As I laid out a few weeks ago, it seems pretty likely that it was Apple that leaked much of the information to The Wall Street Journal about the tablet device prior to its launch — including the bogus $1,000 price from “analysts.” Later, a former Apple employee corroborated this.

Why would they do this? It’s simple. As I said at the time, if they plant the idea in peoples’ minds that a product will be $1,000, then release it for significantly cheaper, it’s a huge win for Apple. So when Jobs announced the entry-level iPad would be $499 yesterday, it was an absolute home run.

I have said for a good while that Apple is purposefully leaking "information" (mixed with misinformation) in just the right doses and intervals to keep the launch mania pot stewing, ending in a rolling boil crescendo right at launch.

(See: The Apple Tablet And Planned Insanity and as early as 8/08: Apple’s "Magician" Archetype Branding Revisited: Good News – Bad News .)

Now when it comes to seeding these price point speculations, they added yet another twist I’ve previously reported on: Decoy Offers or Decoy Pricing.

What it boils down to is that since all price perceptions are relative to a given context (ALL meaning arises in context by the way), if you can create a context where the price point at which you eventually offer something appears low, you will sell a lot more.

To quote my prior post:

Dan Ariely’s excellent "Predictably Irrational" talks about such contextual "decoy offers" that can boost sales for the item the seller really wants people to buy. As an example he uses a past offer by british business magazine The Economist:

It had listed $59 for on-line access only, $125 for print-only, and $125 for print & Web combo subscriptions, and had thereby significantly boosted the number of the expensive combo subscriptions sold (vs. test offers that omitted the seemingly non-sensical $125 print-only option)!

Obviously Apple just took things a step further: Since the Decoy Offer is not expected to be taken by anyone, it really doesn’t matter if you ever really formally write it up anywhere. Just introduce a high price point via a leak and nurture it (by not disputing the rumors) for a while, then triumphantly announce that the thing is actually going to cost HALF that.

If there had been no context of the prior (seeded) expectations, then the announcement of the entry-level iPad costing $499 would have been only referenced against other things in the consumer’s/prospect’s (that includes you!) mind:

Prices for other electronics items, other computers, other Apple products, asf. And the comparison may not have been favorable, or, a wash (no signal one way or the other).

Instead it was compared to a price point that for many months had already been talked about by all and sundry as reasonable, maybe high, yes, but definitely in the realm of the possible.

The expectation that the iPad was going to be a rather expensive and substantive device became more and more firmly established in people’s minds everyday this way. Now if you announce it at HALF, everybody’s knee-jerk reaction becomes: "This is a bargain!"

One more thing that Apple pulled off here is to establish the low $499 entry-level price as an ANCHOR price to pull this stunt off. Even though most people will spend substantially more for the iPad they really want, with 3G wireless and not just Wifi, and with more memory storage.

I doubt apple expects to ship too many of the $499 iPads. In essence, they created yet another decoy offer!

Writes TheNextWeb in I Call It The iLetdown – Why The iPad Missed The Mark And Blew Its Big Day:

Getting right into it, the lowest price for the iPad point is a mirage. A non-expandable device that has a total of 16 gigabytes of storage? Assuming a usable 15 gigabytes of space, I can fit less than a third of my music onto the device. Excellent. And zero percent of my photos. And videos. And apps, of course. So to say that Apple has created a mass market tablet for $500 is a little disingenuous.

So really what we have here is a Double Decoy, so to speak…

In the lengthy post he argues his "basic premise [...] that the internet is not replacing advertising but shattering it", which due to its sweeping nature definitely warrants further examination. The post as of right now has generated well over 200 comments, on a Sunday, so it obviously hit a nerve.

Among other things, Professor Clemons makes the following points about advertising both online or via traditional broadcast media:

Consumers do not trust advertising. Dan Ariely has demonstrated that messages attributed to a commercial source have much lower credibility and much lower impact on the perception of product quality than the same message attributed to a rating service. Forrester Research has completed studies that show that advertising and company sponsored blogs are the least-trusted source of information on products and services, while recommendations from friends and online reviews from customers are the highest.

Consumers do not want to view advertising. Think of watching network TV news and remember that the commercials on all the major networks are as closely synchronized as possible.  Why?  If network executives believed we all wanted to see the ads they would be staggered, so that users could channel surf to view the ads; ads are synchronized so that users cannot channel surf to avoid the ads.

And mostly consumers do not need advertising. My own research suggests that consumers behave as if they get much of their information about product offerings from the internet, through independent professional rating sites like dpreview.com or community content rating services like Ratebeer.com or TripAdvisor.

While I would agree with all three points made, and would count them among important caveats for anyone choosing to advertise for anything in this day and age, I disagree with Professor Clemons’ basic premise. Here’s why:

I would argue that none of the major "Old Media" players online (or for that matter none of the "New Media" either) are anywhere close to having efficiently monetized their page views. Everyone is still clumsily fumbling around when it comes to intelligent targeting of ads, both as to offer theme, as well as to offer pricing.

(Or rather mostly lack thereof, as when trying to employ Madison Avenue "image advertising" without any clear offer being made. Which, if it ever worked on TV, etc., certainly isn’t working online. In fact, online it may increasingly create a negative image of a company/brand/product as "someone" who just doesn’t get it).

This is astonishing, when all it really takes is some common sense about selling people stuff that makes sense in the CONTEXT of what they were already doing.

First, let’s get clear on the fact that an article or opinion piece in e.g. the New York Times provides a lot more pointers as to readers’ state of mind/interest than most Google queries ever could (as do Web videos posted on such sites), so the failure to target properly is in part simply a form of laziness.

While it is true that a news reader does come with, on average, less intent to buy anything compared to the problem/solution mindset of many search engine users, the data we can glean from the readers of an article, especially the LONGER they stay on that page reading, is much richer.

They must be interested in the subject matter of the article, and will tend to approve of the author and likely his general area of expertise. They will also be in a news or opinion mode depending on the piece. So what you should offer them in this case is more news or opinions RELEVANT to the topic at hand. Make the information offered exclusive and/or in-depth, and make the offer cheap enough to ideally keep it in the range of an impulse purchase (offer a Paypal option to keep things simple and secure in the reader’s mind).

For example, German Newsmag DER SPIEGEL was selling in depth dossiers from their archives (including PRE internet!) for a few bucks at one point, not sure if they still are.

Sell books (more INFORMATION) related to the topic at hand, in fact, some newspapers ought to be able to do OK just as an Amazon super-affiliate (earning 4% or more on the referral to book or similar pages on Amazon). Especially when compared to the poorly/non-targeted ads they are now showing, e.g. I saw a comparative car insurance ad placed against a financial opinion column. That connection can only be called tenuous at best.

For another example, just earlier today I viewed a video excerpt from the Today Show on MSNBC.com about micro-blogging service Twitter going mainstream, and they served up an ad for KRAFT dressing or something like that as a pre-roll ad. Completely pointless and a waste of my time and theirs, but in reality this kind of thing is still totally common, on MSNBC.com, Hulu.com, etc. Everywhere.

Basically on all Web properties of Old Media companies (and most New Media companies for that matter). It is still the standard handed down from pre-internet TV advertising days. It’s as if content awareness and keyword-based targeting had never been invented yet…

What if they had served a super short pre-roll ad that said: "Stay tuned after the end of the video, we’ve got a major surprise relating to Twitter for you", and then in a post-roll ad try to sell me something related to Twitter, social media, smart phones (to post to social media from my phone), etc. etc.

That would make at least some marginal sense. Getting me to opt in to a list by offering a free useful/in-depth report e.g. on how Social Media is changing the world, and then try to sell me off of there would be even smarter. Remember, it’s difficult to go "from Zero to Sale" in one step, especially if the price point is outside of "impulse purchase" range.

Or better yet the ad could attempt to hand me off to the account/profile for KRAFT foods on Twitter in order for me to connect there, maybe offering a special gift/incentive for doing so. You get the point, the only limit here is your imagination guided by basic common sense and direct-response principles.

