Mobile Black Swans and Turkeys

Part I: Tame Turkeys

On the return flight home for Thanksgiving this week, I read Nassim Taleb’s book The Black Swan and decided that tis the season to draw profound parallels between innovation and poultry.

And so while busy stuffing the family turkey I thought about how this all applied to my world of consumer engagement, retail sales and payment.

Here are my insights:

  • Chickens: Bertrand Russell’s wrote an anecdote about the benevolent farmer in 1912. The fat and happy chicken thinks the farmer is a benevolent protector until it is hauled away to the slaughter house.
  • Turkeys:  Nassim Taleb, in his book The Black Swan, says that the same holds true for the Thanksgiving turkey. However, he adds that the surprise for a turkey is not a surprise to its butcher.
  • Swans: So the black-swan question for the marketing community is: How do we play the role of the butcher not the turkey?

Moving your retail business from a step-by-step evolutionary growth to revolutionary, black swan transformation is not easy. In fact, it may be impossible. Corporations find it difficult to reinvent from within. However, to be aware of the nature of outliers and revolutionary innovation is a good first step.

You can rename your CIO: Chief Innovation Office, your CTO: Chief Transformation Officer and your CDO: Chief Disruption Officer. However this is all for nought if they cannot identify swans or at least the turkeys.

Look to social media. There is a succession of ever faster black-swan innovations starting with email and ending in SnapChat’s self-destructing messaging. Microsoft did not anticipate Google search, Google did not anticipate Facebook communities; Facebook did not anticipate Twitter micro-blogging; the same holds true for Instagram’s social picture publishing or SnapChat’s peek-a-boo messaging.  The same applies to retail as well as broadcast, payments, health, advertising to name a few rudely disrupted verticals.

Retail payments is a classic chase-the-tail solution mashup. But payment vendors have been more astute. The FIs ran a two-sided business to establish MasterCard and VISA credit services. The FIs have fought to be a part of any POS and prepaid activity in retail. With the emergence of digital payment, payment incumbents have aggressively invested and acquired companies in the mobile POS space (VISA/Square) and as well as in the cloud (VISA/Playspan).

VISA’s purchase of PlaySpan was particularly forward thinking. PlaySpan allowed gamers to buy virtual swords and pumpkin seeds for their virtual battle grounds and farms without leaving the game. Frictionless commerce engineering: meet VISA’s present day  V.me.

But even leviathans like VISA and MasterCard have been sidelined to commodity commerce rails.While they make nice transactional revenue, Amazon, iTunes, PayPal and Playstore and other consumer commerce portals have made the card credentials second fiddle. They discount the interchange and grab the CRM and big data.

Shopper marketing, Shopper engagement all follow similar twists. But not always evolutionary:

SMS was the black swan technology revolutionizing communication for the unsuspecting (but delighted) wireless carriers. We all thought QR codes, mobile apps and NFC would supplant this messaging channel.  WhatApp, Skype and Viber all have eaten away at the peer-to-peer traffic; however, for brands, SMS, and for some successful apps, the notification channel, remains the main opt-in and content delivery channel of choice.

Black swan on the horizon? iBeacons, WiFi Direct or LTE Direct? Maybe.

Proximity engagement is essential for a brand or retailer to drive path into purchase.  Shopkick and Beacons are valuable but are ultimately broadcast solutions.  Future solutions such as LTE Direct promise to extend the retail network and add more intelligence and peer to peer interactivity to this engagement.

However, in all the above cases it is difficult, if not impossible, to identify one strategy, vendor, agency that will bring revolutionary black swan ideas.

When attending events whether speaking or listening, it all seems so easy. Innovate they say. . .

Well so my friends, the innovator’s dilemma maybe just to avoid becoming the turkey.

Happy Thanksgiving!

 

Interview on Twitter, Blackberry & disruptive business models

While the market complains that the it is an overhyped initial public offering. Many of the detractors are using Twitter to voice their concern. Ironic, isn’t it?  Post IPO, the stock will most likely rise to $30 and wait for Twitter to show some lift in advertising revenue. This will come as the media dollars need a home and their are few options for the digital buyer.

