The convergence of SaaS and Consumer

Silicon Valley loves talking about the next big trend and how it impacts the world, so it should come as no surprise that the convergence of SaaS and Consumer technologies (or “Consumerization of the Enterprise”) has been on the radar for a while now.
But there are less discussions about what it takes to win in the “new age” of SaaS companies, nor about the shift in mindset and skillset that startup investors and founders have to undergo to succeed.

I believe that in order to be successful in the “new age” of SaaS Founders and early employees need to have a mix of SaaS and Consumer DNA. Vertical Market Networks, B2B2C companies, and software solutions serving Small and Medium Sized businesses (SMBs), are scaling quickly because of consumer-like characteristics.

Vertical Market Network (read more here) are scaling faster than ever because they are creating virality among businesses. Honeybook (which dubbed the concept of Vertical Market Networks) connects SMBs in the event space, bringing together wedding planners, photographers, and florists, among others, to serve a customer for their project. One service provider usually takes the initiative and starts inviting others, virally growing the reach of the platform. A virtuous cycle begins, similarly to what you would expect in a Social Network, but in this case a business professional network.

B2B2C companies are not a new thing. In the past B2B2C companies were chiefly focused on their primary customer – businesses. If businesses were happy the company was successful. But what has been an fairly easy task is becoming harder and harder. Feedback channels from consumer to businesses are prolific and effective and low quality B2B2C products instantly reflect poorly on the brand. Gone are the days where you can have a crappy mobile app and get away with it.

The quality bar required to meet consumer demands, especially in Mobile and IoT, is ridiculously high. Millions of apps flood the app stores and tech startups are going after any connected appliance you could put in your home. Consumer expectations are insanely high and users have little patience for error or quality issues. Everything needs to have a premium feel. If on the web the cost of an error would result in 1x consumer confidence loss, an error on mobile would lead to 10x loss. Even consumer companies have a hard time doing mobile right. One great quote from Facebook: “When Facebook made the move to mobile, it had to ditch its “break a few eggs to make an omelette” mentality, a big change in the company’s core values.” (read more about it here)”. For B2B2C companies to succeed they have to put both the Business and the End-user first. Almost mission impossible.

Last but not least, Business themselves are changing rapidly. The United States labor market has been undergoing a substantial shift toward small-scale entrepreneurship. The number of proprietors – owners of businesses – who are not wage and salary employees, has skyrocketed.

Building solutions for SMBs isn’t significantly different than building products for consumers, and requires a shift in focus. The line between work and personal is blurring away, and business users have no patience for systems that don’t meet their demands as a user. Companies serving Small Businesses need Product Development professionals who understand how to build products that have world class User Experience and breathtaking design. Economies of scale is key and Product Growth professional help solutions scale as fast as it takes to serve an online ad.

One example of a company that nailed it is MileIQ. MileIQ publishes a Mobile App that automatically logs all rides and lets you easily deduct or expense miles with total peace of mind. Most of their users are sole proprietors or professionals using MileIQ for businesses. However, the company has been built from the ground up with a consumer mindset. MileIQ invested early in hiring Mobile Growth specialists and being ahead of the curve in mobile acquisition. The focus enabled the company to scale the number of paying users in a very short time period.

That is why I particularly like supporting SaaS founders that have a mixed background of Consumer and Enterprise. The team should first and foremost excel in building a product businesses love and achieving success by scaling Sales and Marketing.
However, founders will stay ahead of the pack by baking “consumer-like” characteristics into their product, make it viral, a pleasure to use, and a product businesses and their users will rave about. The companies who embrace that will shape the next wave of innovation in business productivity.

Bots are great for the Enterprise, not just for consumers

2016 was already declared the year of bots. While potentially being slightly over-hyped, it seems that many consumer companies have been putting a lot of meat behind their conversational UI efforts.

Facebook is banking on its messaging apps to get back into becoming a leading platform again. They are already allowing users to chat with businesses for customer service and have integrated with Uber to allow people to call an Uber through Messenger. Up-and-comers like Kik are thinking about “importing” WeChat’s success in China to the US.

