Physical stores have a greater conversion rate than online stores. Conversion rate for in-store traffic is 20% in fashion, 50% in electronics and 95% in groceries. Physical stores are therefore superior to online stores in terms of conversion rates where a 5% conversion rate is considered very good. Even though classic retailers benefit from a high conversion rate the traffic is way lower than online.
Shopkick gets traffic to brick-and mortar stores
Shopkick is a company based on a mobile product that works on iOS and Android mobile devices. It uses different in-store incentives (discounts, freebies) to reward potential consumers that choose to check in using the app in the partner stores.
The check-in, incentive redeem technology is quite impressive. It does not use, as one might expect, GPS features as these are not accurate enough. Founder Cyriac Roeding, explains just how accurate GPS on smartphones is: “It is so inaccurate that you could check into a Starbucks two blocks away”.
Instead Shopkick uses sounds inaudible to the human ear to check you into stores. The technology is patented worldwide and Shopkick founder says they are doing great with over 7000 large retail stores.
What is Shopkick after all?
Simply put Shopkick is a mobile based company. But if we think about it – Shopkick is much more than that. It is the bridge between online and offline retail. Its incentives increase real traffic in stores, increase revenue and all with a simple mobile solution.
Shopkick is doing way better than Foursquare in terms of growth acceleration and revenue per user. After all it has real, tangible discounts. While Foursquare offers you electronic badges and peer recognition (“Look buddy, I am the mayor of this place”) Shopkick’s incentives engage users and marketers even more. The numbers are clear on this: with 3 million monetize – able users Shopkick is here to stay.
As you might have heard George Soros, the Hungarian – American investor known for his 1 billion $ profit in the 1992 “Black Wednesday UK Crisis”, is reported to have sold his stakes in financial companies such as Citigroup, JP Morgan, Goldman Sachs and Wells Fargo, and bought 341 000 Facebook Shares.
Why would Soros buy Facebook stocks?
The decision to buy Facebook stocks that have been steadily falling since the IPO is at least intriguing as the share price dropped 45% since the 18th of May 2012, the day when Facebook went public. Even more intriguing is Soros’ decision to sell his financial companies shares over Facebook.
Let’s look at the chart and then a quick set of facts:
Is this the end of Facebook stocks nightmare?
As you can see the drop in shares price seems to have leveled out. I suppose that might be the lowest point Facebook will see in a long time. After all the company is doing great in terms of users and revenue (next to 1 billion users, Q1 2012 revenue up 45% from Q1 2011).
LATER UPDATE: Facebook unlocked its inside investors shares and the share price dropped 6% and than bounced back to ~$20 per share.
What does George Soros know that we don’t?
George Soros is known as a very informed investor. He knows when to sell and when to buy. He also sold his minor stakes in Intel and Dell.
I can only assume that George Soros bets on one of the following:
A large partnership Facebook is about to join. Last week I’ve noticed some Apple-Facebook motion and discussed the possible implications. Such a move will have positive implications on Facebook’s stocks.
Facebook stocks will begin to rise as the company will provide the market with evidence of its increase in revenues, in the future.
George Soros’ is attempting to trick the market into increasing demand for Facebook stocks. His actions can be enough to increase the Facebook stock price.
I believe that by the end of the year Facebook stocks will see a positive trend and pass a 25$ /share price. After all Facebook is a very valuable company and will continue to be so in the future.
We live in a society organized on the principles of scarcity as driver for profit and social recognition. Our free market system works on a pretty simple principle: people exchange goods with each other with the help of a monetary system. As a result the ones that are better at playing this game get more social recognition, live longer, better and attract better mates.
Open markets vs Centralized planning.
Capitalism vs. Communism
The last hundred years proved that the open market is a better response to people’s needs and wants than the communist economic theory. Communism failed to deliver the results it promised. Centralized economic planning eventually lead to mass social movements, frustration and eventual destruction of communist regimes. The communist governments were parasitic in essence, planned the economic development and backed their decisions through military force.
