Hidden Frequency

Skip the Checkout, Should Google Create its Own Currency?

While it’s too early to call the game on Google Checkout because Google is committed to making it work, even if it means forcing Android users and developers to use it, it’s not exactly a huge success. For those of us clamoring for a PayPal competitor to make the market more consumer friendly, Checkout hasn’t delivered yet.

Rather than just being a PayPal clone tied to Google services, Google should think about creating the impossible dream that so many others have failed at: a web-wide virtual currency. Hundreds of millions of VC capital has been wasted trying to create a universal online currency. Outside of in-game purchasing, none have taken off. Most have crashed and burned. Google could be the one that makes it work.

The advantage of an online or “e” currency is that it makes micro-transactions possible. Right now there’s no effective way to spend a few cents or a fraction of a cent outside of a particular platform. Credit card transaction fees make it impossible to sell services and content for a few cents. Facebook has its own plans, but I’m skeptical of how well that will work outside of Facebook’s eco-system.

A successful virtual currency creates value in two important ways:

It creates an economy for micro-transactions.
It reduces the overhead from credit-card transactions (which eat up 2 to 5% of every online purchase).

To make an online currency work you need to solve five problems:

1. Trust

We need to trust the company handling the currency and making the exchange. Google has trust issues like any other company, but I think they’re best positioned to make an online e-currency work. We trust their algorithm with billions of dollars of commercial transactions everyday (AdWords and AdSense).

2. Security

Besides trust, we need to feel that the company involved has the resources to make these transactions secure. Fraud killed several PayPal clones and made it nye impossible for anybody else without some serious capitalization to even get started. Google has a state-of-the-art technology for preventing fraud.

3. Liquidity

An effective e-currency should be able to be moved from person to person and cashed out with minimal transaction costs. A friction-free currency is also capable of very tiny transactions like a thousandth of cent that can be useful in certain financial transactions like moving away from a CPM model in online advertising.

4. Utility

A virtual currency that’s only useful in one place is not very helpful. Other virtual currencies failed to take off because potential users were concerned by the first three problems. Would you ship a physical good to someone in exchange for a virtual currency from a third-party you didn’t trust? Google can encourage a wide variety of third-parties to adopt the currency.

5. Solvency

In-game and other virtual currencies have no external value. An online currency needs to be pegged to real currency to have real value. A company can’t just generate currency like an African dictator. It has to based upon money on hand. Google is large enough and trustworthy enough to back an online currency we’d feel has real world value.

How to implement a virtual currency

All five problems can be solved by a company with the resources of Google. To implement their currency they should first think about making it a universal currency within games and then extend it outward to virtual goods, digital downloads and then physical goods. By working step by step from content with little intrinsic value to goods with real worth they can grow the currency and learn how to solve minor problems before they become major ones.

The benefits for Google and the economy in general would be great. The more you can reduce the cost of transactions, the greater the surpluses and efficiencies you can generate.

Andrew Mayne is publisher of WeirdThings.com and founder of Blurbtastic.com. His personal website can be found at AndrewMayne.com.

How HTML5 Will Save Podcasting and Make it a Billion-Dollar Market

For all its promise, podcasting is still a niche form of content on the web. Hundreds of millions of dollars have been poured into trying to make this a more profitable medium, but the end result is that in 2010 just a handful of players are just getting by. Its popularity is growing for sure, but not in the dramatic way we’re used to seeing with the web.

This is despite the fact that podcasts are one of the most engaging forms of online content.

The Problem

The difference between text content, videos and other online content and podcasts is this: There’s no way to immediately interact with the content.

If you hear an ad, there’s no way to act on a call to action. If you can’t immediately click on something like a link or or a pop-up (like you can in a YouTube video), there’s not as much value for online advertisers. Marketing has value, but advertisers still pay for clicks. Text links, and click through banners are what drive the online economy.

Currently advertising for podcasts is driven by large marketing budgets that want to “get the word out” and by sponsors with affiliate offers (where they have individual podcasters direct listeners to use a special link or enter a special code). This is a hugely inefficient system. It expects the users to take future actions which never works very well. It greatly limits the potential advertisers. As a marketing tool it’s hard for advertisers to track down how effective a spot was and impossible for podcasters to measure their influence (did you buy a Ford Fiesta because Leo told you to or because Adam did?).

