Online Payment Systems: The Missed Opportunity
For the past few years online advertising has been the de-facto monetization mechanism for online businesses that do not sell physical goods. As a result very few companies have actually focused on receiving payments directly from consumers. This lack of attention really shows when you try to figure out a holistic approach to online payments for your business. The short news: global online payment systems are a mess especially if you are not a 10 year old S&P 500 company!
As this economic downturn puts pressure on more and more web startups to skip the dwindling online advertising revenue stream and go directly to the consumers more entrepreneurs will get exposed to this mess. Since I have been dealing with this problem for almost a year now, I thought I should just summarize what is wrong with this ecosystem. Hopefully this post provides some guidance to fellow web entrepreneurs that are/will go through the same and save them some time.
I am also going to propose some basic requirements for anybody who wants to solve this problem. My hope is that somebody in the payment business will take a look at this list and hopefully provide a product that satisfies these requirements. I really believe that there is a huge opportunity here and whoever cracks this problem properly will benefit immensely. If I was not busy building Zoosk, this would be on the top of my list of opportunities to tackle.
Five Goals; One Year
A new year is upon us again.
2008 flew past me too quickly. I think I accomplished a lot but let go of many important things while doing so. Some of it already has faded from my memory (living in Hayward for a year) and some of it hasn’t fully clicked yet (helping 150 million singles connect on Zoosk). I still think 2008 was definitely a net positive year for me as an individual, but I can do better, don’t you agree?
So, I am going to do the cliché and come up with a few goals for 2009 for myself which I am announcing below. Why publicize them? In the hope that peer pressure from all of you great friends will help me achieve them faster and maybe even better. So, if you see me off track, please let me know in no uncertain terms and don’t let me to chicken out 
- Get my Health Back: Since I suffered stress fractures on my feet in 2007 it has been down hill for my health. I stopped working out regularly once I had both feet in cast for a few months and after that my startup life totally kicked health to the curbside. The obvious effect has been gaining plenty of undesired weight! Even more so, in the past 6 months I have started paying for my negligence in other ways as well. I now get sick too quickly. I have had back-pain, neck-pain, etc. THIS HAS TO STOP BEFORE IT GETS MORE OUT OF CONTROL. So, 2009 will be the year that I get back my health. First stop will be to get back into a consistent training program. Sitting on a stationary bike or running on a treadmill never does it for me. My answer: working out boot camp style
Maybe even playing soccer again if I do well. - Grow Zoosk’s Brand: Last year, my company Zoosk came out of nowhere and caught social dating by a storm. We have added more than 12 million users and made 150 million connections possible. Zoosk is now available in 12 languages some of which I don’t understand at all (btw, it is a very strange feeling to play with a site you built in a language you don’t understand). Pretty impressive if you ask me, but that’s just the beginning. In 2009, we will keep on growing but will have a much stronger emphasis on our brand. In our top countries, I want “cool online dating” to be equivalent to Zoosk in the minds of consumers. We have a tough road ahead of us with entrenched competitors and their multimillion dollar marketing campaigns to trump. But we have smart people on our team that don’t quit. I believe we can go beyond our wildest dreams in 2009. It will be a lot of hard work but man it is fun.
- Get Social Again: Ironically, working at a social web startup damages one’s own personal social life. The long hours of work and the do more with less attitude definitely keeps you away from getting together with friends new and old. But I am going to attempt to make the two coexist in 2009 much better than last year. I think the second half of last year showed a clear improvement in this regard thanks to moving to San Francisco and also because my girlfriend joined me in California. My plan is to build on that improvement in 09 and spend more time with people I care about and meet more people that are not directly business related. So, if I haven’t pinged you in a while harass me about it and don’t take “i am busy” for an answer. I need your help on this one.
- Share Ideas with Community: I think I have done a poor job sharing some of my learnings from the startup journey with others in the past year and a half. A good example of this negligence has been this very blog and lack of posts on it. I will be trying to revive my blog and post more often about things I learn while growing Zoosk. There is a lot of knowledge that people in my position gain (sometimes the hard way) that can easily be shared to help other entrepreneurs. Again I can use your help here. If there is anything in particular that you want me to talk about drop me a line or leave a comment and I will try to write up about it. I have learned plenty from reading about other people’s experiments and it is just fair for me to share back.
- Read More: Yes, I read a lot of blogs and other media through out the year but since I started Zoosk, my non-industry reading has plummeted to unheard of levels! I used to read WSJ and The Economist regularly plus books on culture, history, business, and politics. Last non-work-related book that I have read was in 2007! That’s just a shameful stat if you ask me. I need to reverse this trend quickly or I will turn into one of those ignorant folks that doesn’t know much beyond his nose
. The fix: start reading periodicals first and gradually make room for longer readings such as political books.
