NextWala

Notes from my App Store panel (China Mobile, RIM, Qualcomm and others)

I moderated a panel at a conference held by Silicon Valley-China Wireless Technology Association (SVCW) this past Friday. Here's the video - my commentary/learnings from the panel are right below the video (this is on LiveStream, not YouTube):

In many of the conversations here in Silicon Valley, it seems like we've already moved past the app store phenomenon and are asking questions like "Is the App Store dead?".  My viewpoint is really around "What's New?" and what will sustain the spread of similar discovery/monetization/distribution  methods across different device types and across the world.  It's also interesting to note how On-Device Portals (ODPs) and app stores have been around for years, but how the success of the iPhone App Stores is now spurring more open-ness and innovation.

Some learnings from the panel:
- China Mobile - announced the Ophone last month (August 2009). 70/30 split of revenue between developers and China Mobile - however, developers will be paid in RMB - no way to convert to dollars, as far as I can tell. Also, they will open up the address book to integrate into apps as well as enable better discovery of apps through finding out what your friends have bought (interesting - this is not possible on the iPhone app store today).  When asked about censorship of applications/content (similar to what's done with the Internet in China), the answer was that there is a legimate balance to be struck between and open-ness and security - China Mobile provides verification related to viruses, non-device-friendly applicatoins, customer support costs etc. China Mobile now has a Research Lab in Silicon Valley which is hunting for new technologies to take back to China - contact Shanquan Bao at the Research Center if you're interested.

- RIM - 70%+ of RIM's customers are now consumers, as opposed  to enterprise subscribers.  RIM has ~5000 apps on its Application Center. They have launched App Centers in 30 countries so far. Lowest price-point for apps is $2.99 - they want avoid the real cheap/free apps.

- HipLogic - The company will launch an app store & development platform with Carphone Warehouse in the UK. May 2009 press release here. Interesting to note how a device retailer (with market power and a long history of providing value-added services on top of devices) is thinking about platforms, discovery and distribution for itself, rather than leaving this up to the operators or device OEMs.

- Qualcomm -Qualcomm has paid out $2 billion to developers over the past 8 years, since the launch of the BREW platform.  Qualcomm has launched its Qualcomm Plaza Retail strategy for driving foot traffic to BREW-powered operator app stores. The subscription model has been most successful for its apps over the past several years (this is completely lacking from the iPhone App Store for now).

- HiSoft - Charles Yu had a great view on the comparison between mobile app stores in different countries. Charles' view on app stores shifting power away from mobile operators toward developers was that this is the case in the US but definitely not the case in China and other emerging markets.  He said that, in China, this control is for others to pry out of the hands of the operators.  Subscription accounts for 70-80% of application revenue in China.  Charles also had a great point around how operators and developers interact around controversial apps or content in China - he said that operators essentially hold back payment from developers until they comply.

- Aeroprise -  Dan Turchin, CEO, said that the app store doesn't make sense for enterprise apps distribution or monetization - Aeroprise provides mobile enterpise apps.  However, they are close partners with RIM. He also mentioned a site that tracks how much sleep the Apple iPhone application reviewers are getting - www.148apps.biz!  8500 apps submitted per week. Reviewing 2000 per week, so backlog growing 6500 per week. Staff of 40 full-time people at Apple doing these reviews - unsustainable, according to Dan.

Venrock: Shaping the Future, 40 Years of Innovation

Here at Venrock, we are proud to celebrate our 40th Anniversary and we have commemorated our history with the book, Shaping the Future, 40 Years of Innovation. The book is displayed through a widget from our portfolio company, SlideShare, of course! Click on the button on the bottom right hand corner of the SlideShare widget to see the book in full-screen mode.  

Venrock: Shaping the Future, 40 Years of Innovation

View more documents from Dev Khare.

Do you want ads in the backseat of your taxi?

I don't know why but I seem to be morbidly interested in how taxis are getting connected (I have a previous post on the Digital Taxi here).  Taxi fleets have been early adopters of connectivity technology for purposes of logistics/coordination and they are pioneering the integration of multiple connected devices in the car for commercial purposes.  And New York City's taxi fleets are the earliest of early adopters, compared to other cities in the US.

Now, this early adopter community is turning to back-seat advertising. I was in New York City two weeks ago and noticed, during my frequent taxi-rides, that virtually every taxi there has an interactive digital screen in the back-set, in addition to a card-swipe to pay by credit card and receive a printed receipt.  The devices have been built by Verifone. 

Turns out there are two competing offerings across New York. One side includes Verifone (Transportation Systems) in partnership with WABC.  The other side includes Creative Mobile Technology together with ClearChannel and NBC Universal.  A New York Times article on this is here.

The real twist in this tale seems to be that cab drivers hate this system with a passion - they have to listen to the same news snippets and advertising jingles over and over again. It drives them crazy!!

