Image Image Image Image Image




Labor vs. Capital, when technology’s involved

For a recent project, I spent some time talking to executives in an industry about what new technologies they would like to see. Labor-savings were a priority for (1) safety (some  jobs were dangerous or injury-prone) (20 labor availability (varying degree of  mechanization / labor shortages) and (30 cost savings. [1]  The problem wasn’t unions, but that no one made the kind of new equipment these companies wanted.

Management Consultants are agents of Capital. We are generally hired by, and work for, senior management and other corporate stakeholders. But that doesn’t mean that we are in constant opposition to Labor: all situations are more productive if management  puts down their copy of  The Expropriator’s Handbook for a bit and focuses on improving the company as a whole. But it does further emphasize the socioeconomic and demographic divide that alienates many from labor forces and unions. I was thinking about this recently when reading commentary online about the transit strikes in the SF Bay area. [#]

Read more…



What is behind Snapchat’s valuation? Networks.

Fortune’s Dan Primack wrote a post a few weeks ago asking, “what is behind Snapchat’s valuation?” in a recent round that pegged it at $800M pre-money. He was perplexed by the seeming lack of good, non-generic reasons for an investment from IVP.

I’m not surprised IVP didn’t precisely explain their reasoning – but it isn’t hard to figure out their logic.

Snapchat is worthwhile not because “we love LA” or because it’s “mobile first” (reasons 8 and 1, respectively offered by IVP’s Dennis Phelps). Snapchat is interesting for three principal reasons:

  1. It’s growing really, really, really fast
  2. It’s a new, different kind of communication
  3. Because of (2 + 1), it is or can become a powerful network and communications medium

That’s all you need! (1) would be enough for some – momentum VC! – but (2) provides a philosophical justification and (3) the economic one. Let me explain this reasoning a bit.

[1] It’s growing really, really, really fast

I won’t go into a lot of detail here – you can find public metrics to help support this, and see also Mary Meeker’s Internet Trends report from a few months ago which had good slides on Snapchat.

Key points: >100% Month/Month growth seen this year; more sharing users than Instagram; ever-growing share of total # of photos uploaded as well.

[2]  It’s a new, different kind of communication

Other photo sharing services are based on the premise of either (a) photo curation / memory preservation or (b) experience sharing. But  in all instances, photos are meant to preserve something.

Snapchat is ephemeral by nature and as such it enables photos to be used in ways they could not or were not used before. The medium is different and the constraints push people to interact in new ways. Snapchat is not the same as Facebook, or E-mail, or Texting, or whatever else.

[3] It is or can become a powerful network and communications medium

Because it has a large userbase with increasing penetration, Snapchat can easily end up in an Instagram-like position of having an accidental, but important, social network. At time of acquisition by FB, Instagram didn’t just have a killer ‘feature’ in the form of great photos and photo-sharing: it had a killer potential, in the form of its social networking functions and innate connections.

Because it is qualitatively different as a way to communicate, Snapchat can have the same features but have them be less immediately fungible. There can be platform lock-in. If you have a lot of people together, and you control how they communicate… that starts to look like a pretty good place to be, whether you’re a social network or another sort of provider. Manning the crossroads, you can usually find a way to collect a toll or otherwise cover your rent.

So what?

But that only explains why Snapchat is interesting, and why it might have some future platform to make money. It doesn’t really explain in any monetization logic how the present value of its future (etc.) is $800M today.

To do that, you have to use a bit of VC and Silicon Valley logic and pixie dust… its value is what the market will pay, and right now there are those who will pay reasonable well for a potent, sticky social network. The trick is to be able to make enough money on your own to choose your fate – whether to try to build a business or to accept a fair market premium from a hungry, behind-the-curve suitor.

Primack also missed the obvious market opportunity – reveal that Snapchat never deletes Snaps, and start a ‘premium Snapchat’ model where you have to pay to keep any blackmail-worthy shots from being revealed!

I don’t know that $800M is the right price for Snapchat, but if someone else wants to put money there, I’m interested to see where it leads. There are worse places on the investment continuum between Angry Birds for Dogs and ventures providing water filters to villages in Africa.



Why Google’s payments strategy isn’t working

Google has been trying to make waves in payments for a long time now. Google Checkout was launched in 2006; Google Wallet in 2011. Businessweek did the numbers and found Google spent ~$300M acquiring different payments startups in recent years. But for all the product launches and engineers, there isn’t much traction to show for it – in terms of market share, or profits. Why?

In my estimation, Google’s strategy is failing because its tactics (promote new payment system) are misaligned with its real strategic goals (get access to super-valuable payments data). Its missteps are confusing by any measure, but make more sense when looked at this way.

Let’s look at four questions:

  1. What is Google trying to do?
  2. Why does Google care about payments?
  3. Why is it failing?
  4. How could it do better?
Part One

What is Google trying to do?

Google is trying to promote the adoption of Near-Field Communications (NFC), a technology that lets you use your mobile phone to pay for things by linking it to your credit card, bank, or a digital wallet. This is supported in Android and included on many millions of Android devices. Today, the technology has a 2% share of mobile payments, expected to reach 5% by 2016. [1]

However, instead of NFC, most people are using credit cards, cash, barter, etc., with no signs of quick change. People who do use mobile payments, are more likely to be shopping online, conducting bank transfers, etc., than they are to use NFC. Hence, this explanation…

Read more…



The Tangled Social Webs We Weave (Network & Relationship Visualizations)

Last week I wrote about people and networks in business at a high, abstract level. Today I want to zoom in. The lead picture here is a snapshot of my LinkedIn network from the InMaps tool. It’s awesome and it’s powered by magic. But it’s more than just a cute visualization – it tells us interesting things, too. (I’d love to see what the LinkedIn data teams have done with the information, e.g., how different segments of network users vary in terms of how their networks look.)

For me, my map of ~300 links clearly shows distinct networks of which I am a part.

I’ve labeled these in the image below. The interesting thing is that each is a different shape. Read more…