Tuesday, September 30, 2008

The Future of Directory Assistance Discussed at Pelorus

Yesterday I gave the keynote presentation at the Pelorus directory information services conference in Savannah, GA. This conference is focused on wire line and mobile directory assistance in the US but since my blog primarily focuses on mobile I am writing this from a mobile industry perspective (although anywhere you see "mobile" you could substitute with "telco" or other term that encapsulates both mobile and wire line and likely get an accurate read).

The US paid directory assistance market is being eroded by alternative information services - ranging from 800-Free411 to various mobile search options. Interestingly, although the average price per call for paid 411 is more than $1.70, most people who are DA users don't have any idea how much they are paying. Also, the demographic of those who use paid 411 skews older and the pool of people who continue turning to this service is diminishing. Those that use paid 411 do so on average less than once per month but at $1.70+ a pop the US spend still amounts to more than $5 billion (and shrinking).

So the big questions the attendees at Pelorus (largely executives from the large carriers - AT&T, Verizon, etc... - along with a multitude of vendors) are trying to answer are 1) how can I get more call volume on my paid 411 service and 2) what can I do to position well for the future and capture a new base users with an accompanying revenue stream?

Before I dive into my answers to these questions, it's first important to offer some context.

The US Market is Different from Europe and the UK

As you read this, you are probably saying to yourself "no kidding Captain Obvious" - but I have heard a few people make the claim that the markets are the same and therefore consumer adoption of new paid services in the US will follow a similar path to Europe and the UK. Time will tell but I personally believe this view is incorrect.

The US market for directory assistance (and mobile services in general) differs dramatically from Europe and the UK. In the US, we have a regulated directory assistance market. The carriers have an oligopoly on 411 in the US. Further, consumers in the US select a carrier who then dictates the handset and service contract options to that consumer. Although Google's Android mobile phone operating system is pushing to help ease carrier control over the services (by allowing consumers to easily download and use applications written for that operating system) the vast majority of handsets are locked down by carriers. From a service contract perspective, unlimited use for a fixed fee is what the carriers push in the US - counting on "breakage" to make their services profitable (if 100% of people used 100% of what their service plans allowed for the US carriers would lose loads of money).

In Europe and the UK, the landscape is much different. These are deregulated markets where consumers choose "unlocked" handsets and then independently select the carrier of their choice. They also download various applications and access services that lead to pay-per-use charges. Deregulation has had a huge impact on 411 services. A few years back, directory assistance (the number was 118) was deregulated in the UK which opened the market for paid directory assistance alternatives. A couple of companies mobilized to take advantage of this window of opportunity by launching their own numbers - 118 118 was launched with a clever marketing plan to become known as "the new directory assistance". Of course, the carrier (British Telecom on this case) was on the losing end of this deregulation move as paid call volumes shifted to 118 118. Today, 118 118 is well-known as a preferred provider of pay-per-use directory assistance and is attempting to expand into providing a broader base of information using call center rep's.

In summary, the US market for directory assistance differs dramatically from the UK and European markets. The differences have a major impact on the market opportunity for competitive mobile pay-per-use information services. Following is my quick attempt to provide some points in logical order that further illustrate this position:

1) Paid 411 in the US already captures the market of those who are willing to pay (and they actually have no idea how much they pay in most cases).

2) Paid 411 is an older demographic that uses 411 as a default because people are "creatures of habit".

3) The demographic that is served by paid 411 does not drive "viral" (geometric word-of-mouth) growth.

4) If Paid 411 in the US is enhanced with a broader "answers" capability, the volume of monthly calls from the existing base of paid 411 customers can be increased.

5) The smooth, paved "deregulation road" that was built for new directory assistance entrants in Europe and the UK does not exist in the US. Therefore, the market dynamics in the US are such that marketing a new pay-per-use number won't resemble what has occurred in the UK and Europe. Rather, it will grow slowly in response to massive marketing expenditures (think hundreds of millions of dollars) and will erode the existing base of people who formerly turned to paid 411 as those people move over to the alternative pay-per-use services.

6) Eric Schmidt, Google's CEO, has clearly stated that Google will make more from mobile than desktop over time. Google provides voice, text, and WAP-based information services and certainly intend to be the leader in this space. Google will not be pay-per-use - they will be free and ad-supported. Therefore, the reality is that to truly win in the US marketplace (and ultimately global marketplace) the mobile information services provider will need to deliver a product experience that delivers a much more relevant answer in response to requests than Google and they must generate profits from the service through targeted ads and offers.

