Category Archives: Online Trends

The “Field of Dreams” Dilemma

First published May 3, 2012 in Mediapost’s Search Insider

There’s a chicken and an egg paradox in mobile marketing. Many mobile sites sit moldering in the online wilderness, attracting few to no visitors. The same could be said for many elaborate online customer portals, social media outposts or online communities. Somebody went to the trouble to build them, but no one came. Why?

Well, it could be because no one thinks to go to the trouble to look for them, just as no one expects to find a ball diamond in the middle of an Iowa cornfield. It wasn’t until the ghosts of eight Chicago White Sox players, banned for life from playing the game they loved, started playing on the “Field of Dreams” that anyone bothered to drive to Ray Kinsella’s farm.  There was suddenly a reason to go.

The problem with many out-of–the-way online destinations is that there is no good reason to go. Because of this, we make two assumptions:

–       If there is no good reason for a destination to exist, then the destination probably doesn’t exist. Or,

–       If it does exist, it will be a waste of time and energy to visit.

If we jump to either of these two conclusions, we don’t bother looking for the destination. We won’t make the investment required to explore and evaluate. You see, there is a built-in mechanism that makes a “Build it and they will come” strategy a risky bet.

This built-in mechanism comes from behavioral ecology and is called the “marginal value theorem.” It was first identified by Eric Charnov in 1976 and has since been borrowed to explain behaviors in online information foraging by Peter Pirolli, amongst others. The idea behind it is simple: We will only invest the time and effort to find a new “patch” of online information if we think it’s better than “patches” we already know exist and are easy to navigate to.  In other words, we’re pretty lazy and won’t make any unnecessary trips.

This cost/benefit calculation is done largely at a subconscious level and will dictate our online behaviors. It’s not that we make a conscious decision not to look for new mobile sites or social destinations. But unbeknownst to us, our brain is already passing value judgments that will tend to keep us going down well-worn paths. So, if we are looking for information or functionality that would be unlikely to find in a mobile site or app, but we know of a website that has just what we’re looking for and time is not a urgent matter, we’ll wait until we’re in front of our regular computer to do the research. We automatically disqualify the mobile opportunity because our “marginal value” threshold has not been met.

The same is true for social sites. If we believe that there is a compelling reason to seek out a Facebook page (promotional offers, information not available elsewhere) then we’ll go to the trouble to track it down. Otherwise, we’ll stick to destinations we know.

I believe the marginal value theorem plays an important role in defining the scope of our online worlds. We only explore new territory when we feel our needs won’t be met by destinations we already know and are comfortable with.  And if we rule out entire categories of content or functionality as being unlikely to adapt well to a mobile or social environment (B2B research in complex sales scenarios being one example) then we won’t go to the trouble to look for them.

I should finish off by saying that this is a moving target. Once there is enough critical mass in new online territory to reset visitor expectations, you’ve increased the “richness” of the patch to the point where the “marginal value” conditions are met and the brain decides it’s worth a small investment of time and energy.

In other words, if Shoeless Joe Jackson, Chick Gandil, Eddie Cicotte, Lefty Williams, Happy Felsch, Swede Risberg, Buck Weaver and Fred McMullin all start playing baseball in a cornfield, than it’s probably worth hopping on the tractor and head’n over to the Kinsella place!

Wonder What They’re Doing on Captiva?

First published April 26, 2012 in Mediapost’s Search Insider

I kind of feel like a kid that stayed home while the rest of his friends headed off to summer camp at Lake Winnigapahaha. I just know they’re having more fun than I am.

To really drive it home, my friend Ken Fadner, the publisher of MediaPost, sent me a picture the other day of the launch of the Search Insider Summit on wonderful Captiva Island. “Missing you” was Ken’s postscript.

Awww… I miss you too, Ken!

You’ll forgive me if I feel rather possessive of the Search Insider Summit. For the last several of them, I’ve been the programming chair and emcee. Last year, I handed the reins over to the very capable team at MediaPost, but I still feel like I’m missing my left arm. In the past few weeks, as the event was drawing nearer, I even had “phantom” pains. I’d jolt upright, worrying about a keynote canceling or irresolvable scheduling conflicts, only to remember that it’s now someone else’s worry.