By the way, if you’re not capturing prospects’ email addresses and then marketing to that list, you are making the biggest mistake of all. Back to the opinion piece/columnist example, they should all have big, fat lists ranging in the 100’s of thousands if not millions of subscribers (and the NYT in this example could retain an "ever-green backend" commission from the columnist on any follow-up sales via such a list being built for the columnist).

Also, there should ALWAYS be a big bright ad for the columnist’s current book placed for crying out loud, and if you’re really smart you’d switch that ad out every 20 seconds or so (motion drives attention) to an offer for… the audio-book version, earlier books, "Columnist XYZ sayz…" quote mugs, T-shirts, etc. etc.

Anything will be better than what they are doing now. It bears repeating: All it takes is some common sense about selling people stuff that makes sense in the CONTEXT of what they were already doing.

The bottom line is, any online content property like the NYT simply needs to do a lot more with all of the attention that it already has. In an information economy, attention is the only scarce resource. And they happen to already have plenty of that very resource. It is a CRIME to fail to monetize it efficiently.

To bring it all the way back to Professor Clemons’ post, while I will agree that advertising may currently be largely failing online, in my view this is due not to some basic law of the internet (because there is a good number of people successfully marketing online), but to the fact that it mostly hasn’t even been TRIED, in any intelligent reading of that word, by the usual suspects of major media.

But what makes Google’s new "sponsored videos" feature on YouTube even more relevant is today’s news that YouTube searches now represent the second largest search engine in the world according to ComScore, ahead of both Yahoo and Microsoft’s MSN/Live! So there should be ample room for YouTube to generate profits for advertisers and in turn for itself (Silicon Alley Insider estimates that it could add $1B to Google’s bottom line).

However, as I began to lay out yesterday, there are a number of caveats that need to be kept in mind by the internet marketer looking to take advantage of this opportunity:

1) Marketing within Social Media (vs. search ads PPC) is generally tricky due to a deeply rooted differentiation by most people between social and business contexts: People don’t like them mixed, and can react very negatively if they are (read Dan Ariely’s excellent "Predictably Irrational", chapter 4 "The Cost of Social Norms").

2) So if you are going to market in any social context, you need to get the tone and the context just right, else you are not only wasting your ads, you are likely hurting your brand. The backlash may also be much stronger than in other situations, because you will be dealing with a perceived violation of social trust.

Whatever initial offer you make needs to still fit into the "friends" context somehow, or else be so targeted that the prospect truly sees your offer as a form of "friendly service", e.g. if you are offering something that would help with a social task they are about to undertake, like offering flowers at a special price if someone is surmised to be going on a date, etc. (judging from e.g. a Facebook "action" of theirs).

3) While YouTube is overtly the least directly social (compared to say Facebook, etc.) and instead more entertainment oriented, the social aspect of sending/receiving video clip links to/from your friends is still clearly there. So to stay in tune with the viewer/prospect, you still need to get the CONTEXT just right:

If the search keyword (or individual video for that matter) is an entertainment vehicle first-and-foremost, then offer them more (hopefully related) ENTERTAINMENT products, NOT shoes or cars or deodorant. This goes for pre- or post-roll ads as well by the way, which prospects tend to gladly view IF they have something to do with the actual video content requested.

With more educational keywords/videos, there may be more latitude to offer things, though they still need to be related and represent a LOGICAL follow-up, else your sponsored video will get largely ignored/filtered out by the prospect just like most other ads (even though, as I said yesterday, Google appears to be embedding the ads very discretely, so that they don’t scream "ad" vis-a-vis the other video content).

So the formula would be, create videos that are highly relevant to your keywords, while also being disruptive enough to get attention.

When social trust is violated, as has been very broadly and shockingly the case over the last month or so, the instinctive psychological reaction of human beings is revenge.

And while that may still sound rather pedestrian, the corrolary is where the proverbial rubber meets the road. Because the emotional state of revenge includes an element that says, "we want to hurt the perpetrator(s) of this breach of social trust, EVEN if it ends up hurting us in the process."

