Revolutionary Measures

Hunting for unicorns

Mankind has always had a fascination for mythical beasts, and none more so than the unicorn. Despite allegedly dying out in the flood after failing to board Noah’s Ark in time, they are still all around us in popular culture, from Harry Potter to children’s toys. I even found an exhibit in a Vienna museum labelled matter of factly as a “unicorn horn” – it was actually from a narwhal.unicorn

The horned horses are back in the news, in the world of tech at least, with any startup valued at over $1 billion by venture capitalists now dubbed a unicorn. However with more than 100 companies now achieving unicorn status there’s a growing worry that startups are trading short term valuations for longer term success. True, unicorn status helps attract skilled staff, but down the line it requires either a trade buyer that is willing to pay big money or an IPO to translate mythical (paper) valuations into hard cash. There have also been a raft of stories on how investors have structured their unicorn funding in ways that protect their cash (rather than the shares of others, such as founding teams) if the company should lose its value.

A focus on unicorns also favours certain sectors and types of company. A browse through Fortune’s latest unicorn list reveals a large number of consumer electronics (Xiaomi, Jawbone), retail (FlipKart, Snapdeal) and sharing economy (Uber, Airbnb) companies. In many ways this is what you expect – company valuations are based on what the addressable market is, so the biggest investment goes into those startups that can make most money.

However, it does potentially limit where investors put their money. There are lots of startups that will never be a Facebook or an Uber, but have the potential to be extremely successful niche players that could well grow into billion dollar valued companies. Look at ARM – when it began as a spin-off from Acorn Computers with a completely new business model, very few would have predicted its current success.

There’s also a definite geographic bias where unicorn investors are putting their money – Silicon Valley, China and India. Out of the latest Fortune list just three are in Europe, one in Australia and one in Israel. This doesn’t reflect the energy, ideas and potential in any of these places, particularly in emerging sectors. The danger is that if investors spend their time chasing unicorns they’ll miss out on the startups that could do with their help to build long term businesses that can make a difference to many markets.

So I think we need to add another category alongside unicorns. Keeping the mythical theme I’d go for centaurs. Sturdier than a unicorn, probably better in a fight and with a bit more intelligence (and opposable thumbs). They may not have the beauty or the (frankly over the top) horn of their flashier cousins but they are built for the long term, rather than mythical valuations that don’t necessarily deliver. Given the potential returns they can produce, it is time for investors to move away from the fascination with unicorns to more realistic startups that may be uglier, but have just as much potential.

May 20, 2015 Posted by | Cambridge, Startup | , , , , , , , , , | Leave a comment

The future of advertising – no ads at all

Aggressive marketing campaigns are common, thi...

Think about it – what was the last advert you saw that you really remember or which made you take action? The likelihood is that nothing comes immediately to mind. This is ironic as we are now surrounded by more and more ads, whether on the internet, TV or billboards. And they should be increasingly better targeted given that advertisers can see our browsing history, previous searches and even what we Like on Facebook.

Why don’t we remember ads? I think there are three reasons. Firstly, we’re getting better at blanking them out ourselves. Our brains are struggling to cope with the huge amount of information around us, and are therefore becoming more ruthless and ignoring things that aren’t relevant.

Secondly, as well as giving us greater opportunities to see ads, technology is also helping us to skip them. Most of us fast forward through the ads on recorded programmes, and given that more TV is no longer watched live (or on a TV), we can save time by avoiding commercial breaks. Even if you begin watching a recording of a programme on ITV 15 minutes after it starts, you’ll catch up by the end, without missing anything but the ads. Websites are also waking up to the idea that you can offer a premium, ad free product to increase revenues. YouTube is looking at subscription model that means you don’t have to see any ads on the site, for example.

Finally, most ads aren’t actually that interesting anymore. Big budget TV ads still exist, but the vast majority are much more basic and programmatic – you do a search for a toaster, and small, mostly text-based ads then follow your round the internet for a week, appearing on every page you visit for example. The creativity is more in the algorithm that understands your intent, finds a corresponding ad and then keeps tracking you from site to site. It would be physically impossible for the advertiser to create hundreds of creative ads telling you about how their toaster will change your life – there simply isn’t the time or space to do it.

