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• Recent Posts

  • Bigger pie, more slices
  • Building a large Internet business in India (in the incumbents’ face)
  • What you need to do to be the next Google/Twitter/Facebook
  • On Internet-based platforms and on social media: Fred Wilson
  • Four reasons why charging mobile users for news sucks, NYT edition
  • Stickiness versus Referability
  • But their own mission is far from achieved
  • From database of intents to database of actions
  • Is Xobni losing focus?
  • The Daily Me

For the longest time, the only two entities that made money from a mobile phone were the carrier and the handset manufacturer. Open and shut [1].

No longer. Not only are more mobile phones being sold now than ever before, there are more types of folks making money off it. For smartphones with an ecosystem such as iPhone, there is

- Apple, the iPhone manufacturer

- AT&T (in the U.S.) that provides cell phone connectivity

- tens of thousands of developers who sell their iPhone applications through the App Store (with Apple getting a cut). And this is not just indie developers. Amazon stands to make a huge bundle through book sales via its Kindle Reader app for iPhone [2]

- businesses that create free iPhone applications but make money off ads within their applications [3]

- record labels that offer their music for sales on the iTunes Music Store

- television networks and Hollywood studios that offer their TV shows and movies (respectively) for sale/rent, also on the iTunes Music Store

Of course, this runaway success has inspired every smartphone label to scramble to bake its own pie. Witness the plethora of application stores (Palm, Nokia, Blackberry, Windows Mobile, Android) [4], and Nokia’s attempts to sell music.

 

Open or closed?

The more mature a product category gets, the more players there are that stand to make money off it. That’s because the pioneer quickly realizes that for true scale, it must “open up”  the product to entities other than itself. And that’s where it seems we have from history, a clear lesson: IBM opened up the specs of its original PC, and hordes of beige box manufacturers crowded Big Blue out of its own market. Apple itself nearly destroyed all that the Macintosh stood for when it licensed the Mac to other manufacturers.

“Opening up” a successful product and creating an open ecosystem divides the pie into so many slices that the pioneer is left picking up only crumbs. Apple’s iPhone ecosystem has been “opened up” to all those players above through the iPhone OS developer API, the iTunes Music Store and the iPhone App Store, but the ecosystem itself remains tightly closed.

 

[1] OK, so there were (are) electronic component manufacturers on the source side and advertising agencies on the sell side. But let’s limit ourselves to those that gained directly from the mobile phone. 

[2] Also with iPhone OS 3.0, developers can now charge for features within the application (unlocking extra weapons and purchasing weaponry within games being the most commonly cited examples), so you could have a free basic application with paid features if you like. Before OS 3.0, the best that developers could do was offer separate “free” basic and “paid” full-featured apps.

[3] Take Twitterific, for instance. The free version of the application inserts ads into your tweetstream.

[4] With comical attempts to make them sound different (Palm Software Store, Nokia Ovi Store, Blackberry App World, Windows Mobile Marketplace, Android Market). 

When it comes to the Internet in India, the low-hanging fruit has beeen picked, across sectors. Think Travel. Books. Jobs. Dating. Electronics. Money. In his post today, Rajesh Jain lists a few more: Search (dominated by Google), News (Rediff, NDTV, CNN-IBN), Email (Yahoo, Google, Microsoft, Rediff), Cricket (Cricinfo/ESPN), Video (YouTube/Google).

Online pioneers have lapped up the biggest brands and most popular goods: the largest cities, the biggest hotel chains, the most popular travel destinations, the widest marriageable demography, the most desirable gadgets, the most viral videos, the news everybody reads, the the matches everyone watches.

Now comes the hard part. The cities only a few want to travel to [1], the outliers for whom it isn’t easy finding a match [2] , books in regional languages, people with odd skills, niche but tremendously useful gadgets, highly technical videos. There’s a market for all those. In aggregate, they’re as large and lucrative as those that have already been monetized [3].

Then there’s an even larger market – for individual professional services. The mother of all yellow pages, with a location-based and rating-based component. One that connects me to the nearest puncture shop when my car has a flat on a stretch of highway (and takes Rs. 10 for that connection), directs me to the nearest ATM in any city, to the most reliable service center for my phone.

