Some time back I blogged about GroupOn, the Chicago-based Group Buying phenomenon. Since then they have continued their astonishing pace of growth and are now available in over 100 cities including 10’s of locations outside of the US (all in 15 or so months from launch!). GroupOn’s growth is somewhat propelled by their early mover advantage which has afforded them a large amount of mainstream consumer press in the US, driving awareness of the segment and brand (all that’s required to acquire users) while they gathered cash to drive acquisitions that further accelerate their growth cycle and defend the space. The simplicity of the Group Buying model helps too, as does GroupOn’s excellence in execution. Much like Google the segment they dominate has now become synonymous with their brand in the US at least – something GroupOn’s competitors’ may find is impossibly hard to shake.

Ironically, Group Buying is a very easy segment to enter, it’s a a strong cash business that you can start with a basic transactional website and a couple of sales people, in Australia this has played out and there are already ten or more GroupOn pretenders live and running in only 5 or 6 months. Today’s winners in Australia started with a reasonably large base of consumers they could send offers to from sister businesses (www.scoopon.com.au from www.catchoftheday.com.au ) or smart Facebook  feeder strategies (www.jumponit.com.au from www.facebook.com/sydneydeals ) offering them clear differentiation from the smaller competitors.

Another similarity to Search and a challenge the also-ran Group Buying businesses face is the lack of Switching Cost, meaning that Consumers are able to jump between providers with little or no personal cost, switching “loyalty” at the click of an Unsubscribe link. Chances are a number of poorly funded Group Buying pretenders will come and go over the coming months, it will no doubt be fascinating to watch!

I was struck by how seldom I hear of Google’s search endeavours when I read about the recent release of their updated Search Algorithm, codenamed Caffeine. Given Paid Search accounts for 96% of G’s revenues you’d think it would be the focus of most of their efforts? It doesn’t look that way. Can Google’s solitary cash cow really be getting too little focus from the Mountain View Mafia?

The Caffeine Algo promises significantly fresher results as well as an adapted architecture etc etc – but it’s primary focus has to be on maintaining revenue momentum when the vast majority of effort seems to be focused elsewhere. More than ever, Google has to defend its position in search, not only is Microsoft is about to land its much vaunted Yahoo! partnership providing the first real chance of competing with Google, but there is the problem of a wholesale shift away from Web Search as the primary navigation tool in favour of Social tools such as Facebook and Twitter.

The cracks are already showing, Google’s Q1 Revenues were $6.77bn, up 23% from last year of which 96% relates to search. Clearly Google’s revenues will be hard to improve on through share gain, given their already dominant position, leaving only the increase in Internet Population, Searches per User and Revenue per Search as the growth levers. Google’s numbers show only a 7% YoY uplift in Cost per Click and a 15% YoY uplift in Paid Clicks, so that leaves only the Growth in Internet Population and the number of searches conducted by each to fuel growth – each under threat for the reasons listed above. 

Taking a very long  term perspective, Apple and Microsoft were incorporated 25 and 35 years ago respectively, it looks like Google’s Cash Cow will dry up long before they find an alternative source of revenues and never at the yields offered by Search. The fan boys won’t be pleased.

Ok, so I shouldn’t be ecstatic, but iPhone (at 21% share) being dethroned to 3rd spot behind Blackberry (36%) and Android (28%) in the US (Q1) means three things:

• Switching cost is lower than originally thought

Given Apple’s mastery of the iPhone Ap Store, and the resulting average investment made by each user there was an incorrect assumption that iPhone customers would be highly resistant to switching platforms and losing access to their aps, not so.

• OEM strategy still makes a ton of sense

Google have done an amazing job with the Android OS, moreover the Open Alliance is little different to Microsoft’s own approach to partnering with OEMs, great reinforcement of the potential of Windows Phone 7

• iPhone is not infallible

Apple’s ascent has seemed unstoppable in the recent months, with Apple TV ranking as their principal failure, but Blackberry’s continued dominance of Business Mobility and Android’s performance in Consumer have served to remind us of the fragility of the market, something Apple could easily have forgotten.

Still, the iPhone 4G is just around the corner so the Wizards of Cupertino will rise again very soon; happy to enjoy the moment though!

Roll on Windows Phone 7, the fight is absolutely on.

Rupert Murdoch has asserted that page impressions generated via search engines provide little value to advertisers versus impressions generated by loyal followers of his web properties. Crikey, I wonder how he feels about the Frictionless Sharing?.

Of course Rupert Murdoch would love to drive loyalty by forcing every customer to set his homepage as their homepage, but he can’t, users are empowered to choose where to go next so it seems oddly quixotic of the world’s most seasoned newsman to assert such an ideological view, or, is so much at stake for News that he was willing to assert a patently ridiculous position in the hope of turning the tide back toward walled gardens? Maybe he’d seen the iPad by that point and he wished the entire web would look that way!