If you take this to be the definition of revenge in contrast to say "normal" anger or even rage – which do not include this self-destructive element outright, though they may of course often go down a similar path -, then it is clear why our instinctive response to this financial crisis and the various remedies such as bailouts (whether they be perceived or actual) is so dangerous:

We are literally prepared to undergo further pain personally, if only there could be revenge taken on the "greedy Wall Street executives" et al. by letting their companies go under, and so forth. The sentiment is very much like that captured in the old proverb: Cutting off your nose to spite your face.

I am not trying to make an economic or political case either for or against anything that has been going on since at least September 15 (though there is much to be in disbelief or even cynical about), but the reality is that revenge (or anger) is a very poor basis from which to operate or from which to make important decisions for your business, your loved ones, or yourself. Because it clouds our judgment.

If you have any means to do so (Business Mind Hacks coaching is one of the ways), it would best to let go off the anger and/or feelings of revenge, or to at least set them aside while you are trying to make important decisions or take important actions.

Best wishes in "interesting times"

- Alex Schleber

1) I had thought the Nano might go to $99 from $149 in line with Apple’s new, more populist "recession pricing" ideas they applied to the iPhone. Then again, as the undisputed market leader (73%), you by rule have premium pricing power, although it seems like it could have put a permanent nail in the coffin of all competitors (Microsoft’s Zune apparently currently only has 2.4% marketshare).

2) Thought that the Touch (entry-level now priced at $229) might be put at $199 for the same reason, the psychological impact of going below the ‘2′ should not be underestimated, as recently proven by the strong iPhone 3G sales.

Then it hit me, the Touch in particular may be just the $229 comparison item, that could push people to look at buying the (long-term more lucrative and more important to Apple) iPhone for $199 as a no-brainer.

Dan Ariely’s excellent "Predictably Irrational" talks about such contextual "decoy offers" that can boost sales for the item the seller really wants people to buy. As an example he uses a past offer by british business magazine The Economist:

It had listed $59 for on-line access only, $125 for print-only, and $125 for print & Web combo subscriptions, and had thereby significantly boosted the number of the expensive combo subscriptions sold (vs. test offers that omitted the seemingly non-sensical $125 print-only option)!

Other similar set-ups in formal experiments conducted by the MIT behavioral economics professor had shown similar results. People make less-than-fully-rational decisions based on the context and comparisons provided.

So in essence, it is like saying: "Let a few technophiles buy iPod Touches, but really we want to indirectly boost iPhone sales." And even the $149 Nano pricing makes more sense that way, if you view it as yet another decoy offer to point to the iPhone as a no-brainer.

I wouldn’t put it past Apple, they can read New York Times Bestseller books on business psychology with the best of them…

In other Apple news from the launch event…

They clearly took a swipe at Microsoft by highlighting the Zune’s 2.4% market share, behind 8.6% for SANDISK, and behind "Others"!

I sent out a Twitter post Tuesday on how quickly Apple came out with the 2.1 Touch/iPhone firmware fixes for the most common complaints after the iPhone 3G launch (dropped calls, battery life), two months is a fast turn-around by any measure.

When was the last time Microsoft came out with a (non-security-related) significant update within two months from complaint? Usually it takes them longer than that to even acknowledge issues.

Apple is clearly showing off its capability to be hitting on all cylinders. And it also needed to show the markets that Steve Jobs was healthy, after recent rumors stemming from his gaunt appearance at the June iPhone 3G unveiling. There was even an accidentally published obituary in the mix…

Lastly, don’t underestimate the iPhone App(lication) Store. While many of those 100 Million downloads so far were of the free variety, real money is exchanging hands as well. Something that Facebook/MySpace/iGoogle/etc. app developers are still waiting for to this day.

In 2 months Apple has created a vibrant new market, using consumers’ familiarity with the iTunes Store as a base (such familiarity is a major advantage). A functioning market tends to grease the wheels more than anything else. I would predict a furious amount of development activity/innovation to come out of this corner.