There is no technological barrier to setting up these businesses anymore (you really don’t need broadband for most of this – just plain Internet access, and in some cases, a cellphone). What makes this hard is convincing small businesses/individuals to sign on. Building trust and credibility. Selling to Jet Airways is much easier than to Pravin Puncturewalla on a random national highway. If you’re willing to tackle that, you have a successful business.

Finally, Rajesh has a compelling vision of the “now-new-near” web, which you should read. I think that “niche” is about as much the future as the others. I also think that “now” and “new” are synonymous for the vast majority of cases, so I propose that tomorrow’s web will be the “now-near-niche” web (built around the evolving Internet Operating System)

[1] RedBus.in is doing a spectacular job with that, by my estimates. Driving to work today I spotted a travel service that did a Hyderabad-Kolhapur (!) bus route. And hey presto, Redbus.in has that route listed.

[2] Secondshaadi barely scratches the surface, but hey, it’s a start.

[3] Yes, yes. It’s the same old tired Long Tail phenomenon. Let’s set aside discussions of how cool the phenomenon itself is and why it works, and explore how you can build businesses in India with it.

Yesterday and today
The Web has been through two major evolutionary stages, and we are seeing some major activity in the third evolutionary stage.

The first was the “early web” – through most of the 90s and until the dot-com bust. People accessed content through directories and portals, and the content itself was static web pages.

The second was what was dubbed (retrospectively) “Web 1.0” [1] Search went mainstream, and we also began to see a lot of dynamic content (think classifieds on craigslist and books on Amazon).

The third stage is what we’ve called “Web 2.0” in its early forms and “social media” as focus has shifted from a loose set of open standards and technologies (RSS, OPML, AJAX, Ruby on Rails, CSS, HTML5, Webkit, Flash, SyncML, OAuth) to the services that have been built with them.

Within this latest stage of evolution, developments in the last three years or so have been about putting together the guts of what Tim O’Reilly called the “Internet Operating System” to truly integrate the Internet into our daily lives. We’re reaching a stage of maturity with these internals (that is, growth/focus/interest is slowing), and are seeing an acceleration in the activity around applications and services built on top of them.

Tomorrow and beyond
But I think there’s still tremendous competition for some platforms that will form the guts of the Internet Operating System. Fred Wilson talks about aspiring to be a platform:

I think, that if you don’t want to be [an Internet] platform, then I don’t know what you should be aspiring to be. I mean, I don’t know that there is anything else that you would want to be.

The search system is pretty much Google and the location system is Google Maps. The iTunes Music Store and YouTube are the digital entertainment system, and Twitter makes an extremely strong case for the messaging system. But there’s still no dominant payment system for the web. There’s still no dominant scheduling/calendaring system yet, no dominant remote storage system and most critically, no identity system. And this is nowhere close to being a complete list.

As a parent, can you subscribe to your child’s school’s football coaching team calendar with the playground location embedded, sign up for it by paying the fees through your mobile phone and have your car’s GPS give you turn-by-turn directions to the ground on practice days following the least-congested route based on real-time crowdsourced information? Not yet.

Until these systems are in place, there is an upper limit on what we can make applications do, how deeply we can integrate these applications into our physical world. The “next Google/Twitter/Facebook” is going to be a company that creates a credible missing platform.

The top-level applications that build upon existing platforms will be either be single-purpose applications (Evernote is one example) or “glue” companies, those that tie platforms together. Don’t expect to see a billion-dollar company out of them in their current form. [2]

[1] The analogy with the World Wars is hard to miss. Until WW2, the First World War was known just as the Great War. Until sometime in 2005, “Web 1.0″ was just the Web.

[2] That’s not to say that they’re not worth investing in. I’m saying that next-generation services can only become mainstream once the plumbing is in place – and to take advantage of new platforms, these top-level applications will need to evolve significantly.