Without a way for users to have interactivity with podcasts it’s very difficult to calculate the value of a podcast. This price uncertainty is the underlying problem with podcasts today.

The Solution
The most direct solution is to give podcasts a similar level of interactivity as web pages and web video. By enabling users the ability to follow up on call to actions in a podcast you can measure their level of engagement and put a price tag on their actions.

This interactivity has to work in a way suitable to the medium. Podcasts are mainly an auditory medium, so this interactivity has to work in auditory way. You can’t expect someone listening to a podcast on their iPod or in their car to go to the device to look at a screen to interact. It has to work along the same lines they already do.

Podcast content needs to accept voice input from listeners.

This voice input could be used to let listeners choose which commercial to listen to, give permission for their email address to be used for a special offer or it could even be used to activate a purchase from with the podcast for additional content.

The capability for this is in the HTML5 specification for a “device”. Although not currently implemented, in the near future HTML5 will allow browsers to use your microphone or webcam to send audio or video back to a server. This will allow for a open, cross-platform way to add interactivity without third-party plugins. iPhones, Androids, Macs, PCs, Linux machines and any other system running an HTML5 browser with this implemented would be able to interact. Being a part of the HTML5 spec it would make it very easy for developers to add this into applications.

The hard part is done on the back end where a system has to interpret those voice commands. Fortunately, Google and other companies with voice recognition technologies are working on API’s to make this easier. The end result would be a small piece of code you’d embed that would send your voice input to a server that would then return text input (“Tell me more”, “Send me more information”, “Sign me up”, etc.).

Making it work

A few years ago this would have been technically feasible but much more difficult to implement because of how people consumed content on mobile devices. In an environment driven more and more by apps and mobile browsing, it’s easier to get people to a web page or an application that hosts your podcast.

Currently there’s no support for this kind of interactivity in iTunes and other media players, but that’s likely to change. In the mean time, once browsers ship with HTML5 support for audio, it’s not difficult to get a large portion of your audience to listen to it from a web page or app with the right incentive (use iTunes for discovery, but push people to a web page or free app for more content).

For content producers, creating interactive podcasts could be done in a very simple way using HTML5.

Content would be broken into segments and the commercial spots could be dragged and dropped where needed. A drag and drop interface for creation would handle inserting all of the API calls needed to make it work.

Will Google make this happen?

Once you have the ability to drop commercial spots with interactivity into a podcast you’ve created a way to monetize podcasts with as few as one listeners. With millions of hours of podcast content and hundreds of millions of listeners, that’s a huge potential market.

The company best poised to make this work is Google. Their entire business model is based on scalability. They make money at both ends of the spectrum. A podcast with 20 listeners has value to them if they can treat audio like they do text links.

Their voice transcription technology, while sometimes amusingly awkward, is getting better everyday from a learning algorithms and more than adequate for interpreting simple user instructions. An API to support this already exists.

Because they own Chrome, they can implement the device function whenever they want. Being the first to do this would give them an advantage over Firefox, IE and Safari.

When?

This could happen tomorrow or five years from now. The moment people with the ability to make it happen realize this is where the money is, we’ll see start to see these technologies. They’ll realize it when people start talking about it. If you’re a podcaster, start talking about the potential of interactivity. If you’re a developer, start talking about tools for implementing it. If you’re and advertiser, start asking about it. If you’re a regular person, start asking questions. If you’re an angel or a venture capitalist, give me a call.

Andrew Mayne is publisher of WeirdThings.com and founder of Blurbtastic.com. His personal website can be found at AndrewMayne.com.

Is Google’s Book project just another content scraper?

Over at The Chronicle of Higher Education, Geoffrey Nunberg points out some serious flaws in the Google Book project.

I think it can be summed up by this:

“The ad placement on Google’s book search right now is often comical, as when a search for Leaves of Grass brings up ads for plant and sod retailers…”

Google’s intent for the project seems to be two-fold: Have an immense amount of data to develop natural language processing and have something else to plug text links into.

Making an actual usable database that’s something scholars can rely upon seems a little bit too advanced for their algorithm at this time:

“To take Google’s word for it, 1899 was a literary annus mirabilis,which saw the publication of Raymond Chandler’s Killer in the Rain, The Portable Dorothy Parker, André Malraux’s La Condition Humaine, Stephen King’s Christine, The Complete Shorter Fiction of Virginia Woolf, Raymond Williams’s Culture and Society 1780-1950, and Robert Shelton’s biography of Bob Dylan, to name just a few.”

As it is, the project can feel as useful as a link farm filled with scraped content. If Google Books was a site about web content and not print, they probably would have blacklisted it by now.

Andrew Mayne is founder of Blurbtastic.com and publisher of WeirdThings.com. His personal website can be found at AndrewMayne.com.

The Trillion-Dollar Metaphor

Search is dead. People click less. Growth is only supported by adding users and getting us to spend more time online. We reach peak users this decade and probably peak time next week. After that growth stops. ‘Nuff said.

Then what happens? Text ads die too. Finally we give up the current metaphor and find a new one that better fits how we use the web.

The future has always been social
The one thing everyone knows about the next metaphor is that it somehow involves the word “social” like the last one used “context”. The most obvious example of a social platform right now is Facebook. Yet, the most effective social (and contextual) ad platform in history has a CPM of .04%. That’s 400 clicks out of a million impressions. Scary stuff. Thankfully for them they’ve got entire internal economies based on games and virtual currencies. Facebook will do just fine. So what about the rest of us?

It’s obvious that the newspaper/magazine metaphor we arrived at in the 1990’s for monetizing the internet isn’t going to last any longer than actual newspapers and magazines. Those of us not named Facebook need a new metaphor.

A starting point for a metaphor can be a meme. The current meme is all about social proof. Startups like Blippy and Facebook concepts like Beacon are based upon the idea of using social proof as a way to get you to buy the things your friends are buying.

Both were very clumsy attempts (perceived as being either invasive and/or outright tacky) at cracking the social marketing problem. As obnoxious as it is to build a startup that tweets the conspicuous consumption of affluent Bay area folks to a world going through the worst recession in a generation, it was an attempt by very smart people to solve a problem we have no clear solution for: How do you make people buy things when they don’t want to click on ads anymore? Solution (or so they think): tell your friends what you’re buying and maybe they’ll follow suit.

Near as I can tell, Blippy, Beacon and similar platforms are a metaphoric crossbreed of a Tupperware party and the price tag on Minnie Pearl’s hat. It’s using people’s own consumption as advertising to their friends.

I think there’s potential in that metaphor if it doesn’t come across as being too invasive or tacky. Unfortunately, those are the two things the people trying hardest in that space excel at being.

A really good metaphor, one that we can use to contextualize all of this networked activity, should give us at least another decade of growth and innovation. This metaphor that gives us a new, yet familiar way to look at things and plug in content, business and social interaction is the what’s going to unleash the next big boom in online commerce. Like search and contextual advertising did for the last decade, this new metaphor is will be the launching point for the next trillion-dollar online economy. So what is it?

We’ve already met part of the metaphor…
The important parts of this metaphor are right in front of us. We just haven’t recognized it yet. Text ads, search and contextual advertising were around before Google figured out how to make them all work and we saw the Internet as a giant newspaper/magazine metaphor.

We know the next stage has got to be social and that’s why there’s all of that investing into apparently ridiculous schemes. This isn’t a game where it pays to sit on the sidelines when you’ve got billions of cash at your disposal to spend on experiments. Blippy, Beacon, even the nefarious Pay-Per-Post provided us with lots of information about people’s behavior. Granted, you could have probably learned a lot of this with some clever small scale experiments, but that’s not the way VCs work. It’s all anecdotal until you try it. These are folks willing to build their own space fleets on a whim. Spending ten million to annoy you with locations services or show you how crass your friends are is chump change for them. People say they’re aiming for the next Google. But actually they’re actually aiming to be even bigger than that.

Taking a wisdom of the crowds perspective, we can deduce:

1. Somehow it’s “social”.
2. It won’t be something that makes us click outside our area of interest.
3. We’re going to be even more annoyed by the failed attempts.
4. It’s going to make us rethink “privacy” (an already an alien concept to anyone under 20).
5. It’ll be explained to us as a metaphor we already understand in a different context.
6. Really smart people are spending lots of money on things they think are part of it. There’s a reason Google has been smothering pet projects in the crib; they want to focus their resources.

