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Innovation resistance at Metro, part 3: Missing the forest for the trees

Unlike many other transit agencies, Metro has resisted encouraging third party applications that help riders, partly because they perceive technology from a top-down point of view, and from unrealistic expectations because Google is big and rich. But this obsession with control and getting revenue is causing Metro staff to lose sight of the bigger picture.


Photo by pfala.

Greater Greater Father-In-Law told me a story about his days consulting for health care companies. One large nonprofit hospital with a budget around a billion dollars a year decided to make some forays into establishing a for-profit arm. They created a pharmacy where patients could buy medicines and supplies. This pharmacy did pretty well, and started turning a profit. Executives spent a very large percentage of their time reviewing the performance and exploring ways to improve it.

However, the pharmacy only netted about $60,000 a year. That was less than the cost of one employee. Yet this project was eating up much more of the executives' time than monitoring the operations of the actual hospital. If they could have found a way to serve the same patients with even one fewer staff member, they would have netted as much money for the hospital as the entire pharmacy project. That doesn't mean that it was a bad project, but context is more important.

There's nothing wrong with Metro looking into the possibility of getting some money. But they want to spend $500,000 to investigate this. And we have some strong evidence that $0 is the most they'll get. Even if that's not true, there's no way it's anywhere near $500,000. If Google had offered, say, $50,000 a year for 10 years, would Metro have jumped with joy? But they could make that much just by not spending $500,000 in the first place.

The biggest danger is that once they've sunk $500,000 into this, it'll be all the more difficult to then agree to release the data gratis. Right now, the debate is about doing something that costs Metro nothing, and getting a benefit to riders. After $500,000 goes down the drain, it'll psychologically shift the debate into one about whether it's right to do something that doesn't recoup the investment, despite the benefit to riders.

At last week's Board meeting, Metro's Sarah Wilson repeated another one of staff's arguments against this project: that it might cut into the money Metro gets from ads on wmata.com. But Metro only gets $70,000 a year from ad revenue on the site, out of a total budget of about $1.5 billion. That's four-thousandths of a percent of the budget, and probably less than Sarah Wilson makes.

Sure, every little bit helps, but if the $70,000 in ad revenue is such a concern, why is $500,000 acceptable for a contract just to find out about the possibility of making money? There's no way that working with Google Transit is going to reduce all of that revenue. Let's say it reduces it by $10,000 a year. Just to recoup the $500,000 would take 50 years.

Zimmerman also noted that better and more accessible trip planners could bring in more riders at off-peak times. Many buses and most trains are full at rush hour, but the commuters don't need a site to tell them how to get to work. The people who would use it are tourists visiting the area, and people riding to unfamiliar locations. A lot of that is off-peak. And every rider who takes up an empty seat on a bus is pure profit for Metro.

Anyway, Metro's real business is transportation. The ad revenue is a nice sideshow, but it shouldn't trump convenience to riders. Wilson was arguing that Metro should not help riders in order to force them to use the Web site against their will, all to protect this tiny sliver of revenue. Why not charge for the trip planner entirely? Should Metro promulgate a new policy that every train will pause for 15 seconds after it reaches a station and before the door opens, in order to force riders to look at the ads on the walls? What's the difference?

Of course, the difference is that the ad revenue is a line item on the IT department's balance sheet. If Metro gets more money in bus fares from riders who use the system because of Google Transit, they get no credit. But if ad revenue goes down, even a tiny bit, that might hit their budget and deprive them of the opportunity to hire more staff. It's a common attitude in bureaucracies and large companies alike.

The IT department clearly isn't going to see the big picture. It's the General Manager's job to do so, or if he can't, the Board of Directors. One of them has to stand up and say that it's more important to help riders and try to increase ridership on services with extra capacity than to zealously guard a tiny bit of ad revenue on wmata.com and obsess over a departmental P&L.

Next: Why Metro IT might be moving so slowly.