I’m sure there are wonderful long form TV ads out there, but apart from the Christmas campaigns (which have become part of the festive experience) I’m not watching them, and I don’t know who else is either. There don’t appear to be ads that tell your friends about, like the Tango, Guinness or Levis campaigns of the 1980s and 1990s. Too many TV or billboard ads are generic or ‘good enough’ in the eyes of the client, rather than pushing the boundaries. Targeting is replacing creativity as the key factor in success, so what does this mean for the advertising industry?

It could mean the end of ads as we know it. Brands are looking for different ways to engage with customers, so are putting their money into sponsorship of programmes, sports and events, content marketing and campaigns on social media. However swapping the TV ads you’ve always done for a Facebook or YouTube-based programme requires a leap of faith from marketing directors and ad planners alike. At the moment many have added the internet to their campaigns, for example sharing their ads on their own site, Facebook and YouTube and using cut down versions for internet advertising.

However I think that there’s going to be a moment when the advertising industry becomes ‘digital first’ and the swashbuckling creatives and Don Drapers will be replaced by data scientists and content marketers who can use technology to understand and reach audiences, as opposed to untargeted TV ads that may win prizes for creativity but don’t deliver ROI. In many ways this will be a shame, but shows that whatever industry you are in, digital can and will disrupt everything you do.

April 15, 2015 Posted by | Creative, Marketing, Social Media | , , , , , , , , | 1 Comment

Up Periscope?

I’ve mentioned previously that Twitter is at a bit of a crossroads. Compared to its social media brethren Facebook and LinkedIn it has found it hard to make the move from a network with lots of users to a viable business making significant profits. Twitter may have grown revenues to $1.4 billion in its 2014 financial year, but it is dwarfed by Facebook, and made a net loss. It even lost 20 million users in the last quarter of the year.

English: Up periscope!

Therefore it has been looking around for ways of increasing both engagement and revenues. Given that the 140 character limit on tweets is more than a little stifling, it has made a big bet on video – first with Vines and now with Periscope. With Vines being extremely short (essentially 6 second loops) they at least fitted in with the stripped down nature of Twitter.

However Periscope is something much more long form. Essentially it is an app that lets you live stream pictures from your mobile phone, in real-time, to your followers. It isn’t a new idea – apps such as Bambuser and Livestream have allowed this before. Even more recently Meerkat was the hit of the SXSW festival and raised $12m in funding, announced on the day that Periscope launched. As is the way of cool free new stuff, Periscope has quickly become wildly popular (in social media land at least). This is partly due to its ease of use, but probably more to the prevalence of wifi networks and all you can eat 3G/4G data packages that mean live streaming isn’t going to run up huge bills.

Unlike Vines, which have not really moved beyond being a niche application, there is obviously a lot of potential in live streaming, provided that Twitter can capitalise on its early mover advantage over the likes of Facebook. I can see five ways it can be easily used.

1. Journalism
We live in a real-time news cycle, driven by the likes of Twitter. Therefore it makes a lot of sense to add video to tweets from a press conference or the scene of a breaking story. It won’t replace having a full camera crew on hand, but will fill the gap between recording and going live. And it will be a boon to citizen journalists and members of the public, giving them another way of recording and sharing stories.

2. Adding to the buzz around events
Twitter works really well at collating and sharing what is happening at events such as conferences. By creating a hashtag and encouraging its use, information and opinions can be quickly published and, most importantly, found easily. It is even possible to skip the conference altogether and just follow the key points on Twitter. Expect conference organisers to embrace Periscope and encourage its use to give a fuller insight into events.

3. Sharing sports events
Much of the internet is driven by either porn or sports, and the X-rated opportunities for Periscope are pretty obvious. I presume Twitter will be quick to crack down on them, but the fact that you can live stream from a sporting event has more lasting possibilities. On one hand it will enable people to share football matches as they happen (expect screams of indignation from rights holders), but more importantly it will let niche sports get their coverage to more people, while using a minimum of infrastructure and at low cost.

