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February 21 2013

Commerce Weekly: Best Buy wants to end showrooming, Google wants to start

Google takes on brick-and-mortar; Best Buy takes on ecommerce

GoogleLogoGoogleLogoThe Google retail store rumor ignited again this week. Seth Weintraub reported at 9to5Google that “[a]n extremely reliable source has confirmed to us that Google is in the process of building stand-alone retail stores in the U.S.” to be opened in time for the 2013 holiday season. The Wall Street Journal’s Amir Efrati followed with confirmation from “people familiar with the matter,” though one of those people said it wouldn’t happen this year.

Across the board, analysts seem to think it’s a good idea. Alyson Shontell at Business Insider noted that as Google becomes more of a hardware company — with its Android devices, Google Glass, and self-driving cars — analysts say it’s time for Google to work on its brand image, which will require consumer interaction, something the company hasn’t done much of up to this point. Google executives seem to agree — Weintraub reported that retail store plans started to solidify along with plans to offer Google Glass to mainstream consumers. “The leadership thought consumers would need to try Google Glass first hand to make a purchase,” Weintraub wrote. “Without being able to use them first hand, few non-techies would be interested in buying Google’s glasses (which will retail from between $500 to $1,000).”

On the other end of the retail spectrum, brick-and-mortar big box retailer Best Buy is looking to strengthen its competitive edge against online retailers. The company announced this week that in its efforts to “end showrooming,” it will make its holiday price-matching policy permanent. Beginning March 3, the store will “price match all local retail competitors and 19 major online competitors in all product categories and on nearly all in-stock products, whenever asked by a customer,” according to a Best Buy press release. The release also stated that price matching will extend “post purchase” to include price reductions Best Buy makes within 15 days of a purchase. The company slipped in a change to its return and exchange policy as well — Kim Bhasin at Business Insider reported the new return/exchange period will drop to 15 days from 30, though Reward Zone Premier Silver members will retain their 60-day return eligibility.

A faberNovel study delves into the strategies behind Amazon’s success

This week, faberNovel released an update to its study “ The Hidden Empire.” John Geraci, faberNovel’s head of marketing, noted in a post at TechCrunch that since the first study was published in 2011, “a steady, ever-growing buzz has developed around Amazon as it becomes increasingly clear that they are really in for the kill with the retail industry, intending to spare no prisoners along the way.” Geraci outlined a few highlights from the study, including the fact that Amazon initially took aim at the B2B space with Amazon Supply, “but they clearly also want corporate-accounts domination — and they might succeed in getting it. He also noted Amazon’s continued willingness to experiment with disruptive business models, specifically highlighting textbook rentals for students.

The study, presented in a Slideshare (embedded below), offers a deep look into the paths behind the success of Amazon. Looking ahead, the study covers plans for the cloud, noting that “[e]ven though [Amazon Web Services] AWS is primarily a B2B offer, the Amazon cloud will ultimately be geared toward end-users.” It also looks at the company’s long-term goals to grow the Kindle ecosystem, achieve the same-day delivery holy grail, and lock itself in as a small and medium business supplier. You can view the complete study in the following Slideshare presentation:

Square further simplifies POS for merchants

In its continued efforts to democratize mobile payments for consumers and merchants, Square this week launched Business in a Box for Square Register. According to the press release, the package includes two Square Readers, an iPad stand, a cash drawer, and an optional receipt printer, all of which connect wirelessly to Square Register. The release noted the mobile payment obstacle Business in a Box aims to solve:

“Historically, business owners were forced to piece together multiple hardware components from various manufacturers, manage complicated contracts and pricing structures, and pay for expensive software licensing and service plans. Now, they can be up and running with Square Register in minutes.”

The price point is democratizing as well — the release stated that customizable hardware packages start at $299. Jordan Kahn at 9to5Mac did some digging into the customizations and associated costs. On top of the basic package, which Kahn noted includes a Heckler Design WindFall iPad Stand and an APG Vasario 1616 Cash Drawer, Square will provide a Star Micronics TSP143L Receipt Printer for an additional $300, for a total cost of $599. “We were able to find all the pieces of the package online (minus the free Square readers) for around $480,” Kahn wrote, “although that’s before any taxes or shipping costs.”

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February 07 2013

Commerce Weekly: Google targets Amazon’s shopping platform

Google acquires Channel Intelligence, pursues Amazon shoppers

GoogleLogoGoogleLogoIn a recent post at Wired, Marcus Wohlsen took a look at the success of Google’s switch last fall to all-paid product listings — such as the top result for a search for iPhone 5 — and how it fits in to Google’s plans to compete against Amazon on the shopping front.

Chris Lien, CEO of Lawson and Marin Software, noted to Wohlsen that shoppers either start their searches at Amazon or at Google and that Amazon has been encroaching on Google’s turf as it becomes more of a “commerce search engine.”

In order to compete, Wohlsen writes, Google is establishing itself as a place not only to research products, but also to buy them. Lien says Google likely doesn’t intend to start its own warehouses, but rather to “package the sale from search to checkout” and let merchants take it from there. Marin marketing VP Matt Lawson told Wohlsen, “What you’re going to see [Google] do is do everything they can to enable marketers to sell through their platform.”

This week, Google took a major step in that direction with its acquisition of Channel Intelligence (CI) for $125 million. In a post at Forbes, TJ McCue describes CI as specializing in product ecommerce, offering data-driven services aimed at increasing online sales, and he highlights one of the company’s most successful products — the CI Where-to-Buy button.

Engadget’s Donald Melanson updated his report on the acquisition with a statement Google released regarding the purchase:

“We want to help consumers save time and money by improving the online shopping experience. We think Channel Intelligence will help create a better shopping experience for users and help merchants increase sales across the web.”

Digital wallet? What’s that?

A new study from comScore showed that the slow adoption rate of digital wallets may have something to do with a lack of awareness — only 51% of consumers in the U.S. were aware of digital wallets, aside from PayPal, which had a 72% awareness rate, according to the study.

Andrea Jacobs, comScore Payments Practice Leader, said for the press release that the low adoption rates could be attributed to multiple factors, such as low awareness and a lack of understanding of the benefits, from the consumer as well as the retailer side. She also noted that this isn’t the first time we’ve experienced steep barriers to adoption in the financial services industry: “There was a time when consumers were reluctant to use ATMs for similar reasons, and, today, look at how far we’ve come since the 1970s and 1980s.”

There are some indications of a bright future for digital wallets, however, when all aspects of the ecosystem are in place. Kevin Fitchard reports at GigaOm that Isis chief sales officer Jim Stapleton says their wallet trial in Salt Lake City “is producing positive results from both consumers and merchants,” with users paying with the wallet five or more times per week.

Stapleton wouldn’t specify the number of users Isis has at this point, Fitchard reports, but he said “the typical Utah Isis customer follows five different merchants using the wallet’s loyalty card and coupon features, and a customer who signs up for a business’s loyalty program tends to visit that business twice as often as a regular customer.”

