Geocoding and Reverse Geocoding

Geocoding and reverse geocoding are frequently misunderstood. This causes a certain amount of confusion for our GPS tracking customers. "What do you mean you can't tell me where the car is? Isn't that the whole point of this GPS tracking thing?" Well, we can show you exactly where the car is on a map, we just can't give you the exact address. Here's why.

Let's imagine that you're motoring along in your brand new Prius with GPS navigation. You decide to visit FoxTrax at 118 E. Lockwood Ave, St. Louis, MO. Because you're such a safety conscious individual, you bring your trusty eco-steed to a halt and type in the address. Before you know it the navigation system is giving you turn by turn directions. Life is wonderful. But how did this all happen?

First, the navigation system had to figure out where you wanted to go. Not where in terms of an address, but where in terms of a physical location on the globe. Geographic locations are stored as pairs of numbers called latitude and longitude. So the navigation system opened up its database and looked up a street segment with a matching name, zip code, and address. Computers are great at this kind of thing, so the whole process happened in the blink of an eye. And what's even better is that this street segment came with a latitude and longitude pair attached to both ends.

If you would like to see a working demonstration of this, try searching http://maps.google.com for this latitude longitude pair: 38.59237 -90.35392. You should see the following result: 100-198 E Lockwood Ave, Webster Groves, MO 63119. Notice that you did not get the exact address of those coordinates, which happens to be my desk at 118 E Lockwood Ave. Instead Google gave you a street with a range of possible numbers. More on this later.

The process of discovering the latitude and longitude for a known street address is called geocoding.

After finding the correct street segment, the navigation system calculated the quickest route from your current latitude and longitude using all sorts of higher math. Since this has almost nothing to do with geocoding or reverse geocoding, I'll skip this part entirely.

Finally, the navigation system gave you turn-by-turn directions to your destination. Like magic, just as you approached 118 E Lockwood, the navigation system said, "Arriving at destination, on right."

Hmm. There's something funny going on here. How did the navigation system know the exact location of 118 E Lockwood if all it had was the 100-198 segment of E Lockwood? Here's a secret: It guessed.

What the navigation system did know was where 100 E Lockwood is. And it knew where 198 E Lockwood is. So to get an approximation for 118 the system guessed that 118 is about 18.4% of the way down the street (18 / 98) from 100 E Lockwood. And 99% of the time that is close enough. The human brain can work out the last little bit of the journey.

The big takeaway is that nobody has the exact coordinates for 118 E Lockwood sitting in a database. They are all just guessing. Here comes another secret: Even if they did know the exact coordinates of 118 E Lockwood, the information wouldn't be all that useful. For one thing, 118 E Lockwood happens to be the second floor of 116. How would you ever know the difference based on a set of coordinates?

What about reverse geocoding? The astute reader may already have inferred that if geocoding is the process of discovering the coordinates for a given address, reverse geocoding must be the process of discovering an address for a set of coordinates.

Interestingly, reverse geocoding is considerably more difficult than geocoding. When converting from an address to known coordinates, all you have to do is pull the right street segment out of the database and interpolate for the exact address. But when converting 38.59237N - 90.35392W to an address you have to search a database for all street segments within a specified radius from that point. This is a computationally intensive task in itself. You will probably get several possible street segments back from the database. And when you get those street segments back, you have to decide which one is the best match. Sometimes this is easy, sometimes not.

Let's assume we're a GPS tracking system and we have received 38.5925 -90.3549 as the location of a parked car. Search for those coordinates on http://maps.google.com. Now, tell me what address the car is visiting. Is it on the north side of the street or the south? Is it on Maple Ave or E Lockwood? Is the driver upstairs or downstairs? How do we know that the car didn't park down the street from the actual destination? Have you factored in a few meters of GPS inaccuracy?

The point is that it's simply impossible to convert a set of coordinates into an exact street address in many cases. It's not that we don't know where the tracking unit is, we do. The dot is on the map in the correct location. We just can't give you the correct postal address often enough to make it worth your while. An in-car navigation system has a key advantage: it knows where you are trying to go. An active GPS tracking system does not know where the driver is trying to go, so it must guess the correct street segment and show you a range of possible matches.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com

Who Would Want to Target a Billboard?

Coming Soon: Targeted billboards. A French company called Quividi had been putting cameras in billboards that will count the number of passersby and even record their gender (with 85% accuracy). If a woman approaches, it will show a different ad than it would show to a man. They're also working on the technology to identify relative age and pick out family groups so they can use even more specific targeting. And it doesn't stop there, these billboards are capable of projecting 3D images and sending audio messages as well.

