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January 19 2012

Commerce Weekly: Slow in-app purchasers are worth the wait

Here are a few of the commerce-related items that caught my eye this week.

Report: Don't rush in-app purchases

Mighty Eagle from Angry BirdsIt's no surprise that app developers are betting on in-app purchases to generate revenue in the year ahead. Last summer, Flurry Analytics was already reporting that in-app purchases accounted for 65% of revenue in Apple's App Store and last week IHS Screen Digest said it expects to see the same trend across all platforms by 2015.

Now, developers want to know which users are most likely to make those purchases and who among them are most valuable. Localytics has dug a bit deeper to try to identify successful patterns in the freemium formula, and its findings are interesting and maybe slightly counterintuitive. Long-term engagement is more valuable over time, and it looks like those who engage too quickly are also less likely to stick around. In other words, it's better to let the hook sink in a bit. Localytics found that users who purchased quickly were less likely to stick with the app: of users who made a purchase on their first use of the app, only 16% go on to engage with the app 10 or more times — significantly lower than the 26% average. On average, users had the app at least 12 days before making a purchase, and 44% of all users who made an in-app purchase did so after interacting with the app at least 10 times.

When I think about mobile games, 12 days feels about right. Remember your second day on "Cut the Rope"? Still playing? It's fascinating to compare this to the durability of more complex games: "World of Warcraft" holds players for years, and some of us are known to every so often dust off games that are years older. (I'm looking at you, "Call of Duty II.")

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Bankers show interest in Bitcoin

BitcoinBitcoin is becoming increasingly mainstream — at least awareness of it, if not actual use. In addition to last fall's New Yorker profile that attempted to identify the real identity of Bitcoin creator Satoshi Nakamoto, a recent episode of the CBS drama "The Good Wife" focused on a court case in which the U.S. government was suing to get one of the attorneys to give up the identity of Bitcoin's (fictitious) creator.

Bankers being who they are, all this attention has led them to wonder (as they do with all things), "How can we profit from this?" A recent article in American Banker attempts to help them through their thinking. After explaining that the digital currency "was conceived as a rebellion against the banking system," it then goes on to say "it may also present business opportunities for banks that can get comfortable with the risks." The article does a nice job of laying out the pros (offering exchange services, accepting deposits) and cons (limited growth of the currency by design, slow uptake so far among merchants and consumers).

PayPal expands Home Depot trial

PayPal is expanding its point-of-sale trial at Home Depot. Just a few weeks after announcing a trial at five stores near PayPal's home base in Silicon Valley, the experiment will scale out to 51 Home Depot stores: one in Atlanta, six in Omaha, and 44 in the San Francisco Bay Area. All are expected to be online by March.

Customers can tap their PayPal accounts for all their DIY needs in a couple ways: swipe a PayPal card (available online) or, if you don't have one, you can get a pin to accompany your mobile number and use that to draw funds from whatever source your PayPal account is linked to.

Anuj Nayar, PayPal's chief spokesperson, told American Banker that PayPal needed to ramp up quickly to build momentum — and to meet the company's predicted $7 billion in mobile transactions this year. Early in 2011, PayPal predicted it would move $1.5 billion through its mobile channels. It didn't have any trouble beating that number, eventually overseeing nearly $4 billion in transactions by the end of 2011.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the commerce space, check out DevZone on x.com, a collaboration between O'Reilly and X.commerce.


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January 06 2012

Commerce Weekly: Yahoo's new CEO has data focus

As the payments world roused itself from its holiday hiatus, here are some of the items that caught my eye.

Former PayPal chief brings data focus to Yahoo CEO position

YahooScott Thompson's move from leading eBay's PayPal division to becoming CEO of Yahoo received ample coverage in this light news week. The most interesting aspect to me was this former chief technology officer's focus on the importance of data to Yahoo's success. While past CEOs have focused on advertising, the company's role in the media landscape and alliances with U.S. and Chinese companies, Thompson showed his tech-centered origins in an interview with Ad Age:

At PayPal, we were able to create an unbelievably compelling business because we used data to understand risk and fraud better than anyone on earth. And that was the secret sauce. We had more data than anyone else, better tools and models, and super smart people who were challenged by the problem. It doesn't seem glamorous, but that was the reason.

Fast Company emphasized Thompson's background as PayPal's CTO and made clear to its lay-business audience that when he's talking about data, he's not just talking about a better dashboard to understand advertising opportunities. He's talking about the "big data" opportunity, tapping into large datasets produced by the transactions and interactions of Yahoo's 700 million members around the world.