So my recommendation to carriers is to immediately enhance 411 services to include a broad range of "answers" and market that capability to their existing 411 base (because that is the market opportunity for the service - don't burn marketing dollars trying to reach the 18 - 30 year old demographic because they won't be receptive to a pay-per-use service). Further, embrace the offer-based answers market and aggressively position to become ubiquitous with a service that is more viral and sticky (and, as a result, growing faster) than any other mobile information service on the planet.

Of course, I made the point that ChaCha is the partner to enable these strategies!

Friday, September 26, 2008

Android vs. iPhone = Will open or controlled win?

Android, which was recently launched on a T-Mobile handset, is positioned as a completely open environment for developers who want to build mobile apps. The Android approach is positioned to follow the open source software movement and the advent of communities of developers that help increase the value of the system at a rate that can't be matched by a company operating in a traditional closed environment. Salesforce.com's AppXchange is a great example of a company that has built a vibrant community of developers who are committed to building cool new apps that ultimately make Salesforce.com much more useful to customers.

Conversely, Apple is following its traditional proprietary path in the name of creating the best and easiest user experience. Today, the iPhone clearly has the most traction - both in terms of actual mobile phones in the marketplace and the activity in their app marketplace. However, at least a handful of developers are shifting to Android as their apps have been rejected by Apple.

The question will be how popular Android-based phones will be with consumers compared to their hip iPhone rival. I definitely expect the Android - iPhone battle to be every bit as interesting as the early days of Microsoft - Apple war. It will take time to determine which horese is going to win this race - and the stakes are huge. The winner will reap huge rewards and both Apple and Google are worthy competitors.

What's my prediction? Open wins over proprietary - and it happens much more quickly in today's world than in the early days of PC's.

What's your prediction?

Monday, September 22, 2008

Do Yahoogle and Android Set the Stage for Anti-Competitive Practices?

Monopoly. When you read that word, what businesses come to mind? I am no mind-reader, but I suspect that if you are tuned into technology, Microsoft is the first name that popped into your head.

That may be changing soon. Google has some major initiatives - namely the debut of Android and the launch of its mega-ad deal with Yahoo - that have propelled it onto center-stage with the Justice Department.

Through the ad deal with Yahoo (known in some circles as "Yahoogle") Google will control 80% of the paid search advertising market. Wow! This would seem to make it awfully tough for competitive players to enter the market and for advertisers be assured a fair price on the ads they place.

Google asserts that the auction-style advertising process eliminates any concern over undue pricing control or manipulation. Others argue that Google sets the minimum bid price and the "black box" approach to serving their ads gives Google 100% control over what runs and when it runs - so their favorite advertisers would get top billing while others may be downgraded simply at Google's whim for any reason whatsoever.

On the Android front, Google is rolling out the first phone using the operating system with T-Mobile on the 23rd. The monopoly argument on this front is tough to make given that it is such a nascent play. However, with Google's might that will change quickly.

I see Google for what they are - a tremendously successful economic powerhouse the likes of which the world has never seen. The only frontier that is bigger than online search is mobile search so that is the place I watch Google most closely. Along with the level of power they continue to acquire will come more intensified scrutiny from the Justice Department. Although this threat is strong, I think the biggest threat to Google is going to come from nimble competitors who are thinking differently about how to deliver a mobile search experience that delights users. :-)

Thursday, September 18, 2008

CNN Story - People vs. Computers

Today, Jacque Wilson posted an article titled "Who gives better answers, people or computers? Ask ChaCha". Thanks for the coverage, Jacque! It is a nice piece and I wanted to comment on a few things in the article...

The title of the article, although catchy, does not correctly characterize what ChaCha does exactly (nor should it necessarily...). What do I mean? I mean we are actually allowing ChaCha's users to get the best possible computer intelligence by leveraging human intelligence. Our software actually learns from our more than 35,000 Guides which allows for a smarter and better experience. So with ChaCha you aren't choosing between humans OR computers - you are getting human intelligence AND computer intelligence perfectly coordinated to provide the answer you need, when you need it, without requiring you to jump through any hoops. With that said, a huge component of the ChaCha magic that keeps our average user coming back about one time every single day comes from our amazing base of knowledgeable Guides.

The interview for this article occurred more than a month ago - an eternity in ChaCha time - so some of the numbers Jacque cites are a bit dated. The release I posted yesterday conveys the momentum we have at ChaCha. One key fact, according to Nielsen Mobile, is that ChaCha is now the fastest growing mobile text search service - growing faster than WAP or text for Yahoo! and Google. 27 million mobile answers and more than a million unique users plus the top innovation award from Frost & Sullivan are the best proof that the ChaCha experience is what mobile users prefer.

