Old Skool networks - who is progressing and who is decaying
A good thread broke out on Twitter that started with this…
Of the old skool networks at scale only Twitter and Tumblr feel like they are progressing. Others are (slowly) decaying.
As the conversation expanded I realized I omitted a few important networks that we’ll discuss below.
Before we dive in. This is not a data analysis of the state of these networks. Often times networks will continue to grow for an extended period of time (see Craigslist) while their foundation begins to slowly crumble. These small cracks are not visible as they sit well below the surface of publicly reported data.
But this all begs the obvious question who is decaying and why. Just as importantly why are some of these networks progressing. Let’s have a look.
Who is decaying and why?
1) The primary use cases gets disaggregated
- Facebook - WhatsApp for private messaging, Instagram for photos, etc.
- Craigslist - vertical sites like AirBnB are stealing large categories.
2) Slow to respond to shift to mobile
- Skype - their mobile apps don’t understand that you are never offline in a mobile first world.
- Flickr - missed mobile, but making a comeback. (I am rooting for them).
3) Shoddy execution
- PayPal: created an opening that Stripe took advantage of.
- Craigslist: adding maps to apartment rentals took about 9 *years*.
4) Shifting norms
- LinkedIn - inviting / accepting colleagues seems unnecessary in the age of Twitter. Don’t fret LinkedIn is a fantastic monopoly with a stable revenue base from HR departments. It will be around for a long time.
Which networks are progressing and why?
1) Maintain their original simplicity
- Tumblr - it actually got simpler and more human even as it hit massive scale.
- Twitter - it entertains, informs, and engages all in a 140 characters that never really changed.
- YouTube - it never veered from the video and embeds.
2) Service gets better on mobile
- Twitter - designed around the constraints of mobile.
- Tumblr - photo centric and after some early challenges has one of the absolute best mobile products.
3) Ways for people to make money
- YouTube - big and small businesses are making money from their videos. This is one of those stories that doesn’t get enough attention.
4) Content is king
- Tripadvisor - *the* place for travel reviews. Everybody talks about disrupting them, nobody actually has. They are flat out executing.
Other than Dropbox and Basecamp most enterprise SaaS is still about sales and marketing. As the chart above shows enterprise sales is expensive. Yet, it works because these companies are selling complex and high margin software.
The mobile app model has the potential to change this.
- Secure distribution. App stores provide a (more) secure form of distribution. Enterprises care about this. If you say “I got this on the App Store” the IT guy is not going to lose his shit. The web for better or for worse is the Wild Wild West. Everything goes. A scary world for IT guys.
- Disaggregation. SaaS services can do 300 things. An App can do 3 things (at most) really well. The sales cycle for a SaaS service that does 300 things requires a sales consultant to help describe the benefits and assist in the deployment. Since mobile apps are naturally feature constrained you don’t need a sales consultant explaining 3 features. This disaggregation is happening on the consumer side. Facebook is being replaced by WhatsApp for private messaging, Instagram for photos, and so forth. The disaggregation on the enterprise side won’t move as fast or go to the extreme we are seeing on the consumer world. However, the nature of the devices we now use dictates that it will happen.
- Everybody is a Power User. Let’s consider a business with 100 employees. Today, about 10 (or 10%) people in that business can setup a WebEx and they each pay $25 to $89 per month. What about the other 90% of the employees, why can’t they use Webex collaboration tools whenever they want. In the PC web era enterprise tools were built and priced around a power user. Mobile will vastly simplify services like WebEx and bring it to 100% of employees for $3/month. The enterprise user will decide for themselves which calendar, file syncing, email client, etc. app they want to use. At a price point of only a few dollars a month these products no longer require a significant investment that needs “buy-in” from multiple managers and a sales guy prodding everybody along.
- Google Apps = Enterprise Data. While not directly mobile Gmail has reached 425 million active users (June 2012) and over 5 million businesses use Google Apps. That means that mobile developers have access to critical enterprise data and the most important communication channel (email) within the enterprise. Historically, if you wanted access to enterprise data you spent lots of money hiring partnership guys to develop partnerships. Thankfully, these walls are getting torn down.
