The Most Interesting Fact About the Apple Watch

Regarding the pricing… did you notice it too?

The low end price is $349, but the high end price starts at…? Not $9,000. Not $9,995. Not $9,999.

$10,000.

They rounded up the price! Even luxury brands like BMW round their prices down.

What is the last mass-market product you can recall that was priced like that? This is a very interesting marketing move since people will now “round up” the value of an Apple Watch.

PSA: Stop Releasing Hobby Bitcoin (or similar) Projects for Your Own Good

You’re in serious legal jeopardy if you release a virtual currency project into the wild, and not because the currencies themselves are legally murky. Rather, because you are liable for any wrong-doings that might arise from the use of your product or service.

Corporations exist to shield their owners from legal liability. If you pay money to a company and then that company goes bankrupt before giving you your money’s worth, the owners and employees (unless they’re doing criminal activity on purpose) are not personally liable for your loss. On the same principle, if a software developer at Visa makes a mistake and Visa gets hacked, the software developer isn’t personally sued by the shareholders (s/he may be fired, though). The banks, merchants, or consumers impacted might sue Visa, but none of the employees are having their homes repossessed.

Now look at your project. Are you a high school student with a coin-bot that nearly got hacked? Maybe a student developer who made a hobby wallet that was emptied? Or maybe another hobby project stored on a $5/mo shared hosting service? Count your blessings you weren’t sued or prosecuted. If you release something *personally* and your negligence (or bad luck) makes you lose your user’s money, NOTHING is shielding you from them or the law. You are 100% fully legally liable for what happened. It doesn’t matter that it was a bug or that it was “just a hobby.” If somebody put $10k in your online wallet project and you lost it, you’re on the hook.

So far, it looks like cases like these are largely being blamed on the community of users trusting the services. That will eventually change. All it takes is one angry user who lost grandma’s retirement funds to turn a person’s life upside down.

I think it’s great that there is payment innovation happening right now. And I really support developers doing cool side projects. But before publishing projects that move *real money* around on *your personal servers*, think about whether or not it makes sense that you first setup basic legal protections for yourself.

How Amazing Features Can be a Waste of Time

Differentiation is another way of saying: define your own market. By doing this well, you can avoid the problem of unseating incumbents because they don’t exist or are significantly weaker.

Why Most Features Aren’t About Differentiating

You’ve got 5 seconds. Tell me how you’re better than the incumbent I am currently using. If your pitch to me — as a customer, partner, or investor — is that your site has the most features: you’re screwed. Here’s why, from the perspective of each:

  • Customers & partners: Yes, but, who are you again? I don’t put my eggs in nests that might disappear tomorrow, even if the nest has a built-in heater.
  • Investor: So your company is a feature away from being destroyed?

In the Internet Era, features are cheap. Big or small, a company can bang out a feature in a week or two and start testing it. You disagree because said company would “never” build that feature? Never say never. Innovative companies always surprise people. Hoping your competition doesn’t want free money on the table is tantamount to gambling, and there is a much safer, more logical way of approaching this problem.

So many “feature” companies (i.e., they’d just be a feature in a bigger company’s product) are born everyday. The criticism isn’t that these companies are doing something “easy.” The problem is that many startups use a specific superior product experience or feature as a key differentiator, without considering whether or not it helps them corner a new or different market. Being “better” isn’t enough.

Same Thing, Different Optics

Certain feature sets, if marketed right, completely change your target market. This is key. Let me say it again:

Certain features put you in a different market.

Most all companies are chasing a specific market. 18-24 females. College students. People who like coffee. Couples. Widows. Canadians with houses.

Not all features are created equal. Most features just add further convenience or refinement (i.e., “single signon,” “AJAX uploading,” “mobile support.”). Focus on competing in a way that assures your competitor’s destruction if they were to follow your lead.

Why Incumbents Ignore Certain Features

Like I said, some features change who a company’s customers are. In worst case scenarios, some features alienate your existing customers entirely (i.e., killing your existing revenue stream).

For example, your feature might be a free, ad-supported version of an existing model. A very famous site called OKCupid did exactly this a few years ago. Even today, this is what they’re known for. Why didn’t the other players in the market copy them? Because going free would mean changing their customers from their users (who pay a monthly fee) to advertisers (who pay for data and exposure). Yes, much like Facebook, OKCupid’s product is its users, and its customers are its advertisers (mmmm sweet, sweet data).

While the main differentiating feature, being free, is an easy feature to build, even to this day, incumbent sites like eHarmony and Match remain paid services. They are ultimately after different markets. You and I can intuitively see that there is likely a well-defined difference between the two markets of people willing and not willing to pay for dating (income, what they are looking for, age, etc.). It’s clear now that there was always two markets in the dating space, and OKCupid successfully cornered it using a simple marketing message.

The key for you and I is to understand and learn from this lesson: figure out what differentiators you introduce that give you unique access to a new or different market from incumbents.

Don’t Get Distracted

In any given startup, there is probably a backlog of 100 features to choose from. And most of them are from customers. Think about it.

Customers ask for features.

These customers are asking you to pick their market. With each feature you work on, your are moving toward a given audience. If this is a market you don’t want, ignore the feature. A feature that doesn’t help you define, carve out, and keep a specific target market is a waste of time.

