Mobile Internet As it Should Be

This morning I went shopping with my wife.  I stayed with one sleeping child in the car while she took the other to the store. 

Not much you can do in the car with a sleeping child.  Certainly cannot play music or listen to the radio.  Instead, I flipped open my mobile (a humble non-smartphone with nothing more than your average mobile browser on it) and did some blog-reading catching up.

I read the latest posts on Degardener.  When I was reading this post I noticed it referred to a LinkedIn Group.  Being a LinkedIn junkie I immediately followed the link on my mobile browser.  After logging in to LI, I added myself to the group.

By the time I got back home, I was a group member, and had already received several invitations to link from other members.

Bottom line:  I used the Internet on my mobile while I was in a mobile context – nothing to do, no other connectivity.  The experience was exceptional (EVDO + some of my company’s secret sauce), enabling me to consume content and to act on it in a meaningful way.

As a user experience it was a matter of serendipity meets usability (from useless to useful).

Now I have to check out my new LinkedIn buddies

— Oren

Marketing Strategies – Federated Marketing Partnerships

In this post I’d like to introduce my ideas around federated marketing partnerships.  But before I get started, let’s set the stage.

The Setting

We’ve all seen it – you’ve just launched your new product, and the response is overwhelmingly positive.  Let’s say it is a new download-able mobile application.  Within weeks you get all the right reviews and have thousands of downloads.  You spend your marketing budget making sure you rank at the top of Google’s sponsored links, to draw in more users, and your click-through rates are excellent.

And then something happens.  Soon, much sooner than expected, growth grounds to a halt.  Your user growth dwindles and then stops.  You’re “stuck” with a couple of tens of thousands of users, out of a population of tens of millions of phones capable of running your application.

What Happened?

Classical marketing theory says that you’re having trouble transitioning from the early-adoption stage to the mass market.  But that does not capture the situation adequately.  The early adoption/mass market approach assumes that the mass market is waiting for the right conditions in order to adopt the product.  A lower price point, less bugs, more tangible value, etc.

But it is very likely that you had just ran across what I like to call the needs/awareness gap for your product, which is mostly apparent with small companies trying to operate in large markets.  Let me explain.

For each product and for each market we can draw two circles.  The outer one includes all those customers whose needs we know we can satisfy with our product.  The inner circle includes all those customers who are aware of their need, aware of your product (or product category) and know how to look for it.  The wider the gap between the two circles, the higher the chance for your adoption rate to plummet when you hit the gap.

Take your well targeted Google ad campaign.  You’re serving highly relevant, targeted (and successful) ads, but only to people who are already in context – they have executed a Google search for your product or product category.  But what about all those silent masses out there who simply have no idea that they could be running such a search, and that this would solve a problem for them (which they may not even be aware of)?

In short, unless the need/awareness gap is breached, mass market will never follow the early adopters, simply because they will be oblivious to your entire value proposition.  I’ll never search for your download-able application if I have no idea that one can download applications to the phone.

The Classic Solution – Market Education

So you go on the campaign trail.  You no longer spend marketing money on reactive measures (such as search based ads) but rather go for proactive ones.  You deliver seminars, print advertising, conferences, banner ads.  You engage PR firms, you try to leap the gap by generating more buzz.  You’re explaining the most basic elements of your offering, at a considerable cost.

Educating the Market is a long, painful, expensive process.  It cannot be measured properly, and rarely yields the expected results.  Many companies, especially smaller ones, stop here.  They try to farm their existing user base while trying to grow it at the fringes.

A New Approach – Federated Marketing Partnerships

Ultimately, this is a challenge in “spreading the word” across diverse audiences.  Going beyond the techies or the enthusiasts.

One way we are doing it here is by establishing a federation of marketing partners.  By this I do not mean your typical “partnership” website section, where we list our closest industry friends and peers.  The federated marketing partnership model is about bringing together companies which roughly operate within the same industry, but which still have distinct user bases from one another.  Each customer base is somewhat likely to be more receptive to my offering than the general mass market.  And the same holds true for my customer base and the offerings of the other partners.

Let me illustrate.  Suppose I want to increase the reach of my download-able application.  Why not strike a marketing partnership with a company which is, say, in the mobile messaging space?  I can safely assume that their users are somewhat more informed than the general population about mobile technologies, even if they have never downloaded an application to their phone.

A real-life example exists in the browser toolbar industry.  You download a piece of software, and as you install it, it will ask you if you’d like to install somebody else’s browser toolbar or search engine.  You may not even be aware that this toolbar exists, you would certainly have not looked for it yourself.  But you are just a bit more receptive now, when you are installing new software, to this kind of suggestion.

What you end up with is a mesh of partners, each bringing its customer base to the table.  It is almost like a peering arrangement between bandwidth providers.  The goal is to stimulate user “traffic” inside the federated network, exposing your customers to my services, and the other way around.  Customers learn of new offerings from a trusted source, making them even more receptive.

But wait, isn’t this just what affiliate marketing is all about?  Well, almost, but no.  The power relations inside the federated marketing partnership network are much more balanced than in the case of marketing affiliates.  If I am promoting Amazon.com books on my website, I am powerless in my relationship with Amazon.  Traffic flows one-way, my benefit being a revenue-share cut.  Also, the federated model is not performance or transaction based, it is based on the shared understanding that pooling our user bases provides us all with more value.

The federated marketing partnership model allows small companies, with distinct products and customer bases, to come together in a loosely-coupled marketing mesh.  Network effects make the mesh more and more valuable, as more members join.  Market education happens by osmosis, as users on the edge are gradually exposed to products and ideas which exist elsewhere on the network.

More to follow in weeks to come.

— Oren

Rock bands & Start-ups – My 2 Cents

My entrepreneur friend Aner Ravon and my VC friend Daniel Cohen have been debating the interesting issue of comparing rock bands and start-up companies.  You can read the original post here, Daniel’s comment here and Aner’s rebuttal here.

I would like to suggest another point of view.  Both rock artists and start-ups can be described as players in creative industries.  Professor Richard Caves, in his book Creative Industries: Contracts between Art and Commerce provides a good analysis of creative industries (music, film, theatre, and by extension, software development). 

I won’t delve into the entire model (read the book!), but there is a lot more in common between rock artists in start-up companies than meets the eye:

First, both operate in areas of high uncertainty.  Most rock artists fail.  Most start-ups fail.  Both cannot predict whether they will be successful or not.  In both cases, past success does not imply future success.  Only with hindsight can we explain why some succeed and others fail.  This “we don’t know” problem underlies the interactions between all players in the industry.  It is about sharing risk, shifting risk, minimizing risk, hedging your bets and so on.

Second, there is a lot more supply than demand.  Lots of people out there would like to be rock stars.  Lots of bands will play anywhere, any time, for free, to get some exposure.  The same is true for start-ups.

Third, creative industries are built around gate-keepers, which are the focal points for the players in the industry.  Whether they are agents, music companies, book editors or VCs, they are the ones who control the balance of supply and demand. 

Fourth, a few players will realize abnormal returns.   A few start-ups will be sold for millions, and some artists will become filthy rich.  But the key driver for both is typically not the financial gain, but the creative process.  Artists need to create art for art’s sake, entrepreneurs need to innovate.  Nowhere is this more relevant than in the post-Web2.0 world where many can unleash their creativeness on the unsuspecting masses.

Fifth, and my favorite attribute, is the struggle between perfection and the need to address customer needs and stick to the budget.  Both artists and software developers would like to deliver “the perfect” product.  This is why directors typically exceed their budgets and why product companies tend to push schedules (and budgets).  Both the rock band and the start-up need to constrain their creative urge by taking into account release dates, commitments, commercial needs and tastes, and so on.  Whereas artists talk about “selling their soul” to the “commercial market”, start-up often describe their VC (and sometimes their customer) engagements in similar terms

There is a lot more to it (read the book!), but I hope that by now you’ll agree that conceptually rock bands and start-ups face the same challenges, and by extension can be analyzed using the same tools.

However, I disagree with Aner’s concept regarding “start quality”, and the belief that if you possess star quality things will go your way “eventually”.  I think this statement is driven by “survivor bias“.  It is true that most successful rock artists, in retrospect, can be said to have “star quality”.   But the question is, how many artists with star quality did not succeed, and are excluded from the analysis? 