If indeed there is a broader shift away from traditional point-and-click apps to chat-based user interfaces that is a shift not just for consumer tech but also for the Enterprise. The same fatigue that consumer have with apps is also true for prosumers occupying a work station at work. They get several software solutions for HR, a few more for communication and social networking inside the organization, Many more to sharing content, and so on and so forth.

The transition to bots and conversational interfaces could represent a major point of disruption in the interface paradigm, leading to a slew of incumbent startups going after traditional Enterprise players. There are so many options to explore. What about a conversational analytic platform? How about search and information queries inside the org. run by an bot talking to multiple folks? Maybe a friendly HR bot can help you out with employee benefits? and believe it or not there is already a conversation lawyer out there called Ross (http://www.rossintelligence.com/) courtesy of IBM Watson.

But what about the distribution of those services? Companies like Slack are looking at chat-as-platform as a major next step and that could be one entry. Another simple and under the radar channel is email. Plain old email, requiring no apps to install and barely any configuration to hustle with.

Case in point is Clara. I love my Clara. She might be dumb as hell sometimes, but that is when the human kicks-in and corrects course. Hopefully there is some machine learning going on when that happens as the service seems to improve all the time. I’ve recently surveyed folks who have engaged with Clara only to find out that 90% had no idea they are talking to a machine, with the 10% that did know being Silicon Valley folks who just happened to hear about Clara.

And off course there is Siri and the now Alexa from Amazon. The other I came back home and my three years old toddler has totally lost interest in his previous hobby, the iPad. He spent the entire afternoon busy bossing Alexa around, cracking up whenever she replied to his commands.

Although Alexa currently just resides inside Echo, a consumer product mostly occupying kitchens, I’ve actually started using Alexa for more and more semi work related chores. For example, she is excellent at figuring out what my next meeting is an how traffic is looking (“Bay Bridge traffic is awful today. Thanks for asking”) I can see a natural evolution to engaging with a “personal assistant” – Alexa for business – making every employee a tad more efficient.

All in all it’s exciting development, making technology more accessible and helping us humans become more efficient at whatever we set out to do, including business.

What’s wrong with the Smart Home?

For a while now we have had a slew of companies big and small promise us that the age of the Smart Home is finally here. The industry has seen a rash of early products that have raised soaring expectations and contributed to an expanding universe of ideas – it has become one of the hottest topics in IoT over the last two years (see my post about CES earlier this year – http://www.itamarnovick.com/internet-of-things-is-all-the-rage-at-ces-this-year/)

The “Smart Home” is an idea representing the culmination of many consumer-focused technologies, resulting in a magical residence equipped with lighting, heating, electronic devices, information, entertainment and other home components interacting together seamlessly and controlled remotely. This concept has fueled the imagination of entrepreneurs and tech savvy homeowners. Even my wife got used to having August the Smart lock gracefully unlock the door for her when she comes back home. Yes, she is loving it, thanks for asking.

However, Despite the “future is now” proclamations by industry observers, Smart Home technologies have been in the works for years and even though the first wave of Smart Home products is out there in the market I think we are very early in this cycle.

There are too many blockers and products are not working as well as they should. Here are a few challenges that have been plaguing this market.

Products not yet ready for mass market
While people are interested in the technology, they also aren’t ready to buy it. And I don’t blame them. Many products feel like a V1 or even a beta, with a disregard for usability and an incoherent story about what the product can do for people. This mean that anyone interested in buying a connected product quickly encounters a cautionary tale that makes them think twice about spending $200 on a connected door lock.

Connectivity standards
WIFI and Bluetooth are just not a good fit for connected home devices. Even Bluetooth Low Energy (BLE), which is a newer standard is not a great fit. It’s nobody’s fault, but the devices and consumers who buy them end up paying the price. These standards haven’t been designed with IoT devices in mind and don’t support use cases such as super low latency with consistent very reliable connection.

ZigBee and Z-Wave have been touted for years but market adoption of both is still anemic. Case in point – have you ever seen a smartphone that has any of these new IoT standards?

