Archives for posts with tag: Gowalla

The user data bubble

February 16, 2012 //

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“(In the publishing business) the readers are the product, and the customers are the advertisers.” – Dave Winer

It started with Path last week, and now we learned that Facebook, Twitter, Foursquare, Instagram, Foodspotting, Yelp, and Gowalla all either upload your contacts’ phone numbers or email addresses to their servers for matching purposes.

As the post on Venturebeat states:

“Some of these applications perform this action without first requesting permission or informing you how long they plan to store this data. Foodspotting is the worst of the bunch, as it appears to transmit your data over an unencrypted HTTP connection (in plain text), making it even easier for mischievous parties to intercept.”

It’s a sign of a major problem.

Tulip Mania. Railway Mania. Poseidon Bubble. Japanese asset price bubble. Dot-com bubble. Rice bubble. Housing bubble. Bubbles after bubbles. After the housing bubble, one would think we’d have enough of bubbles for a long time to come. Think again.

The dot-com crash had nothing to do with technology. It had everything to do with the business model used to pay for the technology, which was primarily either display advertising revenue or VC money advanced with the expectations of returns based on display advertising. Display Advertising was trackable, it would be more effective online than offline. The bubble burst, crazy valuations went away and the digital ad market boomed. Ad Networks, DSP’s and exchanged drove down the value of ad impressions. CPM’s went from $100 for premier placements to $10. And impression junk was and is still anywhere. Suddenly, new businesses that relied on advertising revenue to support their model had to pivot.

Welcome to the age of user data.

Massive assumptions are now being made based on revenue generated (or soon to be generated) by personally targeted advertising drawing on user data. Facebook has a business model but their valuation is based on future realization of user data. Twitter doesn’t have a sustainable business model yet but it’s worth billions of dollars.

Often, companies don’t even know what to do with this data, they just have it because one day it will rain gold. You can’t open your computer without reading of the promises of Big Data. Your user data, goes the theory, allows ads to be specifically targeted to you. Should you buy a big bag of dog food, you will likely receive more ads for dog products, sometimes coupons. You’ll be grouped in a segment with other “dog food buyers”, your age and location will be determined, and a data model of you will be developed. A very simplistic one-dimensional model of you is living in some data warehouse and that’s why you encounter all those online ads.

The problem is not with the use of data to make decisions – the problem is with the simplistic one-dimensional use of data to make decisions. And the other problem with this assumption is that it believes in the rational consumers. Targeted advertising draws on the idea of our observed behavior presenting a coherent and realistic picture of our desires and needs.

It doesn’t.

My spending behavior in 2010 bears no relation to my spending currently or in the future – economies change, circumstances change, tastes change, opportunities change. More importantly, we are social beings, not rational beings. We are more driven by emotions and our clique than anything you can find in our brains.

As we know, targeting works on a limited scale. It does lift metrics, it improves performance. But the user data dream that one day all served ads will be relevant and lead to immediate conversion is just that: a dream. I’m not trying to minimize the opportunities at the intersection of data and human behavior, as explained in “How companies learn your secrets.” from the NY Times. I just don’t believe the way to collect and use data right now will lead to a pot of gold.

Tulips have value. Houses have value. Data has value. But the value is not as high as people tend to estimate while the user data bubble is expanding. It’s highly questionable if even a small part of these valuations can be realized. At least, I haven’t see any evidence of that, yet.

Nobody wants to hear things like that, when everybody is enjoying the user data ride. Just like nobody wanted to listen to Nouriel Roubini when he predicted the financial crisis. Nassim Taleb the “Black Swan”. Or Dave Winer the end of the data bubble. But something is wrong here, very wrong.

VCs spend billions of dollars investing in companies based on the user data model. They even tell kids to leave college early to participate in the gold rush. “You can be the next Mark Zuckerberg.”

They fund companies that need our personal data to succeed, just like the mortgage bundlers needed the junk mortgages to create fictitious AAA ratings. One day, when reality sets in and the fundamentals don’t add up anymore, the bubble will burst. A lot of money will be lost. A lot of people will be hurt.

Out of the ashes, new companies will spring up that have realistic expectations about the value of user data. And, who knows, even give us control over the data. Now, that’s valuable. Correct, Doc Searls?


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Gowalla: less badges, more stories

March 15, 2011 //

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Josh Williams, founder and CEO of Gowalla, surprised the audience during his keynote with quotes like “Badges are bullshit.” and “Gamification isn’t cool.”

What?