Those are just a few pieces of the puzzle. I personally suspect that the next metaphor isn’t necessarily going to be something as simple as saying the Internet is now like pay cable or radio. In fact, I think we’ve already exhausted all the traditional forms of looking at media as a metaphor for the internet. Sure it’d be nice to invent some new construct to look at it, but that never works with humans. We work with patterns we’re already familiar with.

I thing this next metaphor is going to based much more on how humans do trade and not how we consume information. And I just don’t necessarily mean how we did commerce in the 20th century, the Middle Ages or even during the time of the Phoenicians. I think we may need to start talking to anthropologists about much deeper metaphors that go back 100,000 years or maybe even further. But not too much further. It’s not a metaphor that applies to chimps or even our more closer related ancestors like Homo Erectus or Neanderthal. I bet elements of it are in Adam Smith’s The Theory of Moral Sentiments and Charles Darwin’s On the Origin of Species. Figure out which part and maybe you’ll be the one to figure out the trillion-dollar metaphor everyone is looking to find.

Andrew Mayne is founder of Blurbtastic.com and publisher of WeirdThings.com. His personal website can be found at AndrewMayne.com.

Is Apple’s iAd the biggest thing since Google Search?

The Apple iPhone OS 4.0 announcement was a big deal. So big that people are having a hard time wrapping their heads around it. The real story isn’t about Apple shutting out Adobe development tools. It’s not even blessed multi-tasking on the iPhone. It’s Apple’s vision for advertising in apps via iAd.

“So what?” Is the response from a lot of people. While we already had in app advertising before, we haven’t had the Steve Jobs version of it. He and his team at Apple are very thoughtful people. They have a vision. They just told it to us. It’s a very, very big vision.

Imagine I told you back in 2000 that I was going to monetize web pages by putting little text ads on them ad putting text ads next to search results for those pages. Very few people thought this was going to be big. Those that really believed it put their money behind Google and made a fortune

Here in 2010 we’re amidst another game changing event. This time Apple wants to be at the forefront of this revolution. Apple wants to do for applications what Google did for monetizing the web.

In Apple’s vision a developer doesn’t have to worry about advertising or monetizing their work. Create a great application. Put iAd into it and upload it into the app store. Apple takes care of making it discoverable and profitable from there.

To be sure, a closed system has its downside. However the upside makes it more than worthwhile for an independent developer like myself. I’d go bankrupt on Google AdWords trying to attract the volume of customers that the App Store store gives me for free (well, 30% of gross).

iAd takes that a step further. With a built in ad model I can start making $.99 applications into free ones and put them into the hands of more people. Lots of more people…

By doing to applications what Google did to web content, Apple’s vision could change the fundamental economics of computing.

As a content producer it’s helpful to think differently about how you might monetize what you produce in a world where people are getting more and more of their content from within apps.

Podcasting, blogging and just about every other form of content have a new opportunity to create a successful business model because of this. A free app based on an iAd supported ad platform in an ecosystem that encourages in app purchase and upgrades is an exciting thing. How would you leverage it?

Sidenote: Don’t think for a second that Google is going to sit still. Expect an announcement about their own platform soon. The question is how well do they understand the app ecosystem? The Android App store isn’t an encouraging sign, but they’re smart and they learn.

Are Google fans too cheap to pay for anything?

google free

Does Google=Free?
I consider myself a Google fan. And my reluctance to actually buy anything from them makes me wonder if I just keep looking to them like the rich kid down the street we’re all nice to because he keeps trying to buy our friendship.

I love many of the things Google produces. I even own a small amount of Google stock. I think Google has collected some of the smartest people on the planet and is changing our world in ways that few have ever done before. Yet, I think despite the things that Google does well, there’s one thing it’s not so successful at: Actually selling things to fans of the Google brand. Apple fans get excited about what Apple is going to sell them. Google fans get excited by what Google is going to give them for free.

