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Category Archives: Mobile

How Mobile and Real-Time are Helping Maximize Revenues and Utilization

05 May

Yesterday an interesting set of announcements hit the tech world that highlighted some of the early successes start-ups are seeing in helping businesses maximize revenue opportunities and service utilization.

  • Overnight, Uber, a provider of high-quality, on-demand car service officially announced the availability of is service in a second city- New York.
  • Then Gigwalk, which turns iPhone users into an instance mobile workforce announced that it had exited its beta period and raised $1.7 million in seed money in the process from an all-star list of early-stage investors.
  • Finally TaskRabbit, which offers a marketplace for people to outsource their errands announced its own $5 million Series A funding round to help expand its service beyond Boston and San Francisco.

Each of these companies is attempting to apply the same concept behind peer-to-peer computing projects, such as the search for alien life forms, in utilizing available bandwidth. But instead of leveraging unused computing power, these start-ups are leveraging excess capacity in service-oriented businesses. For any type of service business, time not allocated or used to generate revenues are opportunities that are lost forever, just like when an airplane takes off with empty seats on it. In the case of Uber, the company is trying to alleviate this problem by matching professionally licensed drivers who have idle time while at work with new, short-term, fare opportunities. Meanwhile Gigwalk is pairing people with availability in a specific location with large corporations that need specific, once again short-term, tasks completed in that area. In the case of TaskRabbit, it’s allowing consumers who have free time on their hands to run errands on behalf of other consumers who don’t.

The opportunity to provide a service and generate revenues in a given period of time isn’t limited to these types of jobs though as other capacity-based service industries are benefiting from real-time yield maximization as well. Daily deal service LivingSocial has already tested its Instant Deals in D.C. offering lunch at participating restaurants for $1.00, while industry leader Groupon is developing a similar service called Groupon Now that enables restaurants, spas, and other retailers to drive business to their establishments through the use of real-time incentives. This makes perfect sense when these service businesses are not operating at full capacity. Taking the same concept of driving utilization through discounts, Hotel Tonight has launched a mobile app for booking same-day hotel rooms in a number of cities across the U.S.

The underlying enabler of all of these start-up services is the smartphone. Without the ability for consumers and service providers to communicate in real-time based on one or both parties’ location and availability, the opportunity to match the two entities wouldn’t exist. This would leave service providers without a way to generate additional revenues or complete certain projects in real-time and consumers without a way to benefit financially- either through service discounts or by generating additional income for themselves. The economic potential for retail and capacity-based services will only grow as smartphones and tablets become more ubiquitous and enable new business opportunities and economics to be created around simple, short-term, service-oriented tasks.

I’m excited to see what other service industries (airlines, data collection in the real world, movie theaters, tourist attractions, etc.) will benefit from start-ups that can help bridge the gap between existing sales opportunities and maximizing a service providers revenue potential by creating what are essentially real-time exchanges for specific services. For established service industries, there will always be a market for start-ups that can bring new revenue opportunities to the table. For entities willing to pay consumers to perform services on their behalf, the key will be to make the task short and easy to complete to attract the widest applicant pool for these jobs.

 
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Posted by on May 5, 2011 in Business Model, Commerce, Mobile

 

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Android: Winning the Smartphone Battle, But Losing the Mobile OS War

21 Apr

Earlier this week I received a long-awaited text message from Verizon Wireless notifying me of a credit I had available towards a new phone if I renewed my contract for another two years. After 9 ½ years of BlackBerry devices (my first BlackBerry actually ran on the Mobitex network, for the old-school mobile-types out there) I’m ready for a change. With a relatively paltry selection of native apps and a mobile web surfing experience reminiscent of dial-up internet access circa 2000 the question I’m left with is which smartphone do I go with- one from Android or Apple?

With the Android-based Motorola Bionic delayed until the second half of the year and rumors of the iPhone 5 shipping anywhere between September and the next year, the immediate decision seems to come down to whether I should get the 4G LTE network-enabled HTC Thunderbolt or iPhone 4. But is this the real question I should be asking myself?

The speed of Android’s rise to prominence in the U.S. smartphone market has been nothing short of amazing, growing from a 9% market share in February 2010 to 33% in February 2011, vaulting Android’s operating system from 4th to 1st place in the process according to comScore. Over that same period of time Apple’s U.S. smartphone market share has stayed flat at 25%. This had led to people like venture capitalist Fred Wilson of Union Square Ventures to suggest that developers should build for the Android operating system first.

What Fred’s analysis, this market share data and my question fail to address though is the broader market dynamics of mobile. The battle everyone is focusing on is Android versus iOS smartphones- and why not? With 70% of the U.S. still using feature phones, according to the same comScore data, the market opportunity for smartphones remains massive. Even so, the war between Apple and Google is actually taking place at a much broader level, as decisions made by consumers like myself and developers alike will decide who the eventual market leader will be for the entire mobile operating system (OS) market- not just smartphones.

While Android might be winning the smartphone market share battle, it’s at the mobile OS level that iOS holds the advantage over Android. Google’s primary market for distributing its mobile OS is the smartphone via HTC, Motorola, Samsung and other handset manufacturers. Apple on the other hand distributes iOS across three markets through its own devices- handheld entertainment devices (via the iPod Touch), smartphones (iPhone) and tablets (iPad). Because of this Apple’s outlook is much broader in scope- to get its other iOS devices into the hands of the 80% of the market (70% of the feature phone users in the U.S. plus the 1/3rd of the smartphone market not on Android or Apple smartphone) not using an Android or iOS smartphone. By getting consumers to purchase an iPad or iPod Touch, Apple can create a barrier to entry for Google through high switching costs.

With every app install, especially paid ones and those that can be used across device types, consumers increase their switching costs for leaving Apple’s ecosystem. So when the time comes for iPad and iPod owners to upgrade their mobile phones, the iPhone is the natural choice since these users are already familiar with Apple’s App Store and iOS user experience. With the iPod’s market share pegged at 70% of the digital music market last year according to NPD and iPad’s at 85% of the tablet market in 2010 according to ABI Research, Apple has a huge advantage over Google in getting consumers onto its mobile OS platform through these types of devices. As iPod sales begin to decline though, the growth in iPad sales will be the key complimentary product in Apple’s effort to gain market share in the smartphone market.

