My New Year's Resolution: A Home in Silicon Valley

A year ago, we announced that we were moving our headquarters to Atlanta. We hired people and set up an office there - yet here we are now in Silicon Valley. Some of you may wonder: Why have people like myself and my family, Darren Dunn and Ian Berman moved their offices here?

The answer is that once moving became a reality, I realized it couldn’t be any other way. This is the place to be, the place that is critical for our future as a company.

WorldMate is a company with a unique heritage: We began as a bootstrap ten years ago, and were creating the earliest and best mobile apps back when they were still called “PDA Applications.” We recognized the particular needs of business and executive travelers, and the necessity of merging the “fixed” and “mobile” internet.

That is our past and present. Our future is in Silicon Valley, which is special in two important ways.

The first is very simple: When the best people in the industry gather in one place, that place will become the best. When I’m in a café in the Bay Area I see, within minutes, executives from Google, Apple, Yahoo! and others passing by. Even key people who aren’t based here are constantly traveling here, and the result is that Silicon Valley is a hotbed of innovation. The best ideas start here. And the trends are set here. When you're here – you see the waves as they start rising, not when they crash onto the beach.

One example is the iPhone: We had 8 years of experience and we've seen mobile platforms come and go--Palm OS, Windows CE and Windows Mobile, Symbian, J2ME…We've seen them all rise, and sometimes also fall. When the iPhone was released we looked at it from a technological perspective, seeing it as an evolutionary improvement of existing technology. Touch screen? We've seen that. GPRS phone with some music and app capabilities? We know dozens of those – and not from Apple, a company with no track record in the cellular market.

Because we were not in Silicon Valley at the time, we didn’t realize what a marketing phenomenon the iPhone would become. As a result we entered the market late, losing the "top iPhone travel app" space which we held on Palm, Symbian, BlackBerry and Windows Mobile to cheap copycats. Had we been in the Bay Area then, we'd have moved early, an imperative for success given the iTunes App Store dynamics.

Silicon Valley is also special in that the products that come from here are the ones that tend to succeed. This tight-knit community gives preference to its own products and helps them succeed—and as we’ve seen, when you succeed in Silicon Valley, it easily becomes a trend that spreads rapidly to the rest of the world.

One example is the Android operating system, which was conceived as one of the leaders in the market long before it had real commercial traction on actual devices in consumers' hands, while systems from companies who sold hundreds of millions of phones (e.g. Nokia's Symbian) or have at least the same penetration in the OS space as Google (remember Microsoft) were already considered irrelevant – at least by app developers.  Yet there is no clear technological reason to say that one platform is superior to the other, no strong business indicator that one system will succeed while the other will fail—in fact it’s the other way around – unless you consider this "PR momentum". Google's ability to attract the local developer community and the local blogger community and impress upon them that through them Android will be a success, almost by definition caused Android to be a success before it was even available in the market. At the same time it caused the competitors to lose ground and be seen as a thing of the past.

Tripit is another example, and closer to home: A web app that mimics ours and is in many ways inferior caught on because of the influence of local media and bloggers, and the local buzz radiated outward to the national market.

So where do we go from here? We intend to embrace the culture and values, to immerse ourselves in the local dynamism and improve our product and our standing as much as we can. The brand new web app we've just released is an example of our commitment to the web as our next platform for innovation and growth. We are already forging new relationships to enhance the product and distribution, but the most important thing is that now we are part of the vibe, we are listening, and we will move quickly with it.

Nokia Deals Industry A Blow By "Going Android" - A Different Angle

So is Nokia going Android or not? Here's what I hope is a fresh outlook on this story...

It was 11 AM on a Monday morning, as one of my esteemed managers walks into my room with a blank look on his face. You know, one that states "I have a great secret to tell you, but not only is it such a secret... it also validates what I've been arguing for such a long time...". He asks for a moment of my time which I am obliged to give under such circumstances, thinking it's probably the latest and greatest about our product. So then the guy states with the required digerati pomp - "Have you heard that Nokia are switching to Android?"...