I am not suggesting that sales guys won’t exist in a mobile app world. If 4,000 people at American Express are using your app they are going to want to talk to somebody about doing an enterprise deal. Or if the Department of Education wants to consider rolling out your app to it’s tens of thousands of employees they are going to need somebody to talk about that:-)
"I don’t trust nobody when they say something good."
"Every time you have a thought about the competition, replace that with a thought about your customer and you’ll do far better as a business."
Learning by serving
As an entrepreneur you have many relationships that matter. One of those is with your board. Many smart people have written about managing your board. Most of what is written is by one side or the other — board members telling entrepreneurs what they want from a good board meeting or entrepreneurs telling you what they learned by managing their board.
As an entrepreneur I learned the most about working and managing a board by actually serving on a board. By flipping sides things that take you half a year to figure out are learned in a matter of hours. Why? I became a spectator to my own thoughts and behaviors as an entrepreneur. This vantage point clarifies things rather quickly.
I was invited to serve on the board of a startup coming out of Stanford course with Howard Hartenbaum. Howard is a Gigwalk board member and while I was at Gigwalk we worked in a CEO / board-member relationship. This was an opportunity for Howard and I to serve together on the board of a very early startup. Here is what I learned. When appropriate I will try and give real examples
Don’t waste time on little issues.
Thanks for coming to our board meetings today! First up, we are looking at a few different credit card processors. We think Stripe is simple to implement, while BrainTree is super flexible for when we scale, and then there is this other one that just launched…. blah…blah… blah…
Talking about which credit processor you are going to use is a waste of time. Instead frame big strategic issues for the board. What does that actually mean? Let’s say you run a daily deals e-commerce site. Which credit card processor you choose is not a strategic issue. One of the most critical issue you face is how do to get off the daily email crack. Spamming people with daily emails is obviously not sustainable. You need customers coming to your site each day because you have unique products to offer them at a great price. Do you start designing your own products? Do you switch to a follow model? These are all critical issues that need to be framed and discussed at the board. Once you get out the weeds a bit and move into a non-executive role it becomes fairly obvious that spending time on issues like which credit processor to use is a waste of time.
It’s OK for the board to see the mess.
Thanks for the $2 million dollars! Oh by the way did you know we still use a single Excel spreadsheet to run our business.
Startups are messy and fragile creatures. Your natural instinct is to try and hide the messy side of your startup from the board. Don’t pretend your startup runs smoothly. Nobody expects it to run like IBM. A good board can help you clean some of this stuff up. After closing our A round and with the help of Howard we transitioned Gigwalk from Excel to QuickBooks and developed internal tools giving us a near real-time view of our marketplace and financials.
Learn how to put your board to work.
Hey! thanks for wiring me a few million dollars I have some work for you to do now. (things entrepreneurs think)
If you think of your board as a benefactor with a large checkbook asking them to do work for you feels like an awkward request. Instead, you have to think of them as what they are - co-owners of your business. As co-owners of your business they are financially motivated to work. Its the CEO’s job to give them projects to work on. Here is an example of how you could put your board to work. When I was serving on the board of the Stanford team I was pushing the team to focus on a single task type before expanding into additional tasks. The founding team was resisting - totally fine.
At this point they should have turned around and said — “OK, I hear that you guys are not big fans of horizontally focused marketplaces, send me a note detailing how you came to this conclusion with examples of four to five digital marketplaces that benefitted from a tight vertical focus, and why our situation is similiar” It’s easy to come to a board meeting and shoot off a few different examples, its another thing to sit down and compose a cogent note. By asking the board to write a note it forces them to take those pattern matching knowledge and skills and puts them to work on a relevant and important issue for you as the entrepreneur.
It’s OK to ask for help.
At first I thought asking for help is a sign of weakness. There is a difference between asking for help and asking your board to make decisions for you - i.e. run your business. If you find yourself doing the later something actually is wrong. When used properly your board and investors can save you lots of time and money.
