Context

With the risk of stating the obvious; the retail ecommerce landscape is rapidly changing. With the exponential uptake of smartphones and tablets, the retail industry is struggling to optimize the sales and shopping experience from the new m-commerce sales channel (mobile phones and tablets).

In January 2014, mobile apps overtook personal computer usage in the United States. Almost 55% of internet usage was through mobiles devices and tablets versus 45% through personal computers. Because of this growing consumer dependence on mobiles and tablets the m-commerce space cannot be ignored.

Exhibit A:

Pic1

Exhibit B:

Pic2

Problem

Currently there are two key issues that retailers face in this m-commerce space; firstly the time spent on a retailer’s website on a mobile device does not translate into purchases at the same rate. Although about a third of the online store visits are via mobile devices, the conversion rates are as low as 4.3%. Customers mainly use mobiles and tablets for out of store and in store research (e.g. to compare prices, find similar products). Secondly if and when the purchase is made, the dollar value spent is significantly lower through m-commerce., the dollar value spent is significantly lower through m-commerce.

Some critics of m-commerce argue that these devices can be viewed as aiding the ultimate purchasing decision; whether on consumer’s desktops or in stores. Hence the conversion rate is not that much of an issue.

However, when we do delve into understanding why customers make fewer purchases through m-commerce, the reasons that stand out are; the smaller screens make it harder to view items on sites that are not optimized for mobile devices; typing is difficult on a smaller device; and comparing prices to make the final purchasing decision is often viewed as much easier on desktops.

If this is true, then how do Amazon and e-bay manage to get higher traffic than other retailers and decent conversion rates through m-commerce? Part of the reason could be that both these retailers have had very high usage through the traditional e-commerce channels. This means that the customers are used to the interface and find it easy to follow and use on their mobile/tablets as well.

Exhibit C:

Pic3

Potential solutions

Two ways in which I think retailers could solve the issues identified:

1. Create a store specific mobile app: This mobile app would be optimized for usage on smaller screens, which will make it easier for consumers to look through potential shopping options. If the user’s card and shipping details are stored on this app, it could also potentially reduce the shopping cart abandonment rates

2. Use location based capabilities: In order to make customer interactions more relevant, stores can use location based capabilities to make their interactions with customers more relevant. For example; send the consumer a coupon when he/she in the isle or in the area. Retailers should consider Apple’s new product; the ibeacon to achieve this

Sources:

Comescore; CNN; Custora; Forbes; The mobile retail blog; Neilson.com


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Contrary to the idea that all print is dead, print magazines have only been experiencing small declines in circulation since 2009, ranging from -2.2% in 2009 (the worst year) to -0.3% in 2012[1]. The more troubling statistics for the industry are around circulation composition and ad revenue.   The circulation declines are coming from single copy sales, which have fallen an average 8.2%[2]. A similar trend can be seen in digital replica versions of magazines, where, in 2012 91% of the 5.8M digital sales were sold on a subscription basis.[3] This has fairly serious revenue implications for the magazine industry, where subscriptions are sold at a far lower per-copy price, and only compounds the problems created by the precipitous decline in ad revenue that started in 2008.

Publishers don’t currently see digital subscriptions as a viable revenue replacement; lower ad CPMs[4] are compounded by the far lower circulation of digital replicas. And this is part of the problem, that magazine publishers believe that digital replicas can substitute for the paper copies. 73% of digital versions are replicas of the print copy[5], while only 25% of consumers want their digital copy to be just like the printed copy[6].

The reason why most magazines are digital copies is a simple technology issue. Most magazines currently use Adobe DPS, essentially making a PDF the print copy, and then loading that into an application to read in the same manner as a print magazine. The benefit of the current system is that it is a single workflow, created after (not in tandem with) the magazine layout, then pushed to an application, with little or no change across operating systems. Some publishers are using native apps (58% according to the AAM[7]), but that generally just means that the screen size is optimized for the device, a feature of the Adobe DPS system. Approximately 30% of magazine publishers are considering going to HTML 5[8], but that seems more likely to continue the status quo of a single product across systems.

Into this breach have come some great hybrid products and providers: Pugpig[9], Baker Framework, Periodical, and 29th Street Publishing which are moving away from digital replicas, and towards a more interactive format. Key to this move is the importance of the emotional connection that readers have with their magazines, which has not, so far been captured by digital replicas, and which I believe is unlikely ever to be.

Readers don’t yet know what they want from their tablet reading experience, but the immersive and interactive nature of the devices leads me to believe that there is the potential to recreate the trust and deep emotional reaction (and the advertising dollars that they command) with tablet magazines. And lastly, the rising popularity of online sources like Buzzfeed and Upworthy whose emotional and curated content  demonstrates the desire of younger  generations for a trusted relationship with content providers, one which tablet magazines, if executed well, can provide.

