In the beginning…

Hi folks, I hope to shed some light on the world of ‘location based services’ (LBS) from my point of view.  I apologize in advance if my grammatical skills are not perfect and if my typing skills are slower than my thoughts.  I intend for this blog to share important news about LBS and my non-expert opinion on that news.  Disclaimer: I am a co-founder of an Internet start-up that is in the LBS space in a slightly different way than Facebook or Foursquare. The company is called Guest List Nation and it was started in December 2009 by my long-time business partner of 12 years (Trevor Hewitt, CEO), a brilliant tech guru (Michael, CTO), our jack-of-all-trades (Dennis Petrou, COO) and myself as the CMO.  Such lofty titles for a 4 person company but why not!  Trevor, Dennis and I have been involved in the San Francisco nightlife space for 12 years, Michael has spent the last 5 years attempting to modernize the industry through his efforts with a website called eVelvetRope.  As a whole we realized the nightlife industry systems are antiquated and we started Guest List Nation in response to the reality that a clipboard, pen and a clicker were the highest forms of technology.

Our vision was to create an automated system for people to RSVP to nightlife events.  After 3 months of planning, designing and meetings we had our first version of the mobile application for the iPhone finalized and approved for placement on the iTunes store.  The application is free to download and offers the user access to 70 or so free guest list offers in San Francisco, New York, Chicago, Las Vegas and Phoenix.  The 1.0 version allowed the user to RSVP to the guest list offer of their choice and our system compiled the RSVP list and emailed it to the nightclub’s manager before the nightclub opened for business.

Wow, we did it…we modernized the old system used by a nightclub or did we?  Wait, there is still a list at the front door, the host has to find your name and cross it off the list and grant you entry.  Well it is a step in the right direction but we are not there yet.  So we spend the next 3 months working on a GPS-verified redemption system.  In August, 2010 we launched version 2.o for the iPhone application and the Android version is days away from launch as well.  Here is where our location based service is utilized: the user clicks on a particular RSVP when they arrive at the nightclub, we check their location (check-in), we verify the person is indeed at the nightclub and we then deliver a free admission ticket on the application’s screen which includes their name, number of guests, the nightclub address, date, time, etc…

I’m calling this a moral victory as we eliminated the clipboard and the pen.  However, the clicker still exists!

I do not intend to use this blog as a commercial for my application, instead I wanted to show you the experiences that shape my writing here.  I’d love to learn more about your perspective on location based services via a few short polls:

Thank you for reading and your input! I look forward to creating a lively, informative and opinionated forum for all here.

Brendan

Do you LIKE?

The Internet industry is loaded with buzz words: social media, social commerce, m-commerce and so on.  Two years ago every major corporation was hiring for a newly created position, Director of Social Media and this person set your Facebook and Twitter strategies.  They created Powerpoints measuring a whole new set of metrics: likes, fans, engagement, retweets and follows.  Brands have poured endless resources into these efforts believing it will all pay off with real profits.  Has it happened yet?  Hmmm…

Seems the true upside to having an innovative social media campaign is to be recognized as having such.  When a TechCrunch writer adheres to a factoid or Mashable designer creates a slick infographic about a brand experiencing tremendous Facebook growth, the true value is not the 50,000 new fans but instead the fact that the article will be read by thousands of people about how the brand is innovative.  So I question is a social media strategy more about being recognized for innovation or more about increasing revenue.

Over the past 2 years the Director of Social has created a cross-functional team from marketing, sales,and  legal to implement the strategy.  Are the sales rolling in now?  Not yet, we need to add social commerce now.  Everybody scrambles find a technology solution and adds a Shop Now tab to their Facebook page.  Sales yet?  Not yet, apparently people don’t shop on Facebook yet; something about trust and security.

Now what?  Immerse deeper, let’s add a LIKE button to the header of our corporate website.  Now?  Deeper, give me a FOLLOW button right new to my LIKE button.  Hmmm, what’s going on here?  Are Facebook and Twitter helping brands increase annual sales or are we helping Facebook and Twitter increase their IPO valuations by plastering these code snippets all over these multi-million dollar corporate e-commerce websites?  Don’t worry Google is here is save the day, I’m sure if Coca-Cola adds the brand new +1 button that we will finally have found the Holy Grail.