End point solutions vs. Platforms
So far, with the exception of SmartThings and a few others, the big promise of having connected devices talk to each other has not been delivered. The solutions that are selling well are actually all point solutions – Dropcam, Nest Thermostat, Canary, etc.
Non of these devices are “Platform” today. Unfortunately, the few platforms that are out there are not playing nicely with the leading point solutions leading to a frustrating user experience.

I think 2016 or 2017 will be a wonderful year for Home Automation filled with breakthroughs. Now all we need to do is fast forward to that time… I can’t wait for my fridge to start talking back to me when I forget to throw out my out of date eggs.

How big Companies (often) lose on Mobile

The mobile explosion is simultaneously the biggest opportunity and biggest threat for established brands and companies. Unfortunately, many big companies just keep failing on this front.

A lot of companies do this:

mobile

It’s a big mistake. Mobile has to be front and center, an inherent part of the company’s DNA and not an afterthought. Mobile requires building new capabilities within the organization with a strong focus on Product and User Experience (UX).

On Mobile UX is 10x more important than on the web – it’s not just the small screen size. It is the nature of user interaction with mobile devices. Interactions often happen in snippets of time – 5 seconds here, another 10 seconds there. Users demand immediate satisfaction and have very little patience. Often users are just trying to do one thing and they want to do it well or use the best application out there to make it happen.

Platform and device dependency are both challenging. Android device proliferation results in a sea of different screen sizes, chip-sets and overall device capabilities. Some devices are excellent and others are so bad there is no way they would make your app shine. Being at Apple and Google’s mercy is a pain point that requires changing how engineering approaches development inside organization. Coming in with an approach that basically dictates moving your Web assets to Mobile is bound to fail.

Folks working at bigger companies sometimes ask me what is the best way to be successful on Mobile. My answer is that it’s best to treat your mobile project like a an independent startup. Hire people with the right skill-set, give them as much independence as you can and all the tools they need to build a product they love. If they will love it, there is a much higher chance to that rest of the world will fall in love as well.

“Internet of Things” is all the rage at CES this year

IoT had a massive presence at CES this year (2014), with a big focus on Smart home devices. The hype around the “Smart home” is just getting started… Who doesn’t wants to a have a fridge that can tweet all by itself?

More seriously, It’s fascinating to see how quickly new devices are getting to market these days. Hardware is hard, and yet a lot of startups are building devices quickly. Here are some cool devices that I’ve seen on the floor:

Canary

A DYI all-in-one Home Security system still in pre-order. It’s had a very successful IndieGoGo campaign and the excitement over it seems well-founded. The Canary is a powerhouse of sensors with HD camera, microphone, thermometer, motion detector, air quality sensor… you name it.

The also have a friendly mobile app that goes with the device, enabling you to see what went down in your home in the last day (or more if you pay for the extended plans). It’s basically a life-stream of the HD camera showing highlights of the day (based on movement and such). Looks pretty neat.

With no Door Open/Close, just a single motion sensor, and no home monitoring solutions Canary will be hard pressed to replace a full-blown home security system. However, if you Rent or don’t want to pay a monthly subscription fee Canary might be a good fit for you.

Revolv Hub

The Smarthome needs a brain to be smart and quite a few folks are off to the races to build a so called “hub”. The grand vision beyond this is that in the future all the “smart” devices will be able to talk to each other and somehow make sense of all the chatter.

Revolv is one of the latest contenders to this category and has been working on some cool stuff. The Revolv Hub is a master controller of devices, connecting your devices to a smartphone app. The Hub supports 10 wireless standards , including Z-Wave, Zigbee and a slew of others. Off course it also supports regular Wi-Fi devices to backlink it all to the cloud. Revolv is working with some big names like Sonos, Philips hue, and Yale locks, but with automatic firmware updates the team is committed to bring many more devices to the fold.

The intriguing part is how Revolv puts all those devices together through their app via triggers. For example, If you move within 100 yards of your house, the Kwikset smart lock can unlock the door and yous Sonos device can turn up the heat.