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[1] Pew State of the Media 2013 http://stateofthemedia.org/2013/news-magazines-embracing-their-digital-future/news-magazines-by-the-numbers/
[2] Ibid.
[3] Alliance for Audited Media Digital Magazine Circulation 2012 http://www.auditedmedia.com/news/research-and-data/us-digital-magazine-circulation-for-the-first-half-of-2012.aspx
[4] CPM is cost per thousand impressions
[5] Alliance for Audited Media 2012 Digital Publishing Survey
[6] Magazine Publishers Association Magazine Readers and Tablets
[7] AAM 2012 Digital Publishing Survey
[8] Ibid.
[9] Disclosure: I have worked for Kaldor Product Development Group, the creators of Pugpig


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Microsoft’s Surface Tablet will redefine the tablet market and dominate the business users segment. At least, that’s what Microsoft hopes. In an already crowded field, with the Kindle Fire, Nexus One, Samsung’s Galaxy Tab and of course, the u

biquitous IPad ushering in a new category of tablet computers, the odds is stacked against the company best known for it’s windows operating system. Microsoft has a chance to succeed, if it can get the critical mobilization strategies right and effectively acquire users to build momentum for the product.

Here are a few things it has done / can do:

Show You’re Serious About It: In true Microsoft fashion, it is proving to be very committed to the Surface. Not only have the average consumer been bombarded with advertisements in every channel imaginable (my favorite was a surface ad painted on the BART light rail system in San Francisco – capturing my attention just when I was most bored at two in the morning). In addition, the Surface launch party rivaled that for the Xbox (where Snoop dog even made an appearance!)

 Focus on Unmet Need:  It’s been long known that the Ipad is a great entrainment device. Heck, all those commercials you see show people drawing funky pictures or happily reading Dr. Seuss to their children. Microsoft recognized that the business segment is underserved in the tablet category. Thus, it was smart for the Seattle based company to include a nifty keyboard as part of the Space’s cover. Its office suite, USB computability and zippy processors were also aimed to appeal to the business segment. In the 90s, Microsoft won in the business segment with its reliability, security and capability of the Windows OS platform. If they can bring 1/10 of that expertise to the tablet market, they should be able to carve out a profitable nitch within the business community.

Encourage Apps: Ironically, Microsoft found itself where its biggest rival (Apple) was 15 years ago. Back then, when Savage Garden was on every radio station and millions turned to the final episode of Seinfeld, Apple’s Macbook was having trouble gaining adaption because many software simply were incompatible to it.  Just as the PC market hinged upon capability and access to broad range of software applications, today’s tablet market is the same way.  The Ipad and the Andriod systems have a huge advantage given the vast numbers of existing apps. To gain adaption of its Surface, Microsoft will need to encourage software developers to develop apps for its operating system. I hope it will be able to leverage its massive cash pile to do this. It also doesn’t hurt that its popular Office software will be available in a stripped down version for the Tablet, serving as an important complement. If Microsoft can successfully convince developers to develop apps for the Surface, it will also help to create a virtuous cycle with the Windows Phones, ultimately allowing Microsoft to jump back into the tech race. Of course, questions remain if developers would create apps for android, apple and Microsoft platforms. If there’s any hesitance on their parts, it’ll be very difficult for the Surface to gain mass adaption.

Overall, with Microsoft’s financial backing and integrated business platforms, the Surface can become a dominant player in the Tablet market – as long as it engages in the right mobilization strategy to acquire users.


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“An App for That” – Yes, Display Ad Revenue – No

According to Cisco, in 2011 PCs generated 94 percent1 of consumer Internet traffic.  This is expected to fall to 81 percent1 by 2016 as smartphones, tablets, and other devices and their respective networks / wifi connectivity continue to both proliferate and improve.  Progressively the internet experience on these devices is matching and often surpassing the experience of more traditional browser based web viewing.  I know personally as a user, I often find it more convenient to check Facebook on my phone even if I am sitting right in front of my computer.  The same goes for my experience with other content driven apps like ESPN where I often find ScoreCenter a suitable and sometimes superior replacement for the site itself.

Why is this?  It is because apps are designed for perfect user experience on touch screen oriented devices.  So long as typing is not a significant portion of what one is doing, it is simply easier to navigate with a touchscreen than a mouse.  Moreover, apps take us exactly where we want, no scrolling on the page or even inputting an address into a browser.  One final thing makes these experiences better, no ads.  Apps not only can work better than online browsing, they are also more visually appealing and less distracting.

So what does all of this mean?  As app based mobile viewing proliferates this threatens the revenue models of businesses that gain most of their revenue through online advertising.  Being no ad or ad light has been instrumental in allowing apps to be successful.  Moreover, open APIs and development kits have forced official apps of sites to be consumer friendly. 

In terms of types of ad revenue, display ads will ultimately be most affected.  While app use no doubt limits online searching as people no longer type ESPN into the chrome bar to access it, these searches are largely ancillary.  In display, views of the app are often in place of views on the site.