As with many new technologies, this walks the fine line between science-fiction-cool and George-Orwell-scary.

There are already laws in place that will keep billboards from blaring audible messages or projecting 3D images at drivers without certain permissions, shop windows and pedestrian billboards are under no such restrictions (yet), and I think we can expect to see higher-tech ads on sidewalks of metropolitan areas very soon. To the folks at Quividi: here's some advice to pass on to your clients who want to avoid nasty lawsuits.

1. Let's avoid personal products. No one in public wants to be the target of an ad for acne medication or tampons. Possible exceptions: fragrances and body sprays.
2. Tighten up the gender-identification before relying too heavily on it.
3. Avoid 3D images that are likely to scare children (who might then run into, say, the street). I'm looking at you, Orken man!
   

We can't be more than ten years away from seeing these in major cities, which means we can't be more than fifteen years away from being able to ignore them completely. And I can't help but see the irony of my weekend trip, which I spent on a river, in a canoe, no less than 8 miles away from a single working cell phone.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com

Coming soon, the jPhone!

It's iPhone Day. Have you bought yours?

I'm fascinated by the trend towards devices that do everything. It's a phone, it's a music player, it's a GPS device, it's a computer, it bakes cookies for you when you're sick! But there are some inherent drawbacks to having one über-device as opposed to several unter-devices.

And yes, that joke was in German.

1. Power - what kind of a Kryptonite battery must it take to power these things? I know GPS is a battery-killer on phones, not to mention it's an Apple product so it's not like you can run down to the electronics store and pick up a spare (although the 3G can be replaced without a soldering iron, so that's a step in the positive!). I've seen the specs for it, I know what it's supposed to do. 6 hours of internet may seem like a long time, so might 8 hours of a video or 5 hours of talk or 24 hours of music. But if you spend your day talking, texting, surfing, and tuning alternately, you're going to end up killing it quickly, and I like a phone to go for at least 4 or 5 days between charges. Maybe that's just me.
   
2. Coordinated obsolescence - You can't just upgrade the phone. You can't just upgrade your mp3--player. If the GPS chip goes all whopper-jawed, you have to replace the whole device. If you accidentally drop your phone in the toilet, you've lost all of your devices instead of one, and subsequently have to replace all of them.
3. One Size Does Not Fit All - What if I have no use for internet on my phone. I have internet at work. I have internet at home. I have a laptop, and there's still a Starbucks on every corner (well, all but six-hundred corners, now). Is there an iPhone out there for me? Or what if I want something with nicer mp3 player and I could care less about video? What if I want something with extra memory for video but I don't need GPS? What if I want a the internet features but don't ever want to use it as a phone? It doesn't matter--you're paying for all of it or none of it.
   

Now, having said all that, there is certainly something nice about combining tech products into tech product. If you want all of the functionality of the iPhone 3G in separate devices--good luck! It'll certainly cost you more than $199. But I'm fairly certain that I'll never want to watch movies on my phone (Lord of the Rings just loses that epic grandeur when viewed on something the size of an index card). But who knows? Maybe I'll buy one and be hooked. Stranger things have happened.

I just wonder what's next. How many gadgets can you combine? Phone, internet, GPS, audio, video, driving directions, relationship advice, calender, foot massager, flotation device, and finder-of-lost-car-keys all in one? What comes after the iPhone 3G? We'll find out soon enough, I suppose.

Have a good weekend.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com

Coming Soon, to a Handheld Near You!

According to an article on NetWorkWorld.com, SkyHook Wireless has released XPS 2.0, the latest version of it's positioning firmware (the previous version can be found on, for example, the iPhone). XPS is an attempt to bridge the speed of WPS, in which a device uses the location of Wi-Fi access points to get a rapid position fix, and GPS, in which a device uses satellite data to get a very precise position fix.

XPS uses data from both to achieve both speed and accuracy, as well as (when necessary) cellular network data. Version 2.0 is supposed to have several improvements in the vein of it-does-the-same-thing-only-better, changes to the algorithm and what not.

GPS and it's derivatives still aren't perfect: there are lots of areas that lack coverage, satellite communication can be slow, and it's often a battery hog. But perfection is a goal, "usable" is what you actually sell, and it's not like cellphones never drop calls or work in the Antarctic. The technology is becoming more and more ubiquitous, especially in handhelds. To quote the article directly: "GPS is very precise, and a rash of specialized location products increasingly smarter versions of it." And while that isn't, technically, a sentence, it is a harbinger of what's heading our way. More and more, portable computers are replacing cellphones. More and more, these are coming with sophisticated GPS built-in.

