Amazon and Apple Just Announced They're Working Together in a Very Surprising Way. (Everyone Else: Be Afraid)

Where did you buy the last thing you bought from Apple? At the Apple Store? Online via Apple.com? Maybe at a retailer like Best Buy or Target, or via your mobile phone provider? 

The one place you probably didn’t buy it: Amazon.com.

But that might be about to change. For the 2019 holiday season, Apple will be selling its iPhones, iPads and other products directly via Amazon

This is a big change, and it makes sense for Apple, which has seen iPhone sales dip and is looking for any advantage. But there’s risk on both sides. The two companies are competitors, and Apple is giving up some customer data by making this move.

Moreover, if you’re Amazon and facing rumblings about antitrust action basically every day, there has to be some hesitation to teaming up with other tech titans. And if you compete with either of these companies, sorry to ruin your Monday morning as you wake up to see them working together.

The upside: Well, if you’re looking for a last minute holiday gift like an Apple Watch, at least you can probably buy it with one click. 

Here’s what else I’m reading today:

The Satanic Temple sues Netflix

This is the kind of headline you have to read a few times to make sense of. A religious organization is suing Netflix for copyright and trademark violations, saying the entertainment giant ripped off their $30,000 statue of a deity called BBBB, and used it in the show “Chilling Adventures of Sabrina.”

They’re asking for $150 million, but they probably already got what they really want: a 10X increase in Google searches for “The Satanic Temple.”
–Bill Murphy Jr., Inc.

Oh, and speaking of strange bedfellows with Amazon

A few months ago, Sen. Bernie Sanders was Amazon’s biggest antagonist on Capitol Hill. Then Amazon raised its internal minimum wage to $15 an hour, and Sanders praised them for it.

Now, he’s promising to introduce legislation  in Congress to raise the minimum wage across the United States to that level (from $7.25 to $15).
–Sen. Bernie Sanders, Twitter

Awww, Black Friday is kinda cute compared to this

Alibaba sold more than $1 billion worth of products in the very first minute of the 2018 edition of Singles Day, which if you don’t know is a roughly 25-year-old Chinese tradition celebrating single people–and the biggest online shopping day of the year.

It’s on November 11 each year (11/11 representing four single people), and this was the biggest in history. By the time China hit Nov. 12, the total sales revenue on the world’s largest online platform was $30.8 billion.
–Arjun Kharpal, CNBC

25 years ago yesterday

Here’s a milestone that went completely unnoticed. Before Netscape, before Internet Explorer, before Firefox, before Chrome, before Safari, before Firefox again, there was Mosaic. The first consumer-friendly browser was released, in version 1.0, 25 years ago yesterday. 
–National Center for Supercomputing Applications, University of Illinois

Criminals ruin something really cool

The U.S. Postal Service has a service called Informed Delivery that lets you get scanned images of your incoming mail before it’s actually delivered. It’s free, useful, underutilized- and apparently not as safe as people hoped. The U.S. Secret Service is now warning that hackers have figured it out and are using it to steal identities.
–Melissa Locker, Fast Company

Cyber Saturday—Coinbase Loves Hackers, Facebook Election Win, White House Video Fake Out

You’re outta here! Facebook said it removed 115 accounts suspected of engaging in “coordinated inauthentic behavior” from its flagship site as well as Instagram in the lead-up to the midterm elections in the U.S. Nathaniel Gleicher, Facebook’s cybersecurity policy leader, said the company had been tipped off about the allegedly bogus accounts by law enforcement last weekend. Meanwhile, trolls have been struggling to spread their misinformation on Twitter, NBC News reports.

Doctor, doctor, give me the news. The White House appeared to share a doctored video as justification for its ban of CNN reporter Jim Acosta. The video in question, which sped up Acosta’s arm movement to make it appear as though he were karate chopping a White House intern, was first shared online by a known conspiracy theorist.