SmartThings

SmartThings is another hub that wants to lord over your home devices and also a successful graduate of crowdfunding campaign. While SmartThings handles smart devices using Z-Wave and Zigbee wireless protocols just like Revolv, SmartThings’ secret weapon is optional sensors that tell you when the dog leaves the house or a window is left open.

The SmartThings app also works with IFTTT (disclamier: IFTTT is a Life360 partner) meaning you can setup protocols like “If I come within 50 feet of the hub, Then unlock/heat up house.”

SmartThings made quite an impression at CES with their “house” (Check it out – https://www.youtube.com/watch?v=5DQfhdK5qMw)

Nest Protect

Nest (the smart Thermostat company) is coming up with yet another product that is aimed to disrupt a dormant and un-sexy category. This time they are going for… Smoke Alarms.

The Nest Protect smoke alarm is all about the human touch. Instead of having annoying sirens go off, it it kindly speaks in a human voice and alerts you of smoke (and where it’s coming from) or a carbon monoxide leak. To dismiss, simply wave at the Nest device. It’s also got a beautiful design (compared to any smoke detector I’ve ever seen) and a battery life that lasts up to ten year.

Why Facebook is winning with mobile ads

Facebook has been making waves in the investment community with it’s massive success in mobile ad revenues. And they are just getting started. According to eMarkter, Facebook’s mobile ad revenue will top $2 billion in 2013, an increase of more than 300% from the less than half a billion dollars earned in 2012.

Unsurprisingly, Mobile developers and marketers were way ahead of Wall Street on this one, and it’s pretty much the biggest secret that everybody knows about right now.
Earlier in 2013, developers started playing with the Facebook mobile app install tools, experimenting with the different options. in the last week of Q1, 40% of the top 100 iOS and Android app developers bought Install ads.

Very quickly, it become clear to mobile acquisition experts that the pendulum in mobile app installs ads has shifted from ad networks to Facebook’s platform. I’ve talked to several marketers and growth professional, mostly in mobile gaming (where a lion’s share of the spending is happening today), and they are all basically saying the same thing – Facebook has the best ROI in the market right now. Most of them are spending at least 50% of our budget on Facebook, and some spend much more.

So why is Facebook is winning in mobile app installs?

First and all, the ad-unit itself seems to work well. The bigger picture in the ad does a good job, and the way the ad unit is integrated into the Newsfeed is effective. With current inventory fill rates, it seems that most users get one or two ads as they scroll through their mobile Newsfeed. That seems like an acceptable ad saturation rate for most users, resulting in less ad fatigue and better conversion rates for advertisers.

More importantly, Facebook has been able to do much more with targeting than most mobile ad networks out there have been able to do so far. Mobile Ad networks are facing  technical barriers, driven by the constraints of the iOS and Android platform. With lack of robust tracking tools across apps, like pixels on the web, It’s difficult for ad networks to track users across apps and gather all the data they need. This results in smaller buckets of available targeted audience. For example, if a marketer is looking for a demographic of woman aged 34-45 interested in event planning, ad networks might provide some or all of the demographics and interest based targeting, but it’s virtually impossible to find an ad network that can deliver the ad to a significant audience scale like Facebook does.

Facebook has also rounded up the it’s mobile ad platform with a number of goodies. One robust capability is the “Look a like audience” feature, which is basically a shortcut to leverage 1st party proprietary data. It enables a marketer to target ads to users who have “Look a like” interests compared to the Facebook fan page userbase. It also allows marketers to retarget customers in the app through contact information, such as email addresses and phone numbers. This is a breakthrough for many marketers who have troves of data,  but are having difficulties leveraging the data to have better targeting.

All this stuff adds up to a substantial advantage driving real value for app developers. Is this advantage sustainable?

For mobile Ad Networks it might be challenging to build an audience as wide and deep as Facebook has, without getting more flexibility from the platforms with tracking and data. Many marketers speculate that this might not happen on iOS at all (Apple seems to be taking the opposite route by tightening control over user data and removing UDID). Some think that there might be more flexibility on Google’s Android platform, but it remains an open question.