From E.B. Boyd's Fast Company post:

Every day, those 700 million souls log in to the Yahoo universe and start making their way around its sites, moving from story to story to story to story — effectively giving Yahoo a media mogul's dream: the largest petri dish in the world to understand what sorts of content appeal to which sorts of people and what sorts of things will make them likely to consume more and more.

Of course, this is hardly news to Yahoo's data engineers or the big data community, but it will be interesting to see what effect a data-savvy CEO will have on Yahoo's prospects.

X.commerce harnesses the technologies of eBay, PayPal and Magento to create the first end-to-end multi-channel commerce technology platform. Our vision is to enable merchants of every size, service providers and developers to thrive in a marketplace where in-store, online, mobile and social selling are all mission critical to business success. Learn more at x.com.

Flurry: More than one billion apps downloaded in 2011's final week

While most retailers focus on the crucial weeks leading up to the holidays, the week between Christmas and New Year's Day — when customers are off work playing with their newly received devices — is more important for app developers. In fact, Flurry reports that this particular week was the largest ever for iOS and Android device activations and app downloads.

Flurry estimates that more than 20 million iOS and Android devices were activated, and 1.2 billion applications were downloaded on the two platforms. Christmas day itself was the biggest day ever for downloads: Flurry estimates that 242 million apps were downloaded while happy recipients explored their new toys.

Flurry also predicted that Apple's App Store will have delivered more than 10 billion apps in 2011 — more than twice the number downloaded in 2008, 2009 and 2010 combined.

EBay's mobile VP goes shopping with Robert Scoble

Just before the holiday, we reported on the "Watch with eBay" feature in eBay's iPad app, which offers viewers a sort of real-time catalog, proffering goods related to the program they're viewing on TV. Robert Scoble has an interesting follow-up interview with Steve Yankovich, eBay's vice president of mobile. Yankovich dropped by Scoble's home office with the app to show him how it works, and he revealed a new feature that identifies fabric patterns in clothing and taps related clothing items in eBay's inventories.

Posters on Scoble's related Google+ thread were more fascinated (or irritated) by Yankovich's comments that even though Android devices are dominating the market, the iOS platform is still more important from a commerce perspective.

Got news?

News tips and suggestions are always welcome, so please send them along.


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September 01 2011

ePayments Week: Financial Times bets on its web app

Here's what caught my attention in the payment space this week.

Financial Times drops iOS app

Financial Times web appThere are at least two big issues involved in The Financial Times' decision to pull its iPad and iPhone apps from the iOS App Store this week: one is about data; the other is about money. The FT, along with other publishers, has complained that the key sticking point in Apple's new requirement that all purchases, including subscriptions, go through the App store, has been the question of who controls the relationship with the subscriber. The publishers see these as their readers, and they want to know everything about them. And when readers upgrade or renew their subscriptions, the publishers want to deal directly with them. The view from Cupertino is different: these readers appear to be iTunes subscribers making an in-app purchase. For delivering this consumer to the app maker (the FT in this case) Apple would like its 30% cut of revenue. That may have been a factor in the FT's decision, though it seems the amount of money it would have had to give up — Robert Andrews at PaidContent.com figured it at $1.63 million at the high end — would have been fairly insignificant to FT's parent company Pearson (and even more so to Apple with its billions in cash).

The FT's withdrawal comes as no surprise. Its online and print versions have been encouraging readers all summer to dump their iOS apps and switch to FT.com's "web app" — its HTML5 site that displays nicely on the iPhone and iPad. The Wall Street Journal reported that more than 550,000 users have the web app. PaidContent's Andrews speculated that the web app's adoption may have been spurred by a promotional offer earlier this summer granting full access to the site. (FT.com is primarily a paid-subscription site, allowing only 10 free articles to registered users every 30 days.)

Lest we wonder if "the pink 'un" knows what it's doing in walking out on Apple and its 200 million store members, we should note that FT.com has run successfully on its paid subscription model for more than 10 years, even during the days when most mainstream news publications believed they could never charge for online content. Some publishers have come around to the FT's model, most notably The New York Times, which resumed charging for full access to online content earlier this year.

What's more, the FT says it hasn't completely abandoned Apple and, according to a Reuters report, still plans to distribute future apps in its store, including one for its luxury weekend magazine, "How to Spend It." Apparently, those are subscribers that the FT doesn't mind sharing with Apple.

Android Open, being held October 9-11 in San Francisco, is a big-tent meeting ground for app and game developers, carriers, chip manufacturers, content creators, OEMs, researchers, entrepreneurs, VCs, and business leaders.

