strategy
UK unemployment drops… unexpectedly?
Jan 21st
The UK Office for National Statistics announced yesterday that unemployment had dropped for the first time in 18 months. BBC News reported this as a “surprise”:
The number of people unemployed in the UK has fallen unexpectedly for the first time in 18 months… George Buckley [of Deutsche Bank] admitted previous predictions of the unemployment rate reaching 10% now looked unrealistic… [The figures] came as a surprise to many analysts.
But to regular readers of this blog, this news is anything but unexpected: in December 2009, my analysis of unemployment-related search trends clearly indicated that the unemployment rate was about to fall.
So could this be an example of search trends providing early insight into economic data? Possibly, but it’s only one month’s figures we’re talking about. A sustained track record of successful projection is needed to demonstrate that search analysis can yield valuable insights.
Over 2010 I’ll be keeping an eye on the data to see what happens. In the meantime, if you can think of other real-world metrics that might be suitable subjects for search trends analysis, get in touch.
Can search predict the future?
Dec 23rd
Today, we often search for information about upcoming major events in our lives – both good and bad – before we experience them. When facing financial difficulty or unemployment, many of us will go online at the earliest opportunity to look for help and guidance. And when we’re considering major financial decisions such as buying a house, search engines are usually consulted before estate agents are called.
Traditional economic reports, on the other hand, look at events that have taken place. Unemployment figures tell us how many people are claiming benefits rather than how many people have been put at risk of redundancy. Average house prices are based on completed transactions, not how many people are currently looking to buy. So while we can be fairly confident of these reports, they don’t provide us with particularly current insights.
This trade-off between confidence and currency was, in the past, largely academic as analysing current data was almost impossible. But in the age of the real-time web, this might be about to change: maybe patterns in search behaviour can give us a glimpse of future patterns in the economy.
We first became interested in this topic back in spring 2009, so we analysed search patterns for two sets of keywords as the UK economy went into recession. We looked for relationships between these search patterns and related economic indicators, and listed some tentative predictions based on what we observed.
House prices
In April 2009, we looked at volumes for 23 keywords that homebuyers might use, including buying a home, cheap mortgage and mortgage providers. UK search volumes for these keywords were then compared to house prices.
House prices charted against search volumes for 23 related keywords, from January 2004 to April 2009. Sources: Nationwide, Google Insights
Searches typically decline as autumn ends before rebounding in January. But in 2008, the January rebound was lacklustre and the decline came in spring – much earlier than usual. This was in line with house prices, which peaked in late 2007 and dropped severely from spring 2008.
In the first few months of 2009, however, search volumes enjoyed a far stronger January rebound than in the previous year – so we hypothesised that house prices would bottom out or even start to rise again in the middle of 2009. Let’s look at how accurate that hypothesis turned out to be.
House prices charted against search volumes for 23 related keywords, from January 2004 to December 2009 Sources: Nationwide, Google Insights
Sure enough, the search volume resurgence was accompanied by house price growth throughout 2009. But you’ll notice that search volumes soon tapered off, with a particularly steep fall after August. Our revised hypothesis, then, is that house prices will initially plateau and then drop again. We’ll revisit the statistics in spring 2010 to see how things turn out.
Financial difficulties
The second set of keywords we analysed was related to impending financial difficulties such as joblessness, debt and insolvency. They included signing on, mortgage arrears and debt problems, and were compared to the UK jobless rate.
UK unemployment rate charted against search volumes for 24 related keywords, from January 2004 to April 2009 Sources: Office for National Statistics, Google Insights
These search volumes dip at the end of each year before rising in January – and the rise in early 2008 was more pronounced than in previous years. The jobless rate started climbing three months later, suggesting that in this case search patterns might anticipate economic statistics. We observed that search volumes had dropped significantly in the first few months of 2009, so our hypothesis was that the jobless rate would stabilise but not drop between April and July. The chart below shows what actually happened.
UK unemployment rate charted against search volumes for 24 related keywords, from January 2004 to April 2009 Sources: Office for National Statistics, Google Insights
The unemployment rate has indeed stabilised, wavering between 7.7% and 7.8% since early June, suggesting that our original hypothesis was valid. And search volumes have kept on dropping throughout 2009. If search trends do anticipate economic reports in this case, we should see the unemployment rate drop steadily between now and spring 2010. Again, we’ll revisit these figures in April to see if this happens.
