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Luxury 2.0 - How eBay Could Have Used OpenSocial To Save $61M

A French court on Monday ordered the online auction giant eBay to pay 38.6 million euros, or $61 million, in damages to the French luxury goods company LVMH, owner of the prestigious Louis Vuitton brand. LVMH estimated that 90% of the sales of Louis Vuitton goods on eBay were for fakes.

Fashionphile estimates that eBay was making $3.8 million in fees a year from the Louis Vuitton brand alone (see the Fashionphile analysis), not including other brands owned or managed by LV such as Christian Dior.

eBay's initial defense? It published guides (like this) that would help educate consumers on how to tell authentic Louis Vuitton goods from the knockoffs. That flimsy protection justified countless abuses like one-day auctions of LV goods; continuing to protect eBay sellers who had zero feedback but 50 listings for LVMH products; fake second chance offers; and worse yet, $75 bins for $1000 bags.

After the first cease-and-desist judgment, eBay appeared to clean up. My impression today is that the promise of eBay - "...to provide a global trading platform where practically anyone can trade practically anything" - is going to continue to lose ground so long as they rely on internal automation instead of vendor certification.

This is where I think applications like OpenSocial have tremendous promise. Instead of relying on internal authentication schemes, eBay should ask LVMH and other luxury brands to create and manage their own social networks. In this case, the Louis Vuitton social network would be composed solely of merchants specifically authorized to sell and resell Louis Vuitton goods. Building this network eliminates the argument that it would be "prohibitively expensive" for similar online marketplaces to comply with LVMH's requests...if you can handle simple constructs such as FOAF or OPML an online marketplace can determine if a retailer is legit.

What's In Style? Brows, Strong Bangs ... and Advertising Leverage

Leave it to Kim-Van Dang of hot shop KVD-NYC to identify the hottest trends for 2008. A former beauty director at In Style and Good Housekeeping (who has done just about everything from giving fashion advice to Bill Clinton to going skinny-dipping in Cannes with Pamela Anderson), she looks at the factors that influence how people experience things. In addition to advice on what's hot for 2008, she weighs in on the latest trend in content, which isn't in Techcrunch or PaidContent but instead the latest issue of Harper's Bazaar.

The July issue of Bazaar devotes a whopping 40 editorial pages to four celebrities and models — Gwyneth Paltrow, Elizabeth Hurley, Carolyn Murphy and Hilary Rhoda — who also star in the advertising campaign for Sensuous, a new fragrance from Estée Lauder. It's significant because it significantly blurs the distinction between advertising and editorial. Magazines typically dedicate a page — or even just a blurb — of editorial space to a new perfume.

Dang predicted that other marketers will seek to mimic Bazaar's example, demanding similar editorial attention:

"...Advertisers have something to show now and say, ‘Why am I not getting this treatment?’ In the current economy, I think advertisers have more muscle."

Fact is, cosmetic companies generally treat their product introductions like movie premieres. They hire stars and models who can land magazine covers and other media attention, or sometimes go even further, like creating a joint venture with Sarah Jessica Parker to create the Lovely fragrance. While I don't see videogame placements anytime soon, product placement is going to continue to stretch conventional definitions. I stand by my 2004 prediction that we'll see product placements in places like Second Life.

Paid placement is something I've blogged about here, here and here. If I've got a restaurant and I want to be noticed by a local upscale hotel, senior Yelp reviewer or blogger, I need to pay or comp them.

Yet the public blogosphere likens this quid pro quo to a crime, as seen on my recent conversation on Mashable. For small to medium sized businesses, you cannot wait for the infrequent blog post or twitter about your company. You have a requirement to shape the conversation.

I think there's going to be a collision, soon, between the online purists and the businesses that sell in the real world. (And it wouldn't surprise me in the least to see Bonnie Fuller's hand in this.)

And as for Kim-Van Dang's thoughts? 

• Brows are the new eyelashes. Brow salons are popping everywhere, as are brow-growing and grooming products.
• Green is the new brown (replacing purple).
• Strong bangs are back. Witness model Kate Moss and designer Erin Featherston.
• It’s all about super-peptides, lasers and injectables in NYC and it’s all about eco-chic facials and elixirs in L.A.
• Do you love visiting spas? Now you can live at one. Luxury condos with built-in spa facilities and services are the next big thing.
• Oh, and lots of French stuff: French butters, French cheeses (Vacherin), French perfumes (Jicky, Shalimar, and Rose Barbare), and French teas (Mariage Freres).

