Functional Online Marketplaces

The marketplace has been a very influential social and economic construct for a very, very long time.

It has been a central concept to commerce all over the world since the dawn of man kind. In time, the marketplace has been refined and evolved to include ever more complex structures. During the past century it morphed from temporarily trade gatherings to large permanent structures such as shopping malls and eventually it evolved into what we now know as the online marketplace.

Ebay, Alibaba, Etsy, Amazon and others have one thing in common – they get sellers and buyers in one place. These online marketplaces are fueled by a business model that has seen a steep increase and proved excellent in the past years. But now, it’s time for the next step:

Functional Online Marketplaces

I believe the times they are a-changin’, like Dylan would chant. The Online Marketplace is not enough any more. The markets demand something more.

That something is the Functional Online Marketplace, a virtual hub that combines the features of a marketplace (buyers and sellers, reputation management, transaction handling) with functions that improve the lives of either sellers or buyers.

The Functional Online Marketplace goes beyond just letting sellers and buyers trade. It helps the seller run its business better and the buyer benefit more from the product purchased.

And some of the biggest tech companies we know have created this type of Functional Marketplaces. We’ve used them and most customers love them. We just didn’t put a name on it. Have a look at some examples:

The Apple Ecosystem

Steve Jobs envisioned the PC as a digital hub, a central unit that connects the user’s digital activity. From email to web surfing, from music to pictures and more. It than proceeded to create this vision and along the way he built much more.

By launching the iPod and than the iPhone, Apple moved the digital hub inside the consumer’s pocket. With such a valuable real-estate in the reach they’ve had to build a system that shipped music, video and applications from third parties to these devices.

The iTunes Store and the AppStore were born. Apple built the platform to consume apps, the place where customers could download these apps, empowered developers to build these apps but did something else too.

It built Xcode (the development tool for iOS developers), it launched Objective C and than Swift (the programming languages used to build apps) and helped developers create useful apps.

Apple went beyond the marketplace paradigm. Yes, it allowed media and software consumers to meet developers but it also created the platform where they could be consumed and the tools to build them. It built an extraordinarily effective Functional Marketplace.

But Apple is not the only one …

The Uber-marketplace

Uber is an extraordinary successful company that connects freelance drivers to those in need of their services. It connects buyers to sellers. It is technically a digital marketplace. And more.

First of all Uber empowered a set of freelancers that didn’t know they’ve actually had a market. The driver app allows drivers to see potential riders and provides GPS-linked functionality inside a simple mobile device.

The functional side of Uber not only improves the way sellers (drivers) provide their services but actually it makes it possible.

For customers, the app makes hailing a driver an easy task, it allows direct payment on mobile phone and brings the comfort previously unattainable. The functional marketplace at its best.

Google – the biggest functional marketplace

Google is many things. Search giant, mail provider, mobile os developer and robot builder among others. But at its core, the business model is quite simple: Get people to pay for ads. Show ads to customers. Make people click on said ads.

Advertising accounts for 89.5% of Google’s total revenue so it’s safe to say that ads are its bread and butter.

To achieve these levels of revenue Google has to place together “The Sellers” (Advertisers) and “The Buyers” (Customers clicking on ads). Though customers don’t technically buy on Google, those that generate the company’s revenue end up as leads or buyers on advertisers’ websites.

To do this, Google built its ad market on top of its primarily function: Search. Users searching for information of interest are effectively buyers in the Google functional marketplace.

The marketplace, therefore provides functional support to buyers. The search, Gmail, Android – are all basically functions that lock in the ad-clicker and in turn generate revenue through these types of transactions.

These are just three functional marketplaces examples but they illustrate the concept. To be successful, a newly established marketplace has to provide more than just a connection between buyers and sellers. It needs to provide function beyond the commercial. By improving the lives of buyers and sellers beyond the commercial, Functional Marketplaces provide the type of lock-in and effectiveness previous models don’t.

3 Effective Marketing Methods for Online Retailers

As an online retailer, you probably have your ecommerce site up and running already, quite possibly bringing you some sales and revenue too. At this point in time, you are probably wondering how to increase the sales.

This post will show you three effective methods to achieve just that – grow your website traffic and boost sales.

