As 2012 comes to a close, I have reached out to top technologists working on personalization solutions and technologies. I want to hear where they think the industry is headed, and how 2012 has advanced the art and science of personalization.
Avail, based in Malmo and focused on retailers, is the pioneer in recommendations and personalization services with more than a decade of delivery. Pontus Kristiansson is the co-founder and CEO. He blogs here.
Question: How has the recommender systems market changed in 2012?
The most profound change is that recommender systems (or personalization platforms as we call them) reached mass-market acceptance. Virtually all the early adopters have now in-stalled some form of solution – in fact, some of them are already revisiting their supplier selection, because of the amount of new functionality available. Instead, most of the demand in 2012 came from the ‘mass market’ – for example, large but slow-moving multi-nationals, many “bricks and mortars” opening up online and lagging sectors such as travel. Recommender systems have finally become a box on the e-commerce platform checklist.
For us as a supplier, the competition has also matured. When we entered 2012, it felt like everyone was claiming to do personalization – be it A/B-test providers, search engines, web analytics providers, email service providers, and even advertising networks. We were worried that retailers wouldn’t be able to see through the confusing competing claims. But actually our concern was unfounded – in an the majority of supplier selection processes we’ve been part of, a pureplay personalization provider has actually won the bid. I think many of these competing segments have realized it takes more than just an algorithm to win and retain customers.
Question: What are your proudest accomplishments for 2012?
As a company founded in 2001, we have already lived through several financial crises. But 2012 may have been one of the worst years ever for European retail. We have seen some of the largest retailers go bankrupt – household names like Comet and Game. And many more are struggling.
Given that macro-economic context, we’re extremely proud of having continued to grow both sales and profits significantly throughout this year. We’ve signed new customers, and even more importantly, we’ve resigned and extended our partnerships with several of our largest customers. We’re now a company that is no longer reliant on venture capital, and any incremental revenue growth translates immediately into investments in product development and customer service.
From a product perspective, we have spent the year refining our cross-platform personalization platform that we first launched in 2011. We can now power personalized advertising, merchandising and emails using a single installation, and a lot of the time this year has gone into making it more user-friendly and integrator-friendly.
Question: What part will recommender systems play in enabling an increasingly personalized customer experience?
A state-of-the-art personalization platform is absolutely essential to provide a great customer experience when trading online. Once you pass about $5-10 million in turnover, or go beyond a few hundred SKUs, there is no other option. For some situations, like personalized advertising or retargeting, which has shown such fantastic results, it is the only option.
Question: What does the future hold for recommender systems and personalization?
We have been saying for years that we’ve only begun to scratch the surface of what is possible from a technology perspective. Personalization platforms are getting smarter and smarter – they’ve already beaten us humans when it comes to deployments at scale.
But there is still so much that can be done in terms of understanding and convincing the shopper. For example, most recommendations are still centered on individual products. The customer journey is much wider than that. What if fashion retailers could recommend other brands of interest, or shoppers with similar interests as you, for example? Or travel sites similar locations, not just similar hotels.
Another example is retargeting, where the product selection and banner design is still really basic – most often my last viewed products flashing through a carousel. It might win you a 0.5-1% click-through-rate, but what does it do to the other 99% of viewers? We believe that retargeting could, and should, be much more controlled and sophisticated.
Retailers really need to understand and embrace the possibilities that personalization gives them. Hopefully, when you look back at today’s e-commerce personalization a few years down the road, it will feel a lot like how browsing websites from the Netscape era makes you feel today.