AIAIO: Our Blog

The latest news from the world of ecommerce is that the weekend was much better online than it was elsewhere. Sales rose 13% on ComScore’s Black Friday-through-Cyber Monday annual index–not a huge number in online terms, but strikingly robust when compared with the overall 4% retail decline in November.

Some tips for ecommerce sites looking to maintain the pace through Christmas:

Compete on price. Ugly, and the last thing I usually recommend, but when the New York Times is running 1000-word articles on coupons, penny-saving is a mainstream fact. Use discounts and promo codes to make customers comfortable with your price points.

Accommodate. Comfort levels are always a differentiator: extended return policies, prepaid shipping labels, and custom order requests will make people feel good about buying from you.

Don’t run scared. In this environment, customers are getting skeptical of sites with continual “Buy today!” come-ons. Maintain a consistent voice and use promotions in the typical manner, so people aren’t spooked away from completing a transaction.

As mentioned previously, a successful, happy purchase now can lead to low-cost repeat business leads in 2009. Despite today’s challenges, retailers must avoid sacrificing the future.

How many times this weekend did someone warn you not to buy gift cards this holiday season? I bet the warning came with mention of an email that had in it a crazy long list of store closings. Indeed, a million people are saying the same thing right now.

Never mind that the email in question is misleading at best and fear-mongering at worst. How quickly did it spread? How deep was its impact? How hard will it be for the stores in that email, unwitting participants in a national red flag, to undo the damage contained in that one email? How many people do you know that will give cash instead of credit this season?

Bad news travels fast, even when it shouldn’t. Companies today must work twice as hard as they once did to monitor, repair and prevent the spread of misinformation. One angry customer can affect a million potential shoppers (much as one happy customer can reach a million readers too, only far more effectively).

Today’s consumer is carefully weighing options on every spending decision. Service and positivity will be more important than ever in earning trust and repeat business.

Techcrunch posted a great item on online video penetration earlier this week. The numbers are both inspiring and sobering.

Among them:

• YouTube is streaming 5 billion videos per month
• Only 4% of those videos support paid advertising
• Online video is generating ad revenue at one-tenth the CPM of television ads
• So far, only 1.4% of video watched by Americans is online
• The online component is expected to double by 2010

As it always has been, video streaming is a great potential resource, but it remains largely potential in nature. Financial aspects will have to catch up to other mediums (or expand greatly in volume) for the industry to become fully viable.

According to research firm NPD, Apple’s iPhone was the best-selling cell phone in the U.S. in Q3 2008.

Which, frankly, is remarkable: a company that didn’t make mobile phones until 2007, and which introduced its phone at a staggering $599 price point, has in less than 18 months come to dominate the market.

Perhaps Apple isn’t the biggest cell-phone maker overall; that’s left to mobile-phone companies that produce multiple models. But in having the best-selling, and arguably best, product in the industry has completely altered the landscape.

The one-two punch of the iPhone and iPod underscores Apple’s incredible product strategy. The company creates a product, optimizes the user experience, markets it like mad, and basically comes to own the product segment.

A decade on, iPods still represent more than 75% of the portable music device market. The millions of iPhones suggest that Apple is succeeding in its goal of becoming the default option for consumer-grade smartphones. No other product–from video game systems to household electronics to automobiles–has such dominance from a single player with narrowly focused product segments.

This is now a company that plays to win. It’s a far cry from the Macintosh era, when Apple was content to make products that were simply better than the competition. Now they are the best, and the marketplace is responding in kind. No wonder so many companies look to Apple as their aspirational benchmark.

I find the pricing of the new iPod Touch interesting in light of the current iPhone pricing models.

A new 8GB iPod Touch, with all the functions of an iPhone except the phone, costs $229. A new 8GB iPhone, meanwhile, costs $199 before the data plan is factored in.