Google probably has its sight on the app install ad spending, and could use the Android platform data to build similar capabilities and go direct to market. With Facebook’s success, it’s almost eminent in my mind. It makes sense for Google to try to play the Mobile app install game – both on Google+ and through other mobile properties, as well as power other types of ads across Android apps.  Apple with iAd is trying to do the same, but up until now Cupertino has not shown marketers that the ad platform is effective, and they need to up it’s game to get there.

All in all, it seems that Facebook has a winner for the short term, and maybe also for the long term.

Why LinkedIn’s content strategy makes a lot of sense

LinkedIn is one interesting “Social” network, and their new content strategy makes a lot of sense to me. Here is why.

Even though LinkedIn is not as viral as Facebook or Twitter, it has proven to monetize well ($8 annually per monthly user compared to Facebook’s $1.5). The higher revenue per active user opens the door to exploring new types of business strategies, including one that you might not expect a social network to go after – a content strategy. To clarify, this is not about LinkedIn buying paid content or distributing paid articles about how awesome LinkedIn is. It’s actually a strategy targeted right at heart of one of LinkedIn’s biggest challenges – increasing engagement.

Backing out a bit to restate the obvious, every freemium product needs to first nail acquisition, then engagement, and finally monetization. Each requirement is not standalone, acquisition is a pre-request for engagement, and without an engaged userbase it becomes extremely hard to drive meaningful revenues.

In it’s infancy, back in 2002-2004, LinkedIn was actually slow to grow and it took quite a few years to ramp-up user acquisition (One reason might be that LinkedIn was just early to the market and people could not see the value until the network effect was fully in place). A few years later and with a few great tricks up their sleeves (including rumored Reid Huffman’s “loss aversion” invite acceptance tactics) they finally got there.

linkedIn_growth

 

In the meanwhile, building on one segment of super active users – recruiters, LinkedIn was able to launch money making products – Talent solutions (The companies cash cow accounting for ~50% of revenue), Advertising (~25% of revenue) and later premium subscriptions.

So LinkedIn has figured the first step – user acquisition (including activation and network effect) and then jumped directly to the step 3 – monetization. Meanwhile, engagement was doing well, but not as great as some of the other metrics compared to other “Social” networks. It all makes perfect sense. The long tail of LinkedIn users were not really using the product daily. Unlike Facebook, the action on LinkedIn is not as compelling for most people. Users don’t come to LinkedIn to check-up on their friends, they come to find their next big gig.

Circling back to content strategies, comes 2013 and suddenly LinkedIn is all about content. They started with the launch of the Influencer product and pushed it hard with massive email campaigns to users and front page promotion. More recently they bought Pulse to help target the best content for users.  What’s interesting about this is that it’s sort of opposite to anything else that is happening out there. Content businesses online are actually facing more challenges than ever – banner ads, the bread and butter for many businesses are becoming less and less effective (just look at Yahoo’s latest earning reports). Content players are finding it increasingly hard to drive revenues for their work and are becoming less sexy as a business.
Actually, the acquisition of Pulse itself is a good indication of the challenges content companies and content related technologies are facing. Pulse is reported to have more than 30 million active monthly users, which is big by any standard and especially so in mobile with challenges around retention. However, Pulse was bought for $90m – That’s $3 per active monthly user – Meanwhile LinkedIn has ~150 million active users each month but is worth over $19b, that is no less then $126 per active monthly user.

Then why is LinkedIn suddenly focus on content? well… LinkedIn has found a way to flip this model on it’s head. With great monetization it suddenly makes a lot of sense to engage users by leveraging content.  Think about it for a second – LinkedIn has the audience and knows how to make money out of it. Additionally, LinkedIn has a strong ad-based product. The equation in the ad business is actually really simple – more pageviews = more revenue, and that is exactly the low hanging fruit that LinkedIn is after.

The content challenge for LinkedIn to make their product one that is used daily and becomes part of a “ritual”, resulting is sustained engagement. If users get used to reading high quality news at LinkedIn the engagement challenge is essentially solved, driving ad revenue up first, but even more important for the longer term, fueling growth across all products.

