Winners and Losers In The Last-Second Economy

Source: James Slavet, a partner at venture capital firm Greylock. His current investments include, One Kings Lane and Redfin.

Last week I was in San Francisco and experienced a series of events that foreshadow the coming importance of what I call the last-second economy.

I’d scheduled five meetings with start-ups in different parts of the city that day. Rather than dealing with the hassle of finding parking at each, or trying to hail cabs, I used a mobile app called Lyft to get rides from place to place. Lyft is a peer-to-peer ride-sharing network, serviced by regular people driving their own cars — not professional taxi or limo drivers. You pull up the app on your phone, press a button to order a ride, and you’re notified who your driver is and how many minutes it will be until he picks you up.

I finished my second meeting of the day in Jackson Square and needed to get over to the Financial District. So I pressed the button on my phone and the app informed me it would be six minutes. Just then, I got a text from my wife asking where we were meeting for our date night. Argggh! This critical fact had escaped my mind, and I needed to immediately book a restaurant reservation. I pulled up my Open Table app, booked a table for 6:45 pm at a great spot in the Mission called Range. I matter-of-factly returned her text with our plans for the night. Just then my ride pulled up.

We are increasingly living in a last-second economy. The Web, email and social networks have compressed planning cycles. And now mobile is further accelerating that compression. The mobile form factor drives a habit-inducing simplicity that will grab and take hold of more and more consumer spending. The mobile-first consumer will plan and buy at the last-second, with high confidence, and high expectations of service quality.

My mobile phone is increasingly the help button for my life. My parents made plans and bought tickets weeks in advance. If they wanted a night out, they’d lock down the details well ahead of time. We can now make things happen at the last second. We can get a ride, book a table, get tickets to a show, find a hotel or even a house to crash in, and buy a gift, each with a couple of clicks of an app, and all at the last second.

If we need to get stuff taken care of at home, whether our dishwasher is broken or our place is a mess, we’ll have a primary app for that. If our car needs servicing and we don’t want to wait for hours at the dealer while it happens, there will be a go-to app for that too. We’ll be able to order high quality service with a few clicks, and get clarity on the precise location and timing of our service provider as he makes his way to our house.

The shift in consumer behavior creates substantial opportunities for businesses that fully understand and capitalize, and it will erode the market share of those that don’t. The last-second economy has significant implications. Here are four:

The Best Last-Second Apps Combine Utility Plus Magic

There will be a number of mobile-first startups that break out and build valuable businesses. It’s not easy to build a sustainable model on mobile; just look at the decay curves for most mobile app startups. They launch with great promise and then struggle to retain users. The most recent industry-wide data I saw from Flurry was a 94% average app decay six-months post install. This means that if a user installed your app in June of this year, there would be a 6% chance he’d actually open your app this week. Mobile app entrepreneurs and investors are all facing the realization that just because you can get someone to install an app, doesn’t mean you can drive ongoing usage.

The most recent industry-wide data I saw from Flurry was a 94% average app decay six-months post install.

One of the best paths for an entrepreneur to build a winning business on mobile will be to provide last second service, in a high frequency area of consumer spend. Startups like Lyft, WillCall, HotelTonight, Wrapp and Just Eat are vying to be defining apps of the last-second economy. [Disclosure: Greylock is an investor in Just Eat and Wrapp.] The very best of these apps will occupy permanent real estate on consumers’ phones, and will have high repeat usage. They’ll have your credit card on file, and you’ll be able to book with addictive ease. The best will deliver experiences that deliver utility (my ride shows up on time) with just the right sprinkling of magic (my favorite Pandora station is already playing when I open the car door). These apps will each be a form of vertical wallet in key areas for the consumer, including gifting, ticketing and live entertainment, transportation, dining and others. The startups that succeed will have capabilities that extend beyond pure front-end software development, including logistics, inventory optimization and distributed workforce management.

A Second Look For Web 1.0

Some of the winners in the last-second economy may be established Web 1.0 companies like ServiceMagic, Stubhub or Expedia, if they evolve to deliver the right experience. Consumers will increasingly expect that they can research and transact faster and more efficiently than these Web 1.0 experiences allow on the desktop. I don’t want to scroll through the reviews on 15 different plumbers. For most things, I want to make a decision and transact in 10 seconds or less. Give me personalized recommendations on the top 3 options based on my location, or better yet, let me press a single button to book the one recommended provider who is available now.

Traditional Service Providers At Risk

Consumer expectations of traditional service providers like Comcast or Sears are going to go way up. It will no longer be acceptable for Comcast to provide us with a four-hour service delivery window. That won’t fly in the last-second economy. We’ll expect to press a button to request service, and to track the precise location and arrival time of our Comcast installation guy. If the Sears dishwasher repair guy is late showing up, we’ll give him a one star rating directly in the app, and Sears had better use that feedback to adjust to whom they route jobs. Positive and negative sentiment spreads faster than ever before through the social web and mobile. A few of these large companies will adapt to the last-second economy and raise their game. Many will not and their reputations and businesses will suffer.

New Software Companies Emerge For Back-End Logistics

As consumers increasingly wait until the last second to book, this will put more pressure on all businesses to more effectively yield-manage their inventory, and to have systems to promote and sell their last second available inventory. We’ll see the pricing and yield management systems that exist for hotels and airlines carry over to a broader range of businesses. The pricing of a last-second spa appointment, even at high-end places that do plenty of business, will be dynamically reduced for a last-second Wednesday mid-day appointment relative to what it costs for a reservation booked well ahead of time for a Saturday afternoon.

