The Credit Card Is The New App Platform

March 7, 2012 1 Comment

Credit and debit cards are ubiquitous, but they’re mostly pretty dumb. That’s about to change. Over 170 million people in the U.S. have credit cards, and the average card holder has 3.5 of them. And those totals are not even counting debit cards, which are roughly 40% of the total market and growing. That’s a crap load of plastic! In spite of the promise of mobile payments, plastic cards are not going away any time soon.

We’re at the early stages of a massive wave of innovation in the payment industry. It’s like when Apple launched the iOS platform for mobile developers. The platform in this case is the payment network. Software developers will add new capabilities to cards by programming the payment network to link online applications to specific payment events. Consumers will be able to effectively “drag and drop” apps to their smart cards in the same way that they add apps to their smart phones today.

We’re big believers at Greylock in the future of “online to offline” commerce, and we’re seeing a ton of innovation in this space. One of our portfolio companies, CardSpring, announced a major partnership with First Data earlier this week. We’ve invested in several other “online to offline” commerce companies including Coupons.com, Groupon,Shopkick, Swipely, TrialPay and Wrapp. And there are many other companies innovating in the space, including startups like Square, and established companies like Google, American Express and Visa.

For all of the attention focused on online commerce, the market opportunity for “online to offline” commerce is way bigger. Online commerce is now a $200 billion industry, but it’s still small compared to offline transactions. Up to 70% of consumer spending is influenced by Web and mobile research, but over 90% of actual transactions are still conducted in the physical world. Several major industries are motivated to see this new app developer ecosystem take flight. Retail marketers know they can advertise more efficiently if they can actually track and close the redemption loop from online browsing to offline buying. Major consumer internet and financial services companies are also highly motivated, as they see a path to greater advertising and promotion-based revenue if they can demonstrate more marketing value through closing the loop. Online budgets that are directed at social ad campaigns will further expand as consumers share experiences connected to their offline card transactions, including reviews and gifting. So what will be the impact of this emerging app platform on the card carrying public?

Expanded memory: If you’re like most people, it’s hard to keep track of all of your paper and plastic. With cloud-connected cards, you can clear out your desk drawer or wallet. Instead of holding on to that Red Lobster gift card, REI loyalty card and printed Groupon deal, you can add these to your card, and receive benefits automatically when you make a purchase. You can also store a digital receipt or warranty on your card rather than keeping these in a filing cabinet in the basement. You’ll be kind of like Bradley Cooper in “Limitless”, without the creepy smile or the terrible side effects.

New spending habits: The ads and offers that you receive today via the Web and mobile are mostly blind to how you’re actually spending your money in the physical world. As these databases are more intelligently connected, the offers you receive will become significantly more relevant and compelling, based on where you spend your actual time and money. Note to payment network innovators: it’s critical that these programs are introduced in a way that protects consumer privacy and retains consumer trust.

Our spending habits tend to be just that, habits. So if you drink coffee at Starbucks three times a week but never try any of their food, you’ll receive an offer to try one of their fruit plates. Or if you buy gas at a Shell Station on your way to work once a week, you’ll be offered a better deal at the Texaco that is right across the street. The discount you receive from a merchant may also vary based on how hard they think your existing habits are to break. Merchants will be able to dynamically manage supply and demand in their local market by testing real-time what types of discounts and offers they need to offer so as to acquire foot traffic. So Supercuts might offer “40% off” if your historical buying patterns are concentrated 5 miles away, and “10% off” if your transactions are centered 5 blocks away.

Validated check-ins and reviews: One potential downside of most consumer review sites is that published opinions are dominated by a small, vocal minority. There’s value in getting a broader sampling of people to share their views. A growing percentage of reviews on sites like Yelp and check-ins on sites like Foursquare will over time be tied to actual transaction activity. When you and your friends buy, you’ll be asked via email or text message if you’d like to check-in or provide a review. As a result, more customers will provide feedback and recommendations, and the information they provide will be better validated, in connection with actual transaction activity. A review or check-in will carry additional weight when it’s been validated.

Quantified self: The “quantified self” is an emerging trend in the digital health space. Early adopters and fitness buffs are wearing devices like Fitbits and Nike FuelBands to track their heart rates, calories burned, quality of sleep and more, so that they can measure and improve their health and performance. The cloud-connected credit card will also deliver a stream of valuable intelligence based on your transaction behavior. Your health data stream alone could include how much of your diet is fast food, how often you actually visited your health club, and how many times you stopped for coffee (aka “your caffeinated self”). Your appified card can also deliver you informed insights on your spending activities across other life categories so that you can optimize decisions and be your best self.