I had to give this year’s event a miss due to scheduling conflicts, but I also felt that for myself, and the event, it was probably time to explore new territory. I was proud of what we had accomplished the Summit. I still believe it is a one-of-a-kind search event: smart, strategic and small enough to be intimately social. The MediaPost team always does an incredible job matching the onstage content with plenty of opportunities to have fun and meet other attendees.

I also loved the event because for two weeks each year, it plugged me into the industry in a way that I just haven’t found elsewhere. I could reconnect with people who are just damned smart and spend a good amount of time thinking about where we’re going and how we’re going to get there.  That, perhaps more than anything else, is what I miss the most.

I’ve had the opportunity in the last year or so to start thinking about what my life will be “post-search.” That was another reason why I decided to step down from the Summit stage. I was recently at a conference where a speaker asked everyone who’d been in this industry for “at least a year” to raise their hands. Almost every hand when up.

Then he said, “At least three years.” Several hands went down.

“At least five years.” About a third of the hands stayed up.

“At least 10 years.” I was one of three hands that stayed up.  The speaker mercifully stopped there, but it was at that point I realized I’ve been doing this for almost 20 years.  Yeesh! Twenty years is a long time to be doing anything, let alone something as dynamic and exhausting as search. I’ve loved every minute of it, but still, that’s a hell of a lot of minutes — somewhere around 6 million by my reckoning, allowing a little down time for sleeping.

So, I’ll be thinking of you all in Captiva. I’ll be wondering what you’re talking about, over the refreshments consumed on Sunset Beach. I’ll miss the insights, both professional and otherwise, that seemed to happen on the dolphin & dinner cruise. And I’ll miss connecting with the smartest group of Search Insiders I know.

Search and the Age of “Usefulness”

First published April 19, 2012 in Mediapost’s Search Insider

There has been a lot of digital ink spilled over the recent changes to Google’s algorithm and what it means for the SEO industry. This is not the first time the death knell has been rung for SEO. It seems to have more lives than your average barnyard cat. But there’s no doubt that Google’s recent changes throws a rather large wrench in the industry as a whole. In my view, that’s a good thing.

First of all, from the perspective of the user, Google’s changes mark an evolution of search beyond a tool used to search for information to one used by us to do the things we want to do. It’s moving from using relevance as the sole measure of success to incorporating usefulness.

The algorithm is changing to keep pace with the changes in the Web as a whole. No longer is it just the world’s biggest repository of text-based information; it’s now a living, interactive, functional network of apps, data and information, extending our capabilities through a variety of connected devices.

Google had to introduce these back-end changes. Not to do so would have guaranteed the company would have soon become irrelevant in the online world.

As Google succeeds in consistently interpreting more and more signals of user intent, it can become more confident in presenting a differentiated user experience. It can serve a different type of results set to a query that’s obviously initiated by someone looking for information than it does to the user who’s looking to do something online.

We’ve been talking about the death of the monolithic set of search results for years now. In truth, it never died; it just faded away, pixel by pixel. The change has been gradual, but for the first time in several years of observing search, I can truthfully say that my search experience (whether on Google, Bing or the other competitors) looks significantly different today than it did three years ago.

As search changes, so do the expectations of users. And that affects the “use case” of search. In its previous incarnation, we accepted that search was one of a number of necessary intermediate steps between our intent and our ultimate action. If we wanted to do something, we accepted the fact that we would search for information, find the information, evaluate the information and then, eventually, take the information and do something with it. The limitations of the Web forced us to take several steps to get us where we wanted to go.

But now, as we can do more of what we want to online, the steps are being eliminated. Information and functionality are often seamlessly integrated in a single destination. So we have less patience with seemingly superfluous steps between us and our destination. That includes search.

Soon, we will no longer be content with considering the search results page as a sort of index to online content. We will want the functionality we know exists served to us via the shortest possible path. We see this beginning as answers to common information requests are pushed to the top of the search results page.

What this does, in terms of user experience, is make the transition from search page to destination more critical than ever. As long as search was a reference index, the user expected to bounce back and forth between potential destinations, deciding which was the best match. But as search gets better at unearthing useful destinations, our “post-click” expectations will rise accordingly.  Whatever lies on the other side of that search click better be good. The changes in Google’s algorithm are the first step (of several yet to come) to ensure that it is.