Obvious history: Jerry and David’s Guide to the World Wide Web helped drive the democratisation of the web by providing links to sites they thought were interesting, over time the service became Yahoo! Web Search as the web became to large to provide a suitable list and they switched to an anonymous algorithm for scale, today’s Google is just an evolution of that algorithm. Publishers soon realised the algorithm could be manipulated and invested significant sums in Search Engine Optimisation to surface pages from deep within their content portals. Although doing so effectively drove users away from Home Pages in favour or Web Search Navigation – so look how empowering web search worked out for publishers in the long run! In the online equivalent of scissors paper stone, Search beats Publisher every time. <<UPDATE>> Just spotted a good article from the very smart Mark Cuban , albeit it was written long before I wrote this!

But now even Search may be losing it’s place as the primary navigation tool of the technoratti in favour of social sharing, (which is really a scale version of Jerry and David’s list but with your contacts providing the recommendations in place of two nerdy kids from the Valley). And Search can’t compete as a recommendations engine when compared with recommendations from your like-minded friends.

Social Sharing is here, savvy publishers and those with most to gain have already adopted Sharing and are actively driving a new recommend / consume habit cycle amongst users. Publishers who resist adding a Share box like the one below to each article page may well grow advertiser yields in the short term by offering a deeper understanding of their loyal audience, but they may also be missing the point. Social sharing should be embraced, as should Search for that matter, as well as any odds and sods miscellaneous user that comes to their site for any random reason. Content providers should be focused on making relevant experiences visible through intuitive navigation to drive social referrals and page impressions per user, reducing their dependency on both Search SEO and the existing Home Page and instead creating a customised home page for each user as they land in an article page they clearly care about. For yield they should invest in advertiser platforms that provide audience insights and behavioural targeting, easily making up the revenue gap left by flirting with a less committed audience.  

With the democratisation of the web came the growth of the Long Tail. Search brought accessibility to the Tail where the smartest SEO was driven by those with the most to gain, Social Share on the other hand is a meritocracy at work brining opportunity to publishers large and small. Although only to those who embrace it of course!

Should the power of Social require any reinforcement, check out the following vid summary from Socialnomics’ Erik Qualman

As a design study the Courier is a tremendous success, but as a PR exercise it has become something far more sinister.

I heard when I was in Redmond last that Microsoft had made the Courier concept public to demonstrate what could be built on the Windows platform and had provided the build specs to at least one OEM, however the Courier has turned from an innovative design exercise into an unfortunate metaphor for our inability to compete with Apple in Consumer, and whipping boy for at least one of the two two recently departed top Execs in the Entertainment and Devices Division.

It makes no real sense to me that anyone would think Microsoft were going to build the Courier, the fact is that Microsoft don’t compete head to head with Apple, OEM partners do, such as DELL, Sony and HP, and these OEMs, every one of them struggling for margin, are checking out Android as an alternative to Windows on low end devices, so now is not the time to start screwing the channel we are so dependent on. However the constant and unfavourable comparisons between Microsoft and Apple/Google are reinforced by the notion of Microsoft competing head on with Apple by building something like the Courier (and it looked pretty good too!). Google’s decision to partner with Mobile OEMs through the Open Handset Alliance to build Andriod powered phones while building its own Nexus device range established a precedent of deep-pocketed companies trampling over their embattled partners. But then, Google always seem to struggle with the notion of boundaries.

Microsoft is in a sticky spot for sure, I mentioned before that Microsoft could hold its breath for a long time, meaning that it could afford to make short term sacrifices for the long term good, but it would be good to have a breather. Now that Bach and Allard are gone, the pressure on Dom Matrix and Andy Lees is enormous, Matrix MUST land Natal in a big way, it has to change the game way beyond the marketing BS and win consumers by the millions, Lees’ responsibility is even greater, if he can’t stop the share loss in Mobile, Microsoft’s entire consumer business could be at risk.  

The premise of Groupon is that small businesses offer deals to the Groupon audience, the businesses trade a substantial discount against a minimum number of of orders, the offer is “tipped” once enough Groupon members have signed up. The Groupon team get to decide which offer is published in each city as well as adding some colourful narrative to entice the purchasers.

Since launching Groupon has encountered many imitators, but their first mover advantage has meant grabbing scale across tens of US cities, immediate profitability (forecasting $100 EBIT by the end of the CY) and a resulting valuation or $1.2bn. Expect that number to grow as the launch cities grows. Can’t wait for it to hit Sydney.

: – - :

In the past month since posting this note I’ve become aware of a healthy stream of Group Buying sites, I’ve listed some below:

http://www.ourdeal.com.au

http://www.ouffer.com

http://spreets.com.au/

http://www.offerme.com.au/

http://www.crowdmass.com.au/

http://catchoftheday.com.au/

http://www.jumponit.com

http://scoopon.com.au

An article in Mumbrella suggested that the market opportunity for Group Buying had now been satisfied, I disagree.

In the US Groupon stole such a convincing march on its competitors that it grabbed a large chunk of market share and mindshare before a strong competitor emerged – no leader has emerged here in Australia. Given how fragmented the Group Buying market now is and how intense the competition is (read low margins) there is a real opportunity for a well backed leader to emerge in Oz, a space also exists for a Group Offers aggregation website supported by a large publisher.