According to a different study released by comScore earlier this week, there is evidence to corroborate iOS’ network effect for Apple in the U.S. iOS’ reach is 59% greater than that of Android when you combine iPad, iPhone and iPod users. This translates into approximately 38 million iOS users overall in the U.S. versus nearly 24 million Android users. More importantly though, in looking at iPad sales specifically, BlackBerry users account for the second highest percentage of iPad owners, behind iPhone customers, followed closely by Samsung and LG. This represents a great opportunity for Apple to convert these users into iPhone customers once their contracts are up or they ready to switch to an advanced smartphone. Update: comScore just released a similar study for the European market showing Apple’s reach being 116% greater than Android in France, Germany, Italy Spain and the UK- albeit on a smaller user base (29 million consumers) than in the U.S. As it relates to iPad adoption, Nokia users closely follow iPhone users in iPad ownership, providing Apple with a huge opportunity to take market share from the largest mobile handset manufacturer in the world.

So how can Android better compete with iOS at the mobile OS level?

  • First, Google needs to nail down agreements with the music industry’s four main record labels in order to launch its cloud-based music competitor to iTunes. This will allow manufacturers to create devices that can finally compete with the iPod and eliminate the biggest feature advantage of the iOS platform.
  • Second, Android tablets need to be synched with the smartphone’s OS platform. The Motorola XOOM, which launched with much fanfare towards the end of February as the first real competitive threat to the iPad (after winning Best of Show at CES in January), seems to have come up short. Sales of the tablet have been estimated at 100,000 devices in its first 5 weeks on the market compared to the iPad which sold 300,000 devices its very first day and nearly 5 million devices in the just announced second quarter. By running a newer and completely different version of Android than its smartphone siblings (Honeycomb 3.0 versus Android 2.0 thru 2.3.3) the device hasn’t been able to leverage apps from the smartphone Android Marketplace. According to Apple’s COO Tim Cook a fragmented ecosystem where Android tablets have less than 100 apps to choose from while iPad customers have 65,000. Without a cohesive OS platform across device types, Android will lack the switching costs afforded to Apple’s OS ecosystem.

For developers, the 189 million cumulative iOS devices sold through the end of March 2011 represents a huge market opportunity. Add in ease of monetization and payment mechanisms in addition to a formal app discovery process that is still lacking in Android’s marketplace, you can see why companies like Color and Instagram chose to launch in the iOS App Store first and why there continues to be more apps available for iOS than Android even though Apple has a more stringent app vetting process.

As for myself, the decision was easy once I took a step back and looked at the broader mobile OS ecosystem options. Even though I already owned an iPod Touch, I’ve decided to go with iOS primarily because I was planning on picking up a new iPad in the first place. So by default, the iPhone it is for me. With three different types of devices being tied to iOS when it’s all said and done I will be Apple’s ideal customer. The only question I have left? Do I wait for the white iPhone.

 
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Posted by on April 21, 2011 in Mobile, Platforms

 

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Apple’s Game of “Heads I Win, Tails You Lose”

24 Feb

Remember as kids when you were given the know-how to always win at coin-flips? By uttering those 6 simple words “heads I win, tails you lose” you were able to set-up the rules of the game in a manner that seemed fair, in that it provided an outcome for both participants, but always resulted in you being the winner of the coin-flip and your opponent the loser (until of course they realized what was going on).

This is essentially the game Apple is playing in the tablet market right now. The company, which launched the industry with the unveiling of the iPad last April, has yet to see a truly competitive offering after selling 15 million iPad units in 2010. The only notable rival last year was Samsung’s Galaxy Tab. This Android-based tablet, which launched in November at a slightly lower price point than the iPad but at the expense of comparable features (smaller touchscreen display and less internal memory though it does include front and rear-facing cameras), has not met sales expectations.

The Motorola Xoom, which gets released today, is expected to be the first viable alternative to the iPad after winning Best of Show at CES in January. This device comes equipped with Android’s tablet-specific Honeycomb operating system and hardware specs to match current versions of the iPad, with the addition of memory expansion capabilities and front and rear-facing cameras, but accomplishes this at the expense of price (higher compared to iPads) and app offering (a handful versus the iPad’s 60,000).

In both of these instances, a trade-off between product and price had to be made by the manufacturer. To compete on price, Samsung had to sacrifice on product (i.e. screen size and memory). To compete on product, Motorola had to give on price (i.e. be more expensive). Throw in research that shows the iPad has 90% awareness among consumers, and you can see why tablet manufacturers must beat Apple on both product and price to beat the iPad.

Heads Apple wins, tails tablet manufacturers lose.

While Apple competitors might be able to match, or even exceed the design and hardware capabilities of the iPad at some point in the future, doing so at a lower price point would be challenging. Apple understands their strategic price advantage and is continuously looking to expand on it.

Case in point- based on iSuppli’s research, the single most expensive component in the iPad’s manufacturing process is the touchscreen display. So it’s no surprise that Apple revealed on its most recent earnings call that it has made long-term financial commitments of $3.9 billion dollars with three suppliers believed to be display providers. If correct, this means Apple would control 60% of the global touch panel capacity according to Taiwanese industry website DigitTimes. Controlling this amount of supply would have two major effects on the tablet market as (1) it would lock in favorable pricing and predictable supply for Apple going forward in manufacturing future versions of the iPad and (2) create supply constraints and pricing pressure on tablet manufacturers.

Once again, heads Apple wins, tails tablet manufacturers lose.

The concept of vertical integration is nothing new to Apple which acquired Intrinsity last year, a semiconductor chip design firm responsible for developing the iPad’s original A4 processor, in an effort to bring the skills and development costs in-house. This became another component cost advantage over the Motorola Xoom which leverages NVIDIA’s Tegra 2 for its processor.

