Historically, you would not have made a lot of money betting against Sequoia, but their most recent gamble, leading a $40M pre-launch investment in Color, a mobile photo sharing application, left me scratching my head.
Like its mobile photo sharing brethren Instagram, PicPlz and Path, Color allows users to take snapshots with their mobile phone camera, edit those pictures and then share them. What differentiates this one from the bunch is that there is no explicit friend or following system – photos appear in a unified stream that is shared based on proximity to other users. For those familiar with the Group Messaging Wars (http://on.mash.to/dWKaIk) and intent on drawing parallels, the analog here seems to be:
Yobongo:GroupMe :: Color:Instagram
However, the point of this post isn’t to bag on Sequoia or Color. What I’m getting at will probably sound like heresy to a venture community that has pumped over $150M of early stage dollars into the mobile social space in the last 9 months, but the more I think about the endgame in mobile social the less these bets seem to make sense to me.
First, let’s understand what I mean by mobile social since clearly companies like Kik, Foursquare and PicPlz have, today, entirely different products and don’t appear directly competitive.
The definition of mobile social is simply a class of mobile applications that facilitate interaction among interconnected mobile users – think a lightweight Facebook-esque application that enables you to communicate, share and transact with anyone on the go.
Using this definition, it quickly becomes obvious that whether you’re Path or Foursquare (who just a few months ago added a photo sharing feature and supposedly is working on a messaging one) you are ultimately on a collision course to broadly own users’ entire mobile experiences. Look no further than this quote from Sequoia Partner Doug Leone, who led the firm’s investment in Color:
“Color aims to lead us all into the post-PC world. Their goal is to become the most widely used social network on smartphones. Sharing by sitting alone in front of a PC browser will cease to exist. Color will usher in a world where people use everyday mobile technology that allows simultaneous connecting and sharing.”
While today these companies are masquerading under the guise of location (see: Foursquare, Gowalla, Whrrl), groups and messaging (see: GroupMe, Kik, Posterous, Ning, Yobongo, GOGII, Pinger, Formerly Beluga) or photo sharing (see: Instagram, PicPlz, Path, Color), the goal for each is the same: engage, connect and own the mobile user – so really the fundamental distinguishing qualities of these businesses are just their initial chosen access points to the greater mobile market.
So is the issue I have with these businesses? To me, it’s the very idea of creating a large, and most importantly, sticky and engaged network of mobile users which stands at odds with the inherent functionality and consumer value proposition of mobile computing – convenience.
By nature, I don’t expect or even want my mobile applications to be engaging, for lack of a better word. I want them to be quick, dirty (ok, maybe not dirty), simple and convenient. I want them to connect me with the person(s) I’m trying to reach, share a photo or message with just one or two clicks, find a specific piece of information within a few seconds and show me – when I request it – personalized, relevant, curated content.
The inconsistent logic behind mobile social businesses is based on an assumption that the way we communicate, share and engage with users and content on our mobile devices will be, in large part, analogous to how we have done it on our computers. Few are willing to admit otherwise, because if this assumption doesn’t hold then the beautiful, feature-rich mobile apps that have taken on hundreds of millions of investor dollars will be largely defunct and simple, clean commodity applications – which would never sell for $500M+ to Google – would win out.
Perhaps my thinking here is flawed and too narrow because I’m assuming most mobile users are like me: when I’m not at home on my MacBook or iPad and when I’m not sitting by my PC at the office, I’m out engaging in activities and with people where my attention doesn’t need to siphoned by a screen. The ideas of browsing and compulsory attention, so critical to web-based businesses, are not native or natural to the mobile computing experience.
Mobile applications are utilities – and no, I’m not going to listen to the argument that Facebook and Twitter are utilities too in that case – where success hinges largely on performance not user engagement metrics. Generally, a good web application is one where average time on site is maximized, whereas a good mobile application is one where average time on-site (or in this case, time in-app) is minimized.
Given these structural dynamics, I have a hard time imagining a world where any one mobile application can boast a large and truly engaged network – at least not by current engagement standards. And if this is the case, then it is even harder to imagine how these businesses can effectively scale revenues outside of foraying into payments or group commerce – neither of which is a picnic of a market. Surely advertisers (as dumb as they may be) wouldn’t pay a premium to gain entry into a channel where user engagement is transient at best.
Now, I’m not arguing that these are necessarily bad businesses, but it does appear that investors have jumped all over them, hoping to snag the next Facebook, without fully realizing just how different the value propositions of these companies are. Nor have investors identified the multitude of factors at play that could prevent these types of companies from successfully scaling any sort of meaningful revenues. Instead, many VCs have taken the stance of “let’s just get as many downloads as possible and then figure out what to do with these users,” a tactic that may work (in rare cases) for web-based platforms but has yet to see any sort of measured success in mobile land.
At RRE, I was excited about our investment in Kik not only because I thought it would be a good horse to get behind in the mobile social race, but because the company had an elegant, extremely fast messaging product (see: performance) with very cool back-end technology (yes, actual technology – a seemingly far removed concept for consumer internet startups and their investors these days) that nobody else had. That powerful architecture not only would give them a leg up today, I thought, but also would leave the business with flexibility to move into adjacent markets and opportunities if or when the social (pixy) dust finally settled.