mCommerce to hit its tipping point

I believe we have, or are about to reach a tipping point for mobile commerce or mCommerce.

Digital Cameras came around in the late 90′s then became affordable. Flickr launched, it exploded.

In the first few years of the last decade, we hit a tipping point where broadband access become ubiquitous. This made streaming video over YouTube a possibility. YouTube exploded.

The iPhone was released June 29, 2007. The Google Android OS was released shortly after. It has only been 4 years but during this time society has already adapted to the smartphone revolution. This industry is exploding.

MasterCard PayPass has quietly been rolling out Near Field Communication (NFC) readers that are more or less ubiquitous across retailers in the United States. The market is now ready and wired to use smartphones as a payment device and as a purchasing device.

Furthermore, Google announced Google Wallet last week. You can be sure that the iPhone 5 will have NFC capabilities as well. Your credit card number will be stored in your smartphone.

Smart phones are within 3 feet of 90% of smartphone users 24 hours a day.

How are you going to capitalise on this mega-trend?

There has never been a better time to be an Entreprenuer

There has never been a better time to be an entrepreneur (I don’t like using the word entreprenuer. I don’t think it is a humble description of ones self and it has a stigma of self promotion attached to it.) however there has never been a better time to be one.

Here are 5 reasons why:

1. Twitter – Twitter is a great tool for keeping up to date with the latest trends. I learn A LOT from twitter. I use it mostly to listen, but it is also an excellent communications tool. Five years ago you had to read a biography to learn how admired world leaders, business leaders and philanthropists think. Today you can follow them on twitter to understand what they are thinking about, how they spend their time and what is important to them right now, and apply these lessons to your own methods.

2. Incubators – Paul Grahams Y combinator has inspired a worldwide startup eco-system which is giving entrepreneurs a chance at real success without much risk. You don’t have to max out 3 credit cards or your parents mortgage anymore. For 6% equity you can have a crack at the big time and present yourself to real investors. These incubators are sponsors of innovation. They are seeding industrial and economic evolution and providing entrepreneurs with experienced mentors, advisors and relationships to assist them in building their businesses and fast tracking their success. I look forward to participating as a mentor in PushStart, an new Australian startup incubator launching shortly.

3. Low cost to market – Building a web based business is cheap. All you need is a good idea, a designer and a developer and you’re away. You can launch a business on a relative shoestring. Companies that needed $5m in the 90′s can get the same or better returns with $250,000 today. The development of mashable web apps, API based web services and free open sourced software coupled with cheap and scalable hosting is making it incredibly easily to create value for next to nothing.

4. Accessibiliy – Tonight I heard Fred Wilson of Union Square Ventures speak on the mega trends of technology at General Assembly in NYC. To put this into perspective, Fred is basically the Warren Buffett of venture capital. What is remarkable is the accesisibility of guys like Fred to entreprenuers. Of course I happen to be in NYC at the moment but nevertheless, if you want to cut through to these kings of tech, they are accessible by e-mail, twitter and in person. Furthermore over 40% of USV’s investments are made in first time entreprenuers. Fred and his peers understand the power of 3 hungry guys in a garage, and they want to know what you’re up to.

5. Ubiquitous access to web and mobile penetration – We’ve hit a tipping point where most of western society has access to high speed broadband. Most of us are now carrying around location aware 3G smart phones that allow for limitless possibilities of application usage.

Leadership

Simon Sinek teachers leaders how to inspire action in this epic Ted presentation.

Watch this video:

On hiring:

If you hire people just because they can do a job they will work for your money. If you hire people who believe what you believe, they will work for you with blood and sweat and tears.” - Simon Sinek

On leadership:

“There are leaders, and there are those who lead. Leaders hold a position of power or authority, but those who lead inspire us. We follow those who lead, not because we have to, but because we want to. We follow those not for them, but for us.” – Simon Sinek

 

Hustling your way to success on the web

Hustler.jpgThe fast track to online success takes more than a sexy website and a PR campaign. While many first time business owners think they can build a website and the traffic will come, that is far from the truth.

Smart online businesses employ smart tactics to scale quickly. The success stories you hear about usually have some kind of secret sauce behind them them that enables for rapid user acquisition. The best ones have a formula that works almost every time.

Here are a few examples of some epic online hustles:

Groupon

When Groupon decided to launch in Australia they did so under the brand name of Stardeals.com.au. They did this because the Groupon.com.au domain name had already been registered. Launching the business under a new domain that has no association with their mother brand is like Nike launching under a different brand name in a different country. Launching without the Groupon.com.au domain on their own was a sign of the strength of their ability to acquire customers and win market share. They were certain of their ability to grow users without having to rely on the brand name they had built over in the US.

Groupon’s success can be attributed to three key concepts:

1) The short term impulse nature of the deal
3) A significant discount to retail price
2) The ability to communicate a deal in real time via e-mail

Groupon hustled its way to success by acquiring e-mail addresses rapidly. Groupon uses Google adwords heavily to drive traffic to their site and have been doing this since they launched in Sydney. If you do a search for “Bowling Sydney” you will notice that Groupon’s ad shows up in the paid search results. This is an effective and easy way of getting users to click through to their site. Furthermore many of the terms that they are bidding on are service related and are long tail keywords. These hyper local keywords are not as competitive as broader keywords such as “restaurants sydney” which in the world of adwords means less competition and cheaper cost per click.

Here is an example of a Star Deals adwords result:

You will also notice that the landing page is customised with the keyword you searched for along with a professional image of what you are looking for. In this case it is a bowling ball. This page is a “gatekeeper” page, and the only way to view the deal of the day is to supply an e-mail address to get past the landing page. Groupon knows that once you have supplied your e-mail address and you are receiving their promotions that you are likely to purchase a coupon at some point in the future, enabling them to recoup their investment in the adwords click they paid for and to repeat the process as a formula.

GROUPON

 

 

 

The aggressive and expensive nature of Groupons customer acquisition strategy can be summed up in this excerpt taken from the “Risk Factors” section of their IPO prospectus:

If we are unable to recover subscriber acquisition costs with revenue and gross profit generated from those subscribers, our business and operating results will be harmed.

As of March 31, 2011, we had 83.1 million subscribers to our daily emails, and we expect the number of subscribers to grow significantly during the remainder of 2011. Acquiring a subscriber base is costly, and the success of our business depends on our ability to generate revenue from new and existing subscribers. In 2010 and the first quarter of 2011, we spent $241.5 million and $179.9 million, respectively, on online marketing initiatives relating to subscriber acquisition. As our subscriber base continues to evolve, it is possible that the composition of our subscribers may change in a manner that makes it more difficult to generate revenue and gross profit to offset the costs associated with acquiring new subscribers. For example, if we acquire a large number of new subscribers who are not viewed as an attractive demographic by merchants, we may not be able to generate compelling products for those subscribers to offset the cost of acquiring those subscribers. If the cost to acquire subscribers is greater than the revenue or gross profit we generate over time from those subscribers, our business and operating results will be harmed.


AirBnB

AirBnB’s secret to its epic growth was described by Dave Gooden in his recent blog post “How AirBnB Became a Billion Dollar Company.”

Allegedly, they hustled their way to success by using Gmail accounts to connect with apartment listers via Craigslist. Whenever someone posted an apartment on Craigslist, the apartment owner would be contacted with the following email from a third party, suggesting they take a look at AirBnB and list their property on that marketplace as well:

This enabled AirBnB to generate critical mass rapidly. Creating a marketplace is always though. It requires critical mass which poses a chicken and egg scenario. The marketplaces requires property listings, but customers are not interested unless there are a meaningful number of properties to browse through. What AirBnB was able to do was rapidly fill their website with inventory. Once there were enough listings, it became a meaningful destination for apartment hunters and travellers.

AirBnB hustled their way to a $100m in funding at a valuation of $1bn.

Lind Golf

When I started Lind Golf I did so because I knew I had a competitive advantage. Before I started I was certain I had a way of generating a lot of targeted web traffic. I never went in blind. I had purchased the domain name www.golfclubs.com.au in 2005 from a photocopy repair guy for $4000. I was selling golf clubs on eBay so I’d validated the market and decided to launch the brand after acquiring this domain name because of its ability to generate targeted click through’s via Google adwords. I also had 3000 customers from eBay that I was able to e-mail the day we launched.

If I had to attribute a single strategy to Lind Golf’s growth, it was owning this domain and using it to generate highly targeted traffic via Google adwords.

We generated hundreds of thousands of clicks in a very short period of time by landing golfers on relevant, targeted landing pages and ultimately that generated the cashflow necessary to invest in growing the business further.

I’d love to know what strategies you’ve used to drive rapid growth online.

What Sony can learn from Apple

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Sony’s Playstation network was compromised and has been offline for over a month. Over 70 million accounts and credit card numbers are stored on their servers. A group called “Anonymous” was allegedly responsible. Sony are not sure whether or not the hackers downloaded the card data so they’ve advised their customers that their card details may have been compromised.

It is believed that Anonymous’s actions may have been in retaliation to Sony suing George Hotz, a well known hacker who managed to jail break the Playstation 3. George figured out a way to gain access to the Playstation operating system which gave users full control over the device, a feature that Sony had purposely restricted. He was also the first person to jail break the original iPhone. Google “George Hotz” and you will quickly realise how smart this kid is.

I met George two months ago, coincidentally in South America while travelling. We were staying at the same hostel in Santiago and got talking. He was rather worried because Sony was about to sue his pants off for what he had done. Sony have since dropped the charges. Lucky for George.

Instead, what Sony should have done is tried to hire George. I’d love to have a guy on my team who can outsmart my entire team. That is a valuable resource. Even if it is just a contract role to understand how he broke into the loophole so that they can fix it. Or an invitation to meet the product manager, a free trip to Tokyo and 100 Playstation 3 games. I’m sure he would have liked that more than a lawsuit.

In fact, that is what Apple did after they learn’t that this guy hacked together a better iOS notification system than the current one. They made him an offer, flew him to Cupertino and hired him as an intern to better Apple’s iOS mobile operating system.

Had Sony been more open minded, they would have saved millions in negative press, their network may not have been compromised and the Playstation 3 would have been securer for it.

They would have also saved the embarrassment of having their top three executives photographed on the front page of the Wall Street Journal bowing in apology at an emergency shareholder meeting.

5 tips on how to validate your Idea

One of the concepts I have often thought about when coming up with a new business idea is how to validate it in the marketplace. You might have a great idea that makes sense to you, but does it make sense to your customers, and how do you go about finding out if there is actually a demand for your idea?toe-in-water.jpg

Here are five steps to gauge whether there is demand for your product:

1. Select a segment of your audience

The key concept here is to identify and apporach a small segment of your potential target market.

For example I am in the process of validating whether there is a market for a new software application
I want to build to assist with e-commerce businesses marketing themselves via e-mail. The software is designed to solve a problem I had at Lind Golf and I want to work out whether or not other e-commerce businesses are experiencing similar issues.

My plan is to integrate the tool with large e-commerce platforms such as  BigCommerce, Volusion, Magento and Shopify. The lowest hanging fruit for me would be Magento users because I know there are over 100,000 of them and they have a popular forum and following on twitter and LinkedIn which I can use to reach out to business owners who have built their e-commece companies on this platform.

These are my exact customers so their opinion is as good as it gets.

Once you have identified your target segment it makes it easier to locate and contact users. Magento has forums, meet-ups and related conferences that I can attend to meet more customers to question and learn from before coding begins.

Make list of 100 businesses or people who you are a target customer.

Much of this can be done online without having to leave your desk by contacting these customers by phone.

2.  Write a 10 question survey

In order to validate your idea you will have to work out if the problem you are solving is a common problem or just a problem in your mind. The easiest way to do this is to ask a bunch of potential users if they are experiencing the problem or pain point your software is looking to solve. By creating an online survey you can collect responses to the same questions and determine if there is a trend amongst customers.

I like to use Survey Monkey to write surveys. Make sure your survey takes no more than 3 minutes to complete or has a maximum of 10 questions with answers that don’t require typing.

3. Keep track of your conversations

Every person you contact at this stage will be much more valuable when/if you have built a product.

These contacts will probably end up being your fist users so its a good idea to record their details along with the feedback they have provided along the way.

I use Highrise by 37Signals to do this. Highrise is a great CRM tool that is available for free for up to 250 contacts.

4. Incentivise your validators to help you

If you pay peanuts you get monkeys. I was sitting in Starbucks Union Square last week and two guys approached me with an iPod Touch. They were working for Four Square doing usability testing for a new user interface and they offered me a $5 Starbucks voucher to spend 5 minutes with them and provide feedback for new user interface changes. I was more than grateful for the gift voucher and was happy to assist.

The idea here is to call up your target list and offer a $10 iTunes voucher or similar to each customer you speak to. This sets up a real relationship where they will give you honest feedback as they are getting something in return and hopefully this gesture will coerce them to feel obligated to do their best to help you.

I’d rather invest  $1000 to receive the opinions of 100 real customers before I start coding, than build a product only to find out later that nobody wants it.

5. E-mail them something to look at then follow up

I spent time designing screenshots in Photoshop so that I’d have something to send my target segment. I compiled them into a brief PowerPoint presentation that described each screenshot. The idea here is to have them understand in 20 seconds or less how our software would be able to help them market their businesses better. The presentation is only 5 slides. So far all the candidates I’ve spoken to have clearly understood what the software does, and while on the phone, they have been able to provide immediate feedback and opinions.

If this product was available right now would you give me your credit card number?

The purpose of this exercise is to validate if you should build your product. Is it worth investing time and money into this project and is there a product/market fit that will sell if it is built. If the majority of your subset of target customers answer yes to the question above, then it is likely that the greater market would pay for your idea well.

If you want to grow a business at scale you can’t do this for each and every customer unless you are selling high margin products that justify a large customer acquisition cost.

The next step is to figure our a way to scale your customer base without having to speak to each and every individual.