Don’t get me wrong, I understand there is a network effect of having a person with 3,500 Facebook friends click M&M’s LIKE button, suddenly 3,500 people are alerted to the fact that you like M&M’s.  What amazes me is that Safeway still has M&M’s when I go shopping.  Yes, I am suggesting that the true benefit of these affiliation buttons of LIKE, FOLLOW and +1 will be cultivated some day by Facebook, Twitter and Google when they start charging brands to intelligently recommend products and services to users.  Brands wake up, you are being duped into building their informed, user-generated social graph that they will someday charge you to utilize.  The buttons are a marketers dream come true, customers directly indicating what interests them.  The true Facebook and Twitter innovation is convincing people is to cool to give up this information. If Facebook has done anything, they have convinced everyone that making your life publicly accessible is a fun, cool activity.

Hey Director of Social Media, what’s next?  These are the same marketers that believed the following were the newest answer at one time: catalogs, postcards, telemarketing, email, websites, newsletters, blogs and so on.  I do not mean to be cynical, but it does seem ridiculous when a reporter or an analyst overreacts to the potential of economic strength of a particular website or innovative paradigm shift.  I am suggesting that the LIKE, FOLLOW and the +1  buttons will soon be viewed as the new spam.  My eyes have already learned to ignore the LIKE, TWEET and FOLLOW buttons; +1 you are next.

Do you mind if I put my buttons at the bottom of this post? 

#Winning What is your strategy?

By now we are all growing tired of Charlie Sheen’s rants about winning, warlocks and trolls but if anything he is demonstrating his plan to win over public opinion.  Despite all the self-destructive behavior he openly admits, people cannot help but talk about his latest tweet or read the critics reviews about his tour stops in Detroit and Chicago.  Yeah, I admit I want to see his show when it comes to San Francisco; Charlie can you send me a ticket?

I had a different “winning” in mind when I was thinking about writing today.  I am wondering if a company should stay focused on their core competency or if they need to expand, diversify and adapt.  I would suggest the answer will be different depending upon many factors: industry, age of the company, competition, resources, finances, etc…  For the sake of this discussion, I’m thinking about Internet companies.

I read an article on Quora few days back that dissected the Craigslist website suggesting that numerous start-ups are trying to carve out their part of Craig’s website.  Have a look at the infogram here, pretty interesting stuff.

When start-ups attack!

The heart of the article was Craigslist works because the user interface is good enough, most of the functionality is free (companies pay to post jobs) and users have a history of successful experiences.  I wonder how Craig resisted the temptation to fancy up the UI despite the thousands of people who have made the suggestion over the years?  Why didn’t Craig Newmark add graphical categories, user profiles, Skype or instant messaging to stop those endless back and forth emails?  Does the age old adage apply, “if it’s not broke, don’t fix it”?    Maybe innovation wasn’t required?  Maybe users asked that the site not change?  Regardless why, the site has staying power and it looks like Mr. Newmark has not updated his HTML tool set since 1995.

On the extreme opposite of the spectrum are the likes of Google, Facebook, Amazon and Twitter.  Instead these companies strongly believe it is more important to innovate than succeed.   Google wants to challenge Apple, Microsoft, Facebook and Comcast.  Facebook challenges Foursquare, Yelp, Google and just about any company with active users.  Amazon challenges eBay, Walmart, all online retailers and US tax laws.  Twitter flies under the radar a bit more, but I would suggest they challenge all news and advertising networks.   If you have made it this far in the article, then I’m sure you have 20-30 other suggestions of companies they are fighting and you are probably right.  Comment below!

But for the sake of this post, the point is these companies started off doing one thing incredibly well and for whatever reason they decide to diversify (aka innovate) into another companies bread and butter.  Is it necessary?  Does it distract from their core competency?  Does of the Board of Directors demand new lines of business?  Is it a way of keeping the analysts hopeful and not downgrade the stock?

