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Shaun Ryan:  [0:03] Hi, I’m Shaun Ryan from SLI Systems, and this is the eCommerce Podcast. Today I’m talking to Hadley Reynolds, director of search and digital marketplace technologies from IDC. [0:13] Welcome, Hadley.

Hadley Reynolds:  [0:14] Glad to be here. Great to be with you, Shaun.

Shaun:  [0:16] Traditional question to get us started: What was the first thing you ever bought online?

Hadley:  [0:21] I think it was a book on Amazon.com, although I can’t tell you exactly what the title of the book might have been. But I remember thinking that buying a book online was a bizarre way to go about things when I could just walk down the street and go into a bookstore. [0:40] But I actually discovered, of course, as I think a lot of people did when they first started to browse around Amazon that you can actually put together a very impressive library and inventory of products online in a way that is impossible to duplicate in the real world really. So that was how I got started.

Shaun:  [1:03] Excellent. When do you think that was?

Hadley:  [1:07] Well, when did Amazon begin? Mid‑’90s sometime.

Shaun:  [1:11] Yes, it would have been.

Hadley:  [1:13] Really, what I found in my personal experience what happened is I drifted my direct‑mail buying habits online first. [1:25] In other words, of course direct‑mail marketing was huge in the U.S. from, I don’t know, maybe the mid‑’70s. Certainly all through the ’80s direct‑mail marketing just exploded, and everybody’s mailbox was groaning with the numbers of catalogs that were coming to the door.

[1:46] So I think on the consumer side, buyers developed habits about which catalogs they would buy from and then as those companies moved their sites online followed the brands. That’s what I found myself doing. I found myself not using the catalogs anymore except maybe to reference things and then just going directly to the sites.

Shaun:  [2:08] I think the transition there is that the sites started off as order‑taking mechanisms where people would make their purchasing decisions from the catalog and then go online to make the order rather than doing a phone call. [2:22] Then the sites transitioned from solely order‑taking mechanisms to marketing vehicles in their own right, attracting traffic and people making their purchasing decision on the sites. That definitely makes sense to me.

[2:45] How about your most recent purchase? What was that?

Hadley:  [2:49] Actually, I bought an industrial product here in the U.S., and I have to say it was an entirely different experience than what you’d expect in a well‑laid out eCommerce site. [3:06] This was a steel‑framed workbench product for shops and so forth. I find that in that industry, there’s still a lot of, if I may say, traditional business models that are actually making online strategies for a number of companies, what can we say, suboptimal or abysmal maybe would be a better word.

[3:35] This particular manufacturer, their traditional business model was in place in which they don’t sell anything directly to the end users. So their online site is really strictly, essentially product data sheets online, and then you have to go find outlets where you can buy these things.

[3:55] Some of the outlets only have physical stores and not websites, and some of the outlets that have websites don’t have good commerce features. They may not even list a complete listing of this particular original manufacturer’s products.

[4:18] So I wound up going back to Bing or Google, I think I used Bing in this case, and putting in the actual product name and then having to find an online source that way. It was a little bit caught between two worlds.

Shaun:  [4:38] Yes, it’s like taking a step back. There are two industries that you’ve touched on there. One is the manufacturers and two is the B2B traditional outlets that probably haven’t had as much of their business transferred to the online world, so they haven’t had the economic reason to make it as optimal as it should be. We can compare it to the consumer‑facing online businesses.

Hadley:  [5:08] Yes, I think that’s a good point. This is a product category that’s falling. It’s a mixed‑use product because most of the people who would buy it would be industrial B2B customers. On the other hand, some significant portion would be consumer customers like me.

Shaun:  [5:23] I’ve spoken to manufacturers of consumer products who often struggle with this idea of whether they should be selling directly on their online site and competing with their distribution partners in different markets, and often it’s a real issue for them. [5:42] But if they choose to not sell online, they need to have a mechanism to send people to the online stores where people can purchase. It’s going to be to their benefit, and then they’re really going to be helping their partners. That’s really interesting.

