Entrepreneur Watch

Relevant Mind: An experiment in social shopping

Last week I met with a startup that's unveiling a "social shopping" concept at DEMO today. Relevant Mind hopes to make it easier for people to get advice about products they want to buy.

It's an interesting concept. I believe that there is a lot of untapped potential in social networks and discussion boards, information that is not going to be tapped easily by search engines.

Relevant mind is offering an alternative to the product reviews you can already find all over the internet. The problem with product reviews is that there's a lot of "review spam" out there. The phrase was coined by Nitin Jindal and Bing Liu at the Department of Computer Science, University of Illinois at Chicago. Some reviews are written by the people trying to sell the product, or by competitors panning a product, although the researchers were not able to come up with a good method for determining which or how many reviews were false.

But let's face it, the book reviews at Amazon.com, for example, usually start with reviews written by friends of the authors. They're good-hearted but misleading attempts to help friends sell their books. CEO Aaron Mann figures that 1/3 of the reviews on Amazon qualify as spam reviews.

Even sites that let you rate a product, such as Netflix, have trouble getting real results. Every product tends to skew toward average, a rating of 3.7. Sites like Netflix have to tweak their rating algorithms with such techniques as giving more weight to negative reviews.

If you're a real aficionado of a product you might join a discussion or hobbyist group. But how to find such groups when you're first starting out?

Relevant Mind tries to help that problem. You can search for particular products, brands, or just click on a price range. When you find a product you might be interested in, click on it and a tab of "Conversations" will appear. Those conversations are brief excerpts from discussions of the particular product on the internet. Click on an excerpt that looks interesting, and you are sent to the site where the discussion appears.

This takes a lot of work, both in coming up with a comprehensive list of products and in finding the relevant discussions. So Relevant Mind is starting with two categories, road bikes and golf equipment, since those are strong interests of two of the founders.

Other categories -- sports, cooking and musical instruments are on the to-do list -- will be added by hobbyists who want to make money providing information about their favorite pastime. It takes expertise to do this right. Relevant Mind will be seeking out and hiring such people through blogs and user groups. "I'm most looking forward to hiring the Vertical Gurus," says CEO Mann. "They'll be the funnest people at our company."

The company will avoid product categories where there are already good independent reviewers, such as consumer electronics. You can go to CNET or any number of newspapers for that.

The site accepts no ads, but tries to make money by linking to retailers who have affiliate programs paying fees for sending people their way. Click on the "Buy now" tab and you'll get a link to sites selling both new and used products.

You'll also be able to create a personalized page on the site or in your browser to help the company learn your likes and dislikes and give you more relevant results.

Here's the difficulty. Some retailers may have great prices but no affiliate program. CEO Mann says he will send people to those sites anyway in the interest of making the site truly useful to buyers. You can't buy new road bikes online, for example, so the site tends to link to people selling them used. That's the right idea, but it will take a lot of willpower to stick to the ideal.

It's an incredibly labor-intensive business model, which is one of the advantages. As long as Relevant Mind manages to develop comprehensive product categories and link to good discussions, it will have a huge first-to-market advantage. This is not something Google will be able to do.

It looks interesting. The site has some bugs to work out. When searching for the cheapest bikes, the results tend to come up with a lot of components rather than complete bikes. But if the site manages to come up with truly relevant results, including finding good retailers, it has promise.

There's a lot of intelligence residing on the web. It's just a matter of helping people find it.

Steve Jobs: punishing his iPhone customers

That Jobs has made some huge mistakes with the iPhone is obvious. The phone isn't selling as well as he thought, he had to slash the price, then try to mollify angry customers who had already bought the iPhone with a rebate coupon.

ZDNet has a list of what it sees as his mistakes in the form of lessons learned:

Jobs realizes he can’t annoy his flock.
New customers aren’t as easy to win over.
The smartphone market is brutal.

All true enough. But fundamentally, the real problem was the first one. Jobs is used to acting like a monopolist. Monopolies have a tendency to punish their customers in the interest of squeezing every dollar they can out of them.

Cable companies drop the quality of service and raise the price. They create sloppy DVRs rather than letting customers buy Tivos. Cellular providers lock you in to two-year contracts and force you to re-enroll to upgrade your phone without paying absurd prices. We don't even need to mention Microsoft's sins.

Mac enthusiasts don't often switch to PCs, so Jobs can get away with high prices. When he returned to Apple he killed the Mac clone business, keeping short-term profits high but dooming the Mac to a permanent, distant second place to Windows computers.

In all the above cases, customers and the companies would be better off if those actions had not been taken. When forced to face competition, a company becomes stronger. What's surprising to me is that the Justice Dept. hasn't cracked down on any of those monopolists except Microsoft.

But Jobs was surprised when he tried his punish-the-customer-to-benefit-me tactic on a product where he held no monopoly. The price was not the problem. The problem was getting into bed with one monopolist and going up against the monopoly powers of the competition.

Why the hell did Jobs sign a three year contract to make the iPhone exclusive to Cingular, now AT&T? Does that benefit his customers in any conceivable way? No. It punishes faithful Apple lovers using any service except AT&T.

Jobs thought, in hubris, that his product was so insanely great that he could force people to pay penalties to their monopoly providers and switch to a second-rate cellular carrier. It was an insanely great mistake.

It didn't work, and not because of the price. What did everybody complain about? The AT&T service! A great phone with a lousy connection and slow service is a lousy phone system.

I wonder what AT&T paid for its exclusivity. I can just hear Jobs telling Cingular execs that he would  turn the company into the leading cell carrier by forcing people to switch.

If Jobs hadn't been so arrogant and greedy, if he had let the iPhone work on any network, he would not be having this problem today.

Like the monopolists, he sacrificed long term results to boost the short-term. Only this time, the short term did not pay off.

Lesson #1, so simple I shouldn't have to say it: Every time you make a business decision, ask yourself if it benefits your customer. If not, don't do it!