Monthly Archives

October 2010

The gamification of everything….

By | Startup general interest | 2 Comments

There is a lot of buzz about gamification at the moment – and with good reason – game mechanics can help make any site or service easier and more fun to use.  However, as with many good ideas, too many people are jumping on this one.

For that reason it was good to read a common sense approach on Nicholas Lovell’s Gamesbrief blog explained by guest author Roy Schmidt of Bigdoor, a company that allows anyone to gamify their website.  I like the way he opened:

There’s a lot of buzz around “gamification” recently, and plenty of confusion about what it really means to gamify a site. One thing is clear: It’s a lot more than just adding badges to a site. It’s about finding the right motivators for your audience and promoting desirable behaviour in an enjoyable way without getting in the way of the core value of your service.

Amen to that.

European VC deal value roughly flat quarter on quarter

By | Venture Capital | No Comments

Headhunters Calibre One published their regular state of the market briefing yesterday and it shows that investment levels in Europe have been roughly flat at just under $1bn per quarter since the credit crunch hit a couple of years ago.  The US, in sharp contrast, has had a rockier ride, but is still sees 3x+ the level of activity we see here.



When you look at the country by country breakdown within Europe we see that the UK still dominates with France not too far behind these days (tax incentives that encourage retail investment into venture capital funds have brought a lot of money into the French market).  Also notable are the declines in the German and Irish markets.

Apologies for the soft focus….



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Succeeding in consumer internet – lessons from Mint’s victory and Wesabe’s failure

By | Startup general interest | No Comments

You may remember that last year, a service for managing personal finances online, was acquired by Quicken for $170m.  You may also have seen that shortly afterwards Wesabe, their main competitor, gave up the fight (the site is still live but only as a discussion board).

So Mint won and Wesabe lost. And that happened despite the fact that Wesabe launched first.

Marc Hedland, a founder (and latterly CEO) of Wesabe, has written a long and thoughtful post which gives his views on what happened, why and what other people have been saying are the reasons for Mint’s victory.  It is a very interesting post, as much for the myths it debunks and the way it highlights the BS that gets talked about topics like this as it is for what Marc sees as the two decisive differences between the two startups.

The purpose of this post is to highlight one of those differences.  In Marc’s words one of the reasons Mint was successful was that:

Mint focused on making the user do almost no work at all, by automatically editing and categorizing their data, reducing the number of fields in their signup form, and giving them immediate gratification as soon as they possibly could; we [Wesabe] completely sucked at all of that. Instead, I prioritized trying to build tools that would eventually help people change their financial behavior for the better

In summary – the key to Mint’s success was instant gratification in return for minimum effort. Wesabe’s mistake was to focus on delivering longer term benefits.

Marc goes on to make an important clarification later in his post, saying that delivering real and lasting value to the user is also important and shouldn’t be forgotten, but you have to get her using the service first. And that takes instant gratification.

This lesson applies to pretty much every consumer internet service.

Twitter Weekly Updates for 2010-10-10

By | Weekly Twitter digest | One Comment

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Facebook makes another impressive step forward – control is the goal

By | Facebook | One Comment

If you have been anywhere near a computer in the last twenty four hours you have probably caught some of the news that Facebook announced yesterday.  It seems to me they have made another impressive step forward – on the one hand by addressing key gripes about the service and on the other by extending their reach into the non-Facebook web.

Zuckerberg outlined the changes in a post yesterday titled Giving You More Control and listed the three most important as:

  • New groups feature
  • Ability to export data
  • Dashboard showing how other sites use your data

To start with I want to dwell on the title of Zuckerberg’s post for a second.  If you read the work of social scientists like danah boyd on popular perceptions of social media it becomes clear that the biggest source of discomfort and fear is a loss of control, and the perception is more important than the reality.  Before social networks we controlled our personal data tightly and that felt comfortable, for many the risk that some personal data could end up somewhere embarrassing (e.g. with their boss or their mum) is enough to limit their use of Facebook, or even stop them using it altogether.  Zuckerberg is hitting straight at this issue both with the title of his post and the feature changes.

The idea of groups is to make it easy to control who your information is shared with.

The ability to export data puts the control back in your hands – you own it and for the first time can take it away and close your account.