4. Catching out celebrities/politicians
I’ll wager that it’ll be about a week before the first politician is caught saying something stupid/offensive while being live streamed. And, unlike Meerkat, Periscope video streams are kept for 24 hours, meaning that the evidence will be there to be shared, retweeted and generally distributed to the world. Celebrities are likely to fall into the same trap – expect people to use live streaming to replace selfies and photo bombing as a way of interacting with/embarrassing their heroes.

5. Live streaming cats
If cat videos are the most popular things on YouTube, it won’t be long before someone puts their cat on Periscope, either live streaming everything they do or finding a way of rigging up a camera to them to show everything they are doing.

Time will tell if Periscope actually does provide an extra dimension (and revenue earner) to Twitter. However, given I’ve seen people taking photos of all their meals and putting them on Facebook, be prepared for a combination of a lot of mundane content (and complaints from phone users who rack up huge bills) in the early days before it potentially finds its place.

 

April 1, 2015 Posted by | Creative, Social Media, Startup | , , , , , , , , , , | 2 Comments

How smart can a smartphone get?

If you needed evidence of the growth of the smartphone market and its move into every part of our lives, then this week’s Mobile World Congress (MWC) provides it. It wasn’t that long ago that the event was dominated by network infrastructure companies, but now it is essentially a consumer electronics show in all but name. And one that looks far beyond the handset itself. Ford launched an electric bike, Ikea announced furniture that charged your smartphone and a crowdfunded startup showed a suitcase that knows where it is and how much it weighs.

English: Steve Jobs shows off the white iPhone...

Five years ago none of these companies would have even thought of attending MWC – and it is all down to the rise of the smartphone. It is difficult to comprehend that the first iPhone was only launched in 2007, at a time when Apple was a niche technology player. It is now worth more than any other company in the world and 2 billion people globally have an internet-connected smartphone. By 2020 analysts predict that 80% of the world’s adults will own a smartphone.

As any honest iPhone owner will freely admit, they may be sleek, but they are actually rubbish for making and receiving calls. What they do provide is two things – a truly personal computer that fits in your pocket, and access to a global network of cloud-based apps. It is the mixture of the personal and the industrial that make smartphones central to our lives. We can monitor our own vital signs, and the environment around us through fitness and health trackers and mapping apps, and at the same time access any piece of information in the world and monitor and control devices hundreds or thousands of miles away. Provided you have a signal……….

Essentially the smartphone is a universal platform that companies can build on – whether it is a disruptive taxi business (Uber) or completely new ways of dating such as Tinder and Grindr.

So, based on what is on show at MWC, what are the next steps for the smartphone? So far it seems to split into two strands – virtual reality and the Internet of Things. HTC launched a new virtual reality headset, joining the likes of Sony, Microsoft, Samsung and Oculus Rift, promising a more immersive experience. Sensors to measure (and control) everything from bikes and cars to tennis racquets are also on show. The sole common denominator is that they rely on a smartphone and its connectivity to get information in and out quickly.

It is easy to look at some of the more outlandish predictions for connected technology and write them off as unlikely to make it into the mainstream. But then, back in 2007, when Steve Jobs unveiled the first iPhone, there were plenty of people who thought it would never take off. The smartphone revolution will continue to take over our lives – though I’m not looking forward to navigating streets full of people wearing virtual reality headsets who think they are on the beach, rather than on their way to work…………

March 4, 2015 Posted by | Creative, Marketing, Startup, Uncategorized | , , , , , , , , , , , , , , , | Leave a comment

Would we Like a social media election?

We’re now well into the General Election campaign and commentators are examining which media politicians are going to use with engage with voters. I’ve already talked about the debacle around the televised debates, which David Cameron is doing his best to scupper, but what of social media?

Rt Hon David Cameron, MP, Conservative Party l...

