Online Shopping 101
These days, everyone wants your attention. Especially leading up to this holiday season, you will no doubt be bombarded with sales, specials, and recommended products. But the marketing techniques of yesteryear are long gone. Now, we have mountains of data to work with. There are 2.5 quintillion bytes of data created every day. Even in 2013, the vast majority of data in existence was created in the previous two years. This data can be used to market more effectively. But how can they make sense of all of it? In honor of Black Friday, we are going to take a look.
Google and Facebook have become the biggest players in advertising. Their job is, essentially, to make a service you will use, and then get you to buy something based on what they know about you via that service. Therefore, their primary goals are to get you on their platform and keep you there, learn as much about you as possible, and determine from that what products you are likely to buy. But their strategies have developed in different ways.
The Evolution
In the early days of the web, it was the wild west. It was very difficult to find what you were looking for, and businessmen were clamoring to find a way to monetize it. Early pioneers like Yahoo and Excite took a stab at it by creating web portals that collected links to websites and plastered banner ads everywhere. But it still took a lot of work and the ads became an annoyance. When Larry Page came up with the initial Google search algorithm, which ranked pages based on the number of times they were linked to by other sites, it changed everything. However, they rejected the banner ads of their predecessors. With some inspiration from Bill Gross’ GoTo.com, Adwords was born. Instead of bombarding you with irrelevant ads, you would be served some sponsored search results. It became arguably the most successful advertising program of all time.
In 2004, Facebook appeared on the scene and started rapidly amassing users. They had one crucial advantage over Google. Rather than having to guess what you’d be interested in based on search terms, they knew a ton about you. We told them our age and gender. They knew what we were interested in from our posts and pages we liked. This allowed them to sell highly targeted ads. Fast forward, and Facebook now knows us better than we do ourselves. In fact, for some time rumors have been floating around that Facebook listens in on us. People told stories of having a conversation about a product, and then seeing ads for that product in their Facebook feed shortly thereafter. And while it has come out recently that many big tech companies are listening, this phenomenon is largely due to excellent algorithms that collect data even when you’re not on Facebook.
Algorithms & Next Level Marketing
Not to be outdone, Google made a brilliant move with Android. They realized that the majority of web traffic was moving to mobile. Making an operating system was a great way to keep people in the Google suite of services. Making it free allowed it to become the single most used operating system in the world, on any platform. It would be much harder for hardware companies to get into the phone game without this resource. And, because Android requires you to log into your Google account to have full functionality, they always know who is doing the searching. They use this information, as well as cookies, to serve you embedded ads with their other advertising program, AdSense.
And we can’t forget Amazon, the king of retail. They also form a good picture of you. After all, they know where you live, and they know what kinds of products you buy. They are constantly tweaking prices to see what sells more. Their recommendation algorithms have been hugely successful, and at last estimate, 35% of the sales are driven by them. Next time you visit the website, pay attention to all of their recommendation strategies. There’s recommendations for you, or based on a previous purchase, or based on what customers also bought, or bundles of items commonly purchased together, etc. A lot of work has gone into these algorithms, and they inspired similar recommendation-based services such as Netflix. Amazon is getting to know its customers purchasing patterns so well that they almost start shipping before you click buy.
What to Expect
Algorithms have proven very useful. Consider the story of the teen girl who Target knew was pregnant before her own father did. As AI gets more sophisticated, companies will get to know who we are even better. AI will be able to predict what we want more successfully than any algorithm, since they can only take into account a limited number of metrics. Advanced AI will be able to look at our digital footprint and form an “understanding” of who we truly are. Privacy is certainly a concern, but there will always be workarounds for the well-informed to protect sensitive data. Line the streets with cameras, and someone will invent a cloaking device. Advancement in technology necessitates this sort of push and pull. But at this point, so much of our daily lives is dependent on our online interactions. Inevitably, our personalities will all end up in a database somewhere.
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