Tag Archives: e-commerce

Where Current Mobile/Location-Commerce Paradigms fall Short And Why

The future of Mobile Business is in Location – now, really!??

Listening to the mobile technology, device and communication industries’ big players currently puts into place two core assumptions about how mobile device usage is going to develop within the years to come:

  1. Location is everything
  2. Location doesn’t matter anymore

As though these seem quite contradictive at first glance, there is some truth to be found inside these paroles, as soon as one takes a closer look:

While mobile devices give you (and the rest of us…) the power to make more informed decisions depending on where you are and where you intend to be in near future (think of navigation, public transit guidance or ), they also disconnect us from the necessity of presence e.g. at airport counters for check-in or .

Despite these advantages, there is an obvious difference between if you go to let’s say an airport on a daily basis for work, occasionally to catch a flight, to pick-up somebody who is arriving or simply for plane spotting and having fun with your kids.

As J. P. Barton already figured out more than a decade ago, real world situational context is not simply about location, but much more about people, places and the things at hand, along with time and the conditions/limitations you encounter.

Barely none but location, however, has been targeted by technological approaches on an end-user scale this far.

This comes out even more interesting, as the technical and organizational hurdles involved have already appeared to be taken an entire decade ago.

Some of the more relevant reasons, why the industry is nonetheless quite slow in anticipating the market potential coming with services like intelligent tickets, context-aware travel-itineraries or automated product-matching for webshops, appear to lie in the integration of already existing, but widely distributed and differing data sources.

This is, where I believe Linked Data can go a long way in easing the adoption process by providing common means for exchanging information online and in near- or even realtime.

Solutions to practically showcase the application of Semantic Web technology to provide such services are to be developed by our appliance team within the coming moths. Stay tuned. 🙂

Checkout Re-Visited: Step 4
"Your Payment Details, Please."

"pay here" way sign

It’s Whom You Trust.

Security risks of long-distance business with unknown people had not necessarily been of interest to end-customers before the widespread advent online trade in the late nineties of last century. But how can you trust a seller who potentially is located several thousand miles away from you ?  So let’s have a look at how trust is made possible in online trade today and how the current approaches probably can be improved by including contemporary developments in social media and security technology.

Trust Zones

No trust at all is the widely accepted default for doing business over the web.
According to Francis Fukuyama and his famous book TRUST — The Social Virtues and the Creation of Prosperity, we can learn from areas in the world, where developed legal institutions and independent judicary (nowadays considered essential for sustainable business) are considered luxury or simply non-existent, that people turn to do business mainly with their immediate families due to the high risk of fraud or robbery when creating deals with anyone else.
   This would of course immediately choke down any successful development in the field of e-commerce. So why does this kind of insecurity fail to hinder the rapid (positive goes without saying…) development of online trade ?
   Indeed, the new technology with its still-to-be-evalued possibilities for quite some years seems to have saved average users’ enthusiasm from getting exploited by the more shady kind of web-workers.
   But within recent years the frequency of reports on the latest online fraud has shown, that organized crime has "successfully" made it through the online technology adoption cycle as well. And criminals’ methods show, that in some ways, they have obviously been doing better than the average online businesses and customers, when it comes to the more psychological attacks as used with Social Engineering.
   Despite credibility votes, product ratings by customers and public evaluation of online offerings had been set up soon, though, as especially the smaller buyers and vendors on portals like eBay had to learn, these turned out to be far from bulletproof as well.

Institutional trust is what keeps the more well-known online businesses running these days.

