Killing Netflix “Profiles” – A Stupid Business Decision

19 Jun

Netflix LogoNetflix is ending its longstanding policy of allowing customers to hold multiple profiles under a single account.  The announcement was sent to users today:

We wanted to let you know we will be eliminating Profiles, the feature that allowed you to set up separate DVD Queues under one account, effective September 1, 2008.

Each additional Profile Queue will be unavailable after September 1, 2008. Before then, we recommend you consolidate any of your Profile Queues to your main account Queue or print them out.

The profiles feature was an excellent way for multiple people living in a single household (husband/wife, roommates, etc) to maintain separate queues and profiles of the movies they have liked, disliked, etc., while keeping a joint account of discs sent to the same address for billing purposes and convenience.

The rationale for the move is not substantially explained in the Netflix communication.

While it may be disappointing to see Profiles go away, this change will help us continue to improve the Netflix website for all our customers.

The most likely explanation is that Netflix has determined that joint accounts are causing them to lose revenue due to their pricing structure.  In effect, multiple users in a single household gain scale efficiencies because it is cheaper to have a single account sending 4 discs at a time ($23.99) than it would be sending 2 different accounts 2 discs at a time ($13.99 x 2, or $27.98, a $4.00 difference).  If multiplied across millions of accounts on a monthly basis, that could mean a lot of additional revenue for Netflix.

… IF it doesn’t turn a large number of their customers away.

The real shocker can be found on the FAQ linked from the email sent out today:

You will not be able to transfer your Profiles data to a separate new account

Consider moving all DVD titles in your Profiles Queues to your main account Queue

How does that make any sense?  Does Netflix seriously expect the wives and roommates and brothers and sisters who have been sharing accounts to merge their accounts into a single account and lose all of the individuality and “social profile” data that they used to enjoy from the site?  This mass of data, and the power of the Netflix recommendation engine was one of the major differentiators that kept its users on the site.

To quickly come to my point, this is a plain stupid business decision.  Here’s why:

  • Users will now have to pay two bills where they used to pay one
  • Users will lose all of the data they have built up over time while using Netflix, eliminating the barrier that once kept them from switching to a competitor, such as Blockbuster
  • Users who decide to stay with Netflix will be forced to spend hours re-entering their movie ratings and rental queues
  • Users who have been too lazy to close or downgrade their accounts won’t renew their accounts, killing the “momentem” that once kept them paying every month
  • Users who do decide to turn their single account into two different accounts will feel like Netflix is nickle-and-diming them, forcing them to pay more for a less convenient, equivalent service that they used to pay less for
  • New customers that might have been attracted to the idea of a single Netflix account per household (it’s easy to convince a new roomie to pay $3.00 a month to move from a 2 to 3 disc account, when they might not have been willing to pay $9.00 a month to get an account of their own)

Who wins from this decision?

  • Traditional competitors who can take advantage of the mass of new potential customers shopping for a DVD rental service (e.g. Blockbuster)
  • New competitors (e.g. iTunes movie downloads) who will open their arms to an influx of users who no longer have any reason to stay with Netflix and its old DVD-by-mail technology

Am I missing something here, or did Netflix just make a huge blunder?

Apple’s MobileMe: A Good Idea for the Wrong Price

11 Jun

Apple’s new MobileMe service, which will allow consumers to sync their mail, calendar, contacts, and other content across their phone, personal computer, and any other device which can access the web, has been been called “The Most Interesting part of this year’s WWDC” and heralded by some to be poised to “Crush Exchange and Google.” While the enthusiasm for a clean, integrated connectivity service is understandable, it exaggerates the willingness of consumers to pay for a service that, while imperfect in its implementation today, is almost entirely available today FOR FREE.

I don’t believe that MobileMe adds enough incremental value for consumers to be willing to shell out $99 – $149 per year for the ability to do what they can already. MobileMe is a service that is too expensive and too late.

Seamless connection of email between mobile and web? Try Gmail and its handy mobile application for the iPhone and Blackberry.

Seamless connection of calendars? Try Google Calendar and Google Sync for mobile, which smoothly integrates into your Blackberry.

