Focus On: Stephen J. Kobrin

What Guided Google to Frommer’s?

Posted on August 20, 2012

Last week, Google announced plans to buy the Frommer’s line of travel guides from publisher John Wiley & Sons. While many experts agree that the move is a smart one for Google, the deal raises some concerns about antitrust — similar to those that surfaced regarding the search giant’s purchase of restaurant review guide Zagat nearly one year ago.

Last September, Google paid $151 million to acquire Zagat in attempt to offer improved local listings on its search engine — a deal that drew fire from regulators and review services like Yelp, which claimed that Google was giving preference to Zagat information in its searches. The Frommer’s deal — the terms of which were not disclosed — would give Google access to the travel guide publisher’s extensive reviews of hotels, restaurants and sightseeing attractions in more than 4,000 locations around the globe, according to Reuters.

“Clearly, Google is showing interest in content with its acquisition of Zagat and now Frommer’s,” says Wharton operations and information management professor Kartik Hosanagar. “Part of that is due to the opportunity to monetize content and leverage its brand and search dominance [in] the content space. [Also,] Google wants to show local reviews on its various websites [such as Google Maps] and faced some flak for taking content from other sites like Yelp and displaying it…. It responded to that criticism by acquiring Zagat, and now Frommer’s.”

Hosanagar notes, however, that the deal is likely to face scrutiny because — just as with Zagat — Google will have the ability “to give preference to results from Frommer’s over TripAdvisor and other [travel] sites.”

According to Anindya Ghose, a professor of information, operations and management sciences at New York University’s Stern School of Business, the move “would make Google a huge player in the online travel business, primarily because of the trustworthy reviews from Frommer’s.” However, like Hosanagar, he predicts that regulators will pay careful attention. “Google is now both a search and content provider, and there is an uneasy duality — some may even call it a fundamental conflict — between the two goals. Recently, The Fairsearch.org group, which includes TripAdvisor, Expedia and Kayak among its members, asked government officials to look closely at Google’s ability to use its dominance in search and search advertising to steer users away from competitors.” Ghose adds that last year, Yelp complained before a Senate judiciary committee that Google has abused its dominance in search, and earlier this year, the CEO of price-comparison site Nextag called for more transparency in Google’s search ranking process.

Such issues aside, Google’s latest effort to amass new content could be a boon to consumers looking for concise travel information. “It would make consumers’ lives a lot easier when it comes to local and travel planning,” Ghose says. “It [would enable them] to get personalized answers to their questions from an authoritative source. The future of online search is increasingly going to be about getting personalized answers and getting them quickly, on the fly. When one is traveling and they want to find a good restaurant nearby, they want an authoritative source to provide a descriptive paragraph that tells them in a personalized manner where to go. They don’t want to be scrolling down a list of multiple choices and doing the hard work of figuring out the ideal venue themselves, especially given the abundance of information on the web. The future of travel, restaurant and local search is going to more and more on mobile devices.”

What does that mean for the old-fashioned, printed travel guide? Will the format die out? The search company has not said what it will do with Frommer’s printed editions, but Stephen J. Kobrin, publisher and executive director of Wharton Digital Press, says that he “cannot imagine that Google is interested in Frommer’s print business. Given the ubiquity of smartphones and tablet devices, electronic travel guides make more sense than print. It is easier to customize for a given trip and easier to carry with you when you are out and about. Do you really want to lug the entire guide for Italy if you are only going to Tuscany?”

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Digital Books: ‘Enhanced’ — But for Whom?

Posted on January 20, 2012

Forget your dusty old biology book. Life on Earth, a textbook by E.O. Wilson now available on iTunes, may soon make it obsolete.

Or will it?

Wilson’s book is an “enhanced” digital book, meaning it incorporates video, animation and other high-tech features to explain the fundamentals of biology. According to Apple, one page “lets the student choose how much detail to reveal in [a] cell interior, from empty compartments to a detailed cell completely packed with proteins and small molecules.” Another “allows the student to control the progress of cell division, with step-by-step explanations coupled to real cell footage.” Animated maps of global photosynthesis and a tour of a wild preserve in Mozambique are only topped by the author’s introduction to ecology, which takes place — where else — “[on] the edge of Walden Pond.”

Life on Earth is just one of a new lineup of enhanced e-books that are scheduled to come out from publishers such as Penguin, which plans to release 50 enhanced digital titles this year, according to The Wall Street Journal.

Publishers are banking on a success similar to what they have seen in regular digital books. “E-book sales continue to climb, with digital titles accounting for 14% of books sold in the second and third quarters of 2011, up from 4% for all of 2010,” the Journal notes, citing data from publishing industry analyst Bowker Market Research. Meanwhile, tablet sales are skyrocketing — 65 million were sold last year, according to the Journal — meaning an increasing number of readers should be able to download and enjoy enhanced digital titles.

And while the pricing might be reasonable — many enhanced titles are available for download as books or apps between $10 and $20 — it isn’t clear that the new format will ultimately lead to a publishing revolution. “While I do not have hard numbers, it appears that very few enhanced e-books have been successful to date,” says Stephen J. Kobrin, publisher and executive director of Wharton Digital Press. “The old dog dancing metaphor applies: You are blown away by seeing the dog dance, but after a few minutes you begin to ask how good it is at dancing.  There has to be a very good reason to take the reader out of the narrative — bells and whistles only seem cool for a while.”

Meanwhile, Apple has introduced software for authors interested in creating their own enhanced e-books, but Kobrin remains skeptical about how this would help the format gain traction. “Producing a good enhanced e-book is anything but easy. You need high quality video and graphics, not what comes out of a point-and-shoot.”

Life on Earth is a perfect example. “[It] looks great,” says Kobrin, “but take a look at the credits. There is a production cast of thousands.”

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What Steve Jobs Leaves Behind

Posted on October 6, 2011

In a brief statement on Wednesday, Apple announced that Steve Jobs, its legendary co-founder and product visionary, passed away at age 56. Jobs had been diagnosed with pancreatic cancer, but he remained the public face of the company until he stepped down as CEO in late August, becoming chairman of Apple’s board.

Upon hearing the news, Knowledge@Wharton asked several Wharton faculty members for their comments on Jobs’s career, and his impact on technology and the business world.

Saikat Chaudhuri, professor of management: “Steve Jobs’s passing unquestionably leaves a great void in the world of technological innovation; he simply transformed the way people communicate, interact and collaborate, not to mention consume media and entertainment. He read the pulse of the market, and balanced the push-pull dynamic between new technologies and customer needs perfectly. He mastered the art and science of producing novel offerings by acting as an integrator of different internal and external technologies, capabilities and resources like very few.

“I only hope that in his last days, he was able to write down or convey all the ideas he had for the future, because his vision and penchant for creating game-changers and new product categories was unparalleled in recent times. His charisma and energy as a product champion to realize that vision will, of course, be sorely missed.”

David Hsu, professor of management: “I retrieved 116 million results this morning on a Google search of Steve Jobs and the word ‘visionary.’ Not only is Jobs revered, I think, for having original ideas of what the future should be like in computing and interacting with various media, but also because he did a remarkable job in implementing the details of making those visions a reality. All too often, leaders in business and government have one or the other (or neither) quality, and so I think Jobs stands out in this way.

“Steve Jobs to me also personified great entrepreneurial leadership characteristics: persistence and tenacity in the face of setbacks and challenges, high standards for both the people in his organizations and his products, and the charisma and work ethic to lead his organizations to its achievements.”

Peter Fader, director of the Wharton Customer Analytics Initiative: “It’s so rare to see someone become such a success (and a cultural icon) without being the least bit wishy-washy. Even when he was misguided about certain things (e.g., hatred for buttons), he did it with great passion and conviction. You’ve got to admire someone who can stick to his principles and keep swimming against the tide – and then eventually make the tide turn in his direction purely through his vision and relentless persistence. That’s an extraordinary achievement, and only an extraordinary man could pull that off. Personally, I’m not a fan of Apple products, but I still see Steve Jobs as a role model for the way that he pursued his goals.”

Stephen J. Kobrin, publisher and executive director, Wharton Digital Press: “Jobs drove Apple to produce technologically sophisticated and beautifully designed products: Opening the box of the most basic Apple product is a pleasure. Perhaps more important, every product is user oriented — they just work. Setting up a wireless network with an Airport device is almost plug and play. An iPad is a powerful and complex computer, but a three year-old can pick one up and intuit how to play with it. Jobs also had the ability to see beyond the horizon; while the music companies were focused on jailing teenagers [for illegal downloads], he developed the business model for digital music.”