There are still some communist states at the moment and the highest profile is clearly China. With a booming economy one might wonder what did China do and other communist states (such as the former Soviet Union) did not. First of all, given time, the Chinese regime will have to change its approach to governance. It already started doing so. Right now China is not as communist as we expect it to be. Collective ownership and central planning are rarely found in China’s economy as every business is at least partly private.
Although there is still just a single party, the almighty Communist Party, the economy is a mixture between capitalism and communism, with very few Marxist methods. Local leaders are evaluated based on economic growth indicators and are encouraged to find innovative ways of fostering growth.
Therefore – the one communist regime that did make it is not that communist to start with. Basically the Chinese government managed to reach a smooth transition to capitalism.
We can see that capitalism was a better bet than communism but is there something better than capitalism? I believe so and we can see this in a very old type of economy that resurfaced in the Internet Age: the gift economy.
The gift economy
Think about the the post you are reading right now – you are getting information that was distributed freely. It is hosted on a free blogging platform, developed as open-source software, based on an open-source programming language, having data stored in an open source database. This is an example of how “free” and “open” can happen. You are able to read this because I wanted to share this information with others, some people thought of the idea of hosting blogs for free, some other people contributed freely to the blogging software and some other people developed the tools to make this happen. Asking nothing more in return than gratitude and recognition.
“I can’t buy food with gratitude and recognition”. Of course you can’t but you gratitude and recognition mean prestige and prestige is a very good way to land a good job or deal.
Have a look at what some of the best developers in the world are doing: they write free software, they get recognition, they get people using their free services and then get founded by venture capitalists to expand their software into large companies. Take Facebook for example: it charges nothing, its prototype was built and distributed freely by Mark Zuckerberg. In time the social network made Mark very rich and it all started with a gift he offered to the world.
If you think about it, what we call wealth is basically a recognition of our contribution to the world. We provide a service or product, the price people agree to pay for this is just quantified recognition. That’s basically the whole basis for our current economy.
If we were to take out the monetary system we would basically have a gift economy that would cycle through groups of individuals.
Why did the internet develop a gift economy?
I believe the Internet is not just a technology. It is a world in itself. It has its own rules, its own citizens, its own localized governing groups (highly influential internet users that can provide leadership for their friends or fans). It must develop its own economy. As this economy does not (yet) have a specific largely spread monetary system (we still use offline payment methods) we needed to find a way to address this issue.
Books and ideas as gifts: Paolo Coelho allows people to pirate his work.
Gifts are the solution and intellectual property is exactly the kind of product we can offer without losing anything and at the same time gaining prestige and recognition. Best selling writer Paulo Coelho was talking about piracy and the S.O.P.A. (Stop Online Piracy Act) in some terms we would not expect from someone that makes a living (actually a fortune) from selling his books:
As an author, I should be defending ‘intellectual property’, but I’m not.
Pirates of the world, unite and pirate everything I’ve ever written!
The good old days, when each idea had an owner, are gone forever.
First, because all anyone ever does is recycle the same four themes: a love story between two people, a love triangle, the struggle for power, and the story of a journey.
Second, because all writers want what they write to be read, whether in a newspaper, blog, pamphlet, or on a wall.
If we think about it his actions are actually very sound in terms of business: he wouldn’t sell anything unless people would know about his work. The more people know about his work, the more prone to buying they are. Behavior economics principles state that we care about other people think and we are prone to do the right thing. We know about the writer as we have read his books online. So did our friends. We know that he should get some kind of financial incentive for the work he put into writing the books. The easiest way to do that is to buy the books.
As a result Paolo Coelho, a writer that somehow pirates his own books, has sold more than 100 million books. “This has nothing to do with giving away your work for free” you might think. Yes it does. Uploading a free Russian translation of his book “The Alchemist” resulted in an increase in book sales from 1000 to 1 000 000 books per year.
Shockingly … Africa still has a poverty issue.
Piracy and Gift Economy
Piracy is an issue of great debate this days. Supposedly this form of information sharing is harming the media industry. I guess piracy plays its part. However, piracy is the cause AND effect of increasing knowledge, curiosity and need to access information.