David Alpert is the Founder and Editor-in-Chief of Greater Greater Washington and Greater Greater Education. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He loves the area which is, in many ways, greater than those others, and wants to see it become even greater. 

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Do we know the full scope of the $500,000 study? For that kind of money, I would expect a consultant to be looking at all sorts of revenue opportunities for Metro - more advertising in stations, buses, trains, etc. Selling and promoting Metro-licensed apparel, as you see in New York and other places.

That doesn't change the conclusion of the article, but I think there are some areas where Metro could be gaining more revenue that absolutely are worth investigating.

by Alex B. on Sep 30, 2009 2:08 pm • linkreport

Great points overall. I often feel that Metro management loses perspective at times and this posting said it far better than I could.

by Allen Greenberg on Sep 30, 2009 2:24 pm • linkreport

I, for one, would love a cammo T-shirt with the Metro logo in neon orange, and would pay as much as 20 dollars for said shirt.

Great article, David. It's quite clear that decisions such as these are made by bureacracies and not by individuals. Let's hope for the best, but I do believe that this is a 'kicking and screaming' situation where WMATA will sign up but only after truly being the last to the party. We need some more vision at WMATA (hint hint: WMATA Bike Share a la DB Bike Share).

by JTS on Sep 30, 2009 3:43 pm • linkreport

We should stage a protest at the next Board meeting. Maybe if enough people show up to voice their opinions, Metro will come to realize what it's customers want.

by James on Sep 30, 2009 4:18 pm • linkreport

@James: Catoe is doing a lunchtime chat on Friday. We should get a protest on there if all the "GTFO Catoe" people don't attack first!

by Jason on Sep 30, 2009 4:56 pm • linkreport

Metro has sold logo apparel and the like before, through its website. My understanding is that the take was minimal. I know that few years ago NJ Transit found it was actually losing money by operating a retail store in the Newark station.

As for advertising, I would like to more. One way to open this up would be allow small advertisers (like a local business) to put a single small ad in a single Metro car. New York allows this, but in DC, its pretty much an all (rent out the entire car or at least one of the big postes) or nothing approach.

By the way, my Metro car this morning was sponsored by the CIA. They are recruiting for police officers and had ads on the outside of the car.

by metronic on Sep 30, 2009 5:55 pm • linkreport

yeah I may just make it myself. full disclosure: not my idea. Saw a cammo t-shirt in philly with the SEPTA logo on it at their 15th/market station on the El. Excellent T-shirt that was a hot commodity for a while

by JTS on Sep 30, 2009 5:58 pm • linkreport

@Jason: I brought this up with Catoe at the last lunchtime chat. Here is his response:

Hello Falls Church. Route and schedule data can be downloaded for Web application development. As of late March, anyone could download technological data about Metrorail and Metrobus routes, stops and schedules from our Web site. The raw data is available in a coded format that can be used by anyone who wants to turn the information into a usable computer application, including businesses and Web masters. Still, for the average Metro rider, the best way to get up-to-date and accurate bus and rail information is to visit our Web site. Users of the information must agree to our terms of use before they can download the information, which includes exempting the transit agency from liability. That goes for Google too. The user also is responsible for keeping the information up-to-date and accurate. Users can sign up for RSS feeds to be notified when the raw data has changed.

The problem with the lunctime chat is that Metro can simply ignore any comments that it wants. There is no indication as to how many people are asking a specific question. It is much harder to ignore a crowd in person.

by James on Sep 30, 2009 6:26 pm • linkreport

So, how does one apply for the $500,000 IP valuation contract?
Can this website apply as a group project?

by shy on Sep 30, 2009 9:57 pm • linkreport

I invite you to inspect the dollar auction for background on why spending $500k to decide whether something that benefits riders should be free is a bad idea. This is a very similar predicament to that posed by defense contracting R&D.

by Squalish on Oct 1, 2009 12:28 am • linkreport

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