(Hey NYC and Company! You need to recruit Kim-Van Dang into your Ask-A-Local program!)

Emerging Sponsorship Categories: Custom Publishing Comes of Age

Bill Chipps over at IEG recently shared the next up-and-coming trend in sponsorship: on-demand book printing.

Figure it out: if you were invited to a golf tournament, you met a ton of celebrities, and had a lot of fun -- how would you feel if you received a surprise in the mail: a hardcover coffee-table style book, filled with great pictures of that event of you and all the people you met? If you're like millions of other Americans that love seeing pictures of themselves, you'd love it!

With vendors ranging from Blurb to Lulu to Amazon's CreateSpace.com, these books typically cost between $20 and $50 per book. Bill indicated these books are useful in three ways:

• It's an emerging category to pitch for sponsorship.
• They become tools to create or supplement fulfillment reports and sales materials.
• They are an excellent activation vehicle for sponsors.

Bill cited the example of Newport Harbor Corp., who last fall began using iPhoto to create custom books for sponsors like the Stop & Shop Supermarket, which sponsors Taste of Rhode Island. While the sponsors were already expecting to see reports describing traffic, the books provided a visual reminder of the event and the sponsors' participation. Interns manage the photography and design elements while the sales team writes copy. They plan on creating books this year for every sponsor paying over $10,000.

The uniqueness of this sponsorship category, combined with the familiarity of such books provides a unique opportunity for forward-thinking marketing organizations. The on-demand part is important: you don't have to have a minimum order; so whether you order 1 or 10,000 the economics are very similar. Some potential opportunities for such custom publishing include

• Restaurants: combine photos, beloved recipes and historical documents (articles, reviews, awards, etc.) to create unique souvenirs for their most beloved customers, or distribute them to local hotels and concierges in recognition for business.
• Hotels: celebrate employee-of-the-month programs that emphasize the service standards of the hotel, but include pictures of the employee and co-workers, personal thank-yous from management team, and copies of letters from appreciative guests.
• Cruise lines: Create a template that includes postcards and mementos from various destinations, include maps and fun facts about destinations. When there is a multi-week cruise, take a lot of pictures of the passengers over the first few days and place them into the template. Email the template to the vendor so when the cruise winds down, passengers receive these books when they disembark.
• Convention and Visitor Bureaus: Reward conference organizers with multi-year deals with books filled with pictures of their membership having fun. Include lots of pictures featuring local restaurants and other venues. In other words, create an emotional component that reminds them how much fun they have visiting your neighborhood.

Reliving the 70s: The Loews Regency Park Reinvents the TV Dinner

Talk about history repeating itself.

Classic TV shows like I Dream of Jeannie are popular on Hulu.com. My friend Sandy went from a straight cut to the Farrah Fawcett wave. Twitter is doing its best to repeat the rapid rise (and unfortunately, the rapid decline as well) of the CB radio craze. And now, the Loews Regency Park in New York City rejuvenates the TV dinner concept: introducing Park Avenue Fried Chicken (above), Wasabi Crusted North Atlantic Wild Salmon (right, top), and the Slow Braised Pot Roast (braised in Pinot Noir, below right).

Jeff Davis over at the wonderful foodie blog Foodfete (go ahead, check it out) appreciates what Chef Andrew Rubin is trying to do...and loves the warm, fuzzy feeling it gives him.

The trays are porcelain, not aluminum or plastic. The fried chicken is free range and the macaroni and cheese is cheddar asiago with a Parmesan crust.

While not designed for a low-fat diet, the good news is that this food may be good for you in other ways. Some research suggests eating certain foods can help reduce stress (and no, this research did not come from Mireille Guiliano, author of French Women Don't Get Fat).

As Sewell Chan blogs over at the NY Times Citydesk,

"...research out of Cornell University suggests that females tend to prefer snack-related comfort foods (candy and chocolate) while males prefer more meal-related comfort foods (pasta or casseroles). The researchers speculate that the gender differences may relate to upbringing. Men may have been conditioned to prefer hot or labor-intensive meals (conjuring up memories of their mothers taking care of them) while women seek convenient comfort foods (a form of self-indulgence)."

As scientists figure out how changes in brain chemistry make us happy, we also are witnessing people who take a more active interest in understanding how their food is produced. I think it's only going to be a matter of time (months, even) before these two trends collide: maybe not TV dinners from your local farmers' market, but certainly using comforting iconography (the old dairy box the milkman would use to deliver milk to your door, or the brown bag lunch) to market locally grown produce.

