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My New Tumblr “Blog”

Sunday, February 20th, 2011

I have been following Tumblr’s progress for awhile.  Tumblr ties pieces of classic blogging, social networking, and Tweeting with a heavy emphasis on photos and videos into a beautifully designed package.   Unlike Twitter which does one thing very well, Tumblr does many.

I will continue to post longer thoughts here, but for  quick “appetizer” notes and things of interest I will start posting them on my Tumblr blog here.  If you want my stream of conscious check out Tumblr, if you want some well formed ideas this is the place for you.

A Lesson in Negative Advertising from Box.net

Friday, December 10th, 2010

My startup is growing.  We need some really simple collaboration tools for tracking projects, logging bugs, and sharing documents.  I started to look at some of the products in this space like 37Signal’s Basecamp, Box.net, etc.  The positioning of these products struck me.  Here are a few products I checked out and the word associations I quickly formed for each:

  • 37 Signals Basecamp: Simplicity
  • Box.net: SharePoint sucks
  • FogBuz: Great for Geeks

Without ever using Basecamp or FogBuz I developed a mental picture of these products. For Box.net all I know about their product is that they think SharePoint is a crappy product.  That tells me absolutely nothing about their product. In fact, Box.net has done a phenomenal job of telling the world that SharePoint sucks  – especially if you live in the SF Bay Area and travel on 101.

This is classic negative advertising – politicians have mastered it.  For companies this hard hitting negative advertising is a poor way of communicating. It doesn’t tell the consumer anything about the product.

If you are going to take some shots at your competitor (which is fair) it also needs communicate your value to the consumer. Here are some recent clever marketing tactics that did both.

Netflix:No Late Fees”

They are clearly going after Blockbuster but don’t have to explicitly mention it.  If I explained the Netflix product to a friend I would say something like “they deliver movies by mail and I never have to worry about late fees like I did with Blockbuster.” They reenforce one of their core differentiators in contrast to their competitor.

Apple: “I am a Mac”

This ad campaign clearly took some shots at Windows but at the same time establishes the Mac as a fast, no-virus, easy-to-use alternative to Windows.  The clever part of this ad is that they don’t slam Windows in a mean spirited kind of way, yet they also successfully tell you you why the Mac is better.

Salesforce.com:  “No Software”

As a pay-as-you-go web-hosted service the “No Software” slogan squarely takes aim at the license fee client-server based application vendors like Oracle, Siebel (now Oracle), and SAP.  Back in 2000 delivering enterprise software via the web as a monthly service was novel – now not so much – and the “No Software” made that point clear without using words like “application hosted software.”

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Disclosures:  I have never worked for Microsoft.  I am not an investor in any private software collaboration company.

The OpenTable Ecosystem

Tuesday, November 2nd, 2010

I meet with a lot of investors these days raising capital for my startup and the best ones are by far those that spend the time to understand the product we are building.  Fred Wilson has some good advice – the faster you get to the product the better.   An elevator pitch is the appetizer, but the main course is the product vision, how the product is sold, and how it works. In today’s Business Insider I ran into an example of an investor who clearly doesn’t understand the dynamics of the OpenTable product.  Witney Tilson (a hedge fund manager) argues that OpenTable is overvalued in the slide below.  One of his key reasons is the lack of natural barriers to entry in the OpenTable business.  If you spend the time to understand the OpenTable product and ecosystem this becomes a rather odd assertion.

Why OpenTable has massive barriers to entry:

  • OpenTable is a two-sided marketplace which have significant barriers to entry, see eBay.  Lets say a competitor magically gets 10,000 restaurants to use their OpenTable clone — you have only one side of the market.  Restaurants need new customers making reservations to make this interesting – which OpenTable delivers by virtue of its strong position in Google search results, integration with all the major online local reviews sites like Yelp.com, and increasingly popular mobile applications.  Generating the traffic to drive to restaurants takes years to develop.
  • Selling, installing, and maintaining an OpenTable system is not a simple or quick process.  Selling to small business is time consuming and expensive.  Once OpenTable is installed, it’s akin to installing SAP or Oracle Financials for an enterprise – nobody wants to rip it out.

Why OpenTable is undervalued:

  • Significant barriers to entry — you would need a minimum of a $50M and 3-5 years to start chipping aways at OpenTable business.  This assumes that OpenTable management is fairly incompetent and does not react.
  • Flash sales:  They have an audience and deep merchant relationships enabling them to layer a Groupon like flash sale – very lucrative.
  • Mobile:  The volume of reservations will increase significantly as their mobile applications reach critical mass.
  • New lines of business: Once they wrap up the restaurant market their is no reason why they can’t do spas, hair salons, and even car-services.

Why Talent is Limiting Supply in the Smartphone OS Market

Tuesday, August 17th, 2010

How many smartphone mobile operating systems can the market support? Wrong question. In a market of billions of potential devices with limited network effects [1] and hyper-growth demand the market could support lots of smartphone mobile operating systems – where lots is defined as greater than six and less than twenty. The limiting factor is not demand but rather supply. How many companies can build a competitive mobile OS? The fire sale of Palm and the launch of Blackberry Torch makes it clear that the list of companies that have the skills and resources to build, launch, and sustain a competitive mobile OS is getting smaller each month. Watching this playout feels like watching the top riders in the Tour de France fight their way to the top of Col du Tourmalet — each and every year only the most talented riders keep pace as the ride becomes absolutely grueling.