Rt Hon David Cameron, MP, Conservative Party leader, during his visit to Oxfam headquarters in Oxford. Full version. (Photo credit: Wikipedia)

Predictions that the last election would revolve around social media were wide of the mark, proving less like Obama’s #Yeswecan campaign and more akin to a series of embarrassing mistakes perpetrated by politicians and their aides who’d obviously never used Twitter before. This has continued with further gaffes, such as ex-shadow attorney general Emily Thornberry’s patronising tweet during the Rochester and Strood by-election that cost the Labour frontbencher her job.

However, there are already signs that social media will pay a bigger role in this election. For a start, social media is a good way of reaching the core 18-24 demographic that is currently disengaged from politics. 56% of this age group didn’t vote at the last election, so winning their support could be crucial in a contest that is currently too close to call.

We are also in an election where the core support of the traditional big two parties is being swayed by the rise of UKIP, the SNP and the Greens. So, rather than just appealing to floating voters in a certain number of swing seats, the Conservatives and Labour both need to demonstrate to their supporters that they understand their concerns and have policies to win them over. This means that they are likely to be more aggressive than in the past, judging that alienating the middle ground is a price worth paying for retaining traditional voters.

How this plays out generally will be fascinating, but what can social media provide? Early indications suggest there are six areas where it will be most used:

1. Attacking the opposition
Unlike offline or TV advertising, social media is largely unregulated. Which means you can get away with more online – for example, the Tory party is financing 30 second pre-roll “attack” ads on YouTube the content of which would be banned on TV. Given the desire to reassure core voters, expect tactics like this to be used even more as the campaign unfolds.

2. Managing the real-time news cycle
CNN brought about the 24 hour a day news cycle. Twitter has changed that to give minute-by-minute, real-time news. Stories can gain traction incredibly quickly, and fade with the same speed. Parties will therefore look to try and control (or at the very least manage) social media during the campaign, monitoring for trends that they can piggyback and starting stories of their own. And given that the media will also be monitoring what politicians are saying, expect a rash of stories with a shelf life of minutes and hours, rather than days and weeks.

3. Reaching voters
One of the most powerful parts of social media is the demographic profiling it provides advertisers with. This means that spending on advertising can be extremely targeted towards potential supporters, with little wastage. Figures obtained by the BBC show that the Tories are on course to spend over a million pounds on Facebook during the course of the election, based on current activities. Of course, reaching voters is one thing, the next step is to actively engage with them, starting conversations, listening and responding to their concerns. That takes time and skill, so expect a lot of effort to be thrown at content and conversations.

4. Monitoring voting patterns
There’s a lot of excitement about Big Data, and in particular how you can draw insights from the conversations happening on social media. Party strategists will be able to monitor what is trending on networks, and then use this feedback to evolve or change their strategies to focus on areas that are resonating with particular groups. However this sort of monitoring is still in its infancy, so results will need to be cross-checked before parties decide to do a U-turn on key policies.

5. Amplifying success
Third party endorsement is always welcome, so politicians will look to share and publicise content, such as news stories, that position them in a good light, and also encourage their supporters to do the same. This has already happened with celebrity interviews with the likes of Ant and Dec and Myleene Klass. However, as journalist Sean Hargrave points out, the Tories have a problem here – much of the right leaning media (The Sun, The Times and Daily Telegraph) are behind full or partial paywalls, making sharing difficult. In contrast the likes of The Guardian, Mirror and Independent are completely free and design content to be as shareable as possible. That just leaves the Tories with the Daily Mail……..

6. Making it bitesize
Like any modern digital campaign, the election will run on content. And to appeal to time-poor voters it will need to be carved up into bitesize chunks, such as blogs, Vines, Tweets and Facebook posts. Politicians are meant to be masters of the soundbite, so this should be just a question of transferring their offline skills to the digital world.

Social media will definitely be more of a battleground at this election, if only because more people are on Twitter, Facebook and other networks compared to 2010. Parties and politicians will look to adopt the tactics above, but with varying degrees of success. Some, such as those that have been engaging with voters for years, will do it well, but expect more gaffes from those that don’t understand the difference between a public tweet and a private direct message and decide to show the world pictures of their underwear…………or worse.

