(shameless plug: May 12 SMASHsummit.com social media marketing conference - get a 20% discount at bottom of this worthless & wildly speculative post)
For everyone out there wondering if i'll ever return your phone calls or emails, my apologies... i have a bunch of rather significant not-quite-finished projects on my plate right now, along with the usual deals & events & insanity. Blogging has taken a back seat as well, but i've been meaning to write this post ever since coming back from Austin after an amazing all-night jam session with GaryVee until around 7am at SXSW. since my kids are sick & i'm procrastinating doing my taxes until the last minute, now is as good a time as ever to blast out this stupid little piece of navel-gazing. so have at thee...
Assertion #1: Check-Ins are Coupons. Gimme $5 or go home, loser.
(and i don't give a flying FUCK about yr "awesome" LBS game mechanics... it's just meaningless early-adopter BULLshit unless/until u Show Me The Goddamn Money.)
for all u nosebleed-valuation VCs jockeying to finance the dorky geniusues at FourSquare, GoWalla, MyTown, and every LBS vendor / app developer out there, it's time to face the music. while i admit everyone at SXSW (including me) was tweet-whoring themselves all over Sixth & checking-in like a sex worker at a Fuller Brush convention, let's not delude ourselves -- the current method of check-ins is a classic case of early-adopter lust for shiny objects, & has not a damn thing to do with long-term sustainable mainstream consumer behavior. no way any normal motherfucker is gonna do this check-in shit.
Without financial incentives or discounts, there is absolutely no reason on god's green earth to "check-in" for your stoner cousin, your luddite penny-pinching aunt, and certainly not your clueless grandmother. they could give a rat's ass about your stupid little iPhone app with the pretty pictures and clever auto-discovery that barely works while draining the hell out of the battery... that is, until you give them $5 off their next beer or 5-dollar foot long.... at which point guess what?
HELLO, MAINSTREAM CONSUMER MARKET!
while there may be ways to s[t]imulate financial incentives & discounts with virtual goods, frequent flier miles, or other point-based systems & psychological motivations, nothing works better to increase conversion than a cool $5 bucks in yr digital wallet, or 20% off yr next offline purchase.
if you don't believe me, go take a look at the history of PayPal jump-starting initial account signup incentives with $5 discounts for joining, referring friends, and entering profile & bank info. while arguably the payment friction on the eBay marketplace created enough motivation to use PayPal even without financial discount incentives, the company used this tactic for years to increase user growth and get to such substantial critical mass that it couldn't be displaced even by eBay's own internal payment system. and PayPal certainly didn't have any fancy game mechanics to get people to use the product (altho i will admit we had some pretty sweet blow-yer-jedi-mind tricks for getting people to enter bank acct info, thereby reducing transaction costs by avoiding credit card processing systems & fees).
So STFU already and gimme the $5, or get your stoopid game mechanics out of my face and go home.
Assertion #2: <1M users in 12 mo's is *pathetic*... can u even spell the word "viral"? Facebook will CRUSH u like a friggin' bug.
I'm surprised everyone is paying through the nose for such anemic LBS growth rates over the past year. let's compare that with Facebook rocketing to over 400M+ users globally in the past year, and 100M+ users in the US. if you're a small startup and you're not acquiring users like mad organically / virally, or picking them up off Facebook or Twitter, you're going to get steamrolled by the larger platform players, or else some fast-growing upstart you haven't heard of. anything <1M users seems like a rounding error, and even Yelp's healthy 30-40M+ users is a bit of a blip compared to FB or other large platforms.
in order for any of these big LBS bets to work, u better start acquiring users at scale (let's say 20M+ users + a lot of local search data) or else yr only hope Obi Wan Kan-u-buy-mi is to maintain a decent technology lead and get acquired. oh yeah, i forgot -- your technology lead = doing a GPS lookup (which will be in every chipset in <12 months) + some pretty icons + some bullshit game mechanics that aren't working for anyone who doesn't speak Klingonese. hurry your ass up or you guys are toast. and i don't know if FB or even Apple or Google is gonna pay a 5-10x multiple on your $80M post-money round. Yelp may have the location data in a few key metros to justify walking away from a $650M offer, but you little shits sure as hell don't. if you're lucky enough to get anything >$250M for your house of cards take the money & run, homey.
Assertion #3: the eventual LBS winner needs $100M+ to signup 1-2M local offline businesses & 20M+ users. (or maybe $500M i dunno but we're talkin' Money G)
Get out your VC "checkin"-book & write down a number w/ 10 zeroes:
that's the minimum ante to play this game of poker.
i'm no expert on the sector-specific financials here, but here's my rough math: i'm guessing you need to acquire 20M+ users @ $5-10 each, and at least 1-2M+ offline businesses at $50-100+ each. let's be generous & suggest it *only* costs you $100M-200M to get to minimum critical mass & basic viability (altho it could easily be $500M or more).now who the H-E-double-hockey-sticks has that kind of FU$K-IOU money?
well, probably only 3-5 players can make those kinds of #'s work.