It’s also only a matter of time before one of the existing large transactional audience businesses such as ebay or Facebook add Group Offers to their buying platforms (about time Facebook made good use of Facebook Marketplace!).

So good luck to the startups listed here – regardless of what happens next, the clock is ticking, I’d say you have 6 months.

It’s ironic that Apple have commoditised consumer electronics whilst appearing to do exactly the opposite. During the peak of iPad hype a few weeks back @nickhodge commented that the hardware was not important, that it was all about the aps..  He’s right of course, but I’d go further, it’s about seamless experiences, and how tightly Apple controls those experiences.

Apple is an exceptional manufacturer of Consumer Electronics. They’ve been consistently out-designing every other PC manufacturer for 25 years. They changed the game in ‘98 with the iMAC’s simple coloured plastics and again in ‘01 with the iPOD’s white earbuds.

The iPOD was pivotal, and a key turning point for Apple’s strategy for two main reasons, firstly it became mass market, where Mac had previously occupied a niche category, and secondly it was tied to a service, something considered as incidental by most at launch.

Manufacturers tried in vain to compete with Apple’s player with more storage space, better battery life and improved sound quality, but consumers didn’t care, the iPOD sucked in all three. The white earbuds made the player must-have, but the seismic shift in MP3 players was driven more deeply by the iPOD’s packaging, the industrial design and its seamless integration with iTunes. Apple dominate the space with 80% share of Mobile Music players. 

In 2007 the iPhone landed with the Apstore as the killer service. Again, Apple had changed the conversation, but this time in the rapidly growing Smartphone category. Clearly I’m not a fan of the hardware, and not just because of the MSFT coolaid I’ve consumed over the years. Regardless, Apple now dominate this category with 40% share.

This month the iPAD launches and the service story moves forward again. Newspapers, Magazines and Books are added to Music, Movies and Aps. Like the iPOD and iPhone the device is seriously flawed of course, however just like those devices Apple has changed the conversation, Mobile computing is no longer about the hardware, industrial design is just hygiene, service is key.

Burberry well and truly deserved their fate. Unlike Louis Vuitton’s monogram, counterfeiting was not the force behind the mass adoption of the iconic weave, Burberry themselves had provided access to their range through an accessories line including scarves and baseball caps. They leveraged their significant brand cache to sell an entry-level product range and all but destroyed their brand as a result. The Burberry brand was dead in the UK, no self respecting fashionista would be seen wearing the Check, worse still, by 2007 even the Chav’s were too self conscious about the Burberry cliché to wear the gear outdoors!

Sure fashion is a fickle thing, but Burberry were truly a victim of their success, and in fashion many others have suffered a similar fate.

Increasingly, fashion’s undesirables are adopting the iPhone as their key to cool, just as the true cool are heard to say “it’s just a phone, I’ll change it soon”. iPhone has some runway yet, there are a few hundred million people still to buy one meaning Apple have at least a couple of years of stellar revenues to look forward to from their phone division; but when the fickle face of fashion is looking the other way, what damage will have been done to the broader Apple brand? Take a $3,000 Mac, strip out the brand cache, and you’re left with some very expensive industrial design and a world of compatibility pain.

If Apple is no longer cool, will you still buy it?

The Google ad platform does an incredible job of identifying an email’s context and finding the highest paying, or most clickable ad to match that context. In a setting like Gmail that means digitally reading the email from the Subject Line to the Body of the email to the Sender’s Signature, using that collected data to identify the email’s context and then finding the most suitable set of advertisers to display when the Gmail-using recipient is reading the email.

Here’s an example, check out the ads on the right (Also note that clicking on “More about…” will open a page with multiple Landscaping ads):

Gmail’s advertising engine is devastatingly effective here having served ads that are not only relevant to the subject of the email, but also to the geography of the recipient, making the ads a very potent way for those advertisers to “poach” the sender’s customers. But where does that leave poor Grassy Bass Landscaping? By sending a quote to a potential customer I have inadvertently surfaced a number of competitors, hardly seems fair! One way to minimise the impact of Google’s poaching prowess is to avoid building context through the subject line or body of the email, right now it doesn’t look like attachments are read so use the attachment to describe the work instead. That’s not ideal, but it may just avoid Gmail surfacing your most aggressive competitors right next to your mail.

Any small business that thinks Gmail is just another harmless, free webmail product should think again, it’s your competitors’ dream ticket to finding your customers after you have done all the hard work, adopt it as your own email provider at your peril.

UPDATE : In the Virtual Revolution, broadcast in the UK on the 15th February, the presenter raises these same concerns about Google’s approach to Privacy and Advertising Everywhere, some interesting perspectives here – Gmail is discussed at 1:44sec. [Note that this link will be broken if this video has not been authorised by the publisher]

It seems very personal, and driven by the gargantuan egos of the two CEOs Eric and Steve! What began as a skirmish on the edges of a Cell Phone DMZ, clearly orchestrated during Eric’s sojourn on Apple’s Board has become an epic multi front battle. I say bring it on!

Microsoft has long supplied arms to both sides, but is offering the bi(n)g guns to only one. Interesting times.