What does this say about our culture? Well, we'll never get lost on the way to the supermarket again, not so long as the phone has battery. Alas, that it cannot also tell us which aisle has the hot-dog buns! I do worry sometimes about becoming over-dependent on such tools for simple things. I knew someone who, when asked what 10% of 300 was, punched a flurry of keys into her graphing calculator before responding emphatically that the answer was "30" (it is--but you shouldn't need the help for simple math like that). Will it be the same for GPS--will it result in an underdeveloped sense of direction? Will we be able to navigate if we go out into the wild--like people used to do in all those SUV commercials? Assuming there's no coverage out there.

I jest--there's coverage everywhere (right?). And as with all things, you can curse the changes or you can accept them, and I choose to say "thank you, Skyhook". The next time someone tells me to "Get lost," I can tell them that it's not very likely to happen.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com

How Many Hypermiles Are in a Lightyear?

One of the things that I love about the English language is that it's a technical language, so new words can be created from old ones on an as-needed basis. For example, take "hyper" + "mile" and make it into a verb. The gerund form of it would be "hypermiling", which has recently entered the lexicon as "increasing your car's gas mileage by changing your driving habits".

Examples of hypermiling practices include accelerating and decelerating more slowly (0 to sixty in twenty seconds as opposed to, I dunno, 5) or turning your car all the way off if you're going to sit at a stoplight for more than thirty seconds, or finally cleaning all that junk out of your back seat.

The overall vibe of hypermiling websites seems to be that aggressive driving is inefficient. The farther down you push the pedal, the more gas you use. So telling people that they can save money by chilling out at the wheel is a good thing, right?

Mostly. Hypermiling is not without defect.

First, some of the things they tell you are slightly questionable. Run your engine filled up to the "low" oil mark. Fill your tires to their maximum pressure rather than their recommended pressure. These sort of things can't be good for the life of the car, and is it possible that you increase the risk of a blowout by running your tires to so high? Wouldn't that be more expensive than the gas you save?

Second, some of the hypermiling suggestions are extremely questionable. Drafting behind semi trucks, for example, is not safe, even though it allows you to go for miles and miles without actually using your accelerator. Turning the car off while coasting down hills--also dangerous (since steering wheels frequently lock if the car is turned off). In the interest of full disclosure, I'll add that most hypermiling sites don't list theses two, and the ones that do list them explain that they're less-than-ideal from a safety perspective.

Third, it's highly possible that the culture of hypermiling has only sprung up to sell MPG meters.

And finally, it's totally geared towards non-commercial driving. Okay, it's true, hypermiling.com offers training for commercial drivers (at $210 a pop), but you can't very well shut your diesel off at a stop light. The problem is that hypermiling requires a fair amount of individual effort, and it's a lot easier to justify that effort when the gas is coming from your own pocketbook. So you can train your drivers to hypermile, but will they actually do it? In my experience, it's hard enough to make your drivers drive their routes without taking creative detours, let alone micro-manage how far down they press the gas pedal.

If you're looking to save some gas money, or want another metric to out-elite your buddies who drive hybrids, then hypermile away. Just don't draft behind me or blow a tire next to me! If you have a fleet, and you want to save gas money, better to track routes using GPS.

I'm just sayin'.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com

The Instinct

So this weekend Samsung released their new "Instinct", their computer-in-your-pocket answer to Apple's iPhone. They've had some amusing mock-trailers that have been running in movie theaters (which, between that and Honda's Navi commercials in theaters, is GPS the new Coke?). It's an entertaining spot: lots of explosions, and it manages to poke fun at movies, movie trailers, and product placement, all while explaining its features and instilling some name-recognition.

Problem is, it kept comparing itself to the iPhone. Rather than let it stand on it's merits, it essentially billed itself as "the other iPhone", and while there's nothing inherently wrong with that, it just goes to show who really owns the market for these sort of devices. Maybe if they'd only said it once.

Either way, seeing this commercial over the weekend while waiting for Get Smart to start has led me to one inevitable conclusion about Apple's next product line.

The iShoe.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.FoxTraxGPS.com
866-686-2780

I Approve This Message

I have a fond memory of a commercial that used to run on local St. Louis stations. It featured 3 people in faux gypsy garb standing an area rug that had been blue-screened in front of a helicopter shot of the arch. It was supposed to look like a flying carpet. Instead, it looked like three mid-westerners dressed as pirates on a blue-screen stage. It was poorly acted, had that grainy shot-with-a-home-VHS-camera look, yet it had a certain charm, nonetheless.

Yesterday I was pointed to a site called Spot Runner that makes pre-fabricated, customizable TV advertisements and sells them for as little as $499 apiece (they do other things as well, but this is what caught my attention). They've been fairly successful, and their success in the small business advertising realm led them to branch out into another lucrative field.

