These days many start-ups are focused on location based services or making money with the local merchants (many of them in the coupon field). Well, even though everyone is pointing to the incredible big yellow pages business most of might seem to not really think about two mayor issues:
1) The local merchant
The owner of a Pizza restaurant or a fashion shop around the corner is a professional in his field, but (most of them) have very little understanding of online business and how much they can spend on user acquisition (average turnover per customer, customer life time value etc…). Until a couple of years ago there was only the representative of the yellow pages and maybe one local newspaper/magazine that were asking for some of his money in return of the shops appearance in their media. But today this person is getting calls/visits not only from the Yellow Pages guy, but also from Qype, Foursquare, Groupon, Google and numerous of other companies. But his Media Budget is limited and for the services itself the User Acquisition Costs are relatively high (without subscription it wouldn’t be affordable). However, he needs to decide to whom he should give his money to. I bet that most merchants are still going for the Yellow Pages since they know the sales rep very well and the rest of them might go with the bigger and well known ones. So why should this person deal with another partner?
(My personal view on this that it is time for a local business hub – someone who is doing the sales and then distributing this through the different channels. Look at all the groupon clones and how much they have to spend on sales.)
The merchant wants to spend his money wisely and he wants to drive more customers into his business. That’s why it also important to take the customer into this view, because without the right audience the merchant doesn’t even considers paying for it.
2) The user
I really like sites who help me to discover things around me that otherwise would be literally invisible to me. So the review sites are doing a great job for me. Coupons are only relevant to me if I know the business, because I don’t want to spend anything on a bad service/restaurant etc.
The big advantage of the new services is not that I can search for something but that I get recommendations of what I might like. This is real value to me as user- Location based service should be more focused on recommendation than search (even though a good search is mandatory). So this leads me to the headline of this post: one killer feature for mobile lies in this business. If a service knows my behavior (I love Italian restaurants, but I really don’t like Indian restaurants) it can match this information with its database and check for similar results. This is very closely tight to my location and to make it even more useful to the time of the day. So this means:
Habits x time x location = recommendation
Such a service would be my daily guide and hopefully would surprise me with many new ideas about where to go. And this could drive many customers to new places. This is only possible with a large database companies like Yelp in the US or Qype in Europe have. So to all the Start-Ups in this field: Create a compelling product for the user, focus on the mobile usecase and when this is working it might be much easier to ask the local merchant for some money.
I just found an printed copy of a Gigaom article about the the Rules for Business Success in Any Market by Paul Polak. I do not fully agree with his point, that he doesn’t invest in a company that can’t pay for itself in a year, but he made some good points about the customer. I very much like his attitude about listing to your customers. Here is some of his wisdom:
1. Go where the action is. “Spend significant time with your customers. This is how you learn what they need,” he says. Not hours, days. Polak lived with his farmers for 6 months.
2. Interview at least 100 customers a year.You do it. Not an employee. Listen to what they have to say. “Too many entrepreneurs build the product they want to build — not the one that’s needed.”
3. Context matters. If your solution isn’t right for the context, for example, if it costs too much for the customers you’re trying to serve, you won’t succeed.
4. Think big. Act big.
5. Think like a child.
6. See and do the obvious. Others won’t, which is opportunity for you.
7. Leverage precedents. If somebody has already invented it, don’t do it again.
8. Scale. Your business must have potential to scale. Remember, your market must include at least 1 million customers.
9. Design to specific cost and price targets. Not the other way around. (Celeste: it means — Do not price to your design, design to the price you need to hit to make your product appropriate to your customer.).
10. Follow practical three-year plans. Two years is too short. Ten is too long.
11. Visit your customers again. And again. “Any successful business in this country is based on talking to your customers all the time. A good CEO spends half his time ‘in the field.’”
12. Stay positive. Don’t be distracted by what other people think.
Today I saw a new Nokia commercial, usually this is not that amazing to write about (this is true for almost any commercial by a big company). But this commercial by Nokia (disclaimer: I work for Nokia) for the new phone N8 is just amazing. I am sure that this one will be huge success, because it is the male audience will love it. Foosball, Kicker or however you want to call it is so popular and especially now when the soccer world cup is starting soon. I posted it right away on facebook and twitter.
What I also really like is that you can watch the different tricks/moves separately at the end of the movie and they even called the tricks by their name. Great work!
I am sure that everyone has their favorite tool or App. Yesterday I was thinking about the Apps on my mobile phone and the Tools on my computer that are most important to me.
Today is a big day for citydeal (the groupon clone started by internet entrepeneurs samwer bros.). They offered a Zalando (a german zappos clone also started by the samwer bros.) voucher worth € 50 for the price of €15! This is a pretty good deal for anyone who needs a new pair of shoes within the next 6 month (at least any woman). Today many people were saying that this will again costs tons of the invested money. But is this true?
Lets have a closer look at the voucher: It says that the voucher has to be redeemed within the next month for a purchase of at least €60. Lets take the usual 50% profit on each fashion item (in this case shoes). Zalando offers mostly shoes at the suggested retail price so the margin should be around that. Most of the user won’t hit the €60 target since they buy the pair of shoes they like most no matter what they cost. I would like to assume an avarage price of €80 per purchase.