"Where have you heard that?" I answer, but I must admit I am a pretty blunt person, and it's pretty clear from my tone that my real reaction is "do you really think we should be wasting time on such nonsense?". The guy names a leading local daily whose writers are all fabled business and technology gurus. I suppress my laugh and dismiss this as rumor. Putting this behind me, I go back to work, and 10 minutes later I get the unavoidable email from one of my executives with the link to the Guardian article. Now that seals it. A "real authority" spilled the beans... Of course that article is a little less firm, stating that Nokia is "understood" to be making such a device and later that there is some "speculation following the Nokia-Intel announcement..."  A-ha.

So someone speculates, the Guardian "understands", and other newspapers are already committing. But it doesn't end there.

30 minutes later, it's all over the social networks and instant messengers, and various friends and colleagues are exchanging opinions. Of course I have to respond to some of them as they're asking me directly and I have to answer - otherwise I am the guy who's too aloof to care. So I get to spend another 15 minutes on this.

Somewhat flabbergasted, I walk over to get myself a cup of coffee, only to witness half of our developers standing in the corridors, exchanging opinions (best case) and libel (worst case), and generally mis-spending time and energies...

Is this over? Has Nokia's denial ended this? Maybe. Probably not.

Bottom line:

I can think of at least 200 small companies, 100 mid-sized and 10 giant ones where such news would be the talk of the day, resulting in dozens of thousands of managers, developers, analysts and any other shape or form of self-styled expert spending considerable time on this "debate". Probably hundreds of thousands of hours, costing dozens of millions, were spent on this.

So never mind that Nokia just acquired Symbian, that Google is an arch-adversary, that building Ovi and then succumbing to Google services (Maps, Calendar etc.) is almost like a public act of Harakiri for some of the executives there.

The real story is about the power of a rumor.

Or maybe not?

P.S: Who am I to talk? I just spent another half hour posting this...

PPS:

This is something I believe in a little more:

Nokia and Symbian: Forget about Android, it’s all about Cutey (Qt)

iPhone Users Are Predictably Irrational

Over the last year or so, I've visited the topic of iPhone Apps and what they're good for several times. I must say I've angered some of my readers who saw my resistance to this great new wave as being purely bull-headed. Now that WorldMate for the iPhone is here, and our commitment to serving users on this platform is clear, we can come back to a discussion that's a little more level-headed. My chief concern was how the AppStore marketing platform - which consists mainly of the best-seller lists, skews the platform towards cheap gizmos. Or basically - my argument is that:

The marketplace that Apple has created does not allow a company like WorldMate to charge a price for its product that is in line with the product's value.

As I've spent some time writing a rather long piece - here are my main themes up front...

• There are dozens of thousands of smartphone users who think WorldMate is worth at least $100 per year
• A rational ROI analysis shows that WorldMate is worth at least $100 per year
• If WorldMate is to make money on the iPhone platform - It can't do that on a few dollars per user.
• Apple's App Store set-up triggered a consumer behavior called "Price Anchoring" which makes iPhone users believe that a price of $1-2 is adequate for apps, without any real rationale
• This makes it very hard to build a scalable business on selling iPhone apps.

Now you know what I think - let me try to explain. This discussion is by nature an economics discussion, so let's start by figuring out the "Right value" or "Right price" for the product. WorldMate for other platforms (e.g. BlackBerry, Windows Mobile) retails for $99/yr. We've done quite a bit of price-testing before settling on this price, and we were considered one of the most successful app developers on these platforms. So you can state as a fact that:

There are dozens of thousands of smartphone users who think WorldMate is worth at least $100 per year

Otherwise they wouldn't have paid, right? But of course you could always argue that these people weren't thinking straight. So - maybe a better way of justifying the price is by calculating the economical value. What WorldMate essentially does is save you time and get you out of trouble while traveling on business. We inform you of things in advance and provide you info quickly - so you won't miss your flight, get lost, etc., and we help you optimize - for instance find another flight when you need to change your schedule, or when your existing flight was delayed / canceled. So basically what we do is save you time. Now our average customer travels over 10 times a year and probably spends around $20,000 on business trips on a yearly basis. He costs his employer around $100 per hour in general, and double that while traveling. So - if we save our customer one hour a year - for instance by telling him he can leave for the airport an hour late cause the flight is delayed, or by giving him a map to his destination which saves him getting lost - the ROI is positive. If ever we manage to get him home a day early or enable an impromptu meeting while traveling (e.g. using our Connections social network) - that's easily a 5-x ROI. Now one may argue that we need to look at the alternative cost - what replacement products are there. Let's assume that there are 2-3 free products or mobile websites out there that could replace WorldMate for free. If it'll take you one hour to find them, or, if these products are not as well integreated as WorldMate such that over the course of a year of usage it'll take you one more hour to get the info from them that WorldMate would have gotten for you automatically - then again, you paid your $100 to get these "Free" products - i.e. you paid more than you'd have paid for WorldMate anyway. So the bottom line is I think I can safely say:

A rational ROI analysis shows that WorldMate is worth at least $100 per year

Yet another way to examine this is how much does it actually cost us - what's our cost per user? The platform we have cost quite a few millions of $ to develop over the last five years. The iPhone app itself cost us ~$150,000 to develop and we're still spending heavily. The content costs per user are meaningful (in the cents to dollars depending on activity). Hosting costs us six figures a year. So we certainly can't be profitable on $0.70 / user unless we serve millions.

If WorldMate is to make money on the iPhone platform - It can't do that on a few dollars per user.

Still - the iPhone customer market sees this differently. We launched a product at a $19.99 introductory price, and while we generally like the sales figures, still we see comments like "how could this be worth $20". Wait a minute - we've just shown how the product is worth 5 times this? So what is it? Are iPhone users less rational? - not likely; Are they underpaid? Is their time not worth as much? Not really - recent surveys from Forrester and Nielsen survey show over 39% have over $100,000 HHI. So why do iPhone users attribute a lower value or price to WorldMate - or for that matter, any app? The answer is as simple as it is perplexing. There's a developing field in economics called Behavioral Economics. Simply put, what it studies is how people actually behave - as consumers, deal-makers etc.. You'd think that what's economics does in general - right? Well, not really - Traditional economics assumes people are rational beings. Empirical studies show they just aren't. And Behavioral Economics tries to understand this conundrum. There's a great book in the field called Predictably Irrational, written by Professor Dan Ariely of MIT, and one of the phenomena it describes is "Price Anchoring" Price Anchoring in simple terms is the fact that the first price you see for something, is what you'll expect it's worth, regardless whether this price makes any rational sense. I especially like the story about the experiment they did where they told people to write the last two digits of their Social Security Number next to the name of a product - as a price. And then asked the same people how much they really think the product is worth. Lo and behold - people whose SSN ended in high numbers, ended up thinking the products are worth more than did the people whose SSN ends in low numbers. Incidentally, we're talking about highly rational MIT MBA students... Further studies show that it's then very hard to change that "anchor" - the initial impression of price, no matter how irrelevant, affects the long term perception of value, or "appropriate price". How does this apply to the App Store? When Apple gave early iPhone developers an incentive to price everything at $0.99, it actually made its customers perceive of iPhone Apps as worth $0.99, $1.99, maybe a few $ - tops. Regardless of the actual value created, the corresponding value of the content / service or any other rational aspect. So for most iPhone users, the equation is simple:

"The adequate price for an iPhone App is $1, maybe $2..."

Oops. How do we make money in such a market? What's the long-term outlook like? Can this change over time? Does Apple care and will it attempt to change it? Frankly, we'll see. We do have some great ideas about how to monetize, but we'll have to live and learn. I'd welcome thoughts and opinions. Some interesting reads:

• FierceWireless: If you're trying to make money, dump your iPhone strategy
• TechCrunch: Report: iPhone Applications Are Getting Cheaper
• Silicon Alley Insider: Apple's Relationship With iPhone Developers: 'Reluctant Tolerance'
• And of course - Predictably Irrational

WorldMate for iPhone: The iPhone App is here!

It's here. After all the debates, arguments, discussions and anxieties - WorldMate for iPhone is out there. 24 hours ago we launched both WorldMate - a free version, and WorldMate Gold - a Paid version. And these are just the first in a sting of releases planned for the next 3 months, which should make WorldMate for iPhone one of the richest and most valuable iPhone Apps out there.

