Don Dodge on The Next Big Thing

Leaders in Indoor Location Positioning technology

2013-04-05T13:29:46-04:00

Who are the big players innovating in Indoor Location and Positioning? What technologies are attracting the most attention? How will Indoor Location evolve? In my previous post I covered the different technical approaches to Indoor Location, how they work, and some of the market uses for it. In this post I will cover some of the leading large players and their technical approaches. In an upcoming post I will cover many startups that are innovating faster than the big companies.

Who are the big players? Indoor Location will be a huge market, bigger than Maps or GPS. Many big companies have been researching this technology for years. Some already have products in the market. Here is a quick look at some of the players and where they fit in the technology stack.

Chip Sets - Mobile chip manufacturers are consolidating the wifi, NFC (Near Field Communications), Bluetooth, cellular, and GPS radios needed to calculate indoor location, as well as sensors like accelerometers, gyros, altimeters, compass, and magnetometers into the chip sets. Leaders in this space include; Broadcom, Qualcomm, InvenSense, STMicroelectonics and CSR. These chip sets provide the x,y coordinates, signal strength, direction, and other sensor data that Operating Systems and Applications can use to calculate precise location reference points.

Mobile Operating Systems - Mobile Operating Systems are also incorporating Indoor Location services that application developers can access via APIs. The big players in this space include Apple, Google, and Microsoft. Apple is late to market with Maps and even further behind with Indoor Location which is one reason why they recently acquired WifiSlam, an indoor location startup. Expect Apple to make significant progress in this area through internal development and acquisitions.

Google's Android OS powers many Smartphones which already include Google Maps. Google has provided indoor maps for over 10,000 buildings including office buildings, airports, shopping malls, and other public buildings for a long time. Google has also piloted Indoor Positioning using Wifi signal triangulation. Do a Google Maps search for Westfield Mall San Francisco. Watch what happens as you zoom in to the location...an Indoor Map of the mall identifies the individual stores, and even where the hand bags are located within a store.

Microsoft's Bing Maps has over 3,000 indoor maps of airports, shopping malls, and public buildings.

Handset Manufacturers - The large Smartphone handset manufacturers are incorporating the location chip sets and Mobile Operating Systems into their phones. They are also adding their own software and services for location. All the major players are doing research and development on Indoor Location. These include Motorola, Nokia, Samsung, and Sony Ericsson.

Motorola already has Indoor Location Manager, and recently announced TRX Indoor Location System. Motorola has been researching indoor location for many years and has a significant patent portfolio that covers wifi signals, Bluetooth technology, Inertial Navigation using sensors, and even using signals from indoor lighting.

Nokia has its own indoor location technology called HAIP (High Accuracy Indoor Positioning) based on BlueTooth Low Energy beacons (BLE). Nokia also started the In-Location Alliance which is an industry trade group focused on Indoor Location. Nokia demoed their indoor location technology at Mobile World Congress 2012. Here is a YouTube video of that demo.

Samsung is part of the In-Location Alliance and one of the largest Smartphone manufacturers. Samsung has also done significant research on indoor location technologies including; wifi signals, other radio signals, Bluetooth technology, Inertial Navigation using sensors, and signals from indoor lighting. In the past Samsung has relied on Operating System services for indoor location, but in the future could choose to commercialize some of its research.

Sony Ericsson has done research on indoor location and has a couple demonstration projects called SemcMap and Indoor Finder. Sony Ericsson is one of the few companies to experiment with GPS signal retransmitting indoors. The idea is to mount roof top antennas to receive GPS signals and retransmit them inside the building which gets around the "line of sight" limitations of GPS. Sony Ericsson has also done research on Rake Receivers which is basically an array of radio receivers deployed across a building that minimizes the effect of signal fading.

Network Equipment

Cisco has a product called Mobility Service Engine which is built into some of their wireless network equipment. Here the network device analyzes signal strengths of Smartphones and wireless devices to determine their position and location. This is the reverse of most solutions where the Smartphone measures the signals and determines location. Cisco has also done extensive reserach on indoor postioning using all the usual technologies and methods described above. These include wifi signal strength, wifi fingerprints, map constraints, inertial sensors, and otehrs.

Aruba Networks uses location data as part of its network security. For example they measure how many times a specific phone or device has connected to the network in the past, how long they stayed connected, where they connected, and then maps that data to corporate roles and permissions for that device.

This post covered the big companies working on indoor location from a technology stack perspective. My next post will cover startups that are innovating in indoor location at the application level for consumer markets like games, social, shopping, advertising, and other areas.