Local content (GPS tracking, local weather, celebrity news etc.): This screen has a map with the taxi's location on it (presumably tracked through GPS). Note the tabs on top for news, weather, sports, dining, etc.  Live TV is available (Accuweather news in this screenshot) - New York's local ABC affiliate WABC is running this Taxi TV network. 

Display and video ads: Advertising is a prominent part of the screen real-estate - I noticed a healthy distribution of ads (not just house ads), including ads from the Red Cross, New York Times and others. I called the number listed on the screen and it directs to WABC's ad sales team. The New York Times suggests that all 13,000 of the city's taxi cabs are equipped with some sort of interactive display technology, whether from Verifone or others.  Let's assume each cab is running for 12 hours a day - this amount to 156,000 hours of viewer time per day or roughly 57M viewer-hours per year which makes it a nice little property (a back-seat passenger is somewhat captive and so this viewer-hour may be worth more to the network than the equivalent time spent in front of a TV at home).

The Connected Car (from The Economist)

 
(Photo by Mark Stosberg)

The current edition of The Economist has a nice article, including some thoughts from yours truly, on the Connected Car.  There are a bunch of interesting trends converging in the new few years that you should try out (safely!) - in-car navigation, car-to-car connectivity, traffic data availability, pay-as-you-go insurance, new ways of creating digital maps, asset tracking, wireless diagnostics, local search, electric vehicles etc.  And many of these ideas are available today, including some from Venrock portfolio companies INRIX, uLocate and Aha Mobile.  Some ideas, such as vehicle-to-vehicle connectivity for driving safety are a decade or more out, in my opinion (see my post on Smart Intersections from a few months ago).  Additionally, the auto industry (now that it is reinventing itself) should not forget that mobile phones/devices are going to be an integral part of the in-car experience.

Coincidentally, just a few weeks ago, I met with Rahul Mangharam (mentioned in the Economist article) at the Moore School of Engineering at the University of Pennylvania, my alma mater.  He's conducting very interesting research into traffic congestion, predictive traffic, automotive safety and next-generation automotive electronics.  Also mentioned in the article is the Stanford CarLab (Cliff Nass and Sven Beiker) which we know well. They're doing some exciting work on human-machine interfaces in the car.

An area that I am particularly interested in currently is the idea of using field-generated and user-inputted data (both explicitly-inputted and implicitly-generated) or crowdsourcing for building geographically-defined databases that can then benefit all stationary and mobile users - examples include traffic, maps, points-of-interest, photos, reviews, retail activity etc. 

Learning from you, my 64 subscribers

(Photo by vernhart)

I just read Eric Ries' post on learning from his blog subscribers.  I'd like to try his approach and I'm hoping my ego can handle it (and I will plagiarize & paraphrase his questions below - thanks Eric!).  So here goes:

If you have a minute, post your answers in a comment, or email me at dkhare at venrock dot com. Here's what I'd like to know:

1. On a scale of 1-10 (where 10 is most likely), how likely is it that you would recommend this blog to a friend or colleague?
2. How did you hear about it?
3. What led you to become a subscriber, versus just reading an article and leaving like everybody else? (or, if you're not a subscriber, what would it take to convince you?)
4. What do you hope to see here in the future?

Thank you!  I appreciate your time and input greatly.

Cheers,
Dev

Electric cars & telematics - no match? (updated)

[April 18 - I've added, to the bottom of this email, comments regarding this post received on LinkedIn]

I originally thought that electric cars would be more naturally inclined to have advanced telematics, including energy monitoring/management and wireless connectivity to web services. Over time, though, I've come to think that there is no inherent technical reason why electric cars are more amenable to telematics than gasoline-powered cars. 

However, the one crucial difference is that electric cars are being designed from the ground up TODAY whereas gasoline-powered cars have decades of legacy components, legacy architectures and entrenched cultures/bureaucracies surrounding them.

Will we see better-than-expected IT/telematics from Chevy Volt, TH!NK's city, Fisker's Karma, Reva etc.?  I hope so, especially from the US-focused companies.  Probably not from the emerging markets-focused companies such as Reva.

And today, I realized that this wish may come true, while watching the Techcrunch video of the test-driving of the Tesla car.  It seems like the upcoming Tesla model has a great screen in the cockpit with mapping and other related functions (I sure hope it's a connected service, as opposed to a pure on-board system).  The company's website certainly does not show anything remotely interesting in the cockpit.  See below for the video of the Tesla test-drive.

April 18 update - I posted a question about the relationship between electric vehicles (EVs) and telematics to LinkedIn a week ago. Here's a synopsis of the many comments that people made there - comments came from Renault, Gragras SAGAsystem, Fleetmatics, Applied Computer Technologies, Hughes Systique, Sirius Satellite Radio, iSuppli, Atlantic Management Strategies, Frost & Sullivan, Mercedes-Benz and VisionSeeds.  Thank you all!