Hiring The Best: Research Shows the Value of Sarcasm

Katherine P. Rankin may have simply wanted to research where sarcasm lived in the brain as part of her ongoing research into dementia. Along the way, she may have discovered an insight which may lead hospitality professionals everywhere to rethink their hiring practices.

What she found is that the ability to perceive sarcasm requires a nifty mental trick that lies at the heart of social relations: figuring out what others are thinking.

It turns out that sarcasm lives in the right side of the brain. (It lives in the right hemisphere, along with the ability to appreciate puns and jokes, appreciation for fine food and wine, love of travel, as well as empathy and listening skills.)    

Why is this important?

Let's turn to Danny Meyer, who as I've mentioned before, knows something about customer service -- he's the founder and co-owner of eleven classic New York establishments. All of these venues have outstanding customer service: Union Square Cafe, Gramercy Tavern, Eleven Madison Park, Tabla, Blue Smoke, Jazz Standard, Shake Shack, The Modern, Cafe 2, Terrace 5, and Hudson Yards Catering. He's also one of the early investors in a little company called OpenTable.

In his book "Setting The Table", he's got a term called the "51 percent solution". He argues that the way people relate to each other is just slightly more important than the technical performance. It's the same reason a flawless four- or five-star restaurant can actually attract far fewer loyal fans than a two- or three-star place with soul. Meyer adds:

"...The human beings who animate our restaurants have far more impact on whether we succeed than any of the food ingredients we use, the decor of our dining rooms, the bottles of wine in our cellars, or even the locations of the restaurants. Because hospitality is a dialogue, I have always placed the highest premium on hiring the best possible staff to engage our guests."

If the customer feels like the wait staff has done something for them (i.e., listened and take action as a result), they have a strong emotional experience and are likely to come back or perhaps tell their friends.

If the customer feels like the wait staff has done something to them (i.e., didn't listen and did something else instead of what they wanted), they are going to have a stronger emotional experience and are more likely to share the negative experience with their friends.

A restaurant can do a hundred things right -- but if the wait staff can't understand the signals the customer is sending, and therefore doesn't react, the whole experience is ruined. By testing for sarcasm, you're also testing for the ability to provide excellent customer service.

Before you go out and hire the most sarcastic people, there is one caveat: as Cornell notes in a recent report, "Questioning Conventional Wisdom: Is a Happy Employee a Good Employee, or Do Other Attitudes Matter More?", the most important factor is whether employees understand what's important in their job. Sarcastic employees are simply better at listening and identifying needs. They still need guidance in developing the improvisational skills that are at the core of delivering an excellent customer experience.

Link: The New York Times has a terrific article -- as well as a video used in a scientific study on sarcasm. (registration may be required)

Louis Vuitton Revisited: What Web 2.0 Can Learn from Luxury Brands

Louis Vuitton Mallatier has been getting a lot of press for its efforts to build and protect its intellectual property. While many pooh-pooh Louis Vuitton's extensive litigation efforts as being misguided, the results are hard to argue with. Nadia Pleisner's inappropriate use of Vuitton IP has been shut down (the Facebook page has been disabled and she has published a statement on her web site) and even giant Google has been taken to task, again: The Paris District Court forbade Google and its French subsidiary from selling search ads against trademarks owned by Louis Vuitton.Google was also ordered to pay 200,000 euros, or $257,430, for unfair competition, misleading advertising and trademark counterfeiting, reports CNET.

So why should Web 2.0 companies care? The idea that Louis Vuitton is wrong is based on the premise that awareness (or eyeballs) continue to be more important than revenue.

That premise leads people to believe that Louis Vuitton should take the high ground whenever someone attempts to link their brand to a controversial issue. The argument is that if Louis Vuitton gets engaged in the issue - through sponsorship of workshops, through education, through advocacy - it will somehow advance their brand.

That same premise leads people to believe that every Google search for "Louis Vuitton" creates greater value for the brand and the company.

After spending years in this area -- I was a member of the IAB committee that established the standard terms and conditions for Internet advertising, and have worked and blogged extensively about Louis Vuitton -- I'm led to the conclusion that Louis Vuitton is doing a much better job at helping its retailer network make money than Google does.

As social networks and Web 2.0 apps alike try to court third parties, many like Microsoft program manager Dare Obasanjo and former Palm CTO Michael Mace are starting to make the argument that if your company has an API, you need to do a better job of showing developers how they're going to make money.

