I’m joining the team at Snaps

Rockets_snap
Snaps is a creative platform for brands.  The Houston Rockets are using Snaps for fan engagement.

Like many of us in the New York tech and media communities, I’ve tried to invest my time working with world class entrepreneurs, incredible visions and great businesses. To that end, I’m thrilled to share that I’m joining the team at Snaps as its CEO.

When I first met Vivian Rosenthal, she described her view of a world where social communication had shifted from text-based, desktop conversation, to mobile-first visual channels like Instagram, Vine,Tumblr, Pinterest and others. We talked at length about how this shift will continue to create new opportunities and challenges for marketers, and how software can help create better conversations between consumers and brands in this new, visual space.

Our conversation didn’t end at mobile. We also talked a about where that visual world is headed. With the emergence of new platforms like Google Glass, Oculus Rift and Magic Leap, new channels will continue to emerge that will transform the way consumers and brands communicate, and they’re only becoming increasingly visual and immersive.

I believe that Snaps is perfectly positioned to help create, capture and amplify the visual conversation on the web. The current Snaps offering is a fun, engaging, creative solution that has already empowered some of the world’s best consumer brands in social media, including SecretKraft, Kate Spade, Sony Pictures, Nestlé and The Houston Rockets.

Snaps has made incredible progress towards becoming a robust creative platform for brands, but we’re just getting started. I’m thrilled to be joining the team at this phase, and hope to share more about our product soon.

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Mobile Advertising Sucks and That Needs to Change

I was not surprised to see a recent report from Trademob finding that 40% of mobile ad clicks are either accidental or fraudulent.

When I interned for Jerry Neumann, he had me take a look at the mobile vs. display ecosystem, which I did. Back then I was interested in the differences between mobile and desktop traffic with respect to audience buying.  My conclusion from that exercise was that existing DSPs were best-positioned to figure this out when mobile ad buying demand was big enough, so the risks of creating a mobile DSP probably outweighed the opportunity.

But after reading the recent Trendmob report on click results, I’m starting to think that we haven’t been looking at the ecosystem in the right way.  I previously thought of mobile the way a lot of people look at mobile: a smaller version of our desktop experiences with some nuanced differences in cookie technology. I’m building some new theories about mobile advertising.  I’m starting with the statement that mobile advertising fundamentally sucks, but also that it’s important for  it to eventually not suck.

Related to my point above about DSPs, even if we get better at audience targeting on mobile, we haven’t solved the engagement problem. Selling clicks on mobile is not an indicator of anything other than a bot or my fat thumb accidentally hitting a banner.  What’s worse: more and more, we’re consuming our content on mobile devices.  If your primary revenue driver is advertising and your customers are increasingly consuming your product in a medium that’s a bad format for advertising, you are going to have a big problem on your hands in the near term.

According to Mary Meeker’s 2012 Internet Trends Report,  here are a few disparate data points that, in my opinion, spell disaster for the ad-supported media industry:

  1. Mobile Internet Usage surpassed desktop internet usage in India this year.  I’m betting that much of the world is moving in the same direction.  While mobile traffic won’t replace desktop access in more developed countries, it’s going to become an increasingly bigger piece of the pie.
  2. eCPMs on mobile are $0.75 vs. desktop which are about $3.50. Based on The Law of Shitty Clickthroughs, this isn’t a great start to the relationship between advertisers and consumers on mobile.  It will likely improve, but probably not by much.
  3. Mobile monetization levels could surpass desktop in three years (but not through advertising).  Most revenue in the mobile ecosystem is commerce-based, whether through game in-app transactions, app purchases, etc.  So, while monetization levels will increase, there’s no indication that media companies will take part in that.

I see this as an ominous sign for publishers, as well as an opportunity to create value.

Going Around the Wall: Foursquare and AMEX

I once had a manager who used to yell to “go through the wall!!” when we hit challenges.  That’s often the right advice, but it’s not always the best way to expend your resources.  When you’re a startup with limited resources,  it’s far more effective to go around some walls.

Over the past few years, companies have been lining up to take shots at the discount space for obvious reasons: it’s a large addressable market and there’s high demand from marketers of all sizes to use social and Internet services to drive in-store traffic.  Discount listing services like Groupon and Living Social have just started delivering on that promise, and other startups are jumping into the fray.

The problem with bringing the real world and the Internet together is that there are often huge walls preventing integration.  For example, Groupon handles its sales to retailers through a massive salesforce of over 3,500.  To implement the transaction, Groupon has to manage the sale online and handle payouts to its partners.   This process is cumbersome and complex.  If a startup isn’t built around being an financial intermediary between retailers and customers, it can be a big, expensive wall to get through if you want to play in the space.

To add complexity to the issue, a lot of big retailers aren’t interested in having Groupon handle their transactions as an intermediary.  They’d prefer to to use their own POS systems to manage their transactions, but no one has figured out an effective way to distribute online coupons.  Everyone that I’ve spoken to in CPG marketing prefers free-standing-inserts (FSIs) because the redemption rates are predictable and there are a fixed amount in the world.  Moving these offers to online delivery systems always present complexities that the customer and the marketer seem to want to avoid.  If you want to offer discounts automatically through a smartphone application,  POS integration is required and a lot of systems (at casual dining restaurants, for example) aren’t set up to scan barcodes.  Headaches and complexities abound.

With those challenges in mind, the folks at Foursquare continue to impress with their ability to move around walls instead of trying to go through them.  Their recent deal with AMEX removes the transaction processing challenge from their equation.  With this deal, there are no barcode/POS integration challenges and no online transactions for Foursquare to manage.  The cashier at the store doesn’t even need to know about the discount and the customer doesn’t have to walk around with coupons in their pocket.  There’s no online coupon to download and print out and the redemption of the discounts is easily tracked.  Customers simply sync their AMEX card with their Foursquare account and start saving.

I think this deal represents truly innovative thinking on the part of AMEX and Foursquare, and should serve as a model to startups on how to go around walls.

AT&T and T-Mobile Will Slow Innovation

Om Malik wrote a good piece on this merger; it’s fairly old news at this point.   I’m pretty sure I dislike this deal and I think it’s going to inhibit American entrepreneurs from accelerating innovation in mobile.

Strategically, the proposed $39 Billion cash and stock deal that’s been put up by AT&T to acquire T-mobile is risky for the company.  AT&T  is justifying the price of the acquisition by claiming synergies, the NPV of which excede the total purchase price of T-Mobile (yes, you read that correctly, but they said the same thing last time).  AT&T also has a $3 Bn. breakup fee, so if the FCC and DOJ decide that they don’t like the deal for anticompetitive reasons, it’s going to be expensive for them to fix.

Right now, AT&T has about 95.5 million subscribers and T-Mobile is hanging out with 34 million.  Verizon has about 100 million users, so while this won’t create a monopoly, it will definitely create a duopoly when it comes to national coverage.  Proponents of this merger point out that with the high CAPEX required to invest in cellular networks, this merger will allow for AT&T to invest in improving its network.  While this sounds great, I have trouble seeing how a company that locks in over half of the market, subjects its customers to two-year contracts and  has a competitor that uses incompatible technology (CDMA vs. GPRS) will be particularly interested in high CAPEX projects.  It’s too difficult to switch,  so why bother?

Right now applications are driving innovation while wireless carriers are falling behind.  I may be cynical, but I have a lot of trouble seeing how this deal works out well for anyone other than AT&T and T-Mobile shareholders.

Five Predictions for 2011

I started to write a retrospective on 2010, but  decided that we all lived through the year and there are some great photo essays that are much more interesting than my thoughts.  Instead,  I’m going to make  five predictions on tech, social and digital media trends in 2011.