€ 80 turnover
- € 50 for the voucher
+ € 15 paid for the voucher on citydeal (in the case citydeal hasn’t subsidised this voucher)
= € 45
This means that they do not make a loss on this deal (the costs for returned goods might be covered by the vouchers that people might forget to redeem within the 6 month period.)
On top of that has Zalando gained at least 10000! new customer with this coupon special. Zalando is already somehow known in the public due to a heavy advertising campaign but I bet that most of the user today are new customers. So you can add the average user acquisition costs on top of my calculation. The timing of this is even more important because the Otto group (the German Mail Order Giant) recently launched Mirapodo (similar concept to Zalando).
The deals citydeal has offered so far support the estimation I made about the Groupon clones in January – this business is tough. The companies out there already burned a lot of cash and only the well funded might survive and get sold. But today this deal might has be different – anyway a big day for both companies in terms of user acquisition.
You hardly can find a newssite about the internetbusiness these days that is not writing about location based services and location based advertising. Currently foursquare seems to be the most coveted investment opportunity for some VCs and an endless amount of new companies want to enter this space recently. But who will benefit from this trend most?
This market will be dominated by the big players who have access to the map infrastructure. Why? Well because soon the map will be one of the most used feature on any phone because more and more content and apps will be based on location data (plus free navigation for the user). It is almost like Apple and itunes. Apple provides the infrastructure and the user and tons of developers are fighting for the audience and thus generating money for the gatekeeper (in this case Apple with its 30% revenue share).
I see Google and Nokia in the best position. Whereas Google is the leader in the webspace with its search and Google Maps, Nokia is in a strong position in the mobile space with an amazing market share and the NAVTEQ map data. No matter how those companies will evolve their products they are the gatekeeper for many revenue streams (like location based advertising) in this field.
2010 will be very interesting for location based services with many new companies entering this market, with big players who are working on their products and some more mature startups (like Yelp) who either sell their business or start to make some good money.
One of the hottest topics at the moment is location. Whether it is location based service or location based advertising, a lot of people are establishing services to tap into the giant local advertising / revenue market.
Many approaches out there are focused on location based advertising, like Yelp, helping the SME (small and medium enterprises) to drive more customers into their restaurants etc. So the local business owner pays some money to be better ranked or to improve the appearance of its business. The mobile perspective made this even more interesting since an App like Qype Radar is a really useful tool for me to make instantly better decision about where to go for dinner in an unknown city.
Google currently announced some very interesting features for the local market:
When someone is looking for a product via Google Mobile, Google shows not only the price in a local store, but also the availabilty in that store. This would be a great improvement and could drive some traffic they have lost to online shops back to their business.
Great feature, because I look quite often for a hotel close to a conference center or another special place that brought me to that town. With this service I can check in a certain space all available hotels in my price range.
Not so interesting for me, but another way to lead attention to a business that paid for advertising.
A service that will grown along with this trend: tiramizoo.com
tiramizoo.com is a new promising start-up that is working on a platform for local couries and the people who want to get something delivered within a certain proximity. Basically this a logistics solution that offers the couriers (like bike couriers) a place to offer their service and for the customers a site to find a fast and affordable way to get their goods from point A to point B. Up to now especially the bike couriers weren’t organized on a large scale and since the local inventory will be accessible on Google it’s easy to imagine the possibilities. Example: You see an interesting shirt in an online shop but Google is saying that this piece is also available at a store nearby for the same price. Instead of waiting for the shirt to be shipped to you just buy it local and get it delivered the same day. Great idea.
When I was just reading a post by Michael Arrington on Techcrunch about the answers they received from MySpace employees (‘…since we all know that the ship is sinking…’) I truly felt sorry for this company and the people who work there.
Last year I was quite convinced that this company will make a smart move by focusing more on the content they can offer to the user – mostly artists. The acquistion of ilike.com with its great features in combination with the tons of content on their network could have been an amazing service and result in promising revenues (ticket sales etc.). Instead on focusing on this transition (since facebook won the social networks game) they started to battle internally. Lots of good people left the company and with them their knowledge and ideas. They joined new startups like Gravity where they could probably focus their time more on creating something rather than struggeling with a huge reorg (reorg always sounds like big corporation stuff).
The article on Techcrunch with the responses by MySpace employees shows clearly that this company is in a threat, everyone is more concerned about where to go and the ones who stay have to build up entire teams again. So instead of creating value out of their content (for the user and Murdoch) they scared some key employees away and with them some of the MySpace spirit left also.
Most of you know the feeling when you go shopping in the States as a person from Western Europe. The American Brands are so cheap, everywhere discounts and specials and on top of that the buying power of the strong Euro. For all of you who might not have the time to go to NY just for shopping (you have to buy a lot in order to make up the costs involved to get there) and want to avoid unnecessary flights (our climate will thank you for this) there is a new service called Dollarpig. A woman from Germany has started this service after she was asked by so many persons to send them products from the States (after she moved to the states). The great thing about this service is that you will know how much a purchase costs at the end of the day. It is such a hassle to order goods from the abroad because of the shipping costs, taxes, customs etc.
This service probably won’t scale that much because at a certain point the brands will have a close look at it, because they usually don’t like that consumer’s benefit from price differentiation for different markets.
I found this on Venturebeat. An intersting video from Randy Komisar of Kleiner Perkins about entrepeneurship and failure. I am glad that he is not only looking at the States but also on Western Europe and Asia.
