Week 6: Googlenomics: A new topic in economics

I wont be surprised to see a new subject being taught as a course in a business school very soom on Googlenomics or clickonomics, simply because of the creation of equivalent indices used in the digital world, which is only becoming pervasive as the mobile smarts are becoming ubiquitous. 

To talk about Keyword price index (KPI), one can see its definition to mirror itself to the CPI. Here every user/surfer is the customer. Since it is almost to safe to say that almost all of us use search engine dominated by Google, the clickonomics will result in solid and safe predictions by product usage, a certain usage etc.

I am awed to see how GOogle is able to build robust and continually evolving complex algorithms along with statistical methods to predict quite accurately usage.

This firmly leads me to believe that there will be one day so much data that a quantitative analysis class will start building case studies on this as well as enough to determine supply and demand curves in the area of clickocomics. All this will only serve to build future theories, which I strongly believe that economists are certainly looking into it while I also believe that right now, it is at a stage where the surface is barely scratched.

Week 6: Googlenomics

As we are nearing the end of this class, let me begin this blog by first commenting 'Understanding googlenomics - a fusion of math, computer science and the concept of supply and demand!! What a way to end this class. Awesome!'

Yes, the bottom line of googlenomics is a fusion of math, computer science and the concept of supply and demand.

Very impressive to see the then entrepreneurs in the early 2000s to think totally out of the box to create a disruptive market in a very established area of advertising. Even though this the secret sauce of Google, understanding the magnitude and the complexities of algorithms of prediction and extracting signal from noise, a challenging and a daunting for a statistician is a differentiator that will hold high and tall for a long time, even though its competitors such as Yahoo and Microsoft are building inroads to the concept.

It is fascinating to see someone using the concept of game theory and Nash equilibrium, something I learnt in micro-economics to implement Google's risk taking idea coined 'Adwords', its unique method of selling online advertisements using auctions going on real time.

I can see why Google is OK with making many of their apps and especially their Android operating system as an open source platform. All of this has to do with the end goal of having more users using the Internet benefit them.

Week 5: Moving to a different plane in web analytics

Traditional web analytics as defined by wikipedia is a microcosm of what is expected to continually evolve with increasing numeratis in Google, Twitter etc.
Web analytics is the measurement, collection, analysis and reporting of internet data for purposes of understanding and optimizing web usage.^[1]
Web analytics is not just a tool for measuring website traffic but can be used as a tool for business research and market research. Web analytics applications can also help companies measure the results of traditional print advertising campaigns. It helps one to estimate how traffic to a website changes after the launch of a new advertising campaign. Web analytics provides information about the number of visitors to a website and the number of page views. It helps gauge traffic and popularity trends which is useful for market research.

As seen above,  the current definition is akin to simple tasks that consulting companies are focused on i.e. proliferation of analytics for coporate strategy level problem solving. Yet it is a very very long way away when these tools can supplement behavior i.e eliminate humans needing to make decisions. Digital marketing is the only area that is getting close to tthis realization even though one can say that it is still a few years away.

Week 5: Web analytics

The articles I read this as posted in the class folder has an interesting issue that is currently being resolved if not need to be addressed based on our web surfing, whether it be using smart phones or laptops, tablets etc.

Let me bring up the classic example of Pandora, an online music streaming service app that brings you close to this realization. This app atleast on the surface appears that it has trained itself to figure out what your music likings are. Similarly, based on my professional content viewing, the emails I get have changed over time from my previous job to the current one using my viewing pattern.

All this is reflected in the all math concept introduced by Google about 15 years back labeled as the numerati. The challenge is that achieving perfection is almost impossible beacuse this involves a lot of behaviorial topics which is highly non-linear. This means that putting together mathematical models is tremendously challenging, if not very difficult and daunting. For the internet to guess what your next mood pattern will be is highly nontrivial. Using past data will give one more noise from statistical analysis because of the multi-variable non linear behaviour.

At a professional level, companies like IBM, SAP are coming up with their decision making corporate level engines that are coined as analytics. These are relatively easier to tackle considering fewer constraints compared to an individual.

Week4: Twitter could be the bellweather for the new business models

In the new digital ma rketing era, I see Twitter as the one that could be the trendsetter or the bellweather given the short and to the point feeds as well as its convenience towards its display in our smartphones which is almost getting to be ubiquitous. All the marketeer needs to do is to post the link or a short sentence on a new product or a new sale or bonanza deal. Twitter, as the CEO was alluding to, could use this marketing campaign as the main source of revenue, especially when the marketeer doesnt have to spend large sums of money for campaigning other than paying digital providers such as Twitter.

Quite honestly, I never used Twitter before this class. However when we had our first asssigment in this class a couple of weeks back, the company that we were following which was Whole Foods got me following my own company Texas Instruments which I learnt key products and training websites for quick learning and updates. Amazing!