What this does for SEO specialists is to suddenly push them toward considering a much bigger picture than they previously had to worry about. They have to think in terms of a search user’s unique intent and expectations. They have to understand the importance of the transition from a search page to a landing page and the functionality that has to offer. And, most of all, they have to counsel their clients on the increasing importance of “usefulness” — and how potential customers will use online to seek and connect to that usefulness.  If the SEO community can transition to that role, there will always be a need for them.

The SEO industry and the Google search quality team have been playing a game of cat and mouse for several years now. It’s been more “hacking” than “marketing” as SEO practitioners prod for loopholes in the Google algorithm. All too often, a top ranking was the end goal, with no thought to what that actually meant for true connections with prospects.

In my mind, if that changes, it’s perhaps the best thing to ever happen in the SEO business.

Has Technology Spoiled Us?

First published March 15, 2012 in Mediapost’s Search Insider

“We live in an amazing, amazing world, and it’s wasted on the crappiest generation of spoiled idiots.” — Louis C.K.

If you want to see “amazing” as it emerges onto our collective radar, your best seat is in front of the TED stage. It’s like a candy store of jaw-dropping technology. This year’s edition was no exception. We saw flying robots, virtual cadavers (to train new surgeons) and enough other techno-goodies to keep the TED audience in a digitally enhanced state of rapture.

One that stood out for me doesn’t exist yet, but Peter Diamandis and his “X Prize” have placed their bets on something called the Qualcomm Tricorder Challenger. Remember the Tricorder from the original “Star Trek “ — a nifty little piece of hardware that could instantly diagnose Star Fleet crew members and other assorted alien life forms? Well, the X Prize foundation thinks we’re at a point where we could turn that particular piece of science fiction into science fact. They’ve put $10 million up for grabs for whoever can create a handheld device that will be “a tool capable of capturing key health metrics and diagnosing a set of 15 diseases. Metrics for health could include such elements as blood pressure, respiratory rate, and temperature. Ultimately, this tool will collect large volumes of data from ongoing measurement of health states through a combination of wireless sensors, imaging technologies, and portable, non-invasive laboratory replacements.”  The TED community collectively started salivating at the possibilities.

But as most of us had our attention focused on the amazing glimpses of our own cleverness on stage, I couldn’t help scanning the audience around me at TEDActive. Here we were, a group of privileged (and mainly well-to-do) Westerners, and most of us had technology in our hands that would have blown away the TED audience of 2002, just 10 short years ago. Imagine demoing the iPhone or iPad then. A standing “O” would have been guaranteed (not that that’s too stringent a bar to get over at TED).

It made me realizing how fickle we are when it comes to technology. What amazes us today is expected tomorrow and becomes boring the day after. We chew up innovation at an ever-increasing pace and seem to grow annoyed if we’re not constantly fed a diet of “wow.”

I started with a quote from comedian Louis C.K.  In his routine, he talks about a flight he was recently on where the airline announced that you could access WiFi while in the air.  Partway through the flight, the system went down and the flight attendants came on the system and apologized.

The person in the next seat responded with an exasperated, “This is complete B.S.!”

How, wondered C.K., could you possible feel entitled to something you didn’t even know existed five minutes ago?

Look, I love my gadgets as much as the next guy. More, in fact. But at that moment, sitting in that darkened auditorium, I couldn’t help but wonder if our own insatiability for innovation is setting off a technological arms race with social implications we can’t possibly foresee. Are we becoming spoiled idiots? Are we so blinded by our own sense of entitlement that we fail to appreciate just how amazing the world is today? And, more disturbingly, as we underutilizing the tools that technology is giving us, going for the easy distraction rather than the earth-shaking potential of innovation?Do we push technology down the path of least resistance, rather than directing it where it can do the most good for the world, collectively?

Of course, applying technology for the betterment of mankind is right in TED’s wheelhouse, so my fears are not so much aimed at what I saw during TED, but rather to the deluge of technical innovation whose only purpose seems to be to make us fatter, stupider and lazier.

