reDesign

This week’s interesting reads:

• Some thoughts on pricing (Redeye VC) - First Round Capital’s Josh Kopelman examines pricing strategies. He starts with pricing of soda in a hotel and found a range of $1 to $4.50. The overall range is incredible — you can get the same amount of soda for 35c to $6. Even airfares don’t vary this much on a percentage basis. How do you pick among various choices if the only thing you know is the name of the company and the price? When it involves child care, he goes with the most expensive.
• Ad Houses Will Need to Be More Nimble (WSJ) - The Journal takes a look at the challenges facing ad agencies as clients demand more accountability and integrated campaigns. Agencies have largely been slow to adopt to the rapidly changing media environment and audience fragmentation.
• Looking at Data Through a DVR (WSJ) - The advertising business continues its slow march from relationship-based buying to data-based buying. As DVRs and settop boxes proliferate, they increase the amount of real data advertisers have to work with. Services like Tivo’s StopWatch allow advertisers to get second-by-second response data.
  The right way to do TV advertising is to insert commercials dynamically at playback instead of a static recording at the time of transmission. Unfortunately, there are many structural barriers to this happening. This is likely to happen first in Web-based playback and will migrate to the TV.

Yahoo! Local has rolled out some new features to increase the Web 2.0-ness of its local search product:

• RSS feeds. You can subscribe to feeds of all reviews near you. If you find a reviewer you like, you can stay up-to-date on his or her reviews.
• A “first reviewed by” designation to highlight contributors who are the first to review a place.
• Attribute drill down. You can narrow your search using filters such as “family friendly,” “casual” or “elegant.”

It’s been a few months since I last checked in on Yahoo! Local. Overall, it’s a huge improvement. It has a long ways to go before catching category leader Yelp. (The metric being by my subjective opinion of product quality.)

Yelp has had the first two features for at least a year.

Among the local players, Yelp has had the best incentive system for contributors. Its “First to Review” designation is one of many things that Yelp does to encourage frequent participation. An “Elite” system rewards frequent contributors with a badge on their profile and invitations to parties. The front page of the site highlights a review of the day. Featured Yelpers also appear on the home page.

It may sound corny, but such incentives are important to keeping people engaged. Most social systems have some sort of perk system, including ODP’s edit-alls and metas and the Wikipedia cabal.

Although Yahoo’s design is more visually appealing than it used to be, it’s still cluttered.

Unlike Yelp, the map scrolls off the search results page, making it hard to see where results 3-10 are located unless you have a very large screen.

Getting reviews is more work than it should be. Yahoo! breaks its 69 reviews for The Italian Store across 29 pages, 3 at a time. Yelp shows all 42 of its reviews on one page, making it very easy to scan.

Then there’s the ads. I’m all for ads — I work in the Web space and like to get paid — when they’re relevant. The ads on Yahoo! Local are anything but. Here is an example of the ads that appeared above the listings for restaurants:

The top two ads are for services that compete with Yahoo! Local. Ads on the side (not shown) pitched “Watch mouth-watering videos of Oklahoma’s best restaurants” and one from Target offered “Find restaurant online. Shop & Save at Target.com Today.” (I’ll admit to clicking through on the Oklahoma ad just to see what would constitute a mouth-watering video of Okahoma restaurants. Unfortunately, they linked it to a video of a bad rendition of Rudolph the Red-Nosed Reindeer.)

I understand that local advertisers are scarce, especially outside the Bay Area. But Yelp takes the right approach. If you don’t have something interesting to say, keep your mouth shut.

More on: local search, yahoo, yelp

Disclosure: I used to work on local products for AOL.

Yup, that’s an Ethernet jack above the urinal. I saw this at my friend Kieran’s pub, The Local in Minneapolis.

No, I didn’t try plugging in.

Here’s what the jack is really used for.

The other day I wrote about viral marketing on social networks by getting users to engage with your products and brands. Facebook Beacon, announced on Tuesday, allows sites such as eBay and Yelp to publish your activity on your Facebook news feeds, automating this process. 44 sites in all participated in the announcement.

This is expanding what many applications already do with Facebook. Applications such as MyFlickr (pictures), Yelper (local reviews), Feedheads (Google Reader), WordPress (blog posts) and others take off-Facebook activity and publish it in your profile and feeds.

With Beacon, when you do something on a partner site — such as write a review, buy a product, win a game — that information gets transmitted to Facebook. You then have the option to publish the information on your Facebook feed. This raises privacy issues. GigaOm and John McKinley offer sharp criticism.

The big question I haven’t seen addressed is what Facebook does with the Becaon data if I don’t choose to publish it. There are brands that people would happily associate themselves with (Timbuk2), others that simply provide utility (Tide) and some that are embarrassing (Preparation H). If I buy Preparation H and tell Facebook I don’t want to publish it, do they still keep track of the fact that I’ve bought it?

With Facebook Beacon, I see the third-party sites being more concerned about the use of the data than users. If I’m Amazon or Netflix, one of my competitive advantages is the database of purchasing habits that I have. Do I really want to give that away?

More on: Facebook

Social networks like MySpace and Facebook are among the leaders in user engagement, with many users returning daily and some visiting many times a day. They’ve almost reached the same level of engagement as email* and have double the engagement of news and sports sites. Yet they present a special problem for marketers: the content is so compelling that few people bother to look at the ads.

The ads have been poorly targeted banner ads or Facebook’s “flyers.” The flyers target a specific network, but even those frequently miss the mark. I’m in the Northwestern network and frequently get ads for coffee shops near the campus in Evanston.

The future of marketing on social networks is getting users to create and distribute advertising information for you.

Two of my favorite Facebook apps are MyTech and HotLists.

MyTech is an application from CNet that allows you to publish your technology purchases. Here’s a screenshot from my profile:

My friends can see what I’ve bought and how I’ve rated it. The purchase and review appear on my mini-feed. (Facebook will soon change the rules on its news feed, allowing the review to also get distributed in my friends’ news feeds.) The Facebook platform and MyTech are enabling word of mouth well beyond the people I talk to on a regular basis. The personal connection also allows my friends to get more information on a product by asking someone they know.

Another great application is HotLists from the makers of HotOrNot. The HotLists application allows you to associate yourself with brands. Here is mine:

Who is going to associate themselves with brands?

Lots of people, if you make it easy enough. We do it every day when we wear a Product(RED) T-shirt, drive a BMW or put white earphones in our ears. On Facebook, HotLists’ statistics page shows that more than 38,000 people use the application every day; about 3.8 million have it installed.

A natural extension of the HotLists application is a brand recommendation engine that suggests brands you might be interested in based on the brands you’ve already selected.

This won’t work for all brands. I don’t see people putting Metamucil or Depends on their Facebook profile. But it can work for brands like Keen. Whenever I wear my Keens, it’s a conversation starter with other Keen fans.

My brand attributes also imbue the brands I choose. People who know how much I travel know that Briggs and Riley makes luggage that can travel a million miles.

* This is based on the general U.S. Internet population; in the college audience, social networks have likely exceeded email in engagement.

Barack Obama has joined LinkedIn, asking the LinkedIn community about what the next president can do to help small business. Back in January, Hillary Clinton asked Yahoo! Answers users about ways to improve health care.

Obama’s LinkedIn profile outlines his career as U.S. Senator, lecturer and Illinois state senator.

Rudy Giuliani is also on LinkedIn. Giuliani even has two endorsements, praising his work as mayor of New York City with his top qualities listed as “Great Results, Personable, High Integrity” and “Great Results, Expert, High Integrity.” Caroline Giuliani doesn’t seem to be on LinkedIn, potentially saving her father some embarrassment.

Both candidates have chosen to hide their connections, just in case the likes of Bernie Kerik resurface.

You see a sign advertising gas at $3.09 a gallon. You pull in and fill up. After filling up, you realize that you were charged $3.59 a gallon for the same grade of gas. Bait and switch? Sounds like it. Illegal? Apparently not in Nebraska. The fine print on the sign said the $3.09 price only applied at select pumps.

That’s what’s happening in North Platte, Neb. A Conoco station is advertising a low price, but that price only applies for two of its pumps.

Under state law, the signs — which show in smaller print that the lower-priced gas is available only at certain pumps — are not illegal as long as gas is available at the lower price at even one pump, according to Steve Malone, administrator of the state Weights and Measures Division.

At a difference of 50 cents a gallon and using a conservative estimate of 60,000 gallons a month, that’s an extra $360,000 a year. Because the Conoco is located just off the Interstate, repeat business isn’t a huge concern.

The owner of the Conoco station refused to comment on his deception. In a a classic race to the bottom, the BP station nearby has also adopted the shady practice.

“I personally don’t like doing it,” [an owner of the BP station] said in a telephone interview. “They (the Conoco station) were pulling more people in to their station. It got to the point that in order to get any business we had to match what they were doing.”

It’s a tough situation. Be honest and lose business to the cheating sleazebag down the road. Or cheat your customers to stay “competitive.” A friend asked how I’d handle it. I’d probably start by advertising my prices with a big sign that says “AT ALL PUMPS”. If that didn’t work, I’d add a sign that said “UNLIKE THE CONOCO”.

via Consumerist

Vending machine priced by grams of fat, Google, San Jose, California.jpg, originally uploaded by gruntzooki.

I was visiting my friend Adam at Google yesterday and he pointed out a vending machine in Google’s Building 43. A vending machine on the Google campus? Isn’t all of the food free? Most of it is. (Thanks for the free lunch, Adam!)

This machine is an exception. And unlike most vending machines, the food is priced based on how bad it is for you. Items high in fat and sugar cost more. The most expensive item I saw was a $4.55 bag of Famous Amos cookies. (You can see it at the right end of the second row.) It’s a terrific way to illustrate the externalities that we don’t take into account when buying food.

I would love to see schools use something similar to illustrate healthful eating habits to school kids. That could be the compromise position between parents who want to ban vending machines and vending machine companies that want nutrition education. (It will never happen.)

Food marketing is based on increasing profits and not health. At restaurants, convenience stores and similar places, they do whatever they can to get you to consume more because it adds straight to their bottom line while it adds straight to your waistline.

I once heard a professor on a radio show asking if an 8″ pizza costs $10, how much should a 16″ pizza cost? Most people would answer $20, because they (incorrectly) thought that the 16″ pizza is twice the size of the 8″. The “correct” answer to the question was $40, because a 16″ pizza actually has 4x the area of an 8″ pizza.

He’s clearly a math professor. The marketing and profit maximization answer is somewhere around $14. Most of the cost of the pizza is in telling you that they sell pizza, the fixed costs of operating the store and delivering it to you. The incremental cost of a 16″ pizza versus an 8″ pizza is negligible. The bulk of the extra $4 is pure profit. The goal is to set the price difference low enough that you feel like a chump if you buy the 8″ pizza.

Marketers also use naming to influence your consumption. Five Guys, a hamburger chain on the East Coast, offers a choice of a “Cheeseburger” or a “Little Cheeseburger”. What guy is going to order the “Little Cheeseburger”? On the other coast, In-N-Out Burger doesn’t provide a financial incentive to consume more. Their combos cost the same as the individual components put together.

More on: Google

Mark Glaser at MediaShift has a great two-part series on measuring Web traffic. It’s well worth reading for publishers, advertisers and anyone else who cares about how traffic is measured.

There are a number of different ways firms measure traffic:

• Panels recruited for the purpose. This is similar to the way that advertisers and networks measure television viewers. It tends to underrepresent small or highly local sites. Special usage monitoring software is installed on each panelist’s computer. Nielsen and comScore rely on panels.
• Buying ISP logs. This has a tendency to undercount at-work usage.
• Direct measurement by each site. This can be done using a tracking pixel or by using server logs. This is the most accurate, though not 100% accurate. Advertisers have a tendency to distrust them because the numbers come from the publishers, who have an incentive to inflate them.

This quote from the Internet Advertising Bureau SVP Sheryl Draizen sums up my view:

There’s this philosophy in the entire media industry that it’s always better to use independent third-party numbers, because they’re independent and don’t have a vested interest. I would argue that that’s not the case, because no one’s independent and everyone has a vested interest. We also have to change our thinking because we have a unique medium that could give us more accurate numbers than we have ever had before…I would challenge the agencies and marketers to stop thinking that the only numbers that are valid are coming from a third party. It’s just not the case in our industry. If there’s a certification process against those numbers, there’s no reason those numbers can’t stand.

If direct measurement offerings such as Omniture, Google Analytics, WebTrends and Quantcast could agree on definitions for visitors, page views, sessions, time on site and other key metrics as well as what bots/spiders/other junk traffic to ignore, they could give panel-based measurement firms a run for their money. That’s not to say they shouldn’t go beyond to offer custom metrics, but advertisers want apples to compare.

PepsiCo is planning to clarify labels to tell consumers that its Aquafina water is actually bottled from public water supplies. According to the CNN story, the labels will be changed from “Bottled at the source P.W.S.” to “The Aquafina in this bottle is purified water that originates from a public water source” or something similar. Aquafina has 13% of the bottled water market in the U.S.

Coke, which distributes Dasani, isn’t planning on changing its label.

In other bottled water news: if you drink Deer Park, it is spring water but from various springs. I’ve seen Deer Park water from Maine and Florida.