This is the difference between Yahoo and Microsoft right now: Yahoo is doing a bang up job of opening itself up, but its efforts at showing how Panama was going to make money for advertisers, or showing how third parties can make money off of Yahoo's search services in general, pale in comparison to Microsoft's ability to mint millionaires (through real revenues, not appreciation of stock) -- some 10,000 by the year 2000, according to a NY Times article.

Meantime, Google does help people make money through its advertising system, but the way it's currently designed, it does a much better job at creating visibility for Louis Vuitton knockoffs, who used to be confined to seedy places like Canal Street in New York but have found a terrific platform for visibility in Google.

At the same time, Louis Vuitton is building on other initiatives that one wouldn't expect from a house of couture. AdAge reports that on the 10th anniversary of launching its line of local city guides (which I covered earlier here), it contracted with Soundwalk, a company specializing in audio guides, to produce three tours of Chinese cities. This is a natural evolution of custom publishing, or brands using the Internet to become de facto media brands unto themselves.

According to a Louis Vuitton spokesman:

"[It] is a new concept in urban tourism, and we really want to offer a new way of traveling to our customers ... with China hosting the Olympic Games in 2008, it was natural for Louis Vuitton ... to open its Louis Vuitton Soundwalk series with a trilogy of Chinese cities."

Beginning June 16, the tours will be available as downloadable MP3 files (via louisvuittonsoundwalk.com). They will be sold exclusively online for $17 each, and are available in English, French, Cantonese, Japanese, Korean and Mandarin.

Can I Borrow You For A Moment? The New Cognitive Surplus

I've had a lot of conversations recently about crowdsourcing - using web tools to engage the public (or other large groups) to solve problems. Jeremiah Owyang of Forrester Research provides an example of how crowdsourcing helped improve a conference session by turning a boring panel into a more lively one:

"...Questions made the panel: Love hearing viewpoints from people with boots on the ground."

Now, Clay Shirky provides a completely different context for crowdsourcing: with all of the free time we are no longer spending on television, and instead spending with Facebook and other social applications, can we find a way to solve some of the really big problems? He asks:

"...Let's say that everything stays 99 percent the same, that people watch 99 percent as much television as they used to, but 1 percent of that is carved out for producing and for sharing.  The Internet-connected population watches roughly a trillion hours of TV a year.  That's about five times the size of the annual U.S. consumption. One per cent of that is 100 Wikipedia projects per year worth of participation."

When he says "Wikipedia projects", he means things like Vasco Furtado, a Wiki Map for crime in Brazil. If there's an assault, if there's a burglary, if there's a mugging, a robbery, a rape, a murder, you can go and put a push-pin on a Google Map, and you can characterize the assault, and you start to see a map of where these crimes are occurring. While that might not mean a lot to someone that may never visit Brazil, in some of my previous posts I've noted how similar local projects led to a fifty percent drop in crime.

Think of it: just a change of 1% in your TV watching habits can lead to a hundred projects, just like these. Clay notes the last time there was a similar change in how we spend our leisure time as significant as this, it gave rise to gin and sitcoms. Read the post for yourself, or Dave Morin over at Facebook posted a video of Clay's talk.

Why We Facebook: Inside the Emotional Cues That Motivate Us

When I worked for TCI Technology Ventures (the venture capital arm of what was the largest cable company), we would look for the cues that would trigger a positive emotion, which would help lock in the customer. For example, while basic phone service is unsexy, voice mail had a lot of emotional cues. People would save key voice mails from loved ones and return to them later. The number of voice messages was a proxy for how loved the person felt.

I know it sounds cheesy, but when you are dealing with sixty million subscribers, emotional cues were among the most reliable indicators of whether a sub was likely to churn out.

So fast forward to social networks. Beyond all of the technical gobbledygook about privacy and data portability, could it be that people use Facebook because of similar emotional cues?