Politics.

For $500, you can make a classy political ad. Fade from a statue of Thomas Jefferson into your face while you talk to police officers (about issues, of course, not your overdue parking tickets). They have lots to choose from, even attack ads ("A vote for Jon Doe is a vote against public education"). I don't know whether to be frightened or impressed. On the one hand, it gives less-well-funded (read as "third party") candidates a slightly more level playing field, since they are able to produce quality ads on a budget. On the other hand, it does point out the vapid, generic nature of political advertising.

Then again, maybe that's a good thing.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.foxtrax-online.com
866-686-2780

Which GPS Reporting Strategy is Right for You?

With all of the recent entrants to the GPS vehicle tracking business, I have seen a proliferation of location reporting strategies. Some are just not worth having when you consider what you can get by using newer technology. Here is a rundown of the reporting strategies I've seen lately.

1. Limited Pull Reporting – The device only reports its location
   when asked by the customer. The customer is limited to a certain number of queries per month. Typically, these are legacy systems that report on a wireless network via SMS (text) message. The cost per report is very high because the wireless companies make a lot of money on text messaging.
   
   
   • If you want to log into a system at 5:00PM and see where your
     vehicle has been during the day this system isn't for you.
   
   
   • If you really, really need to know where the vehicle is right
     now this system is not for you. The unit might not be able to get a fix or wireless connection when you ask if it is in a metal building or parking garage. A "push" system with a good reporting strategy, discussed next, will leave a bread-crumb trail that ends at the entrance to the parking garage or other wireless dead spot. So you will be able to locate the tracker even if it can't currently get a fix.
   
   
   • If you want to calculate stop and drive times for a vehicle's
     daily route this system is not for you.
   
   
   • If you want to calculate daily mileage driven this system is
     not for you.
   
   
2. Fixed-Interval Push Reporting – The device pushes points out
   at a regular interval and the providers system stores the points for later review. Generally, the intervals are 1-minute and up. These can be good systems, but the stone-ax simple reporting strategy still falls short in some respects. The customer pays a penalty in terms of cost vs. benefit because the provider has to pay the wireless provider for transmitting tons of useless data. Consider a fixed 1-minute reporting interval. Much of the time the reports are not interesting because the tracker is sitting still. But sometimes you need more frequent reporting data. As an example, try driving around the block in 60 seconds. It's not too hard to do. Now think about the distance that would be measured from report to report. It would fall far short of the actual distance driven. A smarter reporting strategy knows when to report and when not to.


3. Flexible-Interval Push Reporting – Here, we have nirvana. The
   system reports based on multiple factors. Typically, these systems will have a minimum reporting interval -- report no more often than x seconds, a minimum reporting radius – do not report if the device hasn't moved at least x meters, and a maximum reporting interval – report at least once every x minutes. It might even report based on speed and direction changes. With these systems you get lots of interesting data and little uninteresting data, and you are not paying data transmission costs for useless, repetitive data.
   

Reporting interval isn't the only consideration in buying a tracker.
Some companies might need satellite-based systems for tracking in remote areas. Some very simple schemes might be very cost effective for other applications. Containers, for instance, can be tracked effectively with a once-daily fixed report. But as always, the motto is "Buyer beware." There are plenty of providers, particularly those who sell a year's worth of tracking in one payment, who will sell you a system that does not do what you need.

Patrick Brannan

President
FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.foxtrax-online.com
866-686-2780

How Did I Ever Survive Without My GPS Jacket?

A company in the UK called Bladerunner is offering a jacket with built-in GPS tracking. Originally intended for mountain climbers, their biggest customers now are actually parents worried about their children being lost or kidnapped.

While slightly macabre, it's indicative of an emerging world in which GPS is ubiquitous and we're getting used to the idea of always knowing where our loved ones and friends are. Echoes of this creep up in social networking sites, again, designed to let your friends know where you are and what you're doing at every moment.

How long will it be until we start to notice the pangs of withdrawal when we can't find our friends after being so used to having access to every last detail about their life? Like nowadays when we wonder how we ever got by without cell-phones. I remember the last time I was at an amusement park--when our group broke up into smaller pairs to go pursue various rides and activities, rather than arrange a rendezvous point/time, we knew to call each other when it was time to meet for dinner. We had grown so accustomed to the convenience of the phone that the idea of navigating an amusement park without one struck us as oddly foreign.

Strange.

FoxTrax GPS Fleet Tracking
Clever solutions for vehicle tracking
www.foxtrax-online.com
866-686-2780

Pat Responds: iPhone, Therefore iAm

I think it’s hard to say whether the iPhone will kill traditional GPS.