Among the nobler pursuits of innovation is Segway inventor Dean Kamen’s Stirling Water still, a box about the size of a large camping cooler that allows you to “stick a hose into anything that looks wet…and it comes out…as perfect distilled water.” The box can supply a village with 1,000 liters of clean water a day.  Peter Diamandis gave us an update on the still, saying that hopes are high that it will soon go into widespread production, making a massive difference in the health and well-being of many third-world countries. It all sounds great until we remember that Kamen first introduced it on the TED stage in (you guessed it) 2002.

I wonder. If Steve Jobs had teased us with the capabilities of the iPhone in 2002, would we have waited patiently for a decade to get our hands on it? Or would we have whined like a bunch of “spoiled idiots” until it shipped? We’ve now had four version of the iPhone ship since it was introduced give years ago, so I suspect the latter is more likely.

Considering that the majority of the world still can’t get a glass of clean drinking water, it does give one pause for thought, doesn’t it?

The Facebook Personality Test

First published February 2, 2012 in Mediapost’s Search Insider

I’ve always believed that you could learn everything you needed to know about a person by asking them who their favorite Beatle was. To back up the efficacy of this bulletproof psychological profiling tool, there are several online Beatle personality tests.  I mean really, if you can’t build an online quiz from it, how valid can a psychological tool be? I, personally, am primarily a John Lennon, with George Harrison undertones. But for the test to work, you actually have to know the Beatles on a fairly intimate level, and their status as a cultural baseline is regrettably eroding.

Now, you could use a more standard but much less interesting approach; say a Myers-Briggs personality sorter, or the “colors” test. I seem to bounce back and forth between “INFJ” and an “INTJ.”

But a recent paper by Ashwini Nadkarni and Stefan Hofman (both from Boston University) in the Journal of Personality and Individual Differences offered a more timely way to sort out the extroverts from the introverts (and the neurotics from the narcissists). It seems our usage of Facebook may provide a remarkably accurate glimpse into who we are.

For example, in their review of previous studies, Nadkarni and Hoffman found that people with neurotic tendencies like Facebook’s Wall, while those less neurotic prefer photos.

Several columns back I bemoaned the fact that the more we use social networking, the less social we seem to become. It appears that wasn’t just my perception. A 2009 study by E.S. Orr et al discovered that shy people love Facebook and spend way more time on it than non-shy people.  Ironically, for all the time they spend Facebooking, their friend networks are much smaller than their more gregarious but less-Facebook-engaged counterparts.

Narcissists also spend a higher-than-average amount of time on Facebook — over an hour a day.  They use the social site to promote themselves through profiles and photos. Conversely, multiple studies have shown than many Facebook fans use it to pump up low self-esteem. Through self-promotion and validation through virtual connections, they’ve found a kinder, gentle and more accepting world than the one that lies outside their bedroom door.

Studies have found that more socially awkward Facebook users have found that the less intense and demanding connections formed online can actually help them expose more of their personalities than they can in a more typical social environment. Some are more themselves on Facebook than they are in the real world. It’s not really creating a new persona, but rather exposing the one you’ve always possessed but felt too fragile to put out there in your day-to-day interactions.

Finally, what does it say about you if you use Facebook only sparingly or not at all? Are you hopelessly disconnected? Not at all. The more individualistic you are, the more goal-oriented you are and the more disciplined you are, the less you tend to use Facebook. Ironically, if this matches your personality type and you do use Facebook at all, you probably have a very healthy network of friends. I don’t know where I fall on the scale, but I probably spend less than an hour a month on Facebook — and for some reason, I seem to have a network of close to 400 friends.

Maybe it’s my irresistible INFJ/John Lennon-like qualities. I hope that doesn’t sound too narcissistic.

 

 

Look at the Big Picture in 2012

First published December 29, 2011 in Mediapost’s Search Insider

Another year’s pretty much in the can. And because I’m working on idle this week, trying to catch my breath with my family before plunging headlong into 2012, search marketing falls somewhere behind the recent releases on Netflix and trying out the new Wii game on the list of things preoccupying my mind. So, don’t expect any salient and timely search news from me!

When I look back on what has preoccupied me over the last 12 months, I will say that much of it has been spent “stepping back” and trying to look at the bigger picture. As online interactions have taken a bigger and bigger chunk of our lives (you’ll notice that both of the recreational options I mentioned have online components woven into them), trying to understand how our actions play out against a broader online backdrop has been the thing I think about most often.