Week 4: Riding the service economy and other factors

I want to make a general comment as why to these new age digital business models are gaining attention and showing successes. It is because it thrives well in a service based economy, atleast in th e US which has transformed over the last few decades to one from a manufacturing one.

Is that true for China which is perhaps the largest manufacturer in the world? Even though these models exist there, it is certainly not dominant.

Also, the other reasons for these models to thrive would be the free 2 way digital traffic that is not monitored by the government. I am not sure if this is quantified but it certainly can be restricted by the government or some dominant forces that could be a monopoly with a strong political influence.

Week 4: The Pandora experience and the zero cost model

Let me share an experience of the one that was discussed in the podcast and the Factiva article in WSJ on

Essay: The Economics of Giving It Away. The discussion was 'How do companies generate something from nothing?

The professors talked about WSJ teasing the free customers into buying the subscription using the subscription model, perhaps the most common business model after the advertising model.

I am an avid music listener on my iPhone and the my best app is the Pandora. This is a music (radio?) app that caters to any music taste one has. It keeps feeding in full music of any type. It also allow you to bookmark a track that you like. The ony caveat is that when you start as a free user (the most common way for any internet based application) if you search for an artist or a song etc, it does not necessarily play that exact song, but close enough either from the same band or a similar band. Once initiated, you create a station and it keeps playing full songs of that flavor, For example, I love the Beatles and it keeps playing Beatles or band similar to them in that station with some interlude of ads popping up now and then. Very often it tempts you to become a paid customer where the benefit is that you can now get that track and skip ads. Bookmarking a track for a free subscriber is just a sample of that song. The point here is that over time, you get so used to listening to your favorites that the model believes that you will end up becoming a paid subscriber thereby generating revenue for the company.

This is exactly what the Twitter CEO mentioned in the podcast. Even though the paid subscribers may be minority, the total number is still in millions and a small fraction of them is enough to generate revenue which equates to profit since the cost is amost zero.

Week 4: New digital age business model concepts

This week's articles, podcasts and Flash Videos are a a set of excellent source of concepts that I believe needs to be taught if not highlighted in any curriculum, simply because this is the scoop of this and next generation technology and business models.

The concepts discussed this week are quite paradoxical to the conventional business models we learnt in our strategy courses. I liked the ones where the different business models are dicsussed.

To extend the podcast discussion on subscription model on newspaper which in essence is free such as the NY Times, the key question is how does the newspaper generate  revenue for this kind of model. There are 2 ways which they should be able to do so, one is adverstising and the other is the demographic info of the customers which they sell to the marketeers and in that way, the ads can be generated by user.

Some of my daily experiences I can share with in similar lines are:
- FTimes. We get the freee subscription upto a certain limit as part of one of the finance classes from Kelley school. But a certain number of full articles per month, it teases you enough to make you buy the subscription, very similar to the WSJ discussion in the podcast.

The other experience I enjoy is that of the brokerage model by TDAmeritrade which acts as a liason which takes a commission fee for any stock transaction I make.

Week 3: Transition to the social web

The chapter 3 'Making the Transition to the social web' can be considered as a classic textbook of 101 Marketing concepts and how those concepts change wth the current environment. This is a higly recommended reading even though the course reading says suggested.

The chapter sets the pace very well by positioning the reader to change the marketing mindset. It goes on to talk about the essentials of marketing with branding, segmentation, targeting, communication, content etc.

Highlights that interested me in particular is the metric that was developed by GE Healthcare that uses an NPS score and how it went up with lowered response time to technical problems.

The other concept that was first introduced in week 1 is 'occassionalization' which targets by behavior instead of demographics.

It would be interesting to see some trends or some stats that proves quantitatively the relation between the amount of customer dialogue and branding, although it makes qualitative sense that increasing dialogue increases the branding of the product. I like the example of Google as the icon for creating beta versions based on customer inputs. Even though the chpater talks about bottoms-up approach at the end, I think that linking it to branding concepts upfront in the chapter would be more impactful to absorb the elements of the new marketing concept in the social media environment.

Week 3: Comments on the long tail theory

The podcast on the long tail theory gives an interesting concept that has become popularized over the last 2 years by Chris Anderson. Complementing this podcast is an interesting perspective of the long tail curves from a traditional and current view point that is showing a tendancy to become horizontal as explained in the 'Long Tail' article written by Chirs Anderson.

This podcast and the long tail article both give an interesting view point based on the theory on the 80-20 rule from conventional marketing getting obsolete. This is based on the distribution from the current trends in sales and marketing that shows a strong deviation from conventional marketing.
The theory says that the tail is getting fatter, because of internet which allows the user to no longer be satisfied by the highest volume or highest selling products, but instead have the luxury of pick and choose. This stems from the wide variety available in the internet, that makes it possible for the user to almost customize the product to their choice.

