Better Local InformationFind, Share and Create Anything

The Problem

• Local information is fragmented

• It takes time to find things

• It’s even harder in different languages

Example

• Today there is no easy, unified way to answer the questions:

• "What hospital should I go to?"

• "Which cafe nearby is nice?"

The Solution

• Make it easier to find, share and create local information

Not An Original Idea

• “By making it their mission to organize their specific community’s information and making it accessible online, libraries can strive to create hyper-local resources that get more granular and detailed.”

http://goo.gl/rxD2Y

Refining The Concept

• Local information changes all the time

• Tracking this data is a challenge that technology can address

• Actually, technology can do it better than a library

How?

• Use “Open Data” as a foundation

• Combine this with other information

• Have one portal to access everything

More Specifically

• Use data from OpenStreetMap, Wikipedia and other resources to provide a foundation

• Build a base directory from this

• Have a front-end that allows people to find, create and share information on top of this

A Converged Portal

Places Events Classified Jobs Deals

Social Rating

Foundation

• LAMP Stack

• PostgreSQL/PostGIS/Osmosis

• Wordpress + Geo + Responsive plug-ins

• WPML + Types/Views/CRED/ACCESS

New Code Script # 1

• Pull places from OpenStreetMap data

• Write a Wordpress post in custom taxonomy for each place

• Allow automatic updates of information from OpenStreetMap

• Return updates in directory listings to OpenStreetMap upstream

New Code Script # 2

• Pull data from Wiki(pedia)(travel)

• Write a Wordpress post in custom taxonomy for each entry

• Allow automatic updates of information from Wiki(pedia)(travel)

• Return updates in directory listings to Wiki(pedia)(travel) upstream

Social Links

• Allow each custom post to easily be shared on major networks

• Allow each custom post to record ratings and accept reviews

• Where possible, also display ratings and reviews from other sources

Ultimate Goal

• Reduce the distance between people and local information to zero

Technical Goal

• Make an improved Open Source foundation for local information resources, with a particular focus on delivery to all devices and multi-language services

Hacking Team

• Shane Coughlan

• Kana Fukuma

• (remote servers donated by German and Italian researchers and local government)

First Hacking Schedule

• 17th, 9am to 5pm

• 18th, 10am to 3pm

• 19th, 9am to 5pm

• 20th, 9am to 12pm

Who Pays The Bills?

Digital Economics

• The digital economy accounts for 2.3 trillion USD (4.1%) of the G20 GDP

• Global value is estimated at 16 trillion USD in 2013

• It is about 13.8% of global sales

http://goo.gl/p1edk

Same Old, Same Old

• The digital economy is based on normal economic theory

• Supply and demand is the key to understanding pricing

• The price settles where the quantity demanded equals the quantity supplied (economic equilibrium)

Reviewing That

http://goo.gl/aCK9R

The Nutshell

• The most basic case is that a new digital service appears

• There is supply at a certain level, there is demand at a certain level

• This determines a price that allows supply to continue and meet demand

Digital vs Analogue

• One question is how digital sales work in markets with traditional analogue sales

• Another is how digital approaches become the new normal

• In other words, how does “digital” work?

In Other Words...

• Digital services often disrupt analogue services

• This disruption can reduce prices or change distribution/sales methods

• When this happens there is an adjustment to the pricing equilibrium in a service area

Case Study: Music

• For the best part of 100 years people purchased music in physical (analogue) formats

• Computers and the Internet introduced digital music, but in the early days people did not purchase these services

An Impossible Sale

• Ten years ago analogue music sales were the norm

• Digital stores had no traction

• Piracy accounted for almost half of content, and reduced the average consumer spend from $126 to $100

http://goo.gl/4Ba8f

Then Came iTunes

• Apple introduced a digital store in 2003

• They had the goal of becoming thego-to place for music

• The idea was to be easy and elegant, and to make music more accessible

iTunes Benchmark

http://goo.gl/JxPM0

Flipping The Market

• By 2006, Apple had 88% of the US digital download market

• By 2009, iTunes accounted for 70% of global digital music sales

• By 2011, digital sales passed analogue sales with 8.4% growth vs 5% decline

http://goo.gl/py7XAhttp://goo.gl/IRwZF

Digital Sales Work

• Apple showed that if you make it easy, people will buy digital content

• The same goes for renewals: Hearst Magazine get 70% conversion rates

• This is the opposite of the traditional problem of sales and re-subscription

http://goo.gl/zVCP5

Let’s Go Deeper

Winning Case Studies

• Google - Good idea, good delivery

• Facebook - Good idea, good delivery

• LinkedIn - Good idea, good delivery

Google

• Google has 88.8% of the search market

• Its services are focused on helping people (the users) find things easily

• Google watches what people do, and sends them custom advertising

http://goo.gl/fDycJ

Google’s Money

• Google introduced adverts in 2000

• These now generate over 96% of revenue, or around 37.5 billion USD

• What’s smart is how Google expanded advertising using technology

http://goo.gl/NRQgs

Doing Something New

• Google allows traditional click-through adverts and cheap “per view” brand awareness adverts under the name AdWords

• It also displays ads on third-party sites under the name AdSense

• 70% of advertising revenue comes from AdWords, the rest from AdSense

http://goo.gl/NRQgs

Making Magic

• The flexibility of AdWords and AdSense combined with the personal knowledge of Google user search allows businesses to focus spending

• This is completely automatic

Facebook

• Facebook has 61.46% of the social network market

• It helps connect people and makes it easy to share information

• To make money it shows users custom advertising

http://goo.gl/JbexH

Facebooks’s Money

• Facebook generates 86% of revenue from advertising, over 1 billion USD per quarter

• They are now exploring new income streams like inter-user “Gifts”

http://goo.gl/o4Re4

Doing Something Better

• Facebook has the same basic approach as Friendster and MySpace had

• However, Facebook is focused like a laser on a great user experience

• This keeps users engaged and growing (up 28% year-over-year to 584 million active per month in Q3 2012)

http://goo.gl/o4Re4

Facebook’s Shares

• Facebook has a dual-class share structure

• Mark Zuckerberg has 10 votes for every other shareholder’s single ballot

• This allows the company to follow a vision instead of chasing quarters

http://goo.gl/As63f

Making Magic

• The relatively stable (and growing) user-base means that Facebook can deliver targeted adverts to a massive audience

• These adverts are easy for any person or business to purchase, even to the extent of “promoting” personal posts

LinkedIn

• LinkedIn is a “professional” networking tool with 187 million users

• It helps connect professionals

• To make money it sells subscriptions, hiring solutions and marketing solutions

http://goo.gl/YYgEJ

LinkedIn’s Money

• LinkedIn has three sources behind its 1 billion USD revenue stream

http://goo.gl/29eNz

Doing Something Smart

• LinkedIn focuses on helping professionals network with each other, and on providing services to support careers

• By avoiding distractions it differentiates itself from general social networks

Making Magic

• LinkedIn has a low barrier to entry, but charges both professionals and businesses for advanced services

• It has 81% revenue growth year-over-year across its products

• Last year subscriptions increased 79%, hiring solutions increased 90%, and marketing solutions 68%

http://goo.gl/OIJKr

Summary

• A good idea combined with good delivery leads to success in the digital economy

• People like simplicity, convenience and affordability

• This is pretty basic economic theory

Going Local

Little Local Economics

• Local engagement is key to SME success

• 49% of SME’s report local outreach brings new customers, 22% say it has good targeting, 16% say it brings repeat custom, and 14% feel it is a direct return on investment

http://goo.gl/YTTbG

Big Local Economics

• Local engagement is key to large business growth too

• Local search in the US is estimated to outpace the overall market by 12.1%, and local display by 16.2% between 2011 and 2016

http://goo.gl/kR98G

Local And Mobile

• 40% of mobile searches are for local information

• 70% of mobile advertising will be local by 2015

• 88% of local advertising will target mobile by 2016

http://goo.gl/O2erN

The Big Question

• In the US around 100 billion USD is spent yearly on local advertising

• The online market is estimated to be worth 15.5 billion USD by 2013

• How are digital companies trying to break into the market?