First, this kind of application has been available on phones for a while. My phone has Google maps and Microsoft maps. Both work fine. Neither are anywhere near as good as my wife’s $250 Garmin Nuvi.

Second, there's the concept of “Ergonomic niches.” There is an ergonomic niche for a device with a big screen that sits in a suction-cup mount attached to the windshield and does nothing except find restaurants, find gas stations, show maps and deliver directions.

There's also the technical limitations of tracking on a phone. Battery life is one issue. And, oh, by the way, what do you do when you to make and receive calls while driving? I guess that he figures everyone will finally get on the Bluetooth bandwagon after 10 years of not doing it. But we know that won’t happen because nobody can keep track of the little headsets.

The price of dedicated GPS navigators continues to drop as well. Many people will look at the convenience and continue to decide that it is worth the price to have a reliable dedicated navigation device in the car.

So I think that there is an ergonomic niche for a navigation device that you don’t also hold up to your head and talk on. Mapping on smart-phones is great but will not replace dedicated units.

My guess is that Garmin’s stock is not dropping because of the iPhone. It’s dropping because they are in a competitive market in which the easy pickings have been taken.

iPhone, Therefore iAm

Big tech news this week:

Apple has unveiled the new iPhone 3G, which will cost $199 and is poised to decimate the consumer GPS industry. We're not worried--we're more of a fleet-management service--but Garmin and TomTom are. Their responses to Apple are quite different.

Garmin has announced the Nuviphone, which will be GPS, internet and phone all in one. There's no word on pricing or carrier yet, but unless it's a popular (or open) carrier and unless it costs less than $200 (which is unlikely, given Garmin's other lines), then they're sole selling point is going to be that the Nuviphone speaks driving directions while the iPhone doesn't. Yet.

TomTom's reponse was a write an app for the iPhone that speaks driving directions.

More and more in the telecommunications industry, we're seeing formerly separated markets blur together--established players suddenly become competitors. Look at AT&T's U-Verse, poised to wreak havoc on Charter and Comcast. If you had told me that ten years ago cable companies were going to be seriously threatened by a phone company, I'd have given you a funny look.

And now we have the iPhone, an affordable mp3-player/computer/e-mail-client/GPS device with a longer battery life than the last generation and internet speed that's almost as fast as Wi-Fi, not to mention an army of brand-devotees. Retailers won't be able to keep them on the shelves. Personally, I don't think Garmin has a chance.

Of course, Google still hasn't shown their hand with Android yet, and I've heard rumors that we'll be getting some news to that effect sometime next week. Should be interesting.

So Who the ZebraNet?

GPS is kind of like the internet, in that it doesn't really do anything by itself, but by providing people with information, it can be an extremely useful tool. As such, it's interesting to see what people do with it.

For example, who would have imagined ZebraNet? It's a kind of pony-express, but with stripes! Actually I made that up. Really, it's an academic ecology project.

Daniel Rubenstein, director of the Department of Ecology and Evolutionary Biology at Princeton University, and Princeton engineering professor Margaret Martonosi got together and started ZebraNet. The goal: use GPS collars to track the daily habits of zebras in Kenya.

They provide more information than the traditional radio-transmitter collar, and researchers have been able to remotely gather information about everything from eating and mating habits to velocities and turning angles. Especially useful: being able to collect data at night.

But something like this could only be a result of GPS, never a cause. What I'm saying is that if you were to try and setup the immense infrastructure for a project like ZebraNet like this, you'd be laughed out of the financier's office. "We want to track zebras nocturnal behavior, and to do so we will need to launch at least three satellites over Kenya." Never happen. But since the satellites are already there, the network is in place, we can implement it to gain knowledge about useful (if not necessarily practical) information.

And I draw my comparison back to the internet. When Al Gore invented it back in the day (I'm only telling this joke because if I don't, you will, and I'd hate to let you take credit for it), he could never have imagined e-commerce, the dot-com explosion, or eBay. The designers simply understood that if you give people a way to communicate, and give them access to information, they'll figure out interesting things to do with it

It's Sort of About GPS

(courtesy of icanhascheezburger.com)

Lolcats are one of those bizarre phenomena called memes.

A meme (in the modern context anyway) is something that spreads like wildfire across the internet for no apparent reason! Have you or someone you love recently opened a webpage only to be confronted with that awful Rick Astley song "Never Gonna Give You Up"? As anyone ever told you that all "your base" were "belong to us"? Has someone ever forwarded you a webpage of dancing hamsters? These are memes.

A bizarre side effect of the information age is the apparent need for people to share mindless, yet amusing, trifles with complete strangers.