The dashboard showing how other sites use your data allows you to see and keep control of where your personal stuff might turn up.

Facebook has an impressive track record of innovation – not everything has been successful, but most of it has, and yesterday’s announcements shows that their increased scale isn’t slowing them down.

All of that good stuff said, I still can’t get the site to work how I would like it to.  I’ve written before about how all the professionally oriented content I share on Facebook is not that interesting to most of my non-work friends (to say the least…) and I was hoping to be able to create a group of my professional friends and have my status updates only go out to that group by default.  Unless I’ve missed something that still isn’t an option.  Having dug into it some more I think I could make a custom list of friends that my status updates go out to, which I will push ahead and do, but it would nice to have a group that has an identity all of its own.

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Smartphones as sensor platforms

By | Startup general interest | 3 Comments

One of the interesting areas for the future development of smartphones is as sensor platforms.  I’ve written before about how that might work in consumer health, and Fast Company has an article today about how it might work in consumer finance:

RFID credit cards are on the way. RFID means you’ll be able to pay wirelessly by waving a card over a panel at the point of sale–and in its most sophisticated version this will allow a store’s computers to interact with your RFID-enabled smartphone

This is exciting for a number of reasons – as well as the basic point of not having to carry credit cards and ultimately finally making money entirely virtual it will enable far more sophisticated coupon and loyalty schemes that will be zero hassle for the consumer.

Key to the success of this vision will be retailers rolling out point of sale terminals that can interact with these RFID enabled smartphones.  Something which might not happen quickly.

We can see the beginnings of this future vision today in the PayPal iPhone app which allows phone to phone transfers by ‘bumping’ phones against each other. As a sidebar, Paypal have just added cheque scanning to their iPhone app which makes use of a sensor that is already built into the phone – the camera (only available in the US).  Similarly the Square is a pointer of things to come.

Turning to when we might see RFID in smartphones, Nokia is rumoured to have something in the works and the iPhone 5 (due out next year) will have an RFID enabled screen.  In fact Apple have taken out a patent on the the design, see the picture below.


Sensors in smartphones now include accelerometers, cameras, microphones, and bluetooth, and on top of that there is the potential to plug into other sensors (the Square plugs into the headphone socket).  I’m starting to think that services taking advantage of these sensors and others that will come as well (biometric, infrared) as the link back to the internet could drive an awful lot of startup activity over the next five to ten years.

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iPads, the incredible pace of change and tablet opportunities

By | Startup general interest | 2 Comments

As you may have heard the iPad has had the fastest adoption rate of any consumer electronics ever.  To put some numbers on that it, took just 80 days to sell three million units and the current sales rate is 4.5m units per quarter.  That compares with the one million units the iPhone sold in its first quarter and the 350,000 units sold in the first year by the DVD player, the most quickly adopted non-phone electronic device all according to CNBC.  An adoption rate made more remarkable by the iPad’s $600 price tag.

The iPad is the latest in a string of devices to set rate of adoption records and the speed with which new products penetrate individual markets AND spread internationally is testament to the ever increasing pace of change – a trend that favours the nimble startup.  Tablets were the stuff of science fiction as little as a couple of years ago and the next new thing will come upon us even faster.

Which brings me on to my other point today.  At this rate of sales and sales growth the iPad will pass gaming hardware and the cellular phone to become the 4th biggest consumer electronics category with sales of $9bn next year (according to Bernstein, again from CNBC).  TVs, smart phones and notebook PCs are the three biggest categories.

With that many iPads around, and presumably a good slew of sales from all the other tablet devices that are coming to market, there will be huge demand from consumers for tablet optimised apps and services and from device manufacturers for innovations that will differentiate their products.  The key difference between tablets and earlier generation computing devices is of course the user interface, and this is the most obvious place to look for for further developments – at the software and hardware levels.

A justification of Facebook’s $33bn price tag

By | Advertising, Facebook | No Comments

A couple of weeks ago I blogged some thoughts on the $33bn valuation at which Facebook shares are changing hands.  In that post I wrote that I think Facebook is a great company, but that the small number of shares traded at this price most likely over stated the value of the company.