“Social commerce” is driving growth in US ecommerce market

Reports this week showed global ecommerce sales topping the $1 trillion mark. Though the U.S. leads the world in ecommerce sales, ecommerce represents a “scant 4% of American retail sales,” according to Business Insider’s Alex Cocotas’ research. He notes, though, that the channel is “growing faster than its offline counterparts” and highlights the major drivers: mobile commerce and social media. Cocotas points to such success stories as “social commerce” sites ShoeDazzle and Fab.

According to Jim Edwards at Business Insider, Facebook advertisers can attest to the power of “social commerce.” Edwards looks at Facebook’s mobile app install ads, which on first blush appeared to be geared at mobile game and app developers. “But several of Facebook’s big advertising clients who have used the ads in Q4 indicated that the ads can be used to develop e-commerce on Facebook,” Edwards writes, “turning the social network into a mobile shopping and sales device.”

Edwards explains that the apps are more valuable to advertisers than ad impressions because a consumer with an app is likely to use it more than once, resulting in a “‘lifetime’ of revenue” as opposed to a one-off sale. After testing the ad unit, Edwards reports, CEO Jason Goldberg said Fab’s shopping app was “[f]ive times more effective than any other mobile download channel that we’ve used.”

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January 31 2013

Commerce Weekly: Goodbye traditional retail, hello ecommerce

Here are a few stories that caught my attention in the commerce space this week.

Death bells toll for brick-and-mortar retail

A recent report from mobile analytics startup Flurry looked at the growth in consumer use of shopping apps and concluded the “App & Mortar economy has arrived.” Flurry president and CEO Simon Khalaf reviewed their research results in a blog post on the company website, noting that “consumer time spent in Retailer Apps has skyrocketed by 525% from December 2011 to December 2012,” exceeding the shopping app growth of 274% as well as overall app growth of 132%.

Khalaf points out that it’s “mission critical” for retailers to start extending their reach to consumers beyond the brick-and-mortar walls and into connected devices such as smartphones and tablets. “In the App & Mortar economy, the battle for deeper consumer relationships is beginning,” he writes, “and there are already thousands of apps for that.”

Flurry’s research may be coming up short of the long-term big picture if well-known entrepreneur and investor Marc Andreessen is correct. Andreessen told PandoDaily’s Sarah Lacy that traditional retail is on its death bed:

“Retail guys are going to go out of business and ecommerce will become the place everyone buys. You are not going to have a choice. We’re still pre-death of retail, and we’re already seeing a huge wave of growth. … Retail chains are a fundamentally implausible economic structure if there’s a viable alternative. … Malls are going under, and there’s more to come. These chains are much closer to going under than you think.”

Andreessen noted to Lacy that it’s not only the implausible economic structure of physical stores that will bring down traditional retail, but that online retailers like ShoeDazzle and Fab are finally starting to compete on the shopping experience front, providing the entertainment and social aspects of shopping that have been keeping traditional retail afloat.

On his platform, entrepreneur and blogger Jason Calacanis agreed with Andreessen’s assessments, with the exception of “considered purchases and ‘social shopping.” “I mean, I could order Disney toys online, but visiting the store is a blast with my daughter,” he writes. “Clearly we don’t need to visit a store for toothpaste, underwear or even shoes when you have Zappos, Everlane and Amazon in the mix.”

Starbucks hints at CPG customer rewards, Intuit buys Payvment

In an earnings call with analysts this week, Starbucks CEO Howard Schultz discussed the company’s fiscal first quarter success in its digital and mobile platforms and touched on plans for expansion. Mobile Commerce Daily’s Chantal Tode quotes Schultz’s comments during the call:

“Over the next few months or so, we’ll be coming back to you and sharing with you the plans that we have to take advantage of Starbucks products within CPG, and specifically grocery, and leveraging the technology and the advancement of providing value to our customers that are buying Starbucks products in grocery, and leveraging the card.”

You can find a full transcript of the earnings call at Seeking Alpha.

In other expansion news, financial software company Intuit purchased ecommerce platform Payvment this week and revealed further expansion plans. Ingrid Lunden reports at TechCrunch that the company plans to roll out more than 20 new products this year in such areas as “payments technologies using NFC and Apple’s Passbook, consumer-focused big data apps, and new products for its Mint financial-management range.”

Lunden provides a rundown of several of the planned products, along with product comments from Intuit CEO Brad Smith, in her report at TechCrunch.

Newegg defeats “shopping cart” patent troll

The courts have put one patent troll in its place. Joe Mullin reports at ArsTechnica that Soverain Software’s long-running “shopping cart” patent lawsuits were brought to an end January 22 when Newegg “won an appeal ruling [PDF] that invalidates the three patents Soverain used to spark a vast patent war.”

The ruling not only affects Newegg’s lawsuit, but also shuts down Soverain’s lawsuits against many other companies, including Nordstrom’s, Macy’s, Home Depot, RadioShack, and Kohl’s. Mullin reports that Soverain also will lose the $18 million verdict it had won against Victoria’s Secret and Avon. “The ruling in the Newegg case is a total wipeout for a patent troll that had squeezed many millions from online retailers, was backed by big-firm lawyers, and was determined to collect hundreds of millions more,” writes Mullin.

Newegg’s Chief Legal Officer Lee Cheng told Mullin, “We basically took a look at this situation and said, ‘This is bullshit’ … now, nobody has to pay Soverain jack squat for these patents.”

You can read Mullin’s in-depth report on the ruling and the history of the long-running case at ArsTechnica.

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July 19 2012

Commerce Weekly: Amazon chases immediate gratification

Here are a few stories that caught my attention in the commerce space this week.

Same-day delivery could be the Holy Grail for Amazon, kiss of death for physical retailers

Farhad Manjoo at Slate took a look this week at Amazon’s change of heart in its tax war with US states and what it might mean. Manjoo notes the company dropped its sales tax fight with California last fall and began signing tax agreements with many states, including California, New Jersey, Indiana and Nevada.

Looking at an investigative series the Financial Times is conducting on Amazon (subscription only), Manjoo reports that this move plays into Amazon’s new game strategy: to set up distributions centers all over the country in order to achieve same-day delivery speeds in as many locations as possible. Manjoo says the implications of this for brick-and-mortar retailers are hard to overstate:

“Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. (Remember But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers. If it can pull that off, the company will permanently alter how we shop. To put it more bluntly: Physical retailers will be hosed.”

Christopher Matthews at Time Business took a look at the Amazon situation as part of a series on the future of retail. He cites analyst Aaron Kessler’s estimation that “e-commerce represents roughly 12% of retail sales overall and that that figure could double in the next 10 years,” and he notes that Amazon isn’t just growing along with the market: “It’s actually gaining market share in that category — by growing at three times the rate of e-commerce overall.” Matthews addresses Manjoo’s piece at Slate as well, and doesn’t necessarily agree that brick-and-mortar retailers will be “hosed.” Matthews argues that Amazon is strong, but competition is fierce:

“Indeed, traditional retailers do not see their obsolescence as inevitable and are doing all they can to leverage their main strength: their brick-and-mortar stores. And there is reason to believe that many will have success with this strategy. Consumers still want the social experience of in-store shopping. They want knowledgeable and attentive service, and they want to test, touch and try on products before they buy them.”

Both posts are well worth the read: You can find Manjoo’s piece here and Matthews’ piece here.