James, Reid, and Ali

James Slavet

Reid Hoffman

                                                   Ali Rosenthal

Filed under Consumer Tech, Industry Insights, Security, Start-up Updates Tagged with , , , , , , , ,

Announcing our investment in Tumblr

September 26, 2011 9 Comments

I’m super excited to announce Greylock’s investment in Tumblr.

We knew Tumblr was big when we started talking with David and John over the summer — over the last year or so, it’s practically exploded onto the scene — it seems like every piece of interesting content and expression you see today has been posted on someone’s Tumblr. The numbers back that up — last month the 30 million blogs on Tumblr generated 13 billion page views.

As we got to know the team there more, it became a more and more obvious decision for us to get involved. We love entrepreneurs who are product visionaries, who have a strong point of view and who want to build great products that affect hundreds of millions of users. David is clearly one of those — a founder with deep character and a desire to build a meaningful, enduring set of products and a company that users love.

What we didn’t know when we started, but learned as we went is that in addition to the ubiquity of Tumblr today, the engagement of users and posters and rebloggers is absolutely off the charts. Good content gets surfaced and spread incredibly rapidly — more quickly than any other network I’ve ever encountered. Lots of reasons for this incredible engagement — the team at Tumblr has done a wonderful job of figuring out some fundamental and novel avenues for self-expression. I’ve found so many interesting posts and perspectives on Tumblr that I never would have found without it — and it’s clear that that’s been the experience for millions of other users.

At Greylock, we’re always looking for the breakout companies — because we’ve each been involved in building and growing some of the companies with the broadest reach in history (Facebook, LinkedIn, Pandora, Mozilla, and more), we have a huge respect for founders and teams that have gotten to real scale like Tumblr has.

So Greylock and I are thrilled to be involved with Tumblr now, and we’re excited to help the company take the next steps forward into becoming an even more powerful platform for self-expression and discovery.

And you can find my own Tumblr at lilly.tumblr.com. :-)

John Lilly is a partner at Greylock Partners and former CEO of Mozilla.

Filed under Consumer Tech, Design, Social Media Tagged with , , , , ,

Google & Motorola

August 16, 2011 1 Comment

Very very interesting news about Google buying Motorola Mobility this morning. It’s got so many implications it’s tough to take in all at once, so wanted to capture a few thoughts quickly.

First thing worth pointing out, though, is this: we don’t actually know the shape of the whole deal at this point. Will Google keep the MOTO hardware business? Keep the patents and sell the hardware side? Keep both? It’s hard to know how their internal evaluation went, and what they’ll do from here, so a lot of this is really hard to speculate about.

Having said that, a few thoughts:

- it’s another instance in a long history of software (and now Internet) business devouring the previous generation’s hardware businesses. Internet business are inherently more leveraged: distribution power trumps almost everything else, especially in a phase where the technology portion is maturing.

- along those lines, it’s interesting to think about what happens next for Samsung, RIM, HTC, Nokia, but I’m way more interested in what the software players do. All eyes in that regard are on Microsoft, but I think the more interesting long term questions are for Facebook and Amazon.

- 2 things it’s clear that Google didn’t buy MOTO for: its margins or its ~20k employees.

- seems like Google definitely wanted the IP portfolio.

- and it seems to me that, assuming they keep the hardware business, that they want Motorola because it gives Google full control over the hardware and software stack, which is the only way that they’ll ever be able to even approach the excellent UX fit & finish of the Apple offerings. I feel like that’s one of the top drivers, and maybe the most important one over the long term.

- One other thing that this merger is decidedly not about is distribution — if anything, Google’s distribution power with respect to Android is somewhat weakened, at least in the short-to-medium term, as they’re undoubtedly going to cause some grief with partners Samsung and HTC. Feels like Google has calculated that control over getting the experience right trumps any distribution help they might get from their handset partners.

All of this lines up pretty well with my post about Screens, Storage & Networks last week — the last 60 days have seen Google push hard to get in the top tier on Screens (MOTO) and Networks (Google+).

My most esoteric point I’ve left for last, though: one of the unfortunate consequences of this development is that I think it will move perceptions of big corporations building open software (and in this particular instance, I’m specifically talking about open source software) at least a few more notches towards the cynical. The question that everyone will ask anytime a company tries an open experiment like Android in the future, the inevitable line of questioning will be: “Sure it’s open now, but for how long?” Whether premeditated or not, the path of Android has been from wide open to asserting more and more control — and this is another data point on that path. I’m not criticizing or indicting anyone for this — I think it’s essentially just a natural evolution and response to market conditions that require tighter integration. I think in a lot of ways it’s inevitable in technology networks for this to happen. (And I’ve written about it a bit before.) My only real sadness here is that it’ll move cynicism on corporate open source efforts up one more notch, and that’s not good.

