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Integrations (and Metaservices) For The Win

By - April 04, 2015
GBoard

A GeckoBoard sample dashboard, integrating half a dozen separate data services.

What makes for a truly NewCo business? I’ve been giving this question a lot of thought the past six or so months, leading to posts like Maybe The Best Way To Change the World Is To Start a CompanyLiving Systems and The Information First Company, What Makes a NewCo, and posts on NewCos like MetroMile and Jack.

But lately I’ve noticed a strong theme running through a number of interesting and successful businesses: Integrations. From Acxiom and sovrn (where I am a board member) to Slack, Gecko and Zapier (where I am a happy customer), these companies are thriving because they have built a platform based on the integration of many different products and services. At NewCo, we call this “being platform’d” – an inelegant but apt descriptor.

Four years ago I wrote  File Under: Metaservices, The Rise Of, in which I posed a problem:

…heavy users of the web depend on scores – sometimes hundreds – of services, all of which work wonderfully for their particular purpose (eBay for auctions, Google for search, OpenTable for restaurant reservations, etc). But these services simply don’t communicate with each other, nor collaborate in a fashion that creates a robust or evolving ecosystem.

The rise of the app economy exacerbates the problem – most apps live in their own closed world, sharing data sparingly, if at all.

In 2015, the problem is coming to a head, and there are huge, proven opportunities for companies willing to do the hard work of managing complex data and services integrations. In fact, I’d go so far as to claim that in the NewCo economy, an unfair advantage will accrue to those businesses that excel at delivering seamless, effective integrations of complex services.

It’s already starting to happen. Why, for example, has Slack taken off so quickly, when there were already a raft of seemingly successful collaboration tools (Yammer, Basecamp, HipChat, etc)? As a user of Slack, my answer is simple: Slack has a super elegant approach to integrations. It “just works” with Google Docs, YouTube, Trello, MailChimp,  and about 100 other services. It creates an intelligent “metaservice” for effective group collaboration outside of its core use case. It’s not easy to make these integrations seem effortless to the consumer, but Slack got it right.

Another example can be found in what’s known as the programmatic or adtech industry. For the past four years I’ve been very close to this industry, steering FM into the purchase of an at scale programmatic advertising business (Lijit, now called sovrn), and serving on the board of Acxiom, a public data and marketing services company. With sovrn, we’ve noticed that the hardest, but most rewarding work comes in integrating new partners onto our platform. We’ve got nearly 100 integrations now, with several more coming online each quarter. These are not easy to pull off, each takes from three to six months to get done. It’s messy and hand-crafted, and it involves human to human negotiations all along the way. But once done, adtech integrations open a flood of data back and forth between partners, and when that happens, money gets made.

Adtech and data businesses that have acquired a lot of integrations, like Acxiom, AppNexus, OpenX, and sovrn, are valuable precisely because those integrations take a lot of time. If a large, well heeled tech business wanted to enter the adtech industry, they’d have to buy their way in. Doing 40-50 integrations from scratch would take years. It’s one of the reasons Facebook bought LiveRail, Twitter bought MoPub, and Apple bought Quattro.

Another class of integrators can be found in companies like Zapier, which is playing directly in the mobile app data market (and as such, is a direct response to the problem I posited back in 2011). Zapier gives developers the ability to tie together all their siloed apps, and to manipulate that data on one creative canvas. Another example is GeckoBoard, which at present is mainly a dashboard for disparate and discrete information sources, but even that limited functionality delivers a “holy shit!” set of insights.

Once I started noticing these integration-driven businesses, I saw them everywhere. Sure, Facebook and Google (and all the platforms) have been integrators forever, but they fail to solve more specific and/or bespoke problems inherent to individual use cases. Across online marketing, for example, tools like AppBoy, ZenDesk, and MailChimp lead with their metaservice-based integrative approach.  So do hundreds more, in dozens of categories, far too many to mention here.

But I’d like to call the ball right now: Metaservices is here to stay, and the best and fastest integrators will win.

If you want to get inside great companies around the globe, come to a NewCo festival. Next up is New York, then Austin and Silicon Valley.

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What’s NewCo? These Videos Will Help

By - March 31, 2015

The NewCo festival model is counter-intuitive, so we made these videos to help explain what the fuss is all about. I thought I’d share them here. The first one features folks talking about their experience attending festivals, and the second one features host company presentors doing the same. Enjoy! (Oh, and NewCo New York registration is open now, sign up before the best sessions fill – more than a dozen, including TED, NYT, Gimlet, VaynerMedia, and BuzzFeed, are nearly full!)


A Few Questions For Publishers Contemplating Facebook As A Platform

By - March 23, 2015

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Well, it’s happening. According to no less authoritative source than The New York Times, The New York Times is preparing to plant a taproot right inside the highly walled garden that is Facebook.

As Times’ executives contemplate moving The Grey Lady squarely under the rather constrictive confines of Facebook’s terms of service, they may be comforting themselves with a few palliative pretty-much-truths:

  1. We may be putting our content on Facebook’s platform, but we’ll still have our presence on the open web, apps, and in print. We’re really just accessing a massive audience natively, in a way they want to consume our content. In our other products, we’ll still be in control (well, not so much with iOS but…).
  2. Really, Facebook is just another channel — like when Borders and Barnes & Noble consolidated the newsstand business. Facebook’s just a big newsstand where we have to have our product.
  3. We’re going to be among the initial few to do this, which gives us first mover’s advantage, and probably the best economics anyone will ever get given how strongly Facebook is wooing us.
  4. If it doesn’t work , we can always call it a grand experiment and move along, sort of like we did with AOL back in the day. Or Apple back when the Newsstand was a thing.

All kinda true, and compelling enough to “test,” which is how the article carefully positions the Times’ intentions. But as testing beings, here are a few questions any publisher should ask before dipping a taproot into Facebook’s carefully cultivated soils:

  • Do you have full and unfettered access to reader data? Will Facebook have access to your customer data?

A publisher lives and dies by its ability to maintain a strong connection to its readership. That means understanding how people use your product, so you can make it better. It means knowing who your customers are, so you can call them by name, make them offers, ask them questions, converse with them using sophisticated tools. Will Facebook offer the kind of tools the open web does?

  • Do you have full and unfettered control over your advertising relationships and data? Will Facebook have access to that data?

If Facebook is selling your advertising, or telling you how to sell your advertising, or dictating what your advertising has to look like, or has access to data about your customer data *and* your advertising, they have your jewels in their hands. I hope those are very soft hands.

  • Do you have certainty over the levers of circulation marketing, including the price of reader acquisition and engagement? 

Facebook’s record here ain’t exactly encouraging. Everyone knows that if you want to build audience on Facebook, you have to pay Facebook. Publishers have gotten pretty sophisticated at understanding customer acquisition costs, ROI, and the like. Will Facebook offer a consistent ecosystem here, or will the sands shift as the company ropes in your competitors, leverages “proprietary algorithms” to decide who sees what, then ultimately decides to get into your business in some way? If you want to read up on such a market, just ask Yelp how it feels about Google.

  • Do you have control over your core product, so you can craft your reader’s experience as an expression of your brand? 

I can’t really stress this one too much. I mean, what if a year in, you want to ask some of your Facebook readers to pay you, in exchange for less advertising (or none)? Do you have to ask permission? Wait, you agreed to not do that? Well why would any reader pay you on the open web if they can get it for free on Facebook? And what if you want to do something like Snowfall? Or what if you come up with a really neat widget that pulls in processed content from, say, Twitter and SnapChat? Will Facebook let you? They kinda sorta don’t like those companies, last I checked. My guess is they won’t like others down the road too.

  • Do you have any proof that publishers using another company’s proprietary platform have ever created a lasting and sustainable business? 

I guess I should have put this one first. There have been good exits for some publishers from platforms — a few of the MCNs on YouTube come to mind — but those were native video publishers who will all admit that they could never reach profitability on YouTube’ economics.

I can’t really think of any publisher who thrived on someone else’s platform, for the reasons I laid out above. Sure, a lot of apps have done well, but in the main they were either hit businesses (gaming) or free services that kept their customer and revenue models well away from Apple or Google’s grasp (everybody else ever).

Perhaps Facebook has addressed all these points with the Times and others — but the article certainly didn’t find evidence of that. And all of you other publishers should know how the playing field tilts before joining the game.

Which brings us to BuzzFeed, which has taken a delightfully inverse approach to platform economics — that is to say, it embraces the distribution of its content independent of its home base. Of course, it can do so because its core revenue model is native advertising content, which is distributed in the same fashion as original editorial content. This model suits BuzzFeed very, very well. I’m not sure it scales for many others.

So far, Facebook has not clipped BuzzFeed’s native advertising wings. Could it? Just ask Zynga.

Then again, and to be fair, I’m not privy to the conversations between the Times and Facebook. Regardless, were I a publisher, I’d sure like to know the answers to those questions above. If anyone gets some, do let us know?

(cross posted to Medium).

With Meridian, Sovrn Levels the Playing Field For Publishers

By - March 08, 2015

meridian-logo-invA long, strange, and ultimately rewarding trip, that’s what many involved in the past ten years at Federated Media, Lijit, and now sovrn Holdings might say. One year ago, give or take, we sold FM’s assets to LIN Media, and created sovrn Holdings, a programmatic data business focused on one mission: to foster an ecosystem where independent and influential publishers can thrive.

Sovrn has had an extraordinary year. It’s led the way in the fight against fraud, and has one of the cleanest networks in the industry. It’s a profitable, fast-growing business, and it’s more than quadrupled its network CPM – an amazing feat that is a testament to both eliminating fraud, as well as focusing on data science – understanding the reams of data the network throws off each day, and putting it to work for its 20,000+ publishers. And it’s that focus on data science that has led to sovrn’s latest crowning achievement: The launch of meridian, sovrn’s completely rethought publisher platform.

Meridian is a cooperative data-driven platform. So what does that mean? Publishers integrate with meridian – mainly because of its advertising platform – and when they do, they share their collective audience, advertising, and other data.  Because sovrn has massive scale, we can share back information to publishers that no other platform offers – and we can do it for free.

So that’s what we’re doing. Meridian is a rich insights platform, featuring information about audience segments that was previously the domain of ad buyers alone. I’m excited about this for many reasons, but the main one comes down to this: For too long smaller publishers operated in the dark: They didn’t know who was buying their inventory, for how much, or how they stacked up against similar inventory across the Internet. Meridian is changing that. Over the coming months, sovrn will build more and more information sharing into the platform, all with the same goal: To level the playing field so that buyer and seller are on equal footing.

I’m super proud to be Chair of sovrn Holdings, and proud of CEO Walter Knapp and his entire team today. Congratulations, sovrn, on a major milestone, and here’s to many many more!

A few screen shots of meridian follow.

The main dashboard:

meridian-screenies-of

The comparative stats:

Category Comparison meridian

And the audience tab:

Audience Tab meridian

 

 

Maybe The Best Way To Change the World Is To Start a Company

By - February 26, 2015

bethechange

 

(imageThis piece from Smithsonian caught my eye today – Young People Mistrust Government So Much They Aren’t Running for Office. It covers a Rutgers professor who studies millennial attitudes towards politics, and concludes that the much-scrutinized generation abhors politics – logging a ten point decrease in sentiment toward government in just the past decade or so.

But I have a different take on why our recent college and high school graduates aren’t opting for politics, and it has to do with a far more positive reason: This is the first generation to come of age in an era where “entrepreneur” is not only a viable career option, it’s actually a compelling one.

I’ve never had a real job I didn’t make myself – back when I was starting out some 25+ years ago, the only path that seemed to make sense for me was joining a startup (job #1), or making one myself (jobs #2-7). I started out well before the Internet, and before the 1990s boom which brought the idea of a college-dropout CEO to the fore of our cultural conscience. Sure, we had Bill Gates, but he was a complete outlier, not a demarcation of a trend, as Zuckerberg became during the Web 2 era.

Back in the early 1990s, my friends and family struggled to understand what it was I was doing with my life. It was as if I had some kind of undiagnosed disease – I was addicted to risk, and clearly allergic to “real work.”

But think of the options a smart kid has coming out of college these days. Not only has company creation become mainstream and entirely acceptable, we’ve built scores of institutions that teach and enable company creation – from Babson to Slack to Y Combinator. I recently met with Sam Altman, CEO of YC, who told me his company receives more applications to his program each year than Stanford does. How many apps does Stanford get? About 40,000!

Cynicism aside, the main reason anyone wants to get into politics is to make positive change in the world. And I believe thoughtful young people are taking a hard look at our major change-making institutions – government, religion, education, and corporations – and they’re deciding that the best way to have an impact is to start a company (or join one). And more and more, those companies are focused on creating positive change in the world. To which I can only say: Right on!

Your Network Transcends Time – Care For It

By - February 12, 2015

Every year around this year I fly to Arizona and attend the IAB Annual Meeting, a confab of 1000+ executives  in the interactive media business. Yes, it’s a rubber-chicken boondoggle – what ballroom-based warm-climated event in February isn’t? – but I go because I get to catch up with dozens of colleagues and friends, and I usually connect to a handful of interesting new folks as well. I hate the travel and despise most hotel rooms, but on balance, well – I keep going. (And yes, I think the NewCo model is even more productive, but more on that in another post).

I find the best connections happen over dinner or drinks – perhaps that’s my own convivial nature, but I sense I’m not alone. So I want to tell you a story of a chance meeting at a bar, because it evokes a larger lesson in business:  you’re only as good as your relationships – and those relationships often exist outside traditional boundaries of time and space.

If you’re scratching your head, stay with me. I hope to clarify.

Monday night I was at the bar, chatting with old friends in the industry. The room was filled with happy half-tipsy industry types, the pleasant din of convivial glad-handing was well underway.  At one point I looked to my right and saw a young man who caught my eye and lit up with recognition. “John, my man, how are you?!” he proclaimed, extending his hand for an enthusiastic shake.

Now here’s where I need to admit something. I’ve been in this industry for nearly 30 years, and for 20 of them I’ve been relatively well known in this small circle of digital publishing – I was on the Board of the IAB for six years, and I’ve graced the stage of the annual meeting several times. The net of it is this: At places like the IAB, a lot more folks remember my name than I do theirs. It doesn’t help that I suck at remembering names to begin with, and it’s only gotten worse as I’ve careened toward middle age and beyond. (I’m not alone in this, I just love this TED talk from David Hornik – I’m not dyslexic, but I sure feel that way when it comes to names).

All of which is a long way of saying I didn’t have the faintest idea whose hand I was at present shaking. He looked familiar – maddeningly so – but I could not remember the connection. I am afraid this happens to me far more than I’d like to admit.

Usually when presented with this dilemma, I employ a strategy of conversing my way to enlightenment – hoping for a high order bit that might remind me of our connection. Alas, the man was enveloped in his own bubble of conversation, and after his friendly overture, he returned to his group. I doubt he knew I was struggling to recall his name – I’ll admit, sheepishly, that I displayed recognition as I returned his warm greeting.

Now, I could have written that exchange off, not given it another thought. But these things vex me – I hate not knowing who’s reached out to me with obvious awareness and good intent. It tugged at me the rest of the evening, until hours later, at dinner, it dawned on me who the fellow was. Turns out, he’s a quite successful investor and entrepreneur, but it had been a few years since I’d seen him in the flesh, and I just didn’t make the connection in the moment.

I was pleased with my recall, even if it was late. It closed an otherwise unfulfilled loop – I hate potential lapses in relationships, even if the other party had no idea I had failed to remember their name.

The next day provided a perfect example of why this matters. While waiting for my flight at the Phoenix airport I took a call from an old college friend, a man who has built a great career in banking and venture capital. He wanted to talk about a particular firm – a very well respected company with which he had potential business. And by now you can probably figure out whose company that was – it was the company where my mystery man worked.

“Ah, I just saw him last night,” I could truthfully tell my friend on the phone. “He’s a great guy, and his firm is top rate. I’d be happy to provide an introduction if you’d like.”

I have no idea if my two colleagues will end up doing business together, but that’s not the point. In business, the network is always on – even across the axis of time. The night before, I had no idea I’d be presented with a chance to introduce two great people. But if I hadn’t taken the time to close that open relationship loop, I’d have lost the chance to provide a truly warm introduction – one that might have strengthen the fabric of not only my own network, but of theirs as well. And that’d have been a shame.

Tend to your network, and do your best to return the favor of a warm greeting. You never know when it might come back to you.

Remember the Internet When Considering The Things

By - February 06, 2015

iot-tectonics-center-electric

Last month I sat down with my old pal Jay Adelson (Digg, Revision 3, Equinix, SimpleGeo) who together with his partner Andy Smith is raising a new fund focused on the Internet of Things. Our goal was to get caught up – I’d tell him about my plans for NewCo, and they’d update me on Center Electric, the fund’s new name.

Along the way Jay shared with me this graphic, which I thought worthy of sharing here. What I like about it is how Jay and Andy think about the Internet of Things holistically – most of us focus only on the things, but take the Internet for granted. But it’s worth remembering that objects only become magical when they are connected in some way, and data flows to and from them meaningfully.

More than 50 billion “things” will be connected in some way to the Internet over the next decade, and all of those things will require a massive re-thinking of infrastructure, services, UX/UI, and inter-connectivity. That’s one humongous opportunity – but only if you think systemically. My post on the role adtech will play in this ecosystem is one such attempt, I am sure there are (and will be) many more.

In the meantime, I’ll be watching the investments made by firms like Center Electric. It’s a promising thesis.

Metromile: A FitBit for Your Car

By - January 26, 2015
MetroMile staff

The Metromile staff in front of their SF HQ (Preston is in the red shirt in the back right).

Ever since writing Living Systems and The Information First Company last Fall, I’ve been citing Earnest, the financial services startup, as a poster child for what I mean by an “information-first” company. But earlier this month I met with another perfect exemplar: Metromile, a company that is already upending industrial-age assumptions about what “insurance” should be.**

I’m fascinated by the idea of “potential information” – flows of information that are locked away and unused. Potential information flows live in the imagination of every NewCo – once tapped, they create all manner of new potential value. Metromile is a stellar example of a company that has found a vector into a treasure trove of potential information – the automobile – and is busy turning that information into a new kind of customer experience, one that has the potential to completely retool the utility and value of the insurance business.

But I get ahead of myself. Let’s back up, and start at the beginning. Metromile began as the brainchild of David Friedberg, co-founder and CEO of yet another information-first insurance breakout, Climate Corp. Climate opened up reams of new information flows for the farming industry, and along the way was acquired by agribusiness giant Monsanto for more than $1 billion. Friedberg realized that the lessons of Climate were applicable to consumer insurance, and Metromile was born.

I met with Metromile CEO Dan Preston in his crowded and humming San Francisco headquarters (pictured above). I had heard about Metromile, but my knowledge was limited to their headline: car insurance you pay for by the mile. But I figured the company was up to more than just a cheaper insurance product. On that hunch my chat with Preston did not disappoint.

Metromile does have a deceptively simple premise: those who drive a lot tend to have more accidents, those who drive less, fewer. Simple, no? But it turns out, the way insurance products currently work spreads the risk of those high mileage drivers across the entire pool of the insured. Put another way, if you drive less than 10,000 miles a year, most likely your insurance premiums are higher than they need to be. That’s because insurance companies average out the costs across their entire base of customers, forcing the less risky drivers to cover the costs of those who drive more.

Metronome

The Metronome – Metromile’s vector into a goldmine of potential information flows.

Metromile is the only insurance product on the market that charges by the mile on a retroactive basis – it tracks your miles driven, then calculates your monthly premium in arrears. To do so, it needs access to your vehicle’s diagnostic port – the same access point used by mechanics when they service modern cars (every car since 1996 has such a port).  When you sign up, Metromile sends you a “Metronome” – the same kind of device made famous by Progressive Insurance’s Snapshot, which uses them for data-driven discount products.

If you drive less than 10,000 miles a year, and live in a city environment, chances are you’ll save a lot of money using Metromile. But saving money is just the start of the company’s ambitions. After all, once the Metronome is installed, Metromile begins to collect data about your car and your driving habits. And any good information-first entrepreneur knows that the true value of an enterprise lies in mapping potential information flows. And that little Metronome is a hidden goldmine of such data.

Preston and his team doesn’t see Metromile as just an insurance company. Instead, Metromile is “your friend and ally in owning a car.” An ally with sophisticated data science and a friendly app that delivers much more than monthly savings. From the company’s website:

We aim to make the urban experience of having a car as simple as it can be, by taking our deep understanding of data and transforming it into information and services that make having a car less expensive, more convenient, and simply smarter….With the Metronome in place, the free Metromile app functions as your personal driving dashboard. Use it to track and optimize your gas usage and trips, monitor the health of your car, and locate your car if it’s missing. You can even use it to get automated street sweeping alerts.

And there’s the difference between Metromile and the rest of the insurance business – Metromile sees itself as a services company in the business of helping drivers make more informed choices about their cars. It starts with insurance, but it quickly becomes the voice of your car. Metromile’s app opens a window into the previously opaque world of automotive data and helps you understand all manner of things about your car – if it’s close to breaking down, for example, or if you’re using it in ways that might cause unwanted expenses down the road. When you think about it, Metromile is a fitbit for your car. And that’s pretty darn cool. One to watch, to be sure.

**Because I believe so much in the company, I am considering a small investment in MetroMile. Anytime I write about a company where I am or might be an investor, I will make a practice of noting it – so far, this hasn’t happened yet. As I point out on my disclosures page, I am a fairly active angel investor. 

Apple and Google: Middle School Mean Girls Having At It

By - January 20, 2015

THE-DRAMA-YEARS(image) I’m the father of three children, and two of them are girls. And while my first was a boy, and therefore “broke me in” with extraordinary acts of Running Headlong Into Fence Posts and Drinking Beer Stolen From Dad’s Fridge Yet Forgetting To Hide The Bottles, nothing, NOTHING, prepared me for Girls Behaving Badly To Each Other Whilst In Middle School.

Those of you with girls aged 11-14 know of what I speak: Middle school girls are just flat out BADASSES when it comes to unrepentant cruelty – and they are almost as good at forgetting, often within a day (or an hour) the rationale or cause of their petty behaviors. On one of my daughter’s wall is a note from a middle school friend. It says – and while I may paraphrase, I’m not making this up – “Hey Girl, I’m so glad we’re best friends, because I really hated you before but now we’re best friends right?!” And my daughter *pinned this* to her wall – her ACTUAL wall, in her bedroom!

Anyway, every so often girls in middle school end up squaring off – and the result is an embarrassment of small-minded but astonishingly machiavellian acts of cruelty. Little lies are let loose like sparks on a pile of hay, and soon a fire of social shunning rips through the school. Invitations are made, then retracted vigorously, and in public. Insults are veiled as compliments, and a girl’s emerging character strengths – a penchant for science perhaps, or a love of kittens for God’s sake – are expertly turned against her.

But this post isn’t really about middle school girls. Because we all know middle school girls – with love, patience, and copious wine (for the parents) – eventually grow up and out of such behavior.

Apple and Google? Not so much. And as an avid consumer of both these company’s products, I’m tired of it.

It’s the little things that pile up, the unnecessary lies and petty inconveniences. Like the fact that you need to install a javascript or browser extension to make Gmail the default mail application on your Mac. Because, you know, everyone knows how to do that. Or that you need a third party app (and a degree from General Assembly) to make music and movies purchased on Google Play work in iTunes, or vice versa. Or that Apple won’t let Google index apps in the iTunes store, because, you know, that Google mission of making the world’s information useful and accessible sounds suspicious, right?

Or – and yes, this is the one that pushed me to write this post – that you have to follow an utterly convoluted five-step process just to make group texting work between iPhones and Android users – only to learn it doesn’t really work every time, and in fact, if you’re expecting an important text from someone with an iPhone, well, you better just man up and buy a f*cking iPhone too, loser.

I’m not even scratching the surface of the bullpucky these two companies are putting us through to create “user lock-in” and discourage consumer choice. I mean, we gave up on the easy stuff, like, oh I don’t know, a universal power cord that can charge any phone. Because, you know, why have standards when you can take forty bucks from some poor loser every time he misplaces his charger? Or, if you wanted to change your default browser to Chrome, you had to root around in Safari to do so (Google has since gotten around this)? And don’t get me started on Apple Contacts and Calendar…and getting them into Google’s universe. Yeah, it’s supposed to work. And no, it really doesn’t, not so much, and not so well. I’m six months and thousands of dollars into trying to make that work. Um, Google – tell me please why there’s no Google Calendar app for iPhone? Is it because…you know, Apple’s not cool anymore? Gah.

I bet I’ve missed tons of examples, but given the state of diplomacy in the Apple and Google worlds, I’m not expecting a solution anytime soon. The two companies clearly don’t want to play nice – Apple’s DNA is to lock you into their pristine, walled garden user experience, and Google certainly isn’t eager to encourage Android users to interact with iOS. Apple has kicked Google out of the default position for mapping in iOS, and many expect search to be next. The walls are getting higher, and the middle school girl behavior is likely to get worse.

To Apple and Google, I say simply this: For the sake of folks who love both of your product lines: Grow up. Please!

App Stores Must Go

By - January 11, 2015

appstores2014 was the year the industry woke up to the power of mobile app installs, and the advertising platforms that drive them. Facebook’s impressive mobile revenue numbers – 66% of its Q3 2014 revenue and growing  – are a proxy for the mobile economy at large, and while the company doesn’t divulge what percentage of that revenue is app install advertising, estimates range from a third to a half – which means that Facebook made anywhere from $700 million to more than a billion dollars in one quarter on app install advertising. That’s potentially $4 billion+ a year of app installs, just on Facebook. Yow. That kind of growth is reminiscent of search revenues a decade ago.

But as I’ve written before, app installs are only the beginning of an ongoing marketing relationship that an app publisher must have with its consumer. It’s one thing to get your app installed, but quite another to get people to keep opening it, using it, and ultimately, doing things that create revenue for you. The next step after app install revenue is “app re-engagement,” and the battle to win this emerging category is already underway, with all the major platforms (Twitter, Yahoo, Google, Facebook) rolling out products, and a slew of startups vying for share (and M&A glory, I’d wager).

Over time, app install revenue is bound to wane, and app re-engagement revenue will wax, to the point where the latter is inevitably larger than the former. Neither will disappear entirely, of course, but as the mobile model matures, it’s likely they will take new form. But the following three steps will remain constant – they were true before apps (when we called Internet services “websites”), and they were true before the Internet itself:

  1. Get people to notice your product or service, and engage with it for the first time. 
  2. Get people to come back, and keep sampling your product or service. 
  3. Get people to regularly give you their money for your product or service.

We’ve now got a reliable model for #1: It’s the combination of the app store platform and app install advertising. #2 is coming along as well, as I mentioned above.

But what of #3? It’s one thing to get someone to give you a few bucks for your app, but how can you keep them giving you money (or doing things that make you money, like ordering on GrubHub)? If app makers are spending an unhealthy percentage of their capital on advertising, innovation in product will suffer, and we won’t get apps that people are willing to continually pay for. It strikes me, after any number of conversations I’ve had around the state of mobile, that mobile markets in the US will slowly but surely evolve toward the norms currently in place in Asia, where advertising is a minority of mobile revenues, and in-app commerce of all kinds is the standard. After all, that’s how it is for business in general – advertising is a small but significant percentage of overall revenues.

But for this to occur, our process of app discovery and engagement has to rationalize – it’s simply too expensive to build a loyal audience in mobile, and the top 1-2% of apps can afford to price the rest of the market out. This is the great failure – or cynical intention – of Apple and Google’s hobbled app store strategy. There simply should not be one app store per platform – they’re what Steve Jobs would call “orifices” – monopolistic constructs created to consolidate control. App stores stifle innovation – they are damage, and the Internet will eventually route around them. 2015 should be the year that becomes evident.

My other recent musings on mobile can be found here.