Archive for June, 2008

Is Kindle a money-saver?

June 25, 2008

KindleYou’ll very rarely see me talking about new technology purchases as money-savers. Being a geek myself, I certainly succumb to the Geek Tax, buying new toys when they are expensive and watching them drop in price for years after. Personal Finance Wisdom, this is not.

I was struck, then, by Brett Arends’ recent Wall St. Journal article, which asks if Amazon’s new electronic book reader, Kindle, currently retailing for $359, might be a money-saver. Arends looks at two areas where you could save money: on the cost of the books you read, and on mobile wireless Internet access:

First, you usually pay less for books purchased on the Kindle than you do for those printed on paper and delivered to your door. In a completely unscientific survey, I picked an array of 10 popular books and compared their Kindle price with that of the paper version bought from Amazon. These included Fareed Zakaria’s The Post-American World, Ken Follett’s Pillars Of The Earth, Elizabeth Gilbert’s Eat, Pray, Love, to Dan Brown’s The Da Vinci Code. Kindle versions worked out on average about $6 cheaper. (And, of course, you get them instantly.)

On this point, though, he notes, “at a saving of $6, you’d need to buy 61 new books to earn back the $365 cost of the Kindle” (note, the price of the Kindle was slightly higher when he wrote earlier this week). But, he claims, there’s also mobile Internet service included:

if your mobile Internet needs are pretty basic – such as checking email and news, that sort of thing – you can do that too. Most data plans from a mobile network start at about $20 a month.

How does he figure this all adds up?

So if you need rudimentary mobile Internet and you typically buy two new books a month, getting a Kindle could save you $32 a month. Even when you factor in lost interest, that’s a payback period of 12 months on the $365 cost.

Buy two books a month on Kindle instead of on paper, and you’ll save money. Sounds good — but is he right?

I have a number of quibbles with this analysis — I think Arends gets both parts of his assessment wrong, in different ways.

As a book platform, I think Arends understates the potential savings of the Kindle dramatically. For example, he compares the $24.75 price of the new hardcover book Nixonland with the same book delivered through Kindle for $9.99 — a savings of $14.76 for one book. That assumes, though, that shipping the hardcover book is free. Amazon certainly offers discounted or free shipping programs, but they require an Amazon Prime subscription for $79.00 a year, or Super Saver shipping, with a $25.00 minimum purchase (Nixonland would fall just under that).

Assume for a second that you were not a Prime member and did not want to buy anything else with Nixonland. You would pay at least $3.99 for standard shipping (about 3-5 days for delivery), or $11.98 for second-day air, or $17.98 for next-day air. On the Kindle, you’d pay none of those costs, you wouldn’t need a Prime subscription, and you wouldn’t need to add anything else to your order to get Super Saver shipping. Rather than saving $14.76 a book, you’d instead save between $18.75 and $32.74 for one book. Looking at Arends’ average savings estimate of $6.00 a book, including shipping increases that savings to between $9.99 and $23.98 a book (assuming the Nixonland shipping costs are representative, and that you shipped each book you buy individually, which hopefully you wouldn’t!). Best of all, Kindle delivery — nearly instant — beats the delivery time of any of the shipping options, potentially by as much as a week.

There are downsides of buying books on Kindle, though: you can’t share them with others unless you’re willing to loan out your Kindle itself; storage on the device is limited; and more sentimentally, the feel of a well-read, dog-eared, coffee-stained book certainly isn’t the same on a slab of electronics. But let’s continue as gimlet-eyed rationalists.

For mobile Internet access, unless I misunderstand the description on Amazon’s site, the Kindle does not give you a free web browser. Instead, you have to pay monthly subscription fees for the blogs you want to read. For instance, O’Reilly Radar, where I am a contributor, is available for free online, but costs $0.99 a month to read on Kindle. The excellent blog Boing Boing, co-written by Wesabe advisor Cory Doctorow, is $1.99 a month through Kindle. If you read around 20 blogs, you’ll quickly swamp the $20.00 monthly savings that Arends claims, compared to mobile data plans on other devices. If I subscribed to all 190 feeds I read in Google Reader for free online, it would cost me at least $188.10 a month on Kindle — assuming they were all available on Kindle, which they aren’t. So I’m not buying the “mobile Internet is a cost savings” argument for Kindle. [UPDATE: see the comments for more on this.] For the purposes of argument, I’ll count this as a wash, although really I think you’d do better not paying for blogs that you can read free online.