For example, we hired somebody from a large web company (lets call this company Z). Two months later I received threatening letters and voicemails from Z’s legal teams telling me that this Gigwalk employee was violating a non-compete employment contract (in the state of Washington) and had to stop working at Gigwalk immediately. Our legal counsel advised me that if Z aggressively pursued this case it would be costly. I called one of our investors who had a relationship with Z’s CEO and we resolved the matter 36 hours later. It saved us a ton of money in legal fees and the employee continued working at Gigwalk.
Listen closely, follow your own instincts
Entrepreneurs need strong convictions and instincts. These same instincts gets in the way of listening (guilty). Just because you listened to somebody’s perspective this does not mean you need to act on what was said. It’s impossible for everybody to agree on everything. Even when you already know the answer give it five minutes and listen. It won’t hurt, you may learn something along the way, and if nothing else it will help develop a productive relationship.
Why we need to clarify the Enterprise vs. Consumer distinction
Six years ago broadly bucketing technology companies into enterprise vs. consumer would instantly tell you important things about a company like how they go-to market and acquire customers. That’s no longer true.
Are Basecamp, Square, and Dropbox enterprise or consumer companies? Many people use these products to do their jobs. While others use them for personal reasons - like settling a bet with a friend using Square or organizing a family reunion on Basecamp. So, what defines an enterprise and consumer technology company?
When you look at the enterprise vs. consumer distinction through the product distribution lens there is actually a big difference. Here is a simple test. If you find yourself or people on your team calling, meeting, and emailing your 389th customer to get them to buy your product that’s an enterprise company. Hey, hold on a second! I have a self-serve option that anybody can use. That’s a feature, not a distribution strategy.
Using our distribution lens Basecamp, Square, and Dropbox are clearly consumer companies. They acquire their customers via email (Ariel shared a folder with you on Dropbox), content marketing (Basecamp’s Signal v. Noise blog), and consumer marketing and distribution partnerships (Square has retail partnerships with Apple and others).
A new hybrid consumer enterprise has emerged. Yammer is the hybrid poster child. It acquires its customers via cheap consumer channels and turns those customers into cash with a direct sales force selling to enterprises. This formula creates warm leads, reduces sales cycles, and as the CEO / Founder of Yammer explains…
When your app goes viral in a company, it creates a fast break opportunity for your sales team. Hard for competitors to respond in time.— David Sacks (@DavidSacks) June 13, 2013
The BYOD (bring your own device) trend will further blur the lines between enterprise and consumer. Imagine if in 2001 all companies told their employees bring your own laptops or desktops to work with whatever operating system you want on it and load any apps you please. This is happening right now across mobile. Tens of millions of enterprise workers are deciding - Android, iOS, or WinPhone? 4 inch or 5 inch device? Mailbox or Gmail app? IT or for that matter anybody at your company have zero say in any of these decisions. Having other people (IT or business operations) decide which devices and productivity service will make me the most productive is obviously wrong. As I said before smart companies are going give their employees a $250 / year budget to spend any productivity service you wish.
The world cracked open when Basecamp, Dropbox, and Yammer showed us how to distribute products into millions of enterprise workers using consumer channels. It cracked a bit further once Android and iPhone got to scale and the market is set to explode now that 95% companies support BYOD programs. Exciting times.
Work about work is not work.
When Mailbox launched I jumped in line. The snooze email messages feature sold me. It’s an incredibly well designed and executed product. The team behind Mailbox knows mobile products.
Yet, I recently ditched Mailbox. Why?
It became work about work. Consider this common use case. I swipe an email to snooze it. First I need to set the snooze alarm. When the alarm goes off I receive a reminder I need to process. See what I am doing here. I’ve created work for myself without actually doing any work. In fact, no communication happened at all. When doing email I want to make forward progress - discuss a product idea, provide feedback on a document, and more.
I don’t want tools to organize my email. We’ve been cramming more and more of those into email over the last fifteen plus years. Email has become a bloated mess. Mailbox’s snooze feature is yet another feature that creates more work. Instead, I want tools that actually let me get work done on my mobile device. Sadly, I got more work done on my BlackBerry in 2006 than I do on my iPhone seven years later.
Lately, I’ve noticed when work needs to get done I switch over to a messaging app. Meetings get organized faster. People share more and do so faster. The conversation flows more naturally.