I’m not talking about AdSense and AdWords. Those are primarily business to business services. I’m talking about the things Google has tried to sell directly to end users where we give cash to Google: Google Video, pay-per-view movies on YouTube, the Nexus One and to a degree Android apps.

What does Google mean to people? To most people it’s not “Do no evil”. To them Google means “free”. Our first experience with Google was as a great search engine with minimal advertisement that was free to use. Services like free Google Calendar and free Gmail expanded on that.

Because of this, Google is known to the larger public as the company that gives you free stuff that’s supported by advertising you’re free ignore.

Then Google tried launching things that cost money (not counting B2B stuff). After the failure of Google Video (which featured paid content) they bought YouTube and went back to a free content model for video for a while.

I think the way people interact with Google and what they expect might be a reason that even though Android phones are very popular in general, the Google name is why Android applications don’t sell anywhere nearly as well as iPhone apps do according to developers.

I’m totally willing to be convinced that Google can be a brand people buy stuff from. But here are some example cases that say otherwise:

Google Video
We don’t need to do much analysis here. Google made a very big noise when they launched this platform to sell TV shows and movies. Not many people wanted to buy episodes of Deep Space 9 or Charlie Rose from there and it lost to iTunes and Bit Torrent. The meh design of it didn’t help either. Now it’s a search engine for video

google pay-per-view

YouTube (pay per view)
Recently Google tried an experiment when it offered Sundance feature films like The Cove as pay-per-view downloads on YouTube (Wired). How badly did it fare? The entire slate of films took in only $10,709 during the 10 day period (NY Times). Google says it was “happy” with the outcome. Kind of like the AppleTV is a “hobby” for Apple.

Google backers try to dismiss the effort by saying the movies were too indie and the project was under marketed. The problem with that is The Cove had a lot of buzz going into it and the whole enterprise had the biggest online marketer in the world behind it. This either says the Google machine isn’t very good for selling things (which I find hard to believe) or the Google brand isn’t something we want to pay for. We go to YouTube to watch stuff for free.

In my own experience with Google AdWords trying to push my own DVD’s I found that a person typing “Andrew Mayne DVD” into Google search was far more likely to be looking for a torrent of the DVD than actually a place to buy it. Then is symptom of an ecosystem where people expect everything to be free.

Google Checkout
Launched four years ago, Google’s effort to compete with PayPal has been disappointing. While more of a business service, its front end is faced towards consumers. Even after trying various ploys to get merchants to use Google Checkout, it still has negligible market share. PayPal gets 30 times the traffic. If it weren’t for the fact that Google Checkout is already 4 years old and you know, owned by Google, it’d be easy to make excuses for it. Crunchbase on Google Checkout

I would love for Checkout to be a much stronger contender. As an online vendor I’m not comfortable with PayPal being my own practical option. Yet I’m not willing to take the Checkout plunge myself. Nor are a lot of other people. I don’t think it’s a trust issue. I just think when we see the “Google” name we don’t feel like reaching reaching for our credit cards.

Making matters more vexing, Paul Boutin at VentureBeat.com writes that part of the problem with Android app purchasing (see below) is Google Checkout: Why so few paid Android Apps?

The Google Nexus One
Every Nexus One user I’ve talked to loves their phone. By all accounts it’s a worthy phone to compete with the iPhone. However, even an Apple fanboy like me is confused by the rather low sales figures for the phone. 135,000 in 74 days? This is scary for two reasons. The first is that it indicates that the Google brand isn’t nearly as strong as many thought - at least as a brand you actually buy things from. The second reason is that it questions the use of Google as an end to end marketing solution. Google has put a large amount of effort into selling the Nexus One. Type “phone” into a Google search and it’s the first sponsored link. For weeks it was the sponsored video on the YouTube homepage and popped up in Gmail. Check out Chris Matyszczyk at CNET’s observations on that: CNET

Unfortunately that synergy didn’t move the needle very much. The Droid sold over one million phones in that same amount of time and put Android in ten times as many hands as the Nexus One did. There are a number of mitigating factors like timing, televisions ads, etc. But none of them adequately explain the sad sales figures for the Nexus One. An article at Design by Gravity insists that Google’s overmarketing and underselling are all working according to plan. I think otherwise.

