Dave McClure wrote an interesting post today that touched on something I’ve been thinking about for a while. To begin I should point out I am not an investor nor am I a founder. I come to this article as an observer with concerns. Dave’s argument is that there are far too few investors with design/user-experience/marketing experience. I can only assume that to be true based on the state of technology today. Let me explain.
Building anything for consumers is a tricky endeavor and it takes time to get it right. Companies must have a firm grasp on what consumers want, develop solutions to meet those demands and be prepared to stick it out. In short, developing consumer technology is just as complicated as developing a consumer product. You can invest years in what you think people want only to find out that the demand has passed or your creation just didn’t hit the mark. (See Waterworld, Crystal Pepsi, New Coke.) The tech industry has yet to realize that it’s just another consumer products manufacturer.
What I observe in emerging tech today is a glaring lack of consumer-centric strategy. When Kevin Rose tells people to join Gowalla investors trip over themselves to back it and all of the early adopters rush to be a part of something new and shiny. What we forget is that middle America doesn’t watch Diggnation and they don’t understand why they should drop a slice of pizza at a venue or pickup a muscle car. They just want to know where they should eat tonight.
Startups like Foursquare, Gowalla, Digg and others all look like big opportunities to those of us inside the bubble. We see creations like FriendFeed get purchased by Facebook so it’s entirely rational for founders to create groundbreaking technologies that larger concerns will want to buy. The problem with that logic is that it misses the opportunity to create something bigger in service of a short-term payout. It simply outsources engineering for giants like Facebook giving them access to new scientific creations for their product and marketing teams to adapt into something consumers can use. In short, they get all the value and startups get a smaller check.
Back to Foursquare. Over the past month I’ve encouraged my friends to use it. These are people who have no idea what FriendFeed is and don’t care. To my surprise every one of them is on-board and use it daily. They get the basic value proposition because Foursquare does one thing and does it well. The gaming element revolves around badges and “mayorships”, essentially digital street-cred that encourages us all to compete against one another. Occasionally when one of them checks in, he sees an offer from a close by venue and occasionally takes advantage of it. It’s dead simple and it works. The ease of use makes it more attractive to consumers which leads to greater adoption. As adoption grows so do the opportunities for monetization which are increasingly clear for Foursquare.
Then there’s Gowalla. Insiders rush to it because Kevin Rose and Chris Sacca invested in it and tell us to use it. It features a gaming element that is both genius and overwhelming. Will Joe Sixpack (barf) ever understand why dropping a slice of pizza at a burger joint adds value to his life? Probably not but since it’s shiny and new, we think we should all get on-board.
Aside from the overbuilt UI, there’s the concept of finding and storing objects. It’s fun and seems cool at first, but over time leaves me wondering, what’s the value. Gowalla is one big scavenger hunt that runs the risk of becoming more of a game than a valuable entertainment companion. The confusion leads to less (or misplaced) adoption which in turn makes monetization even harder. It’s interesting to see how partners like Incase are giving it a go, but over the long-term what does hiding a few free virtual iPhone cases in Apple Stores do for marketers?
When you compare the intangible returns to brands like Incase with the types of real-time, same-day returns venues see with promotions on Foursquare, it’s easy to see who’s leading the monetization battle. Incase gained a bit of brand awareness. The yogurt shop made two sales.
So we have three examples. FriendFeed built a marketable technology, Gowalla built a pretty interface, and Foursquare built a solution. To those of us behind LCDs in the Bay Area, Gowalla is exciting because it’s so beautiful and if there’s one thing geeks love, it’s a beautiful design. But leave the Bay Area for a bit and you might discover that function wins over form. Average people care about finding deals (money), knowing what their friends like (community), and winning contests (ego). Foursquare solves those needs because it solves a consumer desire in a simple package. Nothing more and nothing less.
Back to Dave’s point. Perhaps the issue is that there aren’t enough investors pushing startups to build things that make sense to the other 229 million Americans on the internet who aren’t in Silicon Valley. Early adopters will always flock to new and shiny creations but they will only stick around until the next shiny object comes along. Average consumers will remain loyal so long as your platform adds value to their lives. If you need an example of blind loyalty, just look at Yahoo. Tech investors may find success looking past the quick payouts of outsourced engineering projects in favor of companies that have what it takes to become brands. The transformation from idea to brand takes a few years, but the payout for a successful journey is worth the wait.
