline can be charted: On Feb. 1, the average Penney position for 59 search terms was 1.3.
On Feb. 8, when the algorithm was changing, it was 4.
By Feb. 10, it was 52.
MR. CUTTS said he did not plan to write about Penney’s situation, as he did with BMW in 2006. Rarely, he explained, does he single out a company publicly, because Google’s goal is to preserve the integrity of results, not to embarrass people.
“But just because we don’t talk about it,” he said, “doesn’t mean we won’t take strong action.”
Kathi Kruse is passionate about the car business. Her goal is to be the best at identifying, qualifying and delivering innovative solutions that enhance her clients’ bottom line. As an expert in her field she helps Car Dealerships maximize revenue every day utilizing all areas of salesmanship and marketing. Here are some her best practices for Social Media Strategy. Can you create your own Dirty Car Contest?
Today there was a story in the LATimes that tells the world to hold off on buying their next car. Silly as that sounds, it reminded me that with the shortages of inventory we’re seeing and used car prices at record highs, dealerships can take advantage of so many other ways to promote their dealership on Social Media.
Social Media marketing is a long-term relationship-based approach. With inventory shortages expected to last until 2012, dealerships can spend this time marketing the other aspects of their operation. It’s long been a fact that Fixed Ops is the money-maker in the store. When I talk to my non-car biz friends they’re always surprised to find out that the Service and Parts Departments have the highest profit margins in a dealership. Sometimes that gets second-bill behind sales of new and used cars.
I have two best friends, Frank and Bill, who are the best dealership Fixed Operations guys I know. They refer to themselves as “GIBs” (Guys in Back). While anyone who’s worked in a dealership will chuckle at that, they know there’s truth to it too. It’s time to give the GIBs their day in the spotlight. With opportunities abounding, here are 7 ways to market your Service and Parts Departments on Social Media:
1. Facebook Only Specials. Offer a special to your Facebook fans only and start promoting it on a Tuesday to begin the next day. Fans will have to act quickly to redeem the special. It’ll run from Wednesday to Saturday of that week. Customers may even try to book the Service right there on your Facebook wall so monitor your conversations closely.
2. Foursquare CheckIn Rewards. Encourage customer loyalty by rewarding your Foursquare friends when they come to your Service Dept for oil changes and other maintenance or to Parts for anything they need. A free tire rotation on every third checkin sounds enticing–they have to get their oil changed anyway so they might as well earn another service for free while they do it.
3. Dirtiest Car Contest. Encourage your fans to share a picture of their dirty car and then have them invite their friends to like the picture. The photo with the most “likes” or comments wins a FREE detail. Pictures get more engagement which means higher ranking in Social Media.
4. Facebook Featured Fan of the Week. Toy R Us started this trend and it’s grown their fan base to over 1.5 million. Choose a loyal Service or Parts customer and spotlight them on your Facebook page. Most everyone enjoys being a celebrity and they’ll share their status to their network. Extra tip: if your Featured Fan has a great story to tell, invite them to “guest post” on your Wall.
5. Take advantage of Facebook Events. Are you planning a Service Clinic soon? Create an Event on Facebook and invite your entire fan base. Offer exclusive deals to Facebook attendees who RSVP by a certain date.
6. Your Service Advisors on Twitter. Twitter is a great way to converse and engage customers personally. Your Service Advisors can create their own profile, build their followers and keep in contact daily with them. They can let each customer know immediately when their car is due for a service. No more sending out direct mail and waiting for the result. Your staff and your customer develop a real-time communication and they give the Advisor “permission” to market to them by following them on Twitter.
7. Customer Video Testimonials. Your Advisors have at least 10 customers each that would be fantastic advocates for your dealership. Invite them to do a short interview with this script:
Intro: Tell us about yourself (name, city of residence)
1) Is this your first time here at _____________?
2) Why did you decide to service your car here at __________?
3) What did you like best about your experience?
4) What is the one thing you would tell you family/friends about us?