42 % of world income is distributed among the first 10% of world’s richest people
1 % of world income goes to the poorest 10%
half the world’s population lives with under 2 $ per day
20% of the population consumes 86% of world’s goods
Those numbers are astonishing and poverty is not going to go away unless we do something about it. Foreign aids do not help as corruption seems to go hand in hand with poverty. State loans don’t help either as the poorest countries seem to be the ones most prone to impose the repayment of loans to their already impoverished citizens. Humanitarian donations and philanthropic concerts performed by Bono don’t work either as they usually help the ones that need it less: the rich and powerful.
There is however something that does work: education. Studies showed that education is very effective in fighting poverty. Educated individuals improve their own life quality and help economic development.
Empowered, informed, educated
Empowered, informed, educated should be the three words on any agenda that addresses poverty issues. With the proper infrastructure anyone in the world can have access to information that can make the difference between famine and prosperity.
The gift economy can help those in need more than money can. Right now the motivated individual can find all kinds of information online regarding all sorts of topics from survival techniques to quantum physics and advanced health courses.
India GDP Growth Source: http://www.marketresearchanalyst.com/2008/01/06/indian-civil-aviation-market-posed-for-growth/
Internet is already helping lives. The information should be free if we are serious about addressing world issues. Piracy helps. Software companies are outsourcing their IT departments to countries like India thus lowering costs. Fun fact: piracy rate in India is 64%. Do you see a correlation there? I do. Those people needed to learn and increase their revenue before they could pay for software. If they would not have had access to software and information they would have never had the kind of skills that allows India to have the economic growth it has (see chart).
Looking at numbers and charts we cannot fully understand the impact gift economy and information sharing has had on countries like India. But think about the numbers of lives that were saved, the millions of people that could afford to eat each day and the impact this has on the future to better understand the bigger picture.
Gift economy is changing the world
Many people are worried about the impact gift economy has, the way information sharing is changing the world. That’s why we are seeing more and more talks regarding things like SOPA, ACTA or other intellectual property management acts. The media is changing, software is changing, access to information is changing and that means less money for those in control right now. It also means a better future, a future where everyone actually stands a chance at living a decent life.
There are 7 billion people in the world right now and the numbers are growing fast. Relying on centralized organizations to improve life is not the way to go. The individuals need to be empowered, informed and educated if we are to survive the next millennium. The gift economy is still in its youth but things are moving fast in the age of Internet. Ideas spread fast and the gift economy is the kind of idea that changes civilizations. As Voltairesaid:
“An invasion of armies can be resisted, but not an idea whose time has come.”
Humans are not usually rational. The neoclassical economists were wrong. We don’t make the best economic choices given more information. We do not plan for the future. We care about what others think of us. We act on impulse. All these things are the basis for Behavioral Economics Theory.
This (rather) new economics theory has caught momentum and is now one of the hottest topics in theoretical economics. Well… as hot as an economics theory can be. It blends psychology and neoclassical economics (the thing we generally call economics) to help explain why we act the way we act and to help policy makers increase the likelihood of better economic decisions.
There are many variables and a lot of information on the subject but for a better understanding we can look at some principles outlined by The New Economics Foundation:
Other people’s opinion matters: we take great interest in what others think or do. We don’t usually get informed on economic topics. We usually copy behavior and decisions. Why? First of all we are a social species. We want to be socially acceptable and we can do that easiest by mimicking. It’s also easier.
We are creatures of habit: even if what we do is economically wrong we will continue doing it out of convenience or because we have a habit that forces us to do what we do.
We want to do the right thing: we have an innate sense of justice that leads our behavior. Most of us pay our fines not because we might go to jail but because “it’s the right thing to do”. We help others because it makes us feel good, not because there is any financial incentive in it. Actually such incentives may actually be counter-productive as they take out the primarily motivation – doing the right thing.
We act according to our self image: we care about our commitments and we like to stand up for what we believe in. We see ourselves in a certain way – that leads us to certain kind of behavior in order to avoid cognitive dissonance.
We are more loss averse than gain interested: we hang on to what we believe is ours. We treasure our possessions more than we value what we could potentially gain.
We are not very good with data: we don’t really understand numbers, we’re bad at calculating probabilities and we take decisions based on how information is presented to us.
We need to feel empowered to take action: too much information can lead to the inability to act. Too many options make us feel helpless. People need to have a clear understanding on how their actions affect the world around them to fully commit to any activity.
Behavioral economics in social media
Feelings, sharing, likes, friends, fans are not words we usually hear in business economics. We do hear them pretty often these days in social media. Business are starting to understand the importance of customers behaving socially. Social behavior is what drives companies to success or into the ground. There are no formulas in financial economics that can describe the feelings people have toward one company or another.
Classic economic behavior can be described in numbers on a spreadsheet but is not the way real people act. It is a flawed economic model in an economy that results in debt and frustration. The first result can be seen in the financial models we’re currently looking at. The second one cannot.
There is a growing media that helps express and amplify the principles of behavioral economics. That is the Social Media. With the growth of such social networking companies such as Facebook or Twitter, people started acting more and more connected. We now have an way of observing behavior with the help of social media. As it turns out all the principles of behavioral economics can be seen in social media. Let’s have a look at them:
Behavioral economics principles at work in Social Media
Other people’s opinion matters: we care what our (Facebook) friends think of us. That’s why we share interesting quotes, we “like” only certain brands and we are very careful before posting something online.
We are creatures of habit: first of all have a look at your behavior today. You have probably checked your Facebook timeline or Twitter profile at least once today. Why? Because you are accustomed to Facebook. You can’t give up checking the news, the photos your friends posted or the new products your favorite brand advertised on Facebook. Increase in mobile internet popularity is only enhancing this behavior.
We want to do the right thing: people are sharing more and more social causes through social media. With over almost 1 bn users, Facebook acts as a catalyst for social causes. Social causes spread fast and users are very likely to share social messages. But that’s not all. Individuals as well as organizations now know that anything wrong-doing can have a long term negative impact on their life. Here is a video of a police officer pepper spraying demonstrators that quickly lead to a large negative social media response. If you were to search Google for the phrase “Sgt. Pepper Spray” you will find no less than 213 000 pages that frown upon his behavior. Eventually his email address and home address leaked to the internet. You can imagine the outcome.
We act according to our self image: People have a certain self image that translates into social media behavior. For example: Barack Obama’s “Hope” presidential campaign was not really about the soon to be president. It was about the people that he represented. People found in the campaign a positive message for change. They’ve seen that the presidential candidate expressed a need for better people to run the country. People such as themselves. A lot of Obama’s success story happened on the internet where people expressed their views on “Change”. The messages they’ve spread were positive expressions of self image. People were not “like”-ing Barack Obama. They were “like”-ing themselves and the way they wanted their friends to see them.
We are more loss averse than gain interested: Think about how often you see messages like “don’t lose the opportunity”. Why? Because they work. Groupon cashed in on the feeling people have regarding limited time discounts. So did Woot. Using loss-aversion works really well in online retail.
We are not very good with data: If neoclassic economics theory would be true and if we really were rational beings, Groupon would never had caught on. Buying a discounted sky dive or a night lamp when we have ten already does not make sense economically. However, people did buy those things. Why? Because social media goes hand in hand with presentation bias. Suppose we see a 70% discounted offer on blue handkerchiefs that were already bought by 300 people. We think – “oh my, I must buy that handkerchief now or they will go out of stock. Look – 300 people already bought it”. The information has been framed (70%) and enhanced by other people’s behavior. We do not think whether we need the handkerchief or not, whether it is an economically safe behavior. We see the deep discounted price, we see that other have already bought this (see point number 1.) and we “need” to buy the handkerchief. Now.
