Startup valuations are going up. The ‘series-A crunch’ and imminent doomsday prognosticators can go suck it. I can’t argue that valuations aren’t ‘high.’ They are. But all any investor should care about now is where they go from here. And my math says they’re going higher because of asset reallocation, uninvested funds, and market under-representation of new digital media companies. These things comprise such a big theme that (almost) nothing else matters.
Asset reallocation….
Corporations (be they people or not) and people (be they corporations or not) are hoarding cash. In my opinion, recent reports of ‘The Myth of Cash on the Sidelines’ are, well, myths. Nominally, toward the end of last year, nonfarm nonfinancial corporate businesses held $2.11 trillion in liquid assets. Moreover, at these businesses the ratio of liquid assets as a percentage of total assets has turned up significantly over the last year reaching the upper end of its 30-year range. Individuals have built cash hoards too. And asset reallocation is a way more influential determinant than anything so let’s look at where this money could go….
Yeah, I know, it’s a car service. But it’s also an excellent example of what mobile payments is really about; that is, tap and go.
Sure booking your ride via iPhone with a few taps and seeing it show up on the map is pretty cool (except when it doesn’t show up and your downtown, cold, and drunk with unfortunately easy access to Twitter - sorry again fellas), but as I mentioned last month, my favorite part of the Uber (and GroundLink) experience is just getting out of the car when I’m done. No swipe. No cash. No processing. Just the inevitable, “So, we cool?” conversation with the driver. I’d already ‘opened my tab’ when I booked my car, so I could close it and pay on my phone. Automagically.
Everything we do should be this easy. And there is no reason why it won’t be.
Here is the future: we will use one application to: find a place to go, get a targeted/relevant deal, book our reservation, check in and share our location, get recommendations and tips, see the location’s inventory and place our order, check out and pay, and maintain our loyalty programs.
FIND+DEAL+BOOK+CHECK-IN+TIPS+INVENTORY/ORDER+PAY+LOYALTY
Foursquare is likely best positioned to win this future, though with ‘only’ 15 million registrations (and debatable ‘real’ usage), it’s got a lot of work to do versus Groupon (150 million subscribers), Facebook (850 million registrations and 350 million mobile users), Google (!), et al. Plus foursquare is missing the booking, inventory/order management, and payment systems.
But first, let’s look at what is probably the best vertically integrated app in this space: Starbucks mobile. Yeah, Starbucks. Its apps let users find a Starbucks should there not be a dozen on their block, see what items are available, order (sorta), pay (via a bar code scan), and get rewards. I.e., it hits most of the eight components above. Consumers have responded. Since the beginning of the year, the company processed 26 million mobile payments and users reloaded $110 million to their Starbucks cards via the mobile apps. Not bad, considering the company’s core business is coffee.
I feel like Groupon, LivingSocial, foursquare, and similar companies are providing the real-world equivalent of digital cookies. Here’s what I mean…. Ten or fifteen years ago there was lots of online content and everyone was trying to figure out how to monetize it. At the same time, there were lots of companies selling stuff online and they were trying to figure out how to get people consuming that lots of online content to come and buy lots of stuff at their online stores. And, lo, there was born the online affiliate networks.
This time, there is lots of mobile content and everyone is trying to figure out how to monetize it. At the same time, there are lots of local merchants selling stuff and they are trying to figure out how to get people consuming that lots of mobile content and apps to come and buy lots of stuff at their local stores. And, lo?
Just thinking about promoted / social discovery a bit more here…. I rambled last week about how Twitter will make lotsa money from promoted tweets similar to how StumbleUpon already makes lotsa money from promoted stumbles (both = promoted discovery); and a few weeks prior re foursquare and social discovery. But what if we think about them together and swirl in some daily deals…?
Today, foursquare is probably best positioned to deliver targeted, location-based relevant deals. (Even Peter Kafka figured that out yesterday;-)) And clearly foursquare can (and does) make some money from affiliate fees / lead gen for the Groupons and LivingSocials. But could a foursquare also charge to promote those deals? It’s kinda what Groupon and LivingSocial do already (upon conversion), but maybe there’s more. It’s certainly conceivable that merchants can either pay more money and/or offer better deal economics in exchange for better deal ‘placement.’ So if the deals are still relevant (based on location and user preference), why shouldn’t a location-based deals company be able to charge to promote ‘better’ deals. I smell another LBS revenue model. The inventory probably isn’t there yet. But hey, yet isn’t so far away sometimes.
Just thinking.
(Short enough for you, Novich?:))
Twitter’s gigantic freakin’ revenue opportunity is promoted tweets. And similar to how Google found its business model at Goto.com/Overture, Twitter is taking its cue from StumbleUpon. But first….
Remember when Google didn’t have a business model? Yeah, the Internet and media giant with a valuation of $150-200 billion, $35+ billion in annual revenue, and ~$15 billion in annual cash flow couldn’t figure how to generate revenue while it was growing like a weed before 2000. Then they ‘adopted’ the paid search model; i.e., took it from Goto.com (which became Overture, which was acquired by Yahoo), got sued by idealab (Goto.com’s parent), settled for 2.7 million Google shares (which would be worth over $1.5 billion today if they never sold it - but they did), and yada yada yada for more information, well, Google it.
The battle between Yelp and foursquare isn’t just heating up (with foursquare’s website relaunch), it’s also starting to smell a lot like the Google / Facebook war. (For what it’s worth, Facebook is winning that war.) And for good reason - by leveraging their respective social graphs, both Facebook and foursquare can and will give users information that is more relevant, useful, and actionable than can/will Google, Yelp, and other companies not infused with social DNA at inception.
Here’s the Parallel….
Seeing the imminent threat posed by Facebook, Google built and launched Google+. Google knows Facebook will launch products competitive with and potentially better than Google search and Adsense; thus, full throttle into social (after dabbling with Orkut, Buzz, Wave, et al.) More on that here. And about a year ago, Yelp added check-ins and more Facebook / social functionality after catching wind of the potential threat from foursquare. Smart moves on both parts, but by almost any account, neither Google+ nor Yelp check-ins has had a materially negative impact on Facebook or foursquare activity. For example, as of midyear, foursquare had over 10 million registered users, crossed a billion check-ins, and averaged 3 million check-ins per day. Yelp claimed 5 million total mobile users in its S1 and I can’t imagine check-in volume (even per user) is anywhere close to foursquare’s. I’d also argue that neither Google nor Yelp has become particularly ‘social’ relative to their social-from-the-ground-up peers, despite their valiant efforts.
Caterpillar Cowboy: Notes from Yelp's S-1 IPO Filing -
Some quick thoughts after skimming Yelp’s S-1. Read it in the raw here.
- 22M reviews of 19M businesses, averaging 100 words per review.
- 529k businesses have “claimed” their page.
- 19k local businesses pay for advertising, spending an average of $234/mo.
- Yelp made $40M in local…
First of all Rat, you never let on how much you like a girl you’re impressed by an investor. “Oh, Debbie @fredwilson. Hi.”
Two, you always call the shots. “Kiss Invest in me. You won’t regret it.”
Now three, act like wherever you are whatever space you’re in, that’s the place to be. “Isn’t this great?”
Four, when ordering food pitching, you find out what she your investor wants, then order for the both of you pitch accordingly. It’s a classy move. “Now, the lady my users will have the linguini and white clam sauce, and a Coke with no ice.” [Note: this was a tough one to co-opt!]
And five, now this is the most important, Rat. When it comes down to making out getting a term sheet, whenever possible, put on side one of Led Zeppelin IV.
: Check-In Based Ad Platform LocalResponse Raises $5 Million From A Slew Of Investors -
Alyson Shontell | Oct. 12, 2011
LocalResponse, a location-based advertising platform that runs across social media networks including Foursquare, Facebook and Twitter, has raised $5 million in equity financing.
Investors include Cava Capital, Vodafone Ventures, Advancit…