Which reminds us that all mobile communication will gravitate towards an Instant Messenger like experience. No, email won’t entirely die. After all, you still need a way to get Groupon emails.
[Originally published on Medium]
From BYOD to BYOApps
We are starting to see the rise of productivity and work related apps. Apps like Paper and Sunrise are a great example of this trend. This is just the beginning and there will be plenty more. These are all sold directly to the consumer instead of the business.
Today, BYOD is a foregone conclusion. The vast majority of businesses support BYOD programs. Next it will be BYOApps. The consumer will decide what calendar, messaging, note-taking, teleconferencing, collaboration, etc. app they want to use with their corporate data.
Smart businesses will give their employees a budget. For example, you get $250 / year for these productivity services and you can use anything you would like.
The most recent web business model was to attract employees quickly and then create a “fast-break” opportunity for your sales and marketing teams to sell premium services to the business. Yammer executed this model perfectly. While still a viable business model the mobile native business model will likely bypass the enterprise entirely and do business with the consumer. The consumer will allocate their employers money as they see fit.
The puzzling thing about iOS 7 has nothing to do with the UI
What’s puzzling about iOS 7 has nothing to do with the new user experience. In fact, the refreshing user experience overhaul marries hardware and software in exciting ways. Rather, the most puzzling part of iOS has everything to do with what they chose not to do.
Without the app ecosystem Apple is an expensive phone with a browser. Yes, it is better than the HTC One or Galaxy S4. It’s no longer 2x better.
The App Store currently has two critical advantages - more app usage and better monetization. It’s a moat Apple needs to make much wider. For that to happen a broader set of app developers have to graduate from great apps to significant and sustainable businesses — revenues north of $100M / year.
Today, we have a few successful game studios and apps that make their money beyond the app store - Uber with transactions and Twitter with ads. Yet, when will we have an Adobe for the App Store?
To build a sustainable business app developers need two things: a way to get in front of customers (aka distribution) and a way to make money. The fact that Apple did nothing on both of these fronts in iOS 7 is puzzling.
Let’s start with getting in front of customers. The primary way to do that today is via the centralized App Store that’s ruled by most popular (downloaded) lists. Popular lists are a horrible way to discover new apps, yet fixing that issue alone is insufficient. Distribution needs to be decentralized so niche audiences can discover niche apps. What is decentralized distribution?
- App-to-App Handshakes: Apps should have simple ways to link to other apps. Twitter recently showed us how this can be done.
- Buy Apps Anywhere: Read about a cool on app on a site? One should be able to download directly from that site with an App Store widget that carries billing and security features for one click purchases.
Making money from Apps works really well for games and not much else. Enterprise software and productivity apps are massive businesses struggling to make money via the App Store. Where are the Salesforces’ and Adobes’ of the App Store? Here are a few things that can help:
- Paid upgrades -If you launch an important new feature set current app owners get all that new functionality for free. If you buy an app for $5 everything that comes after that is free.
- Subscriptions - Most of the software world is moving to some form of subscriptions. Today, subscriptions are only supported in the Newstand. That needs to change.
- Trials - This is different from in-app purchases. With trials the entire app is free for a limited timeframe. Want to continue using the app after say 21 days? Time to pay up.
Apple currently makes a big deal of their Design Awards. For their own sake they need to focus as much attention on apps that become significant sustainable businesses.
p.s. For more on this topic Ben Thompson’s article is a must read
Small teams = Better apps.
The larger the team the worse your app becomes. Why? With a large team you are naturally tempted to do more. More features will kill your app. In mobile you actively need to be removing or combining features.
- Initial product: 2 to 3 people.
- Scale back-end: +1 to 2 people (depends on back-end complexity, the initial team’s skill set, and scale you need to operate at)
- Support for 2nd mobile OS platform: +1 person (some apps need to do this sooner rather than later e.g. communication apps require wide OS coverage)
- Customer support: +1 person to handle support issues across all the channels. Initially this person is likely a contractor who can handle peaks as the core team should continue handling customer support.
Six to seven people is small enough to move quickly and yet sufficient resources to build an important product.
Once you begin scaling monetization there are a new set of people you’ll need. We’ll leave that for another post.