Over the weekend Silicon Valley veteran Adam Rifkin wrote a guest post on Techcrunch which argues that the $33bn is justified and sets out where the revenues will come from.  I don’t want to get into whether the $33bn is right after all (although for the record I still think it is toppy) but I do think Adam’s ideas on where the revenues will come from are interesting.

Facebook’s revenues have grown from an alleged $275m in 2008, through $635m last year to a rumoured $2bn this year.  Adam thinks that could grow to greater than Google’s current revenues of $28bn within five years with the following revenue lines:

  • Advertising on Facebook – $10bn+ – Adam’s argument here is that the social element of Facebook will bring brand advertisers onto the web in a way Google never has, and the $10bn will come from TV advertising budgets ($60bn pa in the US)
  • Local advertising – Adam calls it Groupon/Pages + Places – $10bn by taking a 30% cut of what companies like Groupon will push through Facebook pages
  • Games – $3bn (the Facebook 30% cut of what Zynga, EA, Disney and others will make)
  • eCommerce – $12bn – Amazon have partnered with Facebook already and together they might create a social commerce powerhouse that other etailers flock to copy.  Facebook credits will be a key enabler.
  • Subscription services for premium inbox, photos – $2bn

These are some pretty big numbers on their own, and added together they come to $37bn – but the point is more the direction than the amount. 

And what Adam is saying directionally is that huge businesses will be built in the areas above, or at least the first four of them, and a number of them will be startups.  Games is perhaps the most advanced segment and that has already spawned two large venture backed exits (Playfish and Playdom) and one large private company on an IPO track (Zynga), and if Adam’s hypothesis is directionally correct, which I think it is, then we can expect equivalent opportunities in the other areas.

Finally – Facebook credits are an important enabler of all the business lines above, and Adam captures their potential well:

if you give Facebook users a few free Credits with the block of Credits they buy (at Target, online, and soon anywhere), they will spend all of those Credits and then want to purchase more. Rather than a straightforward discount, the new math of Facebook Credits means that consumers will never quite be sure if they’re getting a discount or cash back or more for less. Kind of like frequent flier miles where we’re never quite sure what the conversion rate is. Or eBay auctions where we “win” the ability to spend money.

Facebook Credits are poised to be this generation’s American Express: an “affordable luxury” lifestyle brand and credit card with reward programs, frequent flier miles, and other incentives built right in so that the more you use it, the more you earn.

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Twitter Weekly Updates for 2010-10-03

By | Weekly Twitter digest | No Comments

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Massive growth and opportunity ahead in online advertising

By | Advertising, Google, Mobile | 4 Comments

The Lex column in the FT today has an article about Google which highlights the huge opportunities that still lie ahead in online advertising, including mobile.  We’ve been building this industry for ten years already and I’ve posted numerous market size updates on this blog over the years which all made the same underlying point – the online advertising market is very big and is still growing very fast – and I’m going to say it again today.image

The chart inset right shows that internet advertising is still a small percentage of the overall market – eyeballing the bars I would estimate around 15% and I fully expect that within 10-20 years it will eclipse all the others. 

I say that because all the other categories bar Outdoor are shifting from their traditional delivery medium to consumption over the web.  That shift opens up the potential for different forms of advertising that will be sold in different ways.  The most obvious differences will be more targeted and more interactive ads sold on a CPA basis or via exchanges, there will be multitudes of other ways that marketers dream up which take advantage of new possibilities to reach their customers – just look at the way they are rushing to take advantage of relatively new services like Facebook, Twitter and Foursquare.

You can argue the toss about whether it will be ‘television advertising’ or ‘internet advertising’ when it sits alongside television content that is distributed over broadband, but to me the real point is that if the form and the business model of the advertising both change then there will be opportunities for visionary companies to take market share from traditional advertising businesses that are slow to adapt.  Many of those innovative companies are likely to be startups.

The other interesting point that came out of the Lex article is the predictions for mobile search ads.  Lex forecasts that Google could be on an annual run rate of $450m in mobile search by December based on an average of 15 searches per month over 300m smartphones, of which 80% go through Google and monetise at $35/thousand searches (one third of what they get on the desktop).  That number of searches may well be right for December, but I expect it will go way way higher over time, particularly once Google Voice starts working well.  I think we are doing something like 30-50 searches per day on the desktop, and if mobile gets to anything like that level $450m per year will look like pocket change.