David Reibstein, professor of marketing: “Steve Jobs, more than anyone today, embodied the notion of thinking first about the customer, their experience and the user interface. He created a brand that is recognized around the world. While he was in [the] technology [field], he was not bounded by any one technology and was never focused on the technology above the customer.

“He was known as an innovator, which we normally think of in terms of technology. His focus was on innovation in the customer experience delivered via technology. He took on mountains (IBM and Microsoft) and was unafraid in doing so. He was a pioneer who was most willing to take risks. As a leader, he built an organization in his image. He will be missed.”

Kartik Hosanagar, professor of operations and information management: “The biggest lesson from observing Steve Jobs’s career is the value of having passion for what one does and the difference it can make. He talked about this passion in his now-famous talk at the Stanford convocation. This passion was visible in his resolve to hold on to the Apple CEO role despite the decline in his health over the past few years.

“The other big lesson is that of setting bold visions and taking risks to achieve them. Jobs pretty much reinvented Apple when he decided to build the iPod and position Apple squarely in the digital media business (as opposed to the PC business). Struggling companies like Yahoo could learn a lot from looking at Apple’s turnaround. In trying to turn Yahoo’s fortunes around, the leadership has not set any bold goals or taken big risks.

“All that said, we can celebrate his professional achievements over the next several decades. Today is a day when your thoughts mainly go out to the family.”

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Dos and Don’ts for Amazon’s Redesign

Posted on September 6, 2011

Online retailer Amazon.com announced on Friday that it is now in the testing phase of a major redesign that streamlines the site’s older — some might say “cluttered” — interface. According to an article in the Wall Street Journal, the new design is apparently geared more toward tablet users — with “fewer buttons, more white space and a bigger search box.” The Journal also notes that the new version emphasizes the sale of digital products over physical ones. So far, the test site has been distributed to a limited number of users, and the company has declined to say how soon the new design will go live.

The redesign has led to speculation that Amazon is gearing up for the launch of its own tablet. Indeed, the Journal story says, sources inside the company have indicated that the new device will arrive in the coming weeks.

Amazon is the world’s largest online retailer, earning $34 billion in revenue in 2010, according to the Journal. Even with that lead, it’s no surprise that the company is undertaking a redesign, notes Wharton marketing professor Eric Bradlow. “Amazon, like others, realizes the direction of the wind,” he says. “Mobility — and full access while mobile — is becoming expected. Hence, the ability of firms to tailor their content to web users will become critical going forward.”

Still, Amazon needs to be aware of some potential pitfalls, even as it works to remain relevant in the age of mobility. Wharton management professor Stephen Kobrin, publisher and executive director of Wharton Digital Press, says that although it’s hard to determine what kind of specific changes are in store for the redesign without seeing the test version, one potential pitfall would be if “navigation on a [regular] computer will be compromised to make it easier on their tablet.” According to research firm comScore, 282 million consumers visited Amazon in June — whether to shop, research products or read and write product reviews. One thing many of them have in common is a familiarity with Amazon’s current setup.

Bradlow agrees that there is a risk inherent in undertaking a redesign of such a popular site. “One of the greatest drivers of consumer loyalty/lock-in is the cost of learning a new interface from a new site,” he notes. “If a firm changes its own look or feel, there is the potential to erode the loyalty that was there to being with.”

Bradlow adds that for any site design to be successful, the user must come first. “Make search and commerce easy and quick, and don’t think about maximizing site time,” he says. “Think about maximizing consumer needs. Too many [companies] treat site time as engagement; it is not. People may just be confused, or the site may be hard to navigate.”

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Is Quality Control Lacking in Business Books?

Posted on July 18, 2011

In Sunday’s New York Times, Bryan Burrough — an author, former Wall Street Journal reporter and now a correspondent for Vanity Fair, takes business writers to task for producing books that are of generally low quality. He gives many reasons for this: Some of the books are too technical, some too complicated, some authors don’t have access to the business people they write about and some simply can’t tell a story. He also suggests that because businesses are notoriously secret, it can be hard to get access to information that would make a compelling narrative.