For three days we heard that gamification will solve every problem known to mankind: Education, Global Climate Change, ingrown toenails. And, suddenly gamification isn’t cool? Maybe it’s just not cool because Gowalla is losing the battle of location-based services to Foursquare and Facebook Places? Why was it cool when Gowalla signed a deal with Chipotle? And maybe badges are bullshit because Foursquare continues to bank highly on them and thrive?

We could ask these questions but there’s more behind the repositioning

When you’re losing to your competitor, you re-evaluate your mission and your vision. You have done everything in your power to beat them but, for some reason, they are leading in each and every category. And you start to realize that the initial reason for starting your company might have been forgotten while trying to catch-up with your competitors. You never meant to be like Foursquare (just like Yahoo never wanted to be like Google and the comparisons were always weak and meaningless) and you always tried to differentiate yourself by offering passports, connecting people with experiential places. But the public didn’t see this subtleties, they saw you as the LBS loser.

You have two options: Either dig in and continue the war until the bitter end. Or change the game.

Gowalla decided to change the game, transforming the service into a storytelling platform where people can document their memories by associating them with the places where they happened. No specific plans were revealed but it’s likely that Gowalla will add tools that will help people to add more content around specific places. The gamification part of the platform seems to be destined for the pile of buzzwords. And the pro-active part of check-in might change to a more passive activity.

A good move by Gowalla. The execution of their revised vision will determine if user will follow them on their new path.

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Ditto – the evolution of location-based services

March 3, 2011 //

I met Jyri Engestrom at the Monaco Media Forum late 2010. He was in the early development stages of Ditto and we talked about the idea of VRM, and how location-based services have to move into that space to become really useful.

The growing armada of location-based services just let me share where I currently am. I always questioned the value for user and advertisers. Why would I be interested to receive a $1 off coupon from the bar across the street when I just plopped down on my chair, ordered a drink and checked in?

Ditto goes beyond the check-in: It shares your intent to do something. Much more interesting for the user (commercially but also socially) and definitely for advertisers. If I know what you’re intending to do, I can provide you with extremely relevant offers. The application won’t be limited to food and drinks, Engestrom envisions expanding its offering to anything that’s discoverable: books, music, movies, etc.

I find this application very useful and much more valuable than any of the other location-based service apps have to offer at this point. (Sorry, no badges.) We’ll see if it will take off during SXSW.

The Techcrunch write-up.

iTunes link

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SXSW 2010 – It's time to leave the echo chamber

March 16, 2010 //

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No, Twitter didn’t announce their new ad platform. Yes, Foursquare and Gowalla had a breakout conference with more people checking in everywhere, annoying their friends and loved ones left behind. No, there was no new Twitter. And, yes, the future for digital technologies and Social Media is still very bright. But it’s time to shake up conferences like SXSW.

While some talks were insightful (Clay Shirky and Jaron Lanier come to mind), most panels didn’t rise above the mediocrity of typical Interactive conferences: Many unprepared panelists, content didn’t match advertised topics and, most importantly, too much talk about “joining the conversation”, “transparency”, “authenticity” and other tired buzzwords.

I went to SXSW and all I got was a Social Media 101 for beginners?

While the networking opportunities continue to be tremendous, all of us need to up the content game. We need to talk more about ROI, adoption of new technologies and Knowledge Management. We need to talk frankly about failures and successes and share them through case studies. Isn’t it ironic that everybody praises failures but nobody wants to share their failures so all of us can learn from them? And, most importantly, we need  to let people outside of the industry in. We need more input and insights from sociologists, anthropologists, psychologists, small businesses, Fortune 10 corporations and (insert your idea here).

In short, we need to leave the technology and Social Media echo chamber and let some fresh air in. The air at SXSW 200 felt stale and sometimes almost pungent with Social Media celebrity self-importance fueled by breathless fanboys and the always present booze cloud above us all. This post is not directed at the organizers of SXSW 2010. They did a fantastic job by delivering a flawless conference. A small point of criticism: Maybe less crowdsourcing panels (fueling the echo chamber), more crowdsourcing topics, themes and objectives of participants.

No, this is a wake-up call to all of us: Let’s open the echo chamber and let’s learn from and with others. The sessions from wecanendthis.com were a good start: Getting people from all walks of life together to end hunger in America. That was a good start. But while we thought, discussed and collaborated about solving a serious problem, the majority of visitors were busy checking in at various parties. While they thought they were busy checking in, they were busy checking out.

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Categories Organizational change, social media