I have a couple theories. One is just the fact the Google=Free to most people and actually *buying* a product from Google is a very alien concept to most of us. The other theory is that this perception exacerbated the problem when Google wanted to sell an expensive consumer device.

Prior to the launch of the Google Nexus One there was a lot buzz about a potential Google branded phone. Some of this speculation even put Apple fans to shame. Even BusinessWeek speculated that a Google Phone might be free. But don’t blame rumormongers for starting that. The seed of a free phone was planted by Google CEO Eric Schimdt back in 2006 when actually said that mobile phones should be free (MSNBC). Now he was talking about a far off distant time when mobile advertising rates would cover those costs; but who would know better than Google when that time would come? Who better to make it happen?

When Google’s first branded phone actually arrived it was a bit of a letdown for people who were expecting a free or even heavily discounted phone. The fact that it cost $400 more than a (subsidized) iPhone was like finding out Santa was going to invoice you for Christmas presents.

Many were expecting a revolutionary phone and business model. What they got was a solid iPhone competitor and less revolutionary business model. Google’s excitement that you could buy it online directly from them wasn’t as groundbreaking to the rest of us.

Given the fact that Verizon sold a heck of a lot more Android phones than Google did, it seems safe to say that Google may not have the edge on actually selling the platform.

Google fans were expecting Google to bring the Google=Free to smart phones. When they failed to do that, their fans failed to show up.

Android Market

The Android experience
Giving away the (again free) Android OS to phone makers was a great way to create a Google friendly mobile platform for their advertisers and offer up competition to Apple that Microsoft and others weren’t able to deliver. Trying to replicate the entire iPhone experience however is problematic: As someone who wants to sell something I’m much more excited by Apple fans than Google fans. So far it looks like Android users are only into free apps. 98.9% of Android downloads are free apps

There is of course a large community of people who use jailbroken iPhones to run cracked iPhone games and apps. But as a percentage of iPhone users it’s miniscule. The entire iPhone experience works well enough that it’s easier to buy the game for $.99. How many iPhone app developers do you hear crying about lost revenue to piracy?

It’s also interesting to note that when we routinely hear about iPhone publishers having million-dollar months in the App store PC World, it’s cause for celebration in the Android community when someone cracks $15,000. Android is new to the game compared to the iPhone and developer revenues will go up. More apps in the Android market will help and as the number of Android users edges closer to iPhone users it will become more lucrative for developers. However I doubt we’ll ever see parity with the iPhone.

As the Android platform matures and Google phones get into the hands of more law abiding citizens as opposed to bit torrent-prone early adapters it’ll be a solid place to make money; provided the OS fragmentation and hardware variability doesn’t screw things up too much.

The danger for that market from a developer’s perspective is that Android’s openness makes it very easy to pirate. And the tools for doing that are only going to become more ubiquitous. Given the current problems with the Android Market (only certain phones see certain apps, the carriers can restrict what’s available, etc.) more and more people might start choosing to go elsewhere to get apps - sites like Pirate Bay.

Another question we don’t have an answer to is what happens to the Android handset if the iPhone goes unlocked to a specific carrier? A big part of the adoption of Android is because of AT&T and people being locked into other carriers. Most of my Android using friends bought the phones because they couldn’t or didn’t want to go to AT&T.

Because Apple makes money from actually selling phones they have a lot more invested in marketing, developing and keeping users happy then Google does from a product they give away for free (except the Nexus One - but they even undermarketed that).

The fight between Apple and Google to buy mobile advertiser AdMob is a sign that both of them see a big future for ad supported applications. As a developer I have to wonder if Google thinks that’s the only future for mobile applications?

Will Google always equal free?
Soon I’ll have to spring for a larger Gmail account. I’ve said for years I’d love to pay for a better YouTube experience. I’d even pay for Google Voice if I actually used it. I’d also pay for machine translation and a host of other things Google does pretty well.

I think service by service Google will change its perception to a brand that you buy some things from. But it won’t be a quick path. I also think core fans of Google will either complain or not show up whenever Google tries to actually charge them for something.

Until then I’m convinced that for the Google faithful Google=Free.

If you have some counter examples or think I’m overlooking something, you can email me at: andrew@andrewmayne.com