Companies are starting to fall by the wayside as the stacked teams of Apple, Google, and soon Microsoft take firm control of the race.
Lets look at a checklist of capabilities one needs to launch a competitive mobile OS. Half way down this list you will realize that very few companies have assembled a deep and wide enough talent pool to execute a smartphone mobile os on a global scale.

What you need What it gets you
User Experience
Multi-touch interface Parity
Visual appeal Potential differentiation
Multi-tasking Parity
Apps
Games, Games, and Games (1) Acquisition (great games sell devices)
(2) Lock-In (spend creates switching costs)
20,000 Quality Apps Parity
Discovery & Merchandising Easy & trust worthy
Media
Music Lock-In (spend creates switching costs)
Movie rentals Engagement
TV show rentals Engagement
Browser
HTML5 + CSS3 Compliant Browser Parity
Information Finding
Search Utility
Carrier financial incentive via revenue share
Voice Search Cool demo
Maps (limited number of suppliers) Utility + parity
Navigation (limited number of suppliers) Utility + parity
Communication Cloud
Mail Utility + parity
Voice Transcription Diffentriated
PIM Services Utility + parity
Payments
One Click Buy (micro transactions) Parity + Frictionless commerce
Global (90+ markets) Utility + parity
Fraud Mgmt Utility + parity
Launch Marketing
$250M consumer marketing Consumer awareness.
Percieved momentum for developers
$50M App developer launch Studio compensation to seed app library and app competitions
Devices & Distribution
#1 and/or #2 Carrier in top 20 markets (first yr) Market coverage
3 to 4 OEM’s building 8 million devices (first yr) Consumer choice of mid to high-end devices
Developers, Developers, Developers!
Popular IDE App quality
Time to market
Developer happiness
Deep SDK Device access (e.g. camera, acceleramator)
UI (e.g. animation, controls)
Service access (e.g. maps, contacts, mails)
Enterprise
Security Parity
Employee device & app provisioning Parity

[1] Limited Network Effects: During the PC war application developers propelled Windows PC to its monopoly position – users adopted the OS with the widest range of applications and developers adopted the platform with the most users. In the mobile smartphone OS war the top 20,000 apps that matter will be replicated to the top five mobile os platforms in each market or region muting the possible network effects because the development costs are relatively low.

Behind Google’s Data Buying Binge

Friday, August 6th, 2010

Google used to be based on a simple premise.  The web is a big place, we help you find the relevant piece of information for your question and direct you there — as quickly as possible.  You don’t consume information on Google, you simply find it.  Users only spend 3.4% of their time on search engines.  This is changing.  Having the best algorithm is no longer enough.  Google is investing heavily to own the data across key vertical categories and slowly becoming a destination experience for consuming this data.  Unless you own and curate rich data-sets there are natural limits to both the search relevancy and experience you can provide.  Google is quickly adapting by buying access to vast and rich data sets. Let’s look at their recent buying binge:

  • Travel: Acquired ITA Software which aggregates flight routes and pricing information and enables advanced search capabilities on travel data.
  • Local: Attempted to purchase Yelp.com, and after that fell through they ramped investment to build their own local data set.  Additionally,  Google has been investing for years in map with StreetView and satellite imagery.
  • Metaweb (Freebase): Structured data of  people, places, and things.

When Google focuses on a category like local this is what happens to the search experience.  For a query like Delfina Pizzeria (an excellent pizza place in San Franciso) rather than linking to the best sources of information like Yelp, Zagat, SF Chronicle, etc. Google first pushes you towards Google Places. It currently includes a mix of their own content and other sources of licensed content.  What happens when they have their own pictures, reviews, and check-in data — do they really need to license all this other content from the likes of  Zagat and SF Chronicle.

I expect Google to complete the buying binge by acquiring companies with rich data sets across other highly monetizable categories:

  • Shopping: Amazon and eBay to a lesser extent are capturing significant percent of query share in a very lucrative area.  If users bypass Google and go directly to Amazon for their product queries this represents a serious threat to their business.  They need to acquire a company with a huge selection of product data — rich and structured product attribute (size, color), inventory availability, pricing and promotions, and user reviews.  I can’t think of one company (beyond Amazon) that has done this well at the scale Google would need.  This may require acquiring multiple companies to create this.
  • Real-Estate: Is somebody like Trulia next?

Practicing Focus the Apple Way

Tuesday, July 27th, 2010

Today, Apple launched a whole slew of new and upgraded products today, here are the highlights:

  • New Magic trackpad  – this  is very cool as it brings full multi-touch to the desktop (review here)
  • 27 Inch LED Display (review here)
  • Upgrades to iMac line (review here)

A pretty significant product launch.  So, you would think with Apple passing on a big Steve Jobs press event at the very least they would swap the Apple.com homepage to promote the new products.  Not a chance.  They are laser focused on the iPhone.