Saturday, 8 June 2013
Thursday, 11 November 2010
Thursday, 4 November 2010
Why Facebook Places deals announcement is great for location based startups – perhaps even for Foursquare
In the last year working at Yell (the UK’s leading directory company), I have been approached by a number of very interesting location based startups that were keen on partnerships. These are companies that have gone beyond simple location based search, and created unique IP which is augmented by location targeting. Some have already launched whilst others are still in the prototype stage. All face one or more of the following difficulties:
- Accurate listings information: Most location based apps share a need to do geoproximity searches for useful businesses. Accurate geolocation information, name, address and telephone number are minimum requirements. Getting this information and having it refreshed regularly for a large number of businesses that are started up, shut down or just move premises, is a daunting task.
- Marketing/distribution plan: Acquiring new customers is the bane of the B2C startup. To date, location based services had to rely on app stores or marketing a standalone site. Whilst Apple does try its best to highlight new apps, with over 300k apps available, gone are the days when an interesting startup could count on leveraging word of mouth alone. Most new entrants are easily outshone or outspent by bigger brands that can invest in mobile marketing. Even those that do, find that this seldom translates virally.
- Business model: Those that have traffic, struggle to monetize it. Other than paid for apps or paying for upgrades to free apps, mobile advertising is the only option. Those with deep pockets can afford to hire large number of sales people but for almost all startups, that means working with mobile ad networks or Google AdSense. With mobile CPMs on the floor (location based multipliers are still few and far between), you need a lot of traffic before you can pay the rent. The lack of a compelling business model affects their ability to get funding as well.
Foursquare is a great team that has solved all the above problems, but they have spawned numerous clones. The reason for that is whilst the above activities are time consuming and expensive, paradoxically, they are quite simple. It is no wonder that the location based services space has so few hits and limited usage. Foursquare have been around for over a year and a half and acquired just 3 million plus users, despite great interest from the general media and a $20M B round.
Facebook has the ability to alter this landscape dramatically and has a track record nurturing a huge number of startups. This far into the life of Zynga, they had several times the number of users that Foursquare has. The reasons are to do with creating the right ecosystem. First and foremost, this means a rich platform that is already in use by 200M potential mobile customers and growing. The reason it is still possible to virally launch a niche app on Facebook is that it has volume, and a long tail that is highly networked. It is also relatively cheap to target your audience. How else can a 13 year old with little cash get 16k fans in 4 days? Adding freely available local listings and allowing geoproximity searches to this mix is a great enabler. Coupons could be the answer to the ‘Show me the money’ VC or angel question. Whilst the current launch allows businesses to create deals free of charge, Mark Z. has indicated that he would consider making money from deals in the future if it were in the interests of its user community – presumably that could include the app developers.
To be sure, there are going to be challenges. The accuracy of Facebook’s location data is suspect, but then again, that is true of other larger players too. To achieve critical mass, in coupons, you also need volume. Whilst millions of early business adopters are already signed up, Facebook lacks a large sales team to get businesses to publish their offers. However, these issues could be remedied by working with partners, such as directory companies and media sales houses.
And what of Foursquare, that had already invested much effort to create its own platform (and was charging businesses to display deals)? Have they been outmanoeuvred? Perhaps. But Foursquare partly got into the platform business by necessity. If a team that innovative refocused on their core, which is creating a great gaming experience based around local presence, and ported their product onto Facebook, they could yet be the Zynga of location.
Saturday, 25 September 2010
Two to tango: The takeup of location based services such as Foursquare and Facebook Places is highly dependent on smartphone OS evolution.
The launch of Facebook’s Places created a positive feedback loop of locations, seamless check ins and tagging and encouraged a much wider audience to experiment with location services - the ensuing publicity even resulted in an increase in Foursquare signups. However, as regards fostering true location based innovation, developers may have to wait for the next generation of location aware smartphones as the ‘Facebook platform’ is but an app when it comes to smartphones.
To understand why, it is worth examining the evolution of location based services. The first such services had to grapple with small screen sizes, used various cell tower geolocation methods in the absence of widespread GPS availability and were limited by processor speed and battery technology. The situation improved somewhat with the higher end business phones that came out in the later half of the decade, however operators kept a tight grip on device decks (not to mention keeping data costs high) and location based services were limited to early adopters. Thus, launching a location based startup had pretty much the same odds as buying a lottery ticket and mobile pundits such as Tomi Ahonen questioned the commercial future of these services.
Although there were smartphones (Nokia’s N95 for example) that solved some of these issues and drove early adoption of services such as Google Maps, it arguably took the first versions of the iPhone to drive mainstream use of location based services. The 3G iPhone built on earlier versions that had Wi-Fi hotspot lookup and made it practical to reliably find yourself on maps and see nearby points of interest. Foursquare, GoWalla and others layered innovative social functionality on these foundations, in tune with the growing importance of social networking (read Facebook).
However, apps like Foursquare have reached the limits of what is possible with current handsets. One of the biggest complaints by Foursquare users (self included), is that it does not go far enough in encouraging repeat usage - only one person can be mayor of a place at any on time, and even that wears thin after a while. Foursquare is addressing the usage issue by signing partnerships that give the user special offers or content when they check in. But transitioning from early adopters to the mainstream requires either a large number of offers which requires deep pockets, or highly targeted offers that can be pushed to users.
To date, Facebook has proven to be extremely good at providing a social platform conducive to the growth of all manner of applications. The rich APIs and large audience are tailor made for viral growth (helped of course by a healthy budget of hyper targeted advertising). For example, Foursquare's integration with Facebook (pre Places) meant that if a check-in was mentioned in a user’s feed, there was a chance that it would lead to higher experimentation and adoption. But viral experimentation will not make a major dent in the end user value equation. That is where smartphone OSes can play a big part. Until iOS4, multitasking was constrained and third party apps were unable to sit passively in the background and geotarget users. This changed with iOS4, and within weeks of its launch, automatic checkins proliferated with apps such as Future Checkin and SCVNGR. It is a matter of time before Foursquare and Gowalla follow suit.
Problem solved? Perhaps. Geotargeting is highly attractive - some location based ad networks are reporting a 10x CPM advantage – and it won’t be long before more apps try to take advantage of this potential revenue uplift. If you have multiple location aware apps running in the background auto-polling on your phone, you pretty quickly hit a hardware constraint, not to mention the privacy implications. This is a platform issue and will have to be resolved on the mobile platform and not by individual apps. In the face of the privacy storms erupting around Google, Facebook and others, Apple in particular has been careful to stress its fine grained privacy controls, which have now extended to include location apps. It is reasonable to expect these to become standard issue in other OS. As location based apps become more capable, expect the controls to become richer and allow users to manage the type of information that passive apps can collect or the events they can trigger.
However, there still remains a transactional problem. How do users redeem a special offer such that marketers can track the success of such campaigns across a large number of outlets? Current practice for mobile coupon redemption involves scanning a barcode displayed on a phone screen or reading out the code and store staff keying it in manually. The process is inefficient and in the latter case error prone. Near field communications (NFC) may provide the answers. Nokia has had such phones on general availability for some time and said that all its phones will be NFC enabled by 2011. Apple is also working on them - recent patents incorporate an NFC enabled framework for data exchange between the iPhone and a merchant device that supports exchange of user information and payment. This enables iPhone users to make transactions on the go and in the manner of their choosing, without having to use long winded credit card payment (cue Japanese mobile phone users stifle a yawn).
Future users of location based apps may be able to take advantage of content that can be targeted both locally and socially and redeemed or purchased frictionlessly using coupons or m-commerce payments. Think Foursquare or Groupon with automated coupon push and redemption/purchase functionality based on your social graph, and that is just scratching the surface. Just as the advent of the iPhone 3G unleashed a wave of creativity, the widespread availability of always on geotargeting and NFC payments supercharged by social graph and other hyper-targeting information will hold surprises for us in the near future.
Tuesday, 9 June 2009
This article reviews important considerations for identifying the right channel(s) for new product launches.
2. Product Channel fit: Is the channel motivated and able to sell or service the product properly?
The next thing to do is match the prospective channels to the product category. It is important to decide beforehand if you want the channel to perform either lead generation, close deals or service the product, or all or part of these. The tradeoffs are that lead generation is a low touch activity, while closing deals and supporting customers can involve significant partner investment and hence revenue sharing.
Questions to ask include:
- Has the product demonstrated success for its target customers in the channels that you have selected? Partners are more willing to promote and sell a proven product. In a new product launch, it is helpful to invest time in acquiring beta customers directly to serve as references.
- Is the product simple for third parties to position? Does it require significant training on behalf of the partner? Groundbreaking or complex high value products are usually better left to a direct sales force which has undergone comprehensive training.
- As a proportion of a channel's customers, how many fall into your target segments? Partner sales managers prefer to promote products that appeal to the broadest number of their customers. If your product appeals to less than 50% of a channel's customers, you may need to invest significant effort in proper segmentation.
- Does it fit into the partner's portfolio, or even enhance the value of a bundled offering? In the case of an affiliate or partner website, does this product help the partner's positioning of their site?
- What is the sell price of the product relative to the typical transaction through this channel? Can your product help the salesperson meet their revenue or margin targets? Is the affiliate revenue or margin share competitive relative to other products being promoted?
- Does the partner sell or service products that compete with yours? Could your channel program be subsidizing your competitors' products?
3. Is it economically viable?
Questions to ask to include:
- How many transactions can this channel accomplish relative to the total cost of launching the product? How much work will it entail to modify the product to make it fit into the channel? How much is the cost of training and supporting the partners on an ongoing basis? Be sure to validate your penetration and cost assumptions with the closest substitutes.
- What is the opportunity cost of launching in the channel and helping it get up to speed? In a fast moving market, will your competitors be able to steal a march on you through direct sales? In offline channels, there is sometimes a long lead time involved in getting partners to launch your offering. This is especially true of deployments with volume channels such as Telcos which have deployment roadmaps that extend into several quarters and require much preparation on behalf of the vendor.
- What is the cost of failure? If the partner fails to launch or support the product on your behalf, how much more will you have to invest for a re-launch?
- How does this compare with direct sales?