Iran so far away. Banks are on high alert for attacks by Iranian hackers in the wake of the U.S.’s reinstatement of economic sanctions on Iran. The middle eastern nation “might lash out,” as one top cybersecurity executive put it to CNN, which got a glimpse of a major bank’s cybersecurity defense center.

Cylance of the lambs. BlackBerry is reportedly in talks to gobble up cybersecurity firm Cylance for as much as $1.5 billion, Business Insider reported. The business news site’s sources said the deal could happen as soon as next week—although it could just as easily fall apart.

Fun in the sun. U.S. Cyber Command, a hacking-focused division of the military, began releasing unclassified malware samples to the public as part of a cybersecurity information sharing initiative on Friday. The command posted two code samples to the Google-owned malware research repository VirusTotal, including one sample that it said originated from the suspected Russian espionage group nicknamed “fancy bear,” which was best known for digitally infiltrating the Democratic National Committee in 2016.

Naynay on those n00bes.”

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Top 7 Brand Disasters of 2018 and They're All from the Airlines

Every year, I chronicle the brand disasters and brand scandals that did the most damage in the recent months. Previous years have drawn from multiple industries but in 2018 it’s all about the airlines. Here’s the worst of the worst:

1. Bow-Ow (United)

A French bulldog died in April when a United Airlines flight attendant insisted that his owner stow the animal in an overhead bin. The airline tried to position it as a regrettable but unusual mistake. Then the Washington Post pointed out that 75% of all airline animal deaths occur on United Flights. Oof.

2. Deep Doo-Doo (Delta)

Airplanes are not known for their fresh scent but a Delta passenger in October, after smelling something funky, reached under his seat to discover the digested outcome of either an incontinent service animal or a sick old man (depending on the story). According to the Washington Post, rather than have the flight cleaned, they handed HIM some paper towels and a mini-bottle of gin.

3. Whoops, Your Bias is Showing (Delta)

Well-regarded obstetrician and gynecologist Tamika Cross (who happens to be a black female) volunteered to help an unconscious passenger on an October Delta flight. According to the Washington Post, she dismissively told “Oh no, sweetie, put [your] hand down, we are looking for actual physicians or nurses or some type of medical personnel, we don’t have time to talk to you.”

4. Staycation (American)

When a big airline cancels a flight, they typically book the stranded passengers on other flights, even if those flights are on other airlines. In October, however, The Detroit News reported that American Airlines now directs its booking agents to avoid using other airlines unless the passenger is going to a funeral, a wedding or would be forced to stay overnight in a hotel.

5. Race to the Bottom (Ryanair)

You’d think that after a passenger starts screaming racist slurs at another passenger, an airline would 1) intervene and 2) throw the racist off the flight. However, as The Guardian reported in October, bargain-basement Ryanair elected instead to move the victim to another seat and pretend it never happened. Needless to say, some passengers videoed and posted the October incident.

6. Abracadabra (Primera Air)

While one might expect to see a disappearing act during a stage revue, at an airport not so much. But that’s what happened when Primera Air announced they were out of money and “poof” all their scheduled flights suddenly disappeared in October. As the New York Times reported, even the gate agents didn’t have a clue as to what had just happened.

7. Class Acts (American, Delta, Southwest, United)

Things looked pretty bad for the industry as a whole when Forbes reported that “airlines failed to deliver nearly a third of their customers to their desired destinations at, or even reasonably close to their scheduled arrival times.” Then November saw a class action lawsuit filed against American, Delta, Southwest, and United for alleged price-fixing.

Apple finds quality problems in some iPhone X and MacBook models

The new Apple iPhone X are seen on display at the Apple Store in Manhattan, New York, U.S., September 21, 2018. REUTERS/Shannon Stapleton

(Reuters) – Apple Inc said on Friday it had found some issues affecting some of its iPhone X and 13-inch MacBook pro products and said the company would fix them free of charge.

The repair offers are the latest in a string of product quality problems over the past year even as Apple has raised prices for most of its laptops, tablets and phones to new heights. Its top-end iPhones now sell for as much as $1,449 and its best iPad goes for as much as $1,899.