Save 20% on registration with the code AN11RAD

Flickr's geofencing: setting access based on location

Last week, I wrote about geofencing in the context of Placecast's service to announce deals and other offers when subscribers enter a virtually delineated space. This week, Flickr rolled out another interesting use of geofencing: automatically setting privacy restrictions on photos based on where they were taken. Flickr's blog explains the new feature, and creating a geofence and linking it to access preferences is a quick and easy process.

Flickr geofence example

Flickr's geofencing is a mashup of two services that its members are already familiar with: geotagging photos and setting limits on who can see them. But in combining these two simple features, Flickr (and parent Yahoo) will offer many consumers the first glimpse of a new degree of control they will gain over the intersection of their digital and physical worlds: setting controls over what happens when they move from one location to another.

As a bonus, there's a nice post on code.flickr describing the details of the feature and the fun process the coders went through to pull it together: "We met at Nolan's house, ate a farmer's breakfast, and brainstormed."

Is daily deal fatigue getting you down?

Robert Hof has a compelling column on Forbes: "5 Reasons Daily Deals are Tanking — and 3 Reasons They're Not Dead Yet." Movements this week among the category's top players would seem to confirm the ambiguity of that headline. Facebook has said it will stop its four-month old Deals program and Yelp said it would scale its program back (CEO Jeremy Stoppelman said "it hasn't been all rainbows and unicorns"). Meanwhile, Google appeared to be ratcheting up its Offers program, even promoting an offer on its legendarily sparse home page ($5 tickets to New York's American Museum of Natural History). And Groupon continued to storm toward its anticipated IPO.

I tend to agree with one of Hof's main points: too many offers are for expensive, bucket-list or birthday-party events, like flying in a hot air balloon or learning to scuba dive. Google Offers appears to take a more budget-friendly approach, offering things that people really buy every day. Google launched its Offers in Portland in June with a $3 deal at Floyd's coffee, and it continues to promote cheap recession-friendly luxuries, like $7 worth of frozen yogurt. But even Google Offers suffers from an excess of kayak rental offers.

I have to wonder if all the wine-tasting and helicopter ride offers are part of the reason why Groupon has seen its web-based traffic drop by half since June, as reported by Experian Hitwise. It may be that while there is a continuous appetite for bargains on things we consume every day (like coffee and bread), it's more difficult to sustain interest in endless offers for boot camps and laser-based body slimming.

Got news?

News tips and suggestions are always welcome, so please send them along.


If you're interested in learning more about the payment development space, check out PayPal X DevZone, a collaboration between O'Reilly and PayPal.

Fence photo: Fence Friday by DayTripper (Tom), on Flickr



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Reposted byurfin urfin

July 18 2011

Intellectual property gone mad

Friday night, I tweeted a link to a Guardian article stating that app developers were withdrawing apps from Apple's app store and Google's Android market (and presumably also Amazon's app store), because they feared becoming victims of a patent trolling lawsuit. That tweet elicited some interesting responses that I'd like to discuss.

The insurance solution?

One option might be to rely on the insurance industry to solve the problem. "Isn't this what insurance is supposed to be for? Couldn't all these developers set up a fund for their common defense?" wrote @qckbrnfx. An interesting idea, and one I've considered. But that's a cure that seems worse than the disease. First, it's not likely to be a cure. How many insurance companies actually defend their clients against an unreasonable lawsuit? They typically don't. They settle out of court and your insurance premium goes up.

@mikeloukides Isn't this what insurance is supposed to be for? Couldn't all these developers set up a fund for their common defense?less than a minute ago via Tweetbot for iPhone Favorite Retweet Reply

If you look at medical malpractice insurance, where unfounded malpractice claims are the equivalent to trolling, I would bet that the willingness of insurance companies to settle out of court increases trolling. An insurance solution to the problem of trolling would be, effectively, a tax on the software developers. And we would soon be in a situation where insurance companies were specifying who could develop software (after a couple of malpractice cases, a doctor becomes uninsurable, and he's effectively out of the business, regardless of the merits of those cases), what software they could develop, and so on. Percy Shelley once said that "poets are the unacknowledged legislators of the world." But my more cynical variation is that the insurance companies are the world's unacknowledged legislators. I don't want to see the software industry dancing to the insurance industry's tune. Some fear big government. I fear big insurance much more.

Fighting back?

There's a variant of the insurance solution that I like: @patentbuzz said: "Developers need to unite and crowdfund re-exam of obnoxious troll patents. Teach them a lesson." This isn't "insurance" in the classic risk-spreading sense: this is going on the offensive, and pooling funds to defend against trolling. I do not think it would take a lot of effort to make trolling (at least, the sort of low-level trolling that we're looking at here) unprofitable, and as soon as it becomes unprofitable, it will stop. Small-time app developers can't afford lawyers, which is precisely why trolling is so dangerous. But here's the secret: most patent trolls can't afford lawyers, either. They can afford enough lawyering to write a few cease and desist letters, and to settle out of court, but their funds would be exhausted fairly quickly if even a small percentage of their victims tried to fight back.