Hadley:  [5:58] Yes, and of course in a number of industries there are hub sites that have developed, often from trade magazines or some kind of communications vehicle that served an industry. [6:12] Then the magazine or the publisher of multiple magazines creates a hub site around an industry‑particular product area, even issues, and then links out to individual companies. That’s another very interesting trend that combines elements of commerce and elements of journalism or professional publishing.

Shaun:  [6:41] Interesting. So Hadley, can you give me some background on yourself? How’d you get to be at IDC?

Hadley:  [6:49] Well, I don’t know how far back you want to go. I got interested in computers when I was in graduate school in the late ’70s. [6:56] And so I’ve been in the software business since about 1980 and have worked at both software vendors developing enterprise‑class software primarily and also for analyst firms that look at the different kinds of software and their uses, both on the consumer side and on the enterprise side.

[7:21] Most recently I was head of research at an industry analyst firm called Delphi Group, which was a boutique here in the U.S. that focused on managing unstructured information. Search was one of the key areas that we covered, so I wrote a number of reports in the area of search all from the early ’90s on really until the present.

[7:43] Then Delphi Group was acquired by another big consultancy and things changed a lot, so I went back into the vendor world for a while and worked at Fast Search & Transfer.

[7:55] I started a service within FAST called the Center for Search Innovation, and we worked with customers. We brought together pioneer kinds of customers with our R&D teams and tried to have an idea exchange around directions that search was going in.

[8:13] Then I became a Microsoft employee for a while after Microsoft acquired FAST. Then Microsoft elected to dissolve a lot of the FAST outreach programs, including the one that I was running.

[8:29] IDC is a worldwide technology market research firm based here in the Boston area. I knew a number of the analysts there, and they essentially invited me to come and join them. I’ve been there for the last year or so working in what we refer to as the Search and Discovery Practice.

Shaun:  [8:49] Right. So you’ve had a long focus for your recent career history on search, obviously.

Hadley:  [8:57] Absolutely.

Shaun:  [8:58] What sort of people are you dealing with now? Your customers that you’re interacting with, who are they and how are you doing your research?

Hadley:  [9:10] Well, let’s see. I’ll take the latter part first. IDC has a number of different kinds of research vehicles. [9:17] The one that I’ve been using most is what we refer to as an enterprise panel that consists of about 4, 000 or 5, 000 business people who sign up to answer questions on brief surveys in exchange for access to the information that’s developed in the surveys and a number of other perks that they get by being part of this IDC panel, like attendance at IDC events and so forth.

[9:48] That’s one aspect is to do panel research with large groups of people.

[9:54] Another kind of research we do for companies that are interested in particular problems, and this typically would include the largest software vendors or very large web‑based companies, would be to do custom research in a particular area, which could be anything from, again, some sort of population survey.

[10:16] Or a set of interviews with executives or more handcrafted research, if you will.

[10:25] That’s part of how we do the work, and it’s leading back into who do we work with. I just described the typical customer of a custom project would be a very big software, hardware or web business company.

[10:44] By web business, I mean an online company like Amazon, or Monster.com or even Dell.com, although of course now they exist in both… Now that they have stores, they’re a…

Shaun:  [11:05] Multi‑chain.

Hadley:  [11:07] I guess it’s clicks and mortar, right? Is that what we call it?

Shaun:  [11:10] Yes.

Hadley:  [11:10] Anyway. That’s one kind of set of research customers. On the other hand, a large number of our customers are IT groups within Global 2000‑sized firms who are interested in keeping tabs with the directions that technology is going, are interested in keeping tabs with who are the current vendors that supply software for particular areas that they’re interested in looking at‑ [11:37] Whether it be business intelligence, or mobile device management or a whole host of different areas that enterprises have to manage. Those are the two main types of customers, I would say.

Shaun:  [11:54] Excellent. Thanks for that. On this podcast, we have a focus on online commerce obviously, and so a reasonable subset of your customers in your research touches on online commerce, I would assume.

Hadley:  [12:13] Yes, and we have a service that’s referred to as the digital marketplace practice, which combines a number of analysts from different but related areas. [12:24] For example, there are a couple of analysts that are covering the whole world of online advertising. There are a couple of analysts that cover the area of search. There are a couple of analysts that cover social networks, and consumer social sites and phenomena like Twitter, and FaceBook and so forth.

[12:46] We get together in this digital marketplace practice. One of the main outcomes of this practice has been developing a digital marketplace model that attempts to be a simulator and a predictor for online traffic and online revenue flows, whether they be derived from advertising, or for subscription kinds or for eCommerce kinds of activities.

[13:13] So yes, we very much are engaged in the eCommerce world.

Shaun:  [13:18] Excellent. That model sounds interesting. You mentioned it looks at advertising inputs. Does it also look at the traffic from natural search as part of that model?

Hadley:  [13:34] Yes…

Shaun:  [13:35] It does? OK. Well, that must be…

Hadley:  [13:36] … because the idea is to essentially understand where people are moving online, and how they’re getting from place to place and what they’re doing at the various stops along the way, if I can put it that way. [13:51] For example, the dynamics of the traffic that’s moving through the big search hubs, the GYM companies, Google, Microsoft and Yahoo!, what are the traffic flows there relative to the traffic that’s going to sites like the hub sites that I mentioned earlier or other major sites that are destinations in their own right, like a “New York Times” site, for example, or an Amazon.com site, et cetera?

[14:25] When you add up the traffic to all those destinations and hubs that actually winds up being significantly larger than the traffic that goes through the search engines. Maybe not surprisingly, but at first blush I think people all assume that the search engines are probably getting the lion’s share of the traffic.

[14:43] It’s not that they don’t get a lot of traffic, but when you start adding up all the other sites that are important to people and that they’ve learned how to go to directly, there’s a tremendous amount of business that gets done and traffic that happens without ever touching the search sites.

Shaun:  [14:57] Yes, understood. I know I was just speaking to one of our U.K. reps recently about a customer called Which [?] , which does online reviews of products. [15:11] I think that’s an example of one of those hubs you’re talking about, where people will go there and read professional reviews of products before they make a product decision. Those types of things can be significant influences in the whole buying process.

Hadley:  [15:26] Yes, absolutely. Presumably they use some sort of advertising model. I’m not sure what the business model of the particular site you’re mentioning is.

Shaun:  [15:38] It was a subscription model, but it could have just as easily been an advertising one. I think they chose a subscription model to be seen to be independent of the products they’re reviewing.

Hadley:  [15:51] Right, understood.

Shaun:  [15:59] Just to keep moving on, what are some of the trends you’re seeing through this research that may be of interest to our listeners?

Hadley:  [16:12] Well, you’ll have to forgive me if I’m a little bit colored by the fact that I’ve spent so much time looking at search.

Shaun:  [16:18] Absolutely not, no. I’m there too, so go ahead.

Hadley:  [16:25] The big trend of the decade, so to speak, from my perspective is the extent to which search is becoming more and more central to the way people find… [16:36] It’s not just finding things. It’s navigating. It literally understands the world. People use search to understand the world, and then they use it to get places that they want to go, and then they use it to buy things.

[16:49] So I think that the importance of search, not just as a technology but essentially as a new core part of the customer or user interaction model, if you will, or design is we’re a little bit behind catching up with the importance of search in that regard, particularly the quality of search varies so dramatically from site to site.

[17:18] You can see the sites that have got it, that they can really put search in a prominent place within their web presence and drive a whole lot more business than companies who have added search to their sites as something of an afterthought and are not really taking advantage of the benefits that they could be gaining.

[17:42] But I think that this trend for search to become a more important part of the interaction model is the biggest one.

Shaun:  [17:53] Right. For a retailer that means… You mentioned search needs to be in a prominent place. What else does search need to do in order to leverage this trend?

Hadley:  [18:09] Well, in the first place they’d have to get there. I’m sure you remember that even today, there are still a lot of search sites that don’t even have search on their home page or maybe anywhere on the site. [18:25] When I say that it’s becoming a central part of the interaction model, what I mean is that when a large number of visitors actually use this function, they expect the search to be fast, and accurate, and help them find what they’re looking for and not run into a whole lot of stuff that they’re not looking for.

[18:50] This course puts a challenge on site owners to actually be better than Google, because I don’t know about you but the last time I used Google, a lot of the stuff that came up was stuff that I was not looking for.

Shaun:  [19:02] Yes, exactly. My personal opinion is I think that they have the opportunity to be better than Google because they have much more intimate knowledge about the data that they’re searching than Google does.

Hadley:  [19:20] Absolutely.

Shaun:  [19:22] They know about the structure of it. They know how people are using it. They know the sales information.

Hadley:  [19:28] Right. There’s really this marriage of two practices for the company that’s hosting the site. I don’t mean that it’s hosted on somebody else’s computers, but I mean the people that are publishing the site. [19:45] One of them is the content management or integrating the creation of content, the kinds of words that are used in the content, all the surrounding information that comes with, whether it’s product descriptions or just general information that you’re trying to communicate on the site.

[20:10] The content needs to be rich and well organized, and in more technical terms, very well marked up so that the other practice can be effective, which is the search practice and the understanding of how search engines work in the first place, the importance of metadata to both help organize the information for the searcher and also provide navigation paths once the returns to the search come back.

[20:46] There’s a whole host of tweaks, and tricks and, as I say, elements of professional practice here that can make life a lot easier for users of the site than if that function were not done properly, if you will, or done with creativity and attention.

Shaun:  [21:07] Absolutely. I completely agree with you. Because I live in the world of search so much, I seem to see search everywhere. But in your experience, do most online retailers have a good functioning search, and do you see that as something that they’re improving? [21:36] What are the areas that are most lacking? Is it the speed of the search? Is it the accuracy of the search? Is it the richness of the metadata that allows the search to be organized and provide the navigational paths? What are the key things that are lacking, from your experience?

Hadley:  [21:59] Well, I think that search in general has improved substantially in the last three years in particular. But I think that there are still issues relative to accuracy and bringing back false positives, so to speak. [22:20] In other words, the goal of the search on a particular site where the site publisher really does know their content so well, as you pointed out, the site owner should be familiar with what words or terms people are going to use to search for things on his or her site and be able to provide responses from the search system that are more like answers rather than lists of things.

[22:54] So that rather than having to paw through 15 different products, for example, some of which may be not be related at all or only tangentially related because they share a word in their title or something, but they don’t actually do the same thing.

[23:12] Those kinds of frustrating experiences for the consumer ought to be able to be eliminated. So I think that’s an area, this whole accuracy.

[23:22] Of course I mentioned the tricks and practices, and a lot of this has to do with eliminating certain potentially valid responses from the search results page, because you anticipate that those will not be as relevant as other ones. The other one is using all the various methods for boosting content that appears to be what the user is after.

[23:53] I think the core of this whole problem is that we all need to keep in mind that the search term or the search query, maybe it’s multiple terms, is really the user announcing their intent to the system.

[24:09] So if you can really gauge what the user’s intent at that moment is, and then if they’ve put in “rain gear” or something like that, and you know that you have a great, big catalog of umbrellas and raincoats, that if you can create an experience coming back to the user that’s more like what you think of as a landing page rather than a list of links where there’s plenty of visual information‑

[24:41] ‑it’s easy to comprehend what’s being put on the page in front. There are big and easy to click on handles for pursuing certain paths from there.

[24:51] I think that’s a practice that some sites have gotten very good at, and most are trailing pretty significantly. In other words, there’s a lot of room for improvement over the next couple of years in this shift from search results being primarily in the nature of a list to search results being primarily in the nature of a servant environment for continuing to pursue an area of interest.

Shaun:  [25:18] How much of this do you see as being like a technological solution where the site owner needs to get the right search software on board versus a managing‑your‑search solution where they need to be in there looking at the queries and manually crafting those pages or setting up rules to create that sort of experience for the users?

Hadley:  [25:49] That’s a good question. I think the tendency that we see that’s a little disturbing is that a lot of people hope that by doing the former thing you mentioned‑ [26:00] ‑in other words, hooking up with the right search technology, that somehow all the problems that come up with the latter part, the actual manual work, the hard work of understanding exactly what’s going on in the site, and with the content in the site and with the words that are being used in the site can somehow get short‑circuited or made easy.

[26:22] I think that the technology is not at the stage at this point where it can be made that easy because it doesn’t read people’s minds. Language is incredibly indefinite and will always trick up any kind of machine that’s trying to understand this user intent that we were talking about.

[26:39] So where the site publisher has this tremendous advantage is by looking at patterns of user behavior over time through the search logs and other kinds of web analytics.

[26:56] Because they have the advantage of understanding all the content in their domain that it’s a continual process of fine tuning the interaction between the user, and the intent, and the content and the desired outcome, like a purchase or whatever it happens to be.

[27:15] Though I think that tuning all of that in a very strategic and thoughtful way is the key to running a good online business.

Shaun:  [27:25] Absolutely.

Hadley:  [27:26] Frankly, what we find, we have done surveys about whether people feel that they have adequate skills on board to really undertake these kinds of search‑intensive projects where the main technology really is search and search is the driving factor for putting the information in front of the user. [27:50] We find typically that only maybe 20 to 30 percent of respondents feel that they have really adequate resources internally to do that job themselves, so I think that there’s a skills gap at the moment between what a commerce business can put on their site and the people that they have in house to do the job.

Shaun:  [28:17] Yes. From my experience, when companies do start looking at that type of information, not only can they make the experience better for the users, but they learn a lot themselves about their user intents because they are typically able to interpret the user intent. [28:39] When they look at a search phrase, because they know their domain they know, “Ah, this is what the customer should be seeing when they type that in.”

[28:47] But they also get some surprises in there, and they’re surprised about the language that customers are using. Or they can find that people are looking for products or services that they don’t necessarily carry, and that’s also really interesting information and can reveal opportunities for them.

Hadley:  [29:06] Exactly. Yes, absolutely. I also think that there’s a happy accident that the deeper a company gets into understanding what all those terms and what all the aspects of the user’s intent is, it works very well to help drive what’s becoming another core practice today, and that is various kinds of search marketing efforts or search engine optimization programs. [29:40] Because a lot of the terminology, and this comes back to search being at the center of so much activity on the web in general, but because exactly what you learn about what’s going on in your site can almost be applied one for one to what you ought to be doing with a search engine optimization program, or the use of keywords for adding links or improving organic search placements.

Shaun:  [30:08] Yes, I completely buy into that. The language that people use in site search is very similar to the language that people use when they’re searching the web, and site search logs are one of the best keyword research tools out there for a search marketer.

Hadley:  [30:24] Absolutely, absolutely.

Shaun:  [30:26] Now you mentioned your surveys. I believe you’ve got a survey that you’re doing in the New Year. Can you tell me a little bit about that?

Hadley:  [30:37] Well, yes. Maybe this would be the time to turn the table here relative to questions. [30:42] We are preparing a survey to this enterprise panel that will touch on site search and their level of satisfaction with the facilities that they run into in their shopping behavior or in their web searching experiences across the board. It’s supposed to just on the search engines themselves.

[31:09] I’m wondering what are the questions or the challenges that are top of mind for most commerce companies today that we might be able to incorporate in the survey and shed some light on.

Shaun:  [31:26] With regards to search?

Hadley:  [31:32] I guess the core business problems as well, but yes, specifically with the problems of hooking people up with the products that they are looking for.

Shaun:  [31:42] I think that’s a really good question, because what I see there are a lot of new trends that eCommerce operators are trying to keep up with that they’re working on and working at how to prioritize working on one of these versus another. [31:59] Just to give you an example, mobile is a big trend. Everyone’s talking about the importance of having a mobile version of your site, and I think search is a very big important component of a mobile part of the site, because you just don’t have room to have a lot of navigational links.

[32:19] If you go to the Amazon mobile site, you’ll see that it’s mainly a search box, so there’s some work there to do to work out how to build their mobile site, and how to get that going and the relative importance of that versus say another initiative.

[32:38] For example, we see a lot of retailers including more and more video on their sites. How much effort should they be putting into creating videos of their products to help sell the products and also to market the products because the videos can appear in YouTube, et cetera? There’s a tie‑in to search there.

[33:00] We had a retailer recently who incorporated the videos into the search results so you could play the videos straight from the search results, and they found that that doubled the number of views of the video.

Hadley:  [33:16] Yes, video’s an incredibly powerful tool. There’s no question about it.

Shaun:  [33:25] So one of the problems is working out where to put the resources where they’re going to get the biggest bang for their buck versus these competing trends that they’re seeing happening across other sites and seeing being reported in the media. With a lot of them there’s a strong tie‑in to search as well.

Hadley:  [33:42] Yes. I’m actually working on a report on mobile search as we speak, and one of the interesting things there is that it absolutely requires a change in the interaction model. You can’t look at Google or what you would necessarily put up on your site and say, well, that’s what I’m going to put on the phone, because it absolutely doesn’t work to put up great long lists of things. [34:10] It’s fairly obvious, but then if you’re not going to be able to put up great long lists of things, what do you do, and how do you get the search to be?

[34:17] Now we were talking about how it’s important for search to be accurate, and we didn’t dwell on it, but also fast on a computer screen. But now you’ve got somebody sitting there on their phone, and maybe stuck in traffic and trying to get an answer to something quickly.

[34:33] So now you have to be super accurate and super fast in this limited real estate both from a visual perspective because of the size of the screen and also on a typically slower network connection. So you can’t be sending down a whole lot of stuff in that environment.

[34:52] I think the experimentation with the visual interaction metaphor for mobile search is going to be going on for the next, I don’t know what, three to five years maybe before somebody really latches on what the best model is going to be.

[35:10] A lot of the sites are moving to almost using thumbnails of the site’s results instead of lists, for example.

[35:29] Extending your conversation about including video in the results, this isn’t video necessarily but just the fact that you can put an image in front of the user that they can understand in an instant without really reading particularly is very powerful and helpful in the mobile environment.

Shaun:  [35:47] Yes. With the limited screen space, you really do have to get creative in terms of how you’re going to display it. I agree. The results have to be accurate, because people can’t scroll through lots of results, so you have to have relevant results. [36:06] The navigational paths that you often offer on a big screen are more challenging to offer on a small screen, so the facet selections may be done through a drop‑down box, for example, rather than showing a list of all the facets because there’s just not the room to do that.

Hadley:  [36:27] Right, right. Exactly.

Shaun:  [36:32] There are a number of other options to optimize that real estate, as well.

Hadley:  [36:38] Yes. Another issue for advertisers or for advertising business model sites is how are you going to integrate advertising into the mobile experience? Mobile advertising, the advertising and the search are linked at the hip, if you will, literally, really. [37:02] You have a regular search, and then you have an ad‑match search going on simultaneously. What is going to be the successful display model for putting the little ad on the mobile is another… Is it just a tiny little word with a blue underline, or again, is it an image of a site or a landing page thumbnail?

[37:29] The really rapid increase in the numbers of smart phone devices with slightly bigger screens and a lot better interaction, for example, the touch features of zooming, and panning and so forth, are really accelerating the mobile trend. I’m sure that every online retailer ought to be looking at how to present within that environment.

Shaun:  [37:55] Yes. It’s just one of the many things that they need to be looking at.

Hadley:  [38:01] Yes, exactly right. The business isn’t getting any easier as it went along, you know?

Shaun:  [38:06] Yes. Hadley, I think this has gone slightly longer than my normal podcast.

Hadley:  [38:15] I was going to say I hope you edit the hell out of this. [38:17] [laughter]

Shaun:  [38:21] I do think that we’ll look to wrap it up there, and I just want to say thank you very much for your time today. This has been a little more technical than a lot of our podcasts in delving into search in particular, but it is my passion so I’m willing. I love it. I think it’s been great. [38:44] I just want to thank you very much for your time today, Hadley.

Hadley:  [38:47] Thank you, Shaun. As I say, I hope you edit the heck out of it, and I hope it works out for your purposes on a podcast, even though it’s different than a lot of the ones. [38:59] I did sample some of the ones that are on your site. They’re very interesting, no question about it. But I don’t have that perspective of being a retail site manager myself, so this is obviously going to be quite different.

Shaun:  [39:14] Thanks very much, Hadley. I’m Shaun Ryan from SLI Systems, and that was the eCommerce Podcast. Tune in next time.