Apple said displays on iPhone X, which came out in 2017 with a starting price of $999, may experience touch issues due to a component failure, adding it would replace those parts for free. The company said it only affects the original iPhone X, which has been superseded by the iPhone XS and XR released this autumn.

The screens on affected phones may not respond correctly to touch or it could react even without being touched, the Cupertino, California-based company said.

For the 13-inch MacBook Pro computers, it said an issue may result in data loss and failure of the storage drive. Apple said it would service those affected drives.

Only a limited number of 128GB and 256GB solid-state drives in 13-inch MacBook Pro units sold between June 2017 and June 2018 were affected, Apple said apple.co/2AXkeEw on its website.

Last year, Apple began a massive battery replacement program after it conceded that a software update intended to help some iPhone models deal with aging batteries slowed down the performance of the phones. The battery imbroglio resulted in inquires from U.S. lawmakers.

In June, Apple said it would offer free replacements for the keyboards in some MacBook and MacBook Pro models. The keyboards, which Apple introduced in laptops starting in 2015, had generated complaints on social media for how much noise they made while typing and for malfunctioning unexpectedly. Apple changed the design of the keyboard this year, adding a layer of silicone underneath the keys.

Reporting by Ismail Shakil in Bengaluru and Stephen Nellis in San Francisco

Roku: Time To Buy Again

After the bell on Wednesday, streaming media company Roku (ROKU) announced its third quarter results. The company beat on the top and bottom lines and again raised its yearly guidance, yet the stock sold off on the news. As this business continues to grow and repeatedly impress, the pullback makes the name quite attractive again.

The company reported revenues of $173.4 million, up nearly 40% over the prior year period and beating estimates by more than $4 million. On the bottom line, a 9 cent per share loss beat by three cents. While player revenues handily beat estimates, platform revenues fell about $3 million short of expectations, and this is the more important part of the business moving forward. This also lead to ARPU (average revenue per user) coming up shy. While Roku has beaten top and bottom line estimates every time it has reported since going public, this was the smallest beat as seen below.

(Source: Seeking Alpha Roku Earnings page, seen here)

Overall, Roku continues to make progress. The chart below shows how active accounts have soared, up 7.1 million in the past 12 months. At the Q3 2017 report, the year over year gain was 5.4 million. This was the first quarter where platform revenues topped $100 million, and this is the higher margin side of the business. As platform revenues become more of the company’s total, overall gross margins rise even though platform margins are down, so the total gross margin jump was 560 basis points year over year.

(In millions. Source: Q3 2018 shareholder letter and S-1 filing from 2017)

The company’s overall loss did increase a bit thanks to higher operating spending to support the growing business, but Adjusted EBITDA swung from a negative in last year’s period to a positive in Q3 2018. Roku also finished the quarter with about $180 million in cash and investments against no debt, meaning the balance sheet is quite strong. I do not see a need to raise additional funds unless the company wants to make a big acquisition or some major capital expenditure.

One of the things I like the most about Roku is that management continues to raise guidance. As you can see in the table below, every guidance item for the full year 2018 is well above where the original forecast was. Should the company’s progress continue in the near term, we could see more than $1 billion in revenues next year, and perhaps a profit too depending on spending.

(Source: Roku quarterly reports, seen here)

Thursday actually marks one year to the day when I first covered Roku, at which point shares were less than half of where they stand now. I was a big fan of the company’s growth, and results have only improved since. Shares that were in the teens skyrocketed to the high $70s, but they’ve lost a third of their value since then. My last article on the name came with shares in the low $30s, so those who bought on that pullback have done very well.

Since everyone likes to look at streaming giant Netflix (NFLX), I mentioned last year how Roku only needed to get 1/10th of Netflix’s valuation to get to an $8 billion valuation. After the recent pullback, Roku is worth about $5.5 billion, but 10% of Netflix would be over $14 billion now, despite Netflix shares nearly $100 off their all-time high. With the revenue picture and account base growing quite strongly, I now think a $10 billion valuation for Roku is eventually possible. That probably equals a price in the mid to high $80s if you assume some dilution, mostly from stock based compensation, over the next couple of years.