1. Exponential growth in the U.S. smartphone market

Mobile is my current fascination, and the growth that we’ll see in 2011 in the U.S. market promises to make it the rest of the country’s fascination as well.  I wrote a post about this recently, and recognize that people have been predicting the year of mobile for a long time. But looking at the current environment makes it easy to see, from my perspective, that 2011 (or 2012 at the latest) will be the year that mobile will start to compete with the web for most relevant technological innovation (read Fred Wilson’s post to get the pro’s perspective) in the world.

Right now the early adoption is complete.  The iPhone skimmed the market for the high-end tech enthusiasts and the coastal hipsters.  The people who want the next thing have it, but they had to buy AT&T contracts in order to get it and, overall, the iPhone is an expensive investment when you start looking at the data plans.  Broader market penetration will happen with the growth of the Android platform; which will become the device- and service provider-agnostic operating system that will allow low-cost producers to offer smartphones to the price-sensitive consumer.   The increase in availability of these phones, I predict,  will actually lower the cost of data plans as well.  This is a  trend that is bound to continue as the fixed costs of building data delivery infrastructure is recouped and competition brings the supply of data networks up and the cost of the service down.

2. An increase in mobile gaming, but a decrease in pay-for-app models

Angry Birds was worth $20 million to EA, and for good reason.  Electronic Arts currently owns over half of the top 10 spots in the itunes App store and Angry Birds alone has sold over 6.5 million copies.  Mobile gaming is going to continue to grow, and it’s going to pull in a much broader audience in 2011 (see prediction #1).  With the growth of the category, however, I’m not confident that we will continue to see the pay model that currently exists in the itunes store , and I’m not entirely convinced that social currency will support the marketplace either.  I’ve been in the app marketplace for a while now and I’m surprised at how few apps have really embraced the ad-supported model that has driven the web economy for so many years now.  It’s possible that mobile advertising simply hasn’t developed enough to sell performance, but on a CPM level, I’m surprised that more advertisers aren’t clamoring to get into people’s smartphones.  If this changes with the broadening of the market, I think we’ll start to see more social gaming on mobile devices, and gaming publishers similar to Zynga and RockYou on mobile devices.

3. Continued adoption of web-based productivity apps by businesses

Google is going to take a few more swipes at Microsoft in 2011, and they will continue to pull share from the leader with the improvement of Google Apps for business and education.  Cloud-based apps just make sense for most people, who really don’t use much processing power to accomplish the majority of their tasks.  It’s also far easier to synchronize email, calendar, contacts and documents when they’re in the cloud.  Based on prediction #1 (above), it makes sense that more and more companies will move to the cloud for their business application needs because people are going to increase the number of screens that they use, and hence have a greater demand for easily synched solutions. Google Apps are the best cloud-based productivity applications in the market. Microsoft Live is a few years too late and a few features too underwhelming to be particularly useful.

4. Fragmented social networks

Facebook is now the place where you have the most connections that have the highest variance in value (mom, girlfriend, junior high-school acquaintance).  Facebook is now sort of a mashed up wall of brands, bands, friends, frenemies, places and games.  While Facebook continues to do a amazing job at delivering a platform that can be customized and controlled by its users,  I believe 2011 will be the year that people start signing up for smaller communities and networks that are relevant to a particular passion or activity.  Path is trying to fill this gap with a social network that only allows you to share photos with 50 people , and Instagr.am is filling in a void for hipsters and the visually curious to filter their photos with lo-fi effects.  These communities are built on top of the Facebook platform, but a different a slightly different value proposition and will start to syphon off some user attention.

I believe that music isn’t getting a fair shake in Facebook and that money is being left on the table in that space.   We’re going to be releasing a product in 2011 that will try to fill in some of the holes that Facebook misses in the music business and I’m looking forward to seeing entrepreneurs take on similar strategies.

5. Flat adoption of mobile coupons, despite the inevitable heavyweight user war.

Mobile coupons seem to be the trend that just won’t stick…yet.  I believe it’s going to take a little more time than people are hoping for consumers to start really using mobile coupon offers.  Media agencies are starting to experiment with QR codes and companies like Foursquare continue to make the push for location-based discounts (although I’ve struggled to  find a relevant advertisement in my experiences with the platform thus far).  Facebook PlacesHotpot and  Google Places are also diving into this space head first.  While Google, Facebook and Foursquare will trade punches like heavyweights in a royal rumble this year, I suspect that users will be decidedly absent from the fight.  2012 will be the year of mobile coupons, 2011 will still be the year of the Groupon.

The Web Is Mobile

This is becoming increasingly obvious, but it’s fascinating to watch the fast adoption of the mobile web. This inflection point  is another game-changer largely brought to us by Apple.  If the iPod official changed the way we consume music, it was the iPhone that really broke down the barriers between American consumers and the mobile web.  Side bar: it’s interesting to think about, especially when you consider that Fred Wilson and others (myself included) believe that Android will take the market leader position eventually.  Shouldn’t a more open platform have done that to the iTunes/iPod package?  Why didn’t it?  Is the RIAA the problem?

Anyway, a few fun charts.  According to eMarketer,  next year over half of college students in the U.S. will access the web via mobile devices several times per week or every day.  This is over 16% y/y growth:

So what does this all mean? More social and weather apps (I love this chart)….

…and a lot more.  As we increase the frequency and types of behaviors that we engage in mobile,  we will continue to adopt utility applications and entertainment applications.  Christopher Cox was on 60 minutes discussion how 200 million of Facebook’s current users access their accounts through mobile devices. I’m not sure how his numbers reconcile with eMarketers (unless the rest of the world really makes up the other 186 million),  but it is clear to me that our experiences are increasingly becoming mobile.  For reals.

Mobile Coupons

I’ve been talking to some friends in the CPG and beauty verticals recently about coupons and the adoption of mobile as a viable distribution channel for them.  The short story is that we’re nowhere near  replacing traditional coupons with digital ones, but it’s going to happen very quickly when someone solves a few problems that dont seem particularly complicated to me.  I think the opportunity is going to be exploited by a strong, simple application that’s available on multiple mobile platforms, and a website site that will drive a critical adoption rate from  the right consumer base.  The business model, in my opinion, hasn’t been clearly defined yet.

I found these statistics on gorumors.com , which project future growth of mobile coupon spending.  While I think some of these statistics won’t scale (like redemption rates),  it paints a pretty clear picture of what could potentially happen to the mobile coupon business. Here’s some info from gorumors:

According to a recent study by Borrel Associates, Mobile coupons have a much higher redemption rates than those from newspapers or mail – as much as 10x times.  Here is the projected total spending from mobile coupons as studied by Borrell Associates:

2006 : $3.3 million
2007 : $7.2 million
2008 : $7.15 million
2009 : $86.4 million
2010 : $373.7 million
2011 : $1055.3 million
2012 : $2242.4 million
2013 : $4101.6 million
2014 : $6598.5 million

The biggest hurdle that this industry faces is the adoption of smartphones by the core coupon-using crowd.  Right now in the United States, there are about 50 million smartphone users.  My guess is that the number of smartphone users who download applications is significantly smaller, because Blackberry users don’t really download apps and they control over 40% of the smartphone market.  So let’s put the market at 25 million U.S. users; that’s about 9% of the country’s population. When this number gets closer to 25%-30%, I think you’ll start to see major traction.

In terms of a coupon application design,  it needs to stay incredibly simple so that the normal, everyday user can find what they need and easily redeem the coupon.   Another consideration is the branded app versus general consumer app solution.  I believe that publishers should try to get a piece of this market and there’s room for a technology to help them do it.

Regardless,the growth is there and the demand would be there for the right experience.  Someone just needs to figure it out and wait.