Twitter has moved from a microblog to a trend-crowd-sourcing destination.

1 in 5 have accounts but more and more will use the service to scrap instant and succinct info from the web. With this as a unique value prop, Twitter will capture revenue and drive profit over the next 48 months.  http://watch.bnn.ca/#clip1036995

BNN Interview: Challenges with Twitter’s biz model pre-IPO

BNN 5 minutes: The Business News : October 4, 2013 : Challenges Facing Twitter’s Business Model and its Upcoming IPO [10-04-13 12:20 AM]

  • Positive: Twitter is NATIVELY mobile and will not have the same questions that FaceBook had on its IPO – i.e. What is your mobile strategy?
  • Positive: Twitter has an owned-content advertising model which is less impression based and more brand ENGAGEMENT. 
  • Challenge: Twitter is an social aggregation hub. We see lots of auto-twittering without visiting the social platform from third party sites. (See page 61 in their S-1 filing)  Referred to as blind tweeters (syndicated from other sites), these are a big slice of their user base.  This is an impression-based advertising challenge.
  • Challenge: Twitter is an advertising company. Specifically, mobile advertising with 65% of the revenue coming from small screen. The mobile advertising space is in a bubble. Same old story: Big growth in revenues, but no profits. The breaking bubble is evident in Jumptap’s exit to Millennial Media.
  • Challenge: Although the US is Twitter’s home it needs global growth. There will be global pressure from competitors like SINA WEIBO in China and LINE in Japan.

http://watch.bnn.ca/#clip1017318

Mall Busting with Wal-Mart, Facebook & Zappos

Samsung strikes a deal with the beleaguered Best Buy to subsidize their rent with a store-in-a-store initiative. Borders exits the mall and last-man-standing Barnes & Noble seems to becoming a living room chachka vendor with more book browsers than book buyers. Zappos Labs runs field research in malls and Facebook launches a commerce strategy (again).

Is a retail dust bowl about to blow through the mall nationally? Or is this a digital tempest in a tea cup?

We know that online commerce is booming but it still accounts for a small slice of America’s mall business. Undeniably, this $200 billion digital business (ComScore) is expanding scope daily.

If there was ever a digital demarcator, it is the soap business. When Unilever and P&G, the markets main consumer package goods companies, begin to sell soap on Amazon, and when Wal-Mart begins to ramp up its online business, leveraging its 4,000 stories and 158 warehouses as an online distribution network, then mall property owners possibly need to rethink their role in bricks and mortar.

Inertia as a strategy

Malls are entertainment destinations. Always have been. We go to the mall for a movie or latte just as we bundled the family into the Buick 60 years ago to go shopping. But if Best Buy and Barnes & Noble leave the mall, what is left to attract the consumer? Hours of gizmo browsing and cook-book thumbing gone.

Browse-verse-buy business has whittled way the margins of many stores making Blockbuster and Gamestop digital road kill. It forced Target Chief Executive Gregg Steinhafel and Kathee Tesija, Target’s executive vice president of merchandising to cry uncle on “showrooming” in a memo to its suppliers in 2012.

However, muscling your supplier’s prices down is a pharic victory. Even with the volume sales of Target and Wal-Mart know that they need to move some of their business into the cloud. During Wal-Mart’s August 2013 earnings call it announced that eCommerce sales rose by 30 percent in two trailing quarters. Neil Ashe, Wal-Mart’s CEO indicated its total online sales could pass $10 billion in fiscal year 2014.  This is only two percent of the stores earning and only 12 percent of Amazon which sales totaled $61 billion in 2012 but it is a marked trend and a harbinger of the exodus of earns from the mall.

What incumbent stores presently have in their favor is inertia.  The cloud and the mall are still not fluidly connected. Although each shopper is armed with a mobile computer which has the capability of scanning, sourcing and saving the consumer in every aisle, there are too many hurdles and friction between the idea of digital buying and the products within arms reach.

The mandate of any red blooded digital retailers is to eliminate this inertia.

No-click Cloud Checkout

Apple’s iTunes, Amazon and Paypal built their business on simplifying checkout: making sure that the act of buying does not get in the way of intent to buy.

One-click checkout or combining stored customer credentials with a simple password is the sole reason that these companies continue to grow their market share. Their UX team would tell you that every informational and graphic design is based on optimizing clicks to checkout. Each click makes a precipitous drop off and abandoned shopping carts litter the web.

But digital checkout demands trust and mindshare. Even online real estate barons such as Facebook have been unable to enter this market.  Although “Social” and “commerce” seems natural allies, Facebook has not been able to delivered on its promise to leverage its millions of customers to shop cross-channel.  The company launched Facebook Credits in 2009 and phased them out last year. “F-commerce” experiments abound. Remember Facebook + Amazon + P&G partnering in 2010 to change the world. Unilever followed suit launching a storefront on Facebook for its Dove brand. Retailers including JCPenney and Gamestop have attempted to monetize their Facebook community by opening stores inside the Facebook network. After underwhelming results they shut their virtual doors.

Apple and Amazon have proven that community plus one-click checkout works. These digital wallet holders started their business explicitly to sell stuff. And they are poised to remove the inertia from online shopping and with it the last refuge of the mall owner. Online shopping provides advantages with an endless aisle allowing for access to more sizes and categories. According to Nielson the average basket size is much larger for consumer package goods ($80 online to $30 offline) and beauty purchase ($30 online to $10 offline).

The question is that when the households put soap and diapers on their shopping list will they log into Amazon to buy Dove Body Wash 24 Ounce Bottles (Pack of 4) and Pampers Sensitive Wipes 7x Box?

Baked Beans & Apple Pie

The last refuge of the American mall maybe a can of baked beans and fresh produce. If the household shopper wants to grabs a can for dinner tonight or smell the oranges and squeeze the melons before buying, then off to the store they will go. Grocery stores are big box convenience stores.

However, should mall owners that are grocery-anchored feel safe? Their clientele should come from a weekly shopping list.

Well, hold your Kraft peanut butter!

The traditional grocery retailers are faced with increased competition. In March, Wal-Mart opened grocery concept stores about a tenth of the size of their supercenters. With big box and online retailers entering the grocery space, specialty grocers capturing the “foodie culture” consumer and brands creating direct relationship with the consumer, perhaps this is not a safe bet for mall owners.

Google Wallet, ISIS and other phone wallets promise to make in-store shopping more digitally fluid, but what is the digital wallet never makes it to the mall.  Online grocery shopping has grown five fold over the past eight years to $25 billion. Tablets devices have made shopping more leisurely and couch commerce has accelerated.  With CPGs moving their diaper and detergent business into the mainstream online stores like Amazon, the inertia may soon come from the home.

Poaching People

Since Tesco opened their virtual grocery store on the subway in Seoul, Korea two years ago, scan and shop on-the-go signage has become more common. While it is still a media gimmick, it has the potential of becoming a way of luring the shopper online. In every mall or transit hub America at least one brand has attempted to use the in-mall media to engage with the shopper and move them into their cloud store.

In CNET interviews with Zappos Labs’ (an Amazon-owned online retailer) the Director, Will Young, confesses that his team sits around malls stalking shoppers. Their goal is to emulate these shoppers’ behavior online. Young is asking “How can you make the digital experience feel like the in-store experience?”

Whether they succeed or not, there is no question that malls need to re-evaluate their passive media deals. When a brand buys signage on an ad impression basis but uses this media to poach customers then this signage perhaps should not be sold as an impression but as a “mini-storefront”.

Mall owners nationally are holding strategy sessions to evaluate how technology is affecting their business. These stakeholders need to re-evaluate their real estate assets and start to see media as leasable square footage.