With Apple’s event next week expected to showcase the next iteration of the iPad, which should once again place the product’s feature set ahead of its competitors, the question to Android, Tablet OS and WebOS tablet makers is: want to flip again?

Photo credit: Algie Moncrief/Flickr

 
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Posted by on February 24, 2011 in Mobile, Product

 

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Mobile Video: The Final Frontier for Ad Networks?

23 Feb

Earlier this month TechCrunch broke the news that mobile video ad platform Transpera had been acquired by online video ad network Tremor Media. The deal came almost exactly three months after Tremor’s last transaction, the purchase of video ad network ScanScout. The Tremor-ScanScout merger was part of a string of announcements in the online video ad space last fall which began with top 10 online display advertising network Specific Media acquiring video ad platform BBE and ending with another leading ad network, Undertone, buying Jambo Media, a video solutions company.

With advertising a major theme at last week’s Mobile World Congress in Barcelona could this latest Tremor news set off the next round of capabilities expansion and provider consolidation amongst ad networks?

With online video projected to grow 55% annually through 2014, making it the fastest growing online ad format worldwide, it’s easy to see why there’s interest from both traditional display and pure play video ad networks in acquiring online video market share. Looking at recent industry trends and projections, mobile video might be poised to follow this same type of growth trajectory, creating a similar opportunity for ad networks looking to provide cross-platform digital ad solutions to agencies and advertisers.

  • Devices: Worldwide smartphone shipments passed PCs in total volume for the first time in the 4th quarter of last year while tablet shipments, led by Apple’s iPad, are expected to reach nearly 56 million this year and 172 million by 2014.
  • Network Traffic: In Cisco’s Visual Networking Index Forecast, updated this month, the company predicted that, by 2015, two-thirds of all global mobile data traffic would be video.
  • Advertising: Mobile ad spending is projected to exceed $18 billion worldwide by 2015, representing over 15% of digital advertising’s spend. While in the U.S. video is expected to continue growing faster than any other mobile segment through 2014.

Together, these data points confirm that the PC-based era of the web has been officially replaced by the mobile web, which consumers are already taking advantage of through the proliferation of mobile device types. According to The Nielsen Company, Americans, led by teens and young adults, watch an average of 3 ½ hours of video a month on their mobile devices. To understand just how quickly video consumption habits are evolving look at YouTube’s announcement last month that it has reached 200 million video views per day on mobile devices- an increase of 300% over the beginning of 2010.

Media companies and marketers are looking at ways to quantify this audience in aggregate in an effort to bring advertising economics to parity across all “three screens” (television, web and mobile). This represents a big opportunity for ad networks willing to put forth the technical and execution effort to target mobile audiences fragmented by app-type (mobile web versus native apps), device (smartphones versus tablets), operating system (Android, BlackBerry, iOS, etc.) and ad unit interactivity (passive versus touch-screen).

Because ad guidelines and standards for the mobile web are still maturing in comparison to display and online video, ad networks interested in entering the mobile video space would benefit from acquiring video delivery expertise and an embedded distribution network. Any M&A activity would involve one of these three types of acquisition strategies:

  1. Buy capabilities and market share: This tact was used by Specific Media to enter the online video market by acquiring a top 10 video ad provider and instantly gaining reach. If leading online video advertising networks BrightRoll and YuMe, which launched their respective mobile advertising solutions last fall, don’t see adoption of their offerings, they might be forced to take this route in order to match Tremor Media’s cross-platform scale in video. From the display advertising perspective, only Microsoft and Yahoo as well as the largest ad networks will be able to afford this type of acquisition due to lofty valuations in mobile and video.
  2. Buy capabilities, leverage market share in current business: Undertone took this route by leveraging its own scale on the display advertising side with its video technology purchase to become a top 10 online video ad provider of its own within a couple of months of the acquisition. This is the most capital efficient way for any ad networks to enter the mobile video business, though acting quickly will be the key to successfully executing this strategy due to the limited number of acquisition options and venture capital being invested in the segment.
  3. Extend capabilities and market share: As for Tremor Media, already a leader in the online video advertising space, its deal allowed the company to add product expertise (video overlay ads) while growing its reach and video ad volume. Millennial Media, the largest independent mobile ad network which raised $27.5 million earlier this year, and has raised $65 million overall, is the best positioned mobile ad network to take advantage of this strategy due to its profitability, exit options and capital on hand.

While Google bought its way into a dominate position in the U.S. mobile advertising market (including interactive video ad capabilities) with its purchase of AdMob last year, the growth of YouTube’s mobile website has allowed Google to become a cross-platform provider of mobile video monetization solutions. Apple on the other hand used its acquisition of AdMob competitor Quattro Wireless to build the iAd Network solely for its own mobile operating system (iOS). With two of the largest ad networks having been acquired by the two leading mobile operating platforms what merger opportunities still exist in mobile video advertising?

  • JumpTap: The company added video to its suite of mobile ad formats last year in an effort to broaden its appeal to clients. JumpTap, which delivers ads across all major smartphone platforms (Android, BlackBerry and iOS) as well as the iPad, is considered the largest independent mobile ad network in the U.S. after Millennial Media. As such, the company will most likely have to wait and see what happens with Millennial (which will either go public or get acquired) before drawing interest from the likes of Microsoft, Yahoo and potentially Research in Motion (maker of BlackBerry) who have all been rumored acquirers of a mobile ad network and the only companies large enough to digest JumpTap’s $69 million in capital raised.
  • Mogreet: The company provides mobile video advertising solutions through SMS and MMS mobile messaging services, allowing Mogreet to address the feature phone audience as well. Considering the limitation of their offering, especially when you consider the growth of the smartphone and tablet markets, and the $7 million invested in the company thus far, an acquisition of this company would be a stretch for a U.S.-based ad network but maybe not for a network in a large developing market such as Brazil, India, Indonesia or Russia where feature phones dominate the market.
  • Rhythm NewMedia: From a pure play mobile video ad network perspective, Rhythm NewMedia has built the most envious, cross-platform network out there of the remaining independent players. The company, which recently raised $10 million, only works with premium brand advertisers and publishers across Android and iOS mobile platforms covering both smartphones and iPads. Having raised $37 million in total funding makes Rhythm a pricey acquisition for anyone not named Microsoft or Yahoo at this point though.
  • Vdopia: While the company is an online video ad network with extensive operations and market share in India, it also operates iVdopia, a mobile video ad network. Its mobile offering covers both Android and iOS platforms (including iPads) as well as mobile websites. Claiming it has reached profitability, and with only $4 million raised, Vdopia would be a prudent acquisition for an online global ad network.

