Friday, 31 October 2008

Twitter again - at a crossroads

So another post on Twitter. It is a fascinating case study and I am not the only one that thinks so - see Weaverluke's paper.

I think Twitter is at an interesting juncture and its actions in the next three to six months will define whether it becomes a platform, becomes a mass market brand or disappears. All three scenarios are possible.

Plagued by operational difficulties caused by having a intern design the architecture, Twitter has spent the last few months in physiotherapy being coached how to walk again. By and large this has been achieved - with the occasional wobbles we have seen this week.

The interesting element is that Twitter has open APIs to its architecture as all good web2.0 companies should. Or should they?

Gradually, as Twitter's product managers have been sitting on the bench waiting for the engineers to make sure that the court is playable, other companies have made use of that API to create their own Twitter experience. The truth is now obvious. The experience created by the likes of Twhirl and Slandr (the two I use most out of a long long list, even recommended by Twitter) means that you never need go near the Twitter domain again.

So, what now for Twitter? Eventually it will need to make some money. How is it going to do that? You'd have to argue that they need someone commercial on the team at some point - its initial use of SMS was created with the US in mind and would have bankrupted smaller African nations let alone a tech based start-up. Now it is in a situation where it arguably cannot monetise the customer directly. Indeed, others are - only this morning I read of a new initiative for people to place ads in their own tweets to be able to monetise them. (I shall not link to it - it's not my idea of Twitter).


Twitter needs to be the bitpipe and engage in an interesting play for web2.0 - charge for its APIs (would this be a first? I cannot think of another example from this new world). I actually think at this point it is the smarter play.


It needs to put the platform issues behind it and build or buy its way to leading the user experience again. Its acquisition track history is not good. It acquired the excellent Summize earlier this year and yet the functionality to the market is less than it was when it was acquired (I miss Labs!!). So, it is now up to Twitter to compete again hundreds of smaller players - already monetising the traffic that Twitter is not.

If it were not for the economic downturn and the fact that these players all rely on the API for their business, I'd say this strategy was doomed to fail.

With a bit of manoevering, judicious use of both strategies could see Twitter emerge as the master of its own genius again. Can they do it? Do they have the team to do so? Time will tell.

You can follow me here.
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New World: Old World

A short post to make note of an interesting paradox.

Here we are in the nascent and emerging world of web 2.0 where - we are told - that the community rules; that the days of broadcasting are over; and, that brands must engage in interaction and communication with their audience to make their way.

A brave new world? Perhaps. But take a look at these leading examples from Twitter (which has me hooked) which, by general early adopter consent, is at the vanguard of all that web2.0 represents.

These are four examples of people using Twitter with large followings. When they speak their words create waves in the twitter community (ok, so I exaggerate a little in the case of Jemima but I wanted a UK example and she is great). But the key point is not the number of followers but the proportion of followers to those that they choose to follow in return. Without the 'follow' back there is no return leg and no chance of conversation.

I'd argue that in these cases, either the 'publisher' or the audience at large has re-created the existing publishing world paradigm where "I talk and you listen" or perhaps "I want to hear you talk". In this instance, Twitter is nothing more than any other distribution channel or a place where the audience can gather to listen. Not very web2.0.

If this is worrying for you then you should know that the profile in the bottom left is the Founder and CEO of Twitter!

This is the paradox that I mentioned above. Of course, I could leave the post there and leave you with the impression that all tweeters are like this but here are some examples of people who are either champions of the community movement or are applying its principles.

Let's hope this bodes well for Barack Obama's Presidency (fingers crossed) that in the twitter world he proactively seeks out conversation with others (he has fewer followers than those he is following).

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Thursday, 23 October 2008

British Customer Service

British Customer Service? An oxymoron? Possibly.

Even in cases where politeness appears it is only on a qualified basis.

I caught this snap in a traffic jam on Monday. I was amused by the word 'frequently' on the back of this truck.

"Frequently any inconvenience is regretted"

Only in England would the word frequently be used. It allows for all scenarios from 'sorry' to 'piss off'!

I am hot on this topic after a recent two week trip to the States, where eye contact and just general interest in well being (for as long as you're being served) are standard. I have only come across two instances of good service since I returned (in Starbucks in Fulham and Fat Face in Richmond). More often as not one is met with aggression, complete disinterest or lack of attention. Excuse me now while I get into my Victor Meldrew outfit.....

Wednesday, 8 October 2008

Financial Armageddon: Fasten the seatbelts

With the economic crisis sending shockwaves around the world and no-one yet knowing where the bottom is, it is difficult to know what the final impact will be on the mobile industry and start-ups like ourselves.

Below we explore some of the themes that we are likely to experience and what this means (Note: if you leave this post before the end it will seem unbelievably depressing but there is a significant ray of hope at the end):

Industry Impacts
- Operators focus in on churn management. Margins get squeezed. Enabling mobile data takes a back seat.

In such a tough economic environment, the end consumers are going to look to make savings wherever they can and one of the most regular bills are those from the operators. Accordingly, there is going to be a huge effort from the operators to retain customers. This will take the strategic focus off development of the right conditions for the mobile web (e.g. all you can eat data plans) and introduce a slow down ramp to its development.

Financing Impacts
- VCs have trouble exiting. Have more difficulty raising funds than usually the case. Keep cash in house rather than invest in uncertain times.

That the number of VC exits this year is already significantly down on last year is no surprise given that 2007 was a record year for some firms, but even so it is abundantly clear now that selling into a freefalling NASDAQ is not on. Without that measurable return on funds, VCs become a little more cautious. Given that the industry works in a kind of "if you're interested, I'm interested" fashion, the nervousness will be infectious. The implication for start-ups is to tighten the belts and make money last longer.

Revenue Impacts
The advertising industry begins to slow. Mobile advertising money reigned back. Less cash coming in for those relying on advertising.

You need only look at the front of Premier Football League shirts to see that the advertising industry will be taking a hit - high profile spenders such as Northern Rock, AIG, XL are in financial trouble. In addition, consumer spending is down so there is less value to be marketing into. A higher proportion of spending will be in sustaining/creating brand value and a lower overall sum will be invested in trying to grow the overall market (why spend money now trying to persuade someone to buy a new car when you know it is the last thing on their mind?).

Though 2008 could arguably be the year we look back on as the year that mobile came of age and become part of integrated campaigns within advertisers - or at least a firm part of the agenda in planning - its hold on that spending budget is just too new. As spending overall is reigned back, mobile will be viewed as a discretionary piece that can be easily sacraficed. There will still be some spending and experimentation but it will be less than before.

- Consumers look again at their discretionary spending. Ringtone subscriptions the first to fall.

So, if those with a mobile advertising models are going to find it tough, then those with subscription models are really going to struggle. Consumers are going to look to cut meaningful discretionary spending and subscriptions or payments which are large enough to register on the radar are likely to be cut. Mobile subscription providers beware.

Behavioural Impacts
- Start-ups renowned innovation is tested. New models and cash preservation key. Those with positive cashflow breathe sigh of relief.

It is in such an environment that the ability of a start up to innovate is put to the test, not so much in being able to drive new technologies but in how brilliantly they can shape themselves to the environment and survive. Expect to see new models, subtle changes of direction, more conservative growth plans and some innovative guerrilla marketing. Very few new faces will emerge and some will join the deadpool.

- Start-up resolve is tested. Has what is important changed?
It is important to stay true to the things that you believe give you an edge in the first place. In the last cycle similar to this (2001-2002) I saw a number of companies fly to the apparent safety of mobile subscriptions or sacrafice staff to save costs and in doing so compromising their quality. Staying true to your beliefs in the long term. If you begin to compromise that by focusing on other areas you'll lose part of yourselves, our focus and from there, a large number of your customers along the way.

Through all of this, there is great opportunity.

For those that survive:
there will be less competition around;
your brand will have been in the market with less competition for a significant period;
you'll have reduced dependence on VCs;
you'll have more learnings about the user and the market to act upon;
you'll be well placed for any larger players that wish to play catch-up;
you'll be even more convicted on what it is that you bring to the market
and so on

The key through this difficult times is to stay involved. Good luck!

UPDATE: Good post from TheEquityKicker.

Thursday, 2 October 2008

Tighten the belts

Techcrunch published a story yesterday which Techcrunch UK followed up on today about the financial fallout and which start-ups might be best placed to weather the storm. The current situation is arguably more serious than the bursting of the bubble during 2000 and 2001. At that time we were in a period of resetting of valuation expectations. This time we are faced with a situation where venture capitalists will find an exit far more challenging (particularly tough after a record 2007). In addition, those at a point in the cycle where raising money for new funds is required will also find themselves working harder than normal.

I am taken back to the 3GSM World Congress (as it was called then) in 2002 seeing fewer of the same companies again rather than any new start-ups.

The key for any start-up at this stage becomes survival. If you can capture viral growth and/or have the ability to generate cashflow in excess of your burn (even in the economic downturn) then you are very well placed. If you are in a position where cash breakeven is not immediate then you need to show nimbleness and determination.

I was Chairman of a company called UCP in 2002. It is to the immense credit of the management team (Christian Lutz and Marwan Saba) that they survived this period through a mixture of tight cost control, tough strategic calls and dogged sales conversion. When the gloom lifted a couple of things happened: UCP looked around and saw that it had fewer competitors than before the storm (some had gone bust and had not been replaced with new money) and that larger players were suddenly eager to break into the market.

Their tenacity enabled them to stay in the game and without that the subsequent purchase by QPass and then Amdocs would never have happened.

The message for start-ups is clear: get your planning right and do it right now for how you will balance the books over the next 18 months. It will pay dividends in the long run.

Good luck!

Here is another article from Techcrunch including a memo from a VC called Benchmark highlighting what I said above about survival being everything.
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