Part Two: Mapping the Mall (to be continued)

Jump, Tap, Exit. (Jumptap & Millennial)

by Gary Schwartz (14/08/2013)

Jumptap may be the last man standing of the incumbent mobile ad networks to have their exit. The acquisition by Millennial Media, its erstwhile competitor, in a predominantly stock transaction, may not be the glory finish that many had hoped.   What does consolidation mean to the mobile ad world?

Good things . . . in the long term.

Grooming a network

George Bell came on as the new Jumptap CEO in 2010 to ostensibly position the company for an exit.  Bell was the ideal candidate coming from General Catalyst and being an accomplish network deal maker. Back in 1996, Bell took Excite network public.  Apart from a few digital faux pas such as turning down the then two-year-old startup Google offer of $750,000 for their search engine, the Excite network continued to grow with impressive revenues through 1998.

Over the past two years, under Bell’s leadership Jumptap has grown its position in the crowded media market establishing global partnership into markets in Asia and vied for the budgets of digital agencies, direct response and brand advertisers and the inventory of publishers globally. And mobile budgets have grown for all mobile ad network stakeholders.

In Jumptap’s M&A prep this year, the company took in a $27.5 raise from WPP, Keating Capital and General Catalyst topping their raise to date at $121.5 million. A significant number. Key was Jumptap’s decision to bring on board John Hadl a mobile media veteran and rainmaker who advised Millennial Media, Admob and Quattro Wireless.

2013 was its make or break year.

Patents alone

On patents alone, Jumptap should hold significant market value. After the first patent was issued in June 2009, Jumptap has received 52 patents; at an impressive IP quota of one monthly. It has many more published patent applications in the pipe.

George Bell, has advocated from day one for IP differentiation and has continually stated that patents underscore the company’s commitment to ad targeting and smart ad solutions. The company holds a good spread of patents from ad targeting, coupon selection, bid optimization (realtime bidding) and the management of third-party data.

Augme Technology’s (a mobile media company) lawsuit against Millennial Media over ad targeting last year, patent mud-slinging seemed to be the first indication of a mobile ad war.

The Millennial Media acquisition may not vindicate the hard work and positioning on patents and network growth and may speak more to the general mobile ad market ennui.

Ups and Downs

The mega valuations that Admob and Quattro Wireless commanded from Google and Apple respectively four years ago soon rang hollow after Apple shelved Quattro’s platform and mobile ad sales showed halting growth.  It seemed that the online leviathans were just building a mobile ad network and waiting. Mobile buying remained challenging – there was not the scale and simplicity that is required to attract media dollars.

Then last year the market began to heat up with cool results: InMobi received strategic investment from Softbank,  Opera purchased AdMarvel  and Millennial Media, after trying for a Quattro-like exit, opted for an IPO which was surprisingly successful.

Markets results remained challenging. Velti and Augme, both of which had transitioned their business to mobile advertising away from their traditional higher margin mobile marketing business, showed slowing growth.

Of the ad networks, Millennial Media was the closest to turning a profit and generating consistent positive operating cash flow. Now with its expanded holdings what should the network focus on to grow?

“Cross Screen”

There is an oft-quoted line in technology that many are over optimistic in the short term and overly pessimistic about the long term.

In the short term mobile revenues will grow slowly and organically as budgets move into digital. However, in the long-term there is tremendous opportunity to accelerate these budgets if we can manage to simplify the mobile buy across all digital touch points.

Jumptap’s Unified Audience Exchange and their previous partnership with 24/7 (which has credibility on the PC side) was a sign of a multiscreen ad strategy. Networks like Jumptap and TapAd had begun touting the importance of a cross-channel ad buy.  Paul Palmieri, Millennial Media’s founder and CEO mentioned Jumptap’s expertise in cross-screen media a key asset to their network.

Brands want to follow their consumer across their many interactive screens. Google, Facebook and Pandora have made their mobile offering increasingly advertiser-friendly. Larry Page on his quarter call last month said that Google wants “ to make advertising super simple for customers. Online advertising had developed in very device specific ways with separate campaigns for desktop and mobile. This made arduous work for advertisers and agencies, and meant mobile opportunities often got missed.”