Delivering last-second services requires sophisticated logistics and routing. Federal Express built its network before the last-second economy. New systems and delivery networks are required for providing efficient last-mile service. New software companies will be built that service the back-end logistics required for the last-second economy. And new transportation and delivery networks will be built as well.

As consumers in the last-second economy, we’ll live more dynamic and spontaneous lives. We’ll have more freedom to explore and experience new things, without the barriers of long-range planning. And we’ll have to exercise greater discipline and restraint when buying is as easy as pressing a button. The bar will be higher than ever before for businesses to deliver seamlessly on our expectations. But those that do will become indispensable.

James Slavet is a partner at venture capital firm Greylock. His current investments include, One Kings Lane and Redfin. Prior to joining Greylock, James spent a decade in operating roles in consumer technology companies. James was named to the Forbes Midas List of top technology VCs in 2012. You can follow James on Twitter @jslavet.

Mary Meeker’s top 5, eye-opening stats:

Source: “5 Eye-Opening Stats That Show The World Is Going Mobile” Forbes, Parmy Olson, 12/4/2012

1) Nearly half of all American kids want an iPad for Christmas.  

According to research by Nielsen, 48% of American children aged between 6 and 12 want Apple‘s iPad for Christmas, making it the most wished-for gift among the next generation of trend setters. In second place comes the Nintendo Wii U, and another 36% want the iPad Mini, followed by the iPod Touch and iPhone in fourth and fifth place. Sure kids still want a fixed games console, but it’s telling that a large proportion of them prefer the mobility of small devices that they can interact with, and take anywhere.

2) Global mobile traffic now represents roughly 13% of Internet traffic.

Just three years ago, in 2009, that statistic was at a measly 1%. It edged up to 4% in 2010, and it hit 13% in November 2012, according to StatCounter Global Stats. The reason: more people are buying things through their mobile phones, using them in the store to validate coupons, or social networking, or using GPS-enabled apps. Shopping is the big driving force, though. On Black Friday 2012, the day after Thanksgiving that marks that frenzied start to the Christmas shopping season in the U.S., 24% of all online shopping took place on mobiles and tablet devices, up from 6% in 2010. In India, mobile Internet traffic has already surpassed desktop traffic as of May 2012.

3) Nearly a third of all American adults own a tablet or e-reader.

Figures from the Pew Research Center show that more than 29% of U.S. adults already own a tablet device, Meeker pointed out. And just as startling: that number is up from 2% less than three years ago.

4) There are 5 billion mobile phone users in the world, but only 1 billion smartphone users. 

The mobile revolution may seem well underway, but globally it’s only getting started. The number of smartphone users is growing by 42% a year, globally, according to research from Morgan Stanley, where Meeker previously worked as an analyst. Most remarkable again is India. It already has 44 million smartphone subscribers, making it the fifth biggest smartphone market, but this represents just 4% of total subscribers. There’s huge room to grow.

5) Android is growing faster than anything.

Apple’s fastest growing mobile device is the iPad, with sales having grown three times faster than the iPhone in the last few quarters. But that’s nothing when you look at the adoption of Google’s Android platform, which has grown 6 times faster than the iPhone. To date handset makers have shipped well over 600 million smartphones that run on the Android operating system, while Apple has shipped around 100 million iPhones in the last four years.

For Meeker’s full, 88-slide presentation, click here.

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ABI Mobile Research

ABI: Cumulative Mobile App Revenues To Exceed $30B By End Of 2012, Nearly Double 2011

Source: Tech Crunch NATASHA LOMAS, November 23rd, 2012

How much money have mobile apps made? By the end of the year the cumulative revenues of the global mobile app market will have exceeded $30 billion, says analyst ABI Research. This figure includes money from pay-per-download apps, in-app purchases, subscriptions and in-app advertisements — the whole app kit-and-caboodle if you will.

The figure, which comes from ABI Research’s Mobile Application Markets Research Service, is nearly double the amount of money apps had generated by the end of 2011, according to the analyst.

“Consumers’ high interest in apps has for a long time been obvious from download volumes, but it’s 2012 that will go down in history as the year when the economic side of the business finally took off,” said senior analyst Aapo Markkanen in a statement. ”We’re no longer talking only about a short-term gold rush. Apps have become a major digital industry.”

While ABI gives a nod to Apple’s role in catalysing this global app money-making machine, the analyst says the firm that has “stood out the most in 2012″ is Google — noting how the rather flea-market-esque Android Market has been overhauled and transformed into the much more polished Google Play.

“Google deserves a lot of credit for rehabilitating its proposition as an app distributor in the past year or so. If the old Android Market was a garage sale of the industry then the new Google Play has begun resembling a respectable department store. We estimate the Android developers’ share of the annual app revenues to set around one-third,” said Markkanen.

Beyond the two dominant platforms, Android and iOS, ABI notes that the main candidates for the third ecosystem — Microsoft with its Windows Phone OS and RIM with BB10 — have also “clearly made the monetization aspect a key piece in their platform strategies,” providing more opportunities for yet more developers to jump on the app-based, money-making bandwagon in future.

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