The Family Networks is the next big thing, and it’s different then anything that came before it

For a couple of years now people have been fascinated by Social Networks and how they have impacted our lives. We have seen social networks raise to become some of the most prominent tech companies of our times – Facebook, LinkedIn and Twitter. When you think about it, it makes sense – People want to share, like and interact with others. Social Networks are the natural evolution of online interaction.

However, not all Networks were created equal, and they are not all “Social”. More broadly, in our lives there are three distinct networks that really matter – Social, professional and family (not necessarily in that order). The Social Networks, which can be divided to sub-networks (i.e. friends from college, friends from back home, etc.) was conquered by Facebook. The professional network, the digital extension of one’s rolodex, has been conquered by LinkedIn. The last big network that really matters is the family network.

The social Network builds-up on basic social behavioral needs – Sharing an exciting moment in your life, Peeking at a profile of a potential blind-date, and social conformity (You better like that wedding photo, or else…). Social Networks is where you go when you want to catch-up with your friends and see whats-up. Google+ is trying to rebuild the social network graph, and with the amazing tech machines called Google behind it, it’s bound to have an impact. A lingering question still remains – does the social graph need rebuilding?.

The professional network is quite different. it’s social to the extent that people use it to communicate, but what drives the interaction is very different. It’s not about sharing a moment, it’s more about reaching a goal – Getting an introduction, finding your next exciting position, or poaching a key employee from a competitor. It’s business oriented and driven by a different set of wants and needs, which are not really “social”.

The Family Network is different then anything that came before it, and is even less “social”. Think about how families interact and what they do – families sit down for dinner 7pm, they ask “where are you? when will you be here?”, and they share their lives in different, more intimate, way.
That is exactly why the family network requires a completely different approach. it’s about a private network – not about shouting out to million of fans on Twitter, It’s about staying in sync – not about liking a cool filtered picture, and it’s about people you communicate with daily – not about a random friend you met 10 years ago at a party and can’t even remember why you like.

One big network has been left on the sidelines. Time is ripe for that to change.

Credit for most (if not all) of the inspiration for this post goes to Chris Hulls, CEO at Life360.

Privacy on the web is dead. Geo privacy is next

Back in 2010, Mark Zuckerberg went on stage and told TechCrunch’s Michael Arrington that the age of Internet privacy was over and hinted that we should get over it.

2 year later, web privacy is officially dead and every other thing we do is posted online on Facebook, Twitter and Instagram. Major and minor details of our lives are being broadcasted openly to hundreds of friends, family, and random people we last met 10 years ago, befriended on Facebook, and have not yet deleted because of some obscure reason.
Then, as some of those posts get shared with friend of friends and their friends, we can wake up on day just to find out that the embarrassing picture you posted, by mistake, via Facebook’s automatic iPhone sync, is viral and trending with teenagers in Estonia.

This is just the beginning. As humanity takes the next step toward a world where everything is digitally documented in real time, geo-privacy is next. And it’s dying. Quickly.

However, location sharing is a bit different. Location sharing requires refined controls about who you share your location with and for how long. Several companies are already seriously hacking into this and are making significant progress (full disclosure: Life360, the company I work for, is one of them). Those companies are taking the friction out of location sharing. However, they are doing much more then that – they are making the advantages of making your location public seriously outweigh the disadvantages.

I believe we are approaching a tipping point. This one is a bit harder for adults to grasp, but kids are all over it. They understand it’s the future. A 12 year old that just got his first smartphone will grow up in a world where location sharing is a must – finding where your friends are, hauling a cab to your location, checking-in with your mom so you don’t get that “Are you okay?” embarrassing call in front of all your friends, getting that special discount at Starbucks when you check-in. The list of use cases just keeps getting bigger everyday and some of them are killer features.

It might take a little bit more time (as with any technology that needs to leap past the early adopter phase into the mainstream), but eventually we will live in a world where it just doesn’t make sense to not share your location. Ten years ago, if somebody told you that your parents will shout at you for not posting recent pictures of your baby boy on Facebook, you might have dismissively laughed at them. Less than ten years from now, don’t be surprised if other people will just know where you are, whether you like it or not.

Geo-privacy is dying, we just need to get over it.