Category Archives: Web/Tech

Big Numbers

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The press loves big numbers.  Why? Because, the readers love big numbers.  Look at the headline below:

FireShot Capture 10 - Meet the Man Who D_ - https___mail.google.com_mail_u_0_#inbox_1552f8f3a973098a

There are two very large numbers, $5.5 billion and $62.5 billion, referring to two highly ambitious and rapidly growing companies, Lyft and Uber.  I am a fan of both startups.  However, they are both quite tiny in the global enterprise scale.

When you say an $X billion company, one understands that it’s a top-line revenue number.  Apple is a $230 billion company and Walmart is a $480 billion company, in general business speak.

I would also understand referring to these businesses by market cap.  It’s the company value of these businesses based on very liquid market information.  By this measure, Apple is a $450 billion company and Walmart is a $220 billion company.

You’ll notice that these two sets of numbers are almost exactly asymmetrical, so it’s always critical to clarify what one means when the phrase “$X billion company” is brought up.  But I find both to be acceptable and practical.

Then, there is the startup version, with which I have a problem.  I mentioned that both Lyft and Uber are quite tiny.  To be specific, lats year Lyft had a rumored ~$100 million in revenues.  Uber, which is larger, had its revenues estimated at $1.5b billion.  Both numbers are very small compared to those of Apple and Walmart.  Bu this is not stopping the press to refer to them as $5.5 billion and $62.5 billion companies.

Why? VC round valuations.  These two companies, have been valued, in private rounds, details of which are not announced, at the larger numbers mentioned above.  So, all of a sudden, you find that you can get away with calling Uber a $62.5 billion company. And, jaws drop.  Your readers are awed. Links get clicked on.  Young entrepreneurs pull out their calculators and start multiplying their own metrics with the multiples they can extrapolate from Lyft and Uber numbers.  And, expectations rise, appetites get whetted…  And, bubbles form.

Because, the press loves big numbers.

 

 

The Disconnect in Online Advertising

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Online ads suck, but it’s the main driver of today’s internet.

If you did not already know that, a great place to look for confirmation is Mary Meeker’s 213 slide Internet Trends deck, in which, slides 41 thru 110 are dedicated to the examination of how different forms of online ads are growing and that it’s accelerating.  It’s depressing really.  And the money slide is this one:

FireShot Capture 6 - 2016 Internet Trends Report_ - http___www.slideshare.net_kleinerpe

In summary, it will get worse before it gets better.

This is confusing to me.  Because, on the other side of the internet coin is that high quality, frictionless offerings are winning on the internet.  Look at the most successful apps.  Booking.com is eating the lunch of other hotel OTAs, primarily because it works so well.  Uber is a lesson in on-demand UX.  Airbnb’s user experience has helped its massive global network effect, in taking the big lead it has in global marketshare.

Ads, on the other hand, are pulling in the opposite direction.  1010!, a great game, is pissing me off with 5-second video after video, trying to get me to accidentally click on an app install.  And, I am not alone. Back to Meeker’s deck:

Millenials:

81% = Mute Video Ads
62% = Annoyed with / Put Off by Brand Forcing Pre-Roll Viewing
93% = Consider Using Ad Blocking Software

Here’s the slide:

FireShot Capture 7 - 2016 Internet Trends — Kleiner Perkins C_ - http___www.kpcb.com_internet-trends

This disconnect between how fast online advertising is growing while remaining a nuisance for internet users has made it tough for us to build strong investment theses for ad driven business models.  It’s also probably why we get turned on by technology that looks to improve the efficacy in the sector.

Microchunking of Apps

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I find myself thinking these days about how the app universe will evolve.  There are quite a few ideas and analyses on some trends that hint at what’s ahead of us:

The common thread through these is the reduction of applications to their smallest viable (and functional) form, while remaining accessible through multiple platforms, including devices and social media, and maintaining their ability for transactions.  In essence, we are going through “microchunking” of applications, to borrow Fred Wilson’s term referring to the content revolution we saw with the Web 2.0 wave last decade.

I see two areas to watch as this trend develops.  One is the need for flexible SW development frameworks.  I suspect these will be open source. But there will be support and services opportunities around them that should allow for creation of sizeable businesses.