Amazon selling vs the classic book store concept is a classic example of modern vs conventional sales respectively, simply due to the rarity of the books now becoming a sales hit as opposed to traditional days where only the top 20% of the items accounted for the major revenue.

Also it is a low cost for online sales because production cost is very low where books are stored in central location and therefore per store there is no inventory cost and storage cost, as well as rental and leasing of the individual stores.

From a business perspective, focus changed from a few potential hits towards marketing a lot on them which were considered as no-hits loosing money conventionally. This might lead to the fact the distribution is becoming wider. THis again comes back to this business model discussed in the previous paragraph where the business can make money if it is centralized. This implies not to abandon the less prospects, but also important to retailers who look at hits as their model as losses for neglected hits.
If people are shifting in this direction, then the money spent on conventional marketing might not work and might not even payoff. Current trend is based on profiles and customized online advertising. Again, the trend setter are the books, music and video.

Classic example is the Amazon website and emails I get from them, especially over the last 2 years during my MBA years. I had purchased all my textbooks from Amazon and lo and behold overtime, I get automatic updates on books in finance, marketing etc. as opposed to engineering which was the conventional background.

Likewise another example is Netflix. It gives me a trail of movies that it thinks I would be interested based on my viewings so far.

Contrast iTunes to Amazon.  iTunes is strictly digital whereas Amazon is more based on a distribution channel. It would have implications that rely on big hits and if the long theory holds true, these companies would neglect the increasing thickening tail or the low hits and therefore neglecting the low hits would  have otherwise become a money loosing proposition.

The podcasts however cautions that the long tail might be less predictable when it comes to retailers posting or sending emails on long tail items.

I like the probability concept that the professors discussed in this podcast which could reach the value 1 that one might find the book when all the books on earth are available online in a particular digital link. This would make the distribution tail close to horizontal.

Week 3: Blogs paving the way towards transparency

The article on Origins of Social media elaborates very well the fundamentals and the core of blogs in the second half ofthe article.

I found this to be not only educational but also a confirmation of my personal experiences on blogs both in terms of following as well as writing them.

For one thing in terms of the search phenomenon, the concept of tags and links in blogs and increasing their chances of being high in terms of search when done in Google is another factual experience I had from my personal blogposts.

The only issue I have is to keep up with these numerous posts and quite honestly relating back to week 1 when we talked about simply scratching the surface is perhaps true because one does spend a lot of time trying to read all the comments and the multiple blogs of a topic. But seldom, one could capture one or few of them that would enable one to go and deep dive into the topic. It would perhaps be more relevant to have some search criteria that would list the blogs and comments in the order of relevance through the user having some way of specifying or in terms of details, rather than merely listing by chronology.

I never felt the need for style points in blogs because it mires the content, cuts the chase and makes the customer to provider relation more transparent. Clearly, back in conventional marketing there was always a glass ceiling between the public and the provider, where ones' complaint was rarely taken seriously. Such issues should not only be taken seriously but also be prioritized to remediate the problem.

The article talks about expediting the remediation process of any customer's concern very well in the Sony case which paid a terrible price for delaying the solution to the hidden software vulnerability problem.

Week 3: Social and interactive media escalates customer's voice

Here are some thoughts from the The Origins of Social Media article posted for week 3.

Taking the posting example of Vincent Ferrari on the cancellation conversation with AOL is a stark example of customer service amplified to the public.

Now, there are three classes of customers, the usual ones who are happy with the service and the prices, second are the ones who only want the best service and are willing to pay any price and third are the disgruntled customers.

Clearly Vincent falls into the third category. Also, the third category based on conventional customer segments are usually ignored, because, it is a lot of work for the provider to satisfy this customer. Therefore seldom action is taken, regardless of the percentage of the customers in this one.

WIth the advent of the social media, Vincent voiced his thoughts which bolstered others to think about it and voice their own. This effect cascades in such a way that it forces the provider to do something to prevent itself from cratering, something that otherwise would have been ignored in those days where the provider could afford to ignore or delay actions to satisfy the disgruntled customer, simply because they are not heard to the large public.

I am an avid follower of CNET since I keep an eye on consumer electronics latest and greatest. I am able to learn almost all pros and cons sitting in front of my laptop or using my smartphone, as opposed to me going to Frys or Best Buy to understand less than 10% of what I learnd from CNET. Also, one gets a biased opinion usually a favorable ones from most of them in these stores, since the persons you are talking to are salespersons whose goal is to sell what they have in the store.

Gone are the days which has the 'read-only' internet concept, Nowadays, almost every site has a blog which is perhaps the most interactive way for everyone to give their opinion. At the end, every customer gets an unbiased view of the product that they are interested.

Personally, I write blogs related to energy especially in the renewable energy frontier. I get comments on my posts and as well as one gets a sense of satisfaction of being a positive influence in the community. h

Also, with the internet costs falling down and the exponential rise of ubiquitous and pervasive computing via smartphones, one can only envision the interactivity to increase out of proportion.