virtualeconomics

A decision so trivial we can be trusted to make it ourselves

As we gallop towards voting on May 5th the thing that most strikes me about the AV campaigns is not just the feebleness of both campaigns but that if these were ads for anything except how to run the country they would be illegal.

The "No" campaign is feeble in crass and obvious ways. Fronted on TV by a fictitious politician from the last century (not David Cameron, boom boom), its core arguments appear to revolve around the expense (there is none), the complexity (which depends on explaining AV disingenuously badly to a classroom of obligingly dim-witted straw men) and the unfairness of second or third choice candidates coming first. I gather this really is, very occasionally, mathematically possible under AV, and would if we adopted it occur on average about once per century. It is not significant.

You say "local business directory", I say "white flag"

This dropped through my door last week. The picture pretty much says it all. Once upon a time strong men would prove their incredible manhood by tearing a phone book in half. I could tear this one in half myself, a pamphlet that has halved in size in every dimension in the merest handful of years. When I first saw it on the mat I just laughed.

Three potential discontinuities that make "steady decline" the *best* case for newspapers

So the price for newpaper companies continues to head downwards because newspapers themselves continue to enjoy a steady and gradual decline in readers and revenues as demographics and technology suck both away. At one end the old readership is simply dying; at the other it isn't being replaced as people spend the time they once spent reading the news in other ways, primarily online.

Wrong. Sure, for at least the last decade (and Philip Meyer would argue four or five decades) that challenge has been the basic reality of doing business for most print newspapers in the first world. But that steady decline is the best case scenario for print, it's what happens if everything goes well or even perfectly. The idea that newspaper companies are somehow cheap at today's prices rests on a very optimistic assumption that the future will be just like the past. Here's three potential discontinuities that instead of contributing to the steady decline scenario could wipe out one, or more, or all, newspaper businesses overnight (at least, as commercially viable going concerns - not all newspapers are run on that model of course). 

Amazon dating

It occured to me yesterday that Amazon should offer a dating service.

They have all the information that it could possibly be useful to know about a prospective partner. How much do they spend on books? Which books do they buy? How close to publication date do they buy the important ones? Their reviews record would probably be handy too, just to make sure they understood what they were reading. Amazon has locational data for all its customers of course, so all they'd need to do is tweak some privacy settings, add a photo upload facility and let people search for cute potential partners near them who love the same books.

Car insurance ruling will expose and rationalise a basic profiling shortcut

The ECJ in Luxembourg declares cheaper car insurance for women "discriminatory", so it must be gone by December 2012. Apparently this will see car insurance premiums for women go up by as much as 25%.

It is usually claimed that the difference in premiums is because women are safer drivers. They are not - they simply drive less.

According to the 2009 Annual Travel Survey (pdf), "overall in 2009, females made 5% more trips than males. However, males travelled 19% further than females, averaging 7,380 miles a year compared with 6,193 miles respectively." Would a 19% difference in average miles travelled per year account for the difference in insurance premiums between the genders? Why, yes, it would.

Women crash less because they drive less, not because they drive safer. Insurers have, to date, simplified their response to this phenomenon by offering women cheaper premiums than men. Now they're not allowed to use this basic profiling shortcut my initial guess is that the fairest way to achieve the same outcome will be to price insurance on the basis of miles driven, since this will reflect much the same basic insight - that the more you drive, the more you crash and the greater the risk your insurer bears.

AOL's big bet that advertisers will get a bit (but not a lot) smarter

So AOL buys HuffPo for $315m, valuing (as Chris Tolles points out) their 26m ComScore users at $12 each. We're not (yet) in the Broadcast.com league but it's still an excitingly bubbly valuation at ten times 2010 revenues, five times even management's own 2011 revenue forecast and god knows what multiple of the presumably nominal profitability they claim the site achieved in the fifth year since it launched.

AOL is betting the farm on monetising professionally-created content via display advertising. That's a big bet, but of course for AOL it's not a new one - acquiring HuffPo is simply a continuation of the strategy that AOL has been pursuing since it parted company with Time Warner. Engadget, Politics Daily, Techcrunch and especially Patch are all long bets on paying writers and then serving display ads over the results, and if that's the strategy this is a smart push for more of the same.

Google now the UK's largest advertising channel by a factor of two (or possibly three)

Yesterday Google mentioned in passing that it made £2.2bn in the UK last year, making it far and away the UK's largest single advertising channel and giving it roughly 50% of the UK online ad market and approximately 12% of the whole UK ad market. 

Google's 4Q2010 results break out, as usual, UK-only revenues and they allow for some interesting comparisons.

Google announced UK revenues of $878m/£582m in the final quarter of 2010, making the company's UK revenues for the full year $3.3bn/£2.2bn. Compare that to the UK's powerhouses of TV advertising - Sky reported ad revenues of £319m and ITV ad revenues of £728m in 2010 (Sky of course makes about four billion in TV subs revenues on top of that).

"We're not on price comparison websites because..."

You know a good way to spot when an explanation is just an excuse? It keeps changing. 

Direct Line tells us they're not on price comparison websites. Indeed, the company has been boasting of its refusal to compete on price for rather more than a year now.

The reasons an insurance company might not to appear on price comparison websites are, admittedly, more complex than a mere desire not to compete directly on price. There are potentially sound business reasons to want to own the customer relationship. But since those reasons are mostly to do with preventing the price comparison site from selling those customers cheaper insurance from a new advertiser at the end of the year, they aren't an explanation you can tell the customers themselves. So over the course of more than a year we have seen, instead, a series of bizarre excuses.

Did the Pinball Wizard music video always feature so many Nintendo Wiis?

It looks like one TV channel may have jumped the gun on the relaxation of the rules on TV product placement planned for later this year. 

Vintage TV - a music TV channel for the over-50s available on Sky and Freeview - plays a roster of golden oldie music videos. In what I assume was a typical morning I saw an excellent live performance of Ring of Fire by Johnny Cash, the original Beach Boys video for Good Vibrations, any number of presumably less famous fifty-year olds tunes I didn't recognise, plus a video for The Who's 1969 song Pinball Wizard recut to include footage of both the Nintendo Wii and the portable DS handheld games machine.

How hard has the loss of adult services hit Craigslist's traffic?

Four months ago Craigslist pulled the Adult Services section on its US websites. Quietly, without fanfare or announcement, but all the same they were gone. Then at the very end of the year the company confirmed that the section had been removed from its sites worldwide (slightly oddly, since it was pressure from US Attorneys General that caused the original change, but all the same they're gone too). 

The removal of the section was estimated by AIM Group to cost Craigslist $36m pa or about a third of its total revenue. But for a company that famously doesn't care about the money, this can hardly be a significant issue. What matters is whether it costs them traffic and the opportunity to connect people with the services they want to find.