AT&T subsidizes iPhone prices to Apple in exchange for driving sales, at rates commonly assumed to be $325 per phone sold. This means Apple sees revenue of $524 per iPhone sold but only $229 for an iPod Touch.

Does this mean the phone and 3G capabilities of the iPhone cost Apple several hundred dollars per unit in production and R&D? Are the core components inexpensive enough that the iPod Touch provides the same profit margin? Or is the iPhone simply an outrageous cash cow?

OK, so I fully understand the copyright implications behind the bald-faced ripoff that is Scrabulous, and owner Hasbro’s insistence that its violators cease and desist, which led to the Scrabulous Facebook app going offline. What I don’t understand is the way Hasbro is going about its business.

Why, if Scrabulous is so popular, has it been unable to forge an agreement with its creators that leverages the traffic?

Why did a lawsuit get Facebook to shut down the app, while the standalone Scrabulous site continues to chug along unabated?

Why, after many months of legal wrangling, did Hasbro choose yesterday to get tough with Facebook directly?

Why wouldn’t Hasbro get its own Facebook Scrabble app out of beta, and check its scalability, before the Scrabulous C&D overwhelmed the Scrabble beta, knocking half a million Scrabble players offline?

In other words, why is Hasbro alienating its users?

Scrabble has a fanatically devoted consumer base. People play competitively, casually, asynchronously–however they can play, they will. Alex used to play via text renderer before the graphic apps launched; I play EA’s stupid Scrabble iPhone app that doesn’t have a good competitive setting, even though I lose by 150 points every game. A friend of mine taps (tapped) into Scrabulous continually throughout the work day.

Point being, people love their Scrabble. They played Scrabulous simply because it was the best option on the market. With their platform knocked offline without a viable alternative, 500,000 devoted Scrabble fans are flat-out livid, and their devotion is being tested. The same people that love their game have pushed the official Facebook app to a 1.3/5 rating, and the discussion board is full of anger.

Hasbro could have been a hero: test its app’s scalability, make streamlined play, and invite Scrabble fans to play on the authentic platform when it was ready for broad release. Only then should they have shut down Scrabulous, forcing people to make a comfortable transition. Instead, their users have lost faith. It will be interesting to see how long their disillusionment lasts.

Update: Apparently the official Scrabble app was hacked yesterday. Which is appropriate. Also in this article: “Analysts say the blow-back from Scrabulous fans, although painful now, will probably be temporary.” Which is probably true, and somehow disappointing.

Everyone is all abuzz, as they always are, about Apple’s latest product news, in this case the $199 3G iPhone. As expected, the focus is on the price: $199 for an iPhone! What a deal!

Yet it’s not that great a deal. The entry price has been lowered but not the true cost. Of course, Apple and AT&T know this; it’s the foundation of the cellular industry, and AT&T Wireless is happy to exploit it here.

Full disclosure: I am a wildly satisfied iPhone owner. I’m not buying the new one, though, in part due to the economics. Here’s why.

The current (now previous) iPhone cost $399 for the device and $20 per month for a required AT&T Wireless data plan. Over the life of a two-year (24-month) contract, the total cost of ownership amounts to

399 + (24 x 20) = $879

This number excludes taxes, regulatory fees and marginal inflationary adjustments, but it’s an accurate gauge of what Apple and AT&T get from the consumer across two years.

For the new phone, the price drops to $199, but the monthly data fee has risen to $30. Sounds small, but over the course of two years, guess what?

199 + (24 x 30) = $919

By the end of two years, total cost of ownership for the new phone is actually higher for the half-price iPhone. Apple managed to get monstrous press coverage of its $199 price point with little mention of the data charge, which substantially affects the equation.

Now, I’m obviously simplifying a conversation with many other variables. (For example, over two years, “real cost” including inflation and float may benefit the monthly plan; people who renew contracts in less than two years have altered ownership costs; etc.) But my point is simply put: list price and true cost are not the same, and the 3G iPhone is no cheaper than its predecessor.