In the end, Roku announced another strong quarter, but the street didn’t totally like the results. The top and bottom line headline beats weren’t as large as previous quarters, and platform revenues were a little short of estimates. However, the company continues to grow its active accounts base very nicely, and Roku should only be about a year or so away from hitting a billion in annual revenues. As streaming media becomes an even larger part of our lives moving forward, the recent pullback provides another good opportunity for investors to buy.

Author’s additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Roku forecasts surprise loss for holiday quarter, shares fall

(Reuters) – Roku Inc forecast a surprise holiday-quarter loss and missed third-quarter revenue estimates for its high margin video streaming platform, sending its shares down nearly 13 percent in after-market trading on Wednesday.

FILE PHOTO A video sign displays the logo for Roku Inc, a Fox-backed video streaming firm, in Times Square after the company’s IPO at the Nasdaq Market in New York, U.S., September 28, 2017. REUTERS/Brendan McDermid/File Photo

The outlook overshadowed third-quarter revenue, which beat analysts’ estimates, and a loss that was smaller than expected.

Revenue from Roku’s streaming platform is a closely watched metric and the company has pinned hopes on the segment, which generates profit margins well above 70 percent.

Roku reported revenue of $100.1 million from the streaming platform unit, missing estimates of $103.2 million, according to FactSet data.

DA Davidson analyst Tom Forte said the pullback in shares was also a reflection of expectations being “too high” for the company’s third-quarter results.

STRATEGY CHANGE

Roku’s streaming devices have been facing intense competition from the likes of Apple TV and Google Chromecast.

This led the company to tap other revenue sources, including licensing its technology to television makers and earning a share of the advertising revenue from media companies on its platform.

The company is investing more on content for its recently launched Roku channel and is expanding it to more geographies, Chief Executive Officer Anthony Wood told Reuters.

“We added several news providers in anticipation of the mid-term elections and it was one of our best news days ever.”

Net loss attributable to shareholders narrowed to $9.5 million, or 9 cents per share, in the third quarter ended Sept. 30, from $46.2 million, or $8.79 per share, a year earlier. (bit.ly/2qz97eX)

On an adjusted basis, the company lost 9 cents per share. Revenue rose 39 percent to $173.4 million.

Analysts on average had expected a loss of 12 cents per share on revenue of $169.1 million, according to IBES data from Refinitiv.

The company’s shares were down 12.6 percent at $51.41 after the bell.

Reporting by Munsif Vengattil in Bengaluru and Ken Li in New York; Editing by Maju Samuel and Shounak Dasgupta

The Right Way to Scale Your Customer Support Team for the Holidays

This is particularly challenging if your company is growing significantly year-over-year. How can you predict what your holiday sales will be? And what impact will that have on your volume of customer support tickets over the holiday season?

We recently went through this process with one of our clients, an e-commerce company, and wanted to share our five-step approach.

1. Start planning your holiday customer support staffing early.

Starting early is critical for two reasons. First, training: You need to build in time to make sure your new agents are fully trained by November. Second, you need to build in time to change your plan. If customer support ticket volume seems to be growing by more or less than expected, you want to make sure you can adjust your plan accordingly.

At this client, we started planning in August, and hired our first round of agents in September.

2. Develop a holiday sales projection.

First, you need a sales projection for the holidays.

Here’s the key: Ideally, you won’t just have a dollar projection, but a projection for the number of units sold, number of orders, and the number of customers. Why? These sometimes grow in line with each other, and sometimes don’t.

Maybe your customers are buying more items and spending more money per purchase compared to last year. If that’s the case, the number of customer service tickets may not rise in tandem with dollar sales, but with the total number of customers.