We need to feel empowered to take action: there are millions of products on Amazon. Billions of web pages indexed by Google. If we were to browse rather than search we would probably get frustrated and quit. However – we still use Amazon and we still use Google. Why? Because of targeting. Both companies dig through millions of terabytes regarding other people’s behavior to serve us the products and results we are most likely to buy or open. That makes our choices easier and we feel empowered to act.
I believe behavioral economics are here to stay. The kind of human behavior they explain has always been here. Social media is just acting as a catalyst to this kind of behavior. If we are to look deeper into behavior economics we need to use social media data to better understand the way we act and how can we get to economic results. The internet economy is growing at a faster rate than any other sector because successful online entrepreneurs already know the seven principles outlined here even if they’ve never heard of behavioral economics.
This is the question that popped into my mind as I saw a Facebook ad leading to an iTunes Album I have previously bought four of songs from (this one). I bought the songs on my iPhone from the iTunes Music store.
I instantly started thinking how could had Apple (or Facebook for that matter) target me so well. I can now see three possible explanations here:
Sheer coincidence. Maybe … just maybe … Apple happened to market that album to the demographic group I happen to be in. Facebook had just shown me an ad pointing to the exact album I had purchased some songs from. Those 4 songs out more that 20 million songs currently available on iTunes. Not very likely, I presume.
Apple and Facebook started an partnership and are now sharing user data. That means that right now Facebook may have access to my contacts, application data I use, purchase history, browsing history and others. Apple has access to my Facebook data, off-iOS related browsing history, Facebook related purchase intent and so on. More likely.
Apple is using data from my Apple account to remarket products on other web platforms. Such as Facebook. This might mean that Apple is not actually sharing data but might be using data collected on the iOS to target users on other platforms. I believe there is an automated marketing system setup on Facebook for ads that run and target users based on their previous purchase history. Very likely
Apple is using application data to target users. Possibly without express consent from the Apple Developers. I use different emails for Facebook and Apple login. This got me thinking about possible data usage by Apple without express consent from Facebook – or other developers. As I believe an integration with Facebook Ads would be impossible in this case without a partnership between the two companies. I would rather rule this one out.
Apple-Facebook partnership highly probable
Having two of the fastest and largest growing technology companies partnering is pretty much amazing in terms of products they could develop. However several privacy and monopoly questions might arise. Apple was part of a privacy controversy in 2010, regarding the iOS 4 privacy policy:
“The revised policy states that Apple has the right to share this information with 3rd parties who provide services to the customer, including advertising and promotion services. Apple also states that “it may be necessary” to provide this [real-time] information in response to “requests from public and governmental authorities within or outside your country of residence or if [Apple] determines that for purposes of national security, law enforcement, or other issues of public importance, disclosure is necessary or appropriate…. Additionally, in the event of a reorganization, merger, or sale we may transfer any and all personal information we collect to the relevant third party.”
The revised policy does not make any distinction between warrant-based and warrantless searches, nor provide what criteria would trigger the sharing of personal real-time information with government entities, nor allow an opt-out for the location-based information.”
Apple, and all the other technology companies for that matter, don’t really deal well with privacy. Mark Zuckerberg is known for stating that the age of privacy is over.
While that might be true and the younger generations are letting go of old-timey privacy concerns I still want my data taken care of with a bit of responsibility. After all I am a paying customer to Apple and not just a target for advertising. While I do appreciate a more contextual advertising as opposed to classic mass communication I believe I and all the other Apple users have the right to share our my information to whomever I choose.
Is there more to the Facebook-Apple partnership?
On one hand we have Apple with more than enough cash than it needs (110 billion dollars to be more precise). On the other hand we have one extremely high potential technology company that might change the way humans interact and is not doing very well on the stock market right now (Facebook stocks have dropped 47% from the IPO and keep going down).
Apple can take advantage on the blow Facebook took on the market and buy stocks that, in my opinion, are sure to rise again. Facebook could do really well with such an unexpected help. Both companies would benefit from such a move:
Apple is reaching a innovation plateau and it needs a young, visionary leader or product that might replace Jobs. Facebook and Mark Zuckerberg could fill the gap. Although Zuckerberg is still young and inexperienced he has a certain charisma that could develop in the future. Apple fans need an icon, they need innovation. Also – let’s not forget that Facebook is an one billion users market that Apple could turn into consumers.
