Finding a Niche “Inside” the Box

I’m a big fan of innovation. All for it, it is critical to the vibrancy of our economy. That said, being a successful entrepreneur and/or investor often has as much to do with being open to what has worked, and then applying one’s own wrinkle to the tried and true. That’s why I love the below cartoon so much.

Anyhow, I came across a piece on a startup called LaunchBit – http://www.launchbit.com – which fit the “inside” the box theme to a T. In this case, the entrepreneurs behind the service, Jennifer Chin and Elizabeth Yin, are taking the proven ad network business model and introducing the wrinkle of email newsletters. In their own words:

“Most ad channels are pretty lousy and don’t have a good return. Advertisers need a better way of putting their promotions in front of the right people. Meanwhile, niche newsletter publishers work hard to build their readership and create quality content for the subscribers. LaunchBit aims to create an ad network for email that brings together advertisers with niche email newsletter publishers to create a positive ad experience for everyone. Advertisers get the word out to the right people. Newsletters get rewarded. Subscribers get offers and discounts.”

The inspiration for the business, as is often the case, arose out of frustration related to the founder’s original venture.

“When we wrote the Startup Guide and promoted an online classroom for new web entrepreneurs, we advertised in all sorts of channels. The best channel by far was the email newsletters we managed to get placed in. However, finding and negotiating those placements took a lot of time and effort. Turns out it wasn’t just difficult for us; it’s difficult for everyone! Newsletters wanted relevant promotions for their readers and advertisers wanted to provide them, but it was difficult to get the two to connect. That’s when we decided to create an ad network for email.”

Great stuff.

Aggregating Pays Off (Again)

I wrote about these guys last May – see http://bit.ly/pB45dZ. I read in the New York Times today that they have been acquired by Google – see http://nyti.ms/q0i9aS.

Some Medical Goodness

While I do not opine on healthcare-related services and innovations with any great regularity, the sector is so complex and fraught with acronyms that I feel a bit out of my depth, a couple of things recently caught my eye that I thought were worth mentioning.

The first involves the concept of “direct primary care”, i.e. cutting out the insurance middleman, in an effort to extend care, reduce costs, and improve outcomes. In a June 19^th article on TechCrunch entitled “The Most Important Organization In Silicon Valley That No One Has Heard About” – http://tcrn.ch/kHXEu2 – Dave Chase introduces us to Dr. Samir Qamar and his startup MedLion – http://medlion.com. Chase does an excellent job of framing the perverse role that “insurance” has played in regards to healthcare.

“It is a relatively recent phenomenon to have day-to-day medicine paid for through insurance. Unlike all other forms of insurance designed for rare events, insurance became encumbered in day-to-day healthcare (i.e., we use insurance for the healthcare equivalent of getting one’s car tuned up where we wouldn’t dream of using insurance). The result has been what some call a 40% “insurance bureaucrat tax” unnecessarily adding to the nation’s healthcare cost burden.

Fortunately, pioneers such as Dr. Qamar have shown there’s a better way. Dr. Qamar originally setup a concierge medicine practice catering to the well-healed. He remains the House Doctor for the world famous Pebble Beach Resorts. As much as he has enjoyed his Pebble Beach practice, Dr. Qamar wanted to serve a broader population so he opened a practice with a dramatically lower price point. For only $49 per month and $10 per visit, MedLion is able to provide high quality medicine at a price point nearly any family can afford.”

Dr. Qamar states, “For the same amount they may pay in co-pays with an insurance policy, we can offer complete primary care without the added cost burden of insurance. We believe that a farm worker deserves access to primary care just as much as an executive at Pebble Beach.”

Having eliminated the “insurance bureaucrat tax”, Dr. Qamar and his colleagues have also freed themselves of insurance company reimbursement rules written with the 20^th century in mind. You see, insurance companies pay physicians for face-to-face visits with their patients, this in spite of the fact that Dr. Qamar finds that more than half of his patient interactions are via electronic means. By cutting down on the insurance industry’s antiquated, in-person, fee-for-service business model, patients gain the added benefit of more promptly gaining access to their doctors – no waiting three weeks to be seen – as well as wasting less time in the actual waiting rooms themselves.

While Dr. Qamar aspires to make primary care available to a greater number of people, he also aims to enable primary care physicians to make a healthy living outside of today’s insurance-centric model. With alarms being rung regarding a potential shortage of primary care docs throughout the country – see http://nyti.ms/jHy7Rc – any developments that help bolster the number of primary care physicians is welcome. From the TechCrunch article:

“Studies have consistently shown that the higher the percentage a country or a county in the U.S. has patients with a “medical home” (i.e., one has a specific primary care physician they go to), the better the health indicators are. A byproduct of these better health indicators is less money is spent on healthcare. Denmark has had so much luck with increasing primary care that they have reduced the number of hospitals in the country by over half – they simply weren’t necessary anymore.

In the U.S., the early results are similarly promising. That is, by deploying a more primary care centric model, a pilot program is Ohio has shown it can save $500MM per year just in their Medicaid population with diabetes once they scale the pilot. As Bill Gates’ recent TED Talk on State budgets highlighted, these are monies that can remain in education rather than a further draining of education budgets. At a time when Silicon Valley needs more education, not less, this is critical for the future of the industry.”

Shifting gears a bit, while also acknowledging that insurance companies will be a part of the healthcare delivery system for the foreseeable future, a number of startups have recently popped up to help us keep track of our medical bills. The overarching idea/pitch is to do for medical-related paperwork what Mint – https://www.mint.com – has done/is doing for personal financial paperwork. While fraught with privacy challenges, HIPAA is no joke, I think that the idea has merit, especially in an environment where more and more costs are being pushed down to the consumer, to say nothing of personal Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs). Two promising startups in the field are Simplee – http://simplee.com – and Cake Health – https://cakehealth.com. From a TechCrunch profile of Simplee – http://tcrn.ch/lCezqu:

“Just like with Mint and your financial accounts, you give Simplee access to your medical insurance accounts. It then brings in all of your medical, dental, and pharmacy bills and presents them in an easy-to-understand dashboard. Simplee tells your total medical costs, how much you’ve paid out-of-pocket, your deductible, and how many doctor’s visits you and your family have had.

This is all pretty basic information, but health insurance statements are so obtuse that most people have no idea how much they spend on health care. I know I don’t. Simplee does a good job of breaking it all down and showing you what you’ve spent, how much your insurance has paid, what you’ve paid, and how far along you are towards your deductible. It does this for every member of your family under the same insurance plans.

Simplee lets you drill down to individual claims to see what your insurance paid, the negotiated discount, and what you owe. It’s like a statement of benefits that actually makes sense. Simplee currently supports eight of the largest health plans in the U.S (including Aetna, United Healthcare, Cigna, Empire BlueCross BlueShield, and BlueCross BlueShield of California), and is adding more every week.”

Cake Health’s pitch is very similar. Both are part of what the kids are calling do-it-yourself (DIY) health reform. More on that here: http://tcrn.ch/jKSjmX.

Paying for Pixels

For the past year I have been working on a new venture, The Content Project, which my employer, WPP, is sponsoring in the realm of paid digital content, long considered the third rail of “new” media. Having committed the “Original Sin” of providing their content online for free some 15 years ago, conventional wisdom has condemned media companies to a future wholly dependent on advertising. The paid content naysayers contend that asking consumers to pay for content only undermines what is a shaky business model to begin with, i.e. digital advertising dimes struggling to support content which was once subsidized by analog advertising dollars (and subscriptions). Anything that might get in the way of a site’s traffic, and therefore its advertising revenue, is to be avoided, no questions asked.

In their endless treatises, the digiratti assured us that this time around things were indeed different. Gone was the classic “two pedal” newspaper (publishing) revenue model that former New York Times CEO Russell Lewis and his peers used to effectively navigate business cycles. According to Lewis, when advertising was robust, subscription prices could be kept low and advertising flourished. In difficult economic times, the “second pedal”, i.e. subscriptions, was relied on more to take up the revenue slack. (In the most recent recession, The New York Times’ print subscribers carried a heavier load for the company as prices increased significantly.)

Online media was condemned to inherit the antiquated business model of over-the-air broadcast television where all programming, from journalism, to entertainment, was purely ad-supported. Remarkably, in an industry defined by its fluidity and youth, the idea that “information wants to be free” became sacrosanct. And to tell you the truth, when I embarked on this venture, I wasn’t so sure that the pundits were wrong.

That said, a year into The Content Project, I am convinced that direct consumer support for digital media is beginning to take root and will play an important role in the economics of content creation and dissemination from the largest midtown Manhattan media conglomerates to the smallest purveyors of fact, entertainment, and opinion. From Google’s One Pass, to Amazon’s PayPhrase, to all things Apple, and The New York Times Company, paid digital content is top of mind at some of the world’s largest technology and media companies.

Technology is Disaggregating Media, Payment Models Must Follow

The movement from free-to-paid media in the US is well-documented. For the past 50 years, American television audiences have steadily migrated from over-the-air broadcasts to cable, satellite and now telephone company video subscription services. More recently, millions of satellite radio listeners have followed a similar route. The next phase for paid media will stem from the disaggregation of media wrought by the internet. (See cord-cutters.) An “a la carte” mindset has already made inroads in television/video, radio/music, publishing and gaming. In this disaggregated world, a one-size-fits-all approach to paid content, i.e. subscriptions, may no longer make sense.

As end-users create their own media packages, i.e. personalization, in the form of auto-generated apps/content packages, payment models that support these new media SKUs will emerge and will run the gamut from all-you-can-eat to pay-per-use. The time is now for media companies to begin to determine which models best fit which audiences and corresponding content categories. Disaggregated media need not be solely dependent on advertising.

An Opportunity for Media Companies

As the statistics from the Pew Internet & American Life Project research study “Paying for Online Content” illustrate below, the 100 percent ad-supported digital content environment of the past 15+ years is beginning to give way to a landscape where individuals directly pay for a small, but growing slice of the content that they consume. While music and software account for the majority of such sales today, paid offerings are beginning to emerge in additional content categories.

2/3rds of web users have paid for digital content*

* 33% of internet users have paid for digital music online

* 33% have paid for software

* 21% have paid for apps for their cell phones or tablet computers

* 19% have paid for digital games

* 18% have paid for digital newspaper, magazine, or journal articles or reports

* 16% have paid for videos, movies, or TV shows

* 15% have paid for ringtones

* 12% have paid for digital photos

* 11% have paid for members‐only premium content from a website that has other free material

* 10% have paid for e‐books

* 7% have paid for podcasts

* 5% have paid for tools or materials to use in video or computer games

* 5% have paid for “cheats or codes” to help them in video games

* 5% have paid to access particular websites such as online dating sites or services

* 2% have paid for adult content

Source: Pew Internet & American Life Project, “Paying for Online Content”

Dec. 30, 2010

The one area where the pay trend is most evident is in the fast growing mobile application space – a $5.2 billion market in 2010, dominated by Apple, which Forrester Research forecasts will grow to $58 billion by 2014. Consumer willingness to pay for apps is a harbinger of the future economics of content in the browser. The emergence of HTML5 – summarized in an excellent piece in The Times on March 26^th – http://nyti.ms/gOWSJs – will allow for “Cupertino-class” interactive applications on the Web that publishers will be able to offer without having to go through Apple.

Resisting the Temptation to Solely Go It Alone

Paid content to date has occurred in silos, with each content provider setting up their own cash register, i.e. subscriptions to The Wall Street Journal, Pandora, ESPN, Hulu, JibJab, Consumer Reports, etc. While proprietary subscriptions that only allow users to access premium content on an individual site basis is a reasonable first step toward introducing a mixed, sustainable revenue model for digital content providers, for the paid ecosystem to gain further traction and achieve a broader economic impact, media companies must provide their audiences’ with greater payment choices and portability.

In order to make choice and portability a reality, media and entertainment companies must come together to make accessing premium offerings as “frictionless” as possible, i.e. the good things that will emerge in the red circle above. In his blog post from April 4^th, Hulu CEO Jason Kilar reported that his company was on pace to approach half a billion dollars in revenue in 2011, proof positive that compelling business results can emerge when content creators collaborate in the browser.

Exploiting Idleness

An idle asset is a business opportunity. At least that is the perspective of many web entrepreneurs. Empty airline seats, empty hotel rooms, empty private rooms, empty restaurant seats, empty automobiles – see Priceline, Expedia, Airbnb, Open Table, RelayRides. Even idle home offices have been turned into customer service centers – see LiveWorld. So maybe “idle” citizens can be turned into couriers. That is the idea behind a DHL initiative called bring.BUDDY.

I read about it in a post from Springwise – http://bit.ly/fWaACh.

“Created last year for DHL by a team of students at the HPI School of Design Thinking at Germany’s University of Potsdam, bring.BUDDY taps all the consumers moving through a city each day, whether via bike, public transport or on foot. Interested participants indicate their travel route for the day using a downloadable smartphone app; a text message then lets them know of any packages needing delivery along the way. When there is such a package, the participant picks it up from the local kiosk where it’s waiting and delivers it as they go about their daily business. In exchange for their help, the program rewards them with points that can be redeemed for free train tickets, merchandise coupons or CO2 credits.”

When I first considered the concept I could only think about how absurd it all seemed. But in the context of the somewhat analogous services I mention above, and given the increasing prevalence of sharing assets and services in our society, facilitated in large part by technology, maybe it isn’t so crazy after all.

Check out the following video (in German with English subtitles) that lays out how bring.BUDDY would work.

YouTube – bringBUDDY’s Channel, posted with vodpod

Mobile Q&A

This following service plays off of two notions that I have previously touched on in my posts “The Neighborhood (and Strangers) As Entertainment” – http://bit.ly/cK2agb – and “The Future & the Photobooth” – http://bit.ly/hCERJU. I realize that there is no shortage of location-based mobile services pitching their wares at the moment, but I think that Crowdbeacon – http://crowdbeacon.com/ – may have come up with a novel twist on the genre. The service combines what I will call “static directories”, i.e. Yelp, with “real time” directories, i.e. human beings (the crowd), to provide recommendations for people seeking local services. Or as the company puts it “Crowdbeacon is a location-based service focused on providing relevant, localized communication and information to users based on what they need and where they are.” The following video does a good job capturing the spirit of the service – http://crowdbeacon.com/how-works.aspx.

The two keys to success here include building up a substantial crowd of users willing to participate in the service, i.e. provide advice, as well as the quality of the advice that is provided. With the current fixation on web-based Q&A services such as Quora, etc., Crowdbeacon may be in the right place at the right time with a mobile, leisure-based twist on Q&A.

Mr. McGuire: I want to say one word to you. Just one word.

Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.

The Graduate (1967)

If Mr. McGuire and Benjamin were having that same iconic conversation today Mr. McGuire could do worse than offer “aggregate” as his single word of advice. I touched on this back in May of last year – http://bit.ly/ftZulZ. For all the frenzy surrounding the social web, aggregation remains central to the business strategy of a number of emerging services.

SignPost – http://www.signpost.com – aggregated local deals

Foodily – http://foodily.com – aggregated recipes

Chomp – http://chomp.com – aggregated apps

I suppose that as long as we have information overload, so to will we have aggregation as a coping mechanism.

Acquisition News

Saw today that CBS has acquired Clicker – http://read.bi/eO6pvA – which I wrote about last August – http://bit.ly/9Cbvu7.

Simply Brilliant!

There is no better business model, online or off, than creating a marketplace where your buyers and sellers essentially do all of your work for you. Where the sellers provide the inventory that is being purchased in the form of information about that inventory and the buyers provide your marketing in the form of word of mouth, digital and otherwise. Meanwhile the market maker sits in the middle, facilitating the conversation and collecting a fee for each transaction that it helps consummate. Add a clean, simple interface to make all of the aforementioned happen, and you have the makings of a brilliant business, i.e. airbnb. From their web site, Airbnb – www.airbnb.com – describes their services as “unlocking unique spaces worldwide”.

“We connect people who have space to spare with those who are looking for a place to stay. Guests can build real connections with their hosts, gain access to distinctive spaces, and immerse themselves in the culture of their destinations. Whether it’s an urban apartment or countryside castle, Airbnb makes it effortless to showcase your space to an audience of millions, and to find the right space at any price point, anywhere.”

That’s what you call disrupting  the multi-billion dollar hospitality industry.

Funding News

Last week SpeakerText – http://speakertext.com – which I wrote about back in January 2010 - http://bit.ly/fWVdDr – received $600,000 from a group of angel investors including Mitch Kapor, the founder of Lotus, Dave McClure’s 500 Startups, Crowdflower CEO Lukas Biewald, Roy Rodenstein, Chris Yeh, and ex-Googler Georges Harik. More info can be found here: http://tcrn.ch/gLA7Fb.