Union Square Ventures partner Fred Wilson was interviewed by John Battelle as part of the Conversational Marketing Summit. Some bits from Fred truly stood out, mostly about the state of social media. Here they are, grouped by topic (so they’re not necessarily in the order they appear in the interview) [1]

On the disruption caused by the Internet:
The Internet is… one of these… once every hundred years kinds of things that it goes all the way through pretty much all industries. Certainly, the Internet is going to do this to every industry that is end-to-end digital. The media industry I think was the first because it is probably the most end-to-end digital, but there are many more industries.

[How Fred would fix the NY Times] I would get rid of the paper. I would shut down the paper… I would stop covering stuff that is covered better elsewhere. I’d stop covering business, The [Wall Street] Journal does it better. I would stop covering sports, The [Washington] Post does it better, and I would focus on what they do uniquely well, their opinion, their national political news, their world political news.

GM’s going bankrupt and there’s all this innovation going on in the technology space at the same time. And you just think about that for a second. What we’re witnessing is sort of the – or The [New York] Times is another good example, we’re witnessing sort of the dwindling of the industrial era and the rise of the information era.

On platforms on the Internet:
Tim O’Reilly has this thing about the internet-operating system. And if you look at what the internet-operating system is, it’s the internet and a bunch of functions that come with it. Your search function is Google and your purchase function is Amazon and your list-something-for-sale function is craigslist or eBay and you could go on and on and on. And I think Twitter has the opportunity to be the function, which is tell the world what you’re thinking, right? If you have something that you just want to say now, you do that by posting it to Twitter and then the internet takes it from there. So, it’s a short message input function.

I think of, sort of the four big channels in social media as Twitter, Facebook, blogs and blog comments.

… in order to continue to be a piece of the internet-operating system, you need to be an independent company because if you sell delicious or you sell Flickr or you sell whatever else it may be, it gets sucked into something that’s not part of the internet-operating system.

Twitter and Facebook are growing at like 40 percent month over month, the number of incoming visits. And those visits are coming from what I called passed links – links that are passed from me to you. And of course, with the re-tweet function in Twitter in particular, that can get amplified very, very quickly. And so I think that, you know, email is another form of passed link. It’s the original form of passed link, but emails can get passed around virally but most emails don’t have that kind of amplification factor that social media does.

AOL, Yahoo and MySpace are all very good examples of it, that don’t have deep technology innovation in their DNA. And, you know, it seems to me that that is an absolute requirement if you want to be a platform and I think, that if you don’t want to be a platform, then I don’t know what you should be aspiring to be. I mean, I don’t know that there is anything else that you would want to be [2].

On the social graph:
… the problem that Facebook has and they know it, is that there are a lot of people out there who are not friends, who are really powerful social recommenders and you’re not just going to have them in your social graph in the original instantiation of the way Facebook was setup… I think, blogging to me is the proper model and I think that the people who started Twitter launched Twitter with the blogging model, which is I can follow you and you don’t have to read me. And we don’t have to be friends, but you can be influential…

[1] In fact, I highly recommend watching the full video/reading the transcript.

[2] Fred also says that he doesn’t think “there is going to be one magic bullet that solves the problem in terms of monetizing social media” unlike the banner ads model of the early days and the PPC model of the search-dominated era.

The New York Times is considering charging for content delivered via the iPhone and other mobile platforms. According to the head of NYT’s digital operations,

“For publishers to offer their content for free in the mobile platform forever without getting paid very much money, I don’t think it’s going to be tenable”

This is a bad idea. It’s the tragic love child of Mr. Head-in-the-sand and Ms. Bite-the-hand-that-feeds.

To begin with, this idea is remarkably short-sighted. It seeks to squeeze the maximum juice from the lowest-hanging fruit without a thought to what this will do to the tree itself.

Also, it’s contemptuous of an crucial audience: mobile-based readers will be a larger audience than desktop-based ones, are also likely to access the site throughout the day, as opposed to only in the morning and at lunchtime, and because they will likely view a mobile-optimized site, will require less bandwidth per person than “normal” users will.

Then, it’s stupid: the NYT offers no reason for charging mobile-based readers of the NYT other than that they are, well, mobile. It is the same as the inexplicable extra charge levied by Indian Railways for bookings made over the Internet. The Indian Railways gets away with it because it is a Government monopoly. The NYT will not be that lucky.