Conclusion
Our hypotheses from April 2009 were largely borne out as the year progressed: the drop in house prices was reversed and unemployment rates stabilised. So maybe there is some truth to the notion that search patterns can shed some light on forthcoming economic change.
But these hypotheses were in tune with the economic mood of the time. Many commentators were talking about green shoots and a V-shaped recession – there was a feeling that recovery was just around the corner. Today, we remain in what has become the longest-running recession in recorded history and there is considerable uncertainty about what 2010 will bring.
Our new hypotheses are less likely to be tainted by current economic consensus, precisely because no real consensus seems to exist right now. For this reason, the idea of search predicting the future will be seriously tested as the year unfolds. Don’t forget to come back in April 2010 to see the results for yourself.
An open assault on the walled garden
Dec 21st
Mobile telcos charge us for the texts, minutes and megabytes we use. They buy our loyalty by heavily subsidising our increasingly expensive phones. And they’re terrified of becoming like the people who supply our electricity or gas. They’re terrified that one day they’ll be nothing but interchangeable providers of a commodity, irrelevant logos printed on tedious, humdrum bills.
This is why their marketing focuses so much on music, culture and lifestyle. It’s why O2 customers get priority tickets to concerts at the arenas bearing their name. It’s why Orange customers get half-price cinema tickets on Wednesdays. And it’s why T-Mobile runs that insufferable campaign about Josh and his ever-growing band.
Join the b(r)and: T-Mobile want to be associated with music and lifestyle
Customers are being encouraged to associate the brands of mobile operators with a certain type of lifestyle experience instead of just voice and data. This experience extends from the marketing to exclusive content services and even the interfaces and feature sets of the handsets themselves.
In this sense, mobile telcos are offering their customers a walled garden, in which the mobile internet is presented as part of a convenient package branded Orange, AT&T, T-Mobile or O2. If your internet memory goes back as far as the mid-1990s this might sound slightly familiar. But in the next ten years this walled garden is due to come under direct assault.
Charlie Stross has posted an excellent, thought-provoking piece looking at how the next ten years might pan out for the mobile industry – and making it sound in some ways like a technology rehash of the Great Game, with Apple and Google as the chief protagonists.
As Stross sees it, Apple and Google both want to destroy the walled garden built by telcos but for different reasons and in different ways. As a premium marque, Apple wants to work with telcos while preventing their brands from adulterating the Apple experience:
Apple don’t want to destroy the telcos; they just want to use them as a conduit to sell their user experience… [they] want to maintain the high quality Apple-centric user experience and sell stuff to their users through the walled garden of the App Store and the iTunes music/video store
Google, on the other hand, wants people to view more of its ads. To make this happen, Google wants to fundamentally reshape the mobile industry:
I think Google are pursuing a grand strategic vision of destroying the cellco’s entire business model… turning 3G data service into a commodity… getting consumers to buy unlocked SIM-free handsets [like the Nexus One]… and ultimately do the Google thing to all your voice messages [through Google Voice] as well as your email and web access.
These distinct strategies both threaten the mobile telcos, who stand to lose any emotional connection they have with their customers either way. But this doesn’t mean that Apple and Google are going to be bedfellows:
Apple’s iPhone has been good for Google: iPhone users do far more web surfing — and Google ad-eyeballing — than regular phone users. But Apple want to maintain… the walled garden of the App Store and iTunes… [and] Google can’t slap their ads all over those media. So it’s going to end in handbags at dawn … eventually.
The piece (here’s the link again by the way) has me thinking that the coming decade in mobile networks will be much like the previous decade was in land-line internet service provision.
If Charlie Stross is right, the idea of the telco as provider of an experience will not last the decade, meaning that flash mobs, Orange Rock Corps and Josh Ward will become nothing but a dim and distant memory. And customers will hopefully have greater choice over how they use mobile networks, which would be nothing but a good thing in my opinion.
Charging companies for Twitter – what could it involve?
Feb 17th
You’re probably aware that Biz Stone, one of Twitter’s co-founders, told Marketing magazine on February 10th that:
“We are noticing more companies using Twitter and individuals following them. We can identify ways to make this experience even more valuable and charge for commercial accounts”
How to decode this quote? It’s fairly vague, but I can think of a few possible charging models that Twitter might adopt. I’ve listed three of them here:
1) “Twitter tax”
Twitter will try to identify accounts that are run by companies rather than individuals. It will then attempt to extract money from the owners of these accounts. Failure to pay will result in closure of the account.
