Google Adwords auto opt-in for iPhones and other mobiles…”Don’t be Evil?”

I recently noticed, by accident, that all of my Google Adwords campaigns had been automatically opted-in so that I was also now (unbeknownest to me) spending my advertising budget on showing ads on iPhones and other mobile devices. The reason I came across this change is that I noticed an increase in my bounce rate on a few of my campaigns – obviously this is a bad thing since it means that more users who were clicking on my ads were not staying on my landing pages on Wahanda, thereby costing me money that I would have preferred not to spend. This also ate away my daily budgets more quickly, preventing other consumers from being able to see my adverts, and potentially also making a purchase.

It was only when I noticed that my top-line metrics had changed that I visited the “Edit Campaign” settings and noticed this new tick mark (see screenshot) for the mobile devices box.

Google decides what's best for me - thanks Adwords!

Now, I know Google has a very widely pubclized “Don’t be Evil”, so I wonder if this mantra guided their decision to:

• automatically opt-in all my campaigns so that I did not have a decision on whether I wanted to spend my advertising budget on mobile devices
• not inform me of this option via an email or even notifications in the site
• not give me the choice of being opted in, but assuming that I would want this
• time this “innovation” just before the Christmas period when every dollar/GBP of budget makes a difference
• not breakout the effectiveness of this medium in the dashboard so you can see the impressions, clickthrough rates and conversions by this channel (why not make this transparent?)

Google’s “Don’t be Evil” code claims “it’s about providing our users unbiased access to information, focusing on their needs and giving them the best products and services that we can. But it’s also about doing the right thing more generally – following the law, acting honorably and treating each other with respect.” Not providing a head’s up, nor providing transparency into the change seems to be at odds with their claims.

I can understand that some advertisers would love for their ads to appear on iPhones and mobile devices, but my general feeling is that users on mobile devices today will be less valuable in these early days for online retail sites.

Showing ads for location based offers, information, etc, maybe even some impulse purchases may have some early traction, but typical e-commerce sites may find what we found – that this change will just eat away at budgets and not deliver the sales and conversions we are typically used to from advertising on Google Search as conducted from desktops and laptops.

P&G invests in Ocado – implications for online retailing and supplier conflict

With its latest round of funding totalling £18m which closed in late November 2008, nine-year old online grocery delivery company Ocado has raised more money than any other European internet startup with total equity funds raised of £295.5 million, according to the TimesOnline. (Authors note: I plan to research and post in the near future he top 10 European startups by funds raised)

I like their logo...kind of reminds me of Wahanda

The real thing that caught my eye that one of the investors in this latest round was FMCG giant Procter & Gamble, maker of everything from Pringles and Pantene to Gillette and Ariel. P&G invested £5.0million in exchange for 1.0% of the company, valuing Ocado’s post-money equity at £500m - not bad for an unprofitable company that has lost close to £40m through the year-end September 2008, on sales of £288m.

Founded in November 1999 at the height of the dot com boom, Ocado also has over £100million of net debt on the books, which places a full enterprise value of the company at over £600m, for a trailing valuation multiple of over 2.0x Enterprise Value/Sales. From my investment banking days, this multiple seems on the high side for retailers, online or offline. In fact at the time of this post Amazon.com’s (AMZN) rough enterprise value to sales multiple is around 1.0x, so my initial outsider reaction is that Ocado achieved a fantastic valuation based on their latest historical sales figures.

Aside from the valuation paid by P&G and the other investor who made up the remainder of the round, this apparently marks the first time P&G has made an investment into a retail business. P&G’s rationale for the investment was that an investment in Ocado would be:

“a very fertile testing ground. We think Ocado is a huge research opportunity. They have a unique business and we can learn from it. We have not exactly worked out the research projects we will be looking at, but it will give us a better understanding of how people use the internet.”

In addition to this possibly being a vote of confidence in Ocado and the future of the UK online grocery/home delivery market, (especially in the face of fierce competition from the likes of Tesco, Sainsbury’s and others, including Waitrose who not only use Ocado but also have their owne home delivery business), I think its P&G’s way to fire a warning shot to its supply chain and its retail partners. In the past decade, retail consolidation has significantly increased the purchasing power and leverage that companies such as Wal-Mart/Asda, Carrefour, Tesco and others exercised over FMCGs such as P&G, Unilever and others. These retailers have also introduced high quality white-label products that compete with the big brands, and in some cases like at Marks & Spencer’s, they don’t even carry national brands at all.