3. Find the right metric for predicting ticket volume.

Next, you need to translate your sales projection into a projection for customer support ticket volume. To do that, you need to find the right metric. Does your customer support ticket volume tend to grow in line with dollar sales? With unit sales? Or with your total number of customers?

For this client, we started with four simple calculations:

  • Customer support tickets / unit sales
  • Customer support tickets / dollar sales
  • Customer support tickets / purchase
  • Customer support tickets / customer

It turned out that customer support tickets per unit sales had the lowest variance over a 16-month period, so we decided to use that metric for predicting holiday volume.

4. Develop a hypothesis for your holiday customer support team size.

Based on those calculations, we came up with a prediction for holiday team size. The initial prediction showed that we needed to scale the team by 3x to meet holiday volume.

This seemed high. We didn’t want to end up under-staffed, but we didn’t want to spend more money than necessary. We also didn’t want to over-tax our trainers. So we decided to take it slow, hire a few people, and re-evaluate our hypothesis a month later when we had a little more data.

5. Test your hypothesis.

We tested our hypothesis in three ways. First, we developed a robust customer support queuing model. This type of model takes into account not just total ticket volume, but when tickets come in. If all your calls and chats come in between noon and 2 p.m., you need to hire more people than you do if tickets come in a steadier flow throughout the day.

The model indicated that our initial hypothesis would be adequate to manage the holiday volume of customer support tickets.

Meanwhile, we looked at ways we could stretch the capacity of our existing team. We considered allowing a higher first response time, and reducing the availability of online chat.

Finally, we evaluated new data that came in during August, September, and early October. Were the initial sales projections accurate? Was the number of tickets rising in tandem with sales?

We ended up deciding to scale the team significantly, but slightly lower than the initial estimate.

Of course, the real test is only just beginning! But we hope we’ve laid a strong enough foundation to adjust our plan in November and December if need be. The bottom line: If you run a high-growth company and you’re scaling your customer support team for the holidays, you have to be flexible. And err on the side of over-staffing — having a few idle agents is better than providing sub-par support to your customers.

China's ties with Taiwan chip firms under scrutiny as U.S. trade war heats up

TAIPEI (Reuters) – Washington’s decision to cut off U.S. supplies to a Chinese chip-maker spotlights mounting tensions over China’s drive to be a global player in computer chips and the ways in which Taiwan companies are helping it get there.

FILE PHOTO: Men walk past a signboard of chipmaker United Microelectronics Corp (UMC) in Hsinchu, Taiwan January 10, 2006. REUTERS/Richard Chung/File Photo

Shut out of major global semiconductor deals in recent years, China has been quietly strengthening cooperation with Taiwan chip firms by encouraging the transfer of chip-making expertise into the mainland.

Taiwan chip giant United Microelectronics Corp (UMC) (2303.TW) last week halted research and development activities with its Chinese state-backed partner Fujian Jinhua Integrated Circuit Co Ltd, following the U.S. move.

Taiwan firms such as UMC have helped supply China with a steady pipeline of chip expertise in exchange for access to the fast-growing chip market there.   

China has faced a shortage of integrated circuit (IC) chips for years. In 2017, it imported $270 billion worth of semiconductors, more than its imports of crude oil. ?

At least 10 joint ventures or technology partnerships have been set up in the last few years between Chinese and Taiwanese firms, according to industry experts, luring Taiwanese talent with hefty salaries and generous perks.

“Such companies will need to also take care to ensure no patent or IP infringement is involved as the U.S. has export control means to restrict support of critical technology,” said Randy Abrams, an analyst at Credit Suisse in Taipei.

Among the most valuable cross-strait partnerships for China would be ones that strengthen its foundry services and memory chip production. Those two sectors require much-needed help from overseas firms due to the complexity of the manufacturing technologies and intense capital requirements, analysts have said.

TRADE TENSIONS

But the technology transfer between China and self-ruled Taiwan has raised concerns amid the Sino-U.S. trade war and escalating tensions across the Taiwan Strait.