He also notes that many of the business book authors are not good writers; they are “chief executives, professors and experts in their field” who often lack “professional craftsmanship.” A lot are written “by consultants and others who I suspect seek to use the books as giant business cards, a way of garnering attention … or speaking engagements.” Of course there are exceptions, he says, including Greed and Glory on Wall Street, Liar’s Poker and Den of Thieves.

According to Wharton management professor Stephen Kobrin, publisher and executive director of Wharton Digital Press, the term “business books” encompasses a wide range of genres. “These include narratives — such as the spate of books dealing with the Great Recession — biographies of business leaders, histories of firms and the like. Recent books, such as Too Big to Fail, The Wizard of Lies and The First Tycoon, are works of serious non-fiction. More typically, ‘business books’ include investment advice, biographies of CEOs or firm histories aimed primarily at a business audience, and a wide variety of books that deal with specific issues such as leadership, strategy, marketing, human resource management, technology and so forth.”

What differentiates “business books” from narratives, he adds, “is that they are written to provide managers and others working in business and other organizations with information that will be useful in improving their performance and that of their companies. The best business books help the reader adapt to rapid change, view his or her situation from a truly fresh perspective, develop skills or capabilities, gain deeper knowledge of processes and disciplines or provide an understanding of new technologies and their applicability.”  

Kobrin, like Burrough, finds some reasons to be critical. “The worst business books are both jargon laden and trite, capitalizing on the fad of the moment. They tend to be vapid exercises that are the moral equivalent of a too-clever Powerpoint presentation…. That said, it is far from clear that there are more ‘bad’ business books than can be found in any other genre. I suspect the difference is that it might be easier for business books to see the light of day than other categories of non-fiction. More business authors come with ‘platforms,’ the ability to move books through their speaking engagements, consulting practices and the like.” While Kobrin does not have hard evidence to support the assertion, he “suspects that it may be easier for publishers to see their way to a positive P&L with a business book than for other works of non-fiction.”

Burrough and John Helyar co-authored one of the most recognized business books of the last few decades — Barbarians at the Gate: The Fall of RJR Nabisco, published in 1990. Wharton management professor Daniel Raff describes the book as “a brilliant success at the time and durable enough to support a second edition 20 years after the first.” One can find books in the business section of airport bookstores “which are comparably dense, insightful and carefully written,” Raff adds. Some, like Barbarians at the Gate, “also have subjects with plot and character and develop these superbly. But books like that are not typical of the genre.”

Viewed from Burrough’s “personal perspective, or from an academic one, there seems to be something to his criticisms,” Raff adds. ”But I also wonder whether they beg an important question. Business books, for the most part, provide a certain sort of consumption experience, and they appear to be purchased primarily by people who are looking for this experience.” In that sense, Raff says, many business books have something in common with the articles in some magazines also for sale in airport bookstores: “They stimulate readers to think harder than they might have otherwise about why certain decisions are made or how particular things might get done. I do have the impression that a lot of the books are read in the course of an airplane flight and are never subsequently consulted. But that doesn’t mean that they don’t satisfy a need or desire, or that they don’t serve a constructive purpose.”

 

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Can Discounted Tablets Lure New Newspaper Subscribers?

Posted on July 14, 2011

The rise of the Internet and mobile technology is often seen as a death knell for traditional print media. But the owners of Philadelphia’s two dailies are hoping consumers’ lust for the latest in all things digital will help the newspapers beef up readership and revenues.

Earlier this week, the Philadelphia Media Network — owner of the The Philadelphia Inquirer and the Philadelphia Daily News — announced that it will begin offering deeply discounted tablets bundled with applications serving up content from the papers and their websites.

Although the exact pricing and type of tablet have not been announced yet, company officials said at a Monday news conference that the devices will run on Google’s Android operating system. Tablets typically cost anywhere from $300 to $800, depending on the amount of memory and whether it connects to the Internet via WiFi or a subscription service to a cellular network.

Each tablet will be bundled with four preinstalled applications to view content from The Inquirer, the Daily News and the Philly.com website. To get the discount, customers have to subscribe to the apps for at least a year. The program launches in August with a small number of devices, which will initially be available to run on WiFi-only.

But is the promise of shiny, new technology enough to spur long-term interest in the company’s content? “It’s a case of putting the cart before the horse,” says Wharton marketing professor Peter Fader. “You have to have a really good digital strategy, platform and content in place before you start worrying about portals.”

Stephen J. Kobrin, a Wharton management professor and director of Wharton Digital Press, notes that customers who sign on to the initiative won’t be able to choose what kind of tablet they get, or (at least initially) how they want it to connect to the Internet. “The key is getting people who wouldn’t have otherwise bought a tablet and who wouldn’t have otherwise looked at the Philadelphia newspapers on a tablet, in print or online” — which he points out, “are a lot of assumptions from the [Philadelphia Media Network's] point of view.”

Fader argues that, for such an initiative to succeed, it must capitalize on existing pent-up demand rather than attempting to create it. “It has to fulfill a need, and they’re nowhere near that,” he notes. “In some sense, it’s commoditizing; it cheapens the value of their content.”

Even if customers sign up for the program, there’s no guarantee that the purchase will become the basis of a lasting relationship with the Philadelphia newspapers or Philly.com, Fader adds. “Unless people use the tablet predominantly to access the Philadelphia newspapers … they’ll forget that’s how they got it. If you can’t get people to stick around [as subscribers] then it’s not a good investment.”

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Food Security Concerns Lurking Amid Arab Region’s Unrest

Posted on July 6, 2011

Before the tumult of the Arab Spring, one of the biggest challenges to the rule of then-Egyptian president Hosni Mubarak was a lack of bread. In the summer of 2008, long queues and short tempers over bread shortages were enough that the army was called in to bake and distribute loaves to Egypt’s poorest.

Egypt’s bread protests were soon forgotten. But there now is a growing consensus among analysts and policymakers that rising food costs and food shortages are contributing to the region’s unrest. In a new briefing by the International Food Policy Research Institute (IFPRI), a Washington, D.C.-based think tank, researchers detail some aspects of the Middle East’s food security concerns, and how they relate to the ongoing turmoil.

“People’s satisfaction with their standard of living has deteriorated in most Arab countries in recent years, especially in Egypt, Libya, Bahrain and other countries with civil disobedience,” noted the authors of the brief, “Economics of the Arab Awakening: From Revolution to Transformation and Food Security“, which included all of the Arab countries in the Middle East and Africa.

Food security has worsened in most Arab countries, the authors wrote, due to high food-price inflation. For instance, in Egypt, according to the World Bank, year-on-year food inflation in February was at 19%. “The proportion of people without enough money to buy food increased or remained unchanged in all but one of 12 countries examined,” the IFPRI brief stated. “Egypt and Sudan saw particularly large increases.”

Even in oil-rich Gulf countries, concerns over food price inflation have resulted in various government actions, including planning food reserves and forcing retailers to heavily discount certain basic foodstuffs. In the United Arab Emirates (UAE), the federal government has gone further, asking food retailers to agree to a six-month price freeze on certain items, while conducting store inspections to ensure prices do not increase in the month of Ramadan, when Muslim shoppers tend to buy more groceries. Prices for edible oil, sugars and rices last year in the UAE rose by 50%, according to local media reports.

These food security concerns have also led some Gulf countries to purchase farmlands in other countries for their own food production needs. The UAE has become one of the top purchasers of global farmland, according to IFPRI, while Saudi Arabia has made a number of farmland purchases in Africa. Government officials say that with direct access to food crops, they can save on import spending.

In an Arabic Knowledge@Wharton story about Middle Eastern countries investing in farmlands in Africa, Wharton management professor Stephen J. Kobrin said such land purchases risk reviving a colonial system in which large tracts are controlled by overseas interests that hire many of their own people, reducing the economic benefits to the host country. “The big question is, are you developing local skills or just creating an outpost of the investor country?” Kobrin noted.

And more immediate, easier solutions for Arab countries to reduce import spending costs are available, according to an analysis by the World Bank, including improving logistics efficiency, and using risk-management tools to reduce exposure to price volatility and shocks.

The IFPRI brief also questions some of the measures Arab countries have taken in the wake of the unrest, such as raising civil employee salaries and lowering import tariffs. “Most, if not all, of these ‘firefighting’ measures were used by Arab governments before,” the brief states. “These popular but costly responses have been inefficient in stimu­lating sustainable growth and poverty reduc­tion. “

The authors recommend that Arab governments facing food security issues should seek to improve their “trade agreements, logistics and infrastructure, as well as support for the agriculture sector in countries with agri­cultural potential.”