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

JC Penney to launch mobile checkout

Though some predict Amazon and e-commerce will wipe out brick-and-mortar retailing, JC Penney CEO Ron Johnson is certain this will not come to pass. During an interview with CNN Money’s Miguel Helft at Fortune’s Brainstorm Tech conference this week, Johnson defended the position of the physical store. Helft reports: “[Johnson] said he is bullish on physical retailing, and predicted that online retailing, just like catalog shopping a few decades ago, will eventually reach a plateau. He said different categories of retailing will level off at different points, and that ‘the physical store will have a permanent place.’”

Johnson also dropped something of a retail-strategy bomb. Helft writes:

“He announced that JC Penney had scrapped an outdated technology infrastructure and replaced it with an Oracle-based system. The new technology will allow the company to improve the in-store experience with mobile checkouts, self checkouts and tags based on RFID instead of bar codes, which would speed up purchases.”

Kim Bhasin at Business Insider highlighted tweets posted during Johnson’s talk at the Brainstorm Tech conference that indicated the mobile self-checkout system would be in place by the end of 2013. During his interview with Helft, Johnson, who formerly was the Senior Vice President of Retail Operations at Apple and pioneered Apple’s Genius Bar and retail store concepts, compared JC Penney’s situation to Apple’s renaissance. He said Apple had “much tougher years” than what JC Penney is experiencing and noted that “[t]ransformation takes time.”

PayPal buys

PayPal announced this week that it has acquired, a startup that allows developers to scan credit card data using a smartphone camera. Hill Ferguson, PayPal’s VP of global product, wrote on the company blog that the acquisition will allow the team “to work on projects that will accelerate innovation at a scale that’s just not possible at a startup.” Hill also noted the technology will still be available to outside developers, which could point to a licensing strategy down the road, but Hill didn’t elaborate.

PayPal already had integrated’s technology into its PayPal Here product to better compete against Square, but Ryan Kim at GigaOm notes the technology opens other doors as well, allowing “PayPal to not only facilitate more payments but also potentially help with other visual scanning uses such verifying identification cards.” Kim also points out that the acquisition “keeps out of the hands of Square or other competitors.” This acquisition is PayPal’s second in the mobile payment arena, having acquired Zong last year.

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June 14 2012

Commerce Weekly: Couch commerce gets a boost

Here are a few stories that caught my attention in the commerce space this week.

TiVo and PayPal team up to bolster couch commerce

TiVo_Logo.pngSmartphone and tablet shopaholics will soon have another electronic venue to engage their shopping habits: the TV. At the TV of Tomorrow Show in San Francisco this week, PayPal and TiVo announced the two companies will be joining ranks to let consumers make purchases directly through interactive ads on the TiVo interface. According to the press release, users will need to link a PayPal account only once, then purchases thereafter can be made with a couple clicks of the remote.

Matthew Humphries over at notes the potential "kid-factor" issues and the need for some sort of parental control or lock-out. He also addresses another potential problem with ads — namely, that many consumers have grown accustomed to skipping them — and points out that TiVo and PayPal are planning ahead:

"For the most part, TV advertising is something that I for one try to ignore. That's mainly down to the adverts repeating too often and the stuff being advertised not actually being targeted toward me. That is sure to change as the set-top boxes we use get smarter and know who is watching (just ask Intel). One day adverts may actually include products you want to purchase immediately."

The instant-purchase campaigns are scheduled to launch with the fall 2012 TV season.

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

Sprint prepping its own mobile wallet?

The NFC Times learned late last week that Sprint is preparing to launch its own mobile wallet. According to NFC Times sources, the product will be called "Touch" and could launch as soon as this summer. (A blogger at Android Central shared a couple of slides leaked this week that seem to support the wallet development).

I'm sure this news made heads at Google turn, as Sprint is the sole mobile operator partner of Google Wallet. The NFC Times reports that it isn't clear whether or not this means Sprint will end its partnership with Google Wallet, but notes that "it seems unlikely that it could support both wallets on the same NFC phones since each wallet requires control of the secure element."

In related news, Nick Hughes at TechCrunch took a look at trends in mobile wallet and mobile payment systems, and notes that not only are the proprietary platforms causing fragmentation that is hindering mobile payment progress, but they're excluding a vast majority of potential consumers:

"Ironically, many companies innovating on mobile payments today are focusing their attention on a new kind of proprietary 'payment mechanism' in the form of isolated apps, NFC required devices and other exclusive components of a mobile device ... [there are] roughly six billion mobile subscribers worldwide — an astonishing 85% of the world population. Also important to note, 95% of these individuals don't carry an Apple device. And moreover, 75% of the world is still not using a device generally regarded as a smartphone.

"Let me state that another way: There are 4.5 billion people in this world holding a phone, just NOT holding a smartphone.

"So, why is there so much focus on a mobile payment experience in which only 5% — or at max 25% — of the world can actually participate? Shouldn't we look at what all these devices have in common when we are designing an experience as universal as payment? I fear we are leaving too many people out of the game and too much money on the table."

You can read Hughes' entire report and his ideas on how best to grow the mobile payment industry here.

Apple has more credit card numbers on file than any store in the world

Apple's WWDC conference took place this week, and one particular statistic emerged that may hint at Apple's future in mobile payment. As reported by Owen Thomas at Business Insider, Apple has 400 million active accounts with credit cards attached in its app and iTunes stores. Thomas notes the context of this volume: "That's more than PayPal, which has 110 million active accounts (out of 232 million total), and, which reports having 152 million customer accounts.

A post at Mashable reports Apple CEO Tim Cook made a point of noting that this makes Apple "the store with the most credit cards on file anywhere in the world." Proprietary platform issues aside, this amount of data and number of already engaged consumers is a strong indication that Apple is poised to disrupt the payment industry.

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April 26 2012

Commerce Weekly: Mobile commerce is on the rise globally

Here are a few of the stories that caught my eye in the commerce space this week.

Survey shows global rise in consumer desire for mobile commerce

TNS Global's recent Mobile Life Survey, which surveyed the mobile habits of 48,000 people in 58 countries, shows that global interest in mobile commerce is on the rise. The screenshot of the survey's interactive results map below illustrates levels of interest for different commerce features — in this case mobile wallets:.

Mobile Life Survey screenshot
A screenshot of the TNS Global Mobile Life Survey results map. See the interactive version.

In a post for, William Mace took a deeper look at the survey results concerning the mobile commerce status in New Zealand. The results showed a bright future for mobile commerce, especially in the feature areas of mobile wallet and mobile banking. Mace reports:

"TNS New Zealand director David Thomas said New Zealanders surveyed liked the convenience of 'mobile wallets' — essentially using a smartphone to pay for goods and services — and placed the greatest trust in banks to provide such a service."

Thomas explained to Mace that technology and infrastructure are speed bumps to mobile wallets, much like here in the U.S. He said, "Mobile wallets generally require smartphones and generally a near-field communication chip in your phone which is still relatively unusual. The technology has driven mobile banking to come first but we can see with the developments of people like PayMark, Telecom and Vodafone are talking about we can see that the infrastructure for mobile wallets will come soon."