Finally, it’s also lazy. Right now, the “mobile edition” of the NYT is no more than a trimmed-down version of the main NYT website. No more. If it went truly mobile – breaking news pushed to subscribers’ smartphones, live scores, full page customization – it will be worth charging for. It can also monetize the mobile website through display advertising, in the same manner it monetizes the main website.

The NYT has a wonderful opportunity to engage a massive audience with its high-quality content, but it doesn’t seem to have the people in place than can seize it.

Small and medium businesses can’t afford splashy advertising campaigns on TV and billboards that large corporations can, so their marketing strategies need to be smarter.

The most popular of the smart marketing strategies today is about building customer “stickiness”. Making your customer return to you for repeated service. Staying engaged with him/her. Online, you’d do this by creating, say, a Twitter account with updates about new deals,coupons and discounts [1]. Or staying in touch through a company blog. Or having your customers sign up for a regular newsletter (so old school). Or building an iPhone application (so hot!)

Stickiness is often held up as the best way to market a small business. But the basic assumption of stickiness is that you want your customers to return repeatedly. What if your business just isn’t like that? What if you’re a user-car evaluation service? Or an apartment broker? Regardless of how much they love you or your service, stickiness is no use with them.

Your marketing strategy then needs to focus on referability: getting existing customers refer you to other potential customers. Offline, you could offer your customer, as part of the deal close, a choice of one piece of merchandise: a t-shirt, a key-chain, a cap, a set of stickers, whatever. Online, you could build a Facebook application that your customers could display on their page. For the apartment broker business, the application could have you enter your location, size of apartment, approximate rent and display snaps of sample apartments, with directions to call you. You get the idea. If your customer is satisfied, he/she will be glad to help you with this.

Your business needs to choose between stickiness and referability. And it’s not an either/or choice. Sticky customers are also likely to refer you to their friends. Also, customers that care enough to refer you will come back to you. But the focus of your marketing strategy must be one or the other.

 

[1] Dell is doing this pretty well. It’s not a small business, but the principle remains the same.

Is [old giant] losing out to [hot upstart] over [new trend]?

Did Microsoft miss out on the big search opportunity that Google pounced on? Is Google losing the real-time communication game to Twitter?

Microsoft’s original mission was “a computer on every desk and in every home” [1]. Even with their almost total dominance of the PC industry, that mission remains far from accomplished.

Google’s mission is “to organize the world’s information and make it universally accessible and useful”. That’s a mouthful. But it’s also nowhere near completion.

Both companies – one over 3 decades old, the other over a decade old – have still only plucked the low-hanging fruit. Urban homes and corporations have computers, but there are still billions of potential Microsoft consumers – who might be well served with a mobile “computer”, for instance. For Google, even with its mind-boggling data center infrastructure and web-crawling, the task is just begun. Books. Space. History. Energy and resource consumption. And more. And that’s just the “organize” bit. Converting all that data to information so that it is “accessible and useful” is another thing altogether.

Companies like these are larger than the “next big thing”. Their own “thing” is so incredibly significant, so humbling. That’s why it’s unfortunate when such an organization changes its very mission to something that can mean absolutely anything (and therefore also nothing): Microsoft’s mission is now “to help people and businesses throughout the world realize their full potential” [2].

Google isn’t about to kill Microsoft. Not if Microsoft directs all its resources towards what it set out to do. Likewise for Google; Twitter isn’t out to organize everything known to man. So ignore those predictions of doom.

 

 

[1] According to Wikipedia the exact words were “to get a workstation running our software onto every desk and eventually in every home”

[2] Although I didn’t find any evidence to suggest Microsoft changed its mission in response to any other company or threat

In 2003, John Battelle opined that Google was essentially a “database of intentions“.

The aggregate results of every search ever entered, every result list ever tendered, and every path taken as a result. … a massive database of desires, needs, wants, and likes that can be discovered, supoenaed, archived, tracked, and exploited to all sorts of ends… this artifact can tell us extraordinary things about who we are and what we want as a culture.

That phrase made it into his book “The Search” and quickly became a popular way to demonstrate how enormously important and powerful Google might eventually become.