Photos hosted on your desktop and online? Try using Picasa Web plugins for iPhoto, or the Picasa application for PCs.

Getting this kind of functionality today does require that users plug the pieces together on their own. And it isn’t necessarily perfect. Admittedly, some of the features offered by MobileMe are not offered elsewhere – at least that I know about. For instance, constantly synchronized filing and sorting images and files (if I merge two albums in iPhoto, after both have been uploaded to Picasa Web, I have to duplicate that action on the Picasa website) and synchronized contacts (my BlackBerry integration with Lotus Notes or Outlook is perfect, but MobileMe, which is positioned as “Exchange for the rest of us,” is clearly targeting users that have neither) are both new and useful services, but are not justifiable at this price point.

Apple announced its new MobileMe service yesterday at the WWDC in San Francisco. The service is not yet available on Apple’s website (you can currently only sign up to be notified when it is ready), so I can only speculate as to its full functionality. MobileMe will replace its existing .Mac service. Given how weak customer enthusiasm had been for the original .mac service (which I also feel is largely due to its price relative to other offerings from Google and Yahoo), however, MobileMe’s heritage isn’t exactly a bragging right.

One reason MobileMe could win some users initially, however, is that consumers may rush in to claim valuable username real estate. “Mitch@Me.com” has a certain ring to it…

What do you think? Are MobileMe’s features enough to win consumers over? Will they be willing to fork out $100 for features that can essentially be pieced together for free online today?

Coverage of the announcement of MobileMe:

Harnessing the Ocean’s Power for Electricity

9 Jun

Finavera Technology\'s AquaBouy, which is to be deployed off the coast of CaliforniaThis week’s Economist contains a couple of interesting articles in its Technology Quarterly outlining a variety of approaches to harnessing natural and renewable sources of energy for human consumption. Specifically, it focuses on technologies capturing power from the ocean.

Wind

The first looks at new technology for off-shore wind farms which would allow them to be located much further off the shoreline, generating more energy from higher-velocity winds and fewer complaints from nearby residents whose views have been blocked.

the stronger winds out at sea can generate more electricity, and hence more revenue: wind blowing at 10m/s can produce five times as much electricity as wind blowing half as fast, and this greatly favours building more offshore wind far

Instinctively, this seems like a winning combination: it moves electrical generation out of “my backyard,” where so few people are willing to have it, while also improving the economics of wind energy by tapping a more reliable, stronger source of wind.

The ability to get the electricity generated offshore back to where it is consumed, and the amount of energy lost in transmission would seem to be major barriers to the technology’s success. As would the cost of the turbines and maintenance, which would both seem considerably greater than a traditional land-based wind farm.

Wave

The second looks at the approaches to harnessing wave power which are showing the most promise.

YOU only have to look at waves pounding a beach, inexorably wearing cliffs into rubble and pounding stones into sand, to appreciate the power of the ocean.

Unlike wind and solar energy installations, wave energy sites could theoretically be located far from the coastline if an easy means of transporting the electricity were developed, once again eliminating the “not in my backyard” objections of most other forms of electrical generation.

Alas, harnessing it has proved to be unexpectedly difficult. In recent years wind farms have sprouted on plains and hilltops, and solar panels have been sprinkled across rooftops and deserts. But where the technology of wind and solar power is established and steadily improving, that of wave power is still in its infancy.

The article outlines a number of different designs and approaches to capturing wave energy, but none appear to be the obvious choice for the future. Each faces obstacles that have thus far kept them from widespread adoption.

A recurring problem, ironically enough, is that new devices underestimate the power of the sea, and are unable to withstand its assault. Installing wave-energy devices is also expensive; special vessels are needed to tow equipment out to sea, and it can be difficult to get hold of them… Another practical problem is the lack of infrastructure to connect wave-energy generators to the power grid. The cost of establishing this infrastructure makes small-scale wave-energy generation and testing unfeasible; but large-scale projects are hugely expensive.