Enter the LOLcat.

How, exactly, it occurred to anyone to write over pictures of cats using cutesy broken English and phrases like "gimme teh bukket" eludes me. But it's a big enough thing that you see it referenced on shirts, in pop culture, there are websites of lolcats, there are websites that parody lolcats, there's even a LOLCode programming language being developed that uses the bizarre sub-English prominent in LOLcat photos. Here's a snippet:

---

HAI
CAN HAS STDIO?
I HAS A VAR
GIMMEH VAR
IZ VAR BIGGER THAN 10?
 YARLY
  BTW this is true
  VISIBLE "BIG NUMBER!"
 NOWAI
  BTW this is false
  VISIBLE "LITTLE NUMBER!"
 KTHX
KTHXBYE

---

And once again, I sit back and thank my lucky stars that I'm lucky enough to live in a world where things that make no sense and have zero practical application can exist. Not only can they exist, they can propagate and flourish. Doesn't that make the world a far more interesting place?

kthxbye

The Music is Following Me Around

Have you noticed that more and more devices are being aggregates? You no longer have your walkman, your phone, your computer, your TV, your home stereo, your kids' dinky home stereo, VCR, etc. Now we have a variety of catch-alls.

I know many people who use their computers as stereos and movie-players (thanks to DVD, since VHS is effectively dead--this is, incidentally, another thing that will keep Blu-Ray from every taking off). I watch TV on my computer. I recently replaced my 6-piece component stereo with a 5-disc combination CD/DVD player with it's own surround amplifier and speaker set.

Many modern cell phones now are pocket computers that play music and video and can access the internet. It's interesting to me, because now it's no longer about finding the peripherals that do what you want. Back in the component-stereo days, you got eight devices that each did one thing. It was easy to customize, easy to upgrade. If your record-player broke, you didn't have to fix the whole system, just the record-player. But now you get two or three devices that each do three or four things. The consequence of this has been a move towards a more disposable view of electronics, for good or for ill.

So what's next? Maybe a single, central entertainment system for your home, and each member has their own interface, which grants access to certain features (e.g., you wouldn't want your 6-year-old to be able to watch Pulp Fiction). You could even fancy-it-up by pairing it with personal phones using BlueTooth (because Pulp Fiction aside, your 6-year-old will inevitably have a cell phone).

Seriously though, posit this. You're in the kitchen cooking, listening to Bob Marley. You get a call. Your phone sends a message to the stereo to pause it if it's an mp3 or to attenuate it if you're streaming audio from an internet radio station. You finish your call, the music comes back. You go off to the bathroom, and the system knows about where you are because of where it's picking you up via BlueTooth. Your spouse is in the living room watching a movie, so the music stops when you walk through there, but it starts up in the bathroom when you arrive there.

Etc, etc, etc. You could, feasibly, use the same system to keep track of your movies/television/games/etc. Maybe you could even tie it to your car--have something in your garage that allowed you to upload/download movies and music to your vehicle.

In my humble opinion, this looks to be the direction we're headed. Portability, ease of use, flexibility, and I think more and more we're going to see a lack of physical media. Of course, the downside is this: if your record player breaks, do you have to replace your whole house?

How do you Spell GPS in Cyrillic?

Economists often jest about the Law of Unintended Consequences--a kissing cousin of Murphy's Law, and a concept that dates back to the Scottish Enlightenment. I only throw that last little tidbit in because I'm amused by the thought of enlightenment with kilts. I digress. It's a simple idea, if you try to do a task that produces output "A", output "B" will show up as well, and not only will it be there, but it will be something that never occurred to you when you undertook project A in the first place. Which leads me to Russian GPS.

GPS tracking is one of those businesses that actually benefits from the ills of society: car theft, lazy/fraudulent workers, etc. Much like private security, it's a measure that a person or business can take in order to protect one's own assets against, well, crime. Typically, you associate crime with a bad economy, but that's not always the case.

Take a look at Moscow. Right now, they're in a construction boom, but the supply of construction equipment can't keep up with the demand. Consequently, bulldozers and backhoes (et al) are highly valuable in Moscow and are being stolen at an alarming rate. So construction companies are starting to equip them with GPS tracking devices, so if you're in Russia and in the GPS business, this should be a good time for you. It may not last, if the production of bulldozers and excavators increases dramatically or if people decide to suddenly stop making new buildings. But here and now (and by "here and now" I really mean "over there and for the foreseeable future"), GPS is a good Muscovite industry, if only totally as an unexpected consequence of a spike in construction-related crime.

Craigslist and Amazon and eBay (Oh My!)