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

EU investigates possible mobile wallet monopoly

Mobile wallet news wasn't all positive across the globe this week. In the U.K., where mobile retail is up 254% from last year and up 300% year over year for the first quarter of 2012, the European Union might become an additional speed bump to mobile wallets.

According to a report at Internet Retailer, the EU is looking into three U.K. telecommunications companies — Telefónica, Vodafone and Everything Everywhere — that announced a mobile wallet plan last June called Project Oscar. Plans were submitted in March. A press release from the EU explained that the problem lies in the potential monopoly:

"The Commission's initial investigation revealed that the joint venture and its three parent companies may have the technical and commercial ability and incentive to block future competitors from offering their own mobile wallet services to customers in the UK, or to degrade the quality of these competing mobile wallets so that they become less attractive."

According to the release, the commission has until the end of August to make a final decision.

Boston rail commuters get a paper ticket alternative

Consumers can buy a cup of coffee with an app (even in the drive-thru!) or a hammer with a phone number, and several companies offer local smartphone payment options for breakfast, lunch or dinner. By this fall, commuters in the Boston area can add "buying commuter rail tickets with an app" to that list. According to a post at, the MBTA signed an agreement Friday that will allow "[c]ustomers with an iPhone, Android, or BlackBerry who download the free app [to] buy one-way, round trip, 10-ride, and monthly tickets and passes using debit or credit cards." The app will have a scannable QR code. The post describes how it will work:

"Riders will activate their pass when the conductor approaches, and it will generate a one-time image lasting long enough to be checked on the trip but not reused on another ride ... Though the mobile tickets will contain QR codes, the T will not initially equip all conductors with hand-held scanners, using them only for spot checks. Instead, digital watermarks, such as changing colors and animation, will help deter fraud while allowing passes to be verified at a glance."

The post pointed out that similar mobile payment options are common in England, "but the T would be the first major US commuter rail to offer passengers an alternative to paper." MBTA officials also told they will use the new app to gather more accurate ridership data.


February 06 2012

Four short links: 6 February 2012

  1. Jirafe -- open source e-commerce analytics for Magento platform.
  2. iModela -- a $1000 3D milling machine. (via BoingBoing)
  3. It's Too Late to Save The Common Web (Robert Scoble) -- paraphrased: "Four years ago, I told you all that Google and Facebook were evil. You did nothing, which is why I must now use Google and Facebook." His list of reasons that Facebook beats the Open Web gives new shallows to the phrase "vanity metrics". Yes, the open web does not go out of its way to give you an inflated sense of popularity and importance. On the other hand, the things you do put there are in your control and will stay as long as you want them to. But that's obviously not a killer feature compared to a bottle of Astroglide and an autorefreshing page showing your Klout score and the number of Google+ circles you're in.
  4. iBooks Author EULA Clarified (MacObserver) -- important to note that it doesn't say you can't use the content you've written, only that you can't sell .ibook files through anyone but Apple. Less obnoxious than the "we own all your stuff, dude" interpretation, but still a bit crap. I wonder how anticompetitive this will be seen as. Apple's vertical integration is ripe for Justice Department investigation.

January 09 2012

The hidden language and "wonderful experience" of product reviews

How do reviews, both positive and negative, influence the price of a product on Amazon? What phrases used by reviewers make us more or less likely to complete a purchase? These are some of the questions that computer scientist Panagiotis Ipeirotis, an associate professor at New York University's Stern School of Business, set out to investigate by analyzing the text in thousands of reviews on Amazon. Ipeirotis continues to research this space.

Ipeirotis' findings are surprising: consumers will pay more for the same product if the seller's reviews are good, certain types of negative reviews actually boost sales, and spelling plays an important role.

Our interview follows.

How important are product reviews on Amazon? Can they give sellers more pricing power? Ipeirotis: The reviews have a significant effect. When buying online, customers are not only purchasing the product, they're also inherently buying the guarantee of a seamless transaction. Customers read the feedback left from other buyers to evaluate the reputation of the seller. Since customers are willing to pay more to buy from merchants with a better reputation — something we call the "reputation premium" — that feedback tends to have an effect on future prices that the merchant can charge.

What are some of the most influential phrases?

Panagiotis Ipeirotis: "Never received" is a killer phrase in terms of reputation. It reduced the price a seller can charge by an average of $7.46 in the products examined. "Wonderful experience" is one of the most positive, increasing the price a seller can charge by $5.86 for the researched products.

How can very positive reviews be bad for sales?

Panagiotis Ipeirotis: Extremely positive reviews that contain no concrete details tend to be perceived as non-objective — written by fanboys or spammers. We observed this mainly in the context of product reviews, where superlative phrases like "Best camera!" with no further details are actually seen negatively.

Can a negative review ever be good for sales?

Panagiotis Ipeirotis: It can when the review is overly negative or criticizes aspects of the product that are not its primary purpose — the video quality in an SLR camera, for example. Or, when customers have unreasonable expectations: "Battery life lasts only for two days of shooting." Readers interpret these types of negative comments as "This is good enough for me," and it decreases their uncertainty about the product.

What is the effect of badly written reviews on sales?

Panagiotis Ipeirotis: Reviews containing spelling and grammatical errors consistently result in suboptimal outcomes, like lower sales or lower response rates. That was a fascinating but, in retrospect, expected finding. This holds true in a wide variety of settings, from reviews of electronics to hotels. It's even the case when examining email correspondence about a decision, such as whether or not to hire a contractor.

We don't know the exact reason yet, but the effect is very systematic. There are several possible explanations:

  • Readers think that the customers who buy this product are uneducated, so they don't buy it.
  • Reviews that are badly written are considered unreliable and therefore increase the uncertainty about the product.
  • Badly written reviews are unsuccessful attempts to spam and are a signal that even the other good reviews may not be authentic.

What's the relationship between the product attributes discussed in reviews and the attributes that lead to sales?

Panagiotis Ipeirotis: We observed that the aspects of a product that drive the online discussion are not necessarily the ones that define consumer decisions to buy it. For example, "zoom" tends to be discussed a lot for small point-and-shoot cameras. However, very few people are influenced by the zoom capabilities when it comes down to deciding which camera to buy.

This interview was edited and condensed.

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December 01 2011

A young entrepreneur's perspective on Angolan innovation

Nyanga Tyitapeka (@kapetatyi) is the founder and director of Infonauta, Prestação de Serviços, an Angola-based startup company specializing in customer loyalty solutions. I met Tyitapeka at Strata New York last September and was struck by her background in energy and environmental analysis, political science, and economics.

The chance to hear about technology innovation in Africa from a personal perspective is rare, so I asked Tyitapeka to share her thoughts on the Angolan tech scene.

Give us the 10,000-foot view of the technology industry in Angola.

Nyanga Tyitapeka: Today, Angola is certainly not a bountiful country when it comes to tech goods and services. The industry is only just starting here — Angola is one of the last frontiers for big tech giants.

However, the industry is expanding at a fast pace, pervading societal interactions and becoming a source for change in the lives of many Angolans in a significant way. It will be extremely difficult for Angola to stay immune to the wave of technological development that has hit the rest of world in the last decade or so. There's a concerted effort by the government to lay down the regulatory foundations, and it's also investing in infrastructure that will allow for faster development. Fiber optic cables, for instance, are being installed, and we expect to have a telecom satellite by 2013.