Overall, though, fascinating day, fascinating time. Big moves!

–John

John Lilly is a partner at Greylock Partners and former CEO of Mozilla.

 

 

 

Filed under Consumer Tech, Industry Insights Tagged with , , ,

Screens, Storage and Networks

August 3, 2011 3 Comments

I’ve been thinking a bunch about platforms lately, and how they’re evolving very very quickly. Generally, there are two categories of thing that people talk about as platforms. Traditionally, they’ve been computer operating systems: Windows, OS X & Linux, now iOS & Android. Lately people are talking about cloud platforms: services like EC2, but also web services with APIs that other apps are built to integrate with.

But more and more, that’s not the way I’m thinking about my own systems; as devices proliferate at my own home, and as I tend to use tiny connected computers in more numerous and varied contexts.

I’ve been interested in what I call “4 screen & a cloud” products for a while: products that help us unify and take advantage of our laptop + phone + tablet + tv — but it all became a little clearer to me a few weeks when a wave of devices entered the house all at the same time. In the space of a few weeks, I upgraded to an iPad2, got a Samsung Tab to experiment with Android Tablets, got an Android phone in addition to my iPhone, and got a WebOS phone from the D9 conference. So we had all those devices in the house, plus our iMac, Kathy’s set of devices, and my mom’s as well, since she was visiting. Oh, and 3 Kindles between the three of us. Screens were everywhere.

Now, I’m the first to recognize that we’re somewhat atypical in our technology consumption in normal times; add to that the devices that I’ve picked up lately because of work and my house is a jumble of operating systems, devices and power adapters. Exciting!

When you get that many screens and devices, what happens is interesting: when you want to do something, communicate with someone, remember something, schedule an appointment, read a book, or whatever, you just pick up whatever screen is nearest to you and work from that.

Well, you do that if you can. Because in our current platform chaos, not all devices are fungible, not all activities are available from all platforms.

So that got me thinking some about what I need, and where, and in what contexts and on what devices, and now I think about platforms this way: I have a set of screens, a set of stuff, and a set of people that I want to do things with — and I want those sets available to me wherever & whenever I am.

By screens, I mean something more than just pixels: I really mean input & output systems, of which screens are the most visible parts; really it should probably be screens, sensors & speakers. In other words, it’s the displays of each system, the audio systems, and the ways that we indicate intent, be it typing, swiping, speaking, remote-button-puching, smiling, waving, running, or just being.

By storage, I mean something more than just bits: while Dropbox and iCloud and Clouddrive are important, I want to do more than just store and share my files with others. It’s about more than having a place to put my music. It’s about having the context of my life: my apps, my reading material, my history of shopping & interest intent. It’s really the things I’m creating, consuming, sharing, saving, working on and just thinking about. One of the things that’s probably non-obvious about this formulation is that for this to work, the storage is going to be pretty keyed to my identity. Without knowing something about who I am, it won’t work.

And by network, I mean something more than just my Facebook graph: what’s becoming clear is that we’ve all got many and diverse groupings in our lives, ranging from the very intimate groups of a nuclear family to the wide-ranging groupings of Twitter followers. The short version, though, is that it’s becoming increasingly clear that, just like in the offline world, people online want to do things with each other. Shocking, I know.

That’s the definition of platform that’s relevant to me: a combination of screens, storage and networks that help me do my work and live my life. The companies that see that true platforms transcend any one particular technology stack will be the ones that prosper — you can already see some interesting ones emerge.

As a side note, I think screens, storage & networks is one way to look at the landscape of the giants competing: it’s where Apple, Google, Facebook & Amazon are slugging it out (and to some extent it’s the evolution now of my old stomping ground, Mozilla). I would argue that each of the giants has a super strong position in 1 or 2 of the three areas, but none has a lock on all three, and most of the interesting initiatives of each are about strengthening the places where they’re historically weak.

Apple is obviously terrific at screens, okay at storage, and not very good at networks.

Google’s now strong at screens (although probably not as strong as Apple) and could be great at storage, and finally has a credible start on networks.

Facebook is incredibly strong at networks, has some weakness in screens, and is pretty good with storage (at least for things like photos).

And Amazon is very strong on storage, weak at networks, and weak (at the moment) on screens.

I’d argue that their relative strengths and weaknesses are  important for startups to understand as well, as that gives you a bit of a map of one set of opportunities.

Anyway, that’s how I’m thinking about things lately. What do you think?

–John

  John Lilly is a partner at Greylock Partners and former CEO of Mozilla.

Filed under Consumer Tech, Design, Industry Insights Tagged with , , , , , , , , , , , ,

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