February 18, 2015 Posted by | Marketing, PR, Social Media | , , , , , , , , , , , , , , , , , , , | 1 Comment

Will Facebook at Work work?

Last week, Facebook launched Facebook At Work, its latest attempt to bring the social network into the enterprise business mainstream. Cue lots of commentators prophesying doom for the likes of LinkedIn as the social networking behemoth pushed into the world of work.

Facebook logo Español: Logotipo de Facebook Fr...

On a closer look, LinkedIn shouldn’t be too worried, as Facebook At Work is more about collaboration and sharing inside an organisation, rather than looking for new jobs outside the office. In fact it is more of a rival for the likes of Yammer and Huddle.

The other point to note is that this isn’t the first time that Facebook has tried to embrace the enterprise. Back in January 2011, Mark Zuckerberg launched BranchOut, then touted as a rival for LinkedIn. This built a network on top of your Facebook contacts and aimed to find and match you with job opportunities. BranchOut seems to be still going, but is now billed as “letting people capture and share everyday moments in the workplace through photos, news and updates.” While it claims 30 million users, compare that to the 300m+ who have profiles on LinkedIn.

The other factor to bear in mind is the notorious difficulty of getting mainstream workers to adopt collaboration tools, no matter how compelling the user interface or functionality. I remember trying to introduce an intranet into a relatively small organisation and just giving up as no-one wanted to use it, despite the benefits it brought.

So why is Facebook trying again? I can see three benefits for the company – though at least one of them has nothing to do with work……….

1. Add more subscribers
Facebook claims over 24 million active daily users in the UK. This sounds impressive, but that is less than half the population. Obviously some of these holdouts are children, but I’d guess that a fair number are actually the very workers that Facebook At Work is aimed at. While you can keep your Work and personal Facebook accounts separate, I’m sure the company is hoping that a fair proportion of those using the platform in the office will be seduced into setting up a profile for out of hours use. So the social network will get an influx of new members, with the corresponding demographic data and potential revenues that this adds.

2. Easy to use interface
As I’ve said getting workers to use collaboration tools can be like pulling hen’s teeth. But for those already on Facebook I wager that the new At Work interface won’t be very different, encouraging its adoption. This, rather than functionality, will probably be the strongest selling point, when Facebook starts encouraging business use.

3. Spoiling for a fight
While LinkedIn has been successful in many areas, there’s still a huge opportunity in the market. LinkedIn members at present tend to be in professional roles, with a large part of the world of work un-networked. The company itself realises this and is adding a wider range of job ads for roles such as checkout operators and delivery drivers, often directly linked from employer’s websites. Coming from the personal social network space, Facebook believes it can also fill this gap, with the first step being to get within the enterprise and cosy up to HR people through bridgehead initiatives such as At Work.

The benefits for Facebook are clear, but with the network effect being less important for businesses, I’m not sure what the advantages are for the enterprise. Worries about the confidentiality of documents have already been raised, and it would take some strong policing to avoid people slacking off and reading their personal Facebook timelines rather than collaborating internally. Watch this space to see if Facebook can move into the enterprise at its second attempt.

January 21, 2015 Posted by | Creative, Social Media | , , , , , , , , , | Leave a comment

Are online monopolies a good thing?

European flag outside the Commission

European flag outside the Commission (Photo credit: Wikipedia)

The cover story in last week’s Economist looked at the growing global dominance of internet giants such as Google and Facebook. This was partly driven by the fact that the European Parliament recently passed a resolution to more tightly regulate internet search and potentially break up Google, as well as by ongoing worries about competition and online privacy.

So are effective online monopolies (Google has 90% of the European search market for example) a good or bad thing?

Obviously in the real world monopolies are viewed with suspicion, particularly when a dominant position is then used to raise prices, unfairly squeeze competitors and generally provide a poor deal to customers. But a monopoly on its own is not enough for regulators to step in. In many niche markets (say chemicals) the investment needed to compete with a dominant incumbent would put off any new entrants, so it becomes a monopoly by default. If it doesn’t abuse its position regulators tend to just monitor the situation without taking action.