Facebook is not harnessing the huge potential it has. Facebook gaming, social commerce, mobile are all things that are there but the Facebook team cannot yet capitalize on the growth. Apple is doing really well in all those areas and could share some of the knowledge.
In the end – maybe Apple will not take over Facebook but such a move would benefit both companies and is sure to add at least 10-15 years in the spotlight for them. Unfortunately such a technology behemoth will not be taken lightly by the Federal Trade Commision so the two will have to find ways to find ways to address this.
The internet connected car has been a great concept for quite some time now. As 3G connections become more and more popular and 3G coverage extends to even the most remote areas car manufacturers have seriously taken into account adding internet to your car.
iSuppli’s telematics analyst Richard Robinson expects 25% of all cars to be internet connected in the next 5 years. Changes in auto industry in-car entertainment are expected to be as great as changes in entertainment post and pre dial-up internet connections.
Audi Connect will be available to the 2012 luxurious models Audi A6, A7, A8
Intel expects the internet connected car to be the third fastest growing technology, after smartphones and tablets. Audi, Ford, Kia and Nissan are among the first to adopt such technology. Audi has equipped the A7 with a Wi-Fi system callled Audi Connect that turns the car into a hotspot able to host 8 connections at a time.
Ford has also jumped the wagon with its Microsoft powered Sync My Ride and has solved the connectivity issue with a simple internet stick solution.
In car internet killed the radio star
In car internet radio is now an option with MyFord Touch as drivers can tune in to their Pandora accounts and listen to their favorite stations.
Google, Apple, Samsung, Microsoft and LG are already testing connected cars concepts and gadgets. Google has recently confirmed that their self-driving cars have passed the 300.000 miles threshold incident free.
In car internet is surely to develop into a huge industry that will benefit car makers, entertainment and media companies, telecom operators, mobile device producers and of course – the buyers.
How does internet change the auto industry?
As consumers get more attached to their mobile devices and start expecting everywhere connectivity the auto industry will start monetizing on this trend. But that’s not all. What else should we expect? Here are a few consequences of increasing in car internet adoption:
Increase in popularity and subscriptions to internet radios: there is a 52 minutes daily timeframe when 44% of all Americans listen to in-car radio. That margin will turn into revenue streams for internet radios and other internet music streaming providers.
Location-based advertising will lead to a decrease in outdoor advertising: as advertisers will find it easier and more efficient to target consumers on their daily routes, by estimated income and purchase intents, billboards will become obsolete.
Car traffic and mileage optimization: having large data available car manufacturers or internet services providers can offer the best real-time routes for faster navigation and better mileage.
A new class of in-car entertainment devices: GPS devices had a huge increase in popularity and sales as they were fitted to cars. So will the internet ready entertainment devices.
Increase in driving safety: as more and more cars will get connected they will be able to pair and increase safety by automated collaboration.
Increase in audio books sales. Audio books streaming. So far we got accustomed to listening to audio books on CD’s. With in car internet we will see more and more subscriptions to audio books streaming service. Amazon will surely benefit from this.
Car hacking. Car software security software. We don’t really expect our car to be “hacked” but this will surely happen. Where there is a connection, there is a potential breach of security. Software security companies will have offers specifically targeted to internet-connected car owners.
Key takeaways:
in car internet will happen. get ready
in 5 years 25% of all cars will have internet connections
there is a great business opportunity in providing connected car owners with car specific internet services
It seems like everything goes mobile these days. Mobile phones get smarter, tablets get more and more popular and people use their mobile phones for much more than voice. Mobile internet usage includes news, entertainment, shopping, social networking and much more.
The Facts on mobile internet
First of all – what is mobile internet? It is the usage of internet on mobile devices such as handhelds, tablets, personal assistants, netbooks or laptops. It has become quite popular in the past 3 years growing growing from under 1% of total internet traffic in 2009 to more than 10% in 2012.