Whatever the reason may be, it seems every emerging dot com is looking to expand into his neighbor’s core business.  What are your thoughts on why these companies are making these moves or is Craigslist getting it right?

 

 

 

 

 

What is Facebook?

What is Facebook?

In Jeopardy style the clues might read:

• A social networking company founded by a couple of Harvard students
• The fastest growing website of the 21st century
• A company every VC loses sleep over for not investing in
• The website that allows you to stalk your ex

I believe the answer to this question depends on who you ask and it is the myriad of responses that prove the value of Facebook.  So many people use Facebook for so many different reasons:

• A college guy thinks Facebook is a great resource to check out who the hot girl is in Chemistry 201
• McDonalds thinks Facebook is a great place to test new marketing ideas
• Models think Facebook is the new portfolio
• Coca-Cola thinks Facebook is a marketers dream come true
• Mom thinks Facebook is a great way to see how quickly her niece is growing up in Florida
• Dept of Homeland Security thinks terrorists might be using Facebook
• Employers think employees waste too much time on Facebook
• A college girl thinks Facebook is an easy way to chat with her high school friend that moved away
• Zynga thinks Facebook was a great platform to find users
• MTV wishes they thought of Facebook first
• Dad thinks Facebook is a great way to email his picks for the football pool
• Hallmark wonders how to capitalize on the millions of birthday wall posts
• Some couples think Facebook is a great place to publicly argue
• Nightclubs/promoters think its the new Evite, here is my 1 second commercial check out Guest List Nation
• Programmers think it is wild marriage of PHP, MySQL, Memcache, Thrift, Scribe
• Everyone seems to think Facebook is the world’s online photo album

I would suggest that Facebook is a well organized, systematic, interconnected, crowd-sourced database of individual’s lives that feeds one of humanities most basic needs, relationships.  In a society that continually produces new technology that typically isolates and insulates us from each other, instead Facebook allows us to connect.  Facebook feeds your ego with new friends, it provides you a soapbox for your “likes”, and it is your binary imprint on history.  The beauty, strength and simplicity of Facebook is that is allows you to utilize the platform as you want or need as evidenced by the hundreds of ways people interact with the website.  What is Facebook to you?

Groupon: isn’t always perfect!

Unless you live under a rock, by now you have heard about the meteoric success of Groupon, the social-buying, coupon marketing company.  Last month Forbes Magazine called Groupon the fastest growing company of all time.  The name Groupon comes from the words “group” and “coupon”.  The company is housed in a 85,000 square foot warehouse in Chicago, plans to eclipse the $5oo million revenue figure in 2010 and was profitable 7 months after they sent their first email offer.  Groupon’s proposition to businesses is: instant revenue, new customer acquisition, marketing exposure and a new sense of cool because your business was selected as a Groupon offer.  For consumers, Groupon allows you to get that massage or auto detailing for 40 to 60% off.  So what’s not to like?  Seems like a win-win for everyone involved.

And it is until you hear about Jessie, the owner of Posies Cafe in Portland, Oregon.  Like many business owners in these challenging economic times Jessie was looking for alternative marketing ideas and a friend told her about Groupon.  Jessie did some homework and made some assumptions.  Her thinking was I’ll attract all these new customers by offering a discount and share a small percentage (10-15%) with Groupon.  It was that assumption that has Posies Cafe in financial jeopardy.

Jessie soon learned that some of the problems that Groupon can create:

• Groupon salespeople recommend that the best response rates are to those offers where the discount is 50% or more.  Now Jessie’s $12 offer is down to $6.  Now Groupon wants their percentage, “let’s split the remaining money”.  Now Jessie is only collecting $3 to cover her expenses on the $12 worth of goods she has offered via Groupon.
• Groupon does not allow you to limit how many coupons you sell, clearly because more groupons sold means more profits for Groupon.
• Some customers attempt to use the same Groupon multiple times, so if your not accounting for every redeemed coupon then you are at risk.  But the accounting for these coupons takes some time and requires all employees understand it is important to do correctly.  Those customers who you confront for their fraudulent activity might not be so pleasant about you accusing them of attempting to rip you off.
• The week after your Groupon offer can bring your business to its knees.  If your business usually handles 100 or so customers a day, what makes you think you can suddenly handle the demands of 500 customers who purchased this coupon because it is a big discount and not because they wish to support your business.
• Many customers will spend only the $12 certificate value and nothing more despite Groupon suggesting most customers spend more than the coupon’s value.
• Some customers will only tip on the amount they paid for the Groupon and not the actual value, this will drive your staff crazy!
• There is also the woman who approached Jessie and attempted to directly pay $6 for the $12 worth of pastries and coffee in an attempt to sidestep the Groupon percentage.  Jessie indicated these such offers further confused her staff about this Groupon offer.

The purpose of the blog entry isn’t to trash Groupon’s value proposition. I am certain many consumers and businesses have had very positive Groupon experiences.  Instead I am recommending businesses pondering a Groupon offer that you analyze the true cost of the offer on your image, staff, physical inventory, cash flow, already loyal customers and your bottom line.

Where does this leave Groupon?  I would recommend that Groupon sells to Google before the margins in the social buying space start shrinking and Google builds their social efforts around this user base.  Typical of highly profitable businesses like Groupon, competition will come and the only way these new competitors can compete is to do it cheaper.  I believe over time you will see Groupon work harder to maintain their current market share at drastic discounts compared to the current 50%.

Please tell me Groupon’s launch of Grouspawn is a tongue and cheek joke announced by Groupon CEO, Andrew Mason, today at TechCrunch’s Disrupt conference in San Francisco.  You make the call!

Game Dynamics: Why they work

I have to begin by saying that I was probably the most skeptical critic when I first saw Foursquare.  Really, you think I want to disclose my location to others so I can become the mayor of Walgreen’s or Starbucks?  Guess what…I kind of do!  Much to my surprise I am indeed motivated to check-in because I want to capture those elusive mayor titles.

Personally, I am much more motivated to become the mayor and not unlocking the “bender” or “photogenic” badges.  I still have not taken over a La Boulange mayorship yet despite serious checking in at various San Francisco locations.  I am hunting the pesky La Boulange because they offer the mayor 25% off your order.  To support the bakery’s participation in Foursquare I was not a customer until my pursuit of mayor title.  So game dynamics work? Yes, 58 La Boulange (Polk Street) check-ins over the past 2 months and still two shy of the reigning Mayor Kristy.  Maybe as the Mayor of my Starbucks I can past legislation giving all mayors free mocha’s.  Crowd sourced rewards?  Hmmm…

Let’s have a look at why they might work.  In my first post in this blog I asked people why they check-in and the only answer people selected was “its fun”.  I beg to differ, people check-in to satisfy themselves.  Yes, fun is satisfying but there is a psychological reward in ousting that previous mayor or getting your “crunked” badge. People love status and location based services feed this most basic desire.

I would suggest people check-in at different places for different reasons.  I check-in at a Giants game to let my friends know that I am available to grab a beer during the game.  However, I check-in at Starbucks only to defend my mayor title. Have a look at where people check-in the most:

Courtesy of BitsyBot.com

I would suggest a few other reasons why we use location based services: meet new people, see where friends like to eat/drink, learn about recently opened places, and even to earn a mobile coupon.   I have made a new friends through Foursquare when I asked them about their experience at Cafe de Amis, old friends have reminded me that BoBo’s has the best filet and crab in San Francisco, and one of these days I will get that 25% off at La Boulange.

However, I believe the most motivating function of game dynamics is that it is a game.  Layering a game on top of the real world is fun, challenging and rewarding.  I would suggest people will some day tire of vying for badges and will demand real world rewards.  I like to think our company, Guest List Nation, is ahead of the curve as we provide free entry into 70+ nightclubs for checking-in.  Although I do enjoy trying to oust Mayor Christy, I expect people will soon require more incentives to stay engaged with location based services.  I look forward to see what Facebook has in store for Places beyond SCVNGR’s current plans.

Bottom line, game dynamics work for different reasons.  Some people like winning something, some people like saving money, some people like sharing information and some people like to play games.  Voice your opinion, what motivates you to check-in?  Thanks!