The Role of Silicon Valley

Will the innovation of offshore wind and wave technologies happen in the same place so much technological innovation has occurred in the last twenty years? Interestingly, the article mentions that PG&E, the Bay Area electrical utility, is one of the first adopters of wave technology.

In December Pacific Gas & Electric, an American utility, signed an agreement to buy electricity from a wave farm that is to be built off the coast of California and is due to open in 2012

The PG&E project will involve deploying the Aquabouy, which is produced by Finavera Renewables of Vancouver.

Each Aquabuoy is a tube, 25-metres long, that floats vertically in the water and is tethered to the sea floor. Its up-and-down bobbing motion is used to pressurise water stored in the tube below the surface. Once the pressure reaches a certain level, the water is released, spinning a turbine and generating electricity.

Could this early adoption of wave technology, along with San Francisco Mayor Gavin Newsom’s well-known interest in alternative energy, mean that the Bay Area has an early lead in the development of this, the latest of alternative energy technologies?

Greystripe – Developing a Complete Mobile Phone Advertising System from Scratch

7 May

Greystripe LogoAfter attending a presentation yesterday by CEO and Founder, Michael Chang, and VP of Operations, Kurt Hawks, about their startup, Greystripe, I have a newfound appreciation for the challenges that face entrepreneurs innovating in a part of the market where there is so much uncertainty. Greystripe’s primary revenue stream is from the sale of visual ads placed on mobile phones, but the story of how they got there, and the challenges they had to overcome, was both inspiring and daunting. I want to share a condensed version of that story, although I apologize in advance if any of it has been mangled in the retelling.

Where they are today:

Greystripe is an advertising network, content publishing partner, and distribution network for mobile phones that is VC backed by Steamboat Ventures, Incubic, Monitor Ventures. Its most recent capital round, a series B, raised $9 million. Their free, ad-supported games are being downloaded at a rate of 250,000 per day, by users all over the world.

How they got here:

Chang’s presentation focused on how the company has evolved since getting off the ground in 2005, and the multiple iterations the company has gone through in creating its current business model. The company started with a focus on mobile advertising in a single vertical: location based services. Inherent from day one in this business were challenges of developing content for different screen sizes, across different phone manufacturers (e.g. Nokia, Samsung, Motorola) with different operating system software (e.g. Palm, RIM, Microsoft), operating on different telephone networks (e.g. AT&T, T-mobile, Verizon), with different wireless technologies (e.g. GSM, CDMA). The complexity would not stop there.

As it became clear that location based services were evolving much slower than they had hoped, Greystripe’s focus shifted to a different vertical, gaming and applications. Games were sourced from publishers (e.g. Digital Chocolate, Hands-on Mobile), modified with the company’s AdWRAP technology, which inserts additional blank screen pages for advertisements before and after gameplay, and offered for free to users to download on their mobile phones. The next challenge, then, was to find advertisers who would pay for the full-screen advertising real estate within these games. Their search for an advertising network which could effectively source those ads on their behalf turned up empty, and again the fledgling company was back to the drawing boards.

Developing an advertising network, which places ads on behalf of companies and advertising agencies, would require a larger sales force, and a different business model than Greystripe had originally envisioned. A sales team was hired, relationships developed, and the first ads were placed. As the network took shape, and advertisers began to take notice, two new challenges would emerge. First, visual modifications would have to be made to the ads to serve the multiple screen sizes and formats, and second, the games would have to be distributed to users for download. The second would prove to be particularly daunting: it became clear that there were no effective distribution avenues available to ensure that games could actually reach users.

The next iteration of the company therefore took on this challenge: developing a diverse set of distribution channels for publishers. These have evolved to include mobile providers’ own catalogs of games and applications available for download, the sites of the game publishers, and GameJump, a portal developed by Greystripe.

Greystripe today is fully functional end-to-end, and is revenue generating (though not yet profitable). The company is now in its fifth iteration of its business model, and both Chang and Hawks sounded optimistic that even if not the company’s last, that it offered their greatest chance for success to date. Chang acknowledged that future developments could include gathering more detailed profile information about the users of its ad supported games, layering on location sensing technologies, and using it to more precisely target ads to specific users, allowing them to demand a higher premium per screen view from advertisers.