We digital marketers tend to take that “bigger picture” and break it into pieces, trying to make sense of it by focusing on one small piece. Digital marketing lends itself to this minute focal depth because of the richness of each piece. Even the smallest chunk of an online interaction has a lot to explore, with a corresponding mound of data to analyze. We could spend hours drilling into how people use Linked In, or Twitter, or Google+ or Facebook.  We could dig into the depths of the Panda update or how local results show up on Bing and never come up for air.

But think back to what, at one time, was another holiday season pastime. Some of us remember when we used to get a jigsaw puzzle for Christmas. You’d dump out all 5,000 of those little photographic morsels and then begin to piece it together into a coherent image of something (usually a landscape involving a barn or a covered bridge). Success came not only from examining each piece, but also in using the image on the boxtop to help understand how each piece fit into the bigger picture. Without understanding what that bigger picture was supposed to look like, you could examine each piece until the cows came home (again, often a topic for jigsaw art).

So, much of my 2011 was spent trying to understand what the picture on the top of the puzzle box was supposed to look like. What would ultimately tie all the pieces together?  In physics terms, I guess you could say I’m been looking for the Unified Field Theory of online marketing. And you know what I realized? You won’t find it by focusing on technology, no matter how cool it is. Foursquare marketing or search retargeting or hyperlocal optimization are all just pieces of a much bigger puzzle. The real picture emerges when you look at how people navigate the events of their lives and the decisions they must make. It’s there where the big picture emerges.

A few weeks ago I was speaking to a group of marketers about the emerging role of mobile.  This was no group of digital slouches. They knew their mobile stuff. They had tested various campaign approaches and honed their tactics. But the results were uneven. Some were hits, but more were misses. They knew a lot about the pieces, but didn’t have the boxtop picture to guide them.

My message (for those who know me) was not a surprising one: understand how to leverage mobile by first understanding how people use mobile to do they things they intend to do.  Don’t jump on a QR code campaign simply because you read somewhere that QR codes are a red-hot marketing tool. First see if QR codes fit into the big picture in any possible way. If you do that, you might find that QR codes are a puzzle piece that actually belongs in another box.

After delivering my sermon about the importance of understanding their respective big pictures, I asked my favorite question: “How many of you have done any substantial qualitative research with your customers in the past year?” Not one hand went up. This was a group of puzzle assemblers working without any boxtop picture to guide them.

If you want to sum up my past year and fit it into one final paragraph for 2011, it’s this: Understand your customers! Spend a good part of 2012 digging deep into their decision process and their online paths. Make it personal. Stalk if necessary. Ask questions that start with “why.” Observe. Make notes. Broaden your online reading list to include blogs like Science Daily, Futurity, Neuroscience Marketing and Homo Consumericus. At some point, the bigger picture will begin to emerge. And I bet it will be much more interesting than a landscape with a barn and some cows in it.

In Search of Simplicity

First published December 21, 2011 in Mediapost’s Search Insider

“Simplicity is the ultimate sophistication.”

This quote, from Leonardo da Vinci, was on the original brochure for the Apple II. Throughout his life, Steve Jobs didn’t stray far from this principle. In fact, he was obnoxiously obsessive about it.

When Steve returned to Apple after his 12-year hiatus, he embraced simplicity with a vengeance. While Apple was wondering in the wilderness, they somehow managed to amass no fewer than a dozen different variations of their various computers. All were crappy (and I speak as a former owner of several of them) but at least there were a lot of different varieties of crap to choose from.

One of my favorite passages from Walt Isaacson’s book describes how Jobs quickly pruned the unwieldy product portfolio back down to size: “After a few weeks Jobs finally had enough. ‘Stop!’ he shouted at one big product strategy session. ‘This is crazy.’ He grabbed a magic marker, padded to a whiteboard, and drew a horizontal and vertical line to make a four-squared chart. ‘Here’s what we need,’ he continued. Atop the two columns he wrote ‘Consumer’ and ‘Pro’; he labeled the two rows ‘Desktop’ and ‘Portable.’ Their job, he said, was to make four great products, one for each quadrant.”

The upshot is this. It’s not worth doing something unless you know you can do it really well.  Which brings me to Google.