Strong and trusted international brands like Amazon with registered offices and known service quality rarely seem to have trust issues. But when we look at what this trust consits in, it’s esentially (besides the fact that in between almost everyone knows someone who successfully did business with them) the fact that our experience told us, that most companies large enough will have enough stakes at risk to to attempt avoiding brand-damaging legal conflicts with their customers — or you’d at least have heard of it.
   Which gets us back to trusted legal environments and the often missed-out truth, that the "Worldwide" Web actually has been a legal sandbox for users from industrialized countries. This not only affects who you trust as a business partner to deliver either goods or money, but also strongly affects the way you do the transaction to make sure your money goes where you intend and your credit card number won’t have its (digital) bit on the side in the process.
   In the developed world, most of today’s online transactions are bank-based one way or the other, with practically all ‘virtual cash’ approaches having failed on the parts of price, ease-of-use and governmental restrictions (incl. lots of lobbying).
   And the credit institutes for sure have been loving credit card payments, as they provide much higher interest rates than conventional bank transfer. With the growing market share of charge-cards, being thrown almost for free even at not-so-wealthy European customers lately, the credit institutions can still cash in on vendors’ sales at the same rates as with the corresponding 'credit’ versions, despite taking no risk at all. If you furthermore pair such cards (may it be for security or simply for convenience reasons) with micro-/macropayment providers like Click&Buy or PayPal afterwards, the trade-offs for the vendor are summing up to significant amounts, in return leading to higher prices — often at least 5% per incident up from traditional bank transfer costs.
   But what these banks miss out on, is the fact that the non-guarateed nature of debit-cards have reduced the vendors’ trust in the medium significantly and many merchants (including brand names like Deutsche Telekom) already banned this (in their eyes) less appreciable method in favour of in-advance payments; finally shifting the entire transaction risk to the consumer.
   The first serious competition in years, however, now arises from bank-independent prepaid value services. Suffering an oppressed success in Europe and North America, where mobile carriers have always been keen on pushing customers into long-binding subscription contracts, calling credit has become a de-facto currency within wide parts of Africa lately, where traditional trust in the liability of credit institutions and the legal system has been barely existing for decades and distances between bank outlets can be really HUGE. Mobile carriers like Vodafone have already responded to the demand by offering comprehensible banking services via their African (ad)venture with Telkom Kenya Safaricom. But this is not about some small-biz in rural Africa.

This is about nothing less but an upcoming revolution in payment services. Think of it as the online equivalent of traditional letters of credit or guarateed cheques — but with new players on board. The risks of pre-payment are being shared equally in favour of a trustworthy business outcome. That said, pre-payment, combined with peer-based guaranteeing and realtime transaction confirmations is going to be a major driver of how trusted online payment is going to work tomorrow.

Other than the quite generally targeted, but limitedly spread ;-) PaySafeCard in Germany or Austria, with these developments abroad, prepayment is currently making a huge leap forward against the competition. It literally enables everyone to become a payment agent right on her own and furthermore shows that on this basis it is possible to build completely bank-independent transaction systems from scratch in almost no time (compared to the corporate history of many credit institutes). It has also become proven that companies from others than the financial sector can indeed take over the roles of failing established institutions if they can provide a credible brand, along with a comprehensive (read: transparent) and reasonable offering. While succeeding to put these approaches to work may not always amuse fiscal authorities, it creates a stiff breeze of fresh air blowing right into the snobbish financial sector industries who, often with serious governmental support, have successfully managed to resist most any 'legal' attempts to undermine their business model, power and influence on how and by whom money is being transferred from one entity to another.

Peer based trust probably is, after all, the most native and intutive kind of trust humans know. Like in: "Yes, I trust you."

With online business the only chance to identify your business partner at all, usually is via third parties. If this identification fails, it may also be very hard, in case of disagreement, to get back one’s money or delivered goods — the practical non-refundability of granted services goes without saying.
   A possible solution may be similar to how American stores revolutionized consumer payment habits forever during the fifties of last century by issuing ‘credit cards’ to their loyal customers. As discussed more than a year ago in my post on how to secure cashflow for web 2.0 companies, being their own bank over the years has worked very well for companies, such as trading platforms or even offline providers of combined products and services, like contract vendors offering included maintainance with new car purchases or holiday clubs cashing in up front for a certain volume of drinks or leisure activities. And the success of transaction systems like the Hawala peer-to-peer banking as shown that the priciple indeed can be scaled from western countries even to the more rural parts of the world.
   How is the trust generated with these methods ?  Well, first of all, the number of transaction partners is reduced. You don’t pre-pay to someone you do not know, but to a trusted provider who you know will only release your payment to the recipient under certain negotiated conditions. Second, like in the Safaricom expamle, you are free to choose the service you trust most for a particular transaction; which is where the "institutional trust" argument from above comes in as well. Finally (and third): Don’t trust the banks ?  Then use your mobile carrier instead. The entire economy gets in trouble and you need some additional cash fast ?  There will be alternatives now. While increasingly getting recognized by political authorities and celebrated by economists P2P systems for both payment and financing are making their way from the "only suitable for money laundering" to recognized instrumnents of the international payment arena as a fallback to traditional systems.
   Furthermore in many parts of the world this process is expected to be spurred by Islamic (Sharia compliant) financing options, which may not have made it into online offerings for western regions, but as these services are becoming increasingly popular with Muslims all over the world (also abroad from Arabic and Asian countries), they are considered to have significant impact on how online trade is going to be conducted in the future. In essence, we will get more transparent financing options, with risks more equally spread between seller and buyer, where interest rates are being converted into higher sales prices then payed by the buyer over time, thus preventing collateral damage to third parties in case the buyer cannot keep up with the payments.