Beyond these mobile video ad companies there are several other start-ups that focus on providing rich media advertising solutions for smartphones, tablets and the mobile web that could provide the framework for a video offering for ad networks interested in getting into mobile video. Greystripe which focuses on rich media banner ads primarily for the iPhone, while supporting Android  and Java feature phones as well, has raised the most venture capital of the group ($18 million), followed by Medialets ($10 million) and Crisp Media (at least $5 million). Greystripe’s strength is in its ability to transcode Flash ads into HTML5 in order to support Apple’s Flash-restriction on iOS devices. Both Crisp Media and Medialets, neither of which are an ad network but instead earn revenue from serving rich media ads to mobile devices, do provide video ad solutions for both smartphones and tablets. The biggest challenge facing these companies will be potentially pricing themselves out of the M&A market if they continue to raise capital. Based on this, Crisp Media might be an ideal technology pick-up for an ad network with a strong client-base and distribution network.

With the display inventory component of mobile advertising already being automated through demand side platforms like DataXu and real-time bidding exchanges like Mobclix, mobile video might be the last digital ad segment where ad networks can extract additional margin out of the industry through ad effectiveness and audience scale. Perfecting the online and app video experience will be important beyond just mobile as internet television, the next great digital ad opportunity, will leverage these advertising frameworks for its own platform monetization. As agencies begin to provide digital services at global scale to their advertising clients, ad networks that can deliver audiences across devices and digital formats, at scale, will garner the lion’s share of ad campaign dollars coming from these agencies going forward. To accomplish this ad network’s need to boldly go where most networks haven’t gone before.

Photo credit: fdecomite/Flickr

 
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Posted by on February 23, 2011 in Advertising, Mobile, Product, Video

 

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Game Time for Foursquare

06 Oct

When Facebook Places launched in August, the media wasted little time in calling game, set and match on Foursquare and its location-based social network (LBSN) brethren. With over 500 million users, the theory went, Facebook would become the most popular check-in service due to its sheer size alone. While Facebook hasn’t released any initial stats regarding the number of users or check-ins being generated through Places thus far, personal and anecdotal experiences from early tech adopters suggests the uptake hasn’t been significant. Having survived the unveiling of Places by growing its own user base from 3 to 4 million users in less than 2 months, and with plenty of money in the bank, Foursquare has a shot at growing beyond its early-adopter community and becoming a mainstream network. So how does Foursquare become the next Twitter and not end up like Friendster?

Make A Few Enemies (If You Want 500 Million Friends)

The launch of Places was a direct shot at Foursquare by Facebook. To return the favor Foursquare should go after Facebook’s core audience of college students (something I suggested to Foursquare CEO Dennis Crowley in a conversation last year). Beyond revenge, this actually makes a lot of sense if you remember that Facebook’s success was built on its ability to capture the college crowd before opening up to other audiences.

Considering that (1) with 165 million Facebook users in the U.S. alone there is bound to be some backlash by young adults against parental “friending” as well as overall loss of interest in the platform and (2) Foursquare’s raison d’etre is to help people find new things to do in cities, Foursquare can offer college users a unique experience. Students who already use Facebook now have the chance to create a new, curated social graph based on people they want to interact with socially- and one that doesn’t include their parents. By leveraging Foursquare’s discovery element, which the company has started rolling out across several campuses with the launch of Foursquare for Universities, students can develop relationships based on sharing new experiences.

The result is the creation of a real social network- one that occurs in the real world and not just online or through social games. Facebook is accurate in not calling itself a social network as it operates more like an ambient network- one that allows people to communicate and interact with their accumulated social graph from afar. Because Foursquare’s purpose is to enable face-to-face social interaction it has the opportunity to become the place where your real friends are- i.e. people who you’d actually want to grab a drink or hang out with if you knew they were nearby. This statement can’t honestly be made by anyone trying to socialize beyond Dunbar’s number on Facebook. Time will tell if Facebook’s just announced Groups rectifies this situation or is too cumbersome for average users to implement. If not, they can resort to playing dirty by enforcing their newly granted LBSN patents.

Show Me The Money (Or At Least a Discount)

Not to be lost in the social aspect of Foursquare’s service is the underlying business opportunity. While Mayor-ships and virtual badges have been the drivers of Foursquare’s early successes, to a maniacal level in some instances, I agree with early stage investor Dave McClure, though not in such eloquent terms, that game mechanics will only take LBSN’s so far and that tangible financial rewards are how these networks can turn into more mainstream services.

That’s not to say that Foursquare should abandon its game mechanics. In fact the social activity driven through these features of Foursquare’s service should be leveraged by local businesses because these mechanics can create the right type of incentive structure. Local merchants are eager to tap into in-discretionary spending habits (especially those of college kids), but in a cost efficient manner that creates loyalty beyond just the initial lead generation. In the same breadth, consumers are interested in deals at local establishments- especially promotions they can opt-in to. That’s where leveraging Foursquare’s Swarm Badge to drive group participation makes sense.

The concept around Swarm Parties, in which businesses offer discounts to customers once a minimum number of users have checked-in on Foursquare in a given time period, has proven to be effective in increasing sales for local businesses in both the U.S. and overseas. This hasn’t been lost on the likes of recently launched GroupTabs which is looking to provide group discounts for local merchants by combining the check-in features of Foursquare with the deal incentives of Groupon. While Groupn itself has shown how effective it can be in driving one-time sales for local businesses it does also have its drawbacks. Foursquare can help businesses foster the long-term loyalty with consumers that is missing from Groupon-type offerings by helping merchants create incentives that can exist beyond virtual badges. This could include leveraging relationships merchants already have with consumers through loyalty cards, which CardStar is already doing by integrating Foursquare into its service, or creating new reward structures based on check-in frequency.

Find Other Ways to Help Users Grab Life… (And Experience New Places)

Beyond group incentives, Foursquare needs to find other ways to be useful to users and businesses in discovering one another. The recently launched “Add to My Foursquare” button is a great way to transfer an individual’s web-based interest in a venue, by adding it to their Foursquare To-Do list, into an actual visit to the physical store when they check-in nearby that business. Beyond web surfing, Foursquare’s recommendation engine, which is still being tested, could offer search engine-like opportunities for users to find, and merchants to pay to promote, businesses based on matching users’ check-in activity with potential interests. Combined these capabilities can not only enable better discovery and thus socialization opportunities for current users but also act as a starting point for new users who don’t have a check-in history but want to benefit from the wisdom of the local crowd.

Foursquare’s ultimate success, in addition to keeping the service up-and-running, will depend on its ability to create tangible benefits for its current users, before they start losing interest, while simplifying the value proposition for mainstream Facebook users to understand and start using Foursquare. If not, companies like Google Ventures-backed SCVNGR, which now has 500,000 users of its own, has the pieces in place to compete with Foursquare through its own brand relationships, university outreach program and group-buying functionality, are waiting in the wings to take on Facebook Places.

Ball’s in your court Foursquare. I’m rooting for you.

Photo credits: Dunny/WeeklyShot, The Social Network/Columbia Pictures, Jerry Maguire/TriStar Pictures and DodgeBall/20th Century Fox Film

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Posted by on October 6, 2010 in Mobile, Platforms, Social Media

 

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Where the New Commerce Opportunities are in the Current Wave of Innovation

16 Jun

At TechCrunch’s Disrupt conference a few weeks ago legendary venture capitalist John Doerr of Kleiner Perkins Caufield & Byers spoke about what he considers to be the next, and third, great wave of innovation- the intersection of social, mobile and new commerce. Like swells in an ocean, technology innovation is not comprised of a single wave or event, but instead a series of them. Smaller, initial waves enable those in the middle of a set to generate the largest swell and associated impact, while the smaller waves at the end benefit from all the efforts of the preceding waves in the group.

While I would agree with GigaOM’s Om Malik that we are already in the throes of John Doerr’s third wave, the areas of social, mobile and commerce each represent a unique wave in time within this current innovation set. Social is an important, but early wave that will help mobile, the middle wave, generate the largest impact in this third technology wave. One of the benefactors of both the social and mobile innovation waves will be commerce, which well-known early stage investors Josh Kopelman of First Round Capital and Fred Wilson of Union Square Ventures have both identified in recent months as being areas of emerging opportunity.

In 2007, two events helped propel this commerce wave forward more than any others- the launch of Facebook’s platform and Apple’s release of the iPhone. Though Friendster and MySpace preceded Facebook in the area of social networking, the ability to create and extend the social graph of what is now 500 million users to third-party websites and services has enabled Facebook to become the social identity layer for the worldwide web today. Meanwhile Apple changed the mobile landscape forever by enabling applications to be developed for the iPhone that leveraged the smartphone’s capabilities as well as those of the wireless carriers’ networks. The traditional insular, walled-garden approach to third-party content and services on carrier data networks and mobile handsets has been replaced by innovation around the mobile internet and applications. This has resulted in enhanced functionality and value to consumers from not only the iPhone but other smartphones and mobile operating systems looking to benefit from this new ecosystem- all while driving additional data revenues for wireless carriers in the process.

The Social Wave

Internet commerce websites like Amazon were actually early adopters of social technologies- empowering their customers to post reviews and ratings on product pages to help other Amazon shoppers determine whether or not to buy a particular item. This crowd-sourcing feedback model hasn’t evolved much since first being launched though, keeping the relationship between reviewers and shoppers fairly anonymous and thus limiting consumers’ trust factor. Allowing users to layer their social graph on top of the commerce experience would enable potential buyers to see feedback from family and friends or their extended social network first, further enhancing the shopping experience for consumers and inevitably driving better revenues for commerce sites.

Recently launched Blippy and Swipely both aim to capitalize on this theme by enabling their users to share purchase transactions with their social graph. While these companies are focused on creating a discussion around purchases post-transaction, there is an opportunity in being able to curate this commentary and incorporate it into product feedback loops across commerce sites, making the shopping experience even more personal and dynamic.

Probably the hottest area in online commerce though has been the group buying segment with the likes of Groupon and LivingSocial raising $135 million and $39 million respectively this year alone. While the business model isn’t new (Mercata and MobShop, founded in the late 1990’s were the original group buying platforms that became casualties of the internet bubble), the ability to tap into consumers’ social graph to enable the group buying mechanics to work is.

The Mobile Wave

After years of promises, mobile finally seems ready to deliver on the cliché “get-a-Starbucks-coupon-on-your-phone-when-you-walk-nearby.” With the ramp in mobile internet subscribers already exceeding the speed of traditional desktop internet adoption and global smartphone sales expected to surpass personal computing in 2012 according to Morgan Stanley Internet analyst Mary Meeker, how mobile is being thought of and used in commerce is changing dramatically. With most commerce companies already having a mobile version of their website and native applications available across various mobile app platforms, the biggest opportunities in mobile going forward are in bringing real-world and digital experiences together via augmented reality and enabling a variety of payment capabilities through mobile phones.

Augmented reality brings information from the web into the real world in real-time. This can be accomplished by (1) adding visual data elements to the visible world (i.e. through Layar’s Reality Browser) while looking at something through a mobile phone camera, (2) leveraging QR (quick response) codes located on storefront decals (which Google makes available through Google Places) or outdoor ads to access additional information about a place or item via the mobile internet and (3) adding data to physical objects via bar codes (the idea behind recently launched StickyBits) or associating data with locations people have visited (a la Foursquare ‘tips’). In each of these instances the opportunity is to quickly and conveniently provide additional information to help consumers make more informed decisions.

Mobile payments represent the largest, albeit most fragmented, opportunity as Generator Research predicts the market will grow almost ten-fold from last year to $633 billion in worldwide revenues by 2014, driven by nearly 500 million users. The types of payments users are able to initiate vary from physical dongles like Square that allow phones to function as cash registers for merchants, to buying virtual goods for apps through Boku or Zong using a consumers’ mobile phone bill instead of a credit card, to paying friends through platforms such as PayPal or Venmo.

How can commerce make the best use of these innovations?

The underlying theme with many of these commerce examples, from aggregating audiences for sales to sending users mobile coupons, is their focus on addressing the supply-side of the commerce equation. Instead of trying to find new ways to incentivize demand for products and services through price elasticity or information overload, the more interesting and challenging opportunity in commerce is creating solutions to identify demand pre-transaction. If consumers had efficient ways to signal their intent on an individual or aggregate basis prior to making a purchase, a whole new commerce paradigm could be created around real-time demand fulfillment. Some possibilities include:

  • A group of co-workers decide to go out and have lunch together and broadcast their intent to restaurants at the local mall who in turn have the ability to offer coupons or discounts to these consumers before they make their decision;
  • A family on vacation in New York City is interested in sight-seeing as well as catching a show on Broadway. The father sends out a prioritized list of attractions and a budget to local travel agents, which respond with multiple itineraries based on the given parameters.
  • Several people in the same city are looking to buy the same toy. They query their phone to find the cheapest price. Participating stores are notified of inquiry and are given the ability to offer a discount if a minimum number of these consumers buy today, which can be completed on the phone and the toy held for pick-up.

The key distinction with these futuristic examples is that instead of making consumers proactively pull information from disparate sources to get answers, the information is pushed to consumers based on their stated intent. Pleet, which launched earlier this month out of the UK, looks to address this opportunity by “socializing vouchers” around consumers’ intended action in a specific location. Well-known tech blogger Robert Scoble also explores the possibilities of real-time, in-the-moment commerce that leverages context aware apps and services  in a guest post on TechCrunch this month. In either user case (pre-sale or during an event) the default requirement is that the consumer has control over which apps and services can share what type of data with one another and what information (updates, offers, etc.) is allowed to get pushed to users and their social graphs.

Mobile’s role in all this is to tie these web services to a user’s physical location to enable various types of commerce opportunities to occur as well as provide a way for consumers to add information in real-time to enhance the value of the data. For this reason augmented reality (AR) does have a viable future, despite some of the early hype around it. AR can pick up where intent-based, push-oriented commerce opportunities leave off by providing consumers with the ability to pull dynamic information from the internet into their real-world situations. That is why services like Foursquare and StickyBits that allow users to access data related to places and objects via barcodes respectively have a great chance to succeed- because they can generate a large network effect not only from social connections on the platform but also due to the information users are augmenting these respective services with. So for those instances where someone doesn’t have the ability to request offers and information from restaurants on lunch discounts they can instead leverage an augmented reality app that contains information on proximity to restaurants in the area as well as any reviews from friends, general feedback or coupons and make reservations in the process.

Some of the winners will be companies everyone knows…

Amazon- Even though Amazon has been accused of missing the boat on social commerce, they still have the very enviable position of being the largest pure-play ecommerce company, and fastest growing retailer, in the U.S. With all the product information and review data they have collected over the years and experience in managing online storefronts, Amazon could not only empower other sites and apps with this data but also manage the supply chain for consumers looking to transact via mobile yet pick up products at a physical location. The value of the company’s data set could be further enhanced for its own financial benefit by enabling Facebook users to access their social graph through the Amazon.com website.

Apple- The company’s inclusion is due to its recent acquisition of Siri, a voice-activated personal assistant application, rather than being the leading smartphone and app platform. Siri’s value to Apple is in its ability to integrate various APIs from a variety of restaurant, movie, weather, taxi and event services to enable voice-activated search which can lead to a variety of commerce opportunities. In the process of integrating Siri into the iPhone, Apple is also laying the groundwork for an entirely new user experience in mobile search.

Facebook- The company has already proven the power of combining the social graph with commerce by enabling a billion dollar economy in virtual goods to arise. With the launch of Credits, which could become one-third of the company’s revenues over the course of the next 12 months, Facebook has an opportunity to become a big player in mobile payments by enabling alternative payment options for its virtual currency. Combined with the fact that Facebook not only has the most popular mobile app out there but also provides authentication for a number of other mobile apps, there is tremendous upside in what the company can achieve in the commerce space.

Google- The launch of Android, Google Latitude, Google Maps and Google Places over the years are all efforts to bring location into the search equation. Being able to marry search intent with location data opens up a new revenue opportunity around local search advertising and commerce for Google, which despite their forays into display advertising, needs to continue to rely on search advertising to grow its business.

…While other are just getting started

Some of the aforementioned companies in the social transaction, group buying, augmented reality and mobile payments spaces all have opportunities to succeed in this new wave of commerce innovation. The broad category of augmented reality is the most interesting because it operates at the intersection of both worlds (real and digital) so is best suited to incorporate social and mobile features from these other businesses. While most success stories will be through acquisition, companies like Foursquare have the potential to succeed on their own by focusing on the demand and intent side of the commerce equation. Since the company has created a user experience around “checking-in” to locations and venues as well as leaving “tips”, it would require only a slight modification in behavior to have users instead display their intent by “pre-checkin” and aggregating the demand they already capture to drive additional utility around commerce. Even though the company has focused on the game mechanics of its service, the fact that it has nailed social and mobile interaction gives it a leg-up on other competitors.

While I can see why Josh Kopelman believes the past 10 months have shown greater innovation in online shopping than the past 10 years, I believe the wave has yet to come and that the next 18 months is where the greatest innovation will occur around real-time, intent-oriented commerce.

Photo credits: Madeleine1912/Photobucket, centralasian/Flickr and chizzachong/Flickr.

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Posted by on June 16, 2010 in Commerce, Mobile, Social Media

 

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How the Mobile OS Wars Will Be Won

09 Mar

The future of the mobile industry is pretty clear- it’s all about data. Data revenues have allowed U.S. carriers to keep subscriber ARPU’s relatively stable in the face of 30% declines in voice revenues over the past five years. Look no further than Verizon Wireless’ recent announcement to allow unlimited Skype-to-Skype voice calls over its 3G network to see the future revenue prospects of voice, now a commodity service.

Data revenues, in contrast, are expected to continue their explosive growth, more than doubling by 2013 according to a recent Telecommunications Industry Association report. It’s no coincidence that over the same period smartphone sales are projected to account for more than 40% of all wireless devices sold domestically as the underlying mobile operating systems on these devices are providing the necessary functionality and services that are enabling greater data consumption by mobile subscribers.

At the recently concluded Mobile World Congress, Microsoft made the mobile OS market a lot more interesting with its unveiling of Windows Phone 7 Series, a completely rethought and overhauled, mobile operating system. Having met with glowing first impressions, the largest software company in the world has positioned itself to compete across the entire smartphone OS spectrum- from Research in Motion’s productivity devices to mass market offerings leveraging Google’s Android platform to feature-rich iPhones from Apple. However, without the ability for manufacturers to upgrade their handsets from Microsoft’s current operating system, Windows Mobile 6.x, to Windows Phone 7, Microsoft will need to build adoption for its new platform from scratch. Microsoft, like the entire mobile OS market, has to successfully address three key relationships in the mobile ecosystem, and not just build a great technology platform, in order to win market share.

1. Device manufacturer access. To get an operating system into consumer hands, most mobile software providers need to partner with device manufacturers. Google has attempted to remove any potential barrier for these OEMs to adopt its Android platform by making it free to use, open source and fully customizable. Microsoft on the other hand is continuing with its licensing model for the Windows Phone 7 operating system as well as imposing stringent hardware requirements on its device partners going forward.

It is these requirements, in conjunction with recent events, that make it unlikely that HTC will continue as Microsoft’s primary device partner. First, HTC, which built the Nexus One for Google, just launched its own version of the Android device at the Mobile World Congress. Dubbed the Desire, this handset incorporates HTC’s Sense, a design experience the company is implementing across all of its future devices, regardless of the underlying operating system, which could run afoul of Microsoft’s new partner standards. Secondly, HTC’s soon to launch HD2, the most feature-rich smartphone running the Windows Mobile 6.5 operating system, does not meet Microsoft’s Windows Phone 7 requirements to qualify for an OS upgrade.  Considering the close relationship HTC fostered with Google in developing the Nexus One, Microsoft would be prudent to look elsewhere for access to consumers.

Fortunately for Microsoft, LG, the third largest mobile handset manufacturer in the world, and second in the U.S., has announced its intention to be the first OEM to launch a Windows Phone 7 handset this fall. This could result in faster adoption for Microsoft’s new mobile OS especially if other OEMs decide to diversify their operating system portfolio due to Google’s directly competitive Nexus One mobile offering.

Unlike Google and Microsoft, Apple and Research In Motion view their primary businesses as being mobile. Due to this  both have vertically integrated the development of handsets and the underlying operating system. This has enabled both companies to enjoy a more direct relationship with consumers and helps ensure a more consistent user experience across their respective handsets. It’s no surprise that combined, Apple and RIM control two-thirds of the U.S. smartphone market.

2. Retail outlet distribution. As Google learned in launching the Nexus One device, working with the network carrier on distribution and marketing is essential for driving sales and adoption. Google’s internet-only, direct-to-consumer approach to selling the Nexus One on T-Mobile’s network resulted in less than 100,000 of these devices being sold in the first month. Contrast that with the launch of Motorola’s Android-based Droid which resulted in over 500,000 units being sold in its initial month. The Droid’s relative success to the Nexus One can be attributed to the coordinated support from Verizon Wireless which (a) has the largest subscriber base and arguably the best wireless network in the U.S. (b) provided distribution for the device through its retail outlets and (c) was backed by a $100 million marketing campaign.

More than any other mobile OS provider, Research In Motion has benefitted from its wireless carrier relationships. With BlackBerry devices available on every major carrier’s network in the U.S., and thus distribution provided through every wireless retail outlet imaginable, RIM has reached over 40% share of the domestic smartphone market.

Apple on the other hand has succeeded in spite of its exclusive relationship with AT&T Mobility in the U.S., primarily because it revolutionized the smartphone experience with the iPhone, but also because it has been able to drive distribution for its device through its own Apple stores.

3. Developer retention. While device manufacturers and wireless carriers are the critical factors in driving smartphone OS adoption, the iPhone exemplifies why developers are the key to retention. In spite of all the grief and anger directed at AT&T by iPhone users, most customers are unwilling to switch wireless carriers due to the personalization functionality provided by the iPhone through its app store. Even with Apple’s frustrating application approval process, developers continue to focus on building for the iPhone platform because it offers the most lucrative revenue opportunity, according to interviews conducted by Gizmodo at the Mobile World Congress, with interest in Android a distant second but growing due to its potential reach now that 60,000 Android-enabled devices are shipping daily.

Microsoft will need to create the same enthusiasm with developers for its new operating system in order to get these individuals to allocate some of their development time and efforts to learn yet another platform. Unfortunately Microsoft lost a chance to jumpstart its efforts by not having a path for them to port their current Windows Mobile apps to Windows Phone 7.

…and the winner is? I agree with Accel Partner’s Richard Wong that fragmentation in the mobile space is here to stay due to technology but also because of varying business models.

Domestically, Apple will determine how the mobile OS market plays out. If it were to end its exclusive arrangement with AT&T and go with a multi-carrier approach, which has proven to be successful from a market share and financial perspective overseas, Apple would control the most lucrative smartphone market in the world due to its strong relationships within the mobile ecosystem versus its competitors.

