Tuesday, 29 July 2014

Google's Next Opportunity Could Spell Serious Competition for Facebook on Mobile

As I mulled over Google's (GOOG) Q2 earnings a few weeks ago I couldn't help but think that Google is still missing a huge opportunity:  helping more developers get discovered on the Google play store.

Ask any mobile app developer today what their biggest problem is and they will probably say two things:

1.  Make more money on Android
2.  Get their app discovered on the Play store

Apps have become big business for Google.  Android's +Sundar Pichai claimed that it had paid out over $5 billion to developers over the past 12 months.  Some back-of-the-envelope analysis coupled with folks I spoke with estimate that the play store will pull in between 3.5 - 4 billion dollars this year in topline revenue.  Not bad.

Impressive numbers but in reality - Google is still scratching the surface.

When it comes to discovery on Android the solution basically boils down to one thing: Facebook (FB). Every single developer I talk to, including those in our portfolio here at Signia Venture Partners, will tell you that Facebook is the biggest, most important and most expensive source of app installs they have.

The problem with Facebook ads though is that as Facebook's targeting and quality has improved, larger players like King.com (KING), Supercell, Machine Zone, Zynga (ZNGA) and others have gobbled up inventory driving up the cost of installs to levels that simply exceed the Lifetime Value of Users (LTV) for most developers. While the cost per install on Facebook today is somewhere between $3-$4 per install, in September of last year, for example, one of our companies saw CPI go north of $5 which simply wasn't sustainable for their business model.  In fact, according to data released by Superdata, between 2012 to December 2013 the CPI has gone from $1.30 to $4.36; an increase of 288%!

(source: Superdata)

The solution: the industry needs more sources of quality inventory to help bring down prices.  But while some industry watchers think Twitter (TWTR) might have the solution it's actually Google that's sitting on a goldmine: the Play store itself.

Before I joined Google in 2011, I ran marketing for a venture-backed alternative app store called GetJar (acquired this year by Sungy Mobile: GOMO).  GetJar provided an alternative to then Android market by allowing developers to distribute apps to consumers via its mobile web store.  So how did it make money?  Through advertising on the app store itself.  GetJar has an ad-based solution where it allowed developers to bid for actual placement across the store.  Developers could bid for installs by OS, handset and country and a high enough bid coupled with the apps quality score would get them featured in one of several listings either on the home page or across one of the other pages in the store (these appeared in the store as a "sponsored" listings - see below).  If a consumer then clicked on the ad and installed the app, the developer would pay GetJar the value of its bid.

(Source: GetJar homepage on mobile)

The whole model functions much like say... Adwords actually.  So imagine if Google actually added an advertising solution to the play store itself allowing developers to bid for visibility and installs directly on the store front?  What could the economics look like on the revenue side?

For starters, at GetJar about 8% of our downloads were monetizable (back in 2011) - that is we were able to get paid for those installs.  Now GetJar didn't have Google play's scale so lets say Play is only able to sell 4% of their installs. If we assume play downloads are somewhere around 2.9 billion per month (45% more downloads than IOS which is roughly tracking at 2b / month according to Statista) then we're talking about 116M downloads per month.  If we take the median CPI for Android downloads globally according to +Chartboost of around $1.10 then we're talking a high margin ads business worth an additional $1.5B a year in revenue.  Better yet, the cost side of running this business would probably be small for Google.  The existing sales team and ad ops team that currently sells Admob and other mobile search inventory would probably manage this business and 100% of the traffic comes from the store itself (so no traffic acquisition cost (TAC).

More importantly, everybody gains from this.  Developers gain a new, lower cost traffic source for their installs.  Consumers win by discovering new apps / games and other content promoted by the content owners that they might not find otherwise and Google unlocks an additional high growth, high profit revenue stream.

The only possible losers - Facebook (FB), Twitter and nearly every other app install service / ad network out there.  So what is Google waiting for? Well there are a number of reasons why they haven't taken this on.  First, it's a question of focus.  Google has been scaling at an incredible rate and has also been very busy continuously launching new verticals internationally.  Books, Movies and Music continue to expand abroad and this is surely taking up a lot of their resources.  They are also constantly working on improving payments and stability for users which requires resources if they are going to keep users happy.  Second, their could be anti-competitive reasons.  It's well known that over 90% of their business is from games.  These same game developers acquire traffic from many different sources.  Launching an ads business might be good for developers and users but it would negatively affect folks like Chartboost, Fiksu, Twitter and even Facebook.  This could be seen badly by regulators and those affected would likely cry foul.  Finally, there is always going to be the user to keep in mind.  Users might react badly to ads being injected into the store front.  Likewise, they might think Google is using their data to promote certain apps to them which, though it might be welcome by some users, would have privacy zealots running to man the barricades.

So Google must have its reasons for not launching this type of a service to date.  However, given the natural consumer and developer need I think it's more a question of "when" not "if" Google plans to launch a service like this.  The opportunity is simply too obvious to be missed.

Friday, 25 July 2014

Start-up Founders Guide to Public Relations

I've often been amazed by how under-utilized PR is by companies in Silicon Valley.  Often, the vast majority of press you read is limited to simply funding announcements,  product launches and M&A. Since most companies can go quite some time without either of the above happening, many companies pop up onto our radar only to disappear just as quickly as they appeared.

In addition, the few times that companies have the opportunity to get on +Techcrunch, +Venturebeat or the +WallStreetJournal, they don't fully take advantage of the opportunity when they have unclear messaging, rambling product descriptions or miss the opportunity to tell us how their company truly differentiates in the market place.

Finally, when #startup entrepreneurs do get it right they get a brief 24 hour spot in the sunlight which is basically the only public presence that they have until their next press release 6 months later.  What kind of brand presence can you build and sustain over 6 months with two press releases?  Not much.

The reality is that if you're going to do PR seriously you need to need to be religious about it.   Like sales, customer retention, 30 DAU's etc you need to set yourself some goals, measure performance, iterate and improve.  Most importantly, you need to be on it constantly.

When I ran marketing at #GetJar several years ago we put out 2-3 press releases each month.  These were then measured and tracked using #Meltwater and we could go back to our board at the end of the month and tell them the exact dollar value of PR, where we achieved coverage, how much we had vs. competition and how much it cost us to get there.  Not only did we release the obvious like funding announcements, key hires and awards but we also heavily promoted our strategic partnerships with the likes of #ATT, #Yahoo! and others.  We leveraged our data to create blog posts giving people an idea of where the app industry was going (like the App Sizing report with +ChetanSharmaconsulting), which platforms were relevant, which apps most popular and what this meant for the industry as a whole.  We had an opinion and weren't shy about expressing it.  The results at the time spoke for themselves: coverage in every major tech blog on nearly a quarterly basis, winning over 1/2 awards over 2 years, being nominated as "One of The Companies that will change your Life" by #TIME magazine in 2011 and appearances on #CNBC, #BBC, and #Reuters to name a few.

But that's not really the point of this post.  The point is that anybody can significantly boast the visibility and even value of their company by understanding the basics of doing good PR.  Hiring the right agency, the basics of writing a press release, how to leverage social media like #Facebook, #Twitter, #Google+ and #Quibb to make your news go viral and how to evolve the structure of your PR efforts as your company scales.

So enough talk - to make it easier for you I've put together this short Intro to Public Relations deck as part of my work here at #SigniaVC.  It's only about 20 slides and should be short and simple reading.  I hope you enjoy it and feel free to post, tweet me #madmork or email me if you have comments or questions.

Good luck!

Madmorks' Intro to Public Relations