Digital consumer engagement has become a top priority for advertisers and publishers. There is a trend to make mobile advertising easier to buy. Online, mobile and offline media need to be seamlessly connected. Targeting across multiple screens (not just mobile) is essential for brands drive conversion and path-to-purchase.

Millennial will need to navigate through a rash of nimble new start ups in the space (App Nexus, Adelphic, Native, Nextage, Media Math). Consolidation, simplification and cross-screen budgets will help Millennial but it will be difficult for this public company to pivot.

From Singapore to Moscow: Is OPEN a four-letter word?

by Gary Schwartz  (23/07/2013)

I recently returned from speaking in Singapore at the regional CommunicAsia conference and Rasia.com event in Moscow. Innovation was a central theme.

In Singapore I was in a discussion with Google, SingTel and Microsoft. I asked Doug Farber, managing director for Google in Asia-Pacific, if mobile innovation is stifled when there are only a few power brokers that control the mobile ecosystem.

Google has always had a “healthy disregard for the impossible,” Mr. Farber said. Agreed. However, while Google has a healthy internal innovation culture, is it allowing the ecosystem to do the same?

I recall Richard Kramer from Arete Research’s jab that in mobile O-P-E-N is a four-letter word.

There are only a few powers that are trying to lock the mobile ecosystem: Apple, Amazon, Google, Facebook, Microsoft and Du. And while Apple and carrier networks are unabashedly closed fiefdoms, Google’s Android empire may not be truly open.

“But,” Mr. Farber said, “I am the open guy.”

“Open only on the front end,” responded Bill Chang, CEO of group enterprise at SingTel.

Outside of a few global plenipotentiaries, mobile developers have had to pick from the crumbs at the table.

Twenty-five applications command 50 percent of the app store revenue. The billions in revenue do not feed many mouths. The average developer lives on $5,000 per month, which is a bread-and-water diet of $60,000 per year, said Richard Kramer. “Where are the developer’s yachts?”

Hardware innovation has flat-lined and power is exclusively in the hands of Apple and Samsung.

The yearly CES announcements have underwhelmed and recently left the Las Vegas melee altogether. Another handset release with faster “mega” screens does not excite the crowds. With $75 smartphones entering emerging markets, smart has become a commodity.

SingTel’s Mr. Chang said in a market where companies are “cost-cut to death, it is difficult to drive innovation forward. Mobile-first is a challenge.”

Mr. Chang talked about the importance of the CIO is this process. He plays the initialism game that we all do at public events: “The CTO is now the chief transformation officer and the CIO the chief innovation officer.”

But what does that really mean to companies trying to navigate the mobile marketplace?

The CIO never had power, said Michael Thatcher, chief technology officer of Asia for Microsoft. “It is only when something is broken they have power. How can we advance this and stop being tech centric? Stop being reactive. Follow the money.”

But is there money in mobile innovation?

Outside of the big six ecosystem players, there are few that command significant market share. We live in an “app store economy” where we all need to play the piper 30 percent and never own the customer. To make money on Apple’s SDKs or Google’s, dominant big data position is difficult.

The social leviathans are also closed.

Facebook has built a business on connecting people. With its post-IPO revenue focus, it has worked hard to create a media buying tollgate on the impressions and big data that it owns.

In social portals there is little big data sharing and little opportunity to make money as an outside developer. It is a bigger issue for the entire social ecosystem.

The more that these social portals try to leverage these assets to generate revenue, the less socially authentic they become to the consumer. Our social spaces have become more like driving down the public highway.

Social portals such as Tumblr and Instagram have generated such value in the market because they remain authentic – pre-revenue and pre-commercial, of course.

Everything is disintermediated. App stores and social portals are all controlled by Facebook, Amazon, Apple, Microsoft and Google, and somewhere we all have to pay the piper.

Telecommunications is the history of open and then closed systems, from RCA closing down FM Radio and early television.

It is the same recent history of Apple disintermediating the wireless carriers with an “Internet device” and then turning around and using the same iPhone to shut down the mobile Web with a closed App Store.