The quote from an individual named DeLoach in the SEO space also deserves some feedback:

"With the rise of Internet-equipped mobile phones, specifically the iPhone, why would I go to ChaCha to search for me when I can just do it myself?" DeLoach asked.
Great question! It is one that I hear often. The reality is that much less than one percent of mobile phones in the US are iPhones. The fact is that more than 90% of the more than 250 million handsets in the US are not only not iPhones - They are not even smart phones at all. Further, among those who have smart phones - even iPhones - asking a question and getting an answer with the link to deeper resources supporting the answer is an experience that works much better when you are, say, driving a car or walking to a meeting.

So ChaCha works on virtually ALL PHONES - not just a tiny sliver of the phones that are used by the elite. And for those phones that are souped up - ChaCha makes the experience even better. Just try calling 1-800-2ChaCha while you are driving down the highway to find out what time Florida plays their football game this weekend. Then try a similar question with your mobile browser and you will see just how valuable the ability to ask a question and get the answer can be for you!

With all of that said, the market for mobile search is big and growing rapidly and will be so much more massive than online search that opportunities abound for companies with various solutions to succeed. No doubt the iPhone, Google, etc... have strong mobile business opportunities. We believe ChaCha complements all of them - and our numbers are what tell the real story about what people really want and love.

Thanks again for the coverage, Jacque!

Wednesday, September 17, 2008

Nielsen Mobile Says ChaCha is the Fastest Growing in Mobile Search

ChaCha issued a press release today announcing that we won the top product innovation award from Frost & Sullivan and that we are the fastest growing mobile search company - growing faster than Google or Yahoo! - according to Nielsen Mobile.

Here is the release -

Media Contact:

Lisa Kennedy

(415) 618-8726

lkennedy@citigatecunningham.com

Award-Winning ChaCha is Fastest Growing

Mobile Search Service

The human-powered mobile answers service quickly captured

seven percent of the mobile text search market with a quarterly growth rate of more than 800 percent

INDIANAPOLIS – September 17, 2008 – Accepting the 2008 North American Frost & Sullivan Award for Product Innovation, ChaCha announced that it now has more than a million users and has answered more than 27 million queries since it launched its revolutionary mobile answers service in January. This, combined with its quarterly growth rate in Q2, makes ChaCha the fastest growing mobile search service, surpassing both Google and Yahoo in both WAP and text-based search growth rates (according to the latest data from Nielsen Mobile).

ChaCha increased its market share in the U.S. mobile search market to seven percent, tying for second place with Yahoo at the end of June 2008. ChaCha also exited the quarter with an 800 percent growth rate, compared to Yahoo’s 200 percent growth rate.

"Mobile search is growing at an incredible pace,” says Chris Quick, mobile media analyst with Nielsen Mobile. “Within the mobile SMS search category, ChaCha is the fastest growing service, increasingly competitive with other mobile search providers. We’re therefore keeping very close tabs on how ChaCha will affect the mobile market.”

“After reviewing numerous operators in the mobile search and advertising markets, we believe ChaCha offers the most compelling service for mobile users,” said Vikrant Gandhi, senior analyst for Frost & Sullivan. “The high level of interest demonstrated by the number of queries ChaCha answers on a monthly basis clearly indicates that mobile users are finding the service to be of real benefit. We’re delighted to honor ChaCha for their innovation in breaking the code in mobile search through their search methodologies and practices.”

“ChaCha is honored to be recognized by Frost & Sullivan as an innovative and unique service that demonstrates outstanding achievement and superior performance in leadership and technological innovation,” said ChaCha CEO, Scott A. Jones. “In the past eight months, we’ve cemented our position as a mobile search leader and now every 10 seconds a new user tries ChaCha. By offering a superior solution in an explosive market, we are attracting the best partners to leverage our unparalleled service for mutual benefit.”

Recently, ChaCha also launched its mobile marketing solution, ChaCha 1:1, and is partnering with premium brands including Coca Cola, Fifth Third Bank and McDonald’s to implement engaging, conversational and highly relevant mobile marketing campaigns.

ChaCha merges sophisticated search technology with the power of human intelligence by leveraging its growing base of over 35,000 Guides to answer customer queries 24/7 by simply texting a question to (242 242) or calling (1-800-224-2242) from virtually any mobile device. This radically simple solution has allowed ChaCha to achieve its industry-leading growth performance.