As you might have noticed by now, the challenge in front of me for meeting these goals next year will be smart time management. Most of these goals are in direct competition for my time and energy and to achieve them, I will need to balance my resources wisely. As with any other goal, I will need some metrics to see how I am doing on each of the five. For four of them it’s fairly easy:
- Health: my weight will be a good proxy for my progress at least for the first six months.
- Zoosk Brand: again we have plenty of metrics tracking this diligently.
- Sharing Ideas: I can look at the popularity of my blog as a decent proxy for this one.
- Reading: My book reading wishlist should start shrinking (or at least it should have new titles in it)
The hard one to gauge is going to be number three. The best metric here will be my friends’ and how they think I have done. So, please let me know.
One last note: In 2009 I will turn 30. Yes, the big three o! For some reason round numbers in age are more important than others. Don’t ask me why, they just feel that way! Crossing 25 was a major turning point for me as I looked back at my life and what I had accomplished by living for a quarter of a century! (scary, huh!) Now we will see what turning 30 will do. One thing I am sure of is that 2009 will be another amazing year with its ups and downs. Can’t wait to live it
Cheers to a great year for all of us…
good vs. perfect?
Reading a friend’s blog post on throwing perfect parties (or not), i came across:
the gap between “good” and “perfect” isn’t much. One flawed particular, qualification, or requirement is enough to make a perfect thing, a good one.
If you want to succeed in most competitive challenges of today’s world, good is not enough. Usain Bolt wouldn’t capture the imagination of millions if he was just good. Beethoven’s piano sonatas wouldn’t last for centuries if they were just good.
So does this mean that we all need to be perfectionists?
Perfectionism, in psychology, is a belief that perfection can and should be attained. In its pathological form, perfectionism is a belief that work or output that is anything less than perfect is unacceptable. At such levels, this is considered an unhealthy belief, and psychologists typically refer to such individuals as maladaptive perfectionists. (wikipedia)
Not very healthy to be a perfectionists! so now what?
But let’s step back. What does it mean to be prefect? Is that a relative judgment or an absolute one? Can something that was prefect 100 years ago still be considered perfect? Is there really no room for the gymnast who scored a perfect 10 in past Olympics to do better?
I really think perfection is a moving target that is affected by our understanding of the space in which the work exists, the time it was produced, and even the resources/constraints that the performer had at the time of production. Of course, the efforts of other actors in the same era affect the perfection judgment significantly.
So how can we hit this moving target and join the greats? I think the healthy balance here is to strive for the perfect work or output (whatever it means to us at the time) but not to deem anything less unacceptable. Put the work out there. Get feedback and improve upon it. And repeat…. Just be conscious that there is always room for improvement, even if you can’t see it now.
This is one of the reasons why I love working in technology so much. The meaning of perfect in this field changes so quickly that you can’t escape seeing the moving target. What was a perfect web application 10 years ago now would seem so broken! And I am sure what we see as perfect today will feel broken in a couple of years. The challenge is to keep up with moving target and try to stay as close to it as possible all the time.
Now back to perfecting that simple web form!
Blogging from WP on iPhone!
I am testing blogging from the wordpress application on iphone 2.0. So far it’s pretty smooth. I wonder if I can post a photo snapped by the phone directly into a post. That’s the best feature of the Facebook app if you ask me.
So, let’s see how this test turns out
Aha! I just figured out the photo stuff! Pretty neat and intuitive. Attaching a photo I snapped yesterday of first Zoosk roof get together. Now let’s see how it posts…
Back to Urban Life
After living in suburbia for 285 days, I am proud to announce that I have landed in urban life again (aah, it feels good ). If I skip the show (or long depending on how you look at it) time I have spent in east bay, I have upgraded from Seattle to San Francisco and I couldn’t be happier about my latest move.
Although I should day that moving a house plus an office in the same week is not something I will look forward to again! It was overwhelming to say the least. But it’s beyond me now and I am looking forward to a great time in SF.
Again, I have a place I can call home. Hello San Francisco!
View from new Place
Facebook VP: our platform is $RICH$
Recently vice president of product marketing at Facebook, Chamath Palihapitiya, spoke about the Facebook developer platform at the TieCon conference. Some of the figures what were quotes by the attending press caught my attention.