Are we entering another closed loop where innovation becomes stifled? What does this mean for business?

Google sponsors the ship, “Unreasonable at Sea,” to sail around the world evangelizing entrepreneurism and innovation. How can we make the power brokers more unreasonable at home?

Is Facebook suddenly a 13x ROI ad network?


Facebook in 2012 had a hard time convincing the retail market that it was a mobile commerce player. Facebook opened storefronts with GameStop and others retail partners. They should have been a success. However, all languished and were closed over the course of the storefront trial.

While Facebook may not be the destination that users go to shop, it has proven its value as the preeminent social “influencer” of commerce. Today’s Samsung results vindicate the network and all doubters.

After a three-week, $10 million ad buy with Facebook, Samsung reached over 100 million unique users and generated $129 million in sales! That is a 13x return on a $10 million ad buy.

While these numbers are powerful testament to the social shopping behaviour on the web. Samsung has more than 20 million fans on Facebook and needed to find ways influence their buying decisions. SALES not LIKES drive profits!

Coming out of the tremendous results from Cyber Monday, we know that somewhere advertising and commerce needs to find a closer connection. The market is still in the pursue of a way for sales-driving networks like Facebook (in the advertising world) to connect more seamlessly to commerce conversion network (in the retail world).

PayPal reported a 200% increase in transactions through this past weekend. If Facebook’s reach could be married to a “one-click commerce” checkout, this 13x conversion rate may jump a significant multiple.

In a world where “path to purchase” is a perilous path and we need find ways to better connect these two worlds.

Ochlocracy? Are Facebook’s libertarian roots eroding?

I was listening to David Kirkpatrick read The FaceBook Effect biking to work this working. The opening chapter is about how Oscar Morales galvanized Colombia against the FARC terrorist group. Hundreds of thousands marched globally off the drum of Oscar’s Facebook page . . .

. . and it struck me as mildly ironic that while Facebook has become synonymous with democracy (a million voices against the “powers that be”), its new Silicon Valley HQ is now at the center of an “anti-democracy” debate.

Facebook proposed this week that it will terminate its community users’ right to vote on changes to site policies. When you give a libertine community certain powers (such as the right to impact the site’s design) it speaks to the core philosophy of an organization.

When the same company says that it is “too big for democracy”, one may take this as a sign that the post-IPO corporate culture is clamping down on what made Facebook a successful social experiment.

I can understand that a corporation may find democracy inconvenient. I can understand that many in this new public company could see this user-based democracy as a slipper slope to ochlocracy.

However, it speaks to Facebook’s libertine roots. It is incredulous to use FARC as examples of The Facebook Effect and then withdraw that same crowd-sourcing element that has enabled the community to grow.

The cost of the digital consumer: Instagram vs. YouTube

At $33 per user is Instagram a bargain?  YouTube was purchased at $1.65 billion with undeclared but estimated low revenues. The cost-per-user was just north of $50.
However, we know that Google bought YouTube to develop a niche video portal. (A portal that in 2006 was demonstrating an average user time spend of fifteen minutes each day.) Online video was the new frontier and Google made YouTube one of the pillars of its advertising empire and matured the property slowly. Presently YouTube direct content and the YouTube partnership network supports the lions share on online video time spent in North America.

Instagram provides eyeballs – 30 million; however, is the application indispensable, sticky and can Facebook grow the property slowly to extract the value?  Instagram’s global user base spend their time cropping and filter images to make them look upload worthy.

Acquisitions for eyeballs has not been a big win for many buyers. What is the long term content play for Facebook. Is Instagram a mature building block for Facebook or is it a pre-IPO market postioning story?

SXSW roundup interview on BNN (Adult Spring Break)

 

 

 

 

 

 

 

 

 

It was “adult springbreak”. Lady Gaga, Bruce Springsteen, ACL, Venture Classmates, these are the names Gary Schwartz, President & CEO of Impact Mobile has been discussing in meetings at The South by Southwest (SXSW) Conference in Austin.

Watch interview here