Within 24 hours of launch we had over 1,000 new users. Both WorldMate and WorldMate Gold are already Top-20 iPhone travel apps. And this is just a beginning.

What does it do? Version 1 of WorldMate for iPhone provides our itinerary planner that is synchronized with the www.worldmate.com online itinerary planner, real-time flight status, flight schedules, click-thru to to maps & directions, a currency converter, as well as iPhone weather and world clocks. The Gold version automates the Flight Status function such that as soon as you enter the app you know if your flight's on time or not. The Free version is Ad-funded.

Over the coming months, we will strive to prove the thesis - there are enough serious iPhone users out there who are interested in more than gimmicks and games, to warrant the creation of this service on the iPhone.

Let's kick ass!

iPhone musings one last time - the moment of surrender

First I was applauded, then advised, then blasted. The iPhone has changed the landscape, and I cannot ignore this any longer. Competitors like Tripit and FlightTrack are learning from us, duplicating our product, and trying to take the market away from us.
It's time we re-claimed our invention - the mobile itinerary application, and put it on the iPhone.

We've just published a post on the WorldMate blog explaining why WorldMate for iPhone and why now. Check it out.

The BlackBerry App World launch - Is this pent-up demand or what?

It's been less than 36 hours since the App World was launched, and I have to say we're surprised at the rate of take-up. Our own app, WorldMate Live, is one of the apps featured there and hovers around #12 in the top downloads tables.

Extrapolating from our download numbers over these 36 hours, I'm expecting there were over 1M downloads from the App World in the first 24 hours. A million! Considering that the App Store was NOT pre-installed in any BlackBerry, but people actually had to download it to get at the apps in it, this is extremely impressive.

The App World itself still has some quirks - strange process of acquiring and displaying reviews, some usability issues here and there. But it's 100% functional and does the job. And the apps are top-notch. So very different from what we see on the iPhone App Store for instance.

I guess we're off to a good start then!

Going to TravelCom '09

For the next 3 days, I'll be attending Travelcom '09 , one of the key travel trade-shows attended by all the who's who of the industry. Like every '09 show, the economy has a major effect on the vibe and the topics discussed. However at the same time, the travel industry is going through a quite a unique process of change, inflicted by a mixture of economic, regulatory and technology trends. I will be sitting on a panel about mobile and its influence on travel - "What you must know about Marketing Travel through Evolving Mobile Communications Systems" to which I've been invited by one of the few real luminaries in travel - Henry Herteveldt of Forrester. So if you're there - drop by, I guarantee it will be interesting.

Time permitting - I intend to write my next post about Web 2.0 and Travel. It seems like, unlike other areas, in Travel, web 2.0 actually means business.

Oh, one last thing - I owe you this picture, taken from seat 2F on yesterday's Continental flight EWR-ATL... I'm thinking of making it part of the WorldMate brand...

Of Power Luncheons

What a day, after being lectured to by my VP of Products, and before being lectured to by my CFO, I managed to steal a few hours and participate in a luncheon arranged by Blonde 2.o and YL Ventures. Spent 3 hours at the same table with Sarah Lacy, Deborah Schultz and Ayelet Noff - I guess I must be doing something right, no? Oh, yes, Yossi Vardi was there too...
 

iPhone SDK 3.0: WorldMate Live on the Horizon!

We were absolutely thrilled about Apple's announcements yesterday of what is coming in SDK 3.0. Push (at last), subscriptions, tiering, Google Maps integration. 90% of what we need to implement the full WorldMate Live vision on the iPhone. Here's Engadget's coverage of the announcement event.

We will be making some announcements about this in the near future.

Thanks to all our fans who've petitioned Apple for this!

Leaders and followers - How everyone is following Apple's lead (?!)

In the last few months I've posted some rants about the shortcomings of the iPhone AppStore before, for instance under " . In doing so I've echoed the voices of many other industry players, including AppCubby, Mobile Tech Today and others. The general assumption in the market was that when introducing the AppStore Apple wanted to start simple, learn, and upgrade later. An example for such an upgrade are the "Top Paid" and "Top Free" apps tables.