Large tech companies have, in the past, adopted a wait-and-see approach toward the Angolan market, either opting to not come or to use middle-men; this scenario is definitely changing. Companies like Google, which held a conference in Luanda during the first week of November, have recognized that this moment is propitious for serious investment.

It's not surprising that telecommunications has benefited the most from tech innovations. For decades, civil conflict was a de facto bottleneck in the flow of information. Once peace came and the right conditions were set, it was as if a can of soda had burst open. Angolan telecommunication companies, with the help of Siemens and Portugal Telecom, along with business leaders (both men and women) who turned to Brazil, Dubai, the U.S., the UK, Portugal, and China as suppliers of mobile phones and computers, all moved fast to respond to the demand of the market for telecommunication goods and services. The number of newly installed landlines dwindled, pay phones never took off, desktops are mostly confined to the office setting — yet communication soared.

What are the biggest challenges facing Angola today?

Nyanga Tyitapeka: Low levels of literacy, in general. There is not enough brain power devoted to the tech industry and, consequently, there is little to no production capacity. Development issues are the biggest problems for Angola and for a significant number of countries on this continent. There are other challenges, but those are minor in the face of basic needs. Literacy is obviously a prerequisite to achieving reasonable tech-literacy.

Where are the biggest opportunities?

Nyanga Tyitapeka: Like in many other African countries, Angola will soon experience vertiginous growth in mobile tech applications. Mobile platforms and the introduction of GSM, coupled with some interesting payment options, have allowed a war-torn country to bypass huge infrastructure investments. Here, both individuals and businesses rely heavily on USB modems to browse the Internet and on cell phones to stay in touch. An Angolan with a bank account can conveniently check her account balance by sending an SMS, bypassing traffic and long queues at the bank.

Some predict that in the next few years, services like buying a movie ticket, downloading an MP3 file, or using a vending machine in Africa will not require cash nor a credit/debit card, just a cell phone. Cell phones as wallets work well because while an illiterate person may not know how to read and write, she can count and use numbers. Therefore, she can learn how to send an SMS, so long as the message is a number. The possibilities are endless — think about it. When a business can receive mobile payments from a customer, everybody wins: the business's bank, the customer's bank, the telephone services provider, the business, and the client.

What is fascinating about Angola and sub-Saharan countries in general is that they compensate for weak infrastructure and overcome major obstacles by embracing solutions that are nearly grid-free and simple to use.

There's also plenty of room for growth for some device makers who want to establish a presence in the region. Angola, in particular, imports virtually all of the tech devices it uses. Creating regional industrial subsidiaries would greatly cut down the price of imported devices, which sell well here, in spite of the fact that they are extremely expensive due to low supply.

You founded your own company recently — how would you characterize the startup environment in Angola?

Nyanga Tyitapeka: The startup environment is heavily skewed toward restaurants, beauty parlors, corner stores, and small fashion boutiques. Angolans are known in the international business community as entrepreneurial; however, the success rate of startups is still very low. Starting up a business is relatively easy and cheap. I did it in one month's time. However, maintaining it is a whole different game. Some 60% of businesses fail within the first year. You want to start out as lean as possible, say by running a home office by yourself. But working from home is often looked down upon, and working alone can be extremely hard — running administrative errands around town with heavy traffic and without the support of an assistant is a nightmare here.

More troubling for the startup environment than dodging heavy traffic, avoiding high rents, and overcoming cultural barriers is the small pool of enthusiastic people who are OK forfeiting a salary in order to join a startup.

Are you working on any new projects?

Nyanga Tyitapeka: I am currently building Infograficus. It's a hobby platform and a place for Angolans who want to start using the data I've been tracking to make their lives a little easier.

I've started playing with the data I've collected to get some visuals, mostly mapping how prices of the same product vary in different areas of the city. I am also interested in using the information to visualize the economic geography of street vending and to understand the civil response capacity to an emergency situation. It is one way I can help people who face the same problems I face on a daily basis.

Is big data having an impact on the work you do? Where else are you seeing its influence?

Nyanga Tyitapeka: I am not aware of how companies and governmental agencies are harnessing the power of big data, but it is out there, especially in the energy, financial, telecommunications, retail, travel, and public and health sectors. The truth is that Angola is at a stage of the evolutionary process where data itself is a product. Companies and government institutions are, knowingly or not, collecting loads and loads of data.

Data is a natural resource that can assume many forms — from cash transactions to video footage in a store. I call it a natural resource because it is a byproduct generated almost automatically in every business transaction. My hope is that aside from just storing data and running the risk of losing it, economic agents will start looking for companies like mine to figure out what to do with data they already have: how to get better data, how to analyze the data by asking the right questions, and how to turn data into actionable information and a competitive advantage.

This interview was edited and condensed.

Strata 2012 — The 2012 Strata Conference, being held Feb. 28-March 1 in Santa Clara, Calif., will offer three full days of hands-on data training and information-rich sessions. Strata brings together the people, tools, and technologies you need to make data work.

Save 20% on registration with the code RADAR20


November 21 2011

Jonathan's Card: Lessons from a social experiment

Earlier this summer, author Jonathan Stark (@jonathanstark) launched a social experiment by releasing his Starbucks card to the general public. Based on the "take a penny, leave a penny" tray near some stores' cash registers, Stark encouraged people to use his Starbucks card — to spend the money on it and/or to add cash back to it. While Stark never put any stipulations on the process, some observers were taken aback when another developer, Sam Odio, explained how to use Jonathan's card to buy an iPad.

It's been several months since Starbucks shut down the experiment, and now that the frenzy around it has subsided, I asked Stark a few questions about what motivated him to begin the project and what he learned in the process.

Why did you launch the Jonathan's Card experiment?

Jonathan StarkJonathan Stark: The motivation stemmed from my underlying belief that the vast majority of people are good. An opportunity to test this belief in public and on a global scale clicked with me at a very deep level. I couldn't have articulated this at the time, but it became very clear in retrospect.

For what it's worth, here's how the experiment got started:

I had been testing various mobile payment solutions while doing research for a client project. Starbucks' iPhone app was pretty cutting edge at the time, and I liked it. I wanted to test the app on an Android phone, but Starbucks had not yet released their Android app, so I took a screenshot of the in-app barcode on my iPhone and emailed the picture to my Android device. Sure enough, the barcode reader at the Starbucks point-of-sale (POS) system was able to read the picture of the barcode on my Android phone. This blew my mind because I had essentially emailed money to myself and bought physical goods with a digital photo.

Screenshot of Jonathan Stark's Starbucks cardA screenshot of Jonathan Stark's Starbucks card (click to enlarge).

As far as I knew, this was unprecedented. So, I did what any self-respecting geek would do: I blogged about it.

In the blog post, I invited readers to download the card image to their smartphones and see if it worked for them elsewhere in the US and around the world. It did work all over the US and in a handful of places outside the US. People who used it were amazed and delighted. It was really fun giving out free coffee, so I reloaded the card online a few times. Eventually it got a bit pricey, so I figured it'd be a once in a while thing.