The mobile internet is expected to surpass desktop internet by 2014, as shown in the attached graph (source). Such a fast adoption rate is caused by:
Decrease in PC sales (HP sales in the US decreased 12 percent in the second quarter of 2012 and Dell’s PC sales decreased by 9%).
Increase in tablet and smartphones adoption (Apple alone has shipped over 60 million tablets in just 2 years from launch and more than 20 million iphones)
Mobile penetration is disproportionately larger than internet penetration. The global mobile adoption rate is now 86.7% . The global internet adoption rate is 32.7%. Mobile operators will grab out and reach the treasure that is mobile data traffic. They have the infrastructure, the clients and the distribution.
Voice has been steadily declining compared to data traffic in developed countries.
Mobile internet plans are decreasing and adoption rate is increasing – what now?
With mobile internet plans decreasing we will see a clear increase in adoption rate. There is still a long way to go as mobile traffic accounts for only 10% of all internet traffic. Taking into account the fact that Internet has just 32.7% penetration we see that there is a huge opportunity there: mobile internet traffic is due to increase by at least 1000% in the next five years.
How can we benefit from mobile traffic growth?
Using this date one might think of this potential opportunities:
Increase in cheap smartphones sales. As you can see in a previous article almost 75% of all mobile phones are owned by consumers in developing countries. This consumers need low-cost, decent performance, mobile internet ready devices.
Increase in mobile operators revenue. The untapped potential of data traffic is even bigger than the one voice plans had. Mobile operators already have the client base, the mobile infrastructure and the distribution network to reach this potential market.
Increase in mobile commerce: whether retail or paid apps distribution the mobile sales will increase in the future, even at a faster rate.
Premium mobile entertainment: just like apps, paid entertainment will develop at an exponential rate in the future.
Decreased market for desktop based software companies: Microsoft has already began to feel the surge in desktop sales as desktop based software such as Microsoft Windows, Microsoft Office will either adapt or fade away.
By now you have probably heard of this little thingie called Facebook. You have also heard it has a bunch of users and these users are spending a lot of time on the platform sharing thoughts, news, photos, playing games or interacting with each other.
The Influence of Facebook on the Internet Economy
Right now Facebook accounts for roughly 30% of all internet users and is estimated that 20% of all pageviews on the Internet are on Facebook.
Facebook is big. It is so big that Internet World Stats added a special Facebook usage indicator to each country. As you can see there is no Google usage, no Yahoo usage, no Twitter usage indicator but there is a Facebook usage indicator. For good reasons too …
Using Facebook to increase online sales
In just 8 years from the 2004 launch, Facebook is expected to reach 1 billion users in 2012. That number is more than impressive. It is fastest adoption of any communication related technology.
Facebook related sales are a huge part of what lures giants such as Amazon, Apple, Ebay on the platform. From my experience Facebook seems to be the most profitable refferal for small and mid-size ecommerce companies and accounts for a large part of sales generated by larger online retailers.
While Facebook stores may not yet be the best choice (JC Penney, Gap and Nordstrom have opened and than closed their Facebook stores) there is a clear opportunity to be harnessed with Facebook related ecommerce.
Facebook creates jobs, has a 7.3 Billion Euro economic impact on Europe
A recent study by Deloitte states that Facebook accounts for a 7.3bn Euro economic impact and has so far, through the creation of Facebook pages and advertising , created more than 110.000 jobs in the EU.
Just like Europe many other regions benefit from the impact Facebook has had in the recent years. In the EU the country with the heaviest Internet Economy, the UK, has also the largest Facebook user base. Although merely a correlation and not a cause for the heavy impact the internet has on the UK economy it is easy to see that Facebook usage increases internet economy impact and many small and mid-sized companies can benefit from it.
Where is Facebook headed?
With such extraordinary growth and impact on our lives, both socially and economically, Facebook is sure to develop even more. Facebook is more than an website or application. It is a communication framework, a market that has already changed the life of its users. It will continue to do so. It will reach beyond extending the Internet.
I expect Facebook to cycle through some inherent changes but in the end it will probably be the biggest internet – based business in the world.
There are almost 6 billion mobile phones in the world and almost three quarters of these mobile phones are in developing countries. The mobile phones are probably the best connection people of the world have right now. With costs dropping and mobile penetration closing in to 100% mobile phones might be some of the best ways to tap into human behavior, especially in the developing world.
Digicel, the largest mobile operator in Haiti offered anonymized data regarding the post-earthquake behavior of almost 600 000 people. Results were astonishing. Using the data provided scientists Xin Lu and Linus Bentsson managed to create an algorithm that was able to predict with a 85% accuracy where were people going to go after the disaster.
Mister Xin Lu and Linus Bentsson started FlowMinder.org , a place where they can share their research and mobile operator data for NGOs and relief agencies. They believe that the 30 million people displaced by natural disasters can benefit form this and offer Haiti study as a proof of concept.
What are the opportunities and dangers ?
Several uses can be found in working with such data:
Mobile medical assistance – there are places where the patient to doctor ratio is close to 20.000:1 . Using mobile services and self-help information we can states and private companies can setup healthcare automated services that can deliver helpful information to those in need. Moreover such services can help track the appearance of epidemics and evolution of diseases.
Mobile war relief – on most cases war victims are just estimated statistics and data is gathered rather slow. Real time information is of the utmost importance when dealing with war casualties and refugees. NGO’s and relief agencies can quickly get an outlook on the situation and provide assistance where and when is needed most.
Help fight literacy issues with mobile services – Ghana has an adult literacy level of 64% and an mobile penetration of 80.5% . Using mobile services and in the future rich media streamed through smartphones is a quick and cheap way to fight illiteracy issues.
Help setup the base for barter-based markets in developing countries – using classifieds like services through mobile phones governments in developing countries can fight poverty and hunger while at the same time encouraging micro-entrepreneurial movements.
The dangers of using mobile data
While many positive ways to use mobile services can be found there are several issues that arise such as privacy, ethical usage of data, security of provided data etc. For example – having data publicly available in a natural disaster such as the Haiti earthquake one might wonder how would this kind of data be used by robbers.
Even worse – in such tragic events such as war, public availability of data can, in the wrong hands, result in many deaths and suffering.
I can only hope that in this connected world we will all feel closer to one another, we will be able to put aside our differences and use technology for good rather than personal interests.
Internet has changed many aspects of our lives and will continue to do so. As people shift their attention more and more toward the internet so does the economy.
UK leads the way towards this new economy with a £82bn ($128 billion) internet economy. About 16% of this ecosystem is accounted for by mobile connections. The overall traffic is expected to increase each year between 2010 and 2015 by 37%. What does that mean? Having an ever increasing interest for mobile connections and ecommerce we might see three trends in the future:
Mobile networks will need better infrastructure to handle the growing traffic.
Mobile internet will increase in popularity which leads us to…
Mobile commerce will set new challenges to retailers as consumers get more informed, faster deliveries and better deals
Data regarding these numbers has been put together on a study commissioned by Vodafone UK to ATKerney. You can find the study here.
It’s interesting to see that the internet economy reacts to people needs and wants as is stated in the graph bellow:
As you can see the internet is expected to be the most commonly used media in Europe by 2013, with 50% of all media consumption.
The other media (radio, print, TV) is expected to continue to decrease in the following years.
With smartphone usage doubled between 2008 and 2010 it is expected that smartphone terminals will be a major player in the internet economy ecosystem. Data is already used more often than voice. Mobile operators will adjust their market accordingly and that will increase the internet consumption even more.
Online retail (both web and mobile) accounts for roughly £45bn ($70bn) – approximately 6% of GDP, leading the UK to the 1st place in G20 countries as internet economy share of GDP.
Shopkick is a company based on a mobile product that works on iOS and Android mobile devices. It uses different in-store incentives (discounts, freebies) to reward potential consumers that choose to check in using the app in the partner stores.