http://goo.gl/RC20F

Case Studies

• Yelp - Good idea, bad delivery

• Foursquare - Bad idea, bad delivery

• GroupOn - Almost good idea, bad delivery

Yelp

• Yelp is a user-generated local review website that gets 91.4% of revenue from advertising

• 76.8% of advertising is from “featured” local business

• The rest is traditional advertisinghttp://goo.gl/vUz13

Yelp’s Big Idea

• Yelp depends on the “network effect” • “Our platform helps people find great local businesses to meet

their everyday needs. As more people use our platform, more of them write reviews. Each review that a user contributes helps expand the breadth and depth of the content on our platform, in turn drawing in more consumers.”

http://goo.gl/vUz13

Yelp’s Approach

• Yelp has a “bowling pin” strategy • “Yelp enters a new market and begins creating profiles for local

businesses (what they call ‘claimed business locations’). Users then begin to write reviews, which in turn spurs user adoption and more reviews, creating a snowball effect until Yelp becomes the definitive guide to local businesses in their market. At this point, Yelp can pitch itself as a cost-effective advertising platform for local businesses.”

http://goo.gl/vUz13

Yelp Results

• Yelp has seen a yearly growth of 64% in reviews, 67% in users, 97% in business listings and 118% in advertisers

• However, their sale model is staff intensive and not profitable yet

http://goo.gl/vUz13

How Big Is The Problem?

• During the first nine months of 2011, Yelp had $58 million revenue and a net loss of $7.6 million

• Actually, the S-1 filing from that time shows they had not made a profit in three years

http://goo.gl/OVICG

Why Is That?

• User reviews alone do not give a sustainable comparative advantage

• Just selling local advertising is an expensive proposition

• Yelp faces big strategic threats

http://goo.gl/vUz13

And Yet...

• US local businesses spent $133.2 billion on advertising in 2010, $19.6 billion of it online

• 95% of all consumer spending is local

• As local advertising continues to migrate online, the dominant local review provider will do very well

http://goo.gl/Fe7Cx

Potential vs Reality

• The basic proposition of providing local services is good

• However, the single service model (and the offered service of local advertising) is not scaling effectively

• Yelp needs to refocus on higher value sales with a lower marginal cost per transaction

Foursquare

• Foursquare is a “location-based” social tool that gets 100% of revenue from advertising

• These “promoted updates” are offers tied to locations

Foursquare’s Big Idea

• Location-based services allow targeted engagement for businesses

Foursquare’s Approach

• People “check-in” to places

• Companies can send messages about deals or products

Foursquare’s Results

• Since introducing “promoted updates” in 2012, Foursquare generated 2 million USD in revenue

• However, this missed investor expectations and company projections

http://goo.gl/zjjw3

How Big Is The Problem?

• Only 8 million out of 25 million customers use the service monthly

• New features like “Explore” have failed to increase engagement

http://goo.gl/OVICG

Why Is That?

• User check-ins alone do not give a sustainable comparative advantage

• Just selling promoted updates is not a good enough money-maker

• Foursquare faces big strategic threats

Potential vs Reality

• The basic proposition of location-based services is too shallow

• It’s not enough to hold users, and promoted updates therefore cannot generate enough revenue

• The Foursquare service is being replaced by Facebook, Yelp and Google

GroupOn

• GroupOn is a daily-deal website that gets its revenue from businesses offering the deals

• These deals depend on a certain number signing up

• They are usually discretionary itemshttp://goo.gl/AjG1x

GroupOn’s Big Idea

• Sell growth to businesses, sell a cheap new experience to customers

GroupOn’s Approach

• Companies offer discounts

• People sign up to learn about deals

• GroupOn mails people the latest offers

GroupOn’s Results

• At the end of 2012 GroupOn saw active customers increasing almost 37%

• However, gross billings per active customer declined by 21%

http://goo.gl/DbWFV

How Big Is The Problem?

• Some numbers suggest only 1% of GroupOn users become regular customers

• They also say GroupOn business churn rate is up to 90%

http://goo.gl/NMN3q

Why Is That?

• Dramatically altering Supply and Demand with massive discounts breaks the cost/benefit equation

• The customer has a bad experience

• The business has a bad experience

http://goo.gl/KkYYi

Potential vs Reality

• The basic proposition of selling growth makes sense

• However, the first model of deep discounts below fixed costs hurt small businesses and customers

• The focus on massive discounts on discretionary items is not the future of discount vouchers

What’s A Good Coupon?

• Something that matches your market requirements regarding expansion

• Something that matches your math about fixed costs

• Something that encourages people to indulge (just a little)

When The Dust Settles

• Looking at these examples we can see a demand for local services but a problem with business models

• It seems like no one has found the right solution yet

Starting At Zero

• The users are the community

• The community is the product

The Big Question

• What parts of the community could be commercialized to create stable revenue?

Dealing With That

• Many digital companies initially focus on gaining users with free services

• These users become the product

• After a certain point, premium services are introduced on top of the free services

Revenue Model # 1

• Provide a low cost way for commercial services to be discovered

• These could be businesses, events, jobs or special offers

• The “featured” items are layered over the Open Data foundation

Why Is That Useful?

• Businesses currently invest in analogue and digital advertising

• In Japan the cost of this advertising is often high, and the services are extremely fragmented

Example

• A company might pay Living Paper 50,000 yen for advertising in one issue

• They might run coupons through GroupOn at 50% cost on the sticker price

• They might also seek placement in Hot Pepper listings or coupons

Consequence

• Businesses are spending a lot of money to reach their audience

• Each individual effort has a high cost of conversion

• In short, the investment versus the return is high

Historical Reasons

• Japanese sales are traditionally done person to person, even with low value items

• There is a very high cost of conversion in this approach

• This model reduces the potential to scale and refine returns

Lack Of Evolution

• Interestingly, this approach has been carried over to the digital era

• Japanese companies still have high fixed costs and inefficient sales models

• Yet international companies like Amazon and Apple are operating in Japan with modern models

Conclusion

• There is no evidence that the Japanese consumer dislikes simple, efficient services

• They frequent companies that reduce costs by having automated, indirect sales

• The problem is lack of innovation in local service provision

Solution

• By providing a converged data approach, it may be possible to reduce the cost of conversion

• Each individual outreach effort will have a dramatically lower cost, and will benefit from being linked to every other outreach effort

Put Another Way

• It is possible to slot into existing spending habits and dramatically lower costs compared to competitors

• The fundamental concept would be to offer a lower unit cost to a bigger market

The Problem

• Many companies are doing essentially the same thing — digitally connecting local businesses with their consumers

• This is a commodity environment with severe downward pressure on prices

http://goo.gl/vCSgg

The Proviso

• The local market in Japan is way behind the curve

• There is still an opportunity here for local advertising revenue

• It’s just not enough to sustain a business on its own

Revenue Model # 2

• Stack several related services

• This can insulate the company from market changes while adding depth to its services

Sales Concepts

• Cross-selling of related services

• Continual up-selling of each individual service

Cross-Selling

• Cross-selling of related services allows each individual service to be cheap, but the potential for sales to be high

Up-Selling

• Up-selling improved versions of each individual service allows the same product to be sold to the same people many times

But What Services?

• The core proposition is to find, share and create local information

• Combined with cross-selling and up-selling, it suggests a family of inter-related business services

Digging Into The Idea

• Local outreach still sounds promising

• This could be premium listings, event or deal exposure (aka ads)

• However, acting as a provider of digital services is also interesting

• Offering web presence, taking bookings, running a store-front

Stacking Subscriptions

• Conceptually, stacked services could be offered as subscriptions

• This would be a “phone bill” approach to business services

Nutshell Time Again

• The core idea would be to sell multiple inter-linked services at reasonable per-unit prices on a subscription basis

• The subscriptions and distributed income would help insulate the company from market shocks

Challenges

• There is a certain level of complexity in offering any one service

• Great care needs to be taken to ensure complexity does not overwhelm the business

• At the same time, the selected services need to have a clear path to profitability

Next Steps

• In the context of the market, and in the context of the known digital economy, discuss which services can create a sustainable stacked offering

• Assess the feasibility of applying that to the technology being developed

• Determine if the technology and the economics work well together