 Or is the definition of “star quality” derived from having been successful (in other words, if you fail, then by definition you did not have star quality)?  I’m not convinced.  There is more to success than what the individual/company brings to the table.  External forces abound – luck, trends, markets, unforeseen events, competitors, technological breakthroughs – they all contribute to success/failure.  Similarly, unless “star quality” is loosely defined to encompass any successful company, then it does not account for the fact that there are successful companies (and artists) out there who do not have “star quality”, but still they enjoy significant success.

— Oren

Mobile Internet – It is all about Context

Last Friday I was attending several business meetings in downtown Vancouver.  What with one thing and another, I ended up taking the Skytrain back home.  We’re talking Friday evening, rush hour.

Suffice to say, I now know how sardines feel in their can.  I had a book in my backpack and the Metro newspaper stuffed in my pocket, but I was struggling for elbow space.  So reading was out of the question.

Or was it?  I ended up taking out my mobile, and going through some blogs I have not caught up with for a while.  Lo and behold, before I knew it I was home.  I know this is not a big deal for all you Treo/Blackberry users out there, but for us lowly feature-phone (or less) users, this was a real treat.

We’re all happy to complain about the inadequacy of the mobile phone as an Internet access device – small screen, lousy keyboard, slow, you name it.  Hmm… hold on.  Small screen?  Exactly what I needed.  Lousy keyboard?  Who cares.  I easily used single-hand navigation to walk through the text I was reading.  Slow?  First, I’m on EVDO, that’s anything but slow.  Second, it’s not as if there’s an alternative when you’re commuting.

I don’t expect the mobile to replace the desktop anytime soon.  For me it is always the 2nd choice for Internet access.  I’ll always prefer the PC/broadband combo over the phone.  But in the right context, the mobile shines.

We need to move away from thinking mobile Internet is simply WiFi on a larger scale.  It is a totally different interaction model.  Consumption is restricted to very specific time frames, typically when no other alternative presents itself.  Mobile Internet marketing needs to focus on fulfilling the needs users have during those particular time frames, or to invoke such needs by utilizing the “in-context” features of the phone – alerts, localization, always on, always near me.

Blogs/feeds seem to be the “secret sauce” if you will.  The perfect “filler” for when you have time to kill.  Not important enough to be consumed in real time or to defer more urgent tasks, they can be visited opportunistically. 

Oh yes, I made it back to where I had left my car in one piece.  And got a notice for a parking violation.  I guess the phone cannot solve all life’s problems.

— Oren 

Mobile Internet Usage Growth

Forrester has recently released interesting survey results concerning mobile Internet usage by youth in North America.  It turns out that 31% (!) of mobile users aged 12-21 access the Internet on their mobile device.  When you consider that the overall mobile Internet usage rate in the US is just over 10% (Mediapost, Feb ‘07), this figure is quite amazing.

The research also shows that the younger generation tends to use the more sophisticated phones.

Combine these two facts (much higher than average adoption rate, better than average phones) with emerging business trends (mobile advertising), and it could be the case that we are headed towards the inflection point in the mobile Internet adoption life-cycle.

The coming together of different factors -  an active, informed and lucrative segment, new business models, appealing services (blogs, social networks etc.), and tie-ins between mobile Internet, multimedia and messaging features – sends a positive signal to those of us in the mobile internet industry.

— Oren

Mobile Dungeons Revisited

Following my previous post on Walled Gardens and Locked Dungeons, Moco News had this interesting post today.  Apparently T-Mobile USA is now blocking access to 3rd party applications.

 Customer aggravation aside, where does that leave the score of companies who try to make a living by distributing phone clients?

It’s bad enough that applications cannot run on all phones (I could not get GMail to connect, could not get Widsets to work, could not get LiteFeeds to run, etc.), but now you also have to embrace your new business partner – the operator.

It is hard enough to get users to actually download and install applications on their phone.  But with more operators adopting this attitude, entire market segments simply become unavailable to those companies.  Scary.

 — Oren