Disclosures: I work for Google in Developer Relations. Google is very active in Android, Maps, and Indoor Location. I don't have direct knowledge of their plans and wouldn't reveal them even if I did. But, sometimes bias can creep in, so take that into consideration when reading this.

I was an early investor in WifiSlam, an indoor location startup, that was acquired by Apple. I no longer have any financial interest in WifiSlam, but that experience could also bias my opinion.

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Why Indoor Location will be bigger than GPS or Maps, and how it works

2013-04-02T11:07:59-04:00

Indoor Location and Positioning will be huge! Apple recently acquired WifiSlam for its indoor mapping and positioning technology. Why? Because we spend most of our time indoors, working, shopping, eating, at the mall, at the office, on campus, etc. Google already has Indoor Maps for many airports and shopping malls. The race is on. The explosion of Smartphones with built in sensors, accelerometer, gyro, wifi radios, and camera make indoor positioning possible.

GPS and Maps are great, but they only work outdoors and with clear line of sight to the sky. GPS was developed by the US military for battlefield location, and navigation for planes and ships. It uses 24 satellites orbiting 12,600 miles above the earth. Your GPS unit searches for 3 or 4 satellites to "lock" your position. Your GPS receiver "knows" the location of the satellites, because that information is included in satellite transmissions. It measures the time it takes for the signal from each satellite to reach your device, calculates the distance from each, then triangulates your position...and updates it every second in real time. GPS is still remarkable decades after it was developed.

You may have noticed that your Smartphone mapping system is much faster at findng your initial position than your car GPS. Why? Because your car GPS relies soley on GPS satellite signals. In heavily forested areas, or congested cities with tall buildings, it can take a long time to get a "GPS lock" on 3 or 4 satellites because the "line of sight" is blocked. Your Smartphone mapping system augments the GPS with cellular tower signals and known Wifi hotspot locations. These signals are available where GPS is hard to get. Your Smartphone searches for all types of signals, calculates which is most accurate, and provides your location on a map much faster than a regular car GPS. Smartphone GPS is truly amazing! But, Indoor Location is even more amazing. Now lets explore how it can be used, and understand how it works.

Why will indoor location be big? Because indoors is where we spend money, meet friends, and where business happens. How can indoor location be used?

Navigation – Navigating inside large shopping malls, museums, airports, office buildings, college campuses, manufacturing plants, conference and convention venues

Location sharing for Social or family apps – Sharing your location with family and friends at large, crowded locations, or meeting up after individual activities

Shopping list routing – Find specific aisle locations within stores for every item on your shopping list. Enter a search term to find location of any product.

Offers/Coupons – Receive discount coupons and offers for products and services you care about located in close proximity.

Games – Many mobile games could incorporate indoor location. Games like MyTown, Life is Crime, Tap City, Monopoly, and strategy games like Tower defense, Risk, Coalition Games, and other strategy games.

Advertising by location – Targeted advertising based on precise location, time, and interests.

Manufacturing/Inventory/Asset tracking – Track movements of machinery, expensive inventory, assets, robots, vehicles, etc.

Workforce location – Real time location of personnel like doctors, supervisors, technicians, team members. No more public intercom announcements asking Dr. Smith to call the Emergency Room.

Defense/Intelligence – Tracking team members and assets on missions, in the dark, or in crowded locations.

Fire and Police - First Responder team tracking in crowded or dark locations.

How does Indoor Location technology work? Your Smartphone contains many sensors and radio receivers that can pick up all kinds of signals. Indoor location technologies use some or all of these to calculate indoor position. There are many different technical approaches to indoor positioning, and there is no clear winner yet. Until one technology achieves ubiquity it is likely that application developers will need to support multiple approaches and use whatever is available in a particular location. Here is a brief overview of each technology.

Wifi Triangulation – Wifi Triangulation measures signal loss or strength from multiple wifi hotspots to triangulate position. It is not necessary to connect to these wifi hotspots, only to measure the signal strength. Your phone displays signal strength in terms of 3 or 4 bars, but inside it is actually measuring signal strength very precisely. These services have a database of known wifi hotspots, and adds new hotspots as they are discovered by users. Android makes the wifi signal API available to developers so they can build location application. Apple iOS does not, so iPhone developers need to rely on other sensors and technology.

GPS/Cellular/Wifi Triangulation – Uses inputs from GPS/Cellular/Wifi, when available, to determine position. This is important for smooth transition from outdoor to indoor positioning. Algorithims assign confidence rankings to all signals to determine which signal to use, and how to continually refine position.