Google has always embraced the grass roots-definition of innovation. The principle is this: get a bunch of really smart people, let them dream up really smart things, and then figure out a way to monetize it. Google carries it even further. They have recently been on a shopping spree for other companies who are also dreaming up smart things. In theory, it sounds great. There’s only one problem: It lacks simplicity. And, by extension, it lacks focus.

Now, if you refer back to a column I wrote earlier (“Amazon = Evolution, Google = Intelligent Design”) it seems that I’m dancing on both sides of an argument. I don’t see it that way. My point in that column was that you can choose to provide platforms that enable widespread innovation, but it’s difficult to try to own that process entirely within one organization. Platforms enable innovation to play out over a larger stage.

Now, you might say (and I would say the same, being a rabid Darwinist) that nature also lacks simplicity. Evolution certainly didn’t happen through any top-down directive to be number one or number two at anything. Evolution is the biggest ongoing trial and error experiment ever conducted. Google’s approach seems to have much in common with nature in this regard.

But in fact, nature imposes the ultimate simplicity at a later stage, and it does so with relentless cruelty: successful variations survive, and unsuccessful ones die. As mercurial as Jobs was, he doesn’t hold a candle to the whims of ol’ Ma Nature.

In today’s marketplace, there seems to be an urge to try new things just because we can. The barrier to entry is lower than ever, thanks to technology. So we rush opportunity on multiple fronts, hoping one will pay off for us. Companies like Google encourage this by actively enabling their team to dabble in whatever strikes their fancy. I’m not saying this is wrong, but at some point, focus has to be brought into the equation. You need to simplify, prioritize and focus to turn out “insanely great” products. You need not only to be innovative; you also need to be a ruthless pruner of less-than-great ideas. And the culture that fosters collaborative innovation generally has a difficult time arbitrating what survives and what doesn’t. This creates confusion and mixed priorities. It saps away simplicity.

Google’s approach is to extend beta periods indefinitely, hoping that this will weed out the winners from the losers. Eventually, loser products (and there have been many) die under their own inertia. But in the meantime, this extended life-support system drains corporate resources. How many real winners have come out of Google Labs? What is the success rate of Google’s approach to innovation? What would have happened if Google Search weren’t as wildly profitable as it’s been? Would Google still be around?

Walmart vs. Amazon: A Regime Shift in Motion

First published November 17, 2011 in Mediapost’s Search Insider

Financial analysts are not predicting a rosy short-term future for Amazon’s stock price.  Recent blunders with the rollout of new Kindle devices and earnings under increasing pressure have these analysts predicting a shorting of Amazon stock. In all likelihood, Amazon’s share price will tumble.

So why is Walmart so worried about Amazon?

A recent article indicates that Walmart is preparing for what could be the “retail battle of the decade.” When you match the two up on numbers alone, it seems like the “mismatch of the decade.”  Walmart is 10 times the size of Amazon in overall sales. It’s the largest retailer on the planet, by a huge margin. Amazon doesn’t even crack the top 10. In fact, Amazon sits at #44 on the list of global retailers.

But let’s flip the numbers. When it comes to online sales, Amazon outsells Walmart 10 to 1, and its topline growth is 44% while Walmart’s per location sales growth is trapped in the low single digits (if there is growth at all). So, if online retail is a game changer, and if this signals a “regime shift” in the retail landscape, then Walmart is right to worry. In fact, they should be petrified.

The article steps through Walmart’s strategy for ramping up e-commerce, but one line in particular raises a huge red flag: “Walmart would love Amazon’s top-line growth, but isn’t about to settle for its profits.”

Walmart has built its empire on incredibly precise supply chain management, obsessing over the details of physical fulfillment. Company strategists hope to use this to their advantage in their war on Amazon. Fair enough. But when it comes to the tough calls required to fully embrace digital (and they will come), Walmart will be hampered by the need to protect an existing model that relies on bricks and mortar. This mixed set of priorities will virtually ensure Walmart will move slower than Amazon, who has no option but to excel when it comes to e-com. This is a classic “regime shift” scenario, and history is not on Walmart’s side. The fact that its e-com head office is pretty far removed, philosophically and physically, from the head office in Bentonville, Ark. speaks to the challenges that Walmart has ahead of it.

