Paul Wallbank – Brilliant Communications

Category: Disruption

  • Time to strike deals

    Time to strike deals

    It didn’t take long for the competition in the payments market to heat  up after the announcement of Apple Pay last week as PayPal launched a campaign asking if you’d trust your financials to a business who can’t protect your selfies.

    While PayPal  pokes fun at Apple, there are more serious competitive pressures developing as the companies start negotiating with credit card providers and banks to reduce their rates. This is something that will be an immediate benefit for businesses of all sizes who are prepared to renegotiate their contracts.

    Most businesses, big and small, are poor at monitoring what they pay for a service; while they’ll shop around and negotiate when they’re looking for provider, they’ll let often these contracts go for years without reviewing them – something that utilities like banks, telcos and power companies take advantage of.

    I was reminded of this earlier this week at a lunch with some senior Qantas accountants who were quite open about how every supplier’s contract was constantly reviewed and discounts were aggressively pursued. It’s a tough life for the airline’s subcontractors.

    Times are tough for Qantas though, having sustained a 2.8 billion Aussie dollar loss last year along with constant declines in market share and stock prices. So it’s not surprising they have an aggressive cost cutting strategy in place.

    Many other industries are now looking at the same problem as the global economy is now in a phase of at best anemic growth for the foreseeable future, which makes it essential for all businesses to start reviewing their costs.

    With the banking sector now being disrupted by companies like PayPal and Apple, it might be time for all businesses to ask some hard questions of their banks and payment providers. The time is right to strike a deal.

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  • A unicorn in the wine industry

    A unicorn in the wine industry

    “I was a closet tech guy until the 2000s,” says Vintank’s founder Paul Mabray in describing how digital technologies are changing the wine industry to the Decoding The New Economy YouTube channel.

    We’d spoken to Paul before about the forces changing the wine industry and visiting him in the Napa Valley gives some perspective on the opportunity the sector has in capturing the enthusiastic US wine market.

    Paul’s first venture into wine technology was with Inertia Beverage Group in 2002, “when I started Inertia I said ‘hey, there’s this thing called the internet’”, Mabray recalls. “They said ‘hey Paul you’re so cute, the internet won’t be around in a couple of years.’”

    The internet being a fad turned out not to be the case and Vintank evolved out of the rising importance of social media to industries like wineries.

    “Vintank is the mission control of social media, the one stop engagement platform for the wine industry,” says Paul of his social media listening service which he and co-founder James Jory established in 2009.

    Wine is lagging other industries in adopting social media and other digital technologies because it’s avoided many of the disruptions other sectors have had to deal with.

    “The wine industry is the last industry that hasn’t been changed by the internet,” Mabray says. “If you look at hotels with expedia.com or restaurants with Yelp or Open Table, that hasn’t happened yet.”

    A key facet of Vintank is its use of the freemium business model in offering a basic service for free; a common practice in the consumer (B2C) market but fairly rare in business (B2C) software services.

    “It’s a very different way to do freemium in B2B. Freemium in B2C you do mass adoption — that tiny fraction that pay makes it profitable because so many people have it.”

    “In the B2B freemium model what you have to do is distribute it for free and then you measure the usage; who is using it the most is where you send the sales team in.”

    For Mabray, we’re in early days of using digital media and the wine industry is one of the sectors that needs to adopt the technologies quickly: “The driver for me is this horribly complex problem that needs to be solved — the wine industry needs digital to survive.”

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  • Changing the payments industry

    Changing the payments industry

    It didn’t take long for the effects of Apple’s payment service to be felt by the industry, within a day of the announcement Bloomberg reported Apple is negotiating with US banks to shift transaction fees from merchants.

    At the same time Bank Innovation reports the major credit card companies are considering changing the definition of ‘cardholder present’ rules which would make app based purchases cheaper.

    The changes Apple Pay is bringing in is part of a wider move to easier, frictionless commerce as Stripe co-founder John Collison discussed on this site last week.

    For the banks and credit card companies this means a very different operating environment. What was once a very profitable business is now changing rapidly and profits may not be so easy to come by.

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  • Don’t be at the wrong end of the long tail

    Don’t be at the wrong end of the long tail

    One of the most important characteristics of the technology industry is  you have to be first or second in your market to guarantee profitability.

    As more of the world become digitized this is becoming true in other sectors, as Tomi Ahonen’s survey of the app industry shows. This also demolishes the long tail theory of online economics.

    The long tail idea was put out by writer Chris Anderson during the first dot com boom.

    Anderson’s view was the long tail of older material would be a useful income source for creatives and businesses. For many, small payments on a ‘long tail’ of older work would add up to reasonable revenues.

    I’ve always skeptical of that view as the internet tends reward the ‘one percenters’ — a tiny number with the most traffic or revenue make the money while the bulk of players fight over the few crumbs that drop from the table.

    A sheer disaster industry

    A good example of how digital markets favour a tiny group of leaders  is in Tomi Ahonen’s survey of the 2014 mobile apps market that shows the vast majority of developers struggle for pennies.

    Ahonen pulls no punches, describing the apps industry as a “sheer disaster industry with only one sector making money” and goes on to describe just how dire the predicament is for most developers.

    The first point is where the money is being made; the first answer is by Google and Apple who skim five billion of the industry’s $21 billion in revenues. Just that stat alone shows where the real money is in the sector.

    Of the remaining $15 billion the top 1.3% of the industry — around 27,000 developers — take $11 billion, or 73% of the revenue and leave four billion to be shared among the other 98%.

    Slaves and huddled masses

    At the other end of the scale those who Ahonen calls the ‘slaves’ and the ‘huddled masses’ there’s only 400 million dollars to be shared around two million developers. Implying 87% of the industry barely make a few hundred dollars a year.

    On Ahonene’s figures two out of five developer make nothing.

    HUDDLED MASSES IN APPS ECONOMY 2013
    Revenues left . . . . . . . . . .  0 million dollars
    Bottom 39% developers . . 819,000 developers
    Bottom 39% earn . . . . . . .  0 million dollars
    Bottom 39% earn . . . . . . .  0% of all revenues
    Bottom 39% earn . . . . . . .  0% of developer revenues
    Average per dev . . . . . . . .  0 dollars
    In above numbers:
    Beggars failed to earn . . . . 400,000
    Hobbyists don’t care . . . . . 250,000
    Branded utility app devs . . 170,000
    Source: TomiAhonen Consulting analysis on Vision Mobile survey Aug 2014

    The Apps industry is a stark indicator of just how brutal the economics of digital distribution are. The long tail is real, it’s just that it describes a massive imbalance in income within markets.

    For all of us trying to make a dollar in the digital world, we need to find the niche where we fit into the profitable part of the curve.

    Being on the wrong end of the long tail is a recipe for poverty.

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  • Standing up to the giants – why the big software companies don’t always win

    Standing up to the giants – why the big software companies don’t always win

    In the latest Networked Globe post I have an interview with QNX founder Dan Dodge on how BlackBerry wants to be at the heart of the Internet of Things.

    One of the things Dodge discusses is how twenty years ago Microsoft told QNX they would be driven out of business by the software giant’s Windows CE operating system.

    As it turned out Microsoft failed dismally.

    QNX’s survival in face of a big competitor is similar to Google’s failed attempts to enter various industries. Everyone assumes Google will succeed against the smaller players because they are rich and smart.

    Often however the rich player doesn’t win because the smaller incumbent is savvy, focused and knows their market well.

    Sometimes bigger is not always better in the software industry.

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