About ChaCha

ChaCha, a free mobile answers service, allows users to call 1-800-2ChaCha™ or text questions to ChaCha (242242™) on mobile phones and receive answers within minutes. ChaCha expert guides — trained and skilled individuals — use ChaCha's powerful internal patent-pending search tools to respond to any query. For more information about ChaCha’s newest features, go to www.chacha.com.

For more information about how to maximize the power of mobile answers to take your marketing campaigns to a new level on the mobile frontier, visit ChaCha’s 1:1 Mobile Marketing Solutions partner site at: http://partners.chacha.com/.

Created by serial entrepreneur Scott A. Jones (www.scottajones.com) and Brad Bostic (http://blog.bradbostic.com), ChaCha is funded by Bezos Expeditions, the personal investment firm of Jeff Bezos; Morton Meyerson, former President and Vice Chairman of EDS as well as Chairman and CEO of Perot Systems; Rod Canion, founding CEO of Compaq Computer; and Jack Gill, well-known Silicon Valley venture capitalist.

L.A. train engineer may have been text messaging before crash

Laws that ban text messaging while driving have been catching on and if theories about the worst train crash in fifteen years prove to be true expect the bans to spread like wildfire. Today, it was reported that at least one of the friends of the train engineer had received a text message from the engineer within a minute of the crash. This may help explain why he inexplicably blew through a red light and multiple warning signs to careen into a freight train killing at least 18 people.

The fact is that text messaging does have an addictive quality. It's so addictive that while driving I oftentimes can't resist the temptation to text.

I think this issue is going to drive a lot of mobile innovation leveraging voice as the input. The massive distraction with texting is when you are trying to key in your outbound message. If you could just speak your message, have it transcribed ACCURATELY and easily direct it to the appropriate contact, I think the issue is solved and text junkies can continue texting away.

The issue today is that transcription of voice to text remains sketchy at best. I think the folks at Vlingo are doing the best job by providing speaker-dependent transcription technology but the need for an app on your phone is a bit limiting.

In any event, make sure you don't crash your car because you are texting - and let me know what type of mobile innovation you think might be spawned by the bans that will likely lead to a texting withdraw syndrome that will, in-turn, create a lucrative counseling service for texting commuters who are in withdrawal.

Tuesday, September 16, 2008

Zynga Leverages Social Networking to Build Casual Gaming Growth Engine

At CTIA last week I had the opportunity to meet Scott Derringer of Zynga. It was great to hear about their company. Scott told me about their team and the fact that several of them worked on previous start-ups together - some more successful than others.

The concept behind Zynga is compelling yet simple - to add a social element to casual games. It sounds like they have the right recipe with staggering growth over their first year of operation.

I will be watching them closely and expect them to be a huge success. Once they offer a mobile set of games ChaCha will be first in line to collaborate with Zynga!

Monday, September 15, 2008

Blackberry Storm Internal Verizon Video

The Blackberry Storm will soon be introduced through Verizon stores and an internal training session was recorded. You can check it out here http://gizmodo.com/tag/blackberry-storm. The primary feature of this phone is its touch screen (yawn). As a Blackberry user, I have come to really like the track ball thingy - it makes it so easy to navigate around and it tends to select the thing I am trying to select. The touchscreens I have used, including LG Voyager and iPhone, have looked cool and functioned poorly. Perhaps I am missing something but I just don't get the touchscreen's true utility (except the cool "pinching" feature for zooming in on the iPhone - that is awesome!).

iPhone Sales Weak in Japan

In Japan, the iPhone's release was accompanied by predictions that the fancy new web-capable device would reach 5% market share quickly.

But Japan is one of the world’s largest and most demanding mobile phone markets. Perhaps even a bit too demanding for the iPhone. According to market-research firm MM Research Institute, Apple (AAPL) sold just 200,000 iPhones in Japan in the device’s first two months on the market.

And now demand is declining. So much so that analysts say sales are unlikely to top 500,000 units, let alone two million. The reason: The iPhone, even with its multi-touch screen and elegant design, pales a bit in comparison to the typical Japanese handset, which boasts not just a high-end color display, but a video camera, GPS and digital TV and electronic currency support as well. Said MM Research analyst Eimei Yokota, “The iPhone is a difficult phone to use for the Japanese market because there are so many features it doesn’t have.”

Saturday, September 13, 2008

United Stock Hammered by 2002 Google Bankruptcy Coverage

If you've ever wondered just how much control Google has over our economy, take a look at this...

The article about how United Airlines filed for bankruptcy in 2002 was revived when it showed up on a newspaper site’s “most viewed” section on Monday.

From there it was picked up by Google News and later seen by alarmed stockholders. The stock plunged from around $12 to just $3 a share before trading was halted.