The second is a similar opportunity on the operations side. Think of it as a set of standards providing context and interoperability for microchunked apps.  As applied to the need around human transport, an example may be standards for my mobile device to signal that :

  1. I am at point A.
  2. I need to get to point B.
  3. I am willing to pay X for this service.

This signal can then get acquired and processed by an open marketplace, and matched with the supply side signals from providers, whether they are taxis, Uber drivers, etc.

I am keenly waiting for Open Bazaar to see how it fares in the wild.

Intentions and Context

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Girl With Mobile Smart Phone

Ben Evans penned his best post of the year last week, which has kept me thinking on it since.  One problem I have with it is its title, though.  I have trouble distinguishing between mobile and the web at this point.  What we call phones refer to a fraction of the utility I receive from mine, and any business that creates its value on the “connected world” (my preferred noun for what includes mobile, web, the internet, etc.) needs to think of these platforms in a unified manner.

The topic is a vast one.  It touches on

  • programming frameworks
  • the future of native apps vs. evolved browsers
  • whether we will continue to rely on legacy input/output interfaces such as mice, keyboards, touch screens, LCD displays, etc.
  • how we navigate and ultimately get to where we need in the massive world of data and information.

I am not smart enough to wrap my mind around what we have coming. I do, however, notice that the final point on the list above is exciting a lot of entrepreneurs.  It’s the quest for the new search paradigm. Google’s Page Rank was a great benchmark, in its speed and accuracy, for our expectations on how our information needs are met.

For the next generation of solutions, Fred Wilson is proposing that we rely on contextual runtimes.  I like his examples:

If I’m building a lunchtime meal delivery service for tech startups, that’s a Slack bot.

If I’m building a ridesharing service, that’s going to run in Google Maps and Apple Maps.

If I’m building a “how do I look” fashion advisor service, that’s going to run in Siri or Google Now.

If I’m building an “NBA dashboard app”, that is mostly going to run on the mobile notifications rails.

I find myself thinking about where context will reside, whether on the cloud or the mobile OS, and how much will be implicit versus explicit.  Essentially, we are looking for better ways to sniff for intentions, the way Google persuaded us to type it into a search box.

Square IPO

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squareSo Square started trading publicly today.  The tech world has been awash with schadenfreude and I-told-you-so’s, since they priced the IPO at $9 per share, below the Series E price at $15.  I have not studied the filing, but I am assuming there are preferences that protect the late investors in the case of a down-priced liquidity event.  That’s how it’s supposed to work: fantastic returns to the early investors (Series A investors are getting like a 50X return), and as the risk was reduced over the company’s development, lower returns to later investors.  The latest investors just get their money back, if they sell now.

What amazes me is that people are ignoring the incredible success of a company that has created about $2.5b of value for its shareholders in just 6 years.  Here’s the first piece of news about the company I could find.

The story is amazing. Right under the noses of payments giants like Visa, Mastercard, Amex, First Data and PayPal, Dorsey was able to build a product that was welcomed by the SMEs, and a company that is now able to provide returns to its backers.  Congratulations to all involved.

New Face for my Blog

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Quietly this summer, this blog turned 10.  I missed noting the exact date (incidentally, it’s May the 4th, Star Wars Day 🙂), but I did decide this summer to migrate out of Typepad, with which I have been quite unhappy for some time.  You may have noticed that csertoglu.typepad.com is now redirecting to CemSertoglu.com.  The new site has a cleaner design.  I have also decided to drop the Sortipreneur name from the blog, which had really never felt right.  This is the first post I am typing using WordPress.

You may have also noticed that I am trying to blog more frequently.  Let’s see if I keep that up.

Thank you for following me here and I hope you enjoy the new home of my blog.

The Game has Changed – Power to the Audience

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Adblock_logo_&_wordmarkNow that Apple is openly encouraging ad blockers, publishers are up in arms.  The topic dominated the tech conversation last week, and I think it is well understood by now. If you are not up to speed on it, here are a few links to skim.

This development should not be a surprise to anyone in digital media.  We have been headed in this direction for a while. When was the last time you persevered through a Youtube pre-roll's full length?  How about clicking on a display ad?

