May 16, 2017
HuffPo Article: 3-Part Series on Investing in Mobile – Part 3: Funding for Change
The central thesis of my bestselling book on mobile, mobilized, is that our mobile products are extensions of ourselves. So, when thinking about what makes a great mobile product, I think about what we are when we strive to be our best selves and I use the mind-body-spirit framework to describe what that means:
- Body: We all want to look good and expect the same from our mobile product.
- Spirit: We all want meaningful lives and similarly expect that our mobile products will be highly personalized.
- Mind: We all want to learn and grow and we expect that our mobile products will do so with us.
Where are opportunities for investors? What should they stay away from? Let’s look at part 3: mind. We need rapidly adapting mobile products because our behavior on mobile evolves so quickly (3 years ago, who would have taken a selfie without looking like a fool?!)
For large companies, this can be a curse and many are still struggling with their mobile-first transition. Service industries like insurance, for instance, have made a very small inroad into mobile yet the large majority of their customers are mobile.
Heavy industries like shipping, that are mobile in essence, need to adopt mobile as a competitive differentiator: none of the top players in that space is able to monitor their ships and the merchandize on them in real time. Using mobile would optimize routing, delivery and much more.
This is great news for investors because it means that many of these struggling giants are prepared to pay a premium to buy their way into mobile. But they change both fast and slow.
Changing fast: when it comes to bots, my eyes are on China
With so much data collected via our mobile devices, the machine learning, deep learning and artificial intelligence technologies (AI) that were developed decades ago finally have something to churn on. But their value comes less from the algorithm itself than from the nature and quality of the underlying data. What does that mean for mobile investors? The opportunities are in vertical bots that focus on very specific use cases and are powered by large amounts of data. Think about Amex for example, they know what we buy, where we travel, and much more. What if they used that information to recommend purchases right where and when we need it? However much of that data is behind a firewall and carefully protected, so new entrants will be hard pressed to access it unless they rely on a rich network of subject matter expert. Here again, my eyes are on China and what WeChat is doing with its channels, many of which curated by subject matter experts.
Changing slow: the end of app stores
App stores offered prime visibility early on, now they have become extremely crowded. Over the past few years, they have been replaced by messaging platform, but those too are becoming crowded. What’s next? App stores and messaging apps are after all nothing more than an icon on your screen that people go to when they have a specific need –remember “an app (or bot) for everything.” Many technologists hope that the time of the browser will come next, and there are a few entrepreneurs trying to build next-gen mobile web platforms. I believe we can do better than a browser. After all, a browser app is yet another icon on your screen. What if instead, we applied AI to skip that icon altogether. Imagine you used OpenTable to book a table at a restaurant, but instead of having to pull up/download Uber to get to the restaurant, your phone has already made arrangements to get you there on time. URX (acquired by Pinterest) attempted to enable this type of experience, but there’s room for more.
What am I less excited about as an investor: unicorns.
I’m skeptical of the recent success of the Snap IPO for instance. Why? Because it feels like the people vs. OJ Simpson. The evidence that Snap is not a category killer is overwhelming: the company doesn’t make money, its growth is slowing, it exists in reaction to Facebook (Facebook keeps your data, Snap doesn’t). So the current sky-high valuation of Snap seems driven by emotions, not by reason.
I’m also mixed on Uber and Lyft. They’re engaged in a race to the bottom: riders want lower prices, drivers want higher wages, governments want their share, and competition is fierce. Something’s gotta give. My advice to investors is to demand extreme focus: unless they make self-driving car a reality in the next 3-5 years, Uber and Lyft will become taxi companies and no taxi company has ever been worth billions of dollars.
If you’re an early stage investor, I’d love to hear your perspective and who knows, we might co-invest. If you’re an entrepreneur building a mobile company, I’d love to help you so drop me a note or grab some time with me via my website: scmoatti.com.