Procter & Gamble's Stable of Consumer Brands

Although P&G claims in its quote to be planning on conducting as yet-to-be determined “research projects”, I am sure that the consumer insight and retail data they will gain from Ocado alone will justify the investment they have made.  Companies like P&G used to get scanner data and weekly retail sales data from supermarkets and other retailers, but more and more retailers are following the lead of Wal-Mart and have stopped sharing retail data.  Therefore consumer product companies like P&G have had to resort to other means to improve their point-of-sale intelligence, and have had to accept tightening margins and increased advertising budgets to continue to generate demand pull from consumers (but don;t get me wrong, I am not shedding a tear for P&G!).

Going direct to consumers is one way of cutting out the middleman, but in this case I think its more of a mechanism that P&G will use to keep its retail partners honest and a way to maintain its margin integrity. Without a credible channel, manufacturers like P&G do not have a credible threat against the growing dominance of the large and growing retail chains. It could not be out of the realm of possibility that P&G would open its own direct to consumer store selling all of its goods, much in the same way airlines and hotels starting selling direct to cut out and enforce better terms with its offline and online travel agency partners.

Back to Ocado for a second – their largest investor is John Lewis who owns Waitrose and there was mention that there is also partner conflict here as Ocado is possibly being prevented from working with other retail partners. In response to this, John Lewis has moved its investment in Ocado to its pension fund to allow Ocado to operate more freely, but I wonder now if Ocado will face similar supply & investor conflicts with P&G who surely will want better merchandising and terms over its fierce rivals such as Unilever and the like. The plot thickens!

Online Christmas, err, holiday shopping season trends…

In America, Black Friday, which is the day after US Thanksgiving, is famously the busiest shopping day of the year.
Online in the US, “Cyber Monday” – which occurred on Monday, December 1st this year – has traditionally been the busiest shopping day for online sales according to various sources such as Comscore.

As a new online retailer myself through my London based spa & wellness company Wahanda, I was braced for December 1st…until I did some research and found that in the UK, our equivalent of “Cyber Monday”, or “Mega Monday” as some press outlets were calling it, was not supposed to occur until December 8th, one full week later than the US. By the way, is there a UK equivalent of the US Black Friday? And why does our Cyber Monday occur one week later? What’s the “trigger event” in the UK?

Frosty the Snowman 2008 - Carnaby Street, London

The BBC claims that “the peak shopping hour will take place between 1300-1400 GMT when £28m may be spent online in an hour” and that ” the UK’s Christmas online retail sales could reach £13.6bn ($19.9bn)”, so in essence just over 2% of the total Christmas sales would occur in just one hour!. The £28m for one hour of sales is a pretty amazing number, because if you put it into context and assume that the holiday shopping season is about 6 weeks long (or 42 days) and that the holiday spend estimation of £13.6bn was evenly spent over that time period, then each day would represent £32m of sales. Therefore, having £28m of sales in one hour would be exceptional.

Since the beginning of December, at Wahanda we have seen sales continue to increase each week, and while “Mega Monday” was not bad, we have seen that the following Monday was even stronger and that each day has been better than the previous one. Of course being a new company it may be that we will wait until next year to really see the full effect of the Mega Monday effect. Another thing we have thought about is that people may either be spending less, or delaying their purchases as the shift more of their holiday pound online. This same effect is seen increasingly ever year in the travel industry where consumers continue to delay their summer holiday decision and purchase given the ease of booking online and the broad availability of discount offers.

Some interesting other online retail notes we have noticed from both our sales that mirror the articles in the press, and in speaking to other offline & online retailers:

• Most popular days of the week to buy online: Mon (strongest day by far), Tues, Fri (non travel products) and Sun, although in the last week as we get closer to Christmas, we have seen some encouraging sales on Wed & Thurs which previously were quiet days
• Most popular times of day to purchase:
  • Weekdays: 8.30-9.30am / lunchtime (which is the busiest by far) / 4-6pm (second strongest interval)
  • Weekends: The sales tend to be heavily weighted to hours before 5pm in November & December
• As much as 40% of turnover and profit for some online (and offline) retailers occur in the holiday season
• This I learned from my days at Yahoo! Search, but weather plays a huge role in both traffic and purchases – the worse the weather, the better the online traffic on search, and from what we have seen, the better the conversions on our online retail shop