Apple's move is understandable.  While spammy ads are a nuisance on the desktop experience, they are a killer when you deal with them on the small smartphone screens.  Apple wants its users happy in their browsing experience, and does not have to apologise to anyone when you decide to use blockers.

Ultimately the media audience is gaining power, and it will reward not those that are trying to circumvent and trick the distribution channels, but those that are committed to delivering engagement.

A good recent example is Medium, which has grabbed the headlines with its recent round.  It is delivering real engagement and thus proving valuable to the brands that are using it to deliver their messages – in context and without spam.

The bar is now higher for monetisation for publishers.

Migrating Digital Histories

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Bigdata-1The web is aging.  I remember the day my co-founder at SelectMinds, Steve Richmond, first pointed me to the new search engine, Google, in 1999.  I also remember setting up my first Gmail account, this  blog on Typepad, my YemekSepeti account, all in 2005, my Facebook account in 2006, my Twitter account in 2007, my Runkeeper account in 2010, and my Uber account in 2012.  I have had little reason to switch from these services, and continue to use them still in 2015.  In the meanwhile, these services have learned about my preferences and patterns. 

Most of these services publish APIs that would allow me, or a service I'd permit, suck meaningful data out of them.  What is important for that service is that it knows the context of these services. Think of it as a Zapier or Unroll.me, not for connecting services to each other or unsubscribing, but for connecting them to me, so I can claim my ownership of my data growing in each of these services.  Ideally, such a service would then offer me a set of tools to manage this data, provide wizards for migrating between service providers.

I am surprised such a service is not here yet. I think it would be a valuable area to tackle.

PS. Of the services listed above, Typepad will likely be the first one I abandon. I'd appreciate a tip if you know of a good tool for migrating out of Typepad.

Changing Customer Behaviors Cut Both Ways

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Hail cabTechnology educates.  Uber has taught millions of people to dip their hands in their pockets, as opposed to raising it up in the air, when they need a ride.  Booking.com has taught people to consider to the flexibility of their travel plans, when booking a hotel room.  They have influenced behavior, made things easier, and created a lot of value by gaining lots of customers.

On the supplier side, they  have become the platform of choice, primarily because they had aggregated the greatest slice of demand, in the shape of the customers mentioned above.  They then capitalized on their aggregated supply and demand, by commanding very high take rates (commissions) from the transactions they enable, leading to their unicorn status.  In the case of Uber,  a recent leak indicates that the take rate is ~20%, and at Booking.com, the take rate estimate is ~%16.

One question that comes to mind is whether these high take rates will survive? The pressure is on the platform, especially as it grows, allowing it to benefit from economies of scale, and as competition emerges, to lower its take rate.  We have seen this in numerous marketplace businesses in our portfolio.  In addition, the education process I describe above, is also benefiting the incumbents who are utilizing these platforms to reach customers.  A case in point is the case of Hilton's own booking app.  According to the NY Times: 

Hilton has introduced a number of services for guests who book directly, including a digital check-in option that eliminates waiting in line. Quickly adopted by its customers, the app is now used by over one million people each month, according to Geraldine Calpin, who oversees Hilton’s worldwide digital efforts.

A million people each month is a huge number, and should be an alarm for Booking.com.  A company called Arrow will soon make NY yellow cabs as easily hail-able as Uber cabs.  Technology, while educating users on more efficient new behaviors, is also lowering the cost of incumbents to battle marketplaces.

My prediction is that marketplaces will ultimately earn their permanent place in their respective markets (note the pun :)), but I would not count on the high take rates to continue.

 

Stop Spamming Me from your Service Domain

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SpamI am your customer, perhaps a happy and loyal one.  Therefore, I pay attention to your emails – I may have placed an order on your service, or may be expecting to hear from you.

So I open your emails, especially if they come from the same email domain as your service's notifications do.  If many of those emails are unsolicited and irrelevant ads and promotions, you are abusing my loyalty.

Stop taking advantage of the attention of your valuable customers.

As an aside, there is a business opportunity to figure out how to separate service notifications from promotions.  Gmail does not seem to do a good job at this.