I don’t think this is very likely, however:
- Distinguishing companies from individuals would be extremely difficult. A lot of anger come from those who felt they’d been unfairly classified (e.g. if you’re a consultant and you discuss professional topics on Twitter, are you a “company”?)
- No value would be added for those who pay
- A lot of genuinely handy and non-revenue-generating information services would vanish from Twitter, diminishing the value of Twitter as an information utility
- This diminishing of Twitter’s usefulness would lead many people to desert the service.
2) “Singling out the marketers”
Like the first option, Twitter will identify accounts that are run by companies. However, it will draw a line between companies that use it for information services and those who use it as a sales channel. Companies who use it as a sales channel will be penalised while those who use it for information services will not.
This is a bit more viable than option 1:
- Distinguishing sales from servicing would be easier than distinguishing companies from individuals. Rules could be defined, e.g. if you are seen to link to product pages or talk about offers or sales then you’ll be penalised
- It would allow services that people find useful to continue – e.g. getting news updates from the BBC
- It would encourage companies to use the service in an “ethical” way while heavily penalising spammers
- As a result, there would be a lower risk of people leaving the service.
3) “The enhanced service”
Twitter will not try to distinguish companies from individuals. However, it will create an “enhanced” account which will provide additional features at a cost. Companies will be free to keep using the “basic” service if they want to.
This is the most likely option, I’d say:
- The challenge would be to come up with features that would make a paid account compelling
- These could include things like offering brand protection (the account is marked as ‘official’), ecommerce features (people being able to pay over Twitter), advanced analytics (see reports on your followers and their behaviour etc), tracking abilities (find out how many people clicked the link in the last message you sent, etc)…
- This would add value for people who chose to pay
- There would be no need on Twitter’s part to pay people to detect and penalise companies
- Things like news feeds and so on would continue to operate, meaning that the usefulness of Twitter wouldn’t be too diminished.
Most of the commentary I’ve read so far seems to assume that something akin to the first option, the “Twitter tax”, would be introduced. But Twitter surely realise that it would be costly to implement and would seriously impact their growth rate. An enhanced service for which companies or individuals could pay is far more likely.
In particular, keep an eye out for commerce features. Pay-by-Twitter might seem far-fetched at the moment but as the service becomes ever more pervasive a compelling user need for that service will begin to emerge.
Googlewatch – updated
Feb 2nd
Before Christmas I suggested that Google may have reached its apex during 2008, especially as it had, for the first time, allowed a dubious new feature – SearchWiki – to infiltrate the product that sits at its core – search.
And over the weekend, Google spent an hour saying that every site in its index was potentially harmful. This was the result of human error – namely, someone listing a harmful site with the URL “/” and this being treated as a wild card across the whole index.
I don’t really subscribe to the view that this was an apocalyptic error on Google’s part, but I do think that, like SearchWiki, it’s a small but significant example of the fallibility of Google search. And for a company with Google’s visibility, perceived fallibility can be every bit as harmful as actual fallibility.
2008 – the year Google jumped the shark?
Dec 24th
As the year draws to an end and I retreat home to wrap presents and eat mince pies, I find myself wondering if 2008 will go down as the year in which Google’s fall from grace began.
Don’t get me wrong – there’s no way I’m forecasting doom for Google. It’s not Woolworths. But a large part of Google’s advantage in its decade of existence has stemmed from the unparalleled reputation it enjoys. Indeed, earlier this year it was named as the world’s most powerful brand for the second year running.
Why is its brand so strong? Google has always been a good example of a business that diversified without corrupting its core offering (in Google’s case, search). Yahoo! is a counter-example. As it acquired companies like eGroups and GeoCities, expanding its set of available services, it lost its central focus and gradually became bloated and flawed.
The increasing clutter of its homepage was a visual manifestation of this strategic drift. Google’s remained an appropriate distillation of its focus on search – even as it added mail, news, calendar, maps and other successful services.
Yahoo! and Google’s homepages from 1996 to 2005
But I think that this year might mark a turning point and that future historians might go as far as saying that Google jumped the shark in 2008, even though it saw off the laughable challenge from Cuil. Let’s look at some of the things that Google’s launched this year:
- Google SearchWiki – I’m listing this first because out of all Google’s product launches this has been the first to really impact its core offering, search. The idea is that users of the feature can manipulate and personalise their search results. Someone suggested to me that it heralded the end of natural search optimisation. My prediction? The feature will be gone within 12 months.
- Google Knol – Google’s “Wikipedia killer”. I don’t like basing conclusions on anecdotal evidence but, well… have you ever used it? The press hype around the Knol launch was driven more by negative attitudes to Wikipedia than positive ones towards this competitor. I don’t think Knol will be going away any time soon but I think it’s been something of a damp squib. I’d be interested to hear from anyone who uses it regularly.
- Google Chrome – Google’s “Firefox killer”. Like around 3% of the internet I installed and started using Chrome when it came out. However, I’m not among the 0.83% of the internet who are still using it. The only good thing about it is its start-up time. Apart from that I think Google should spend more time going after the likes of Apple and Microsoft rather than Wikipedia and Mozilla.
- Google Lively – Lively was full of fail. Launched in July as a competitor to Second Life, people who know about such things (e.g. not me) were immediately critical of Google Lively. Generous souls waited for subsequent releases to deliver improvements, but instead the service was officially killed in November 2008.
Oh yeah – there’s Jaiku as well, but I’m tired of writing bullet lists. It’s Christmas after all!
Google has a far from perfect track record when it comes to product launches and its policy has always been to develop experimental projects and see how they fare in the market. However I think 2008 has been different for two core reasons – one, that it has started to alter its core search offering (in the form of Search Wiki) and two, that many of these other launches do actually seem to be strategic as opposed to whimsical.
If it’s true that these releases have indeed been strategic, then the underlying strategy – whatever it is – is failing. Google is in danger of its brand being tarnished by failure. 2008 has been the year in which it’s become possible to at least envision a future Google that’s not a million miles from AOL or Yahoo!.
Google Flu Trends
Nov 13th
In this post, I’m going to try to outline a convergence between two separate trains of thoughts. It might get messy, so bear with me.
Train one (think of this as the Edgware branch of the Northern Line) is search engine optimisation.
One of the areas I’ve been working in a lot recently is search engine optimisation. I’ve carried out three fairly in-depth assessments of different search markets in the last few weeks.
It’s been an interesting learning experience in a lot of ways—the last time I was heavily involved in SEO was a few years ago and the tools available for carrying out analysis have come a long way since then. Perhaps the most potent new weapon in the arsenal of a search market analyst is Google Trends. Try it, it’s fun.
Train two (this is the High Barnet branch) is corporate social responsibility (CSR).
For a while now I’ve held the view that companies are not doing enough just throwing money at CSR initiatives—donating to charity, that sort of thing. After all, money isn’t the only thing that successful companies have to contribute. They are also rich in expertise and capability. Companies should therefore look for ways to apply their know-how to social problems.
An example of this that I often refer to is TNT Express Worldwide’s work with the World Food Programme. It assigns staff to work with the WFP and contributes its expertise in the fields of distribution and logistics, helping to manage the distribution of food in geographically remote and challenging regions. The value of this contribution is inestimably higher than it would be if it were purely financial.
And here’s where the two trains of thought converge. To torture an already stretched metaphor, imagine this as being Camden Town station.
Google launched Google.org some time ago as its philanthropic arm. It’s headed by epidemiologist/technologist Dr Larry Brilliant and seeks to do the sort of thing that TNT are doing with the WFP, namely using Google’s unique capabilities to bring a fresh approach to various social problems.
A great example of this is the recently launched Google Flu Trends, an analysis of how Google Trends can help point to flu outbreaks around two weeks than conventional epidemiological analysis.
It’s nice to see companies bringing knowledge and not just money to the table when it comes to health, hunger and other real-world problems.
The end of Web 2.0?
Oct 13th
Even though I’ve been known to use the phrase “Web 2.0″ from time to time, I’ve never really liked the idea very much. It’s useful shorthand for when you’re talking to anyone whose knowledge about the internet is defined largely by current trends and ‘hypes’, but really, what’s ever been new about the idea of the web being a platform for user-generated content and social networking? Me and a lot of people I know have been using it for that purpose for nearly fifteen years already.
That said, there’s a case to be made for the validity of the phrase. There’s a combination of interactivity, interoperability and a certain visual aesthetic that can arguably be described quite aptly as “Web 2.0″. But in the last year or so the Web 2.0 brand has been becoming more and more “bubble-esque” as ‘coolness’ has started to outstrip utility within that world.
And as you will no doubt have noticed, we are no longer operating in an economy where coolness carries more weight than utility. The contraction of liquidity will lead to less and less investors being content to capitalise Silicon Valley firms with vapid business models. Products that don’t deliver clear operational value will find it much tougher to get funding.
All in all, it’s like 2000-2001 again, but writ large. The FT’s Lex column (login needed) reported this morning that if the equities markets recover twice as quickly as they did after the 1929 crash, hardly anyone currently over 65 will live to see them reach their heights of summer 2007. The economic climate of the coming years isn’t going to support the kind of culture that “Web 2.0″ has become.
But is that really a bad thing? No, I don’t think so. The hardships that this industry experienced between 2000 and 2002 gave it a sorely-need maturity. And the next few years may do the same.
Even if its underlying concepts were never that new, “Web 2.0″ has introduced the mainstream to a way of connecting over the net that was previously the domain mainly of people like me – geeks, to be blunt. There is now an opportunity for it to go through the same process of maturation that “Web 1.0″ did all those years ago.
Edit, January 2010: Interestingly the technology sector seems to have held up quite well despite the sustained global recession, which only now seems to be drawing to an end. Twitter might even have moved into profitability in 2009. There are still too many people marketing themselves as “social media gurus” but in general the big companies associated with “Web 2.0″ have made well-informed and sensible decisions rather than turn into bloated dot-bomb throwbacks.
Online behaviour and the economic downturn
Oct 1st
Online intelligence service Hitwise released a report last week claiming that UK internet usage patterns were changing in response to the current economic situation. The full press release is here.
Hitwise gathers its data by looking at the traffic logs of its clients’ websites, which number around 1,500. These websites are divided up into a range of categories and sub-categories. Hitwise is therefore aware of traffic volumes to sites in different categories, and has attempted to draw conclusions from changing patterns in these.
This methodology may be imperfect—1,500 websites may sound like a lot but is just a drop in the ocean—but the findings seem to be intuitively correct. For around a year now the subject of how a slowdown would affect online behaviour has been coming up more and more frequently, and the general consensus has been that online retail and price comparison sites are not going to be as exposed to the effects of a drop in consumer spending. Smaller household budgets lead to an increase in price-sensitivity, and price-sensitive consumers spend more time researching and planning purchases as opposed to buying on impulse.
An example of this in the Hitwise research is that traffic to what it identifies as price comparison, voucher or cashback sites increased by 20% between July 2007 and July 2008, after a slight drop in traffic to such sites between 2005 and 2007. Voucher sites seem to be the biggest beneficiaries (to the uninitiated, voucher sites collate promotional codes & vouchers from various retailers, which can be redeemed at checkout for discounts – here’s an example).
However, another contributor to this trend could also be quite simply that British people have become, on average, more sophisticated online shoppers. It’ll be interesting to look at how traffic to voucher and price comparison sites bears up when the growth phase of the next business cycle begins. Will those sites become the online equivalents of Poundstretcher, shunned by all but the most price-sensitive? Or will they remain the first port of call for the clued-up online shopper?
Murdoch’s paid-content move
Aug 7th
Posted by brelson in media
No comments
I’m hoping that News International will end up looking back on their move to paid content as a serious blunder. Not because I’m irked at the idea of paying for the Sun or the Times (I don’t read either) or even because I’m a particularly ardent defender of free content. I just dislike News International in general and Rupert Murdoch in particular, and would rather live in a world in which their influence is greatly diminished. I also believe that Rupert Murdoch has a history of serious miscalculation when it comes to the internet and would like to see that belief borne out.
If I’m wrong, it’ll at least be interesting to see what paid-content providers end up doing to differentiate their output from non-charging competitors. We might end up seeing a period of accelerated innovation in digital content as it becomes a product in its own right – as opposed to a vehicle for selling advertising.
But to go back to my original point – I do hope that this all turns out to be a major cock-up on Murdoch’s part.