Then one Saturday night, I noticed that my card balance had gone up. This freaked me out because the app is linked to my debit card and I thought someone might have guessed my password and was emptying my checking account. Fortunately, this was not the case. What had actually happened was that one of my friends discovered that he could anonymously add money onto my card using the picture of the barcode, either in person at the POS or by entering the number at

At this point, my head exploded. I instantly realized that I could use the picture of the card to create a worldwide "pay it forward" experiment. I was up all night building a landing page that described the experiment, gave instructions on how to use the card, and how to donate to the card. I also wrote a script that scraped every minute for the current card balance — whenever the balance changed, the card would tweet its balance. When the card balance went to $0, it would tweet for help with a link to the instructions on how to donate.

What surprised you the most about the experiment?

Jonathan Stark: There were a lot of surprises. It's hard to say what surprised me most. Here's a list of biggies:

  • That Starbucks let the experiment go on for as long as it did. Sharing the card goes against the company's terms of use, and it could have been killed right away.
  • I was surprised how many people were perfectly comfortable with the concept of buying things with their phones. It seems to me that the average smartphone user is more willing to accept the "mobile wallet" concept than industry analysts would lead you to believe. I expected more people to have security concerns. I think I only got two questions about that.
  • How fast and huge something gets when it goes viral. I was getting contacted by network TV producers within days once the experiment took on a life of its own.
  • How addictive the Twitter feed was. By the end, @jonathanscard had more than 9,000 followers, many of whom later told me that they were watching it like TV, cheering when someone would make a big donation, booing when someone would spend $100 at a pop.
  • How generous most people are. I was amazed how many people were willing to throw $10, $20, even $50 into the pool to buy a coffee for some anonymous stranger. In one week, more than $19,000 went through the card.
  • How accommodating Starbucks baristas are. We heard stories about people bringing all sorts of wacky stuff up to be scanned: digital cameras, laptops, iPads, and so on. People who didn't have any mobile devices even took to printing the barcode out and scanning it like a coupon.

What are the broader implications from this experiment?

Jonathan Stark: There is no doubt in my mind that the experiment would not have taken off like it did without the Twitter feed. It was addictive, interactive, and simple. Once the community grew and started to engage with each other we had to create a Facebook page to allow people to have threaded conversations. Twitter became the card's data feed and Facebook was where people talked about it. Both were critical but in very different ways.

Starbucks doesn't have an API, which I think is a big missed opportunity. Retailers want to make sticky and engaging loyalty programs, right? One great way to do that would be to publish an API that allows third-party developers to build on top of a loyalty program in all sorts of delightful and unexpected ways. One thing everyone was asking for during the experiment was a heat map of where the purchase activity was taking place. Because there was no API, I couldn't provide this — which is too bad because it probably would have become viral in its own right.

Strata 2012 — The 2012 Strata Conference, being held Feb. 28-March 1 in Santa Clara, Calif., will offer three full days of hands-on data training and information-rich sessions. Strata brings together the people, tools, and technologies you need to make data work.

Save 20% on registration with the code RADAR20

This interview was edited and condensed.


December 17 2010

ePayments Week: Google goes patent shopping

I'll be tracking payment-related news, products and ideas in the weeks to come. Below you'll find a number of recent developments that caught my attention.

Google's mobile payment purchase

We've been waiting to see how and when Google will move into the mobile payments space. It looks like we may not have to wait much longer. At the Web 2.0 Summit in November, Google CEO Eric Schmidt demoed a location-smart purchase on an anonymous black phone that appeared to be running an upcoming version of Android 2.3 (code named "Gingerbread"). But it wasn't Schmidt's purchase on stage, but a purchase by Google last summer that may shed more light on what was going on behind that demo. Tech M&A blog Inorganic Growth revealed this week that Google bought Toronto-based Zetawire, a low-profile mobile startup with patents involving "mobile banking, advertising, identity management, credit card and mobile coupon transaction processing."

The Nexus S, the first Android 2.3 phone, went on sale this week (check out Engadget's review). Since Gingerbread supports near-field communications (NFC), the promising wireless technology that improves on Bluetooth (faster) and RFID (more focused and secure), we should soon have a better idea whether the mobile payments revolution is well underway or just a step closer.

Video of Eric Schmidt at Web 2.0 Summit is below:

For me, Visa? You shouldn't have.

Visa launched its iPhone app this week. It appears to be a timid start for an organization whose chief executive recently boasted that they intend to compete head-on with PayPal.

At launch, the app is offering an ATM finder and location-smart coupons from a number of vendors. This app's potential lies in its promise to learn a customer's buying habits and serve targeted offers. I was a little surprised that Visa wasn't able to do more of that targeting on its first try. By entering my credit-card number and agreeing to terms, I no doubt gave access to years of transactional data. My enthusiasm for the app will likely never be higher than the day I installed it, so an opportunity was missed. I was also disappointed by a bevy of untargeted offers: chocolates, day spas, and jewelry stores. My Visa app seems to think I'm a trophy wife.

Does FarmVille need ads?

Most social games are only able to sell virtual goods to 1 to 3 percent of their players, raising questions about how Zynga (and other social-gaming companies) will continue to thrive if they don't pounce on revenue streams like advertising. An AdWeek report on the Social Gaming Summit held in New York earlier this month suggests that as the dominant player, Zynga doesn't have to worry about ads right now -- perhaps because it's making enough from sales of virtual goods in its games. Still, an exec cited in the AdWeek piece noted that "not monetizing 95 percent of your audience isn't a great model." Sounds a little like public radio -- with mafia and pirates, of course.

Got news?

Suggestions are always welcome, so please send tips or news here.

October 19 2010

Opening up the mobile wallet

Among the most transformational aspects of mobile are the effects it's having on consumer purchases. In the same way that plastic has more or less killed cash as the legal tender of choice, mobile will eventually kill plastic -- and perhaps sooner than you might expect.

In case you missed it, one of the more grandiose announcements of the summer came when AT&T and Verizon teamed up to displace credit and debit cards with smartphones. That was just one of many recent initiatives and announcements in the mobile payment space. Other include: Starbucks unveiling a mobile rewards program, JC Penney experimenting with mobile coupons, commuters paying for fares with mobile devices, fans at live events ordering concessions without leaving their seats, and transit authorities developing smarter parking meters.

I recently caught up with three innovators working deep within the mobile commerce space: Naveed Anwar, senior director of PayPal's Developer Network; Kevin Hartz, founder and CEO of Eventbrite; and Humberto Roa, co-founder of iConcessionStand. They share their thoughts on mobile payments and ecommerce below.

How are smartphones changing the ecommerce space?

Naveed Anwar, PayPal: The mobile commerce industry is booming. By the end of 2011, Nielsen predicts smartphones will overtake feature phones in the U.S. market. And Gartner predicts that by 2014, mobile and Internet technology will help over three billion of the world's adults to electronically transact. In addition, emerging economies will see an increase in mobile and Internet adoption through 2014. The worldwide mobile penetration rate will reach up to 90 percent.

How will mobile wallets affect consumers?

NA: Consumers want to live an on-demand lifestyle, and that trend is driving consumer purchasing behaviors. The mobile wallet is necessarily an on-demand wallet, meaning it's accessible from different devices and platforms and can hold more than any wallet in your back pocket: multiple funding sources, coupons, receipts, loyalty cards, private label cards, and business cards ... and that's just the start.

What has been the biggest challenge for micropayment platforms?

NA: The biggest challenge they face right now is keeping up with -- and getting ahead of -- the pace of change. The mobile space, for example, is innovating so fast that we need to be focused and strategic about the opportunities we pursue and the tools we offer. When everything is moving at a hundred miles an hour, that's a lot easier said than done.

What is the most important thing you've learned about building mobile apps on an ecommerce platform?

Kevin Hartz, Eventbrite: The one thing that's always struck me as being most important is simplicity -- the ability to create accounts and conduct transactions is essential to adoption. If you have a platform that anyone can build an app on, then innovation will run rampant and everyone involved has something to win.

How many of your users prefer electronic payments to a more conventional payment option?

KH: The last stats I saw showed that over 60 percent of the volume of Eventbrite transactions use some form of electronic payments, and that figure has been pretty steady over time. We have some exciting plans for mobile forthcoming and expect that number to grow as mobile devices continue to penetrate transaction volume in our market.

How has mobile changed event planning?

KH: One of the biggest changes is the imminent death of the paper ticket. Eventbrite is a big opponent of the conventional paper ticket, and the mobile wallet concept only helps us to kill it dead even faster. It boggles my mind that we still use physical tickets for sporting events, concerts, etc. We'll definitely see a lot of innovation on this front over the coming months, because it'll only make things simpler for people. Simple sells.

How have micropayment systems helped you as a small business?

Humberto Roa, iConcessionStand: We offer an exclusively mobile marketplace that's location-based and that allows people to interact with stores relative to a particular venue, so we're a small company but have many of the needs of a much larger company. Micropayment systems makes it possible for us to be able to pull off those kinds of logistics.

What aspect of mobile payments needs to change?

HR: I really hope that mechanisms such as chained payments will go mobile. We monetize our app by charging a small convenience fee on each transaction, and ultimately we'd like to be able to collect that convenience fee immediately and pass on the rest of the funds to the ballpark. [Note: iConcessionStand is an app used to purchase concessions at venues, such as ballparks.] Right now, we aren't able to do that because chained payments aren't available for mobile, so we send all of the money to the ballpark and then invoice them for our convenience fees.

This post is part of a collaboration between PayPal and O'Reilly exploring the future of payment.

The rise of mobile wallets will be discussed at the Innovate 2010 Developer Conference, being held October 26-27 in San Francisco. Full details are available here.

December 14 2009

Innovation from the Edges: PayPal Taps the Developer Community to Build Next-Gen Payment Apps

Two enduring tenets of Web 2.0 are "A platform beats an application every time" and "All the smart people don't work for you." Companies that take those bits of wisdom to heart find ways to engage developer communities to extend their products--and the result can be creative, surprising new applications that would never have been developed from within. Online payment giant PayPal recently announced the PayPal X APIs, a new group of developer APIs designed to enable new applications that can more tightly integrate with PayPal services. To encourage developers to create some awesome applications with the APIs, PayPal is offering prizes $100,000 and $50,000 (in cash plus waived transaction fees) for the best new applications. We caught up with PayPal's director for their Developer Network, Naveed Anwar, as he prepared to deliver a talk in Beijing, and he filled us in on what the new PayPal APIs bring to the table for application designers, and laid out the details of the challenge.

James Turner: In the last week or so, you've released new API. Can you talk a little bit about what's different with them, in comparison to how people have interacted with PayPal in the past as developers?

Naveed Anwar: We haven't actually released new APIs; what we have done is that we announced a set of APIs on November 3rd, which was our adaptive suite. Adaptive suite APIs include adaptive payments and adaptive accounts. Then we also announced our authentications and permissions API. What we had done at Innovate was to make those APIs exclusive -- adaptive account, authentications and permissions, exclusive to the attendees of the conference. We did a full-on release for those APIs on November 3rd when we announced the platform. But we've had an overwhelming response from the community where people where saying, "You're limiting us from actually using these APIs. Is there any ability for us to get these early on rather than to wait until 2010?" Based on the feedback, based on what people were looking for, we decided to open it up to everyone now, instead of sometime in 2010.

PayPal_mark_180x113.gifVery briefly, adaptive payments has a lot of core features. Some of them are the ability to send money, receive money, do parallel payments, do chain payments, do PIN authorizations. Adaptive account is the ability to create single or batch accounts in an in-flow, versus the idea of actually going and creating an account off an experience of the PayPal account. And authentication APIs is the way of actually interacting and accepting PayPal as an authentication mechanism on your site. Those are just like very high-level things that we have announced with our launch. But PayPal X per se is not just the new stuff that we announce, but also a slew of everything that is our merchant services, our web check-out flow, all of those products which have been out there in the community and people have been utilizing for the last seven years. Those all come under the same umbrella.

James Turner: So most people are familiar probably with PayPal as a third-party payment mechanism; that you go to a site, you buy something and then you get redirected to the PayPal site. What new functionality does this bring into that picture?

Naveed Anwar: Well, what you describe over there is a very typical merchant flow where someone wants to create PayPal as a payment mechanism. And once they are about to complete their transaction of the shopping cart experience, they click on a button which they come to a PayPal site and basically helps them complete a transaction. With the new set of APIs, what we've decided to open up is the ability for people to enhance that experience. Rather than to jump from their site over to the PayPal site and lose context, now people can actually incorporate that experience straight into their application. You don't have to jump onto the PayPal site to complete a transaction or to create an account. That is one major functionality that we're adding. And really, it's removing those barriers that developers have had in the past of actually trying to think of coming up with a payment solution, and giving them the set of tools which lets them concentrate on the core experience of the application versus trying to figure out how are they actually going to get payments integrated; how can they come up with a payment mechanism; what are the rules and regulations needed to set up a payment system. All of those headaches are taken away from the developer and the entrepreneur or the merchant. And that is where the solution from PayPal comes.

James Turner: So most developers have probably at some time in their life had to integrate in with a credit card processing system. What do you see the real ease-of-use or value-add on a developer perspective for using PayPal instead?

Naveed Anwar: The biggest advantage that I see is that as you look where the industry is moving towards, it's really focusing around digital goods as well as mobile. There isn't any platform out there which supports cross-border transaction and cross-border ability to pay anyone and receive goods. I see a lot of movement of goods which are actually created outside the US and then shipped over to the US as well as digital goods such as video games where a lot of the development community is out in Southeast Asia. In particular, you have developers setting out in India, China, as well as Singapore where someone wants to buy a quick experience on a digital good, be that a game on Facebook, be that a game in some other social networking environment. And that ability of PayPal, where we support 190 countries and 24 currencies, is something that no one else has been able to offer. We've done a lot of partnerships with a lot of banks and extended the reach. And that is the real value proposition of someone who integrates with PayPal X. From the very first day, you become global in nature. And with the scale of things which move these days across the globe, PayPal fits very beautifully into this as a solution for the community.

James Turner: One of the big hopes in the community has been to see micropayment become more feasible. Traditionally, the sub-dollar transaction level just hasn't been economically feasible because you get killed by the per transaction cost. Is this going to help people out?