At dinner last night, I couldn't help but overhear (because they were speaking quite loudly) a group of people talking about the internet--how it was dangerous and how they could not understand people's, especially young people's, fascination with it. I wanted to say that the future is always dangerous and fascinating, but I instead cowered minded my own business and finished my Hunan Tofu.

I've spent the week talking about internet business models and have come to (what I feel is) the last major one: the marketplace. The big three are eBay, Amazon Marketplace, and
Craigslist.

There are two hallmarks of an internet marketplace: the don't buy or sell themselves so much as they facilitate (and charge commission on) other buyers and sellers, and they really only work if they are ubiquitous.

Amazon Marketplace is the most structured of the three. It takes care of the product listing and photos and shipping charges. You simply give the price and condition of the one you're selling. This works out great for consumers--multiple sellers compete with each other to offer the lowest price, and the price stabilizes because when it reaches the theoretical market-determined-value, buyers are purchasing the product at the same rate as sellers are offering it. More or less.

EBay is less structured, giving sellers more freedom to tailor their listings/images/shipping-charges/etc. It's auction-style format is good for sellers because buyers bid the price up. The price stabilizes because if something is selling well, more sellers will offer it.

Craigslist is the most free-form and also the most bare-bones. It's strictly a classified listing, and they only charge commission on specific types of listings in very specific markets. Furthermore, it's region-specific, so the price of a Metallica CD in Brooklyn will reflect that market and may not be the same as the price of the same thing in Poughkeepsie.

Of course, this also means that while you can find absolutely everything on Craigslist in Los Angeles, you're a bit harder pressed to find as much on the Jefferson City version.

I have been fascinated by the idea of a marketplace since I first learned about them. I enjoy watching market forces at work, or seeing how the "value" of a thing may have very little to do with the price of it at Wal-Mart. Nintendo Wii's, for example, seem to have a market value of around $350, even though the price tag is only $250. Metallica CD's, on the other hand, seem to run around $4-5 despite their $16 price tag in the shop. And in a testament to the laws of supply-and-demand, despite the fact that their formats are vastly different, prices on eBay and Amazon Marketplace end up roughly the same.

Had I a bit more wherewithal at the age of 21, I would have written my undergraduate econ thesis on this topic. Oh well.

Have a good weekend.

The Rental Business

The story goes like this: A computer-science test had a question that asked the taker to calculate the "bandwidth" of a truck carrying DAT's down the highway. Even though it was moving slowly, it was carrying a huge amount of data, and in numbers, the bandwidth was ridiculously high. One of the students realized that it would be a very cost-efficient to send discs of data through the mail. Thus was born Netflix.

Who's to say whether the story is true or not? I don't think it is, but it's a good story. Regardless, Netflix is certainly a net-juggernaut. Its impact on the video-rental industry is so profound that Hollywood Video is going under and Blockbuster had to develop it's own version. The secret to this business model? People like to rent movies. People hate movie rental stores. People hate driving to a store for a movie only to find out that it's not in stock. People hate scouring for a title and not finding it because it was listed as a "drama" rather than a "comedy". People hate late fees. Fans of foreign films and anime and other obscure sub-genres hate being left in the cold because there's not enough demand for their local branch to stock them.

The Netflix model is based purely on customer convenience. You give it a list of movies you feel like watching, they mail you whatever's next on the list. Send it back whenever you're ready, and they send you the next one.

It's not really any cheaper than going to a rental store (unless you rent a lot of movies--and there are folks that do), and you may or may not be able to get the latest new releases, but it's extremely convenient. You never have to leave your home to do it, and they have everything, no matter how obscure..

Bonus: The video rental business is (obviously) fairly young. Prior to 1970's, the idea of renting or even owning a commercial movie was pretty strange, and when the VCR first came out, they sold it as a "time-shifter". It was intended to let a person tape television shows and watch them later. The video rental market didn't really flourish until the early 90's.

Beware of Seller

Aldi's has an interesting business model. Rather than customer service, rather than trying to meet all of their customer's needs, they focus on getting the best price for maybe 50% of the customer's needs. If you've been to an Aldi's, you know that they don't take checks, they don't bag your groceries, they don't play music, and they don't have shelves. But they have good prices on staples, and that's usually worth a trip.

Well, a "trip" on the internet is a couple of clicks, so it's much more worthwhile to comparison shop. On the internet, you have more and more retailers who specialize in offering the best price for one thing. Some people have taken the Aldi's model to a ridiculous extreme. Woot comes to mind; Woot sells one product per day at a very low price, and when they sell out, it's gone. You can't back order, you really can't get refunds or exchanges. There's no guarantee that they have enough of any one item to satisfy demand, and they have subsequently developed a cult of followers who go to their website at 11:59 and jam the F5 key until midnight, just to have a chance at buying the new product or catching the new promotion.

