Thursday, April 29, 2010

Is Bravo an Ad Network on FourSquare?

I just began to understand the value of FourSquare's strategy to partner with content providers. I thought I understood partners like Zagat recommending better restaurants or to dos, but I recently checked in to Merc bar and was told by Bravo to go to Paul Smith. By choosing to "follow" them to get a badge, I essentially opted in to them pushing me content.

If you think about this closely, this is essentially a proactive magazine, pushing me content when it's most easily actionable i.e. when I'm nearby. Of course the content itself is a form of advertising. Go here, buy this.

So another way to think about this is me opting-in to local ad networks, based on brand affinity (ex. Bravo, Zagat, WSJ, etc.).

I opted-in because I wanted a badge and I wanted to experiment, but over the long term this strategy can only be successful if I care about the badge that much (limited once you get the badge), if the content provider negotiates better deals (couponing as advertising) or the info is insightful and wanted (content as advertising).

As banner ads continue to die as we get better at ignoring them (just like tv commercials) advertising will continue to be integrated into service and content (just like TV). FourSquare's content strategy is an interesting development that allows them to plug in content providers or in other words ad networks. They need to be smart about controlling the marketplace, but it's a brilliant idea.

Tuesday, April 27, 2010

Facebook Could Become the iTunes of the Internet

Note: I recognize that iTunes really is an Internet application already, so saying Facebook Could Become the iTunes of the Internet is like saying Justin Timberlake Could Become the White Michael Jackson. But alas …

I continue to be bullish about Apple in general. They make the best computers. The best media players. And they have the best media distribution platform – and if you follow Fred Wilson, you know that software is media too. Take a look at the AppStore. The success of iTunes when everything else failed miserably was based on a couple key factors:

1) Apple had the best media player and leveraged it – It’s amazing what a simple track wheel can do. Basic file interface and playlisting, easy to navigate. Drop dead simple. That’s what it took to win a billion dollar industry. A trackwheel.

2) iTunes was simple and just worked – I got my first MP3 player from my roommate Al. Getting songs on and off of it was a chore. The interface was flashy and choppy at points. Features were hard to use. iTunes you could just install and go. And provided the music you needed.

3) Micropayments were made easy – I think it’s kind of silly that Amazon “patented” one click check out, because Apple is even better at it. You put your credit card in once, and then any time you make a purchase, all you need to is put in a password. Easy. People will buy at $0.99 a song if it takes less than 15 seconds but won’t buy at $0.49 a song if it takes 1-2 minutes. They optimized on the right dimension – time. And because they roll up all transactions minimizing the fixed costs of credit card processing, they optimize on cost as well.

4) Apple worked with the media companies at desperate times – Yes Apple implemented DRM when no one else would, and that was more of a perceived chore than an actual one for the consumer. But in the end, that was what kept Apple in the game. And by leveraging the desperation of the moment (and their iPod install base), Apple struck a good deal with the media companies. A minor inconvenience for the power of consolidation.

Now the iTunes model to micropayments can apply to all kinds of digital media including news, magazines, stock research, blogs and almost anything. So now let’s shift gears to Facebook, which is in a tremendous position to become the iTunes of the Internet. The parallels are interesting:

1) Facebook is the Biggest Internet Application and Social Network – Already being there for now 500 million people is a HUGE advantage. No one else can really compete there. By integrating payments into Facebook apps like Farmville (60M players) they can overnight build an eWallet install base. With a little creativity, you could increase penetration well beyond that.

2) Facebook is Simple and Works – Facebook’s differentiation from MySpace was that it was simple, not cluttered and that the activity feed brought you what you really wanted – what your friends were up to. It was surprisingly useful and provided what you wanted before you realized how much you needed it. Now 250 million people check it every day.

3) Micropayments Made Easy – I haven’t seen Facebook’s payment interface, but it will be simple. They have a growing history of embedding their technologies into outside web sites. And their applications have experimented with credits already, so they have lots of sample implementations to reference. Plus, with tons of payment applications for person-to-person gifting and gift cards, group payments and social gaming, weaving in payments to the social fabric makes sense. But the success depends on the chances of a collision: that the person you are interacting with is on the same network. Facebook is the natural choice.

4) Facebook Will Work with the Leading Media Companies in Desperate Times – Ok, so this hasn’t exactly happened yet but all the pieces are in place. Media companies like NY Times, Meredith, Hearst and more are scrambling. They continue losing money, audience and differentiation – just like the Record Labels were. They are trying to create subscription based services and micropayment access, but they are unlikely to succeed. If they could plug in a simpler payment service with one click payments, they sure will have a hell of better time of it. They may lose the 5-10% margin in payment processing, but they will probably get 50+% increased conversion.

Now there is one thing I didn’t mention in the analysis that could be the X factor of success. Apple has much better brand standing than Facebook. Facebook’s Beacon program was an unfortunate misstep from which they will not easily recover. Customer trust is built over a lifetime and lost in an instant.

So Facebook needs to tread lightly. Start by integrating payments into its applications like Farmville. Partner or create some basic apps that further increase penetration (event payments, gifting, etc.). Then offer a payment API like Google Checkout to a few big media companies and then you are off to the races.

It wouldn’t take that long, but it would transform the Internet. Micropayments everywhere … Facebook is the iTunes of the Internet.

Now of course no one is going to just give up the largest payment processing opportunity on the planet. PayPal is no slouch at 30M monthly uniques. Amazon Checkout has had limited penetration beyond it’s walls, but there are a few noteworthy customers like Meetup. Google Checkout is a good small vendor solution, but has had little penetration among the big boys. And with the media hating Google right now, they seem unlikely bedfellows. Then of course there is Apple, with iTunes owning paid media distribution right now. If the iPad sells 5M units this year, that’s significant traction. But hardware purchase is a big obstacle to customer adoption. So advantage Facebook.

It’s all very early … but that makes it all very exciting too.

Monday, April 26, 2010

2010 - The Year of Magical iPad Thinking

So this week I sold some Apple stock, but I think that may have been a mistake. I am so bullish on the much maligned iPad. Here’s why. I was at an entrepreneur round table reviewing an educational book company that was all electronic. You could replace the names of the characters and it would read or let you read the story to your kids. You could touch words and it would pronounce them for you. Not a very hard app, but great for kids.

How would you deliver that experience? On a kindle? Nope. Black and white is boring. On a LeapFrog, too hard to read and interact. The iPad is your best bet. Now if they added more interaction like choose your own adventure that would be even cooler (as I pointed out). Imagine a world you can explore, full of stories, interactive characters all in a learning environment. Would you really put it on a netbook? Probably not. Where are developers flocking? The iPad. Where will you have a rich library of these apps? The iPad.

Think of where else you would want an iPad in an educational environment. A while ago I wrote about FoldIt models.

Here is the YouTube embed:

On an iPad, this is a much cooler interface to understand organic chemistry. Anatomy: imagine exploring a 3D model of the body with your hands vs. a text book. iPad. Physics: demonstrations where you can change the variables and create interactive problem sets. Geometry: exploring shapes, symmetries, angular relationships. What about music and composing? The iPad already has some wicked DJ apps. Now let’s focus on music learning. Drawing and sketching?

But beyond that, let’s look at some of the more traditional, not so visual subject. I always hated history. Sure the stories were good, and I was ok at memorizing dates. But I was never good at synthesizing the whole thing together. Was the assassination of Archduke Fedinand a response to Russian involvement or did it trigger it? Imagine exploring history like a mind map with timeline interaction. See the events, drill down, see what’s next. Zoom out. See a related timeline of English involvement. What was happening in America at the time. When you can quickly navigate data with your hands, you create whole new ways to organize, present and interact with data of all kinds.

The iPad is magical – yes I said magical. Multi-touch interaction, a rich and large screen and a small footprint is revolutionary. Yes, it’s a big iPod Touch. But it’s the best platform by far for so many interesting apps. At the very least, it will be the leading portable gaming device within a year, which is a huge market in and of itself. The excitement given the wealth of possibilities is deserved. No one else in the market can pull this off. That's market leadership.

I think I may go back in. AAPL it up people!

Thursday, April 22, 2010

Facebook Is the New Internet

First off, I am borrowing a little from Mark Cuban on this, but I have been thinking about Facebook's latest moves and his article sparked my writing. It's an interesting time right now for Facebook as they release new functionality to extend its reach into every web page and service. Soon, everything we do on the net can be easily shared, incorporated into Facebook. Imagine a world where the NYTimes reports which articles your friends are reading and let's you easily spark discussions on the topic, just for you. Music playlists that are easily shared and commented on? What Facebook is doing is adding social connectivity to all our online activity, which is becoming most of our activity. And in doing so, it is plugging into our core existential social needs. Technology, which often is seen as taking us away from a social context, will now be bringing us back in and creating more meaning. And no one else can remotely achieve this. Facebook is the platform (which is also why I disagree with Mark Cuban on Facebook needing a mobile OS, they can just deeply integrate into the contact list because that's who owns our social connectivity. You can't launch a product without that).

And if Facebook defines our social connectivity, who are friends are to us, it inversely defines who we are to our friends. Why should I only be tagged on Facebook in photos or notes? What if this blog is tagged (besides me posting it to my activity feed) or a research article I write or a mention of me in huge story in the NY Times (see you this summer)? Check out Taggable, which does exactly that. Now the whole electronic universe can be captured on my Facebook profile and the work crowdsourced by friends. One day, it might be automated based on context and matching algorithms (this Trevor Sumner instead of this one).

Facebook encompasses so much. It's how we find out what's going on, what our friends are reading and recommending. As Mark Cuban points out, how often do you use Google anymore to find reading material ... If every service becomes social, is there a difference between the social web and the web itself?

Next up: Facebook is the new App Store.