E-Commerce in Africa

CBC's radio show Spark had a recent discussion of African E-Commerce (episode 130). Basically, individuals are increasingly using cel phones to conduct business transactions using texting services whereby they are able to communicate their inventories of goods, their demands for goods, and transfer funds between banks and individuals. Without cel phones, these transactions involved individuals traveling from village to village with their goods, incurring significant time costs while traveling between. These can be particularly high given that traveling to purchase some goods may require an individual to miss a day's wages. As such, cel phones serve the role of infrastructure in reducing the opportunity costs of engaging in transactions.

There are a lot of digital conveniences we take for granted in the Western world. Ok, let’s be honest and say we take most of them for granted. If we want something –anything– it is available at our fingertips. So what’s it like in places where the infrastructure still doesn’t exist to make those digital conveniences viable? Femi Akinde is the founder and CEO of Slimtrader, a company that is looking to change the way people in sub-Saharan Africa do business…all through their cell phones.

Ticket Pricing in the Age of the Internet

Peter Tracey recently directed me to a column by Terrance Corcoran. Apparently, Industry Minister Tony Clement is looking into ways to address ticket retailers who are engaged in uncompetitive practices.

In Ottawa, Industry Minister Tony Clement declared himself to be a "regular concert goer," making him therefore qualified to take action against Ticketmaster and its associated resale arm, TicketsNow. "The government won't stand idly by when there is potential that companies may be engaged in uncompetitive practices that are hurting consumers," he said. Mr. Clement dispatched the Competition Bureau to investigate.

In Ontario, no slouch in maintaining high farm prices, Premier Dalton McGuinty is preparing legislation to protect Britney Spears consumers by going after Ticketmaster and setting up an apparently beefier anti-scalping law than the existing one. Ontario's Attorney General, Chris Bentley, said "What Ontarians want is fair access. This is about consumer protection." Various class-action lawyers and U. S. politicians are also getting into the concert pricing regulation business.

Even the performers are restless, with old boy lefties like Bruce Springsteen reportedly "furious" that tickets for his welfare-state priced concerts -- $90 to $250 -- were being sold at higher prices on the TicketsNow resale site before the regular sales process had run its course.

Corcoran argues that there is no need to regulate this market as the internet has taken over the position once held by scalpers, in doing so imposing some market discipline on ticket pricing.

Almost overnight, the buying and selling of tickets for sports, concerts, theatre and other live events has gone from the moribund paper era to the electronic era. The market took over scalping, bringing market prices to tickets that in the past were sold only once at what the concert promoters thought and hoped would be the right profit-maximizing price. If not, if the price was set too low, too bad. The market died with the first sale, except for a few scalped tickets at the door on the day of the event.

There is no need for politicians to attempt to control this market. In fact, that would be the worst approach. The rise of online market sales makes it possible for performers, promoters, ticket sellers and resellers to capture top market value. The major beneficiaries will be the performers, who for the first time will be able use auctions and other pricing mechanisms to get the most out of their performances.

I wonder if Tony Clement has thought about Trent Reznor's suggestions for stopping scalping.

Google's Chief Economist: Internet Searches as Auctions

Hal Varian is a name familiar to almost every graduate student in microeconomics. He is currently serving as the chief economist for Google. Wired's article discusses the concept of Google's AdWords as an acution:

In the midst of financial apocalypse, the gadflies and gurus of the global marketplace are gathered at the San Francisco Hilton for the annual meeting of the American Economics Association. The mood is similar to a seismologist convention in the wake of the Big One. Yet surprisingly, one of the most popular sessions has nothing to do with toxic assets, derivatives, or unemployment curves.

"I'm going to talk about online auctions," says Hal Varian, the session's first speaker. Varian is a lanky 62-year-old professor at UC Berkeley's Haas School of Business and School of Information, but these days he's best known as Google's chief economist. This morning's crowd hasn't come for predictions about the credit market; they want to hear about Google's secret sauce.

Varian is an expert on what may be the most successful business idea in history: AdWords, Google's unique method for selling online advertising. AdWords analyzes every Google search to determine which advertisers get each of up to 11 "sponsored links" on every results page. It's the world's biggest, fastest auction, a never-ending, automated, self-service version of Tokyo's boisterous Tsukiji fish market, and it takes place, Varian says, "every time you search." He never mentions how much revenue advertising brings in. But Google is a public company, so anyone can find the number: It was $21 billion last year.

His talk quickly becomes technical. There's the difference between the Generalized Second Price auction model and the Vickrey-Clark-Groves alternative. Game theory takes a turn; so does the Nash Equilibrium. Terms involving the c-word—as in clicks—get tossed around like beach balls at a summer rock festival. Clickthrough rate. Cost per click. Supply curve of clicks. The audience is enthralled.

During the question-and-answer period, a man wearing a camel-colored corduroy blazer raises his hand. "Let me understand this," he begins, half skeptical, half unsure. "You say that an auction happens every time a search takes place? That would mean millions of times a day!"

Varian smiles. "Millions," he says, "is actually quite an understatement."

The Twitter Market

I have a Twitter account, but still don't quite "get it."

I've been told by some friends (also academics) that they have found it a useful tool in communicating with their classes (e.g., homework reminders, corrections of typos on assignments, etc.). I'm going to give it a shot in the fall and will let people know how it worked. I'll be joining others at the university (like the University of Calgary library) in using Twitter as a way to pass along information.

I've also heard from some friends of mine involved in marketing and web design that its a useful tool in building web traffic to particular sites. The general statistic I've heard thrown around is that for any link you post on your Twitter update, 4-10% of your followers will visit that site. In this sense, more followers is a good thing.

So an entrepreneur seeing an opportunity has developed a new service: TweepMe will get your "thousands of followers" (4,000+) automatically for a fee of $12.95. (By the way, they currently are offering $2 off on their service.)