Businesses that have regular contact with customers, like dealership Service and Parts Departments, have lots of opportunity on Social Media. Take advantage now and grow your profit without having to sell a car to do it.
Here’s a great article from this weeks Venture Beat. What are some of your experiences with raising prices? We have always found that communication is paramount and to never ever mange by exception.
If you’ve spent the last few years improving your software as a service (SaaS) app and haven’t raised prices then you are probably undercharging your customers. Your solution is getting better and better, your customers are getting greater and greater value – why can’t you capture some of this value in the form of higher prices?
In fact, you probably started your company with prices that were too low – either because you were afraid to charge more for your service or because you didn’t realize just how much customers were willing to pay for your product. While raising prices can be risky, if done right it won’t cause a widespread customer freakout.
Raising prices doesn’t always have to result in a negative media blitz or a mass customer exodus. Having gone through (what we consider) a successful pricing change ourselves, here are a few tips to getting the fair market value for your app or SaaS product without sending your loyal fans running for the hills.
Do recon on similar services. – This may sound obvious, but how will you know the value of your product or service until you see what’s already out there? More importantly, if you have been adding features and functionality to your app, the original competitive set against which you compared yourself when you launched may no longer be as relevant.
Also, don’t just do an apples-to-apples (or app-to-app!) comparison. A major problem OfficeDrop made when comparing our price to other services was that we limited ourselves to other SaaS applications – when we should have realized that most of our potential customers were purchasing expensive, off-the- shelf software from traditional vendors at very high, one-time prices – then repurchasing expensive new versions of this software every few years.
So, check out the other similar services that follow a different pricing structure. Do the math. Are you leaving money on the table?
Be very deliberate with your communications. – Over-communicate. Communication to existing customers is absolutely critical to making a successful pricing change. In fact, when Sixteen Ventures, a SaaS Value Pricing consultancy, analyzed the problems Zendesk and Chargify had with their pricing changes, it was clearly much more about communication than the actual price increase.
We aggressively communicated with our customers and users via our blog, on Twitter and directly on our home page prior to the pricing change. For example, we posted on our blog several days prior to the pricing change to alert the world to the upcoming change.
In addition, our CEO, Prasad Thammineni, sent an email directly to our paying customers and to the potential paying customers who were currently in our free trial period. We kept the email brief and hyped our new features. Most importantly, we made it clear the users did not have to change the price they pay.
Prasad not only requested that users with questions email him directly (by simply replying to the email) he also provided his direct office phone number and our customer service number. Not a single user called, and he got two emails. One was email was, “Why are you bothering to tell me this?” and another simply said, “Ok.” Potential crisis, averted.
“Grandfather” current users in at their prior rate if you raise prices. – Let your paying customers keep their existing pricing. Give them the option to upgrade to the new prices, but keep your current paying customers happy. Critics of this move would say – “Man, if your service is getting better, then your old customers should be happy to pay the higher price. So don’t bother grandfathering ‘legacy’ users in at a lower price point.” I disagree.
We chose grandfathering since it seemed like the most civil way to raise prices for our loyal customers. They took a chance and started using a startup company’s software to run an important part of their business. Now they were reaping the reward by getting a substantially improved service at a lower price than the rest of the world.
The most important point in Prasad’s email to users was to let current customers know we were grandfathering them into their existing, current pricing plans. Additionally, we let users who were currently in our free trial period choose between the old pricing plans or the new pricing plans (different features for each, of course) when they upgraded to a paid plan. No bait and switch.
Finally, we didn’t promise that we’d eternally keep the old plans around, but made it very clear that we had no intention of changing their plans anytime soon. After all, inflation does happen.
Above all, don’t apologize. – Charge more because the service is getting better. Customers are getting more. Appearing defensive will automatically put customers on the offensive. Tie the pricing change to an increase in value – that is by bundling around new features/benefits that your customers and market will perceive as higher value.
People are much more likely to accept new pricing if it is bundled with a clear message that the change is because of new, valuable features.