Browsing articles from "February, 2011"

Daily Deal Companies Desperately Need Targeting

Remarkably, both Groupon and LivingSocial sent me offers for Spider-Vein treatments today. This made me wonder:

1) With all the data and big data-crunching resources now available, why aren’t these companies doing more advanced targeting to optimize offers? As far as I can tell, I’m not a likely buyer for Spider-Vein treatment offers.

2) Are they running out of good deals? This seems unlikely given the number of local merchants there are in San Francisco, but perhaps existing merchants are reaching burnout.

3) Is there customer scarcity? Given that one offer came in at 5:43am and the other at 8:31am, perhaps one company was worried that there would be a limited supply of customers for a very similar offer.

4) Was there a commitment that required them to send out the offer to a minimum number of people within a certain time-frame?

Whatever the case, it seems far too unlikely to be coincidence. Here’s hoping for a double burrito or sushi deal tomorrow.

Feb 23, 2011

Product Innovation Is Your Acquisition Strategy

A wave of Web 1.0 offerings are now being rebuilt as truly social, mobile Web 3.0 applications. That doesn’t mean just creating an iPhone app version of an existing site, or adding Facebook Connect as a way to login. It means designing social and mobile in from the beginning.  As a result, many of these new offerings won’t come from existing players, but from innovative entrepreneurs designing social and mobile Web 3.0 versions from the ground up.

Facebook now reaches 600M consumers worldwide and receives some 25% of US pageviews. Apple last month announced the 10 billionth app download. Some 17 million tablets (most of which were iPads) shipped in 2010. This unprecedented growth makes these powerful distribution platforms. Companies have to pay a tax to leverage them, but relative to the large percentage of invested venture dollars that traditionally go into acquisition cost, that tax may not be so bad.

This does not mean traditional online sales and marketing (including SEO, SEM, etc.) are out of the picture by any means. But it does mean that in categories where social, mobile or both can be core, those who leverage these platforms have a significant distribution advantage (and associated lower cost of acquisition) over those who don’t.

In Web 1.0, marketing and sales were responsible for acquisition and monetization. In Web 3.0, product innovation is the acquisition and monetization strategy. Affiliate and referral programs pre-date the web by many years. But the social web means that rather than user and customer acquisition being transactional, it is now an on-going, core part of the product experience.

The hybrid acquisition model, where acquisition cost can be exchanged for valuable digital goods, is at the core of Web 3.0. Consumer IT company Dropbox provides one great example of this: want more storage? Pay for it or just invite a few friends. Where inviting those friends would once have meant importing email addresses and disrupting social norms, those friends are now available at the click of a button; meanwhile, friends and colleagues are used to receiving updates and invites.

The recent success of many social games has shown that people are always searching for a sense of fulfillment and new ways to be entertained. But it’s also demonstrated that putting social at the heart of your application, and using product innovation as the primary way to acquire users, will cause that product to spread like wildfire.

For several years, we were in a period of platform innovation. Now we’re in a period of platform consolidation and application innovation. To call out one interesting example, the iPad, equipped with the right applications, is fast becoming a replacement device for a range of traditional physical items, from books to flash cards.

At the same time, remaining categories of the offline/traditional world are finally making the move online. This is because high speed broadband is widespread, smartphones are pervasive, and, online or off, the web is now a competitive requirement as much as it is a technology advantage.

Opentable moved restaurant reservations from the phone to the web while operationalizing restaurants. Group buying companies such as Groupon, LivingSocial, and others are bringing the web to local, brick and mortar merchants. Zocdoc is web-enabling doctors and making online reservations possible in the process; and companies can hire labor worldwide via marketplaces like Odesk and Rent-A-Coder.

Conclusion
The history of Silicon Valley is the cycle of king of the hill. New kings have accelerated adoption faster than their peers, by putting high leverage acquisition mechanisms at their core. Two high leverage acquisition mechanisms – social and mobile – are now widely available and accessible and can be core to a wide range of online offerings. Marketing and sales now take place through product innovation. Significant capital is required for significant scale, but with the social, mobile web, in many categories, more adoption risk can now be taken out faster and at lower cost. That’s good news for entrepreneurs, investors, and consumers alike.

Feb 22, 2011