Adding these up, it looks to me like if you normally order books using standard shipping, you’ll need to order 36 books — three a month — before you start saving money with Kindle. If you usually use second-day air shipping, you only need to buy 20 books to save money with Kindle. If you use overnight shipping, you only need to buy 11 books before you start saving — less than one a month. (Again, these numbers assume you are not an Amazon Prime member, and that you’re shipping books individually.)

Is Kindle worth it, then? You can certainly use your ordering history on Amazon to decide for yourself, but the numbers look very good to me. I also believe that wireless delivery of products like books has a real environmental benefit: compared to the carbon cost of shipping a book to you overnight, Kindle is potentially a huge savings of plane exhaust.

All told, Kindle looks like that rare tech device that avoids the Geek Tax and offers a number of economic and other benefits. For myself, I find the first version of the device inelegant, and I’ve had a hard time getting excited about buying one. I do buy and read a lot of books, though, and would love the cost savings it appears Kindle offers. I’ll probably wind up buying one for that reason, and for the environmental benefit I’m guessing wireless delivery would offer.

Welcome, Allese!

June 23, 2008

Last summer, we brought Allese in as an intern to help us take care of the increasing amounts of work at Wesabe. We were psyched that she dove right in and did a great job with her assigned tasks. Even better, though, was that she started using Wesabe for her own finances, and had a ton of great suggestions and contributions for improving the site. Best of all for me, she jumped into Wesabe Groups and started asking questions, posting her own advice, and kicking off threads that turned into great and long-running conversations. Her participation in Groups wasn’t part of her job nor even anything we asked her to do, but right away she made the community better and has been very active in Groups since.

Allese

Allese working on her Latte Factor (photo by Brad Greenlee)

I’m happy to announce that we’ve hired Allese full-time, and that she’ll be taking on the role of Community Manager for Wesabe. For a long time this has been part of my role, and of course I’ll continue to participate in Groups as I have. As Groups activity has continued to climb, though, we’ve wanted to make sure we can answer every question in Make Wesabe Better, and that we’re keeping track of all the great feedback we get from our members. Allese will also continue to post topics and questions that we hear about from members frequently, or that are of interest to her in her own financial life.

Please join me in welcoming Allese to her official role at Wesabe. It’s great when you can start someone at a job by saying, “Just keep doing what you’re doing.”

The Six Million Dollar Search

June 11, 2008

We’ve gotten a ton of feedback and requests about the Wesabe search function in the time since we originally added search as a feature. Our design — okay, my design — was to have one search field with two buttons, one that would search your own personal accounts, and another that would search all the public information on Wesabe. That didn’t work — it was too confusing and people didn’t like it. We’ve also gotten a lot of requests for attribute search — that is, a way to make more sophisticated searches than the basic “anything with this word in it” format. Finally, as Wesabe has grown, the amount of data our search engine covered started to grow enormously as well, and unfortunately we had a number of performance and accuracy problems with our original search engine as a result.

That’s all over now. After finishing up a long run of work on our new Tips tab, Coda put on his surgical mask, took search into the operating room, and made a bunch of “We have the technology — we can rebuild him” jokes. He set about fixing everything about search on Wesabe, and I’m happy to report that almost every one of the requests we’ve gotten for search has now been fulfilled.

We’ve gotten rid of the two-button search interface, and now each tab has its own search field, which searches that tab only. If you want to search your accounts, the search field in the Accounts tab will do that, whereas if you’re looking through Groups, the search field there will only search Groups.

In the Accounts area, Coda has added a very rich set of attributes for searching. You can, for example, search for all of your work expenses that don’t have a receipt image attached like this:

tag:workexpense has:no-attachment

You can search for all of your $100.00 ATM withdrawals in your Wells Fargo account like this:

merchant:atm account:wells amount:100

Or, if you want to make sure you get the ATM withdrawals near $100.00 (say, the ones with a withdrawal fee attached to them), you can search for transactions within 10% of an amount like this:

merchant:atm account:wells amount:~100

If you want to search through your notes on your transactions to find the place you took your friend Sarah, that’s easy, too:

note:sarah

There are many more options available — check out the search documentation to learn more.

Last but not least, Coda rebuilt the search infrastructure so that we have good confidence it can scale with the amount of growth we’ve had over the past year and a half, and a lot more. (Maybe it would be more accurate to call this the “Six Trillion Dollar Search.”) We have some work planned to make the search results display significantly faster, but we’re not limited by the search engine any more — any performance problems left are in other parts of the system.

Oh, and one more thing: all of these search features are available through the Wesabe API, too.

Thanks to Coda for taking this on and making such significant improvements to search on Wesabe. We’ve been making “nah-nah-nah-nah-nah” sounds while searching, now — it’s fun to have all that power available.