Saturday, July 7, 2012

The Yin and Yan of Jack Dorsey

I thought this was interesting on multiple levels. By coincidence I read these two articles almost back-to-back, so even I couldn't miss the connections.

We start with a man named Jack Dorsey, the man who launched Twitter. I think Twitter is (like Facebook) overhyped and little understood, but I still found this story in Wired Magazine a compelling read. It's a personality profile of Dorsey; and of course because it's written by a leading-edge tech mag, there's a Cult of (Steve) Jobs undercurrent; much of the article compares him with Jobs and Apple.

As an illustration, there's a discussion of Dorsey's current project, a merchant payment service called Square. For the purposes of this blog post, I'm not interested in Apple, design, or other Revealed Truths. I'm interested in the company itself and what it does:

. . . Earlier this year, Square . . . released Square Register, an app that makes it easy to use an iPad as a full-featured cash register. Vendors can set up buttons for each item they sell, much as McDonald’s lets cashiers simply press Shake instead of entering the price. It can also connect wirelessly to a cash drawer.

But Register’s real value is that it offers sophisticated analytics for free. Its users get data that allows them to identify which products are selling and when, and future versions will be even more powerful. “As a customer enters the vicinity of the establishment, a notification will spring open on the merchant’s screen,” says Megan Quinn, Square’s director of products (who has since left the company). “It will show the customer’s name and suggest their most likely order, based on an algorithm that knows past purchases and things that sell well at the store.”

Henderson, the engineering lead on Pay With Square, points out that the company collects all kinds of information about its users, data that might be invaluable to merchants and customers alike. “First of all, we know your location,” he says. “Second, we have a decent sense of your history. We know the kinds of places you’ve been and what you like. But we also know lots of other things—like if there’s a whole bunch of food trucks that pull up nearby, we’ll see the spike in activity and can point you to those trucks. I think you’ll see us get really good at this.”

Analytics and data-mining might provide Square’s real business model. So far, the company has charged a very small fee for each transaction, and merchants aren’t likely to pay much more. And while Square has been giving participating merchants access to analytics about their businesses for free, it is also aggregating that data, real-time information about what people are buying in every region of the country, complete with detailed demographics. It’s reasonable to think that might be very valuable in the near future.

Square is still focused on smaller merchants, but its executives believe that even tier-one retailers will use Square before long. “The Neiman Marcuses and the Walmarts will want to have an emotional attachment with their buyers, where anybody can walk in and pay with their name and have an electronic receipt,” Rabois says. “That’s what we’re going to deliver.”

In other words, Square aims to provide shoppers with an emotionally satisfying experience . . . .
Wired, "The Many Sides of Jack Dorsey", paragraphs 40-45

I showed this article to a friend and he was thrilled at the prospect. Rooting through the wallet for money, making and handling loose change and such just slows everything down and can be an annoyance (e.g. almost nobody wants pennies anymore, let alone a pocketful).

He also made a point that in some places, like Europe (and probably many parts of the US), a lot of transactions are still in cash, such as cab fare. Cabbies don't take plastic, so you have to have and handle an often unfamiliar foreign currency, which leads to more bills and more coins, and receipts (if you're lucky) to keep for expense reports. Even when you are able to use credit cards, you're still limited to whichever brands or systems they accept; American Express (still a favorite for US corporate travel) is often non grata.

The no-swipe, no card, electronic-wallet-on-your-iPhone world that Square envisions may still not be adopted by cab drivers or small bistros in France, but it's still a welcome step toward it.

That aside, the portion of the Wired article that I quoted above discusses the use of analytics—the analysis of buying habits. Wired's example would be walking into a coffee house and the barristas would have your likely order on the cash register and ready to go as soon as you walked in the door. I used to frequent a chinese restaurant and always bought the same lunch, so they always knew what I wanted as soon as they saw me. That's not a bad thing.

So next I came across an article in The Economist magazine (June 30-July 6, 2012. London's skyscape on the cover). This article never discussed Square in particular, but the part about Square's analytics dovetails in nicely:

The internet was supposed to be the consumer’s friend. By making it easy to shop around, it would drive prices lower. But online sellers of all sorts of goods and services are taking a keen interest in new software that promises to help them spot customers who are well off, or whose money is burning a hole in their pockets, so as to charge them more).

Online shoppers let slip plenty of information about themselves that could be of use to crafty salesmen. Cookies reveal where else they have been browsing, allowing some guesses about their income bracket, age and sex. Their internet address can often be matched to their physical address: the richer the neighbourhood, the deeper the pockets, it may be assumed. Apple computer-owners are on average better-off than Windows PC users, and firms may offer them pricier options, as Orbitz, a travel website, is doing. Your mouse may also be squeaking on you: click too quickly from home-page to product page to checkout, and the seller can conclude that you have already decided to buy—so why offer you a discount?
The Economist, "Caveat", paragraphs 2 and 3.

I know the Wired article wasn't about the dark side of technology, yet there's a little bit of me that thinks it's the "Apple is Good, Steve Jobs is God, this man is obviously the Chosen One so all he touches is good" philosophy springs forth. If Dorsey idolized Bill Gates, I would bet the implications of Square's analytics would have gotten a harder look.

And then finally this cherry on top. Flip the page after the Economist article and you see a full-page ad for SAS's analytic services (see image at top of this post). If I were SAS, I'd be pissed.

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