• EVs need to be more proactive/predictive about the remaining miles that the car can travel on its current charge. This is because charging points are sparse and traffic conditions and driving behavior greatly affect the performance of the car.  As a result, traffic and location-based information (such as location of charging points or parking spots), combined with predictive algorithms, could be of great use to EV OEMs.
• Telematics need to be an provided on an open platform for EVs, so that new applications/services can be developed that tie into mobile devices etc. Proprietary approaches such as from Onstar will not survive much longer.  The auto OEM has to make performance data available to 3rd party devices and also enable third-party devices to have some (controlled) effect on performance.  
• There is an even split between people who think that EV OEMs will provide built-in telematics functionality versus those who think that mobile devices will incorporate this functionality and then interface with the cars to take in and put out information. Personally, I think this depends on the type of telematics you are talking about - if it is performance- and energy-management-related, then IMO it will have to be embedded in the car.
  
• Some comments said that EVs will be premium-priced for quite a while and therefore consumer will expect whiz-bang features such as telematics, connectivity, diagnostics, energy management etc. as a standard part of the MSRP.  (Wireless) connectivity should come standard with all EVs, given the initial audience for these cars. But what's the recurring revenue business model that will fit with consumer expectations? 
  
• Telematics is a fuzzy term, incorporating energy management, LBS applications, diagnostics, roadside assistance, navigation, entertainment services etc.  Some of these areas will differ in traction between EVs and gasoline-powered cars, some will not.  I personally think that energy management/predictive intelligence will be key for EVs.  All the other features mentioned above can also be put into gasoline-powered cars equally well - the only difference is the early adopter audience for EVs which will (I think) expect a lot of these features.

Confessions of a Car Salesman

 

(Photo by Roadsidepictures)

I have just returned from Leadscon, which focused on online lead generation and was sold out.  The online lead gen business was worth nearly $2B in 2008 and the key verticals were mortgage, auto and edu with emerging verticals include home improvement, car repairs etc. (i.e. anything that puts off a new capital purchase for as long as possible).  The biggest issues seemed to be trust and transparency between lead buyers and sellers.  I'll write more about my learnings from Leadscon in the next post. 

The experience got me thinking about how the automotive industry is dealing with lead generation, especially with the severe downturn in auto sales. After all, in this industry, 'leads' have historically walked into dealerships, driven mostly by self-motivation but also by large scale advertising on TV by auto OEMs as well as smaller-scale advertisments in local newspapers and other media outlets by dealerships. 

The last decade has seen the Web impact car buying in a big way, putting pressure on dealership margins, as well as enabling a whole new channel for lead generation.  Companies like Edmunds and CarsDirect have emerged as lead gen leaders.

I'll put two contrasting scenarios in front of you, as food for thought. More in subsequent posts:

Legacy scenario: Confessions of a Car Salesman - article on Edmunds.com.  The writer went undercover to work at a car dealership and exposes the inner workings and psychology of the dealerships. Here's an excerpt from how the author was trained to negotiate with a buyer:

"But here's the beauty of this system," Michael said, "these numbers aren't coming from you — you're still the good guy. They're coming from someone on the other end of the phone. The enemy."

Michael returned to his scenario. "OK, so when you give these numbers to the customer you say, 'Here's a pretty good deal for you.' But Mr. Customer says, 'Oh man! Michael, I told you I can only put down $3,000.' So you cross out the $6,000 you wrote and put down $5,750. You say to the customer, 'Is that more what you had in mind?' And you nod as you say this. Try to get them agreeing with you."

This reminded Michael of something and he laughed. "Here's another thing. Never give the customer even numbers. Then it looks like you just made them up. So don't say their monthly payment is going to be $400. Say it will be $427. Or, if you want to have some fun, say it will be $427.33."

While Michael was training me, he didn't ever say, "Here's how to cheat the customer," or, "This is how we inflate the prices." In fact, he stressed that I was supposed to treat customers with respect to build a strong C.S.I. (Customer Satisfaction Index). But manipulation and overpricing was inherent in everything he said. The reason for this was simple — without overpricing we couldn't make a living. What we were selling was profit. Or, as Michael put it, "This is money for you — money for your family."
.

Future scenario: Zag.com got financed last month to the tune of $37.4 million.  Zag is an 'online auto-buying service that saves consumers money when buying cars.'  The keys to its business model include group buying and distribution through affinity groups (such as AAA, Parenting.com and, yes, the NRA).  Imagine hundreds of buyers grouping together to buy hundreds of cars at one shot (no pun intended)... the bargaining power is immense. But the key is that dealers are incented to participate through a fixed price model as well as lead generation over the Web.  How much better is this than going to a car dealership?  Find out more by clicking on one of the links below:

USAA - www.usaa.com/auto
AAA MidAtlantic - http://aaamidatlantic.zag.com
Other AAA clubs - www.aaa.com/autobuying
Upromise - http://upromise.zag.com
Administaff - http://driveyourdream-adm.zag.com
National Rifle Association - http://nra.zag.com
American Express - www.amexnetwork.com/autos
Overstock Cars - http://cars.overstock.com
CapitalOne - www.capitaloneautobuying.com
Parenting - http://parenting.zag.com

At Leadscon

I just landed in Las Vegas and am attending Leadscon over the next couple of days.  The conference is sold out which is saying something in this down economy when most tradeshows are being down-sized or cancelled.

I'm interested in lead generation in this recessionary environment.  If performance marketing is (somewhat of) a safe harbor in this environment, then there must be several businesses that are benefiting from lead generation / CPA. Digital goods/services providers are benefiting, for sure. I wonder how auto OEMs, consumer electronics providers, durable goods providers and others are leveraging the recession - notwithstanding their own specific industry problems, all of these categories would probably benefit from shifting 10-15% more of their ad spend online (from TV and other traditional media).

Some of these areas that are benefiting include:

• Incentivized rewards - TrialPay, Offerpal, Super Rewards etc.  Incentivized rewards have had a great ramp in the past year, providing a solution to the monetization problem faced by social network app developers.
• Virtual goods - Facebook, Hi5 etc. have all introduced virtual goods and many social network apps vendors as well as MMOGs have embraced virtual goods wholeheartedly.  Leveraging this trend, Venrock is an investor in TwoFish which is a "virtual economy data platform that harnesses powerful post-purchase intelligence to manage virtual economies for leading social, gaming, and entertainment experiences."
• Subscription businesses - Netflix, ShutterFly etc.  One of the takeaways from the recent Jefferies Internet and Media conference was that "more subscription based models are likely to emerge given the current ad weakness."  Based on this thesis, Venrock recently invested in Aria Systems which is a leading provider of on-demand subscription billing products.  

If you are one of these companies benefiting from this recessionary environment and are at the Leadscon show, give me a ping today or tomorrow.

Turn-by-turn navigation prototyped on the Apple iPhone

The industry's been talking for over a year about turn-by-turn nav becoming potentially available on the iPhone.  The size of the iPhone screen is as big as many GPS personal navigation devices and, in my opinion, would be more than ideal for in-car nav, when mounted on the car windscreen.

Apple's iPhone SDK Terms & Conditions do not allow turn-by-turn nav - when I ask around, I hear that the reason is probably mostly technical (i.e. background processing on the slow iPhone chip would really eat up compute cycles and potentially interfere with the primary functionality of phone calls and music).  I've also heard that Apple may have designs on the navigation space itself - there have been rumors that all the mobile nav apps companies, including Telenav, NIM and Decarta, have gone through a beauty contest at Apple headquarters in Cupertino

Now we have a prototype of a working turn-by-turn nav app for the iPhone.  Thanks to The iPhone Blog for catching this demo at Mobile World Congress.

 

(Photo by: The iPhone Blog)

I think it will be quite a while until Apple allows this to appear on the App Store, unless the iPhone chipset gets faster. Not only are companies like Sygic interested in the iPhone market, I'm sure many of the GPS device makers such as TomTom, Garmin and (formerly) Dash would be interested. The ad-supported nav vendors that have appeared in Europe over the past year are probably also watching developments on the iPone - these include Amaze and Nav4All.  There are also a slew of consumer-generated (maps+traffic+nav) companies that will be launching soon that will look at the iPhone market.  Stay tuned!

Smart intersections are several years down the road

There has been a steady amount of talk about vehicle-to-vehicle (V2V) communications as well as IntelliDrive/vehicle infrastructure integration (VII) over the past few years. There's a Catch-22 problem here - I don't believe this benefits any startup or even large auto OEMs until every car has it - that won't happen till governments put a large amount of capital into funding the roll-outs. So, IMO, the market is a decade out.  What do you think?

The Wall Street Journal posted a video of this space today:

Here's a scenario from a Gearlog article: "We are traveling at an impossibly high speed along the Autobahn when a stalled Cadillac CTS looms ahead. As if sensing its plight, the Caddy's brake lights and backup lights flash. A warning flashes in my car's dashboard, the seat vibrates, and then powerful disc brakes bring us to a halt just a few feet from disaster—all without the driver touching a thing. The demo actually took place in the parking lot of Giants Stadium at about 20 mph, but one day it could happen on the Autobahn, or on Interstate 80, at serious speeds."

For those of you who've made it this far, here's a fun clip from a motorcycle on the German Autobahn: