Whilst in Arrakis

The Future Will Be Better Tomorrow

It’s harder than you think (thoughts on Slack)

It’s harder than you think – Public Enemy

Slack just did a massive $100m financing round. Its parent company, Tiny Speck, started in 2009 as a game company. They did 3 rounds of funding for about $15 mil before ditching games altogether and entering the corporate IM space.

Monetizing games is a fight against entropy. They peak in two weeks and then you have to continue pushing out content, promotions, acquire users (as long as LTV > CAC and in a world where LTV goes always down and CAC goes up). If you look at the user activity curve of all successful games it look always the same. There are very few exception and these tend to be very valuable (World of Warcraft, Clash of Clans).

Successful tech companies OTOH have a curve that compounds over time. This is because providing entertainment is a fickle proposition and is due to end at some point in the near future, while solving problems or enabling solution is potentially boundless.

TL;DR raising financing for games is easier harder than tech because the adoption is very different and over time one returns more money than the other. Also you price game companies using present revenues while tech companies tend to be valued on growth and future revenues (as revenues can be built later – see ‘Business models are a commodity‘).

PS. I really <3 Slack. If Yammer was still around as a private company they would have been clobbered. Now that they are Microsoft they are going to be completely wiped out.

The problem with Siri

Dear Siri,

it’s not me, it’s you. Let me give you an example…

“Siri, I would like to book a hotel for tonight”

Here are the list of nearby hotels” [List hotels based on a Yelp search, no indication if any of the hotels has actual availability for tonight. Clicking on the list takes me to the super shitty Apple Maps. Clicking on the hotel in Maps lets me call the hotel]

(The first on the list is the Radisson) “Siri, book me the Radisson”

Here are your Bing search result for ‘raisin’

See? I have millions apps that can book the hotel already installed on my iPhone. I don’t want to call the hotel, thank you. Chances are that if I am talking to a piece of software means that I prefer doing a transaction with another piece of software and not call a hotel, figure out my corporate rate, my credit card number, my frequent flier thingie for hotels. All this data already exists in my phone and in my email account. If not, ASK.

On top of this our relationship is purely transactional. Once you spit out your result you forget about me. Me. Your user. I mean have you ever seen Tron? Users are important! And you need to remember the past few seconds of interaction to understand if the queries are linked, such as it was in this case.

85% of iOS users have never used Siri and the main reason is that it is a gimmick that does not solve any real problem. Yet.

@pmarca’s latest tweetstorm about unsustainable valuations

And here is Sequoia Capital famour “RIP Good Times” from 2008. Can’t believe it has been six years already.

Re Twitch

Twitch_plays_pokemon_animated

So,

we have been seriously talking about convergence of TV and games for more than 15 years now and while we always envisioned interactive movies what happened was exactly the opposite: people watching non-interactive streams of other people playing. Similar to watching sports on TV in a sense.

I think we* overestimated the desire for interactivity (after a long day being a mindless couch potato might be favorable) but most importantly we underestimated the impact of belonging to the same culture and sharing our accomplishments (which is incredibly like talking about sports with your buddies.)

In a sense Amazon just bought ESPN for nerds and there’s nothing wrong with that. (UPDATE: Seems I’m not the only one that reached this conclusion: ‘Twitch: Has Amazon Acquired the Next ESPN?‘)

My work on cryptocurrencies

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So,

I actually did some work in the summer of 2001 on cryptocurrencies. At the time was big on peer-to-peer protocols and saw them as the solution to move data on the edge faster and without having a single point of failure (both technical and legal). I envisioned having P2P protocols for every major application and decided to work on payments.

My idea was to have the ability to pay for something (digital or otherwise) to a party while retaining anonymity and without a central authority. At the time did not know a lot about encryption (which would become a big part of my life in later years) so was more interested in the protocol itself and missed some of the beauty and innovation of Bitcoin (even though my idea was closer to Stellar).

The name and the examples I chose to make my case were a bit controversial and after 9/11 I decided it was a good idea to mothball everything as there were bigger opportunities elsewhere but I am pleased that others kept working on the problem. The entire financial system needs to be open, extendable and more in line with the internet than being just a financial VAN.

How to develop billion dollar apps

 

1. Core apps vs. combo apps

My theory goes like this: iOS started as a super early adopter device and the core apps (phone, contacts, email, calendar, etc) were simply a logical step from similar applications that have existed on smartphones for a long time, arguably with a nicer UI.

Fast forward 6 years and the iPhone brand has sold over half billion devices with an additional 200m iPads. The core apps have barely evolved compared to what has happened to the apps that are present in the App Store. There has been significant improvement in the default iOS UX but that’s just a pretty overlay on top of the same actions [1].

By catering to a mass market Apple has left plenty of space for app developers to take hold in their core apps.

2014-07-26 06.58.53

Have replaced most core apps the latest being Humin that replaced the Phone app. Wish there was an alternative for Music

 2014-07-26 23.15.11

Humin really blew my mind and was looking at the common theme behind me using Sunrise, Gmail etc instead of the old ones and the answer is about combos. [2]

 

2. Enter the combo apps

A combo app is an app that aggregates data from different applications to perform its functions, and then adds a layer of intelligence/context over it to figure out meaning from this data.

With an installed base of up to 700m the mass market is interested in basic simple usability so Apple can reach people like my parents (who get a brain aneurysm every time they have to perform a new action in software that they have not done before). This creates a race to the bottom in terms of features and leave ample space for innovation to cater to early adopters who have plenty of apps rich with data already installed on their phones.

An early example was Sparrow that would use Dropbox for storage. Most apps can now connect to Facebook, Twitter and Linkedin. Citymapper connects with Hailo, Google Maps uses Uber, Gmail uses Google Drive (whatever that is), Moves is used by all health apps and vice versa. The list is long.

What this means is that you can infer additional context form past use behavior. For example you can mine emails and FB to figure out who are your closest friends. Humin automatically filters your contacts by your current location, and then (correctly) assume that you are more likely to call people in SF when you are in SF (and additionally when it’s daytime in SF) apart from the ones you marked as favorites that are always present.

And the more these apps can be connected and the more data can be harvested from each other new forms of service can be provided to the user.

Enterprise communications (whether IM or videoconference) still suck. Photo management blows as we never imagined we could have so many photos. Contacts are a mess (maybe Humin will prevail and fix this), Pocket is not yet fully integrated in other apps or in iOS. Moving unstructured data from one device to another is still a Wagnerian nightmare.

Moreover with HealthKit you are going to have a new dimension of data as well where you can link biological responses to actions and again down the road you could infer the status of a person when certain actions are taken, cluster them and build a predictive model on top.

My final point is that core apps represent the biggest opportunity. Samwer famously wrote: “there are only 3 areas in ecommerce to build billion dollar business: Amazon, Zappos and furniture” and I believe there is an analogy in mobile. Only here we are talking about a twenty  fucking billion dollar opportunity [3] for those lucky ones that can replace a core app and build a business on.

 

TL;DR: combo apps are the future and you have plenty of shitty iOS apps (Yahoo! Stocks [4], Clock, communications) that you can re-invent. The combo can also create new class of apps that we have not discovered yet (fucking/dating/marrying, professional services, freecycling, knowledge dissemination and tutoring. The list can be pretty long.) Replace one core app and your company will be bigger than Iceland’s GDP.

 

PS. this idea of leveraging existing data and manipulating it and presenting it in new ways is nothing new. Y Combinator and 500 startups rely heavily on this theory while choosing their investments. Dropbox and Airbnb are prime examples. Neither requires a data entry sales force to populate or maintain any dataset so it’s enormously scalable and easy to kickstart at the same time.

 

-Notes-

[1] Apple has put effort where leverage is. So focus was (correctly IMO) in improving developer tools to make and sell apps rather than say improve the phone app which might be irrelevant in 5 years.

[2] Yes, I do have Dylan on speed dial ahead of my family. Don’t ask. It’s got something to do with Batman anyway.

[3] Whatsapp, I’m looking at you, without even a desktop app.

[4] Yahoo! Stocks. I can’t believe that SUCH A BUG-INFESTED TURD has been allowed to be on the default page of iOS and every other alternative has been built with the same shitty idea that people want a fucking Bloomberg terminal on their phone with the same fucking usability of a fucking Bloomberg terminal (hello ’90s!)

How Microsoft contradicts itself

Burning-Platform

“Microsoft is the productivity and platform company for a mobile-first and cloud-first world, and games are the single biggest digital life category in a mobile-first world.”

Maybe it’s just me but the first part of that sentence is the exact opposite of the second half. Mobile-first and productivity therefore consoles for your living room with games.

Microsoft is a software-first company that caters primarily to enterprise customers. Games and online ads are a distraction on the bottom line and not a strategic objective. Not to mention that they have nothing to do with productivity.

Microsoft is shutting down its non-game content studios after only a few weeks of operations as part of its layoffs.

I have said this many times, Microsoft should merge its Xbox division with Valve and in the process acquire a stake the largest independent app store in the market (Steam). This would enable them to focus on the corporate and services market while having the games managed by a third party that could be free to innovate without having to worry about other Microsoft divisions (apparently infighting was a big issue at Microsoft during the days of stack ranking).

It would automatically give them monopoly status in the following markets: PC gaming, games distribution and the console market. While killing Linux gaming. Not bad.

 

Kentucky Road Zero

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So,

I bought Kentucky Route Zero[1] when it first came out. Then bought it again on Steam because I had no idea where the files were. Knew about the art, gameplay and the praise it got[2] – but never actually got around to play it until tonight. I am in awe. And that phantom limb I got after the ending of Lost[3] doesn’t itch anymore.

 

[1] KRZ was originally a two-man Kickstarter project that raised $8k in funding and received no attention from the gaming press.

[2] Rock, Paper, Shotgun named KRZ as its Game of the Year for 2013. Had Bioshock Infinite been made with a more RPG-ish, procedural gameplay I would not felt so conflicted here.

[3] Well more like after the 2nd season.

Stephen Elop in charge of games at Microsoft

 

I am officially wrong about my prediction of Gabe becoming the CEO of Microsoft. Stephen Elop was put in charge of Nokia so he could sell it. Maybe his mandate at Microsoft is the same. If I was them I would offload the Xbox to Valve and get their software distribution platform in return.

24 Hours after Landmark

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