One day app viewing may be the primary way for people to access online channels for Facebook and ESPN.  If an online business is an ancillary revenue channel (ESPN), this will be fine.  However, it will be a problem for Facebook, the U.S. leader in display ad revenue at 16.5%2 of the total display market.  Facebook has a much smaller percentage of the mobile display ad market (a much smaller market).  It trails Twitter, Pandora, and others at only 6.6%3.  Facebook may be expected make $2.6 Billion2 in online display advertising in 2012 but they are expected to only make $72 Million3 from mobile.  As mobile and tablets become a larger portion of internet use, Facebook and other content companies must figure out ways to properly monetize there apps either through ads or other means.  For now, these applications may be complementary services for customers but in the not so near future they could be the business itself.

Notes

  1. Cisco VNI Forecast – May 2012
  2. eMarketer – February 2012
  3. eMarketer – September 2012

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INTRODUCTION
 
On September 28th Jeff Bezos revealed Amazon’s newest invention, the Kindle Fire. It’s a new tablet computer that runs on a tailored version of the Android operating system. More importantly, it uses Amazon’s new mobile web browser known as Silk, which was built to give users an ultra-fast browsing experience. The $199 Kindle Fire was also optimized for Amazon’s digital media products, including its movies, games, eBooks, music, and more.

This tablet isn’t just another e-reader from Amazon. The company’s bigger vision is to use it as a platform for growth by subsidizing the tablet’s cost to consumers to drive mass adoption and then integrating its entire ecosystem of products into the Kindle Fire.

SUBSIDIZATION & VALUE CREATION

During the launch presentation, Jeff Bezos said, “We are building premium products at non-premium prices.” But how can Amazon deliver a modern tablet at such a low price? Subsidization. In fact, early estimates indicate that the components and material costs alone total $262 per tablet. And that doesn’t even include the non-material costs, such as marketing and transportation.

At a price of $199, it seems Amazon is set to lose at least $63 for every unit it sells. However, management and the company’s shareholders believe the consumer value created by the Kindle Fire can be captured later by using the device as an instrument to grow the company’s retail, eBook, video, music, and other business lines. Furthermore, Amazon’s brand penetration and awareness will unquestionably improve.

For now, the low price mitigates adoption risk for consumers, providing Amazon with increased sales volume and a larger installed base to harvest by cross-selling its other products.

INTEGRATION & CAPTURING VALUE

In order to capture the value it passes along to consumers through “non-premium” prices, Amazon has successfully integrated its other offerings with the Kindle Fire. The list below outlines how the company’s other businesses will benefit from the new tablet:

Shopping and e-commerce

Retailers are discovering that the number of consumers who shop on their websites using tablets is steadily increasing. Even more interesting is that those users have higher conversion rates than shoppers using a traditional PC (4.5% for tablet shoppers versus 3.0% for PC shoppers). Additional research has shown that tablet shoppers also spend 10% – 20% more per order than traditional PC users. By delivering the low-priced Kindle Fire, Amazon will help expedite the growth of the overall tablet market and provide its users streamlined access to its many online e-commerce properties.

Amazon.com’s redesigned website

If you’ve visited Amazon.com recently, you may have noticed some changes. The new design is a simple, tablet-friendly site that will make mobile shopping easier. Since its flagship web property is suitable for mobile devices (especially the Kindle Fire), Amazon won’t have to create separate mobile apps. Instead, shoppers can simply navigate to Amazon.com using their mobile device’s web browser and use all of the functionality available to PC users.

eBooks

Last year Amazon announced that its eBook sales outpaced sales of traditional printed books. This is a startling figure given that e-readers have only been on the market for five years. The Kindle Fire will certainly play an important role in expanding the company’s eBook market.

Amazon Prime

The Kindle Fire will come with a free 30 day subscription to Amazon Prime, which gives shoppers two-day shipping on all Amazon purchases. In addition, Kindle Fire users will also have free access to Amazon’s ever-growing library of digital videos through the Prime service.

Amazon App Store

Although the Kindle Fire runs Google’s Android operating system, it comes with a pre-installed version of Amazon’s App Store, not the Android Market (which is most common among other Android tablets). Platform control will surely drive more traffic to Amazon’s App Store.

Media Content

In addition to its already large inventory of movies, songs, newspapers, and magazines, Amazon has announced new content deals with Fox, NBC, and CBS in the past two months. These contracts will significantly expand the company’s online video streaming service, which will yield substantial synergies with the Kindle Fire.

Cloud Computing

In an effort to promote the use and benefits of the company’s cloud computing offerings, the Kindle Fire is equipped to remotely back-up all of a user’s content on Amazon’s servers.

FINAL THOUGHTS:

Many companies have tried breaking into Apple’s dominant share in the tablet market without much success. In a recent interview, Jeff Bezos said, “Some of the companies that have made tablets and put them on the market … the reason they haven’t been successful is because they made tablets. They didn’t make services.” Since the company’s broad product portfolio provides it with dozens of ways to capture value, Amazon is essentially delivering services, not just a product, to consumers. This is something other technology giants, including Apple, will struggle to match.


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