In my study sample of 150 businesses that ran Groupon promotions between June 2009 and August 2010, 42% said they would not run a Groupon promotion again. Their main reasons were that a significant proportion of Groupon redeemers are extremely price sensitive, barely spending beyond a discounted product’s face value. Not surprisingly, repeat-purchase rates at full price were also low — just 13% — for these businesses.

It goes without saying that Groupon could definitely design to solve this problem, but it’s going to take a different perspective that they have now.

Most of the social games we’re seeing today are largely about ‘grind and reward’; you have to farm to get a currency (grind) and then you can trade currency for that little special something to show off to your friends (reward). The props are different, but the mechanics are largely the same. The games are really approachable because anyone with enough patience and tenacity can grind out goods, and the experience is satisfying because in some small way, you’re earned for that reward. In a society of complex tasks and relationships its satisfying the same way cleaning your house might be, or working in your yard. From a distance its mockable, but the experience is real. There are millions of people grinding on virtual farms and frontiers even as you read this. The rewards are satisfying too; people pay real money to buy virtual currency to skip grinding out their rewards.

In certain circles, people have a problem with these sorts of games. You see when you have a grinding mechanic in a game and your repeat the same action over and over, it starts to feel like a little bit of an addictive mechanism. Players are sure to go back to their farms everyday to play and earn goods (and the games are designed to promote that). Just like mindlessly dropping tokens in a slot machine, players head back to their farms just after the cyber veggies have ripened to retrieve them and sell them. Zynga is the darling of the startup world because they’ve figured out how to do something no one else has; they’ve got an algorithm that makes people predictable.

Lately, I’ve been wondering if there’s a way to redesign some of these game mechanics. I’ve been wondering if there’s a way to navigate the tension of making the game exciting enough for people to play often, but make it rewarding and diverse enough and get rid of the grinding. I think if the game designers flipped the scarcity model in the game they could unlock something completely new, I’ll explain.

So in Farmville, the scarcity model is based on currency to purchase ‘things’. It takes time to earn this currency and this is where Zynga wins. They’re betting you’ll dump real money in the game so you won’t have to wait to get your reward. I’ve been wondering what it would look like if the game itself was ephemeral. What if every two weeks there was a new and different adventure in Farmville you could play? Like what if every two weeks they added a level? During this adventure, much of the game play could be the same, but you’d be playing because at some point that level will disappear. With the massive adoption of some of these games, you could imagine releasing new levels that would drive the same level of interest as Harry Potter movies. You could imagine developing rich story lines that rival Mad Men. As you push toward a serial model, you create social games that could be truly social events; everyone can celebrate because everyone starts the level at the same time. Now, instead of everyone experiencing Farmville in a sad cyber silo, they can post about the different activities or story lines going on in the level. They will have a reason to connect around content. Then much like Facebook itself, the experience will drive repeat visits, the community will help drive rewards the games can stop treating people like gambling junkies.

Right now social gaming seems to be about taking proven game mechanics and replicate them over many themes to drive growth. But if the beauty of social gaming is an easily deployable platform and a vast audience, why not create stronger communities around the games? Why not give players reasons to connect? Why not have challenges that players have to work together similar to boss fights in massive multiplayer games?

Trust me, this is the way this space will move forward. There is no way your friends mom is going to farm purple cows for the next 5 years. But if social gaming gives her a platform that she can connect with the story the same way she did that last season of Desperate Housewives, lets her connect with her friends about the experience, and walk away with unique badges that help her boast about being part of a community, that is the way forward.

@LenKendall – I’ve got Park Place for McDonald’s monopoly. If you have boardwalk I want to be your friend

This made me think about how times have changed. When McDonald’s Monopoly was originally designed, the world wasn’t connected. So the possibility of you finding the elusive Boardwalk piece to complete your set and win millions was extremely slim. Today, in the connected world, I wonder if you would have a better chance? (Think Lazlo Hollyfeld.)

Ionically, from McDonald’s perspective the probability of you winning today was the same as it was 10 years ago. McD’s releases 3 Boardwalk pieces into the world and those pieces divided by the total number of play pieces released is your probability. The underlying assumption is that the only pieces you can play are the pieces you earn through buying fries/drinks/burgers. It doesn’t work that way anymore, (and hasn’t for some time). In 2007 people were selling pieces on eBay. The contest just launch and nothing’s changed..