So, no-one would argue against the fact that monopolies need to be watched closely. But what is interesting is the difference between the online and offline worlds, in four key ways. Firstly, the cost of entering an internet market is relatively small – you’d don’t need to build an expensive factory, but can rely on scalable, inexpensive cloud-based servers and storage to host your business. This makes expansion easy, particularly given the widespread adoption of the internet and mobile phones across the globe, providing a proven way of connecting with customers.

The second factor that causes internet businesses to grow exponentially is the network effect. Essentially the more users on a service, such as Facebook, the better it is for everyone involved as there are more people to interact with. In turn this attracts more people in a virtuous circle. It can work the other way though – as the fate of early social networks such as MySpace show.

Thirdly, the majority of the internet services being discussed are free to consumers. So they don’t directly see any negative impact from the monopoly (such as a rise in costs). What isn’t immediately obvious to users is the price of free. Essentially their personal data is used to power advertising, direct mail and other marketing campaigns, with many consumers having a hazy understanding of what their information is being used for, or how to increase privacy settings. In fact, it is advertisers that can feel the impact of higher prices, given the online control of the internet giants.

The final difference, and one that The Economist makes much of, is the speed of change in the technology space, and how this makes today’s monopolies tomorrow’s has-beens. Companies find it hard to jump from leading one wave of innovation to competing in a new space. IBM dominated the mainframe market, but has had to reinvent itself in order to survive, while the replacement of the personal computer with tablets and smartphones has dealt a major blow to Microsoft.

However, these are still multi-billion dollar companies and have hardly withered away. Therefore in my view, technology innovation alone is not enough to regulate the internet giants. What is needed aren’t heavy handed rules, but a more measured approach that balances the needs of consumers with the speed of innovation and the potential competitive impact of monopoly positions. It is an incredibly difficult balancing act – and will require give and take from both sides if it is to succeed. Done right and new breakthrough services will be allowed to grow, but without trampling on other businesses. Get it wrong and innovation is stifled, potentially harming consumers and businesses who want to access the latest technology and services.

December 10, 2014 Posted by | Marketing, Startup | , , , , , , , | Leave a comment

Social networks – command and control centres for terrorists?

It wasn’t that long ago that the only spies in the public eye were James Bond and prominent Cold War defectors. But over recent years high-ranking intelligence chiefs have stepped out of the shadows to appear in public, write books and give interviews. They’ll be inviting the public to tour MI5 or the Pentagon next. It all seems a bit counter-intuitive as I’d have thought keeping a low profile was one of the key skills that intelligence agencies were looking for.

Some of the satellite dishes at GCHQ Bude, in ...

The latest spy to break cover is Robert Hannigan, the new head of GCHQ. In an interview with the Financial Times to mark starting in his new role he lambasted social networks such as Twitter, Facebook and WhatsApp, calling them “command-and-control networks for terrorists and criminals.” One of his key concerns is the spread of encryption techniques on common mobile phone operating systems – both Apple and Google have recently made encryption a standard feature that users can opt-out of rather than having to opt-in to use.

This is obviously good for privacy, but bad for those looking to monitor the activities of terrorist cells. In his article Hannigan issued a plea for more openness and collaboration between tech companies and the security services.

But in my opinion he’s overlooking two major factors. Firstly, demonising social media is a bit like criticising the telephone network for being used to plan a bank robbery. It is, as tech companies claim, an agnostic platform. If the police suspect a crime is being committed (or planned) there are processes in place to work with a social network to assist them in their enquiries. Normal people don’t see Facebook as a threat to their safety – though, given what some seem happy to share online, perhaps they should.

And secondly, and perhaps more importantly, there is a lack of trust in the security services. The revelations of Edward Snowden showed, as many suspected, that our online activities are being spied on. Recent revelations about police being able to access the telephone records of journalists without needing a warrant using Regulation of Investigatory Powers Act (RIPA) legislation just add to this.

The trouble with the whole debate about online privacy is that it is becoming increasingly polarised. On the one hand social networks support their ‘free’ business model by collecting and selling data on the interests of their users, allowing them to be targeted with ads. Then at the other end of the spectrum the security services are demanding more access to the very same data. The people in the middle are the users, the vast majority of whom have no idea of how much they are being tracked when they go about their business online. What is needed is more education so that it is clearer about how they can legitimately protect themselves online, rather than both sides scaremongering about the other. Terrorism is a threat to a free internet, but equally so is draconian, untargeted snooping by intelligence agencies and the erosion of user privacy by the networks that we rely on.

 

November 5, 2014 Posted by | Marketing, Social Media | , , , , , , , , , , | Leave a comment

Tech startups are booming – or are they?

The tech market across Europe is on a roll. According to Dow Jones VentureSource European startups raised €2.1 billion (over $2.8 billion) in Q2 2014 from VCs, the highest amount since 2010. The average size of the 365 deals was €2.2 million, up from €1.5 million in Q3 2013. Essentially that means every day of the quarter four startups got funding from VCs.

European Union flag

European Union flag (Photo credit: YanniKouts)

At the other end of the company journey, Tech.eu counted 92 tech exits in Q2 2014, up 70% from Q1 2014. 10 of these were IPOs, showing a healthy move back to the stock market for tech companies. And while deal size was undisclosed in 72% of cases, 15 were for over €100 million.

So, does this mean that everything is rosy in the tech market and your startup will receive its deserved funding in a heartbeat? Unfortunately not, and there are three worrying points behind the figures:

1          What is a tech company?
I’ve always been suspicious/puritanical on what makes a startup ‘tech’ rather than part of any other sector. Taking a look through both the Tech.eu list of exits and its corresponding index of EU tech funding rounds so far in 2014, I don’t see that many companies I’d class as technology. IPOs and exits included:

  • Takeaway platform Just-Eat (food)
  • Zoopla (property)
  • Markit (financial information)
  • Oldford Group (gambling)
  • M and M Direct and Game Digital (retail)
  • eDreams Odigeo (travel)
  • Jobsite (recruitment)

Companies that received the largest amounts of funding mirrored this list – Delivery Hero, which has raised $285 million to date, is an online food ordering platform, while Ozon ($150 million) is an online Russian retailer.

There are what I’d consider genuine tech companies receiving funding (Klarna is a payments provider, Tradeshift is B2B software and Elasticsearch is a search and analytics engine). And looking at the IPOs, Zendesk (customer service software) also fits into my narrow definition of proper tech.

Obviously consumer facing companies need large amounts of funding – they have to market themselves and launch into competitive marketing which takes cash. But my complaint is that technology is part of every business, so just because you sell via the web, that doesn’t make you a tech company. After all, in the early days of the telephone, no-one created a new category for businesses built on the communications power of the phone. By lumping these companies into ‘tech’, investors and commentators overlook the genuine technology companies making software and hardware in favour of more glamourous consumer businesses. It was exactly the same issue in the dotcom boom, with anything that had a website being lauded to the skies as a tech pioneer.

2          Europe lagging the US
The European figures for funding look strong, but in the US private tech companies raised $13.8 billion in the same period. We’re talking about a similar size market in terms of people, yet nearly five times the investment. No wonder that many EU tech firms are crossing the pond to tap into US funding. Zendesk is a good case in point. While founded in Denmark, its successful IPO was on NASDAQ, where it has seen its share price nearly double from $9 to around $17.97 currently.

Clearly, there are structural and funding issues that need to be addressed to convince European companies that this is where they need to build their startups if we are to build a vibrant tech sector across the EU.

3          Selling out too soon?
Some companies are never going to have the scale to survive on their own and fit better as part of a larger entity. So, trade sales are a vital part of the tech ecosystem – investors get their money back (hopefully), enabling them to invest elsewhere, while founders and management teams are able to move on to the next big idea.