For the potential entrepreneur’s in the audience, Chang offered several tidbits of advice – including the importance of this kind of iteration and evolution in the formation of a business: “Push things far enough to really test the business model, but without pushing them so far that you run the company into the ground.”

Reflecting on the Launch of Hilltop Consultants

5 May

Mini Hilltop Consultants LogoI was recently asked to contribute to a guidebook for new student members of Hilltop Consultants, a student nonprofit consulting organization that I started while I was at Georgetown University. I thought it would be appropriate to also post my thoughts here:

Starting Hilltop Consultants was an exciting part of my university experience at Georgetown. I had heard of other student nonprofit consulting organizations on other campuses, and was surprised to see that none existed in Washington, DC. Given the plethora of nonprofit organizations based in the area, the potential client base was huge. My peers, other undergraduates at the McDonough School of Business, were an ambitious bunch who were eager to find ways to gain real-world experience early on in their university careers. These same ambitions had led many to join The Corp and the Georgetown University Alumni and Student Federal Credit Union, and I saw no reason why their energies couldn’t also be directed toward nonprofit consulting projects.

After returning from a semester abroad, in January 2004 I began working on the plan in earnest. A group of three other students answered my calls for assistance to start a new student business organization. We drafted a mission, vision, and business plan, applied for recognition as an official student organization, and recruited the first leadership board for Hilltop. By April of 2004, Hilltop Consultants was a reality. By the time I graduated in May 2005, we had served four clients over the course of two semesters, and hosted the first ever business strategy case competition at Georgetown University, the Business Strategy Challenge.

As a member of Georgetown’s case competition team, I had experienced first-hand the excitement of student case competitions, and saw a great opportunity to expand Hilltop Consultants’ activities into that area. By choosing a local nonprofit organization as the subject of the case study, we were able to further build upon Hilltop’s mission of both serving the DC nonprofit community and enhancing Georgetown students’ opportunities to learn about business by advising the managers of local organizations as they struggled to tackle real-world business challenges. Our first Business Strategy Challenge, in April 2005, focused on the obstacles facing the United Way as it adapted to a fundraising environment in which donors demanded greater transparency about how their donations were being put to use.

After graduating from Georgetown, I spent three years as a management strategy consultant for the Monitor Group. I was lucky to not only gain experience serving many impressive businesses in the United States and abroad, but also served several nonprofit organization. It was incredibly stimulating to work in a place where I was constantly surrounded by a group of people with such incredible intellectual horsepower.

Consulting is a valuable first-step out of an undergraduate education not only for business students, but students from all academic paths. It provides a strong analytical foundation which is valuable to employers in nearly all reaches of the economy. It also provides opportunities to build presentation skills and enhance a person’s professionalism as he or she is put into meetings with more and more senior clients. Finally, it provides excellent opportunities to explore a variety of industries and practice areas (e.g. marketing, finance, operations) to see where your passion lies.

I hope that Hilltop Consultants not only helps students find a way to contribute to the nonprofit community through a higher impact investment of their time than might otherwise be possible, but that it allows students to “test the waters” of a career in consulting. The long hours, the often grueling travel schedule, and your status as “advisor” rather than “decision maker” mean that consulting certainly isn’t the perfect career for everyone. As a first dive into the professional world, however, I can think of few better options available to a recent Georgetown graduate.

-Mitchell Fox

Founder and President, Hilltop Consultants, 2004 – 2005
Consultant, The Monitor Group, 2005 – 2008

TripIt and Dopplr – A Match (which could be) Made in Heaven

17 Apr

TripItI was recently introduced to TripIt, a “next generation” travel site which has really impressed me in my first day as a user. It replaces Dopplr (which I have used for approximately four months now) as my favorite startup travel destination on the web for two major reasons: its superior input methodology and the practical usefulness of the site’s main service: itinerary aggregation.

While these sites are clearly competitors, I think they might find that if a collaboration agreement could be reached, the sum would be greater than the parts.

