- Alibaba-backed ShopRunner, brand-focused US e-commerce site, gains momentum, eyes China: ShopRunner Inc, the e-commerce startup backed by Alibaba Group Holding Ltd that styles itself in some ways as the anti-Amazon, more than doubled its users over the past year and hopes to do so again in 2015, Shoprunner's chief executive said in an interview. The five-year old online retailer's gains may allow it to win over more customers who prize convenience and experience over cost savings, while taking advantage of its Alibaba relationship to help American retailers sell to China's still-growing middle class. ShopRunner borrows some of Amazon.com Inc's innovations: it charges $79 for two-day shipping to Amazon's $99. And it has an express checkout akin to its larger rival's one-click-buying feature. But CEO Scott Thompson says ShopRunner aims to be more like an online shopping mall that showcases brands than an Amazon or eBay marketplace where the focus is on lowest price. It also gives partners - ranging from Cole Haan and Under Armour to Neiman Marcus [NMRCUS.UL] - ownership of customer data and relationships. "These businesses spend a lot of money to do the right thing with their brands," Thompson told Reuters in an interview. "I want the segment of customer who says I want to pay a fair price, but I want the experience to be predictable." ShopRunner is one of a number of startups nibbling away at Amazon's dominance of the online arena.It remains to be seen whether any will make waves. The soon-to-be-launched Jet, for instance, is raising funds from investors at a rapid clip and hopes to carve out a niche in lowest-price shopping. ShopRunner membership is now at 2.4 million, though it is unclear how many of those users signed on through American Express Co, an investor in ShopRunner, which also offers its cardholders free membership. Beyond the numbers, Thompson says members are widening their spending - in much the same way shoppers patronize adjacent storefronts at the mall. Cross-shopping, when members who start out buying from one or two retailers evolve to shop from more and more, grew nearly 60 percent in 2014, from just under 20 percent previously. "It's that age-old tenant in the mall that draws customers in, and people around it benefit from the traffic," Thompson said. Over the longer term, Thompson hopes to take greater advantage of ties to Alibaba, the Chinese e-commerce titan that paid $202 million for 39 percent of the company in 2013. ShopRunner is one of several U.S. e-commerce companies working with Alibaba and affiliate Alipay to help U.S. retailers access China. Through Alipay's nascent "ePass" service, which aims to let Chinese customers buy and pay for goods from U.S. retailers hassle-free, ShopRunner helps Neiman Marcus and Cole Haan sell to consumers in China by marketing their brands to buyers there. As Alibaba's biggest single U.S. e-commerce investment, ShopRunner will play a key role in Alipay's effort, although it also has relationships with sites in which Alibaba has no equity holding. Thompson wouldn't give specifics but said ShopRunner's own four-month effort to sell through Alipay was going well and demonstrated the vast potential of a market in which retailers like Best Buy have made little headway despite years of effort. There's some evidence Alibaba's program is taking off. Gilt.com has seen a doubling in sales to China since it started working with Alibaba and Alipay.
- How does Facebook know who your friends are? It’s a mystery that has nagged users since at least 2011, when the Irish Data Protection Commissioner conducted a full-scale investigation into the issue. But four years later, there’s still a lot of confusion and misinformation about what Facebook’s doing when it “finds” your friends. Did it scrape your phone for names and numbers? Run a reverse-image search of your picture? Compile a “shadow” or “ghost” profile on you over a period of years, just waiting for you to log on and “confirm” its guesses? Alas, Facebook’s actual process isn’t actually that sneaky or malicious. In fact, it involves this pretty complex academic field called, dun dun … network science. In a nutshell, whenever you sign up for a Facebook account, Facebook asks permission to look at your e-mail contacts if you’re on a computer, or your phone contacts if you’re on a smartphone. When you grant the site permission, it searches your contacts for users already on the network, and it searches other users’ uploaded contacts for you. That gives it a very primitive outline of your social circles: who you know, but not how you know them or how well. To refine that map, Facebook asks you more questions about yourself: where you went to school, when you were born, what city you live in. Each field in your Facebook profile and each interaction you make through that profile actually double as a source of data for Facebook’s mapping algorithms. What they’re trying to do is determine the structure of the network: where the cliques are, which people bridge them, who knows who. Once Facebook knows the structure of your social network, it can analyze it to predict (with startling accuracy!) not only the people you’re most likely to know now, but the people you’re most likely to know in the future. This isn’t magic: It’s actually closer to statistics. In the network, there are a set number of “nodes,” i.e., people, and a set number of “edges,” i.e., friendships. Given that, each nonexistent connection between two nodes is a statistical possibility. But not all nodes are created equal, so not all connections are equally likely. (I don’t anticipate befriending many 40-year-old guys in Siberia, say.) To estimate which connections are most likely, Facebook can run analyses against the structure of the network, using a long and entirely above-our-pay-grade list of coefficients and indices. Those coefficients account for a huge number of things: How many unusual commonalities do two people share, for instance? How many friends do they have in common? Which people in the network serve as rallying points, the people who know everyone? How many “degrees of separation” exist between them, how many friends of friends? In the end, Facebook’s friend-recommendation system isn’t magic or malice — just really good math. And guessing your future friends isn’t telling the future; it’s modeling the evolution of Facebook’s social graph.
