Archive for 'Web 2.0'
Blonde 2.0 Tries Hard to Get Me in Trouble
One thing I've noticed during my six months of jet-setting is that entrepreneurs around the world want to be compared to Silicon Valley, but frequently get upset when you do it. Michael Arrington jokingly asks how I intend to piss off a whole country this time before I leave for any trip. (At least, I think he's joking…)
So, note the tap dancing below as Ayelet Noff asks me to compare Silicon Valley entrepreneurs to London entrepreneurs and Israeli entrepreneurs.
Wonga: How the Net Should Kill the Finance Industry
[Cross-posted from TechCrunch]
What’s awesome about the Internet is how it breaks up monopolistic markets where middlemen unfairly gobble up outsized fees, leaving us little choice but to keep paying them. It happened with software, it happened with music, and it’s happening now with media. But there are a few sectors of our economy that have stayed mostly undisrupted—one of them is banking.
Sure there are companies like eTrade that opened up the market for buying and selling stocks. But it didn’t fundamentally change the market that much, it just moved part of it online. The thought for a long time was that banks needed to be too controlled, too regulated to be turned over to the Wild West of the Net. Then the credit meltdown hit and we saw just how reckless these so-called safe and regulated institutions were.
The time is right for the Web to unleash its full market-destroying power on the finance world and while I was in the UK I found a company making a promising start: Wonga.
Now, Wonga would hardly say its role is to upend the world’s financial institutions. But it’s one of the most dramatic examples I’ve seen of a Web company using what the Web does well to remake lending.
Wonga gives people a way to borrow small amounts of money quickly, between £50 and £200 for first time borrowers to be repaid between five days and 30 days. (Returning customers with a good repayment record can borrow up to £750.) A would be borrower gives Wonga just eight pieces of personal data online, and its algorithms find 1800 data points based on that within 2 seconds, making a rapid decision about whether that person is a good or bad short term credit risk. If approved, the money is wired into the borrower's account within the hour. And, the borrower gets to decide when to repay the money, with no penalty for early repayment. One of the most notable things about the UI is a sliding scale, which shows exactly what fees someone would owe Wonga for every dollar borrowed and extra day before its repaid. No fine print and formulas to calculate; the cost of every dollar you borrow is calculated for you.
Wonga was founded by Errol Damelin, a serial entrepreneur who previously started a supply chain software company named Supply Chain Connect. He sold that company in 2005 and decided he didn’t want to build another enterprise software business. (Smart move.) So he traveled around the world looking for ideas. In the U.S. he became captivated with payday lending companies—an industry of strip mall storefronts that generates a whopping $12 billion in fees.
There was a clear demand for short-term loans to tide people over or take care of emergencies. But it was a polarizing industry, seen as predatory and exploitative. Damelin spent more than a year digging into it, and brainstorming with well-known UK angel investor Robin Klein on how to rethink it and make it better.
Two things excite me most about Wonga. The first is that it isn’t peer-to-peer lending. Peer-to-peer lending in a social sense, like Kiva, is one thing, but I’m not convinced peer-to-peer lending for profit works or scales. It feels a bit like trying to apply Web 2.0 ethos of wisdom of the crowds and social networking somewhere that it just doesn’t fit. Instead, Wonga has raised $28 million from Balderton Capital, Greylock Ventures, Accel Partners and Dawn Capital and is loaning out its own cash. In its first year of business it did more than 100,000 loans, for an average of £250 each, and it’s already profitable. “This is the best business I’ve ever been in,” Damelin says.
Second, it’s the first time I’m aware of that a bank that has actually aligned its incentives with what’s right for the customer. Put another way: Wonga makes its money when you repay the loan, not by keeping you in debt longer. Think about it: Credit card companies make the most of their money from people just able to make their minimum payments every month. And payday advance chains make most of their money by rolling over your debt to the next payday.
Critics have said that Wonga is usurious by charging a 1% interest fee per day. But that’s a knee-jerk response. Wonga is simply charging a premium because it allows borrowers quicker access to cash than any other service, the same way a town car is going to charge you more than a cab off the street. And because it only makes money when a borrower repays the amount, there are no tricks to keep you in debt longer. Wonga’s ideal customer is someone who uses the service two to three times a year and always repays on time, Damelin says. If more financial institutions had this basic orientation to doing business, we wouldn’t have had the credit meltdown because people would have known exactly the risks of agreeing to ARMs and zero-down mortgages.
Sure, you can say Wonga is dangerous because it's giving people an easier way to live outside their means. But that's a bit like arguing giving kids condoms encourages teenage sex. You can't change human behavior, but you can help make people safer.
Now here’s the downside on Wonga: It’s only available in the UK, and it will likely stay that way thanks to a bevy of licenses and regulations entailed in getting near the finance sector. It’s even worse in the US, where each state has its own laws. Even a copy cat business might be cost-prohibitive in the U.S. because of all the state-by-state regulations and red-tape.
As our taxpayer dollars continue to bail out the same lousy institutions, it’ll take innovators like Wonga to force real change in the finance world. But in this country, it’ll need an assist from the government as well.
Why Zynga Is Worried about Playfish
[Cross-posted from TechCrunch]
When I wrote my BusinessWeek column on Zynga a while back, every venture capitalist in the Valley told me that Playdom was the company’s biggest competitor.
After all, it competes game-to-game, with similar mob-style and
poker games, and was said to be doing the same revenues as Zynga with
much higher profitability. (As my column pointed out, Zynga’s revenues
are more like double Playdom’s—and since I’ve heard the discrepancy is
even greater.)
As you’d expect Zynga’s CEO Mark Pincus pooh-poohed Playdom as any
sort of threat. But tellingly, he said the company he was worried about
was UK-based Playfish. So, while I was across the pond, I decided to
see what the fuss was about and sat down with Playfish’s founder and
CEO Kristian Segerstrale. I came away convinced this was one of the
hottest companies to watch in the UK. Here are five reasons why.
1. Not “The UK Zynga.” Playfish is very much running its own
race in this market, and this may be a case where distance from the
Valley is actually healthy. It doesn’t try to compete on specific games
with Playdom, SGN, and Zynga. For instance, it doesn’t have a mob game,
the most popular genre right now, and it doesn’t have a poker game,
Zynga’s top earner. “That’s such short term thinking,” Segerstrale
said. “Something is wrong if your route to success is copying
competitors’ games.”
2. Platform Development Doesn’t Have to Mean Half-Ass Development.
Playfish is not about building a game in a week or so and throwing it
up on Facebook. Playfish spends six months to a year designing a game,
and they’ve only produced seven of them. While everyone else talks up
how quickly and cheaply you can build a game on social networks,
Playfish still employs the same artistic discipline of a console game
with a Wii-like look and feel. The plus with platforms like Facebook
and the iPhone isn’t speed to market for Playfish, it’s easier
distribution and greater social engagement.
3. Traction. The painstaking design process appears to be a
hit. Every one of Playfish’s games has been a top ten hit on Facebook.
Across all platforms, those seven games have yielded 100 million
installs and 30 million monthly uniques, says Segerstrale. Playfish
pays “practically nothing” for customer acquisition and makes money
through virtual goods, ads and premium versions of games.
Playfish is profitable and hasn’t spent a dime of its recent $17
million funding round. That’s gotta be some top line given Playfish has
200 employees across several offices. In fact, TechCrunch Europe’s Mike
Butcher speculated that
Playfish could be the $1 million-dollar-a-month Facebook app maker,
back in September 2008. It certainly puts the company in an enviable
position given the paucity of venture funds in the UK.
4. Proximity to the Valley Insiders via Investors. While
Playfish enjoys distance from the one-ups-man-ship or developer
poaching of SGN, Playdom and Zynga, it’s connected into the Valley
where it counts. One of its main investors is Accel—also one of the
main backers of Facebook. Yes, that matters. (See Sequoia
Capital-backed Google’s purchase of Sequoia Capital-backed YouTube.)
5. Segerstrale Knows Games. This is the fuzziest one, but
also probably the most important. As a CEO, Segerstrale comes to this
industry from a different point of view than Pincus. Pincus has said he
was never really much of a gamer—Segerstrale on the other hand has
loved games since he was three years old playing Pong with his older
brother. He always got a visceral rush from playing, especially with
other people. So he’s spent much of his career working towards two
goals: Decoding what makes a game “fun” and deconstructing the concept
of a “gamer” so games are just something everyone plays.
His first attempt was at mobile, thinking that with phones in every
pocket, everyone would essentially have a game console. Indeed, the
company he cofounded, Glu Mobile, went on to a successful IPO. But
gaming was still a niche activity on phones. There were too many
barriers set up by the telcos and it wasn’t as easy for people to find
and download games. Facebook turned out to be a much greater platform
for this kind of democratization of gaming because users could market
games to one another.
Segerstrale’s macro theory is that we’re in the first shift of a
move from physical games and goods to digital ones, and from games as a
product to games as a service. It’s a theory that seems right-on to me.
For one thing, we already saw it with the transition from enterprise
software to software as a service. For another, sales of console games
are down 20% year-over-year according to NPD, while comScore says
social gaming is up 20% year-over-year. It’s nice to see a CEO who can
articulate not only a product vision, but a clear industry vision.
All the positives above aside, I’m still not convinced that
Segerstrale will succeed in his mission to democratize games. I still
mainly use Facebook as a way to connect with friends, not to build
virtual restaurants and I don’t necessarily see that changing. In fact,
Facebook has so de-emphasized apps in its new all-feed iteration, I
spent nearly an hour trying to find a listing of games, before someone
finally told me it was on the throw-away bottom bar of the profile
page. And by emphasizing the social stickiness of a game, there’s a
chicken-and-egg risk that the games are boring for people who don’t
have enough friends already playing.
But these are execution risks and every promising startup has them.
When it comes to business model, financing, vision and product,
Playfish is certainly a formidable competitor to Zynga. With hundreds
of millions in real dollars already swarming around social gaming, this
will be fun space to watch.
Renee Blodgett & Sarah Lacy discuss the London Tech Scene
While participating in the Traveling Geeks week in London, and checking out the start-up scene in the UK, I had the opportunity to interview a few of my fellow travelers about their impressions of the London tech scene. In between our busy schedule, I appreciated the chance to speak to Renee Blodgett and Sarah Lacy.
Renee Blodgett is the CEO of Magic Sauce Media, a strategic communications, social media, and branding consultancy, co-founder of Traveling Geeks, founder and producer of We Blog the World, a blog dedicated to global storytelling and the latest developments in social, cultural and technology trends and blogger of Down the Avenue .
Renee discusses the difference between UK and Silicon Valley start ups. Her impression of the London tech scene, after having previously lived in England, was that the UK is not really a start-up culture. They are more reserved and still trying to get their head around social media and remain reliant on traditional media, like radio and television. According to Blodgett, the UK is not really a start-up culture.
Sarah Lacy is the author of Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0. She is also Editor At Large at TechCrunch, a reporter for BusinessWeek, and also co-hosts the Yahoo! Tech Ticker.
Lacy provides some important insights on the current state of the economy. She points out that UK-based start ups are feeling the consequences of the economic downtown far more than start ups in Silicon Valley. A long-time observer of the UK tech scene, Lacy has seen that many start ups have failed, yet there is definitely potential to excel. Several companies have done very well. What is the secret to their success? A strong business model, concern for metrics, and a focus on profitability. Lacy also agrees with Blodgett that the UK isn’t as into social media. While Israelis love social media and are relentless, the British are more reserved and restrained.
An Interview with Zemanta’s Tori & Qype’s Hunter
Talking to Zemanta’s Andraz Tori and Qype’s Andrew Hunter. Click play to hear their story.
Moshi Monsters: Virtual World for Kids
I spent some time talking to MindCandy’s Michael Acton Smith talking about their primary brand: Moshi Monsters, which is essentially a Facebook mixed with virtual world experience for kids.
He talks about how kids can create pet monsters, participate in games and contests, and engage with their friends in various ways that are safe and secure.
We also dive into marketing and what kinds of things they have been experiencing with as a young company only out of the gate just over a year. It includes Facebook advertising as well as traditional TV. Learn more in my chat with Michael below.
An Interview with GroupSpaces, UberVu and School of Everything
Below is an interview with the founders of GroupSpaces, UberVu and School of Everything at Seedcamp in London earlier this month.
Skype and the Social Web
Perhaps a little known fact outside Skype Headquarters is that the social web is fundamental to its product development strategy.
During the development of Skype 4.0 for Windows, for example, over 50,000 individual pieces of feedback were gathered from users around the world, from blogs, forums and Twitter as well as direct surveys.
Skype’s experience team, which consists of a mixture of designers and researchers, reviewed and analyzed the data they received, and their findings had a direct influence on the way the product grew and matured from beta to final versions.
Functionality and user interface were both greatly influenced by the views of Skype users, but not, of course, without the expert knowledge and experience of Skype’s engineers and designers.
For Skype, however, this wasn’t a one-off; it’s an everyday way of doing business. Peter Parkes, Skype’s blogger-in-chief, works daily with product teams to gather, collate and pass on feedback. And it doesn’t just go to the engineers and designers who build the software itself.
The feedback also helps their customer support team provide better answers to users’ questions, and helps their marketing team produce more compelling copy. Remember, every tweet counts.
Refer back to the video interview I did with Parkes and community manager Dobb.
Skype was a sponsor of the Traveling Geeks UK tour.
Moby Picture: What Matters to us is Your Story
Mathys van Abbe from Moby Picture was in London during our latest geek tour.
I didn’t have enough time to put their app through the test on the Nokia N79 we were using on the ground, but I plan to load it up on whatever new phone I end up with in the next couple of weeks. It’s most definitely time for a new one.
Their mission is to enable users to share their adventures as easily as possible. Says Mathys, “it’s not about the technology. What matters to us is your story.”
Moby Picture adds as much context in the background as possible to enrich your content. They also match your location against other content taken in the same timeframe, determine whether there’s a popular spot nearby, or an event going on.
Groups enable you to aggregate content about specific interests, events, hobbies, etc. Using this feature, you can post to a group in a variety of ways, but the simplest is to just add the group hashtag (like #moby) to the title or description of your posting.
They are working on closing deals with publishers and are encouraging third party developers to use their APIs. More after I start playing with it.
Video of Howard Rheingold talk in London on 21st Century Literacies
This is my edit of a talk on 21st century literacies that I gave in London at the Reboot Britain conference in July, 2009. It was part of the action-packed, fun-filled Travelling Geeks tour. About 40 minutes. {Original link: Howard Rheingold on 21st Century Literacies.}
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Howard Rheingold on 21st Century Literacies.