And about 33 percent of Facebook application makers reported profits of up to $500,000 a month. Finally, at least one-quarter of the applications running on Facebook have 100,000 active daily users.
Looking at adonomics or other Facebook application trackers, you can see that only 50 Facebook applications boost 100,000 and above daily active users. By Chamath’s math, Facebook only has 200 applications! I guess MySpace platform is not doing too bad in retrospect.
In reality, Facebook has some 25,000 applications on it’s platform. and only 0.2% of those have more than 100K daily visitors. I am just hoping that Chamath was miss-quoted, and that he and his team don’t really think every application on their platform is thriving.
And imagine if 33% of Facebook applications were making half a million in profits every month. That would put the profit of just this 1/3 of applications at around $50 million dollars a year! That should put their revenue in the $150 million range, exactly how much Facebook made in 2007!
Simply AMAZING
Facebook Apps, Another Perspective
If you are following social media development, then you probably have seen or heard of the O’Reilly Research analysis published here and analyzed here (among many other places). Ben Lorica’s post on Radar provides a very interesting glimpse into the Facebook ecosystem and highlights some industries that are doing well through an in-house categorization of applications and comparing the corresponding number of active users.
As this chart from the research highlights, the biggest category on Facebook is applications that are ‘just for fun’. Obviously the assessment that the most successful applications on Facebook are those that have marginal value and are time wasters resulted in extensive coverage of the report in the blogosphere and ended in headlines such as: On Facebook, Girls And Boys Just Want To Have Fun.
I think the categorization of the applications by the research team has a lot to do with this assessment. I have been looking at the same question from a different angle for a while which might be useful in structuring a discussion around the topic.
Facebook was a social network way before it became a platform. It had millions of users that were active on the site way before any of these applications existed. When the platform was introduced last year, from a user’s perspective, all of a sudden new functionalities became available. Some of the functionalities were improved versions of the existing features (think SuperWall) and some opened completely new opportunities (such as iLike for music).
So what happens if you look at the Facebook universe in terms of activities that were facilitated before and after the platform launch. Below i have tried to summarize the main activities of a typical Facebook user (please comment if I have missed major areas). I have also included (a very subjective) assessment of how Facebook was doing in facilitating each category before the platform launched by using different font sizes.
In the right most column I have included some of the applications that have emerged to improve the user experience for each activity plus the total daily active users of all such applications in the top 20 facebook applications (in terms of daily actives). Please note that the active numbers are based on back-of-envelope calculation on a random day and only for top 20 applications. In the O’Reilly report, they summed all applications up which takes the tail into account as well.
I think this perspective highlights a couple of trends/questions
- What’s up with Photo Sharing? Is Facebook Photo application so perfect that nobody can provide value beyond it? This seems like an excellent opportunity for a brand new application to come out of no where and take over.
- Improving existing functionality/purpose has the least barrier to user adoption. This is especially true in case of sub-perfect existing experiences. Facebook wall was boring and text only when FunWall and SuperWall exploded in popularity. People discovery still sucks on Facebook which is a great opportunity for Zoosk and others innovating in this area.
- Media consumption has always been a part of most successful social networks except for Facebook. To this day I don’t understand why Facebook is so bad when it comes to media discovry and sharing. But this was a known winner and iLike and Flixter capitalized on the opportunity very well.
- Social gaming seems to be the only truly new activity category when it comes to successful applications. It was basically ignored by (or unknown to) social networks until Scrabulous and Friends for Sale came into the picture on Facebook. This category now is rightly so getting plenty of attention from the venture community and entrepreneurs.
What does this mean for applications not in these categories? Is this the extent of utility that application developers can provide on social networks? I don’t think so. Social gaming didn’t really realize it’s potential until early February this year, full 9 months after the platform opened up. What is the next big emerging activity category? That being said, I believe it is much more natural to grow on social networks if you are enhancing or extending existing user bahaviors.
I should also highlight that this analysis is only looking at very large applications. If your application does not benefit from network effects then you don’t need to be huge in order to be able to provide utility. One more thing to keep in mind is that monetization potential is completely left out of this discussion. Even though having a large active user base helps with monetization opportunities, it does not guarantee the way to profit.
Is this trend going to hold up on other social networks that are opening up? It’s too early to tell. But the initial indications suggest it might hold true on MySpace and Bebo as well.
PS: Obviously a large contributor to the success of applications is the viral engineering of applications. For each of the successful applications in these categories there are hundreds of tiny copies. Just because you pick a hot category does not mean you will have a huge user base. It might just make it a little bit easier to do so. Follow Dave or Andrew’s blog if you want some viral wisdom.
