(9) The New Busines s of Consumer Data: Who pays whom?

1. The Networked Economy:Information Management, Strategy, and Innovation网络经济：信息管理，战略和创新 (9) The New Business of Consumer Data: Who pays whom?

2. Agenda for today • The (Old) Data Revolution • Example: Amazon.com • Mainly implicit data, some explicit data • The New Data Revolution • Example: Facebook • Mainly explicit data • Customers start interacting • New business models • The New Consumer Revolution • How their attitudes to their info changes

3. Computers, Business and Communication • 1970’s • “Experts” learn a language the computer understands • Digitizing back office • 10M people • 1980’s • Front office interacts with back office • 100M people • 1990’s • Customers interact with firm • Search: 1bn people poking at stuff • 2000’s • 1bn people poking at stuff • 100M people producing stuff • Peer-production and collaboration • Customers interact with customers • Next • Discovery in addition to search • Serendipity: Discover what not searched • People in addition to pages • Social commerce • Mobile in addition to PC (and paper) • Continuous partial attention • Model current situation plus history • Sensing

4. Who will select the best picture?

5. Let Amazon.com access your camera and microphone? • November 2007 • Adobe Flash installed on820 million Internet-connected computers and mobile devices

6. Integrated Media Measurement Inc • IMMI • Listening into your room • every 30 seconds, • for 10 seconds.

7. Data collection and analysis (Amazon.com)数据收集和分析(Amazon.com) • Level层次 • Customer消费者 • Orders订单 • Session aggregates访问总计 • Clicks 点击 • Data collected 20072007年搜集的数据 • 100 MB • 10 GB • 1 TB • 100 TB Amount of data 数据量

8. Data in the Digital Networked Economy • From Stanford Stat252/MS&E238 (Data Mining and E-Business): • Clicks • Selection • Intention • Search • Attention • Engagement • Interaction • Relationship • Situation • Discovery • Location • Mobile phones, GPS • http://aweigend.wikispaces.com/Data+Mining+and+E-business+Stanford+Spring2007

9. Navigation with two-way internet connectivity (dash.net)

10. A data revolution, not a software revolution • Mapping companies did not realize that users can add value… • NAVTEQ spent USD 300M to reach breakeven, was acquired by Nokia for USD 8.6B • …vs Amazon.com realizing early on that users can add value • E.g., by reviewing books • Google enables external developers to build services using company’s data • Application Programming Interface • When will airlines, banks etc follow? • Group discussion: Develop scenarios for one of your group member’s company’s data strategy?

11. “Pay as you drive” insurance (Norwich Union) “车开起来再付钱”保险

12. Buy and trade business cards (Jigsaw) • 7M business cards (2007.12) • 200k members • Community corrects • Jigsaw collects

13. Give data to get data about applicants (JobScore) • Use information about candidates from interviews at other companies

14. The basis of the Digital Networked Economy is Data Web 2.0 Web1.0

15. Fast innovation by experimentation (the scientific method) Web 2.0 Web1.0

16. 加入购物车

17. 加入购物车 戴维斯的专辑 Also want to make recommendations!添加推荐! 去收银台 等一下！再加16.01美元就能……

18. 购买戴维斯专辑的消费者 也买了另两张专辑 想买戴维斯专辑的消费者 同时浏览了其它同类专辑 Also want to make recommendations!添加推荐! • Substitutes (buy instead of)替代（选择购买） • Customers who shopped for X also shopped for Y (based on clicks)Z买了X的消费者也会再 • Complements (buy in addition to)互补（额外购买） • Customers who bought X also bought Y买了X的消费者会再买Y

21. Result: Right vs Left对比结果：左还是右 • Metrics　衡量标准 • Conversion rate: Percentage of visits placing an order转化率：下订单的浏览者所占的比例 • Order size: Number of additional (from the second page) items put into cart 订单大小：（从第二页起）新购商品数量 • Result　结果 • “Your Shopping Cart” on right is about 1% better than on left “Your Shopping Cart”置于右侧比置于左侧的效果提高1%

22. The five levels Web 2.0 Web1.0

23. Some attributes of Web2.0 • User focus (Me-business, not E-Business) • User is at the center of Web2.0(not the company) • VRM (Vendor Relationship Management) not CRM (Customer Relationship Management) • System engineered for feedback • System engineered to improve over time by leveraging user data (not deteriorating over time) • Network effects • Demand-side economies of scale (not only supply-side economies of scale) • Transparency • Google Maps: Create API for developers to use the data (not increase security)