So where’s the beef in here ?

Most of the tools to make all of this possible are already in place: While you may want to use a professional lending portal like Smava or Zopa to re-furbish your home, you may just choose some cross-subsidized offering to get a "FREE" extra to a cinema visit or a special event added to you next vacation trip. In addition you can always check the business options you have against your self-maintaining address-book on XING or LinkedIN to see if there isn’t a not-so-remote acquaintance being able to act as the trust factor between you and you business partner. And independent institutions like Trusted Shops, TÜV and others are working to make such diverse market of payment options secure enough for you and me to try out one of the new offerings with our next purchase.

Creating comparisons with how MP3 file-sharing disrupted the music industry are out of this article’s scope and not necessarily intended, as the financial industry indeed is a completely different business, with by far bigger impact e.g. on political decision-making.

But technology enabled, simple citizen-to-citizen services to be potentially more appealing to customers than the corporation-owned "walled gardens", may be an insight, which could turn out to be hard to reverse.

A Checkout Re-Visited: The Basket (Step 1)

The term checkout has been known for decades as the point-of-sale from within a variety of industries; no matter if on- or offline. In e-commerce, however, the checkout is mostly referred to as the process from the point a prospective customer has chosen the products from the virtual shelves (almost inevitably using a virtual ‘basket’ or ‘cart’ as he likely would have done in a traditional retail store), via entering delivery and payment details to the point where the order is completed and the deal is done.

The early e-commerce sites in the mid-nineties have provided as many allusions to the buying process in a conventional store as they could, to create the necessary peace of mind with their customers to make them feel comfortable to buy through a medium they, at the time, often just began to explore. And they were successful pursuing this approach.

However today we are more than ten years older and we interact with online stores in still much the same way as if this was our first dial-in with a 28.8k modem in 1995. And on the vendors’ side there are millions of folks willing to sell their own mass customized or even tailor made creations without being willing to take the hassle of administering their own webshops.

As Harward Business Review, WIRED Magazine, as well as lately BusinessWeek announced 2008 to be the year of the P2P-Economy’s lift-off, it seems quite ridiculous to do business over the web not very different from how we already did an entire decade ago.

So let’s have a rush through the common webshop checkout here, with its typical 5 to 6 webpages, standing between a customer considering to buy and the actual purchase being made. And let’s see where we might be able to use modern days’ infrastructure to improve and smooth the buying experience for the customer while providing the seller with all the necessary information needed to successfully deliver his customers a pleasant puchasing experience.

Step 1 — the Basket (or Cart)

Even though it actually doesn’t make a lot of physical sense to put shopping cartpremium site-memberships, downloadable MP3 music, games or software files into a real shopping basket (as these are likely to remain intangible for their time being), humans obviously continue to love the evolution-proven collecting experience they get when adding their very own choice of items, probably tracked down on some remote website, into an equally non-material basket or cart. But if not even this cart is to stick with physical constraints, why does it still carry around all the disadvantages of its real-life counterpart with it ?

As these are:

  • If you leave it alone, it may be gone soon.
  • You are not allowed to carry it with you outside the borders of the shop.
  • To buy from or simply to compare different vendors, you need to take one separate basket at each of the various shops offering these goods for sale and invest additional time in review and purchase. Just that in the web’s virtual world there is no real benefit from carrying around loads of brand-named shopping bags — not even for women. 😉
  • Once you take the cart to the cashier’s desk you are not welcome to postpone of selectively buying only some of the basket contents.
  • After the purchase you are left alone with information needs like the "best before"-date or relevance of the purchased items to your own plannings (like ingredients to a certain recipe or availability of a pre-booked restaurant table at your travel destination.


Wishlists like those from Amazon indeed do help here, however they only solve the time issue, but still leave you alone with the two other ones.
So what about turning things around here:
 What if YOU as a customer could bring YOUR OWN shopping cart ? 
What if you could go on a shopping tour through a multitude of online shops, just adding to YOUR personal cart whatever you like, without the need to care where it comes from ?

You could do your deal comparison in a relaxed manner, similarly to browsing through your e-mail inbox: considering which mail to work on immediately, which to postpone and which one to forward to friends. You could also do re-purchases of products you liked with ease and one-click-order style (hopefully Amazon won’t sue me for that expression).

There is no trouble whatsoever with the technical part of this. Mostly any item sold on the web can be uniquely identified at least by the URL of the page it is presented on. Furthermore telling a vendor what you would like to buy from him, shall be easier than sending a TrackBack ping from your weblog:

Using more elaborate technology like semantic XML descriptions or web services instead, buying with your own virtual basket is going to be much more pleasant than anything you have ever experienced in an online shop by now. This is especially true for the purchase of services, where availability and conditions use to literally change within minutes, rather than days or weeks.

PLUS: You know where it’s going. No strange screens or misunderstandable options to choose from. It is going to be always the very same standardized process — no matter which shop you are actually buying from at the time.

Re-Thinking Checkout: As for Conversion We p(r)ay…

Checkout sucks. Really. Adopted to the web from the world’s retailing industries, "checkout" basically describes the procedures within the purchasing process from the point a customer has added goods to his shopping cart or basket through payment with optional rebate and p&p negotiating until the deal is done.
This post is the first in a series about how we are going to do business online in the years to come and what buying from an online shop could possibly be like within the near future. Not necessarily philosopher’s stone in e-commerce, but an look-out to possible outcomes being fortune cookie with "BUY!" prediction insidecreated by developments currently underway on the net. Those of you accustomed to catching up with the latest tweaks and geeks will likely have heard of one or the other approach, though what in my eyes has been missing by far, is a combined usage scenario for these new ideas and concepts. That said, the original reason for me to write these articles, has been that
Checkout sucks. As a paradigm.
It’s so last century, you know… 😉


So let’s get back and re-start at the point, where the customer decides, which items – if any – to put into her basket. Here the journey through a wonderful set of freshly conceived concepts and brandnew technological perspectives begins…

Revenue 2.0: Is it really just about advertising ?

Currently most institutional Web 2.0 investors still seem to think of advertising as the key revenue driver for any type of web-project. Considering the advertising market being a rather volatile one, to me this still seems to be a quite strange move for someone basically caring for someone else’s money to multiply in foreseeable ways.

So what to do, if you are about to start a web business and going the vc-funded, giving-it-all-away-for-free, over-hyped, profit-through-exit way is not an option to you ?

Chris Shipley and Jens Kunath discussed the need of alternative approaches to generate money from the companies’ business on their blogs these days.

   But, as you can see from the comments they got on these posts, there are not too many people agreeing with them, that enough web users would be willing to pay for an online service.

Scenarios are, there would always either be a well-funded competitor giving it all away for free or the service would likely start cannibalizing itself by offering a great share of its value for free in order to attract more ‘future’ paying customers to the particular site.

As we should probably ignore the IMHO foolish aspect of the latter approach for a second – what else than giving away your product for free to all and trying to sell it to some at the same time may drive people crazy enough to consider paying for an online service ?

 Subscription or sponsoring have not really been powering the big success stories these days…. Revenue sharing has been huge with eBay or Google and also taken grip with German companies like my current employer Spreadshirt or (more recently) laying the foundation for the success for the physical-media sharers at Hitflip. Though it needs a huge number of customers to provide a steady flow of income for the service provider.

When considering various business models for SemaWorx I’ve come up with the following (admittedly quite manageably sized) list of approaches on how to get people to pay real money for an online service and especially to provide a reliably contnuous cashflow for the venture itself:

1. Sponsorship of Membering (though not exclusively… ;-))

Ever visited a website living (either in part or even entirely) from Sponsoring (where I will leave out common keyword adversing) ?  Usually a variety of more or less well known firms offers discounts on their products inside a dedicated section of the site.

Did you ever take them on such an offer ?

Many of these are quite typical examples of advertisers and platform operators thinking way more of their own comfort, rather than providing additional benefit for their customers:

Wrong target audience

Does anyone log-in to a business networking portal (like e.g. LinkedIn or XING) in order to rent a holiday car ?

Seemingly crooked offerings

Is a 10% discount on rental car fees a ‘gain’ for a German business network’s members, if the competition advertises a 30% rebate to any Automobile Club member (the vast majority of German car drivers) ?

Ridiculous fine print

You all know these from your mobile operator’s € 0.0x offerings: The advertised product is astonishingly cheap, but the catch is, it is only available in combination with expensive services or warranty trade-offs.