Primary Functionality:

Dopplr LogoIf you were to ask me what Dopplr’s primary purpose was – its raison d’être – I would say creating community around travel, particularly for frequent travelers. It notifies me when I will be in the same place as one of my friends (still hasn’t happened to date, but I like the idea) so that we might meet up and grab dinner or a drink, or perhaps to share travel plans and tips. It also allows users to share their ideas and expertise about the places the visit frequently with other users online. In other words, it is a site that’s all about community. Unfortunately, there isn’t much of one yet. Until it has gained the faithful participation of more of my friends and acquaintances (which it has certainly been doing in the last few months), it just isn’t very useful to me.

TripIt, on the other hand, has a pretty compelling service from the get-go. It offers to aggregate the disparate elements of my travels into a single master itinerary. In effect, it does all those nice things your assistant would do for you when planning your travel, if you were lucky enough to have one. It allows me to look to a single location for all of my travel details: what flight I am on, what time it leaves, when it arrives, what seat I am in, what hotel I am staying at (at what address, with what phone number), and which rental car company I will be using to get there. It even provides a few handy “value-adds” such as weather forecasts for the locations I will be in each day, and quick access to city maps.

In January, TripIt added some social functionality and is attempting to build a community element which appears similar to Dopplr. Nevertheless, it’s community appears to be even thinner than Dopplr’s, and has a long way to catch up.

Input:

Whereas Dopplr offers a fairly easy and intuitive method of inputting travel locations and dates, TripIt introduces an input methodology that is truly groundbreaking (in my experience, at least). Instead of requiring any real effort on my part, all I have to do is forward them my confirmation emails (from United, Hertz, and Sheraton, for instance) and it parses the information to identify all the pertinent details. It loads this detail into my calendar instantly and automatically, even capturing things like my frequent flyer numbers.

Another blogger who recently compared Dopplr and TripIt suggested an even better idea: setup an email filter to automatically forward travel plans to TripIt, eliminating even that minimal effort required to put the site to work for me. With an email filter in place, TripIt would automatically aggregate all travel details, update my travel calendar, and stream it through iCal to calendar programs like Google Calendars. (As a side note, am I the only person who wishes you could use an iCal stream as an input into an existing Google Calendar entry, rather than requiring you to establish a separate calendar for external feeds?)

Once in my Google Calendar, my travel plans (and location) would be easily shared with friends and colleagues. Even better, once they join the TripIt community, we can even build collaborative itineraries (such as a business trip with several colleagues making arrangements for the group individually).

The Case for Collaboration:

In summary, TripIt has quickly won me over on its practicality and simplicity. Where it still falls far short of Dopplr, however, is on the community element. Dopplr’s Facebook application and blog widget (which I use here as well as at mitchellwfox.com) allow me to quickly and easily allow others to track my location. The potential value of discovering that a friend’s travels will overlap with my own is strong enough to convince me to continue updating my itineraries there in the meantime. If, however, TripIt’s itinerary aggregation and input could be joined with the powerful potential of community I see in Dopplr’s model, it would be a match made in frequent-flyer heaver.

Where from Here:

It will be interesting to see how the TripIt business model develops. In my initial usage of the site, I didn’t see any obvious indicators of what their eventual business model would be. Following in the steps of the likes of TripAdvisor by adding advertising and the ability to book trips would seem a logical course of action. One interesting suggestion made by another blogger was to enable travelers to re-book previous itineraries through a simple interface asking for the dates of the repeat booking, which could then be executed through a partner, such as Expedia or Kayak.  Given the convenience this would provide the user, you might be able to extract a small booking fee.

It is an exciting time in the development of online travel tools – I wonder what’s next.

Continue reading

Growing Excitement Around Product Recommendation Software

9 Apr

Richrelevance Logo

When you are shopping, a sales person who can quickly understand your needs, preferences, and budget and make a reasonable, logical recommendation is invaluable. While shopping online has typically required that customers already know what they were looking for, or that they conduct extensive research online in advance of a purchase, software is increasing playing the role of the sales person. While approaches to providing customer shopping recommendations have evolved with time, however, today’s software leaves considerable room for improvement. The recent funding of a Bay Area startup focused on customer recommendation demonstrates that venture capitalists have started to wake up to the potential this technology could hold.