  1. Pay Per Click Advertising (PPC)

ppc-icon-newThis is an online advertising service provided by all the three major search engines today (namely Google, Yahoo and Bing). The following steps will allow you to start advertising your site online using the PPC method. (You’ll have to repeat these steps for each search engine where you wish to advertise):

  • Open an account
  • Create one or more ads for your site (with text and/or graphics)
  • Enter a list of keywords corresponding to which you wish your ad to be shown
  • Specify your geographic and/or demographic targeting preferences
  • Specify how much you wish to spend/pay each time a user clicks your ad and visits your site
  • Specify campaign duration, spend limits etc.

And that’s it. Within a day or two from the time you finalize your campaign (often faster), the search engine/s will start displaying your ads and the traffic (and sales) will start rolling in.

Of all the web marketing methods this article will cover, PPC advertising is the only method that delivers almost instant gratification. It is also a highly accountable method that provides totally measurable ROI.

You can read up some more on PPC advertising as it relates to online retailers at Entrepreneur.com.

  1. Search Engine Optimization (SEO)

searchSEO is the art and the science of getting your website to show up at or near the top of the results when the prospective buyers of your products search for keywords related to your business and products at various search engines.

High search engine result rankings for the keywords relevant to your products achieved via SEO will almost certainly boost the traffic of potential customers flowing in to your web site, with the resultant increase in sales and revenues.

SEO, however, is not a path that you should tread lightly, for two reasons. First, it is not an easy or a trivial task. In order to be executed successfully and effectively, SEO requires deeply entrenched knowledge, expertise and experience, backed by ongoing study and knowledge update processes. Secondly, if executed in a manner that violates the arbitrarily and rapidly changing best practice guidelines of the search engines in any way, SEO can potentially backfire drastically, causing your site to get blacklisted by the search engines in the worst case scenarios.

To get up to speed with the most current SEO scenario, you can go though this useful 90-slides presentation from Rand Fishkin.

[slideshare id=37772825&doc=tactics-to-love-leave-arial-140807131953-phpapp02]

Insomuch as you have an online retail operation going, it is quite likely that your website has been built using one of the several ready-made ecommerce software platforms.

While most of such software platforms provide at least some basic features to facilitate SEO, there are huge differences in SEO features across different platforms.

  1. Social Media Marketing (SMM)

smm-iconSMM, you can say, is the ‘newest kid on the block‘ so far as online marketing is concerned. As you can readily imagine, there are gad-zillions of people (including your potential customers) spending untold numbers of hours everyday at various social networking sites and services like Facebook, Twitter, Instagram, Pinterest etc. And therefore, marketing your online retail business at these social media sites can certainly be a very lucrative way of growing your brand visibility, traffic and sales.

Most of the popular social networks offer their own self-service advertising programs under various pricing schemes and models, including PPC (that we looked at above), with Facebook, as is to be expected, leading the pack in terms of reach as well as ease of use.

And then, there are many third-party services and agencies that help you grow your website traffic and sales using various social media platforms.

You can read this article at the InternetRetailer portal to get interesting information on social media vis-a-vis small retailers.

Online retailing is a highly competitive business so make the most of the tips above to enhance your marketing operations.

Author bio: Catalin Zorzini is the founder of Mostash.com (a digital marketing studio). He likes hot soup and hot jazz.

(II) Ogilvy to Zuckerberg: How did Amazon, Apple, Facebook and Google change consumer research and targeting ?

In my last post I talked about the shift in consumer targeting that happened once the Internet went mainstream. Several highlights were the short history in consumer targeting, information regarding Amazon’s personalized recommendations and Apple’s usage of consumer data to increase music and app sales.

Now we’ll have a look at how two of the largest and fastest growing technology companies use consumer data and behavior to deliver ads. As Facebook and Google’s business model heavily relies on advertising they have to make sure ads are delivered efficiently to increase revenue.

However, trying to increase ads relevance and user experience can sometimes lead to unexpected (?) outcomes. Both companies had had their fair share of legal troubles regarding users privacy. For example last year Facebook user tracking practices lead to a request by US congressmen for the Federal Trade Commission to investigate the company. Apparently Facebook would track users web traffic even after they logged out. By linking browsing history, location and time of visit  to account information (list of friends, preferences, browser) the company could potentially extend its user profiling to some very intimate data. Apparently the issue was corrected and now Facebook stopped linking browsing data to user profiles. Even so, the anonymized data can provide the company with some very good insights.

What are Google and Facebook’s revenues?

As stated above both companies rely heavily on advertising revenue. 96% of Google’s 2011 $37.9 billion revenue came from advertising. Industries that pumped most money in Google’s Adwords program were Finance and Insurance ($4 billion), Retail ($2.8 billion), Travel and Tourism ($2.4 billion) – source.