It’s Amazon’s move into CPG that has raised the ire of the giant from Bentonville. Soap, diapers and other consumer staples are the essentials that drive Walmart’s revenues, and these are areas that Amazon is aggressively expanding into. But it’s not just consumer packaged goods that Amazon has set its sights on; it’s also going after the industrial and B2B market. In fact, Amazon is attacking the established marketplace on all fronts, with the full intention of smashing the current model and replacing it with one that takes full advantage of online efficiencies. In short, if we remember the stages of a Kondratieff wave, Amazon is building the foundations of the reconstruction phase.

Amazon’s plans go far beyond the Kindle sales and struggles with profit margins currently beleaguering its stock price. This is a massive long-term play, and one that I would be hesitant to bet against. The act of shopping is about to change forever. In my previous column on this topic, many commented that for some things, the ability to touch and feel a product is essential. That may be true, but there are many, many more things where we could care less about the need for physical evaluation. Also, this divide between online and physical shopping tends to be a shifting one. Things we couldn’t imagine buying sight unseen just a few years ago are now purchased online without a second thought.

I’m not sure what lies ahead for retail in general, or the battle between Walmart and Amazon specifically. But I do know the retail landscape of the future will bear little resemblance to the one we know today. And I also know that the battlefield will be littered with causalities. It’s not beyond reason (or historical evidence) to suspect that the world’s biggest retailer may well be one of them.

The View Above the “Weeds”

First published November 10, 2011 in Mediapost’s Search Insider

Yesterday was not a good day.

It was a day that made me wish I had never gone into this business — a day that made me long for a warm beach and a mai tai. I don’t have these days very often, but yesterday, oh boy, I had it in spades!

I’ve been doing search (yesterday, I used a different, less polite noun) for a long time.  And I have to be honest, some days it feels like a thousand leeches are sucking the blood out of me. Given that, it was impossible to muster up much enthusiasm for the roll out of Google+ Business Pages or the raging controversy of Facebook’s “LikeGate.” Really? Are those the most important things to litter our inboxes with?

On days like yesterday, when I get caught in the weeds of digital marketing (where the blood-sucking leeches tend to hang out) I sometimes lose sight of why I got into this in the first place. This is a revolution. What’s more, it’s a revolution of epic, perhaps unprecedented, proportions. In macro-economic terms, this is what they call a long-wave transition or a Kondratieff wave (named after the Russian economist who first identified it). These cycles, which typically last more than 50 years, see the deconstruction of the current market infrastructure and the reconstruction of a market built on entirely new foundations. They are caused by change factors so massively disruptive, often in the form of technological innovations or global social events (for example, a World War), that it takes decades for their impact to be absorbed and responded to.

The digital revolution is perhaps the biggest Kondratieff wave in history. One could tentatively peg the start of the transition in the early to mid ‘90s with the introduction of the Internet. If this is the case, we’re less than 20 years into the wave, still in the deconstruction phase. To me, that feels about right. If history repeats itself, which it has a tendency of doing; we have yet to get to the messiest part of the transition.

These waves tend to precipitate what’s called a “regime shift.” Here is how the regime shift works. Companies started in the old market paradigm eventually reach a stagnation point. In our particular case, think of the multinational conglomerates built around market necessities such as mass distribution, physical locations, supply-chain logistics, large-scale manufacturing, top-down management and centralized R&D. In this market, bigger was not only better, it was essential to truly succeed. Our Fortune 500 reads like a who’s who of this type of company.  But eventually, the market becomes fully serviced, or even saturated, with the established market contenders, and growth is restricted.

Then, a disruptive change happens and a new opportunity for growth is identified. At first, the full import of the disruption is not fully realized. Speculation and a flood of investment capital can create a market frenzy early in the wave, looking for quick wins from the new opportunities. Think dot-com boom

The issue here is that the full impact of the disruptive change has to be absorbed by society — and that doesn’t happen in a year, or even 10 years. It takes decades for us to integrate it into our lives and social fabric. And so, the early wave market boom inevitably gives way to a collapse. Think dot-com bust.