Consumer recommendation tools online initially began by mirroring something that already existed in the print world: editor’s reviews and “product of the year” comparisons. Later came “Buyer’s Guides” which followed a simplistic logic to evaluate a few short responses to an online survey to provide a customer recommendation. Then came Amazon‘s product recommendations, based upon the analysis of other customer decisions (“others who purchased this item also purchased…”). This basic methodology has since been implemented in a number of different places around the web, with varying success. I would argue that NetFlix has been the most successful – the one site where I have significant confidence in the accuracy of the recommendations I receive, and act upon them with little or no knowledge of the film recommended. NetFlix, unlike today’s iTunes or Amazon stores, however, does this by not only considered what I have purchased (or viewed) before, but also how much I liked it.

If other online stores were able to earn my trust to a similar level without requiring the lengthy initial interview NetFlix used to gauge my movie taste, and were able to more deeply understand my shopping parameters, tastes, and the reason I arrived at their site, they would stand to gain a greater share of my wallet. If Amazon had been able to successfully recommend a book to me which I enjoyed (rather than assuming the South American literature textbooks I bought for college courses indicate a passion for Spanish authors), I would be far more likely to trust their recommendations a second time, and to begin to rely upon this functionality, visiting their store on a consistent and regular basis.

Baynote, a software firm located in Cupertino, raised $10.75 million in a second round of funding last year from Steamboat Ventures.  Its software attempts to understand customer intent by observing their actions on a website, and groups him or her into one of several customer archetypes to best deliver their anticipated needs.  The challenge, however, is that a customer’s visit may be so short as to fail to give enough evidence of intent for the software to accurately predict their intent.

Richrelevance, a San Francisco based technology startup which yesterday announced it had closed a Series B round of investment valued at $4.2 million dollars backed by Greylock Partners and Tugboat Ventures, is attempting to deliver this kind of next-generation product recommendation software. Built by David Selinger, a leader from Amazon’s recommendations team, richrelevance promises the ability to enhance a web store by personalizing the shopping experience and providing relevant, high quality product recommendations. Unfortunately, however, its technology doesn’t appear to make any massive improvements upon the flawed system in place at Amazon.

Perhaps this shouldn’t be surprising, however. It turns out the challenge of substantially improving recommendation algorithms and technology is a very considerable one. Even NetFlix, which posed a large cash reward to the tune of $1 million for any person or team which could improve the accuracy of its prediction software by 10%, has been unable to meet this seemingly modest goal after over a year and a half.

I will watch with curiosity as other companies tackle this challenge. I believe it is a field with significant growth potential, and one where I would be excited to see more innovation and expansion.  In the meantime, reasonably talented retail sales people need not worry about losing their jobs… just yet.

ING Direct Enters Low Cost Investing

18 Dec

ShareBuilder LogoWith an email announcement sent to ING Direct customers last night, the integration of ING Direct and ShareBuilder is official:

I’m pleased to announce that ShareBuilder, America’s most innovative online brokerage, is now part of ING DIRECT.

… ShareBuilder was created by its pioneering founders to make it simple and affordable for regular folks to invest in the stock market.  Thanks to ShareBuilder, investors big and small can now invest, big time.

The deal, which was first announced in November, introduces an interesting new element into the world of low cost brokerages.

Earlier this year, BusinessWeek covered several new players in the world of low cost equity investment, including the likes of TradeKing, Zecco, and ThinkorSwim, who use a powerful combination of social networking and low cost trading to target first time investors. First time investors value the social element because it helps them make sense of the world of investing through easy to follow blogs, forums, and FAQs. Users answer one another’s questions, reducing the need to hire an army of support staff to help them.