@mikeloukides Developers need to unite and crowdfund reexam of obnoxious troll patents. Teach them a lesson http://t.co/8wFkyFQless than a minute ago via web Favorite Retweet Reply

This is precisely where the big players need to get into the game. Apple has tried to give their app developers some legal cover, but as far as I know, they have not stepped in to pay for anyone's defense. Neither has Google. It's time for Apple and Google to step up to the plate. I am willing to bet that, if Apple or Google set up a defense fund, trolling would stop really quickly.

Blocking sale of patents?

A large part of the patent problem is that patents are transferable. @_philjohn asks "Do you think changing law to prevent transfer of patents could reduce the patent troll problem?" On one level, this is an attractive solution. But I'm wary: not about patent reform in itself (which is absolutely necessary), but because I've worked for a startup that went out of business. They had a small intellectual property portfolio, and the sale of that portfolio paid for my (substantial) unused vacation time. That's not how things are supposed to happen, but when startups go out of business, they don't always shut down nicely. It's worth asking what the cost would be if patents and other kinds of intellectual property were non-transferable. Would venture capitalists be less likely to invest, would startups fail sooner, if it were impossible to sell intellectual property assets? I suspect not, but it isn't a simple question.


A call to action

Patent and copyright law in the U.S. derives from the Constitution, and it's for a specific purpose: "To promote the progress of science and useful arts" (Article I, section 8). If app developers are being driven out of the U.S. market by patent controlling, patent law is failing in its constitutional goal; indeed, it's forcing "science and the useful arts" to take place elsewhere. That's a problem that needs to be addressed, particularly at a time when the software industry is one of the few thriving areas of the U.S. economy, and when startups (and in my book, that includes independent developers) drive most of the potential for job growth in the economy.

I don't see any relief coming from the patent system as it currently exists. The bigger question is whether software should be patentable at all. As Nat Torkington (@gnat) has reported, New Zealand's Parliament has a bill before it that will ban software patents, despite the lobbying of software giants in the U.S. and elsewhere. Still, at this point, significant changes to U.S. patent law belong in the realm of pleasant fantasy. Much as I would like to see it happen, I can't imagine Congress standing up to an onslaught of lobbyists paid by some of the largest corporations in the U.S.

One dimension of the problem is relatively simple: too many patent applications, too few patent office staff reviewing those applications, and not enough technical expertise on that staff to evaluate the applications properly. It doesn't help that patents are typically written to be as vague and broad as possible, without being completely meaningless. (As the staff tech writer at that startup, I had a hand in reviewing some of my former employer's patent applications). So you frequently can't tell what was actually patented, and an alleged "infringement" can take place that had little to do with the original invention. Tim O'Reilly (@timoreilly) suggested a return to the days when a patent application had to include the actual invention (for software, that could mean source code) being patented. This would reduce much of the ambiguity in what was actually patented, and might prevent some kinds of abuse. Whatever form it takes, better scrutiny on the part of the patent office would be a big help. But is that conceivable in these days of government spending cuts and debt ceilings? Larger filing fees, to support the cost of more rigorous examination, is probably a non-starter, given the current allergy to anything that looks like a "tax." However, inadequate review of patent applications effectively imposes a much larger (and unproductive) tax on the small developers who can least afford it.

If we can't rely on the patent office to do a better job of reviewing patents, the task falls to the Apples and Googles of the world — the deep-pocketed players who rely on small developers — to get into the game and defend their ecosystems. But though that's a nice idea, there are many reasons to believe it will never happen, not the least of which is that the big players are too busy suing each other.

Apple and Google, are you listening? Your communities are at stake. Now's the time to show whether you really care about your developers.

Crowdfunding the defense of small developers may be the best solution for the immediate problem. Is this a viable Kickstarter project? It probably would be the largest project Kickstarter has ever attempted. Would a coalition of patent attorneys be willing to be underpaid while they contribute to the public good? I'd be excited to see such a project start. This could also be a project for the EFF. The EFF has the expertise, they list "innovation" and "fair use" among their causes, and they talk explicitly about trolling on their intellectual property page. But they've typically involved themselves in a smaller number of relatively high-profile cases. Are they willing to step in on a larger (or smaller, as the case may be) scale?

None of these solutions addresses the larger problems with patents and other forms of intellectual property, but perhaps we're better off with baby steps. Even the baby steps aren't simple, but it's time to start taking them.

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