While the authors acknowledge that it is beyond the report’s scope to determine how large a role living standards and food security played in triggering the revolutions, “results clearly show that in most Arab countries, both indicators have worsened.”

Read the report here:  http://knlg.net/pzgcK1

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An End to Online Retailers’ Immaculate Tax Exception?

Posted on June 15, 2011

Most people probably don’t take the absence of  sales taxes into account when they buy online. Shipping costs often offset at least some of the tax savings, bringing costs more in line with neighborhood-based competitors. But for higher-priced items – say, a laptop computer — the $50 or $60 in foregone online sales tax starts to affect purchase decisions. Who wouldn’t want to pocket that money, or use it to buy some extra frills for the laptop?

Multiply that savings by millions of buyers and it becomes easy to see why revenue-starved states want to scotch what they see as a blatant tax loophole – their inability to tax sales made to in-state consumers. Some estimates show states lose about $23 billion in online sales taxes annually. California alone, now suffering a huge budget hole, loses about $1.5 billion a year. But now it’s not just some states that want to level the sales tax playing field. Big bricks-and-mortar retailers like Walmart, Target and Best Buy are lobbying Congress, saying they are tired of their online competitors enjoying an unfair advantage. They want the sales taxes equalized for all.

At present, no U.S. interstate commerce laws require online retailers to collect sales taxes, although seven states now try to do so and about a dozen others are considering similar laws. A 1992 Supreme Court decision ruled that online retailers should collect sales taxes, but only in states where they maintain a physical presence. So, Best Buy, for example, collects taxes for online purchases in states where it has stores. Dealing with 50 complicated state tax codes was deemed too onerous for strictly online retailers. Now, some federal lawmakers are pushing legislation that will streamline the regulatory process to make sales tax collection easier.

Ebay continues to oppose efforts towards online taxation, arguing it would hurt its many small business partners. Amazon, the 800-pound gorilla of online retailing, could lose $653 million, or 2.7% of its North American revenues for this year if sales taxes were imposed, according to Credit Suisse. Amazon has also fought state sales taxation efforts ferociously, but now suggests it would support federal rules for more even-handed sales tax treatment so long as they are applied fairly and are not too complicated.

But the issue of complicated rules is a straw man, says Wharton management professor Stephen J. Kobrin. The technical challenges around online taxation are “not insurmountable” and will not “put small businesses at a disadvantage.”

He points out that “aside from the small number of transactions paid in cash or by check, every purchase on the web is cleared, one way or another, through a credit card company. There are a finite number of tax jurisdictions in the U.S., and setting up a procedure to add the tax as the payment is processed and then remitting it to the appropriate jurisdiction would not seem to be rocket science.” At the same time, “while pure digital purchases may pose more of a problem,” like music downloads, for example, “all physical goods are delivered to an address that is within a given tax jurisdiction.”

More generally, however, “avoiding legitimate taxes is not a valid reason for preferring to purchase online,” Kobrin says. So, in some ways the question of online sales taxes is one of fairness. “This is not about whether or not buyers should pay state sales tax on goods ordered online; rather, the question is whether buyers should be allowed to continue avoiding paying these taxes.”

As for big retailers like Amazon, Wharton’s Eric Clemons, a professor of operations and information management, says that “Amazon has a great business model, one that is definitely not based largely on avoiding state sales tax and one that will survive any change to state sales tax laws. Instead, Amazon’s attraction lies in price competitiveness, a seamless online ordering process, a reputation for standing behind products and the more general convenience of ordering online.

“I understand the proposed change, but it seems quite arbitrary, and ultimately the FTC (Federal Trade Commission) may indeed need to get involved as a regulator of interstate commerce,” Clemons adds. “The most natural change, of course, would be to treat online sales as if they were physical sales, and impose the sales tax of the selling state upon all online purchases. This would result in taxes of 6.5% for Amazon and 6.86% for Zappos. Although this would be the simplest change to explain in the courts, it would be especially embarrassing for eBay. With a state sales tax of 8.25%, among the highest in the nation, eBay might have to rethink its location. It might want to move to New York, as long as it avoided New York City or Utica.”

Most observers say, however, that implementation of any new sales tax rules would take at least a couple of years.

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