Yet first time investors are also the target audience for ShareBuilder, which earned rave reviews in Forbes “Best of the Web” for its investor starter packages that included an investment guide, investment certificate, and a copy of the Wall Street Journal Guide to Understanding Personal Finance; distinctly “old-school” approaches to targeting this same audience. Its online guides to investing in ETFs are similarly praised by Forbes, and 40% of their users invest in them.

So the question comes to my mind: why did ING pick ShareBuilder? From the little I know of the company, here is some common-sense speculation:

  • Acquire a well-established (ShareBuilder has been around since 1996) with a good reputation and track record
  • Acquire new customers for ShareBuilder, and use the existing base of ING Direct users to add new users to ShareBuilder
  • Acquire a company with a similar target customer to ING Direct: the financially inexperienced
  • Extend ING Direct’s product offering of simple investment offerings to include equity investments and ETFs

How can we analyze those criteria to understand the prospects for these new social investment sites to be acquired?  The first two bullets don’t currently play well, as both are still young and have relatively small pools of users, but that could change with time.  The third and fourth fit quite well, assuming there are some other big fish like ING Direct looking to get into the world of equity investments.

But it is the choice of ShareBuilder and its technology approach which has me thinking this morning. It seems to be part of the “old guard” of web investment (forgive the expression: web investing 1.0), lacking any significant social elements that the new players are using as their main differentiator. But which is the better approach to addressing the needs of new investors? Easy to use, self-service FAQs and free investment books, or forums and user-generated content?

Since obviously the answer to that will depend on the particular user, and their need and desire to interaction and personal advice, I suppose the question really becomes: how big is the pool of new investors who prefer “traditional” help tools, as compared to “social” tools? Are there enough new users comfortable with social networking to slowly erode share from eTrade, ShareBuilder, and the like?

An emerging generation of young professionals who spent their college careers on social networking sites would seem to bode well for Zecco and TradeKing, but it would be interesting to see an analysis: for every 100 new investors joining a brokerage online today, how many go to each?  And what can the new players do to increase those figures to their advantage?

Opportunity to Build a Worldwide Brand of Boutique Hotels

16 Dec

Thai Boutique Hotel - BangkokTourists visiting new cities are certainly not all looking for the same thing out of their experience. Some seek inexpensive or unique shopping experiences, some seek thrills and adventure, others seek the opportunity to say “I went, I saw, I … took a picture.” What generally unites people when they are traveling, particularly in parts of the world that are new and unfamiliar to them, is the desire to sample and taste a bit of the culture that makes their destination unique.

For tourists, selecting a hotel is a challenge of balancing their desires. In most cases, they want:

  • A hotel they can afford
  • A hotel where they feel they will receive the level of service they are accustomed to
  • A hotel that is comfortable, safe, and clean
  • A hotel that is conveniently located to the places they want to visit

Trying to satisfy these four challenges is difficult enough, and in many cases lead people to choose the Marriott, Hilton, or Sheraton, even as they aspire to “immerse themselves” in their experience. They settle for these international chains because they are reliably consistent, delivering fundamentally the same hotel experience wherever you go.  Yet that, inherently, is their fundamental flaw – they fail to meet the truly differentiating fifth and sixth criteria for a truly remarkable hotel experience:

  • A hotel that reflects the culture and local flavour of the surrounding city
  • A hotel that is exciting and unique; an adventure unto itself

I have little doubt that in nearly every corner of the world there are wonderful local hotels that meet all six of these criteria (though, sadly, not all – Jizan, Saudi Arabia comes to mind). The challenge for the tourist is how to FIND these hotels. For the more adventurous, sites like TripAdvisor can help. Where you are lucky enough to have a local friend to serve as your guide, you might be directed as to the best place to stay.

Moroccan Boutique HotelBut, at the end of the day, CatLover245’s rave reviews and assurances of good customer service really aren’t enough for most people to choose the Little Damascus Inn over the Sheraton. At least you can be reasonably confident that you won’t find bed bugs at the Sheraton.

The challenge of building confidence with consumers that a hotel can, in fact, meet all of these criteria creates a significant opportunity to build a network of branded boutique hotels in major tourist destinations throughout the world.

