Taxing times for tech companies

Very few of us like paying tax, but there’s a fine line between legitimately reducing your tax bill and actively avoiding paying the tax that is due. And at a time of austerity where everyone is tightening their belts, there’s obviously a push by governments to close loopholes and maximise the revenues they receive.

Given their high profile and obvious success Starbucks and Amazon have both been the subject of widespread condemnation of their tax avoidance methods, and I’ve covered Starbucks inept PR response in a previous blog. Google was up before a House of Commons Select Committee last week (for the second time), backing up its claims that, despite revenue of £3 billion in the UK, all its advertising sales actually take place in the lower tax environment of Ireland. Google boss Eric Schmidt has countered that the company invests heavily in the UK with its profits, including spending £1 billion on a new HQ that he estimates will raise £80m per year in employment taxes and £50m in stamp duty.

Apple is the next company caught in the public spotlight, with CEO Tim Cook appearing before a US Senate committee that had accused it of ‘being among America’s largest tax avoiders’. Meanwhile, the loophole that sees Amazon and other big US ecommerce companies avoid paying local sales taxes is being challenged by a new law passing through Congress, with estimates of between $12 and $23 billion extra being collected.

Given the close links between Google and UK politicians (Ed Miliband is appearing at a Google event this week and Schmidt is expected to meet David Cameron on his current UK trip), the cynical view is that this is a lot of sound and fury, signifying nothing. But it does create an image problem for the companies involved, particularly at a time when we’re all meant to be in it together.

Obviously the most popular thing for companies to do would be to re-organise their tax affairs so that they meet the spirit as well as the letter of the law. But that’s not likely to happen given the enormous sums at stake. Instead expect increased calls for global tax reform (so that the organisations involved don’t have to operate the way they are currently ‘forced’ to) and a slew of feel good announcements that demonstrate the level of investment and support for the UK economy by the companies concerned. Being ultra cynical perhaps the whole tax situation explains the huge support by big tech companies for Tech City – it is simply an elaborate way of diverting attention from their financial affairs…………..

How to become a tech billionaire

People create startups for a variety of reasons. They might have a burning desire to solve a problem, they’ve come up with something innovative that they want to commercialise or it seems the logical step from what they were doing before. It might even be an accident of being in the right place at the right time.

Obviously you’re not going to put your heart, soul and every waking hour into a startup unless you want it to succeed. And one measure of success is money – how much is the company worth, and what is your personal reward for your blood, sweat and tears along the way.

So it is interesting to look at the latest Forbes list of the world’s richest people, which has just been published. The good news is that tech and telecoms dominate the rankings – but the bad news for entrepreneurs is that it takes a lot of time to become a billionaire.

Overall the richest man in the world is Mexican telecoms tycoon Carlos Slim Helu, worth a whopping great $73 billion. To put it in context that’s more than the gross domestic product of many countries (for example Azerbaijan’s GDP was $63bn in 2011).  

Following Slim Heddu is Microsoft founder Bill Gates with $67 billion (enough for Azerbaijan and loose change) with Oracle’s Larry Ellison also making the overall top 10. But all three of these are either long established companies (Oracle, Microsoft) or seized an opportunity (mobile phones in the case of Slim Heddu), rather than tech startups.

You have to delve further down the charts to find Google co-founders Larry Page and Sergey Brin (only $23bn and $22.8bn) respectively. In fact they are followed in the tech list by current Microsoft CEO Steve Ballmer ($15.2bn), showing that you don’t need to start a company to benefit from its growth. And despite the travails of Facebook’s stock price Mark Zuckerberg is still worth $13.3bn, but at 28 is one of the youngest names on the list.

So from studying the rankings, what do you need to look at if you want to join the Forbes Tech rich list? Here are a few tips:

1. Cross the chasm – none of the top 10 are particularly innovative, but the majority have achieved mass market appeal very quickly (with the exception of Oracle which has used its muscle to hoover up the B2B competition)
2. Keep it at it – billionaires might have not invented things, but they’ve focused on execution and have prepared to invest for the long term to drive growth. Perhaps this long term focus explains the lack of tech UK leaders in the upper echelons of the list, In fact the highest UK representative is the Duke of Westminster. And it is difficult to get more long term thinking than a peer of the realm that owns huge swathes of central London.
3. Look at emerging markets – Latin American mobile telecoms has skyrocketed over the past 20 years, propelling Slim Heddu to the top of the list and there are a large number of billionaires linked to the BRICs countries where they’ve used technology to revolutionise people’s lives
4. Flotation is just the start – lots of startups (particularly in the UK) look for an exit through flotation or more often a trade sale. As the rise of the fortunes of Gates and Ellison show a stock market listing was used to increase investment in the company rather than sell up.
5. Deliver something scalable. You can’t build a billion dollar organisation selling people’s time (ruling out my PR company joining the Forbes list anytime soon). You need a product or service that provides economies of scale as you grow – software or telecoms being perfect cases in point. The more copies of Windows sold the greater the profits per copy as development costs are spread more thinly.

Don’t set out to be a billionaire. Everyone wants to be rich (even if, like Bill Gates, they then use the money to fund charities and education) but I doubt anyone set out with the specific goal of becoming a billionaire. Develop your idea, be innovative, appeal to a large market and deliver on your promises and (with a bit of luck) success will come – even if it takes some time. And of course for anyone that follows my advice and hits that billion, I’ll take a very reasonable 1%……………….

Driving you round the bend

Over the years the humble car has been getting smarter. From electronic control units that monitor and automatically manage performance (and flash alarming warnings at regular intervals) to in-built sat nav devices, cars are becoming driven by technology.

And now it looks like the internet is coming to a vehicle near you. Intel, for example, claims that, for some brands, by 2014 every car they sell will offer some sort of internet connectivity and analysts IHS say that over 50% of consumers would be swayed by the presence of an internet-capable device when it comes to buying a car.

So what do they predict connecting your car to the net would enable? Obviously there’s entertainment – surfing the web, updating social media, listening to internet radio and watching streaming content. But where analysts see the biggest growth is in apps that help the driving experience – from updates on the nearest cheap petrol station to finding you a parking space in a crowded city.

All very impressive sounding, but will it actually catch on and will car manufacturers actually recoup the billions they’re investing in connected technology?

In my view, the market is going to initially be a lot smaller than people think – but it does provide a potential new revenue stream for car manufacturers if they retain control. In terms of size of market there are four ways that the car market is very different to other internet-connected devices.

Firstly, not that many people buy cars new, so even if half of new cars are smart, that will take a while to trickle down into the mainstream, by which time technology will have moved on in leaps and bounds.

Secondly, a lot of the apps being touted around can already be found on 3G smartphones. Plugging them into a voice controlled connected car should guarantee an easier experience but as anyone that’s tried speech control will tell you it doesn’t always work.

Thirdly, there’s the safety aspect. You can’t use your mobile phone in a car, and the complex apps that some people are talking about would be equally distracting to the driver. In the US a quarter of car accidents are attributed to mobile phone use. I’m sure ‘I was arguing with my car when I crashed’ would soon enter the list of insurance excuses.

And finally, the car market is in turmoil as cash-conscious consumers desert mainstream brands for cheaper alternatives – Peugeot for example lost £4.3 billion in 2012. Is it likely that such advanced technology will be in the latest generation of Kias anytime soon?

But if car manufacturers can get it right they would be able to add a completely new revenue stream to their operations. Rather than just selling a car, they’d be able to act as a gateway to the internet, taking a cut on every app installed in the vehicle and providing ongoing services (such as mapping) on a subscription basis. You may even get to the point of cars, like mobile phones, being subsidised if you sign up to certain packages.

However the big challenge to the automobile industry is adapting to this new reality when it happens. Can they avoid losing out to the likes of Apple, Samsung, Google or mobile phone networks by keeping control of the relationship with the customer? When you look at other industries transformed by the internet (such as music or retail) it isn’t the traditional players that have survived, but young upstarts. Ready for a Google car? They already have one on test…………

Smart vs common sense

I like my gadgets as much as (or more probably more than) the next person. However looking through all the announcements at the Consumer Electronics Show (CES) in Las Vegas I can’t help thinking some are a triumph of ingenuity over common sense. While we can automate a lot of our lives, there are some things that we should be doing intrinsically through common sense rather than relying on electronics. There are genuine innovations at CES (the Plastic Logic PaperTab ultra thin tablet springs immediately to mind), a lot of bigger and better TVs but it is the wacky gadgets which attracted my attention.

I’ve previously moaned about Google Glasses as most of us are lucky enough to have eyes which do a similar job a lot more cheaply. As well as optical technology, CES also sees a whole range of other ‘firsts’ designed to make our lives easier. Here’s a round up of five I found particularly pointless……..

A phone you can use in the bath
One of the few places we can’t use our smartphones is in water, but for those that can’t exist without them while in the shower, Sony is introducing the bath-friendly Xperia Z smartphone. Though if it encourages geeks to wash more, it could be a positive move……..

The intelligent fork
Rushing your food? Tired of being admonished by his wife for wolfing down his food, French inventor Jacques Lepine invented the Hapifork. If you eat too quickly the smart fork buzzes to tell you to slow down and is being marketed as a way to tackle weight gain. Instead, why not just focus on your food and make conversation while eating to avoid guzzling your grub?

The Android Oven
Staying in the kitchen Dacor’s cooker has an 7 inch display and runs the Android operating system that lets you pull up recipes and then adjusts the cooking time to match. All fine so far, but what happens if you get the recipe slightly wrong and it frazzles your dinner while you’re busy playing Angry Birds?

Monitor your plants from afar
The Parrot Flower Power is a Bluetooth monitoring tool that you put in the soil next to one of your prized plants. It then sends messages to your iPad on the nutrients in the soil, ambient temperature and if your plant is in trouble. Again, a pair of eyes, a watering can and reading the label that comes with the plant should be a lot simpler – at least until they develop a version that automatically electrocutes aphids without you needing to spray……….

Find your missing luggage (sort of)
Arriving at a different airport to your luggage is a major inconvenience. Pop the Trakdot, a card-sized tracking device into your bag and it will use mobile phone technology to let you know where it is – and it even shuts down in flight to avoid crashing the plane. However while it might prove your luggage is in Paris, Texas when you’re in Paris, France it doesn’t actually get it back to you any quicker.

I’m sure we’ll see some of these gadgets hit the shops in 2013, but hopefully common sense will prevail over technology and people will keep using their eyes, ears and hands to interact with the world around them, rather than leaving it to a computer…………

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One nation for 4G?

Holy cow! (Photo credit: Today is a good day)

The government is continually stressing the importance of high speed internet access to the economic competitiveness of the UK. However the rhetoric hasn’t really been met with much action – particularly if you live outside London or one of a handful of major cities.

So the news that Ofcom has agreed a revised, earlier timetable for the launch of 4G services is obviously a good thing. High speed mobile data services should now launch by Spring 2013, a full six months earlier than originally planned. And for some people it will come even earlier as EE (the owner of Orange and T-Mobile) will offer 4G services on its existing spectrum to users in 16 cities by the end of 2012. Neither Cambridge nor Oxford is among them as they’ve essentially been picked on population.

When it comes to broadband, the government has carved up a £114m pot between 10 cities to provide 100Mbps access to businesses and consumers. However it doesn’t look like this will help it hit its own target of delivering super fast broadband to 90% of business premises by 2015.

Lots of efforts, lots of rhetoric, but there’s a real risk of a digital divide developing here. I live in a rural area (Suffolk) where basic mobile phone reception is patchy and broadband speeds are much slower than in a city. Obviously it’s my choice where I live but if government wants a competitive economy it can’t afford to neglect any area. Otherwise you’ll see villages simply turn into commuter housing with workers driving off to where there are jobs, increasing congestion, hitting the environment and damaging communities. A huge number of businesses can now be run from anywhere – all they need is decent broadband and a mobile phone signal. In turn this means parents can work from home (or closer to it), reducing the need for childcare costs and allowing them to get more involved in their kids’ education.

To borrow a topical phrase, we are one nation, from Land’s End to (subject to referendum) John O’Groats. What we need is strong government action that invests in infrastructure to ensure that all of us have access to high speed internet access (both fixed and mobile) – it will stimulate the economy, improve people’s lives and reduce commuting. And in the meantime please don’t send 22 meg attachments as it knocks the whole village offline…….

Entrepreneurs and the Olympics

London 2012 banner at The Monument. (Photo credit: Wikipedia)

Now the last cheers of the victory parade have subsided the UK is facing up to life without the Olympics and Paralympics. There’s been lots of talk about whether the mood of euphoria will have any lasting impact on the country/economy/attitudes to disability/sport, but putting that aside, what lessons can entrepreneurs learn from London 2012 and the athletes that took part in it?

Here are six that came to mind, I’m sure there are more:

1          Believe in yourself
Obviously you don’t get to become an elite athlete without believing in yourself and your abilities. It should be the same for entrepreneurs – you may not be Usain Bolt but you’ve got the skills and potentially killer idea. Don’t lose sight of that, even when the daily toil of startup life threatens to overwhelm you.

2          Treat your customers well
Like many people I was bracing myself for surly jobsworth games staff who barely tolerated spectators at the Olympics. Instead we got the Gamesmakers, full of happiness, energy and enthusiasm who went out of the way to help people. Obvious, but treat your customers well and meet their needs and they’ll come back again and sing your praises to everyone else.

3          Have a plan
Every detail of London 2012 was worked out, much of it years ago. There were clear short, medium and long term goals up to and beyond the games so that everyone knew what was meant to happen when and where. While startups don’t need this level of preparedness, they do need to have both an idea of where they are going and how they are going to get there.

4          Have a back up plan
While you can work out every detail of your plan, people let you down and circumstances change. G4S’s last minute inability to keep its promises could have been a disaster, but organisers had a back up. In fact deploying the armed forces probably helped deliver a great customer experience as they used common sense and friendliness when guarding the games, rather than narrowly sticking to the rules. So make sure you have an idea of what you’ll do if your wonderful new product doesn’t work or doesn’t sell.

5          Enthusiasm is infectious
Unfortunately you can’t capture and bottle the Olympic spirit – the enthusiasm and goodwill generated would be worth a fortune. For the first time ever people in London randomly struck up conversations on the tube and it was OK to smile at strangers. Make sure you’re enthusiastic about your idea or business – otherwise how can you expect others to embrace it?

6          Be yourself and have a sense of humour
It would have been relatively easy to create a slick, well-organised games without a soul – essentially an event that could have been held anywhere and had no especial personality. Instead we got an idiosyncratic, very British experience from the Queen parachuting into the opening ceremony all the way through playing the Benny Hill theme tune at the Beach Volleyball to Fat Boy Slim astride a giant inflatable octopus at the close. Did everyone understand it? No, but that didn’t matter – visitors and viewers from around the world reacted to the quirkiness and humour much more strongly than they would have to a boring corporate games. So inject your personality into your company and don’t be afraid to laugh at yourself if you want to attract interest and supporters.

Chirping your way to success

Like A Bird On A Wire (Photo credit: Bruce McKay Yellow Snow Photography)

The market for communicating data over short distances is becoming increasingly crowded. From apps like Aurasma that let you access additional information simply by pointing your iPhone at a graphic to QR codes and even Google’s ludicrous Goggles, there are now 101 ways of connecting you to your immediate environment.

Why? The main reason is that we’re now so bombarded with information that marketers have realised that there’s a danger of missing their (vital) messages. And as members of the Now generation, if we can’t find out more about something we’re interested in immediately we’ll simply forget it and move onto the next big thing, like a shoal of smartphone-equipped goldfish.

Adding (literally) to the cacophony of solutions available, scientists at University College London have created Chirp, which transmits cloud-based data to devices through what sounds like robotic birdsong. Chirp certainly hits the mark with its own marketing – with a catchy/annoying short name, a great back story about research into birdsong and a bearded CEO that looks like he’s straight out of the labs.

And, to be fair, the solution seems clear and easy to use. You upload the data you’d like to chirp to the cloud and then set it to send to any devices in the vicinity that are running Chirp. Simple, straightforward and instant – at least when tested in an anonymous conference room as you can see on this BBC video.

As a marketer I can see the uses for Chirp immediately – for example you can send offers to people as they walk past your shop/coffee shop to lure them inside, and as Chirp works over public address systems and radio transmissions your range is essentially unlimited. But we’ve been here before on this push model – remember 10 years ago when Bluetooth was going to be used to send marketing messages to your phone in the same scenario? It didn’t work, as the security (and battery) implications of switching on Bluetooth outweighed any benefits you’d receive in terms of money off your latte.

What mass market consumers seem to prefer is the pull model, where they choose what to scan (whether a QR code, an Aurasma logo or even listen to a Shazam jingle), making an informed decision on what content they consume. Obviously this makes us marketers very sad as consumers miss out on engaging with our wonderful products and services. Hence the continued innovation in the sector to make it as seamless as possible to get our consent to be marketed to/at.

I wish Chirp, and all its rivals, good luck but it strikes me that it is not the technology that is the main issue, but getting consumer buy-in to install the app and keep it switched on. That’s where marketers need to focus their efforts if Chirp is to really fly.

 

 

Appy Days?

You’d have to been living under a rock not to have noticed the app revolution. Driven by smartphones and tablets apps are now everywhere, with hundreds being launched every days covering everything from banking to games and a lot less useful topics in between (virtual bubble wrap anyone?)

One consequence of this is excitement is that everyone wants an app – whether it actually helps their business or not. And as Nick Clarey of Airsource pointed out at last week’s CamCreative, a lot of the time an app is the last thing you should invest in, with a mobile optimised website a much better bet.

Given his business is building apps it is worth looking at the negative points he sees before commissioning one:

1              It is difficult to design an app well – mobile devices are very personal, so people get very protective of what runs on them. Otherwise you risk annoying them by invading into their personal space and providing a negative experience. The small screen space makes design critical to engaging users, but too many apps fail to understand this.

2              You need to keep it fresh. People expect updates and upgrades to apps, but as users control when they update you’ll end up supporting multiple versions of the same app – unlike a website which you update centrally.

3              Apps are expensive. You’re talking £10k to create a decent app from scratch, and costs go up if you plan to deploy on multiple platforms as there’s not a lot of code re-use possible. While you can use cross-platform development tools they tend to give you lowest common denominator apps that don’t use the full functionality of each device. And then you’ve got to buy the devices to test them on and go on to support multiple versions.

4              Apps take time to build. To do it properly you need a full team of user interface designers, graphic designers, engineers, testers and project managers and even then it’ll take 2-3 months to finalise your app.

So given they’re expensive, time consuming to build and have the potential to piss off your users, why should you bother with apps? There are some of Nick’s positive points:

1              App stores offer a built in way for people to discover your product. While there’s a huge variety and number of apps on offer, there are still less than the number of websites in the world. Market your app well, encourage reviews and you will be found.

2              There’s a lot of ways of making money with apps. Whether it is simply selling the app, giving it away and showing ads, selling add-ons or a full freemium model the choice is yours. Yes, the app store takes 30% but statistics show that even if you don’t update your app you only see a drop of 25% in sales per year. So good apps keep selling and making you money.

3              Apps perform better on mobile devices. As they run natively, unlike a website, you have complete control over the functions in the mobile device (like cameras, microphones) and they are more responsive, particularly if you’re offline.

4              If your app delivers a great experience and you really engage customers it is incredibly powerful. Whether that drives greater brand loyalty or app sales the rewards can be extremely positive for your organisation.

So before you rush off into app development take a look at what you want to achieve and whether an app is really the way to go. This is particularly important for PR and marketing people who want to be on trend and part of the app revolution. Think first – have you got a solid business case or are you just creating expensive brochureware that will either not be used, or even worse actually disengage your customers from your company? Apps can be incredibly powerful but they’ve got to be fit for purpose – or you’ll have an expensive white elephant on your hands and egg on your face. And that will make everyone involved very unhAppy indeed…………..

Is there any point to PR agencies? Or why Mad Men trumps Ab Fab

I’ve worked in PR for nearly 20 years and I’ve seen a huge amount of change in the industry. I used to be faxed (for younger readers, here’s an explanation of a fax machine) press releases from clients in the US, would re-type them and then fax them back for client approval. They’d then be posted out (again, explanation here) to arrive on a journalist’s desk the next day (if Royal Mailwas willing and able). If it was really really urgent you could fax it to a journalist, provided they worked for a publication so important that it boasted a fax machine.  And fax machines always jammed – I distinctly recall being physically restrained from throwing a particularly recalcitrant one out of the window when it chewed up 20 pages at a crucial moment.

Mad Men (Photo credit: Wikipedia)

Another thing that has changed for the better is the recognition of what PR can do for a business. Connecting companies with their audiences to get the right messages across at the right time is seen as a critical part of marketing. Content is king and companies need to deliver compelling and interesting stories to potential customers quickly and in a way that engages with their concerns. Social media is all about conversations and relationships – content is what drives these to a successful conclusion, whether it is making a sale, re-assuring existing customers, gaining investors or recruiting staff. At a time when people simply don’t watch or believe adverts PR should be moving to the front of the marketing toolkit.

And this importance doesn’t depend on your size. Whether you are a nascent Cambridge startup, a giant multinational or a government department, PR can get you noticed. I’ve seen this amongst the companies I work with – sure, money is tight but they know PR can deliver results.

So does this mean that all is rosy in the PR industry? Well, not really. PR agencies are being offered the chance to lead company marketing efforts – but they are ducking the responsibility. Just as when SEO arrived and digital agencies seized a chunk of the marketing budget that could have gone to PR, the same thing is happening now. Ad agencies are busy reinventing themselves as storytellers and leading integrated campaigns that could/should be championed by PR agencies. It’s not just me saying this – the PR category at the recent Cannes Lions event was won by an ad agency. For the third year in a row. Judges criticised tactical campaigns submitted by PR agencies that simply lacked big ideas.

The problem is that PR agencies aren’t used to big ideas (or often big budgets compared to advertising folk) so tend to be grateful for what they can get, rather than pitching to run the show. So when you’re a global marketing director looking for the killer campaign, who are you going to turn to – Don Draper from Mad Men or Edina from Absolutely Fabulous? There’s no contest – PR may well be the key marketing element of the next decade, but it probably won’t be traditional PR agencies doing the work.

Social media goes to war

Apache Helicopter at Camp Bastion (Photo credit: Defence Images)

I’ve often wondered about how social media causes normally sane people to share really detailed, personal information with the whole world. Is it a desire for recognition, a belief that the internet has different rules or simply not thinking that makes it OK to provide enough information that people can find out where you are, what you do and even your inside leg measurement? Essentially it is the offline world equivalent of jotting your bank details down on a postcard or leaving your passwords in a coffee shop.

Two stories this week aimed to bring home the real consequences of indiscriminate sharing through social media. Firstly the US Army warned that geotagged photos and features like Facebook Timeline identify the locations of soldiers, while a fake Facebook account in the name of a leading NATO general tried to ‘friend’ senior military officers and Ministry of Defence officials.

All very worrying but before we come over all Daily Mail let’s look at applying a little common sense. Back in World War II, the mantra was ‘careless talk costs lives’ and the same principles apply today. Soldiers need to follow strict social media guidelines, and if that means they can’t compete to be Mayor of Camp Bastion on FourSquare I think that’s the least of their worries. And, with the best will in the world, why would you want to be following a four star general on Facebook if you merely worked with them? Given that the whole Wikileaks case blew up because of Private Bradley Manning passing classified, top secret, information to the site, I’d say that the military has plenty of larger security breaches to plug before it spends too much time blaming social media. Like everyone using social media soldiers need to think before they post, tweet, poke or upload photos…………