Wifi Fingerprinting – Smartphones turn on wifi for a few seconds to get a Wifi Fingerprint and associate it with a Check-In location. Compares the current Wifi Fingerprint to a known database of Fingerprint/Location pairs. Often used in conjunction with Check-in services like Google Places or FourSquare. This allows a more accurate location within a building. For example, checking into a place like Westfield Mall has many different Wifi Fingerprints depending on where you are in the Mall. If your Wifi Fingerprint is not found in its database it will ask you to enter a new specific location.

Dedicated Beacons - Cheap, low power, radio beacons located at known positions within a building. The only purpose of the beacons is to transmit a unique signal that can be received by your Smartphone. Uses the same location triangulation methods as wifi, but can be more accurate due to their specific location and purpose. These radio beacons can transmit proprietary signals or standard Bluetooth 4.0 Low Energy aka BLE.

Bluetooth Sensors - Many electronic devices contain Bluetooth, including every smartphone. These Bluetooth sensors can read signals from dedicated beacons, or dynamically create a mesh network of Bluetooth signals that constantly corrects and refines relative position and location.

Tracking Sensors from known positions - Most smartphones contain multiple sensors including a compass, gyroscope, accelerometer, altimeter, and barometer. These sensors can measure your direction, turns, speed, and height above sea level to create a three dimensional view of your location. Starting with a known position from other methods such as GPS, cellular, or wifi which work outside, the smartphone sensors can be used to track your position inside a building.

Magnetic sensors - Magnetic sensors can pick up the Earth’s natural magnetic forces to determine lat/long position similar to the way a compass works, but two dimensional, and much more accurate.

LED Lights - lights in the ceiling can be programmed to pulse in milli-seconds, so fast the human eye can’t detect the pulse. But, your smartphone camera can detect the pulses and distinguish between different lights and triangulate your position. The LED lights each have a unique pulse fingerprint. They can be used with standard light fixtures and remain in fixed positions within the building, making it easy to calculate location.

Cameras - A ceiling or wall mounted camera within a building can cover up to 100 square meters. The camera on your smartphone can automatically take many snapshot photos per second. Object recognition software uses pattern matching to compare those smartphone snapshots to the wall-mounted camera to determine precise location.

In my next post I will present a fairly complete list of startups and companies that are providing indoor location services and which technologies they use. I believe there will be lots of winners in this space using a variety of different technologies, and focusing on many different vertical market segments.

How Facebook maximized the IPO proceeds, but botched the process

2012-08-22T08:30:50-04:00

Most companies leave a lot of money on the table when they IPO. They price at $12 to $15 per share at the IPO and trade up to $20 - $25 on the first day, and up to $30 to $40 over the next few months. Investors are happy. The press is writing positive stories. Everyone is happy. But, the company left all that money on the table, the difference between the $12 IPO price and the $25 first day close. This can mean hundreds of millions of dollars for the company.

Facebook optimized the value of the IPO to the company by pricing high, and brought in billions of dollars in cash. Facebook stock closed at $38 per share on the first day, and most of that cash went to Facebook. Great result for Facebook. They worked hard to find the share price where they could sell all the IPO shares at the highest possible price, and generate the most cash for the company.

But, by doing so they disrupted the age old IPO process. Now investors are paying the price. Investors who bought the IPO shares thinking they would immediately go up 20% to 50% were sadly mistaken. In fact they have gone down 50%. The press is writing negative stories about how Facebook is declining, user growth is slowing, they don't have a good mobile strategy, and that monetization is awful. Facebook hasn't changed their strategy in the past few months...but public perception has changed.

The original VC investors in Facebook, and employees who hold stock option grants are "locked up" and normally can't sell their shares until 6 months after the IPO. Normally there would be a Secondary Offering where they could sell their shares in an orderly fashion to institutional investors. This is why they call the first selling of stock the IPO (Initial Public Offering) and the second selling of stock "The Secondary Offering".

Facebook also changed up this process by letting some investors sell some stock at the IPO, and letting other early investors and employees sell their stock after 2 months, or 3 months, or some other time period they stipulated. By doing so they kind of messed up the idea of a Secondary Offering because stock was dribbling out...actually, exploding out, in chunks over the first 6 months and beyond.

The Secondary Offering is normally supposed to be done about 6 months after the IPO, in a very positive environment for the company. Because there are a limited number of shares sold at the IPO there is more demand for the stock than there is supply. This creates a hot competitive environment for the stock and the price goes steadily upward. Perfect time for a Secondary Offering of the "locked up" shares from early VC investors and employees.

Facebook essentially can't do a Secondary Offering now because the stock price has dropped so far, so fast, that institutional investors are worried. They just heard the Facebook IPO story a few months ago, and now everything looks bleak. The press is writing negative stories. Bad timing.

Facebook stock is currently trading at around $19, and has declined to about half of its opening day IPO price of $38. The price could decline even further with the hundreds of millions of shares coming off "lock up" flooding the market over the next several months. Normally this is done in an organized Secondary Offering to institutional investors. Instead, in the current situation, it will be totally disorganized with shares coming out at odd times, and dumped on the market for retail investors and brave mutual fund managers. The flow of shares and price can't be controlled by the IPO investment bankers the way they would with a Secondary Offering.

So, Facebook did a great job maximizing the value of the IPO cash proceeds, but totally botched the normal process for an orderly Secondary Offering. Facebook did great. Investors are getting killed. Proceed with caution. With most IPOs you are probably better to wait until the dust settles, most of the locked up shares are on the market, and the company has reported a few more quarters of financial results. The stock market will stabilize around an agreeable price. This is true of most IPOs and appears to be true with Facebook too.

Long term I think Facebook has a very bright future. Short term it is unpredictable and potentially dangerous for investors.

Disclosure: I own no Facebook shares, and my day job is with Google. I am NOT a financial advisor and am NOT giving financial advice here. This is just my opinion, and is worth what you paid for it...nothing.

Bill Gross IdeaLabs a different kind of incubator

2012-08-16T13:59:42-04:00

Bill Gross has started over 75 companies and invested in many more. Thirty five of his companies have been acquired and 8 have gone the IPO route. Some of those companies include; Goto.com, Overture, CitySearch, NetZero, Tickets.com, CarsDirect.com, Shopping.com, eToys, Compete, Picasa (acquired by Google), InsiderPages, WeddingChannel.com, eSolar, Duron Energy, dotTV, Desktop Factory, Evolution Robotics, and UberMedia.

Bill started IdeaLabs in 1996, long before the idea of startup incubators was popular. You have to know Bill to understand why IdeaLabs was necessary. Bill has so many ideas, in so many different market segments, he couldn't possibly do them all himself. So, he started a lab, hired all the support people necessary to build companies, and hired entrepreneurs to build out his ideas.

Bill has started 75 companies, and wants to start more. The limiting factor? Not money. The limiting factor is finding entrepreneurs who want to join the team and build companies.

Check out this interview with Bill Gross on my recent trip to IdeaLabs.

IdeaLabs is located in Pasadena, California in a 45,000 s.f. building. There are 12 companies in the building now, and 25 companies in the IdeaLab portfolio. They include compaines in software, hardware, energy, advertising, ecommerce, robotics, and more.

IdeaLab Infrastructure - Everything you need to start and build a company; Engineering, Designers, HR, Recruiters, Finance, Legal, PR, office admin, photo/video services, etc. If more than one company needs it...they buy it or staff it. Everything is done in house. They even have a machine shop to create custom hardware parts.

IdeaLab Model - Start with an idea that is vetted by Bill Gross and his team of company builders. Prototype and test the idea using IdeaLab staff engineers. Conduct user tests. If everything looks good fund the idea with up to $250K. Assign a CEO from the lab, or recruit one from outside. Hire the founding team to build the MVP and get a beta version to market. At this point IdeaLabs may bring in VC investors, or they may decide to fund it themselves.

IdeaLab synergy - At any given time there are 10 to 15 companies incubating at IdeaLabs. They range in size from 5 people to 50 people. When any company reaches 100 people they need to move out on their own. There are no competing companies in the portfolio so founders easily share information, advice, introductions, and help out on short term needs. Like other incubators, they bring in industry experts and successful founders for talks.

Want to help start a company? - You could come up with an idea yourself, recruit a team, pay for it out of your own pocket, build an MVP prototype, and then try to raise money from investors. It is a tough process, even for those that have done it before. Or, you could join Bill Gross at IdeaLabs as a founder and help build a new company. The financial rewards are significant, and the risks are much lower. Not for everyone, but a great opportunity for the right person. Contact Bill Gross at IdeaLabs to find out more.

Three reasons Microsoft will not buy Nokia at any price

2012-06-18T11:01:15-04:00

Nokia (NOK) stock price is dropping to historic lows with a current market cap of just $9.3 Billion. Nokia has revenues of over $38B, $6B in cash, 30,000 patents, and a great brand. Investors and sharks are circling. Microsoft (MSFT) isn't one of them. Why not? Three reasons; they don't want to, they don't need to, the FTC & EU regulators wouldn't let them...even if they wanted to. Techmeme thinks Microsoft might be getting into the hardware business, but not phones. Lets explore these three points.

They don't want to - Microsoft has strong DNA as a partner driven company. The success of Windows was driven by thousands of hardware manufacturers and tens of thousands of software companies supporting Windows in their products. For more than 30 years this has been the business model. They view Windows Phone 7 just like Windows on the PC...an operating system platform for any hardware device. They just work with manufacturers and the money pours in. They don't want to mess with the model.

It has been a great model, but it doesn't always work. Microsoft has always been the opposite of Apple (APPL). Microsoft makes software available to all manufacturers, while Apple is a closed system. For most of the past 30 years Microsoft had the better model. Not anymore. Apple has proven that a beautifully integrated (closed) system can be very attractive. Apple has DNA too. Apple products have always been integrated hardware and software. It has worked well for the Mac, iPod, iPhone, and iPad. Hmmm...maybe Apple will buy Nokia. Makes more sense than Microsoft, but I digress.

Microsoft made one exception to the model I can think of, the Xbox. And that was only because they couldn't convince the game box makers to play nice with them, and because they didn't have any partners in this space. Microsoft spent billions developing the Xbox hardware platform just so they could sell their game software. Eventually, the bet paid off. And, in the future it could be a huge home computing platform if they could shake their legacy DNA. Not likely. Microsoft might enter the Tablet space. This would mark a change in strategy, and create huge channel conflict with partners.

Smartphones are a huge market, and the future of personal computing. Microsoft is trying to use their Windows PC distribution model for Smartphones. It isn't working. Manufacturers who once used Windows Mobile have grown tired of the slow pace of innovation at Microsoft and high OEM prices. Many are now using Android. Microsoft responded by making a deal with Nokia, paying them billions of dollars for "marketing" and engineering transition costs. To date that isn't working very well either.

Microsoft doesn't need to buy Nokia - Microsoft already gets everything they want from Nokia without buying them. Microsoft wanted distribution from a big brand Smartphone manufacturer. The idea was that other manufacturers would follow after Nokia blazed the trail with Windows Phone 7 and grabbed market share. Nokia was one of the few big manufacturers that hadn't committed to another OS. It was a reasonable strategy for both companies. It hasn't worked out yet, but it still might. The Xbox strategy didn't work in the first year either. These things take years and billions of dollars to execute. Microsoft has plenty of time and money. Nokia doesn't.

The FTC and EU wouldn't let them - Almost any big acquisition by Microsoft, or any of the big players, will attract an FTC, EU, and even China review. We live in a world where government regulators decide, not the two willing companies. That is a subject for another day, but suffice it to say that government regulators would probably not allow Microsoft to acquire Nokia based on some theory of "competition" being lessened and consumers being harmed.

Nokia could still turn things around. Microsoft could pump in more money to help them out. Nokia can sell off assets and patents for billions of dollars. Nokia already announced they will lay off 10,000 employees as part of a restructuring. It will get worse before it gets better. But, the Nokia brand and asset is too strong to just totally disappear. Nokia can emerge from the restructuring as a smaller stronger company, or end up being acquired by a bigger stronger company...but not likely Microsoft.

Disclosure - I worked for Microsoft for 5 years. I don't speak for them. I now work for another large tech company. I don't speak for them either. These are my own personal uninformed thoughts...and probably wrong.

About Last Night... the social network for nightlife

2012-05-22T11:42:08-04:00

About Last Night, the social network for nightlife, launched today at Techcrunch Disrupt, and is available for download on the AppStore. Its about the party last night, the concert last night, your date last night, or any event last night. It is an iPhone app that is photo centric and location based. It is similar in design to Path, but the sharing model is more like Twitter, and the posts are totally focused on nightlife.

About Last Night posts are headlined with the location where the photo was taken. The person who created the post is listed below the photo. All posts from all users are visible in the main stream, but you can get different views (Following, Locations, Nearby) to tailor the stream to just what you are interested in.

Whats happening anywhere? Lets say I'm from Boston but visiting New York for the weekend. I want to find the best night spots in New York, or know what is happening at Columbia University. About Last Night has a "Nearby" view that uses your GPS location to show all the posts from night spots near you. You could also be "Following" Columbia University to see all the posts from Columbia. You can follow people or locations. I'm sure college students and the nightlife crowd are going to love these features.

Whats hot? About Last Night also has a voting system where users give a "thumbs up" to parties and places they like. As a post gets more thumbs up votes it earns a bronze medal, a silver medal, up to a gold medal. This is an easy way to find the best parties and night spots near you.

Deals - Bars and night spots can also post special offers and discounts, or post bands playing or new menu items. Users can vote up posts they like, and share the deals with their friends via Facebook, Twitter, or email.

Private Feed - Your little black book on your phone. About Last Night posts are public just like Twitter posts. But, you can flip a switch and make a post private, just for you. Lets say you see a very attractive person at a party and want to remember them. Just snap a picture, add a note, and set it to private. The app automatically puts a time stamp on it, and adds the location where the photo was taken. This could be useful when you can't quite remember the details the next morning...or next week. This could also be useful at a conference or large party. Lots of people give you their business cards but you can't remember them the next day. Just snap a picture and post it to your Private Feed.

Disclosure - My sons, Derek Dodge (25) and Darren Dodge (21) are the founders of About Last Night. I am a proud father, so my bias may show through in this post. Check out the app for yourself. You candownload it from the iPhone Appstore. They assure me an Android version is coming soon :-)

I could build Instagram in a week

2012-04-11T09:22:56-04:00

I could build Instagram in a week. How many times have you heard someone say "I could build [insert hot startup name here] in a week"? I hear it all the time. But, I have yet to see one of these delusional wizards actually do it. They are obviously too busy inventing the next big thing. They fail to realize that building a successful consumer web or mobile product takes more than great technology. A lot more.

Success looks easy from a distance. Technology seems simple if the design is great. Attracting great founders and early employees just means rounding up some of your friends. Raising money is always easy, right? Getting great press stories just takes a few emails. Attracting influential users just sort of happens. Viral growth is a simple formula. Solving a problem that millions of people care about is just luck. Going public or getting acquired is automatic. There are hundreds of critical decisions along the way. None of them are easy.

From a technical point of view there isn't much difference between Instagram, Path, Oink, Hipster, or a bunch of other companies that all do essentially the same things. Mobile, social, photo apps that include comments and some type of friend/follow model. Why is one worth $1B and another shut down with no value? It isn't about the technology or how long it took to build.

First Mover Advantage is real. The first product on the market has a big advantage...if the product actually works. People get used to the product, get to like the user experience, and develop a user community culture. Users invite their friends and the viral growth cycle starts. Once the user community starts to grow virally they are not likely to switch to another product...even if it is better. A competing product with a few new features, or something that is faster or cheaper, isn't likely to steal away many users.

Design and user experience matters, especially with consumer products. Timing and luck play a big part in success. Technology can be replicated, timing and luck can't.

Facebook definitely has the engineering talents to build a mobile product with features similar to Instagram. But it wouldn't be Instagram. It would be an obscure feature buried somewhere inside the Facebook app that would only work within Facebook. Instagram is magical because it does one thing really well. It stands alone, and is quick and easy to use. It isn't bogged down with the overhead of a much larger app or service. Instagram photos can be shared across lots of different social services. If Facebook engineers designed a mobile photo sharing app would it work like this? No.

Mobile is the future, and photos are core to Facebook. Instagram does both better than Facebook. Being the leader in two growing trends is critical to Facebook. That is why Instagram is worth more than $1B to Facebook.

Google Video is another example. Google already had a video hosting/sharing service called Google Video...but it wasn't YouTube. Even though the features were similar, the user experience, and more importantly, the user community, were very different. The technical features could be replicated, the brand and user community could not.

Web video, and search for that video, is a huge trend. YouTube was the clear leader. Whoever owned YouTube would instantly become the leader. That was worth $1.6B to Google...even though they already had comparable features in Google Video.

Next time some wizard tells you they could build XYZ hot startup in a week, just smile and say "You probably could build the features...but you couldn't build the user community or the company. That is where the value is."

Why Instagram is worth $1B to Facebook, Web 2.0 just went mobile

2012-04-10T09:24:58-04:00

Facebook announced that it acquired Instagram for $1 Billion. The company is less than two years old, has no revenue, and about a dozen employees. Remember, acquisitions are about what the acquirer can do with the company in the future, not some multiple of revenues or profits today. Why is Instagram worth $1B?

Facebook acquired Instagram for about $30 per user, or $1B. ($30/user X 33M users = $1B) Facebook is valued at about $100 per user or $80B ($100/user X 800M users = $80B). Other popular social apps are valued around $20 to $50 per user. The monetization models need to work out about the same to justify the valuations.

If Facebook was worth $80B last week, is it worth $81B now with the addition of Instagram? Yes. Here is why. The number one thing people do on Facebook is share photos. Photos are going mobile in a big way. Instagram is the clear leader in mobile photos. Instagram added 1M users in the first day of availability on Android. Facebook needs a growth engine to show investors after they go public. Instagram is that growth engine, and it is worth much more than $1B to Facebook and its investors.

Web2.0 to Mobile - Everything is going mobile. Path, Instagram, FourSquare, are totally mobile, and don't care about the web. This could mark the turning point for another sea change; Web 2.0 to Mobile. Facebook has a horrible mobile app and needs to upgrade its mobile services. Path is the most elegantly designed mobile app, with an awesome user experience. Instagram is the best mobile photo app. FourSquare is the leader in mobile location data. All of them are critical to any company that wants to dominate the mobile paradigm shift.

Is Instagram worth $1B to Microsoft or Twitter? Probably not. Microsoft couldn't monetize the users and growth in the same way that Facebook can. Microsoft isn't focused on social or mobile photos. Twitter could realize a ton of value from Instagram, but $1B? Probably not. Twitter will still get lots of users and traffic from Instagram. They don't need to own it.

The value of a company is different for different potential acquirers. If Facebook can monetize its users in a way that justifies $100/user, than paying $30 per user for an acquisition is a great deal. For other potential acquirers maybe not. It depends on their monetization model, and what they plan to do with the acquisition in the future. This is why Instagram is worth $1B to Facebook, and why AOL patents are worth $1B to Microsoft. They both acquired good value for what they want to accomplish.

How to name your company and product

2012-03-19T11:32:09-04:00

Company names and product names can be a very expensive and time consuming process. It shouldn't be because company names and URLs don't matter. One of the first things you do when starting a company is come up with a name. Most times the name you come up with is already taken for the .com URL. Much angst and frustration follows. Don't sweat it. Be more creative in your name selection process. Lets look at some very successful companies and their names.

Cisco is the most successful networking company in the world. Is Cisco a word? Does it have anything to do with network gear? No. Cisco is the last few letters in San FranCISCO. The founders are from the San Francisco bay area and thought Cisco was a short and memorable name that was easy to spell. They use the Golden Gate Bridge as their logo because that goes along nicely with the name. Neither the name or logo has anything to do with network communication gear. But, their branding and marketing made the name Cisco synonomous with networks.

Zappos is the most successful online retailer of shoes. Is Zappos a word? Does it convey any meaning about online shoes? No. Zappos is a mis-spelled derivation of the Spanish word zapatos, which means shoes. Zappos was a great name because it had no pre-existing meaning in consumers minds. No one had the trademark or domain name for Zappos, so it was easy and cheap to obtain. Tony Hsieh made Zappos stand for quality products and outstanding customer service.

Shoes.com vs Zappos.com - Should the Zappos founders have named their company Shoes.com? Would that have made a big difference in their success? I doubt it. Amazon acquired Zappos for over $1.2 billion. Shoes.com is part of a 130 year old shoe company. Which one do you think sells more shoes? Which company created more enterprise value? Regardless of the answers...the name had absolutely nothing to do with it. The branding, marketing, and customer service had everything to do with it.

Amazon.com and Apple are counter examples. Amazon had a pre-existing meaning that had absolutely nothing to do with online retailing of books. There is nothing about the word Apple that says computers, phones, or music players. In fact, the words Amazon and Apple meant something completely different before those two companies took the words as their names decades ago. Today such common words would not be available as names anyway.

Jeff Bezos chose the name Amazon because it represented something big. When Amazon started online web stores were virtually unknown. There were very few web sites, so they probably got the domain name pretty cheap. When Bezos started Amazon it was only focused on selling books online. Should he have chosen Books.com instead? No. The name probably wasn't available, and it would have limited his reach to just books. It would be tough to branch out into movies, music, clothes, and a million other things if the company name was Books.com. BTW, I just checked and Books.com resolves to BarnesandNoble.com. They probably acquired the name for big bucks at some point, but don't even use it as their company name...because it isn't really a brand name.

Google, Yahoo, Napster, AltaVista, Zynga, and hundreds more company names meant absolutely nothing to anyone before they started using them. Of course there is a story behind how they came up with the name. But, the name itself meant nothing to the public or potential users of the service.

Google is easy to remember, easy to spell, and just 6 letters short. All good things for a name. Google is actually a mis-spelling of the mathematical term googol which is a 1 followed by 100 zeros. Does the meaning of the word googol have anything to do with search? Does the general public know what the term means? No. Google is a great name because it is short, easy to remember, and easy to spell. The Google logo with its primary colors (blue, red, yellow, green) is memorable and playful. Everything about Google incorporates the playful primary colors. That is how branding works.

Napster was Shawn Fanning's nickname. He got the name because his hair was very curly and nappy. He played basketball a lot and the other players would make fun of his nappy hair and call him nappy, or The Napster. That is where the name for Napster came from. Again, the name is short, easy to remember, and easy to spell. The name is not a word that meant anything. The Napster logo of the kitty with headphones became one of the most well known names and logos in the world. That is good branding and marketing.

Zynga was the name of Mark Pincus's dog. Zynga of course is the largest social gaming company worth several billion dollars. Another friend, Shervin Pishevar, named his company Social Gaming Network or SGN. The name accurately describes what the company does, but which company was more successful? Did the name matter? Nope.

There are many other examples. The key is to be open and creative when coming up with a company or product name. Don't worry about the name meaning something. In fact, in most cases you want the company name to NOT mean something. You make it mean something later with good branding and marketing.

Great logos are important, and part of the branding program. The company name and logo are how the general public remembers your company. The Napster kitty is a great example. Today with the explosion of mobile apps, a tiny little icon represents your company on the mobile screen. The tiny blue box with a stylized T is instantly recognizable as the Twitter logo. A different shade of blue with a stylized F is obviously Facebook. The red box with the stylized P is the logo for Path. Choosing a color and an icon is just as important as the company name and logo. They all must work together in the branding.

Company names should follow a few basic rules;

Memorable - the name should be easy to remember, and not confused with anything else.
Easy to spell - removing vowels or doubling letters is not usually a good idea
Short - Try to keep it to 10 letters or less.
Non generic - calendar management is way too generic

OK, so think outside the box when coming up with your company name. Choose a logo and icon that is distinctive. Don't pay crazy amounts of money for a domain name. Make your name mean something with good branding and marketing. Always dispaly the company name and colors together with the logo or icon. Once the connection is made in the consumers mind they will work together or alone.

Why company names & URLs don't matter

2012-03-15T20:21:55-04:00

Some founders agonize over the name of their company and pay big bucks to purchase the domain name. Save yourself lots of time and money because it doesn't matter. At least not the way you might think it matters.

The best names start without any meaning at all. Brand names become recognizable because we make them mean something. Two startups I worked with provide good examples; AltaVista and Napster. These words had no real meaning before we started using them, but became some of the most memorable and recognizable names and logos of that time.

Google, Yahoo, Zappos, and Cisco are further examples of words that didn't mean anything until they made them mean something. That is a good thing because you don't want to confuse the marketplace with a common, well known name that already has a meaning. It is really hard to overcome preconceived meanings.

You also don't want to confuse the search engines, or rank poorly for your own name. Lets say you have a cool new startup focusing on fixing the problems of multiple calendar management. You are convinced Calendar Management is the best name for your company, but you discover that someone already owns the domain name www.CalendarManagement.com Undeterred, you offer $100,000 for the domain name. But, the owner wants more...they want 2% equity in your company too. Don't laugh...I have seen this happen many times. Don't fall for this.

Here is the problem. Do a search for Calendar Management. I got about 1.2M results. Every company that is doing anything remotely close to calendars or management has loaded their web pages with key words and applied SEO magic to rank highly for those words. The advertisers have also bid up those keywords to very high prices in order to get their ads in front of anyone searching for those terms. So, how do you think your new little startup is going rank against this kind of competition?

Company names should follow a few basic rules;

Memorable - the name should be easy to remember, and not confused with anything else.
Easy to spell - removing vowels or doubling letters is not a good idea
Short - Try to keep it to 10 letters or less.
Non generic - calendar management is way too generic

A great logo is really important. In this age of cell phone apps, a tiny logo is the face of your app and company. The association of the logo to your name and to the product is what great marketing is all about. Spend quality time on designing your logo.

Pick a unique name that doesn't mean anything, is memorable, easy to spell, and short as possible. Then design a great logo to go with your name. Don't overpay for domain names. Once a user visits your site one time the browser cache remembers the name and will auto-complete it after the first few letters...or teh user will bookmark it. So, in the end...the URL doesn't really matter.

And, BTW, CalendarManagement.com is held by a domain name squatter just waiting for some sucker to come along and offer big bucks for it. Domain name squatters are down there with patent trolls in my book. They add no value and take money from suckers. Don't be one.