The best inspiration/example to explain the difference between yesterday and today is the DARPA balloon challenge this past December. DARPA wanted to know how fast a networked group of people could solve a large-scale, time critical task. To learn, they offered $40k in a challenge that involved releasing 10 8-foot balloons in secret locations across the US. It took a team from MIT less than nine hours because they created a pyramid scheme around the challenge. Before the challenge they issued the following message:

“We’re giving $2,000 per balloon to the first person to send us the correct coordinates, but that’s not all — we’re also giving $1,000 to the person who invited them. Then we’re giving $500 whoever invited the inviter, and $250 to whoever invited them, and so on…”

So imagine if a networked entity (like 4Chan) decided to unleash the same wrath on McDonald’s that they did on Time’s Time’s Person of the Year. There are already Facebook and MySpace groups with the same intention. There was a Andriod app in the UK for the last contest.

Let’s say only 5% of McDonald’s customers are capable of pulling of this sort of collusion, should McDonald’s design the game differently? (It would cost the same either way.) Should the game be built for the connected world? Individually, those consumers aren’t that significant, but collectively they could screw the game to the wall.

I’m sure McDonald’s has all sorts of rules to prevent this sort of collaborating, but maybe they shouldn’t? The whole contest is about marketing and buzz. maybe they should invite people collude. The cost to McDOnald’s would be the same, but the engagement from their consumers would be radically different. They would reframe their brand in an entirely different context, you would have stories celebrating how people were collaborating to win. The game would be about collaborating to win, not gobbling more McDonald’s. It feels like the publicity alone would reach new audiences and meet our culture where it already is.

According to the foreword in the report, the author ( Heather LeFevre ) found herself in a pretty normal predicament; she felt she was underpaid, but couldn’t prove it. So instead of sitting on her hands, she put together an anonymous survey and sent it out to her network inquiring about their skill level and pay scale. She promised to share out the results and she’s been conducting this experiment for a few years. So, with a cheap web survey and a decent address book, she completely turned an age old process on it’s head.

This is pretty inspiring for me for a few reasons. First, instead of wringing her hands that she didn’t have the information to figure out her problem, she just went after the data. Instead of reinventing the wheel, she used simple tools she had at her disposal- an anonymous survey and an email. The data we don’t have often seems to be the first roadblock to progress; we don’t start because we’re not sure. This is such a great example of how to keep it simple and get it going.

Second, she solved for her problem, not all the world’s problems. If she would have stepped back and thought to herself “this is a big idea, how can create a salary report for the entire industry” she probably would have failed. Even limiting to the industry, she probably wouldn’t have gotten enough responses to complete the first report. By keeping the effort small, she could actually engage her audience. There are salary comparison websites all over the web (Glassdoor.com, Salary.com). These sites promise to share salary data, but they never seem to get enough scale to be useful. The idea behind the concept is so big people don’t know where they fit in the process. I love how she used technology to amplify her effort and didn’t make building the tool the object of her project.

There’s a big idea here for me. It’s the same thing that drove the success of Facebook (and social media in general). How can you use technology to amplify the network, connect people and then get the hell out of the way. The Internet isn’t much different than a good house party- if you can set the stage for people to interact, the party will usually take care of itself.

The site seems to have built some pretty interesting ideas around investor transparency – you can see current holdings and trades, investors are rated on returns over time, etc. The metrics aren’t so different from what’s offered by mutual funds (at least on a quarterly basis), but there’s something very powerful about the service being framed around an actual person. It also allows KaChing to position themselves as an interesting alternative against this big, evil, opaque $10T mutual fund industry.

On the face of it, it seems like a pretty brilliant service. This total transparency puts you ‘in control’ of your money. Doesn’t everyone want more control? The truth is I have a job, and when I pay an investment service, I’m paying them to watch my money, that’s their job. I pay them for a service, you get the idea. Now that bit aside, I think KaChing’s ability to tell a very simple, human story is an indication of a bigger trend to come in financial services.

Financial Services is pretty much an arms race. For the most part, financial service providers do they best they can to offer the most attractive services while exposing themselves to the least amount of risk, and charging as much as their competition will allow them to get away with. (I know that sounds cynical, but let’s just call it like it is). What KaChing could be evidence of is that people want/need/will-go-out-of-their-way to invest on their terms.

People cross a confidence chasm when they make an investment. The big trick is how can service providers help them feel more secure when there’s inherent risk at play. Would it help if I boiled the offering down to an actual person (instead of a faceless mob of traders)? Would it help if I could see any and all historical trades to see if my provider really walks the walk? Would it help if I could compare across money managers so I can align on investment philosophy? Would I just like to be able to scratch the service (not that I would, but I could)? Would that feeling of control help me cross the confidence chasm?

The thing is KaChing isn’t even promoting all these types of interactions – they aren’t a mutual fund, they’re an investment portal. But because the service starts with a certain amount of transparency, they create all these interesting byproducts around trust and possible pretty compelling investment interactions. Those interactions don’t have anything to do with what I invest in, but rather how I invest. I’m hoping that this site and a handful of others will start to mold financial services into a very different beast in the next 5-10 year. I think it will be a cocktail of new service providers, and new visualizations that help us slice and interpreting all the data and transactions going on. My bet is that the big guys will be compelled to offer similar services, or they’ll wither because they force everyone to view the world as they view it.

Reason 1: The denial-of-service attack that brought Twitter down, could have awoken a sleeping giant – the fact that Twitter is a single point of failure. If that service goes down, the fun stops…and the internet hates it when the fun stops. This Wired article covers some of the particulars, but this sounds similar to something I wrote a few months ago. Mark my words, this event will ultimately spawn the services that displace twitter. Competitors won’t compete directly with Twitter, they’ll just begin to wrap/mask it.

Reason 2: Tweens aren’t Tweeting. I had seen from some of our internal research that Twitter just wasn’t resonating with younger users, but now these reports corroborate that fact. For me this is interesting because (if this service becomes more than a fad) it will be the first service that a younger generation didn’t bring to an older generation. It’s another incident of technology moving in a bidirectional pattern, (which means our society is reaching some comfort/satuation point with technology, it’s no longer an emergent/youth thing). Clay Shirkey had another great example of bi-directional technology movement in his excellent TED talk (the first story, the one about elections.)

As an aside, here’s a great story of how the Twitter was born. Oddly enough, there was a team in pace to build a different piece of software that ultimately became less and less promising. They had to come up with a different idea mid-stream.

My colleague, Diego Rodriguez commented that Twitter works a little like MMPORGs like World of Warcraft. From a distance, it just looks wierd and socially strange. But if you get into it and try to understand all the underlying principles and interactions, it’s infinitely fascinating. (I’m paraphrasing what he said, but I think he’s dead on.)

So, I’ve been struggling with this Twitter thing for a while. It’s the first piece of technology to gain lots of users that just didn’t feel right to me. I get all the interactions, I get the viral part, I just couldn’t see anything substantive. It’s massively popular, but besides that I can’ see where it’s going (and, like Twitter, I decided to just ignore the “what’s the business model question”).

This post from Grant McCraken has been hanging out in my browser for a few weeks. He has a fascinating point comparing Twitter and the social conventions of puns. I’ll spare you from quoting the whole post (please read it), but this sentence has had me churning since I read it.

Maybe we groan at “twitter” because it represents a cultural confusion, a semantic overload, an immensity of messages too much for our frail cognitive capacity.

During a long, slow, wet jog this week, everything came together for me. I was thinking about how Twitter is mainly people just posting about moments in their lives. Like all flavors of personality, people post for all types of reasons…conversation, promotion, vanity, informational, and on and on. The fascinating thing is because the medium is pretty open, people post for many, many reasons. On the other side of that, there are people read tweets for almost a completely different reason. (I get that there are actually conversations going on, but there lots, and I mean LOTS of people just noodling about their day.)

On the buy side of the equation, people have to opt-in to hear you. So by definition, everyone gets exactly what they asked for. Wannna hear about aplusk, go right ahead, you won’t drag me along with you. Readers can also do LOTS with those little posts. They track activity, personal interest, entertainment, etc, etc. It’s like someone taking the classic communication model and breaking it to bits – lots of messages going out, but they aren’t going to anyone really….and people are reading lots of messages and in many cases they aren’t reading from anyone specifically.

I was wondering, when you post for one reason and people consume for different reasons, is that breaking the convention of communication tool? You use tools to get things done. Hammers sink nails, emails deliver communications, wikis allows group editing. Twitter is different, you can’t exactly control what’s going on after you post…it’s a little like releasing a bird in into the wild. What happens after you send is beyond you. There’s so much flowing into this river of communication, you can’t be sure anyone will read what you write. If they read it, you can’t be sure they aren’t reading for a different reason than you intended. (You didn’t communicate to them, they opted into what you said…subtle but huge behavioral difference.)

It sort of offends the sensibilities to say it, but Twitter (or micro-blogging) feels more like an extension of self, less like a tool. FaceBook is close to being an extension, but it’s still filtering to your friends, it’s not completely open, definition in the communication. Maybe I’m getting too caught on the ‘tool’ versus extension thing, but the behavior is significant.

I’ve done a lot of work around mobile phones, and I’m always fascinated that people feel like their phone is an extension of self. There’s the image component, but more importantly it connects them to everything, without it, they’re crippled. Twitter seems to be working in a similar capacity. So if this is a significant behavioral evolution (and it could be a total fad), can one company be in center of it all? In this open, networked world, if this type of communication is bigger than any of us, shouldn’t it be bigger than Twitter?

This morning I saw a presentation from a student at Rice advocating for an open micro-blogging model. He draws a nice analogy between tweets and email and Compuserve and Twitter. He built an implementation of the open platform and he’s hosting it for others to learn from.

Maybe it is bigger than us…