- Microsoft ($266B market cap)
- Apple ($219B)
- Google ($180B)
- or maybe Facebook...
- ... with lots o' help from a Private Equity group w/ Very Big Balls of Steel
Now certainly Twitter and Yelp could be in this game somewhere, and probably several other providers of local search data / business profile data, and other relevant stuff. But at a minimum, you're gonna need to have or acquire 10-50M users (active/frequent, not just registered) and have or signup 1-2M local businesses (perhaps more?). this is customer acquisition cost on a scale that only a few big players can fathom, or a few larger venture / private equity players can go after. And that's with a ton of execution risk. Even Microsoft who has the money might not have the cojones to think they can buy & integrate all the pieces to make it work, unless it's just one big acquisition. Google could maybe do it if they buy Yelp or Twitter, but they still need to get the social dynamics to make the user base work. Same for Apple, altho either might figure it out if they're lucky and buy the right company(-ies).
But the odds-on favorite here by far is Facebook. With 400M+ users, an already very active userbase, and users' growing familiarity with FB Connect on off-platform sites, they are the easy pick front-runner. Maybe they buy somebody, maybe they don't. Maybe they buy *several* somebodies. But you can bet yer sweet ass the road to the LBS playoffs sure as hell goes thru 1601 S. California Ave, Palo Alto, CA.
Count on it... or should i say "Check-In" on it.
oh and one last not-so-minor point:
Again, this plays to Facebook's potential future strengths (they're working on a payments product, and their users are very comfortable with various virtual currencies), and Google / Microsoft historical weakness (Google has only minor payments traction with Google Checkout, and Microsoft none to speak of). However, Apple also now has substantial payments experience, and could be a player in this area. And both Amazon and eBay (via PayPal) become very attractive targets for partnerships or acquisition by one of the major players. But since Amazon is doing quite well thank you, and Bezos shows no signs of giving up the crown, expect either an ever-weakening eBay or still-growing PayPal individually to be in play by Microsoft, Apple, and/or Google within the next 2 years (yeah, i know i've been predicting this annually for the last few years... but just cause Ballmer's a blimey M&A idiot doesn't mean i'm wrong about the reasoning).
alright, got all that?so here's my odds-on crazy-and-not-really-very-serious predictions:
1:2 - Facebook buys Gowalla, FourSquare, MyTown or Loopt, takes home the gold. this is the default.
2:1 - Apple buys one of the above, and/or Square, gives Facebook a run for the money. probably still loses, because FB has too much frequent user activity, Connect dominates, & Apple doesn't move fast enough in software.
3:1 - Google buys Twitter for users/social + Yelp for local biz, gives Facebook a run for the money. maybe also buys PayPal, maybe not. probably still loses due to no clue on social, unless they let Twitter figure it out. still not likely. (they likely do buy Twitter & Yelp, but still not enough to win LBS).
10:1 - Microsoft decides to spend a boatload of money buying something or several somethings, and fails miserably... unless it's Facebook. but Zuck won't sell for less than $75B, and Ballmer doesn't live up to the first half of his last name. so therefore Microsoft is FAIL. (probably hard & painful FAIL.)
50:1 - Google or Apple figures out a way to buy or merge with Facebook. This is complete looney tunes, but would be the right move. however, Google can't likely pull it off without antitrust violations stopping them in their tracks. and even if Jobs buys the farm, don't think he hands Zuck the crown unless some very unusual scenario comes down.
in summary: Facebook wins LBS. unless Jobs has more smarts than hubris than i think, and Apple buys Facebook (NFW.). somewhere along the way PayPal gets bought by somebody (likely MSFT), but prob doesn't matter. Microsoft flails on mobile & LBS, and becomes irrelevant outside the workplace in less than 10 years. Google probably swings & misses on LBS, but maintains strength in search and remains relevant in several others (YouTube, Gmail, maybe Android). Apple keeps killing it in hw, and does well enough with sw & apps to maintain relevance in music, videos, books, other areas. Amazon is pressured by Apple in media, but does well in e-commerce & infrastructure svcs. AOL stays alive in advertising & content (i think). Yahoo does a lot of re-orgs, buys something, but nobody really gives a fuck. eBay dies a quick death after they sell off PayPal. Twitter has a shot at LBS, and so likely gets bought by Google or MSFT, but will still have a tough job beating Facebook.
once more for emphasis: Facebook wins LBS. Google, Apple remain strong in search & media respectively. PayPal gets bought (likely by MSFT). Amazon stays strong in commerce & infrastructure. AOL stays afloat in content & advertising (maybe). Microsoft dies in mobile & consumer (very) slowly, acquires lots of stuff along the way. Yahoo dies slowly, and/or likely gets bought (or merged with the new AOL). eBay dies quickly; nobody notices. Twitter gets bought by Google or MSFT (or maybe Cisco?) within 3 years.
... or not, and i'm a friggin' idiot.
but if you've read this far, at least i'm an entertaining writer, eh? ;)
yer welcome, mofo.