But looking through the crop of acquisitions the largest amount (37%) were by US companies. Facebook and TripAdvisor made two European acquisitions, and the likes of Cisco and Intel bought one business each. The risk is that too many smart European tech businesses don’t turn into long term, billion dollar companies with their own ecosystems around them, as they don’t get the chance to grow before being snapped up for their technology or market position. That holds back the wider European tech economy and reinforces US dominance. It would be good to see longer term backing for European tech, with more IPOs and acquisitions by local companies, rather than selling out to US giants.

I don’t want to come across solely as a whingeing naysayer, as it is great news that funding is up for tech businesses across Europe. But I think there needs to be a narrower focus on what tech actually is amongst the media and investors, and a longer term attitude if Europe is ever to come close to building a sustainable tech economy across the continent.

 

 

August 6, 2014 Posted by | Cambridge, Startup | , , , , , , , , , , , , , , , , , , , , | 1 Comment

Big Brother is manipulating you?

As anyone that has read George Orwell’s 1984 knows, the ability to rewrite history and manipulate information is at the heart of controlling behaviour. As communist Russia showed, people could simply be airbrushed from the official account and would vanish from the public consciousness. 1984

Of course, in the age of social media, the web, and 24 hour global media, this ability to control news should have disappeared. If a government blocks a site or a mobile phone network, there are ways around it that spread information quickly, bypassing attempted censorship.

However, I’d argue that the reverse has happened and that Big Brother can operate stealthily in two ways. Firstly, rumours can start and spread unchecked, with the majority of us not taking the time to get to the original source, instead believing something that has been retweeted or shared on Facebook. I’ve had people swear blind to me that a major incident took place ‘because I saw it on Facebook’ – though I can’t believe they’d be as credulous if a random stranger told them the same story down the pub. By the time the truth is out, immeasurable damage can be done – to a company’s brand or share price or a person’s reputation.

Secondly, we believe what our computers tell us, and act accordingly, particularly when it chimes with our own preconceptions. Essentially we think that the complex algorithms that control what appears on our screens are unbiased, rather than reflecting what the site owner has determined in some way.

This leaves us open to manipulation, whether by marketers trying to sell us things or more sinister experiments. Facebook received justified criticism for running an experiment where it tampered with the stories in people’s timelines, seeing what the impact would be on what users themselves wrote. Unsurprisingly the percentage of negative or positive posts had a direct link to the tone and language people used in their own posts.

Now dating site OKCupid has admitted that it experimented on its users. This included deliberately pairing up unsuitable couples and telling them that they were a perfect match to see what would happen. Now, there’s nothing wrong with a little serendipity, but deliberate meddling risks breaking the trust between a site and its users. Throwing in a wildcard of “here’s someone completely unlike you, but why not see what happens if you meet?” is one thing if it is advertised, but quite another if it is hidden behind the veil of computer processing.

Some might argue that this is just a next step in techniques such as Nudge, where choices are ordered in a way to drive particular outcomes. These are supposedly for the greater good. For example, if diners come to the salad bar first in a cafeteria they eat more healthy stuff and if you automatically enrol people in pensions, they tend not to take the opportunity to opt out. But I’d say it goes much further than this, and is about trust.

In many ways breaches of trust are similar to security breaches – something that the user relied upon unthinkingly has been removed, calling into question the entire relationship they have with a company. And like trust in any relationship, it is a time-consuming and difficult process to rebuild it.

So, anyone involved in marketing, media or technology does have a responsibility to be as open and transparent as they can be. At the very least there are legal safeguards (such as the Data Protection Act) that need to be obeyed, but I think companies need to go further than that. We live in a world where people want to have a genuine relationship with brands that they respect and trust, rather than the transactional, one-sided versions of the past. Therefore organisations need to think first about the consequences of experimenting on their users before playing Big Brother with their lives.

July 30, 2014 Posted by | Marketing, Social Media, Startup | , , , , , , , , | Leave a comment

Follow

Get every new post delivered to your Inbox.

Join 62 other followers