The fun economics story of the day is that Orbitz sometimes looks at your computer’s operating system to decide what hotel options to show you. Dana Mattioli breaks the story over at the Wall Street Journal:
Orbitz Worldwide Inc. has found that people who use Apple Inc.’s Mac computers spend as much as 30% more a night on hotels, so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see.
The Orbitz effort, which is in its early stages, demonstrates how tracking people’s online activities can use even seemingly innocuous information—in this case, the fact that customers are visiting Orbitz.com from a Mac—to start predicting their tastes and spending habits.
Orbitz executives confirmed that the company is experimenting with showing different hotel offers to Mac and PC visitors, but said the company isn’t showing the same room to different users at different prices. They also pointed out that users can opt to rank results by price.
Here are examples from the WSJ’s experiments:
The WSJ emphasizes that Mac users see higher-priced hotels. For example, Mattioli’s article is headlined: “On Orbitz, Mac Users Steered to Pricier Hotels.”
My question: Would you feel any different if, instead, the WSJ emphasized that Windows users are directed to lower-priced hotels? For example, Windows users are prompted about the affordable lodgings at the Travelodge in El Paso, Texas. (Full disclosure: I think I once stayed there.)
As Mattioli notes, it’s important to keep in mind that Orbitz isn’t offering different prices, it’s just deciding which hotels to list prominently. And your operating system is just one of many factors that go into this calculation. Others include deals (hotels offering deals move up the rankings), referring site (which can reveal a lot about your preferences), return visits (Orbitz learns your tastes), and location (folks from Greenwich, CT probably see more expensive hotels than those from El Paso).
About a month ago, I remarked on Groupon’s explosive revenue growth (and its equally impressive cost growth).
The company revised its financial results yesterday, and the revenue picture looks less explosive. In the latest update of its S-1 registration statement, Groupon reported $393 million in Q2 revenues. That’s a remarkable figure for such a young company but a far cry from the $878 million it previously reported.
And what happened to the almost $400 million in missing revenue? That money–payments to the merchants who provide goods and services for Groupons–is now subtracted before reporting revenue rather than deducted after as an expense. In short, Groupon went from a gross measure of revenue to a net one.
The bad news for Groupon is that the new presentation makes the company appear less than half as big as it did previously. The good news, I suppose, is that its expenses went down by the same amount.
Groupon’s effort to go public has been one of the bumpier ones in recent memory. Its first filing emphasized a profit measure, essentially profits before
less marketing expenses, that was widely ridiculed. That got dropped in the second draft. And now a gigantic restatement of revenue in the third draft. Not to mention, the company’s recent difficulties with the SEC’s quiet period requirements.
Daily deal leader Groupon continues to grow its revenues at a jaw-dropping pace. According to its updated S-1 filing, the company sold $878 million in Groupons in the second quarter, ten times more than a year earlier:
However, costs have been exploding too. Groupon spent almost $1 billion in Q2:
Put it all together, and Groupon has been losing hundreds of millions of dollars:
Small compared to the billions and trillions of red ink the federal government confronts, but still a formidable problem. Particularly given all the other players in this space, including a certain search company whose $6 billion acquisition offer Groupon spurned last year. I would have taken the money and run. But perhaps I am not seeing the secret ingredient that will give Groupon a persistent competitive advantage in the face of vigorous competition.
We’ve all heard the rumors that Groupon is the fastest growing company ever. Today it finally opened its books in its preliminary filing to go public.
In the first quarter of 2009, the online deal company mustered only a quarter of million in revenue. In the first quarter of 2011, it brought in almost $650 million.
Only slightly less wow, by the way, is the fact that Groupon lost $103 million in the first quarter. Marketing and SG&A are expensive.
One highlight of the Milken Global Conference was an excellent panel discussion of how new communication technologies are changing the way that people think and interact.
Moderated by the amusing Dennis Kneale of Fox Business, the panelists were:
Nicholas Carr, Author, “The Shallows: What the Internet Is Doing to Our Brains”
Cathy Davidson, Ruth F. DeVarney Professor of English and John Hope Franklin Humanities Institute Professor of Interdisciplinary Studies, Duke University
Clifford Nass, Thomas M. Storke Professor, Stanford University
Sherry Turkle, Abby Rockefeller Mauzé Professor of the Social Studies of Science and Technology, MIT
I am proud to say that I sat through the entire panel without checking my iPhone or iPad. But it was a struggle.
The full panel is a bit more than an hour. If you are short on time, you may still enjoy the first few minutes of movie clips illustrating some perils of modern technology. Here’s the link again.
Marco Arment is the brains behind one of my favorite apps. Instapaper allows you to store articles off the Web for later reading; very useful, for example, when I am surfing and come across an article I want to share with my students or use in a future blog post. And the editor of Instapaper periodically shares excellent reads that I might otherwise miss.
Instapaper is currently available for both the iPhone and the iPad for $4.99. As Marco discusses in his blog, however, the iPhone version has sometimes been available for free (but with ads).
Based on his pricing experiments, Marco has decided that free is a bad model. In part that’s because ads provide weak revenues, and it’s expensive to support two versions of the app. In part it’s because the free app cannibalizes sales from the paid version.
But that’s not all. Another problem is that the free version attracts “undesirable customers”:
Instapaper Free always had worse reviews in iTunes than the paid app. Part of this is that the paid app was better, of course, but a lot of the Free reviews were completely unreasonable.
Only people who buy the paid app — and therefore have no problem paying $5 for an app — can post reviews for it. That filters out a lot of the sorts of customers who will leave unreasonable, incomprehensible, or inflammatory reviews. (It also filters out many people likely to need a lot of support.)
I don’t need every customer. I’m primarily in the business of selling a product for money. How much effort do I really want to devote to satisfying people who are unable or extremely unlikely to pay for anything.
Free is a risky price because it allows people to get something without really thinking about whether they want it. That’s why health insurers insist you pay at least $5 to see your doc or get a prescription. And it’s why DC’s nickel bag tax has been so effective in cutting use of plastic bags.
Kudos to Marco for sharing his results and calling on others to run similar experiments. But I won’t be one of them. Free continues to be the right price here in the blogosphere.
Wired’s cover story this month, “The Web is Dead,” features the following chart showing the portion of internet traffic in different uses:
Over the past few years, peer-to-peer services and video have gobbled up an increasing share of traffic, while the “traditional” web — you know, surfing from site to site, reading your favorite blog about economics, finance, and life, etc. — has been declining.
Chris Anderson cites this as evidence of the pending death of the web. To which there is only one thing to say: wait a minute buster. Just because the web’s share of total bits and bytes is falling doesn’t mean it’s dying. Maybe it’s just that the other services are growing more rapidly.
One of the benefits of being off the grid for a week-plus is that other commentators have already had the same thought and have tracked down the relevant data. Kudos to Rob Beschizza at BoingBoing for charting the data in absolute terms. Rather than dying, the web is still growing like fresh bacteria in a petri dish: