Hooked, health markets but the mind is wandering… to pooh and data privacy

Hooked by Nir Eyal

One of the things I learnt many years ago was that there were four fundamental basics to increasing profits in any business. You sell:

  • More Products (or Services)
  • to More People
  • More Often
  • At higher unit profit (which is higher price, lower cost, or both)

and with that, four simple Tableau graphs against a timeline could expose the business fundamentals explaining good growth, or the core reason for declining revenue. It could also expose early warning signs, where a small number of large transactions hid an evolving surprise – like the volume of buying customers trending relentlessly down, while the revenue numbers appeared to be flying okay.

Another dimension is that a Brand equates to trust, and that consistency and predictability of the product or service plays a big part to retain that trust.

Later on,  a more controversial view was that there were two fundamental business models for any business; that of a healer or a dealer. One sells an effective one-shot fix to a customer need, while the other survives by engineering a customers dependency to keep on returning.

With that, I sometimes agonise on what the future of health services delivery is. One the one hand, politicians verbal jousts over funding and trying to punt services over to private enterprise. In several cases to providers of services following the economic rent (dealer) model found in the American market, which, at face value, has a business model needing per capita expense that no sane person would want to replicate compared to the efficiency we have already. On the other hand, a realisation that the market is subject to radical disruption, through a combination of:

  • An ever better informed, educated customer base
  • A realisation that just being overweight is a root cause of many adverse trends
  • Genomics
  • Microbiome Analysis
  • The upcoming ubiquity of sensors that can monitor all our vitals

With that, i’ve started to read “Hooked” by Nir Eyal, which is all about the psychology of engineering habit forming products (and services). The thing in the back of my mind is how to encourage the owner (like me) of a smart watch, fitness device or glucose monitor to fundamentally remove my need to enter my food intake every day – a habit i’ve maintained for 12.5 years so far.

The primary challenge is that, for most people, there is little newsworthy data that comes out of this exercise most of the time. The habit would be difficult to reinforce without useful news or actionable data. Some of the current gadget vendors are trying to encourage use by encouraging steps competition league tables you can have with family and friends (i’ve done this with relatives in West London, Southampton, Tucson Arizona and Melbourne Australia; that challenge finished after a week and has yet to be repeated).

My mind started to wander back to the challenge of disrupting the health market, and how a watch could form a part. Could its sensors measure my fat, protein and carb intake (which is the end result of my food diary data collection, along with weekly weight measures)? Could I build a service that would be a data asset to help disrupt health service delivery? How do I suss Microbiome changes – which normally requires analysis of a stool samples??

With that, I start to think i’m analysing this the wrong way around. I remember an analysis some time back when a researcher assessed the extent drug (mis)use in specific neighbourhoods by monitoring the make-up of chemical flows in networks of sewers. So, rather than put sensors on people’s wrists (and only see a subset of data), is there a place for technology in sewer pipes instead? If Microbiomes and the Genetic makeup of our output survives relatively intact, then sampling at strategic points of the distribution network would give us a pretty good dataset. Not least as DNA sequencing could allow the original owner (source) of output to connect back to any pearls of wisdom that could be analysed or inferred from their contributions, even if the drop-off points happened at home, work or elsewhere.

Hmmm. Water companies and Big Data.

Think i’ll park that and get on with the book.

Yo! Minimalist Notifications, API and the Internet of Things

Yo LogoThought it was a joke, but having 4 hours of code resulting in $1m of VC funding, at an estimated $10M company valuation, raised quite a few eyebrows. The Yo! project team have now released their API, and with it some possibilities – over and above the initial ability to just say “Yo!” to a friend. At the time he provided some of the funds, John Borthwick of Betaworks said that there is a future of delivering binary status updates, or even commands to objects to throw an on/off switch remotely (blog post here). The first green shoots are now appearing.

The main enhancement is the ability to carry a payload with the Yo!, such as a URL. Hence your Yo!, when received, can be used to invoke an application or web page with a bookmark already put in place. That facilitates a notification, which is effectively guaranteed to have arrived, to say “look at this”. Probably extensible to all sorts of other tasks.

The other big change is the provision of an API, which allows anyone to create a Yo! list of people to notify against a defined name. So, in theory, I could create a virtual user called “IANWARING-SIMPLICITY-SELLS”, and to publicise that to my blog audience. If any user wants to subscribe, they just send a “Yo!” to that user, and bingo, they are subscribed and it is listed (as another contact) on their phone handset. If I then release a new blog post, I can use a couple of lines of Javascript or PHP to send the notification to the whole subscriber base, carrying the URL of the new post; one key press to view. If anyone wants to unsubscribe, they just drop the username on their handset, and the subscriber list updates.

Other applications described include:

  • Getting a Yo! when a FedEx package is on it’s way
  • Getting a Yo! when your favourite sports team scores – “Yo us at ASTONVILLA and we’ll Yo when we score a goal!
  • Getting a Yo! when someone famous you follow tweets or posts to Instagram
  • Breaking News from a trusted source
  • Tell me when this product comes into stock at my local retailer
  • To see if there are rental bicycles available near to you (it can Yo! you back)
  • You receive a payment on PayPal
  • To be told when it starts raining in a specific town
  • Your stocks positions go up or down by a specific percentage
  • Tell me when my wife arrives safely at work, or our kids at their travel destination

but I guess there are other “Internet of Things” applications to switch on home lights, open garage doors, switch on (or turn off) the oven. Or to Yo! you if your front door has opened unexpectedly (carrying a link to the picture of who’s there?). Simple one click subscriptions. So, an extra way to operate Apple HomeKit (which today controls home appliance networks only through Siri voice control).

Early users are showing simple Restful URLs and http GET/POSTs to trigger events to the Yo! API. I’ve also seen someone say that it will work with CoPA (Constrained Application Protocol), a lightweight protocol stack suitable for use within simple electronic devices.

Hence, notifications that are implemented easily and over which you have total control. Something Apple appear to be anal about, particularly in a future world where you’ll be walking past low energy bluetooth beacons in retail settings every few yards. Your appetite to be handed notifications will degrade quickly with volumes if there are virtual attention beggars every few paces. Apple have been locking down access to their iBeacon licensees to limit the chance of this happening.

With the Yo! API, the first of many notification services (alongside Google Now, and Apples own notification services), and a simple one at that. One that can be mixed with IFTTT (if this, then that), a simple web based logic and task action system also produced by Betaworks. And which may well be accessible directly from embedded electronics around us.

The one remaining puzzle is how the authors will be able to monetise their work (their main asset is an idea of the type and frequency of notifications you welcome receiving, and that you seek). Still a bit short of Google’s core business (which historically was to monetise purchase intentions) at this stage in Yo!’s development. So, suggestions in the case of Yo! most welcome.

 

SaaS Valuations, and the death of Rubber Price Books and Golf Courses

Software Services Road Signs

Questions appear to being asked in VC circles about sky-high Software-as-a-Service company valuations – including one suggestion i’ve seen that it should be based on customer acquisition cost (something I think is insane – acquisition costs are far higher than i’d ever feel comfortable with at the moment). One lead article is this one from Andreessen Horowitz (A16Z) – which followed similar content as that presented on their podcast last week.

There are a couple of observations here. One is that they have the ‘normal’ Enterprise software business model misrepresented. If a new license costs $1000, then subsequent years maintenance is typically in the 20-23% of license cost range; the average life of a licensed product is reckoned to be around 5 years. My own analogue for a business ticking along nicely was having license revenue from new licenses, and support revenue from maintenance (ie: 20% of license cost, for 5 years) around balanced. Traditionally, all profit is on the support revenue; most large scale enterprise software vendors, in my experience, assume that the license cost (less the first year maintenance revenue) represents cost of sales. That’s why CA, IBM and Oracle salespeople drive around in nice cars.

You will also find vendors routinely increasing maintenance costs by the retail price index as well.

The other characteristic, for SaaS companies with a “money in this financial year” mindset, is how important it is to garner as many sales as is humanly possible at the start of a year; a sale made in month 1 will give you 12 months of income in the current financial year, whereas the same sale in month 12 will put only 1 months revenue in the current fiscal. That said, you can normally see the benefits scheduled to arrive by looking at the deferred revenue on the income statement.

Done correctly, the cost of sales of a SaaS vendor should be markedly less than that of a licensed software vendor. Largely due to an ability to run free trials (at virtual zero marginal cost) and to allow customers to design in an SaaS product as part of a feasibility study – and to provision immediately if it suits the business need. The same is true of open source software; you don’t pay until you need support turned on for a production application.

There is also a single minded focus to minimise churn. I know when I was running the Individual Customer Unit at Demon (responsible for all Consumer and SME connectivity sales), I donated £68,000 of the marketing budget one month to pay for software that measured the performance of the connectivity customers experienced – from their end. Hence statistics on all connectivity issues were fed back next time a successful connection was made, and as an aggregate over several 10’s of 1000’s of customers, we could isolate and remove root causes – and hence improve the customer experience. There really is no point wasting marketing spend on a service that doesn’t do a great job for it’s existing users, long before you even consider chasing recruitment of new ones.

The cost per customer acquired was £30 each, or £20 nett of churn, for customers who were spending £120/year for our service.

The more interesting development is if someone can finally break the assumption that to sell Enterprise software, you need to waste so much on customer acquisition costs. That’s a rubber price book and golf course game, and I think the future trend to use of Public Cloud Services – when costs will go over a cliff and way down from todays levels – will be it’s death. Instead, much greater focus on customer satisfaction at all times, which is really what it should have been all the way along.

Having been doing my AWS Accreditations today, I have plenty of ideas to simplify things out to fire up adoption in Enterprise clients. Big potential there.

Further Insights – Apple/Beats and the Anaemic Twitter

Jimmy Iovine Interiew - AllThingsD

A bit of a slow day today – i’m doing my Amazon Web Services Accreditations and it appears to be a slow news day at the same time.

There was neat video cited by Benedict Evans Weekly Email where Jimmy Iovine, one of the two co-founders of Beats, was interviewed at a recent AllThingsDigital conference. Full 41 minute video here. Having listened to it yesterday, I think i’ve changed my mind – and that Beats is probably not the wholesale Xioami-type younger persons brand for Apple. Instead, it sounds like the real benefit is a redesign of Apple’s relatively unsuccessful “iTunes Match” and a re-implementation of the “iTunes Genius” recommendation engine. The Beats folks are curating their own “what track should we play next” capability with over 100 professional record industry mix specialists, and then trying to bolt on some behaviours that a machine-generated recommendation engine can follow.

On a completely different tack, I think Twitter’s lack of user growth is certainly below what most commentators appear to thing as possible (with a base of 200 million Monthly Active Users – compared to Facebooks 1.2 Billion equivalent). That said, there was a comment I saw berating people for being so hard on them.

The central argument is that only 60 million of the 200 million logged in Monthly Active Users post any tweets at all. There was a three year old comment from VC Fred Wilson (full text here) I saw that suggested this was actually a terrific achievement, and that most media production has far less user content shared. Fred (who was an early stage investor in the company) said:

Let’s remember one of the cardinal rules of social media. Out of 100 people, 1% will create the content, 10% will curate the content, and the other 90% will simply consume it. That plays out on this blog, that plays out in Twitter, and that plays out in most of the services we are invested in.

Twitter has 400mm active users a month, 100mm of them are engaged enough to log in, but only 60mm tweet. For years people have made it out like this is a bad thing. It’s not a bad thing. It is an amazing thing. Let people use the service the way they want and you’ll get more users. Logged out users are users just like logged in users. We should focus more on them, build services for them, and treat them like users, not second class citizens.

That said,  a few people are starting to complain about Marc Andreessen’s bombs of successive numbered tweets – the very thing i’ve said (with supporting dialogue from other participants) were really gold. The main complaint given (full article here) was the way they mess up the twitter streams of people who aren’t as fascinated as I am by the content of the discussion to-and-fro’s. I just wish there was a way to bottle these things – and i’m sure they will in time. Whether it’s in Twitter or with a different service. But that’s for another day.

In the meantime, back to my AWS certifications.