Last week I provided an estimate of the implied revenue Amazon expects to earn in advertising from the newly discounted Kindle with Special Offers. I happened to catch MG Siegler’s post on TechCrunch on the same topic.  Siegler takes an approach I heard frequently immediately following the announcement, namely that $25 isn’t a strong enough discount.  Amazon should have been more aggressive and marked the device down to $99 – then we’d be talkin’.

I agree with Siegler that this is part of a broader pricing experiment for Amazon.  Amazon loves to experiment with pricing (among other things) and by so doing they can more accurately estimate demand elasticity (among other things). Thus, the recent price cut could have simply been an info gathering exercise. On the other hand, Amazon has on several previous occasions cut the Kindle price so I imagine they have a good handle on the shape of the demand curve as well as demand for ebooks (additional books sold) as a result of additional devices moving into circulation. As I wrote, Amazon could have arbitrarily picked $25 – it is after-all a very round number.  In this spirit, I don’t agree with Siegler where he suggests Amazon “must have looked over the potential numbers from advertising and determined that $114 was as low as they could go.” They could have gone lower, but opted not to. And I don’t think that decision was heavily influenced by per unit revenue loss rates.  

this was previously published in March 2008 in Dealerscope Magazine:

Ten years ago, consumers bought consumer electronics devices largely independent of the services and content they would eventually use in conjunction with those devices. Those times are gone.

As opposed to piecing together an a la carte experience by coupling hardware, software and services, today’s consumer is in search of a more robust, 360 experience. This 360 experience focuses less on what the devices, services and content can do in isolation and more on how they come together to provide the consumer with the experience they are seeking straight out of the box. This change is driving an important shift within the consumer electronics industry, as content owners, service providers and hardware manufacturers come together to create and provide a 360 solution.

The most successful companies – especially in the digital world – will be built around organizing dispersed information (something I said I would expound upon).  Name a successful company in the digital space, and you will see data organization at its core.  AOL for example – while best known for its ISP business in the 1980s – was centered around a destination page that organized information (including email).  AOL was one of the first sites to organize dispersed information in the form of rudimentary news, weather, and other information relevant to the user.

Yahoo in turn expanded this by building its dynasty around organizing information and increased user time on their site.  Search – in the purest sense – is based on organizing dispersed information. Because the ability to toggle between sites is minimal, sites are becoming centralized around carefully culled genres like technology, politics, weather, or news. In many instances, once a topic reaches some minimal threshold where it can support a following it splintering into sub categories.  You see this in areas like technology (ie wireless, automotive, computer, television) or politics (ie right wing, left wing, moderate). Sites like Groupon and LivingSocial are successful because they have organized around a specific genre (local daily deals).

Today apps and other sites are creating “skins” that allow individuals to highly personalize what information is relevant to them.  These “skins” allow individuals to unorganize aggregated and organized information in order to reorganize it by creating a highly personalized flow of information. The future of the web will be a series of organizing, “unorganzing,” and again reorganizing bundles of information.

Amazon recently announced they would sell a new Kindle with “Special Offers”version.  Kindle with “Special Offers” has the same specs as their WiFi-only Kindle but will include advertisements as the screen saver and on the home screen bar.  In exchange, Amazon will only change $114. 

In all likelihood Kindle hardware will one day be free (or close to free) because of cross subsidization (give away the hardware and monetize the content). The Kindle app for other devices is logically already free.  And of course, this go-to-market approach is common for other technology categories like gaming.  Gaming hardware doesn’t drop to zero likely in part because of the retail relationships that must be maintained by the OEM, but it isn’t uncommon to see it sold below cost at different times. With Amazon’s Kindle in other retail channels, this might be the approach Kindle takes.  You also don’t want consumers taking more than they’ll use.  With a registered Kindle account this becomes less of a concern.  I won’t be surprised if the Kindle with “Special Offers” remains exclusively available through Amazon because of the confusion it might cause in other retail chains which might help drive volume back through Amazon. 

Over the weekend I read William Langewiesche’s recent book Fly by Wire: The Geese, the Glide, the Miracle on the Hudsonwhich chronicles the role electronic control systems play in avionic safety generally and US AIR flight 1549’s miraculous landing on the Hudson river specifically. A fly-by-wire approach is something we will begin to see with more frequency.

In avionic application, the fly-by-wire approach establishes certain parameters that guide the actions of pilots – for example making it impossible to stall the airplane, or obtain more than 2.5Gs which could impact the integrity of the aircraft. Creating bounded ranges and cementing curbs allows for quick, decisive decision-making in times of distress.  Bernand Ziegler – the former head of Airbus, and champion of the fly-by-wire approach explains, “we give you guarantees so you can react as fast as you want without having to worry about breaking the plane.”

BestBuy is apparently holding iPad supply so they will presumably have enough supply on stock and in the stores for an “upcoming event.” This highlights the delicate nature of retailing today.  Physical media is no longer the traffic driver it once was, but today’s traffic drivers aren’t providing the margin that retailers need so events have become the focus to drive traffic (think Black Friday, CyberMonday, etc). More to follow on this topic.

The demand for “metrics” is increasing. At the same time, data availability is accelerating. More, the availability of survey software like SurveyMonkey has driven down both the cost and accessibility to survey tools. In economic parlance, we’ve seen both supply and demand shift out. As the chart shows, the end result is a lower price and a much higher quantity.  

This is in everywhere evident. Political and social issue polling has increased with a 24 hour news cycle, cable news channels, more independent research institutions, and think tanks. Surveys have become commonplace. I receive a survey invite each time I stay in a hotel, attend an event, close an account or any number of a host of activities. These invites enter my inbox with subject lines like “your opinion counts,” “please share your feedback with us,” “your recent stay at Renaissance,” or “would you recommend Hertz?”

Here are the last 11 government shutdowns.  The average closing is just 5 days – and excluding in the December 1995 closing, the average is only 3.2  The Government will be open again next week.

[table id=8 /]

I’ve written about Xobni for Outlook in the past, but a recent experience illustrated the role data will play in the future and ultimate implications for privacy. 

When it first launched I tried freecycle and several months ago I signed-up again to see how the service had evolved and was progressing.  Because I knew this would be accompanied by a slew of emails and I didn’t want the frequent emails to hit my Inbox, I filtered them to a separate folder.  I recently perused the folder and noted my xobni window began to update. As you know, Xobni pulls information in from sites like LinkedIn and Facebook.  After matching emails, Xobni will retrieve all available information. When a matched LinkedIn profile exists Xobni pulls in all available including location, title, and current employer.  With 100M+ users now, it is becoming more common to see LinkedIn profiles populated. For unconnected “friends” on Facebook where emails are matched it will pull in what information is allowed by the user – which typically consists of at least the profile photo.   

The emails sitting in my freecycle folder also contain information.  For example, A. W———- is giving away “10 baby pacifiers in excellent/like new condition. 4 of them are girl colors, the other 6 are gender neutral. Nuk and Playskool brands.”  This offer seems logical, her Facebook photo – delivered into my inbox via Xobni – presumably shows her son (age 2.5) and daughter (7 months).

Clearly it isn’t a stretch to presume someone giving away pacifiers has children who recently grew out of pacifier use. But what about Nikki C—– who offered a “potty time elmo doll, need batteries. Also comes with potty, potty time elmo book (interactive sound book-works) small book for elmo. I’m also including a cookie monster and cabbage patch doll.” Sounds like the mother of a young, recently potty-trained child.  In fact, Nikki is a 21 year-old college student and “Independent Childcare Provider” in the DC region. She probably cares for a child that is approaching 3 years-old.   

I could go on, but the point in all of this is information is created (or perhaps relinquished is the more appropriate term) for use in a specific setting. Users relinquish information to specific services to extract value from that service. I doubt Nikki realized I would know what she does and where she goes to school when she sent me an email and A. W—- didn’t know she was telling me the gender and approximate ages of her children or Holly who emailed me her mobile phone number and presumably has children in Hayfield Secondary since she belongs to the Hayfield Secondary network on Facebook. 

None of them likely internalized the fact they were actually emailing ME when they hit send and surely didn’t recognize that computing power would in seconds provide layers of potentially rich information on their personal lives. With the simple addition of their email address to my description of the personas listed above, I could have added to those layers. 

Xobni is first and foremost an email management tool.  LinkedIn and Facebook integration are designed to facilitate that management.  But in a very simple way Xobni shows how information is rapidly aggregated and shared. I’m not a privacy hawk, but the simple example above highlights potential externalities of information sharing.

More, we are just seeing the beginning of an approaching wave of innovation around data aggregation. Data creation – of which we are doing more than ever before – begets organization. With inexpensive computing power data creation also begets more data. Algorithms can identify previously unrecognized information.  In this way, computers take a mosaic approach to information organization – and ultimately reveal thing that hadn’t been explicitly released.  Over the next 36 months we are going to see a plethora of services intent on rearranging information and squeezing out hidden value.  

I’ll write more about it in another post, but I believe one of the key elements behind wildly successful ideas or companies – and especially in the digital realm – are the ability to organize dispersed data and create meaning. This will be a major influence on the companies sprouting in the next few years.     

Users (and especially American users) give their information away and that won’t change.  Many cry foul when this information is misused but we quickly forgive when offered something in exchange. The foundation of (potentially intrusive) mobile coupons/discounts is built on this premise. 

So what do we learn about privacy from all of this? Managing your online identity is no longer solely about controlling what lands on the top results of a search engine query of your name.  Managing your digital identity is about (1) recognizing what information you disseminate where, (2) what information will leak from that sharing, and (3) what the sum of these information tell about you.

Last week I had an extended conversation on the future of postal service and wanted to share some of my thoughts on potential scenarios 10 years from today. These are clearly quick sketches. The future – as is often the case – will likely be an amalgamation of these scenarios.  

Scenario 1: Traditional Mail Ceases to Exist, Small Parcel the Only Thing Delivered

Small parcel post is escalating.  I seem to recall a statistic recently from Fred Smith of FedEx, suggesting small parcels represent some 15% of their total shipment volume. This category of mail is driven by online retail sales and consumer-to-consumer transactions – both of which continue to increase.  Consumer-to-consumer transactions are on the rise as sites like eBay continue to gain in popular and are used more frequently for a wider assortment of goods. Online sales represent only about 5% of retail sales today, but this is clearly growing as well. It won’t be surprising to find online sales representing a quarter of all retail sales within five or six years. As these transactions increase, small parcel post naturally follows.

There are a few trends playing out in the technology sector which will also impact the rate at which small parcel post increases. First, as the retail sector has become more challenging, manufacturers are increasingly looking at selling directly to consumers.  This isn’t unique to technology companies, but is playing out across a host of categories. A second element I see evident in technology is the rapid acceleration of product launches, the speed at which companies are attempting to bring these products to market, and the swiftness at which information about new products is disseminated to potential consumers.  Manufacturers are building less inventory over a shorter period time before bringing a given product to market. Seeking to fill a broad supply chain in a shorter window will force manufacturers to increasingly rely on expedited, small parcel post – regardless if they are going directly to consumers or through more traditional retail channels.

Scenario 2: The Death of Direct Mail

Today, direct mail represents roughly half of all mail sent. According to a report from advertising and marketing consulting firm Winterberry