To answer that question, we reference an unscientific survey of Facebook users via SurveyMonkey, which yielded the following factoids:

 

What Facebook Users Do Every Day

1. Look at Photos (28.1%)
2. Poke Someone (12.3%)
3. Send Private Messages (10.5%)
3. Write on Someone's Wall (10.5%)
5. Add a New Friend (8.5%)
6. Comment on Photos (6.1%)
7. Add Photos (1.8%)
8. Edit Profile (1.2%)
9. Add New Applications (0.9%)

What Facebook Users Do Frequently

1. Look at Photos (43.9%)
2. Write on Someone's Wall (34.2%)
3. Add a New Friend (32.9%
4. Add Photos (27.2%)
5. Edit Profile (21.0%)
6. Send Private Messages (17.5%)
7. Comment on Photos (15.8%)
8. Poke Someone (14.9%)
9. Send Gifts (6.1%)
10. Participate in a Group (5.3%)
10. Add New Applications (5.3%)

What Facebook Users Never Do

1. Use the Marketplace (81.8%)
2. Create Your Own Group (54.4%)
3. Comment on Notes (49.1%)
4. Write Notes (44.7%)
5. Create Your Own Event (42.1%)
6. Send Gifts (40.4%)
7. Add New Applications (31.6%)
8. Poke Someone (28.9%)
9. Participate in a Group (23.7%)
10. Comment on Photos (6.1%)

When looking for emotional cues, I look for things that people do somewhat obsessively, for example, every day. Using that criteria, "viewing photos" and "poking someone" rank higher than "send private messages", which is a form of email. Sharing photos is a very intimate exercise common among family and close friends, and has become more widespread thanks to photo sharing sites like Facebook and flickr.

As for "poking someone", it's helpful to understand what a "poke" actually means. A common answer is it's a mindless way of saying "hello", but others have compared it to online flirting: if someone pokes you, and you poke them back, it's a way of saying, "Yeah, I'd date you."

Compare this to the #1 activity that people never do, which is "visit the Marketplace". (Notice that "Use Beacon" wasn't included as a choice ;) Brands that are seeking to get involved with Facebook should look for ways to emotionally involve their target audience, or as Don Dodge puts it, execute a "head fake" where you entertain people with shiny, fun activities; all of which are just a front for your sophisticated data-collection operations.

Retail Storytelling, Part I: What Every Bricks & Mortar Retailer Should Consider for their First Web Video

After thousands of conversations with traditional retailers about online media, I'm often asked why companies should blog.

My answer is that they should do it just to make sure their story gets told.

We've entered this Golden Age of storytelling -- thanks to blogs, podcasts and web video, everyone is a producer, and everyone is a critic. People are going online to find stories that help them make up their mind.

But here's an example that brings it a little closer to home. Every day, I walk my dog past a hot dog vendor. He's had good business, but he asked me how hard I thought it was to get people to walk just thirty feet.

As it turns out, pretty darn hard. There's a reason why grocery stores pack their aisles with messages and easy-to-reach displays.

So, he's changed his thinking recently. While he gets good loving from Yelp, he's learned that he gets lots of play by storytelling, and then spreading the story to local news outlets. (And what a headline: "Hot Dog! Biker Jim's Excellent Adventure!") His web site has been a great brochure, but he's started to look at web video.

Retail storytelling is the natural evolution of virtual tours. The more your customers know about your store and where things are, the easier their shopping experience is. The great thing about web video is that it puts the consumer in charge: it tells the whole story to an interested customer, and lets an uninterested customer cut the story short.

Here are some things for retailers to consider when putting together their first web video:

• What's the name of your store? You can't assume that just because someone has clicked on the video, they'll remember the name of your store. Reinforcing your store name makes it easier for your customers to Google you at a later time or recommend you to someone else.
• How long have you been in business? The longer you've been in business, the more likely you'll be there when the customer shows up. At least that's the assumption your customer makes. The biggest frustration of consumers today is when they Google a retailer online, only to drive to the location and find out that it's not there. History communicates trust and credibility. If they trust you they're more likely to visit you and hence, buy from you.
• How many locations do you have? Despite what people say about their preferences for mom and pop stores, the more locations you have the more trusted you are. If their first experience with you is in New York City they're more likely to tell their friends when you open a location in their neighborhood.
• What's your specialty? Understanding your theme or "elevator pitch" makes your store more memorable the next time your customer goes shopping. You may not have what all of your customers need all the time, but they need to remember your theme when they're looking for gifts for friends.
• What do you sell? Today's consumer is all about saving time. When you offer a menu of your products you save them time. You also allow them to consider your store for future needs. Describe your merchandise using broad keywords and major brand names. Take the time to use tools like Facebook Lexicon to determine what keywords are most in use (here we compare Prada vs Gucci, or Celtics vs Lakers), and use the most popular keywords.
• What's new? New sells! Send an email blast or text message pulse to give your best clientele a chance to see and buy your new merchandise before everyone else does. Create a web video that shows off the new stuff that just arrived.