China has aggressively used “market-distorting subsidies” and “forced technology transfers” to capture traditional and emerging technology industries, Brent Christensen, the director of America’s de facto embassy in Taipei, told a business gathering in late September.

“These actions are harming the United States’ economy, Taiwan’s economy, and other economies.”

Taiwan is one of the largest exporters of IC globally and many worry the island could lose a key economic engine to its political foe.

Taiwan’s government views the island’s chipmakers’ cooperation with China cautiously and has implemented policies to ensure Taiwan’s most advanced technology is not transferred.

“When businesses go to the mainland to invest in wafer production, they must accept controls including one that requires the manufacturing technology to be a generation behind,” the economics ministry’s industrial development bureau said in a statement to Reuters.

INTELLECTUAL PROPERTY CONCERNS

Cooperation between UMC and Fujian Jinhua came under scrutiny last month, when the U.S. government put the Chinese company on a list of entities that cannot buy components, software and technology goods from U.S. firms amid allegations it stole intellectual property from U.S.-based Micron Technology. Fujian Jinhua denied the allegations.

Fujian Jinhua now faces big challenges to reach commercial high volume production as expected in 2020, industry observers say.

Last week, both UMC and Fujian Jinhua, which was only founded in 2016, were charged with conspiring to steal trade secrets from Micron in a U.S. Justice Department indictment.

“Taiwanese tech companies need to carefully re-evaluate their positions and supply chain arrangements as the tension between the two super powers escalates,” Bernstein analyst Mark Li said.

While China will need at least six years before it can catch up in chip manufacturing, according to some estimates, the scale of its chip-making abilities is already seen as a threat in other parts of the chip supply chain.

Barely 2-1/2 years after breaking ground on a 12-inch wafer plant in China, Nexchip, a joint venture between the Chinese city of Hefei and Taiwan DRAM maker Powerchip, started producing 8,000 wafers a month. Wafers are thin pieces of material, usually consisting of silicon, used to make semiconductor chips.

Nexchip’s main goal is to produce liquid crystal display driver ICs for flat-panel makers.

Using Powerchip’s resources and Taiwanese talent, which make up a quarter of its 1,200 employees, Nexchip is helping reduce China’s reliance on foreign chip suppliers.

With an aim to become “the world’s No.1 chipmaker for display drivers,” Nexchip plans to build three more 12-inch wafer plants and ramp up its monthly production to 20,000 wafers by 2019, according to a person with direct knowledge of the matter.

After visiting Nexchip late last year, researchers from Taiwan’s chip hub, Hsinchu Science Park, said progress at the Hefei plant was a “breakthrough”.

“This will likely increase Taiwan firms’ needs to invest in the China market, and it will be a test for the (Taiwan) government’s industrial policy.”

Reporting by Jess Macy Yu and Yimou Lee in Taipei

257B Ads, 58M Installs Say The Mobile Subscription Economy Is Booming As Costs Drop 50%

It’s getting easier and cheaper to acquire new customers to your mobile subscription-based apps, according to a new study by Liftoff and Leanplum.

How much cheaper?

Think half price. And it’s not even a Black Friday sale.

Last year the average cost of acquiring a new paying subscriber for your mobile-app-driven service was $162.22. Now it’s just $86.99, according to the study, which looked at 257 billion ad impressions, 58.4 million app installs, and 47.4 million post-install events.

“The year-over-year data showcases major momentum for subscriptions,” says Mark Ellis, Liftoff co-founder and CEO. “Now pair that with Apple’s recent report that revenue from subscription-monetized apps is up 95 percent since 2017 … there’s no question that the long-term benefits of the subscription model, in the form of loyal users and stable cash flow, are worth the investment in service quality and marketing spend.”

The biggest opportunity? 

Marketing to women.

While female customers cost 10 percent more to acquire in categories like bookings and reservations, they convert 40 percent more often than men. In apps that offer in-app purchases, women are even harder to attract, but they offer twice the conversion rate of men: 3.8 percent to 1.8 percent.

Bad news for gaming; good news for mobile
There is one caveat to this report: gaming customers are actually getting more expensive: they’re up 56% compared to last year. Adding to the bad news: in-app purchase rates dropped by nearly half as only 2.9 percent of gamers bought something.

That’s actually a sign of mobile maturity, however. 

The “real” economy of actual goods and services is becoming mobile-enabled and mobile-driven. The virtual economy may slow as a percentage of overall activity, but is likely to keep growing as well.

In both, the same is true: Customer relationships matter more than acquisition.

“To be successful on mobile, you need to understand that mobile user acquisition and retention go hand-in-hand,” says Joyce Solano, SVP of Global Marketing at Leanplum. “The best way to protect your acquisition investment and retain customers throughout their lifecycle is by forming a relationship.”

Relationships, of course, are built on communication.

Leanplus, which offers mobile engagement services, says that contextual mobile messaging can increase customer retention by 62 percent.

One challenge: scammers
Scammers have noticed the massive opportunities in the subscription app market as well, and they haven’t missed them. The result is that sneaky subscription apps are stealing up to $4,700/year from unsuspecting consumers. 

Still, reading the fine print is a good idea.

American Airlines Just Explained a Truly Surprising Problem You Probably Never Thought Of. (Their Plan Requires Some American Airlines Passengers to Help)

It’s been a tough road at American Airlines. But the company had cause for optimism after a pretty impressive third quarter this year-;in fact, the best third quarter in American Airlines history, apparently by one metric, with more than $11.5 billion in revenue.

But even in that report, there’s an area where American Airlines says it’s just not doing well enough, according to a recent call with analysts.

They have plenty of passengers, but they aren’t getting those passengers to pay enough.

Far not, they have a plan, American CEO Doug Parker said in the recent earnings call. But they’re going to need American Airlines passengers like you and me to do our part in order for it to work.

Segmentation strategies

Brian Sumers summarized the call and the plan at Skyft:

The airline plans to add a big chunk of revenue by improving its segmentation strategies, selling customers different products, including business class, premium economy and extra-legroom seats, depending on what they value.

It’s already selling the various cabins, but Parker said American will become more sophisticated about how it markets its premium seats and makes offers by next year. 

In other words, they’re not selling just transportation. They’re selling experiences, good and bad, big and small. And they’ll need you to buy more of them.

The hope is that this extra push will translate into an extra $1 billion in revenues, while meanwhile cutting costs another $300 million.

Do you really want skimpy?

This isn’t limited to just basic economy, but it sure is reminiscent of what American said just a few months ago it was hoping to do for economy minded passengers.

Or more to the point, how many passengers come close to buying basic economy, but at the last second upgrade their purchases for more expensive seats, once they’re presented with just how little service they get with a basic economy ticket.

No advanced seat assignment, $30 (at least) to check your first bag, no standby or same-day changes, and no chance of an upgrade.

It starts to feel a little skimpy.

The art of the upsell

So you upgrade, maybe. That’s the spirit.

The upsell rate only went up apparently last year, too.

In August, when American was trying to justify why it was going to let people carry on a bag for free with basic economy, the argument was largely that it didn’t matter, because 60 percent of passengers were upgrading anyway. 

But it seems maybe that’s still not good enough.

All about the UX

If’s not as if American came up with this upselling idea on its own. It’s a highly profitable strategy for its competitors, for better or worse.

That explains why analysts and investors want to know why American isn’t pursuing it better already. And Parker acknowledged that those other airlines “are doing a better job than we can today of making sure this sell-up activity is available to the customers.”

So, the answe  is largely technology, he said. User experience. They need to find the right mix of times and ways to bombard customers with offers to upgrade their purchases. 

And of course they also have to have better upgrades to offer, such as more premium economy seats to sell.

Rest assured, American is on the case. They’ll be adding upsell opportunities and making sure that you know about them. 

And then the rest, my fellow American Airlines passengers, will be up to us.