Cheap, aggressive messaging

Undoubtedly the infamous ‘You Won It All!!’-fake advertising banners probably won’t support you building a reputation among business people as well…

This is just plain WYSIWWPTSY.

So how can sponsoring on a Web 2.0 platform be successful, if everything is being customized or self-adjusts to the users needs, only the business model unfortunately doesn’t ?

Sponsoring for online services needs to be directly related not only to the target group and their oucomes, but also to the company it finances and the business relationship it has with its customers.
   Companies living on sponsors’ wallets should avoid backers providing no value to their target groups as these on the other hand won’t deliver the expected returns to the financiers, if they are disappointed or even annoyed by their offerings. The additional value delivered needs to be immediately obvious to the particular online services’ customers. What does it help e.g. being Premium in a so-called Social Network, when the ‘average’ user get’s the same offerings !??

Good examples on the opposite for outcome-related privileges provided by sponsors may be free welcome snacks or a "special treatment" upgrade for hotel chains, shorter check-in intervals for airlines and last not least sponsored premium memberships for the corresponding online services.
Mostly any kind of cross-subsidized offerings as described in Chris Anderson‘s editorial essay in WIRED perfectly fits in here as well. 

2. Be Your Own (Cashflow-)Bank

The Fuggers did it. The Mafia did it. And, of course eBay did. And most recently they did it as well: Setting up an own payment infrastructure, that is.

Isn’t that cool: You own the money, before you own it !

Simply do it like the big Casinos have been doing it all the time — let yout users cash-in the money even before they have actually spent it. This very cleverly camouflaged version of pre-payment is the method to secure your cashflow. Call your virtual currency 'Game Dollars', 'Flips', whatever you like — or simply leave the bucks named €uros or Dollars.

It’s just important, your company is trustworthy enough to make your users pay-in early and (hopefully) not wanting to be paid out again – at least not until your cashflow has grown to some reliable steadiness. And, of course, you will also need to keep an eye on the inflation of your lit(t)erally self-mad(e) richness… 😉

3. Create Value-Sharing Communities

The porns did it first !  If you are a lonesome man, admit it: You have noticed these eye-catchers on your lonely, nightly roundtrips on the web. The 'Gold Card' networks promoting flat-rate access an often quite huge set of porn portals (obviously equally often run by one and the same person…) spreading across red light advert-farms everywhere – always trying to lure your credit card details into their databases for 'later' deployment, while promising a lot of instant fresh flesh in return.

May their concept occasionally be lewd — the promoted business model isn’t so at all.

On the web it’s currently a bit like back in the early days of loyalty cards; you needed to keep a separate one for every shop or store causing your wallets and, yes, occasionally even your pockets 😉 wear out faster then they were used to before.

But it needed some both wise and influential store-managers to recognize the dilemma and come up with one card to pay them all: Welcome to the first credit card.

Even though the need for standardization nowadays is a wide-spread word on the net, talk lacks a lot of action as mostly all existing approaches have either security leaks or require at least a minor degree in information technology to be used.
   Greed at upstart young ventures (originally out to provide reasonable solutions to the issue) and big corporation trying to prevent establishing an open system in favour of their proprietary solutions have each had their share that we are to re-sign all payment and delivery details with every damned vendor we are going to do business with over the web.

If anyone of you can come up with a proper solution to this, please drop me a hint and I will be proud to be one of the first to join.

4. Franchising ?

"That’s for the big guys only…", is what reportedly Fred DeLuca throught either, back in the early days of one of what has become one of the worlds biggest franchise food-chains: Subway.

Especially being a young company one cannot be everywhere in the world out there and much less finance rapid growth from a just freshly inflamed cashflow.

Why not let this be financed by other people’s businesses who are already in the market, providing an entire bunch of customers waiting to be served by your product and, in return, leaving the franchisees their share of the earnings while keeping to what you can do best: Care about, develop and improve your product.

This may be one of the few ways for truly rapid expansion without taking money from investors or being a millionaire yourself in advance.

5. Product Placement

And finally, for those who really dare to jump onto the advertising bandwagon, what about the still rarely deployed flavour of product placement ?

Selling computer games ?  Shoot the advertisers’ product to dust. That guy is selling food ?  Throw it at your mates ! Selling trips to Florida ? Create them a baggage-packing game. Let them name it !

Hopefully my guesses could spark your own thoughts on how to make reliable money from your own Web 2.0 app. Any ideas, critics or suggestion I missed ?  Leave me a note in this article’s comments and I will be happy to start exploring any new approach.