It seems hard to fathom that a successful company could embrace such contempt for a typical customer's demands, but there it is. And they can get away with this because the anarchy of the net has bred a generation of online shoppers who have "buyer-beware" pre-programmed into their psyches (or perhaps they're all just eBay burn-victims, but that's a rant for another post). There is an understood risk discount. I know that what I'm buying may not work and I may not be able to easily get it returned. I'm taking that into account and am therefore willing to pay less for it than I would at a brick-and-mortar store. I buy a $15 mp3 player online, I understand that there is the very real possibility that it will disappoint. That's why I was only prepared to pay $15 for it, and if I need to return it, I'm going to lose money on shipping.

And it's the shift away from a customer-oriented shopping experience that can sometimes drive prices down. The overhead of having a sales floor with shelves that need stocking and the money spent on theft-prevention, not to mention return and coupon scammers--these are all very real costs of doing business. Doing away with them means that you can reduce prices significantly. Is it significant enough to offset the costs of shipping and risk?

I guess that all depends on what you're selling.

We sell GPS trackers. We cut out middle-men, and that is what makes us competitive. Also, the risk discount is not insubstantial for products that cost $85 or $200, so we offer refunds and customer service. Shipping is not a major, major part of the end-customer's cost. Also, you can't exactly "steal" GPS service off of a store shelf. It makes sense for us to focus more on the customer.

But it's a different story with, for example, mp3 players--which are high-theft. So you can frequently find good deals on the web--far better than what you would ever find in a store. Just be careful what you buy.

The Tip Jar

There's a McDonald's commercial that shows a cable-repairman staring stupidly at a couple of wires. There's a tin can next to him. Someone reaches over and drops a few dollars into the can, and the cable man thanks them and connects the wires. And this, it seems, is very much like the internet.

Internet Business Model #2: The Tip Jar

Several websites make money solely on the basis of "If you love us, you won't let us go out of business." The most notorious of these is probably Wikipedia (although they may have other revenue streams I don't know about). But there are others: several internet radio stations keep themselves funded by soliciting donations PBS-style from their listeners, sometimes pairing this up with kickbacks and referrals.

Continuing the line of thought from yesterday, right now there's not really the infrastructure to allow people to pay small amounts of money. But what if there was a button on your browser that, when you clicked it, would give $.05 to the site? Would a lot of people donating a nickel net more revenue than a few people donating $100's?

What's most interesting about these sites is that they place valuation completely on the user. If you like the service, send us something to help keep the lights on. How much or how little is up to you, but every bit helps. Invariably, a lot of users donate nothing, and invariably several users donate substantial chunks of change. So, in the end, the same service that may absolutely taken for granted by one person is over-valued by someone else. And that's just a little bit fascinating to me.

The Value of a Search

What is the value of a Google search? Or an e-mail? How do free services pay for themselves? How does a business model come into existence from the anarchic void of the Internet? A coworker and I had an interesting discussion the other day about micropayments and the values of internet services. How invaluable, for example, are the search engine or the e-mail account? And yet these services are widely available absolutely free.

Virtual products or virtual services typically have extremely low marginal costs, and then pricing becomes a bit, well, weird. Let's say you spend $10 million developing a piece of software. Once it's developed, you can make copies with packaging for $1 apiece. What do you charge for it. Traditional economics principles would tell you to set the price low, because your marginal costs are low. But that becomes impractical. If you charged $2 for a unit, then you would need to sell 10 million units for it to become profitable, but if you charge too much, then there is a high likelihood that people will be turned off by the price and you won't sell many at all. Is it even practical to charge $2 for a product that may cost $5 to ship and be subject to a $.30 fee for credit card processing?

Then consider a company like Google, whose marginal costs per search are probably something like a tenth of a cent. Google is set up with an advertising business model, but what if there had been another option? What if it had been possible to charge a penny, or half a penny per search. For most of us, that would be an extremely reasonable. If you did a thousand searches in a month, that would be $5--that would be extremely profitable for Google and, again, quite reasonable for a consumer.

What if it cost a half a penny to send an e-mail? That would not be a particularly huge amount to your typical net-user, but it would cut down on spam and e-mail forwards tremendously. Unfortunately, there is no infrastructure in place to accept payments of 1/2 a cent.

But maybe there will be someday. The internet is still in its infancy (in many ways), and it's worth taking a look at prominent sites 10 years ago and comparing them to even run-of-the-mill sites today and seeing just how far technology has come. How much more will it grow in the next 10 years?