As the wave progresses, the “regime shift” starts to play out. Established players are still heavily invested in the existing market structure, and although they may realize the potential of the new market, they simply can’t move fast enough to capitalize on it. Case in point, when industrial America became electrified in the late 1800s and early 1900s, the existing regime had factories built around steam power.  Steam-powered factories had a central steam engine that drove all the equipment in the factory through a complex maze of drive shafts and belts. The factories were dirty, dangerous and inefficient. New factories powered by electricity were cleaner, brighter, safer and much more efficient. But even with the obvious benefits of electricity, established manufacturers tried to retrofit their existing factories by jury-rigging electrical motors onto equipment designed to run by steam. They simply had too much invested in the current market infrastructure to shut the doors and walk away. New companies weren’t burdened by this baggage and built factories from scratch to take advantage of electricity. The result? Within a few decades, the old manufacturers had to close their doors, outmaneuvered by newer, more nimble and more efficient competitors.

When I plot our current situation against the timelines of past waves, I believe that given how massive this wave is, it could take longer than 50 years to play out. And, if that’s the case, there is still a lot of deconstruction of the previous marketplace to happen. The good news is, the building of the new market is a period of huge growth and opportunity. There is still a ton of life left in this wave, and we haven’t even realized its full benefits yet.

On days like yesterday, when my to-do list and inbox conspire to burn out what little sanity I have left, I have to step back and realize why I did this. Somehow, way back then, I knew this was going to be important. And yesterday, I had to remind myself just how massively important it is.

Bye Bye Big Box, Hello Digital

First published November 3, 2011 in Mediapost’s Search Insider

My friend Mikey (whom you may remember from the “Mikey Mobile Adoption Test”) and I were recently driving through our hometown, past a long row of new big-box retail locations that have recently sprung up.

I, somewhat exasperatedly, said, “Who the hell is going to buy all this stuff?”

Our town’s population is only 120,000 but we seem to have a huge overcapacity of retail space, with more going up all the time, thanks in part to a development-hungry First Nations band with plenty of available real estate.

Mikey replied, “Well, the town isn’t getting any smaller and people need to shop somewhere.”

That, and a recent article by MediaPost reporter Laurie Sullivan, got me thinking. Do we? I mean, do we need to shop “somewhere,” as in a physical store location?

I paused, and then replied, “I’m not so sure. I buy a lot more things online.”

“Really?”

“Really.”

A few days later, I was in a presentation where someone showed digital marketing growth projections for local advertisers on a slide. The growth over the next few years was relatively moderate: about 5% to 6% year over year. This despite the fact that the current penetration rates were well short of 50%.

Put it all together and I can’t help wondering whether we, collectively, are “sandbagging” our local digital growth potential. Modest growth projections assume fairly linear trends in the future. We use past adoption and extrapolate these into the future. Statistically, it’s probably the rational thing to do, but it doesn’t take into account the possibility of a dramatic shift in behavior. For example, what if we’ve reaching a tipping point where, as Sullivan notes, it’s just a lot easier to shop online than to actually hop in your car, drive across town and then try to navigate through a 25,000-square-foot massive retail location?

That’s the way things tend to go in real life. We don’t incrementally change behaviors, we change en masse. And when we do, we trigger massive waves of change that deconstruct and reconstruct the marketplace. I suspect we’re getting close to that tipping point.

Personally I, like Sullivan, find the physical act of shopping a royal pain in the tuchus.  Recently, my wife and I decided to go buy some coasters, those little squares that go under cups on your coffee table. Indiana Jones has embarked on less daunting quests. When we finally found them I reckon that, accounting for my wife’s and my time at fair market value, those coasters cost somewhere around a thousand dollars. All this for a six-dollar set of coasters that I don’t even particularly like (don’t tell my wife)!

We’re to the point now where shopping should be painless — a search, click and buy, then relax and wait for FedEx to deliver. Even local shopping can become massively more efficient through mobile technology. At some point, we have to realize that going to huge retail stores that are built to maximize per visit sales rather than enable you to find what you’re looking for is a horribly inefficient use of our time. And when we do, the current retail paradigm is flipped on its pointy little head. The net impact? Those modest growth curves suddenly shoot for the sky!

And all those big-box stores that Mikey and I drove by?

Perhaps bowling will make a sudden comeback. I know several great locations for an alley.