An entrepreneur with good financial backing could make a small number of hotel investments in high-growth tourism cities such as the Middle East and Northern Africa, bring them up to international standards of quality and service, unite them under a brand, and market them to tourists from abroad. With time, as CatLover245 and her friends write positive reviews, and as more and more customers experience the benefits of the hotel in its diverse locations, it will build a faithful following of advocates and frequent stayers.

I would choose to first target the developing world, where many hotels miss out on substantial opportunity to attract visitors merely by lack of a web presence with photos and a map, written in fluent English. With an understanding of the increase in revenue that could be expected by linking a hotel into online reservation systems like Orbitz and Hotels.com, investors could value properties higher than their current owners.

By upgrading service, renovating and redecorating rooms, and bringing in an additional infusion of local flavours and colours, the hotels could start charging more for rooms. Substantial changes to management and workforce wouldn’t be necessary so much as bringing a few leaders who can help oversee the transition to world-class standards.

How long this opportunity will remain untapped is questionable. Already, chains like Joie de Vivre and Kimpton are building branded networks of boutique hotels throughout California and the United States. Companies like Mexico Boutique Hotels are taking that concept to other popular mainstream tourist destinations. It’s only a matter of time before the same basic concept is carried to other parts of the world.

Further reading on Boutique Hotels:

PayPal Should Go Social

14 Dec

PayPal LogoPayPal, the electronic payment program launched to prominence by eBay, should join the social networking bandwagon and create social applications for LinkedIn and Facebook. While other stalwarts of “Web 1.0,” such as eBay and Skype, have launched into this space, PayPal has inexplicably lagged behind.

My friend Tony and I were discussing this idea yesterday as we tried to finally sort out payment from a recent trip we took together to Spain. We had a few ideas about how a social application could add real value for the company:

  • Build Awareness: PayPal already has good penetration and is clearly the market leader in the US for electronic money transfer. It is not, however, universally understood or used. Trying to arrange payments for a company ski trip recently I discovered that more than half of my colleagues had never used the program. Facebook badges and notifications about friends adding the new application would surely help further build brand awareness for their service, and attract more users.
  • Find Fellow Users More Easily: Similar to Skype’s Facebook application, PayPal could help users of the application to more easily identify which of their friends also use PayPal to make it easier to determine the easiest way to send payments to them

But with an ounce of innovation, combined with a new social platform, PayPal could start to offer some truly interesting services.

  • Collaborative Accounts: Allow multiple users to create a common account linked to each of their individual accounts for making payments and managing cashflows relevant to all of them. This would have been perfect for organizing the company ski trip, as it would have both allowed users to easily add money into the account, it would allow a small group of “Administrators” to make payments out of it and to the various vendors that needed payment (lodging, lift tickets, shuttle services, etc). Everyone would be able to see how much money is in the account, and how it’s being spent. Its transparency and paper trail would largely eliminate the need for a single person to be the “Treasurer.”
  • Pay Backs: So you and your friends went camping this weekend. Two bought $40 worth of groceries each, one bought $200 in alcohol, and your other three friends, well, they ate and drank. How are you going to work out repayment? A newly social PayPal could help friends solve this dilemma, allowing multiple users to add money to a common account (called, perhaps, “BoozeCamp”) which would then be repaid evenly to all members. A little creativity on how to allow people to add non-cash value (receipts) to represent their contributions, and you’d be set
  • Communal Payments: You have three roommates, and a landlord who insists on receiving only one check each month for rent. Or perhaps, you and your friends want to chip in to help out your friend who hosted a great party, or who paid for a birthday present from “everyone.” Basically just a slight modification on the above ideas, PayPal could create an easy system for making payments together, by aggregating funds from multiple users, and allowing everyone to see who has paid, and who hasn’t

Any of these innovations could add new uses to the stagnating PayPal platform (who, by the way, could still use a user-interface makeover while they are at it – even after they prettied-up their front page), and help combat new entrants. There could be some tough legal issues to overcome regarding money laundering, but I imagine there could be some balance struck between putting maximum fund-limit caps on accounts while still allowing 90% of legal uses.