Naveed Anwar: Absolutely. I think as the platform opens up more APIs -- I mean we did do a very brief announcement around new pricing, which will be available next year. And we'll make an announcement on what date it's available, but going down to a flat transaction model for goods moved across in certain areas. But the real thing which I look over here is that as they're looking and working with our community, we're trying to mold our roadmap based on feedback from the community. So a lot of times, you'll have companies out there talk about like, "We can offer you a certain amount of feature sets and we'll work with you." But really, no one actually reserves the road map to work with the community.

In the case of micropayments, in the case of other APIs, we've been hearing a lot of feedback from the community. What we announced on November 3rd was that we're reserving 30 percent of the roadmap based on direct feedback from the community where they get to vote on certain features that the community has been asking. And based on the ranking of the community, we will put them into our roadmap and release them. And that is one of the things that we heard loud and clear, that they wanted a micropayment solution. They wanted to see new pricing. And we touched a little bit on that on November 3rd. And early Q1, we will be announcing when that pricing will be available to the rest of the community.

James Turner: One of the things we're seeing as PayPal matures and expands is a lot more of PayPal as almost a financial institution. As you become more of a generic payment methodology for sites and other institutions, what kind of assurances are you going to be able to bring to the end users that things like fraud protection and challenges to charges are going to be easy for a consumer to do?

Naveed Anwar: So I'll take a step back for this one. Security comes to the core of what we do. That is one of the main reasons why we took a while. I mean the idea of opening up a platform is not something that came overnight. We've been thinking about this long and hard. And anytime we do deal with financial institutions and the complexity of moving money, the fact of risk management, the fact of fraud management comes in majorly. We've spent the last three years looking at all of the possible avenues in making sure that we are building out the safest and secure platform which we will open up to the developer community by making sure that we're building the appropriate risk models in place, building out the appropriate fraud deterrences in place. And that's something that we take very seriously.

That said, PayPal has been doing this for quite some time. For the last seven years, if you look at the PayPal history of being able to be the number one P2P, person-to-person payment solution, and then three years ago when we launched our merchant services program, the fastest growing merchant services program accepting PayPal, the fact that we moved almost $2,200 a second through our pipeline into 190 countries; over 24 currencies gives me quite a bit of assurance that what we are trying to build out over here is not just safe and secure, but it's also keeping in all of the models of risk that we know of to date as well as building a mechanism to anticipate things which might be hitting this industry and building a good set of resources behind it. So I feel that what we're opening up from the platform side is not just something we came up overnight but spent quite a bit of time looking into all of the details and something that we will keep monitoring very closely.

James Turner: You have, right at the moment, a challenge going on for your developers which I believe is going to end this week. Can you describe a little bit about what that’s about and if there's still time for people to get involved?

Naveed Anwar: Absolutely. The last day for people to actually register, which is basically giving your idea of what you want to submit for participating in the competition, is December 16th. Now that said, there's always that possibility of extending that deadline because a lot of people have been asking for some time. But December 16th is the current deadline for which people can submit an idea. There are two prizes. The first prize is $100,000 in which $50,000 is a cash price and $50,000 in waived PayPal fees. The second prize is $50,000: $25,000 in cash and $25,000 in waived PayPal fees. The ideas are simply to utilize and come up with an innovative application using our set of APIs, and let the community basically vote on it. So the first set of ideas, once they are submitted, are going to be opened up to the community to vote on. And from that, a set of finalists will be selected which will be judged by a panel of judges from PayPal and across the industry which are listed on our rules and regulations site. And from there, the winners will be announced. We're shooting for them to be announced at the Demo conference coming up in March.

James Turner: Obviously you don't want to give people, "Here's what to do to win." But in your mind, if you had to come up with one interesting application that people could use as an example, what would you think something you've thought of would be?

Naveed Anwar: Again, like you said, I don't want to push people in a particular area, but really looking in ways on how we can solve the problem of transactions on mobile devices is something that excites and interests me a lot, if people can think around those areas. A couple of examples that I can share that people have already built applications on is a company called Fundraiser. Fundraiser, which is a company which launched at TechCon, utilized adaptive payments as a solution in which, very quickly, they came up with an idea of setting up fundraisers for any particular cause in which people could contribute online. And that would come through parallel payments and chain payments on features out of our adaptive set of suites. So those are the kind of ideas that we're looking for. Something very creative. Something out there which people want to solve for and can be innovative around it. So that would be something that I would suggest people to look in, particularly the mobile area.

James Turner: If I'm a developer and I'm considering doing this, I haven't actually had a chance to look at the APIs and the platforms, what would my choices be as far as languages, as far as platforms?

Naveed Anwar: We have sample code available in PHP, C, C++, Ruby. I mean it doesn't limit anything. Again, it's a true platform, whatever you feel comfortable in writing code in. I think you'll find a lot of examples available in those out over here. But, again, not to limit anyone. We've got sample code available on That is our developer portal where you find sample applications, our documentation APIs, SDKs, and all of the things that you need to get started on one single destination. So I encourage developers to spend a little bit of time thinking about their idea and then looking across some of the high-level documentation before they actually sit down coding.

James Turner: So just to finish off, obviously you're talking about a fair amount of money even for a company as big as PayPal. What is it that makes you want to kind of spark this kind of interest? PayPal, in a way, is a big enough brand that you don't really need to introduce people to the brand. Why do you need to run this big promotion?

Naveed Anwar: It goes back to the basics which I started off with, in that we can probably come up with solutions and think of use cases for one or two or three or four ideas. If you look at the whole global scale of ecommerce available, it is a business. It is an opportunity of almost $30 trillion. PayPal is doing, from this opportunity that is available out there, a very small percentage. And if we could actually facilitate the community out there who are building applications -- and an example I would use is like look, when Facebook opened up their platform, it allowed people to work in that particular environment, in the Facebook environment. When the iPhone opened up their platform, they allowed people to work in their environment which was build the applications on the iPhone. When PayPal was looking at opening up its platform, we are not limited by one particular area. We go into the enterprises. We go into social networking. We go into all the places where payment as a solution is needed. And if we can actually reduce that barrier of entry -- because at the end of the day, when anyone is building out a business and anyone is building out an application, they're looking at ways of monetizing it. Traditionally, the ways to monetize is to take click-through or inserting ads, but really not a mechanism in which people can actually get real money coming to their account. That's where PayPal comes in.

From a brand perspective, I think if you look at what PayPal started off with, it was kind of like four failed business models and the fifth business model was the ability to send money to each other, and through a demo which was going from one Palm Pilot to another Palm Pilot. So doing and working from a demo point-of-view where the developer community goes back to its roots and we really wanted to go back to our roots and work directly with the community. Hence, the reason -- the push around, bringing back that domain, using that for the community, as well as looking at ways in which how the community can give us feedback on the 20th or the 30th use case for which I cannot think internally, but someone out there already has a problem and they want a solution. We want to work with them to have a solution for them. What do I get out of all of this? It's that when someone thinks about writing an application, be that in an offline mode or an online mode, and they want to think about integrating payment transactions as a solution, I want their day to start at and finish at That's my ultimate goal.

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