Worldwide, Gartner Inc.’s prediction that Google’s Android platform will surpass BlackBerry, the iPhone and Windows Mobile in market share in 2012 is fairly safe due to Google’s approach and the economics of its operating system. Google’s interests in the mobile space are squarely focused on search and location-based advertising. As such, giving away its platform makes complete sense. The biggest risk Google faces is getting into its own way by pushing corporate agendas that come at the expense of partner relationships. Developing its own mobile handset, acting like a telecom company by acquiring wireless spectrum or building its own broadband network, and allowing the fragmentation of the Android operating system are all examples of how Google could quickly lose favor with each of the three key relationships in the mobile ecosystem.

Through sheer size alone Microsoft should be able to rebuild most of the market share it has captured with previous iterations of its mobile operating system with Windows Phone 7, but not to the point that will make it a market leader. Microsoft’s continued reliance on a licensing model for its mobile OS and restrictive design parameters will hurt adoption as it competes against a free and open Android platform. While integrating the Xbox experience directly into the Windows Phone 7′s capabilities might be enough to convert some iPhone gaming enthusiasts, Microsoft’s Zune is a distant second to iTunes’ content portfolio, making it difficult to compete with Apple’s overall smartphone offering.

With Microsoft committing $1 billion to develop its new mobile operating system, Research In Motion faces the greatest market share risk. Not only is an acquisition of RIM by Microsoft highly unlikely now, but Windows Phone 7 Series OS is best positioned to compete with BlackBerry’s biggest strength- mobile enterprise email. By bringing Outlook to its mobile operating system, Microsoft can woo traditional BlackBerry users with native email capabilities and additional functionality through its Office productivity suite. Research In Motion has not only taken a preemptive strike against Microsoft but Google as well, which has integrated Google Apps into Android devices, by releasing a free version of its enterprise server for small businesses. With a relatively small application store, RIM will have an even greater difficulty in retaining its mobile OS market share lead in the U.S. over the next few years.

Whatever the outcome the consumer wins, as the competition will continue to breed innovation and enable smartphones to further evolve from productivity devices into personalized mobile experiences- courtesy of the mobile operating system.

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Posted by on March 9, 2010 in Business Model, Mobile

 

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Even with Android, and now Nexus One, Google Still has Apple Envy

19 Jan

While the media has enjoyed positioning the recent launch of Google’s Android-based Nexus One “superphone” manufactured by HTC as a direct competitive threat to Apple’s iPhone, I agree with Bill Gurley of Benchmark Capital that this is the wrong question to try to answer as Apple and Google are taking very different approaches to the mobile market. Apple, as in the personal computer market, has focused on developing the most well designed, highest grossing margin, products they can imagine at the expense of market share. Google on the other hand, by open-sourcing the Android operating system to handset and device manufacturers for free, is aiming to become the most widely used mobile operating system at the expense of Microsoft’s Windows Mobile and, to a lesser extent, Nokia’s Symbian (which is more widely used internationally) platforms. As Fred Wilson of Union Square Ventures alludes to, by leveraging its ability to tightly integrate its applications (Calendar, Gmail, Maps, etc.) into Android, Google can extend the operating system to provide a solution for not only consumers, but the small/medium business market as well, right out of the box. Having also signaled their intent to develop an enterprise version of Nexus One, Google will be able to challenge Research In Motion’s Blackberry platform for larger, more lucrative business clients as well this year. Combined with a strong pipeline of Android-based handsets being released by device manufacturers over the course of the year, it’s more a question of when rather than if Android will become the largest mobile operating system in terms of market share in the United States.

With such a bright outlook in mobile, why would Google be envious of Apple? Because Google wants to be more than just a search company.

Google’s mission has always been associated with organizing the world’s information and making it accessible, which enables users to more easily find content to consume. Apple, whose mission statement has evolved to include spearheading the digital media revolution, focuses on delivering this content in the form of applications, music and videos to consumers through its own devices and services. It’s this difference in how content is discovered and where it is consumed that has enabled Apple to establish a more direct relationship with both consumers and content owners than Google has achieved and, in the process, extract more economic value from both by way of hardware sales to consumers (iPhone, iPods, etc.) and distribution fees (through iTunes sales) from content owners.

Google is attempting to eliminate this relationship discrepancy primarily through acquisition. DoubleClick and, most recently, AdMob were acquired to provide Google with online and mobile display ad monetization capabilities, respectively, wherever the content is, regardless of device. In an effort to keep a larger revenue share, and further bridge the relationship gap it has with consumers who use Google to search but consume content elsewhere, Google has also entered the content business by, most notably, acquiring YouTube to help keep consumers within its network. Combined with the company’s recently failed attempt to acquire Yelp, I agree with Simon Dumenco’s assertion in his Advertising Age article that Google is attempting to become a media company in the process. Because Google’s content efforts have focused on user generated content though, the company has entered into partnerships to match Apple’s content offering- cutting deals with television networks and movie studios for premium content for YouTube, supporting an open app ecosystem on the Android platform and exploring partnership opportunities in the music space (though an acquisition of an iTunes competitor such as MOG or Spotify would make sense for Google and Android at this point).

Regardless of the number of phones that are eventually sold with the Android operating system and applications that are added to the platform, the truth is Google will never be able to replicate what Apple does, as the two organizations have completely different cultures which is evidenced in their respective approaches to mobile. Google’s left-brain, quantitative, engineering-driven approach to business isn’t organized to compete with Apple’s right-brain, qualitative, design-driven model. It’s in the design process Apple is able to foster an emotional connection between its products and consumers, something Google is unable to achieve because it provides software-based services. And because Apple design approach integrates both the hardware and software components of its devices, content providers, including Google, must work directly with Apple in order to reach these consumers. Apple’s design prowess will be on display again next week when they finally unveil the long-rumored tablet device which is expected to bring additional types of premium content from print publishers directly to consumers through these devices- adding more fire to Google’s Apple envy.

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Posted by on January 19, 2010 in Mobile, Product

 

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