This last Saturday, the New York Times ran a piece on a possible new monetization idea that Twitter was considering: to “offer shopping advice and easy purchasing”. People already solicit their Twitter followers’ opinions, and it is also already possible to identify real-time trends related to a particular product, company or event. Put those together, and you get an extremely powerful (and, the founder hope, lucrative) tool.

Viewing this piece of news in the context of “database of intentions” you can see how the web has evolved since Battelle propounded that idea:

One, Twittter is now a database of actions, of people announcing by-the-second what they have tried, used, bought, rejected, liked and disliked. I see an attractive opportunity for an analytics firm to help companies make sense of what people are saying about them, what events caused this conversation, and the results of a company’s actions/response on the conversation and subsequent sales/signups.

Two, it is still a database of intentions, but at dizzying, real-time speeds. From the New York Times article:

“Commerce-based search businesses monetize extremely well, and if someone says, ‘What treadmill should I buy?’ you as the treadmill company want to be there,”

While it’s certain that companies can use these intentions to snap up customers before competitors, it’s unclear as yet how companies will be able to scale and respond if and when Twitter achieves Google’s adoptions levels. There is definitely an opportunity for another business here.

Xobni is my most heavily-used application on weekdays – to locate attachments and email from dozens of people. I’ve been an ardent user and evangelist since it was made publicly available over a year ago.

Lately though, Xobni seems to balk at tackling email management problems, even though there is tremendous scope for just that.

The startup’s original vision was compelling – to mine the social network that already exists in email archives. And boy, did they deliver – listing most popular contacts, mining their contact information from email, most recent (threaded) conversations, and a list of exchanged attachments. It was a definite shift in the email paradigm. It seemed like they really understood deficiencies in today’s clients to deal with the volume of business transacted through email. I looked forward to them tackling hard problems in my inbox.

Except that they didn’t.

Some time ago, Xobni announced integration with LinkedIn – then Facebook, then Hoovers, then Skype. These were useful in that LinkedIn pulled up an unknown contact’s official designation and Facebook their (mostly unofficial) profile photo. But they seemed to point to a loss of focus on tacking problems with email itself [1]. Indeed, the company’s last few updates – Skype integration, access to Facebook profile streams – have nothing to do with the company’s original mission at all [2].

There are plenty of things I’d like Xobni to do, as a heavy email user in a large enterprise – integrate with Exchange to pull up profile information for contacts, view recent IM (Microsoft Communicator) conversations with users (just like email), see my last (and future) meetings with a contact – to name a few off the top of my head.

Xobni’s latest feature releases will be attractive for individual users of Outlook, not enterprise users. The latter (who are the bulk of Outlook’s user base) want deeper Xobni integration into their everyday workflow. Integration with LinkedIn and Facebook on the other hand, could be plugin-based and therefore optional.

Xobni is easily the best thing to have happened to email in a long long time. It can either deliver on its vision or integrate with the latest social media sensation. The choice is theirs.

 

[1] I won’t speculate on whether this has anything to do with the departure of their VP of Engineering, Gabor Cselle, but it *is* ironic that he left to found reMail, a startup that tackles hard problems with mobile email.

[2] Along with these, admittedly, Xobni also improved performance and made the UI marginally more customizable. They still don’t take away from the chief point.

Nicholas Kristoff of the New York Times:

When we go online, each of us is our own editor, our own gatekeeper. We select the kind of news and opinions that we care most about.

Nicholas Negroponte of M.I.T. has called this emerging news product The Daily Me. And if that’s the trend, God save us from ourselves.

That’s because there’s pretty good evidence that we generally don’t truly want good information — but rather information that confirms our prejudices. We may believe intellectually in the clash of opinions, but in practice we like to embed ourselves in the reassuring womb of an echo chamber.

That’s cause for concern by itself, but I wonder if this was one of the factors that led people to move to online news consumption in the first place. Think about it – haven’t we all heard these? “Oh, I read only the sports page”. “I wish newspapers had bigger business sections”. “I love the Op-Ed pages in the Guardian!”

That’s what online is about – you can read only sports, only business, only politics, only gossip, only high-brow opinion pieces – whatever agrees with you – or whatever you agree with.

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