24. Participation • Incentives • Pay people (e.g., Yahoo directory index) • Get volunteers (e.g., Wikipedia) • Create self-interest (e.g., BitTorrent) • Participation • Youtube: 0.19% visits to video upload • Flickr: 0.2% of visits are uploads • Wikipedia: 3.89% of visits are edits to entry • Why do people participate? • Spread their ideas • Need for belonging

25. Data: From “Me” to “We” • Node: The individual • Clicks • Logs • Intention • Search • Why is intra-site so hard? • Google (Advertising) • Attention • Tags,… • Attensa (News) • Location Links:Relationships between individuals • MySpace, Facebook, XiaoNei (校内网)

26. The five levels Web 2.0 Web1.0

27. Where do people go for information? • 20 years ago: Produced news • Publicized opinion (“VeröffentlichteMeinung”) • 10 years ago: Search • Search: Already know what you are looking for • Discovery: Find something you didn’t know you were looking for (Serendipity) • Blogs, Wikipedia • Now: Social network • Discover via people you are connected to • “Generation C”

28. Digital Networked Economy: Generation C Connectivity • Convergence • Cooperation • Community • Creation • Co-creation • Conversation

29. Conversational Marketing • Conversation • Between whom? Company downcasting Individuals

32. Thank you!Andreas Weigendaweigend@stanford.edu+1 (650) 906-5906 www.weigend.com

33. Appendix: Google’s e-commerce

34. Google’s role in e-commerce Google helps users more easily and efficiently find merchants and purchase products. Search Find Buy Merchant Customers Google Users • 51% of internet users are influenced by search engines for their purchases.* • Google reaches more Internet users worldwide than any other web property or ad network. • Google receives more than 475 million unique visitors/month.** * Internet Retailer news, March 6, 2007 ** Custom Analysis by ComScore/Google, Sept. 2006

35. Opportunities in e-commerce Online retail purchases accounted for 2.8% of total retail sales in 2006. • What is holding back eCommerce? • Long checkout processes • 63% of shopping carts are abandoned after beginning checkout** • Too many accounts • Average number of passwords per internet user: 17** (Source: Verisign, 2004) • Fear of sharing personal information • Consumers are afraid of their personal information being compromised 2006 Consumer Purchases Share by Channel 2.8% 97.2% Online sales Offline sales Total eCommerce sales: $108.7B Total Retail sales: $3.9 Trillion* • Quarterly Retail eCommerce Sales, 2006, US Census Bureau • Note: These numbers do not include travel * Verisign, 2004 ** Online Customer Experience Survey, Allurent, February 2006

36. Google Checkout • Google Checkout is an online checkout process that provides a fast, secure way to buy and sell online. For Buyers… Convenience Speed Confidence • Single login across the web with sreamlined checkout • Credit card number concealed • One place to track purchases For Sellers… More sales Less cost Fraud Protection • Google Checkout badge attracts more customers • Streamlined checkout process increases conversions • Free credit card processing on all Checkout sales until 2008 • Beginning 2008, earn free transaction processing with AdWords • Payment Guarantee covers 98% of all Checkout orders • When resolving disputes, we assume our merchants are honest and trustworthy

37. Search…Find…Buy… • Shoppers use Google and Product Search to search for items to buy.

38. Search…Find…Buy… • Product Search and Checkout help shoppers find exactly what they’re looking for and where to buy it from.

39. Search…Find…Buy… • To buy, shoppers need only click Google Checkout and enter their username/password.

40. Order History • Google Checkout users can easily manage all of their purchases in a central location.

41. Success With Google Checkout • Checkout has acquired millions of buyers and thousands of sellers, including 25% of the top 500 merchants. “The new Google Checkout badge … has given us a 23% lift in clickthrough rate. And Google Checkout does a great job of helping convert that additional traffic into more sales; customers that use Google Checkout convert 24% more frequently than those that go through our standard checkout process. – Fred Lerner, Jockey “Since starting with Google Checkout, business has grown 20 percent per month, the company is saving 50 percent on transaction processing costs, and repeat business is on the rise too: more than 60 percent of new customers who use Google Checkout purchase again within the same month.” – Floyd Wallace, Coffee Bean Direct