One thing I certainly did not expect is for everyone else in the industry who's been distributing mobile apps for years, to look at Apple's success and draw the conclusion that they need to "go primitive" in order to be competitive. Take a look at handango.com for instance. They've been leading the mobile applications downloads market for years, and were the Mecca for early-adopter smartphone users. Over the early years, they've evolved their merchandising practices. For instance, they moved from a "Top 50 downloads" table counting downloads, to a "Best sellers" counting unit sales (just like iTunes), to a best sellers list measuring revenue generated by the different titles. And it worked for years.

Over the last few years, growth has stagnated. While I can't put my finger on it exactly, I can say from our ISV partner point-of-view that it seemed like things have slowed to a crawl there. Initiatives like subscription billing, free applications distribution with pay-per-download for the vendor and others took years to evolve for "IT reasons". And the iPhone has dealt them a blow - with their core audience switching in droves from Windows Mobile and Palm to iPhone, and then being forced to download only through the App Store.

How does a company respond to such market conditions? Well, in their case it looks like they've picked a very naive version of "if you can't beat them, join them". A couple of weeks ago they've switched their best-seller lists to be run by "most units sold" instead of "most revenue generated". So long $99 eOffice and WorldMate Live. Long live $0.99 iFart and iMaid.

Does this strategy make sense? Let's assume for one second that this strategy is indeed the right one for the App Store (I don't). Is it the right one for Handango? Are Apple and Hadango equivalent? let's see. Apple's targeting un-informed consumers who purchased the "coolest phone out there" and is trying to educate them to download apps. It has an existing billing relationship with them which means that it can easily power a good user experience for a $0.99 impulse purchase. The focus is on mass market "goods" and the strategy is focused on the lowest-common-denominator.

Handango's audience reached it after looking for a place to buy applications for their (non-iPhone) smartphones. They put their credit card numbers in to pay for their purchase. They have opted for BlackBerries and Windows Mobile devices. Are they the same psychographic as iPhone users? Will the lowest-common-denominator strategy work?

An even bigger concern are Apple's competitors. The AppStore's success is of course something they cannot ignore, and the rush to issue such stores of their own is justified. Advertising their phones as application platforms is something they should have started doing years ago (and believe me, I personally pitched such campaigns to them in the past). But are you going to be a leader or a follower?

One of the giants of this industry, a company who's been defining the mobile market for years, has recently announced its upcoming application store. This company has built various application and content distribution channels over the last 10 years, and has tested every model you can think of - from internet to on-device to retail-point-of-sale. They've done everything except one thing, which is to actually promote application use to consumers when they advertise their phones. Wait, isn't that a key part of Apple's marketing strategy?

Anyway, they're working with their developer community on the upcoming launch of their app store, and initially stated they will support a variety of business models - subscriptions as well as one-times, trial apps, freemium, etc. Then all of a sudden they have a change of heart. You see, now they are looking for a "consistent download experience", so why don't everyone go back to pay-before-you-download applications with a one-time fee and that's all?

What's going on here? Have Q4 reports been so bad that a market leader has lost any ability to think on its own and is blindly following Apple's example? What will they do in a few months when Apple will come out with subscriptions, trial apps etc.? Implement them then because then it is good practice in line with consumer expectations? Incidentally - is this also the strategy with your phones? To just clone Apple? Is this scalable? sustainable?

The latest news is on RIM's BlackBerry App World. The good news: an App Store for BlackBerry, with some more flexibility allowed to developers, and RIM heavily promoting application use. The bad news: RIM seems to be assuming BlackBerry users and iPhone users are the same demographic / psychographic. Therefore it taks the $0.99 - $9.99 pricing levels that are the norm on the iPhone App Store (but not imposed by Apple) and setting them as the established price level for the BlackBerry App World. Is your tool worth $50? Is your service going to generate / serve the business user $500 in value? Sorry, this is a Dollar Store.

Where is it all going? How much innovation is going to go down the drain because of this infatuation with $0.99 gimmicks? Frankly I don't know. I can only take solace in comments posted by our users on my previous posts about this, for instance:

"If people are willing to pay $.99 for crappy apps and odd sounds, imagine what they would pay for an app that is actually useful and works wonderfully like WorldMate Live."

Let me know what YOU think...