Meanwhile Facebook reported “only” $3.1 billion in advertising revenues last year. Even though the numbers are visibly lower than Google’s, Facebook advertising revenue increased 69% and topped Yahoo in 2011.

Just to give you a perspective on how big this figures are Publicis, the largest advertising group, a 86 year old company, operating in 104 countries reported a $7.7 billion revenue in 2011.

Having established that online targeting leads to generous revenues, let’s have a look at how Facebook and Google manage to efficiently target consumers using technology:

How does Facebook target users?

facebook logoFacebook increase in popularity coined the term “social media”. This term describes web and mobile platforms where organizations or individuals communicate through different types of media (text, image, video etc.). As more and more users started using Facebook the available content increased, social links improved as users added more and more friends.

Facebook recognized the opportunity in consumer targeting using social preferences (Ex. “Your friend likes X Brand. You should too.”). Interestingly Facebook managed to give user profiles a real – life feeling by encouraging people to bring their friends along. Of course few people could recognize nicknames such as “MickeyMouse1982” so users started adding their real names, than their birthday, location etc.

Soon enough Facebook had a few hundred million demographic profiles at hand. These profiles were interconnected so influence groups could easily be determined. In a genius move Facebook introduced the “Like” button and later “Share”.

By using the “Like” button users would essentially hand over to Facebook their personal preferences.

As publishers saw that articles posted on Facebook were more likely to become viral and increase traffic they adopted the Like/Share widgets and later the Facebook Connect signup system. As these widgets could track user behavior by transferring traffic data back to Facebook the social network now knew what users were interested outside the platform.

Combining this data Facebook launched and improved in time their Facebook Ads platform. With more than 20% of all web traffic plus data on web traffic outside its social network, the company could potentially target ad delivery better than most other media companies. Let’s review what kind of data Facebook has at its disposal to target users:

  • consumer demographics: users enter their demographic information during signup or later as they use the social network
  • social networks: Facebook knows who is a friend of who, who is more likely to have his or her posts liked, shared or commented on. Basically it knows who is most likely to influence their peers actions with a granularity almost impossibly to achieve by others
  • consumer preferences: every time a user clicks a like or share button, comments, posts a status, photo or video it basically signals Facebook on some of his or her preferences regarding a wide array of things (music, products, news) that could later be used to show relevant ads.
  • web traffic: by tracking user behavior through like, share or social widgets Facebook registers data that even anonymized can show insights on a scale that no other company can

These are the most important factors in Facebook efficient ad targeting. Weather advertisers choose to use classic ads, sponsored stories or promote several posts the company takes into account this data to maximize exposure and engagement.

How do Google ads become “contextual”?

google logoProbably the most disruptive technology company in the past two decades, Google relies on user data, behavior and semantics to deliver the contextually targeted ads.

To deliver ads, Google needs data. Where does it get it from?

Where does Google get data from?

  • indexed and ranked web pages: even though the number is not really known as Google is secretive about its data centers, it’s estimated that indexed data is stored in more than 30 data-centers. These data centers hold 35 to 50 billion pages at any given time. They are ranked according to an algorithm initially designed by Larry Page and Sergey Brin and improved in time.
  • web page analytics: Google Analytics is used by more than 10 million web sites. As Google hosts data regarding traffic and user behavior on these sites it can predict user behavior and ads most relevant to potential consumers.
  • email information: even though information is anonymized Google makes good use of mails hosted on it Gmail platform. With more than 350 million users in Jan 2012 the data flow through Google’s emailing platform is astonishing.
  • searches: Google responds to almost 3 billion searches every day. By analyzing searches and user paths Google can determine what are the most popular search results and how can this information be used to optimize ad targeting and delivery.
  • Google+ is the company’s response to Facebook’s rise in popularity. It already has more than 170 million registered users (mostly active). Having answered the need for information in social networking targeting Google further improved its advertising targeting capabilities.
  • Android is Google’s mobile operating system. Though buggy at start, Android is now on its way to world domination in terms of mobile operating system.

Basically Google knows a lot about a lot of potential consumers and uses these data to increase efficiency in ad targeting.

Having a look at how the likes of Amazon, Apple, Facebook and Google use research and targeting , we can surely say that conventional (old ?) knowledge on the matter is becoming increasingly obsolete. As technology replaces human input research and targeting becomes real-time.

Unfortunately some privacy issues arise when people become “users” or “consumers”. On this matter – soon.