- Advertising comes to Tinder: This week, Tinder unveiled its first ad in the form of a video promoting Budweiser’s next #Whatever, USA campaign. The video ad will show up for Tinder users the next time they open the app, but much like Instagram’s foray into advertising, Tinder ensures that rolling out advertising on the platform will go slow. Within a few swipes, users will land on Bud Light’s profile with a special auto-playing video, asking users to enter into the next #UpForWhatever contest. #WhateverUSA is a campaign that has already worked once for Bud Light, where the brand builds a random party town for a week of ‘spontaneous fun’ with contest winners and celebrities in attendance. With the new Bud Light ad on Tinder, Users can swipe out of the video immediately, with the same animations for left-swipes (Pass) and right-swipes (Like), which will be recorded by Tinder for the brand. “If you think about the way Tinder works, with ‘like’ and ‘pass’, we have a really amazing signal for advertisers,” said Brian Norgard, VP of Advertising at Tinder. “We’re being careful to respect our core experience for our users, which ensures that we can give that data back to our brands in a really valuable way. The response so far has been off the charts. You won’t believe how many people will swipe right if the content is high quality.” Tinder is using this first advertising campaign as a way to test the waters, using a number of different video lengths across the course of the campaign. “The product is very early, and we’re just starting to learn how our users are reacting to this format,” said Sean Rad, cofounder and president at Tinder. “Based on that we’ll make decisions on where we want to take the product or if we even want to proceed. Like everything else we do, we care a lot about the user experience and will protect a good balance between enjoying that uninterrupted Tinder experience with asking you to hear something from a sponsor or advertiser.” Rad and Norgard were both very clear about the fact that things will go slow at first, with Rad telling AdWeek that “it’s going to be a long time until [advertisements are] a consistent part of your experience.” They also told me that the engagement has been overwhelming and surprising. “We’re investing heavily in relevance, whether it’s leveraging the data we have with these signals our users give us, or using that data to do a better job of matching our users,” added Norgard.
- Wary of attack by activist hedge funds, IBM hires advisers to deal with restless investors: International Business Machines Corp (IBM.N) is concerned about a possible attack by prominent activist hedge funds, and is working with two investment banks to formulate a defense plan, according to the people, who declined to be identified. When asked for comment, IBM said: "IBM is continuing to execute on our strategy - making investments in growth areas such as analytics and cloud, reinventing our core franchises, and returning capital to shareholders. We are managing the company for the long term." The storied American technology giant, worth $157 billion today, has struggled to transform itself from a low-margin hardware maker into a cloud-based software and services company. When Virginia Rometty took over as chief executive at the start of 2012, Wall Street was hopeful that she would be able to kickstart growth. Analysts praised the former systems engineer for her strategic thinking in guiding IBM's acquisition of PricewaterhouseCoopers Coopers Consulting in 2002. As revenues continued to decline year on year, however, some IBM investors began to lose confidence management, according to people familiar with the matter. Last year, IBM withdrew its long-term operating earnings target for 2015, and shares of Big Blue are now down about 25 percent from a March 2013 high. Some IBM shareholders are trying to persuade prominent activists to build positions in the company and come up with ways to boost value, people familiar with the matter said. Pershing Square and ValueAct Capital both looked at IBM in recent months, but passed on making a move, the people said. A spokesman for Pershing Square declined to comment. ValueAct did not immediately respond to a request for comment. Part of the activist funds' concern was that IBM, whose stock is trading at around $159, is too expensive and the company's structural problems could not be fixed easily, according to several sources. Another reason, the sources said, is that some investors feel Rometty is doing a good job coping with a tough situation, so she does not fit the role of an underperforming CEO that many activists look for when they make a move.