In some markets, usability is everything (mobile). In others, aesthetics (marketing). Yet again in others, speed (search engines). Maybe in another, depth of technical end points (APIs). And within these markets, there are niches with even finer requirements.

Identify your core desired audience and build features only they yearn for. Everything else is a distraction.

Feature != (does not equal) Technical

A feature isn’t necessarily a boat load of programming. A “feature” is a marketable unit of software development. The complexity of that development is irrelevant. It can be as simple as a change in design, pricing, copy, or even name. Here are some examples:

  • Pick an XXX domain for your Pinterest clone: bam! PinPorn (NSFW). No difference in technical features from the original, but the site successfully corners its own market via community (the feature).
  • Want to be a Groupon for gay people? Fab. (Another year later, they’ve exited their niche and become a mainstream fashion site.) You know how they did that? They built a sizable mailing list of the gay community from their original ideas to be a gay Facebook and/or Yelp. Fab’s differentiator? Good taste, according to them.
  • Instagram’s killer feature was tight social integration (arguably pretty technical); yet Hipstamatic came first. Instagram brought easy sharing to a paid digital photo filter market that Hipstamatic defined.
  • And, of course, there’s Facebook: a MySpace for college students. The killer “feature” was that you had to have a “.edu” email address. Facebook probably would have perished in its early days without those 5 lines of code (maybe less).

The Real Meaning of Market Differentiation

Recall my example about the free dating market. Rewind 10 years. Online dating was something you paid for. That was it. Maybe this is easy to recognize now, but this market dichotomy (free vs. paid) was not apparent until only recently.

When smart people ask you about your market differentiation, this is what they mean. They are asking you if you’ve found a market angle that existing players will gladly give up because they either don’t value it or can’t compete in it due to conflicting interests.

So next time you’re looking at a list of features to work on, ask yourself: “is this feature putting us in the market that we want to be in?”

Facebook is okay with hurting their developers

Update: Only two weeks later, all of the user decline figures are far worse than I had originally stated (e.g., Band Page is down to 4M users from 31M!)

Facebook just seriously injured their own app developer ecosystem, and they’re poised to finish it off. And they did it on purpose.

Recently, Facebook announced that they would remove the default landing tab for Facebook Pages. They did this while simultaneously introducing Timeline for Pages. Most people probably aren’t going to miss those “like gate” pages where users were asked to like the brand’s page. The move makes sense for Facebook as it forces brands to spend money on the new Facebook ad units that have embedded likes (see below). Brands are understandably upset: getting likes means spending money.

The effects were immediate to one audience. The real doom-and-gloom story is around app developers. Facebook made this announcement at the start of this month. Since then, some of Facebook’s biggest apps have taken a nose dive on traffic. How big? A good example of this is Band Page, which gave artists cool, interactive fan pages with embedded music/videos, rather than the boring old wall. Facebook announced these changes roughly at the start of March. As you can see below, Band Page lost roughly 1/4 of their users (6 MILLION!) in a period of 15 days (yes, the chart is a little weird to read).

And this will only continue as more pages transition to the new format (10 more days until it’s mandatory).

The “default landing tab” was how many, many apps got their traffic on Facebook. The default tab was the first thing new users saw when they visited a brand’s page. This was a way for the page to “message” themselves to new potential customers, and it was very popular for brands to spend money on these apps.

Unfortunately, that party is over.

Check out this comparison on how else the new change hurt an app like Band Page. Here’s a “before” of Taylor Swift’s page, which has yet to convert to the new format:

Notice how it lets you play the music straight from the page and links to their iTunes store (links like this are not allowed on Timelines, btw)? Notice how it “lives” in Taylor Swift’s page as part of a seamless experience? See how you can see a quick list of all the apps the page has?

Let’s compare…

Snoop Dogg recently updated his page to use Timeline.

Wait. Where’s the link to Band Page? Oh, I found it under that little “2” to the right of his “Snoopermarket” (that’s cute) section…

Check out the installed Band Page app look and feel:

What? Where am I? Where’s his page? That white space you see is exactly as it appears. The app is sitting alone off in its own area.

It might as well live on Snoop’s own website, and I imagine this is exactly the direction many brands will take as this becomes the norm for Facebook apps.

How much does all this hurt these apps? Check out the biggest losers in the weekly app ranking charts:

It is the same story with every major app: stagnated growth in early March followed by a continuous and very steep decline as the month continued. All that jazz about the Ticker and Open Graph hasn’t been enough to stop this decline. I fear what will happen April 1.

Page apps are getting destroyed! This explains the recent shift for Wildfire (reference) and Buddymedia (reference) to becoming Facebook Ad aggregators. These two companies built an empire by being the go-to solution for Page apps and now they’re running away. At least Facebook notified these guys.

Facebook is out to kill page apps, albiet slowly and only after suffocating the ecosystem so the loudest and most deep-pocketed players move to greener pastures (see above two examples). Developers beware. Profile apps suffered a similar slow strangulation followed by a sudden death. When profile apps were killed, we got just over 60 days notice (announced as a footnote Aug 19, 2010 and officially removed Nov 3, 2010).

IPO-Facebook needs to make money, and if there’s companies eating their lunch, don’t expect them to sit back anymore.

After all, Timeline is all about hurting Twitter. Let’s see, it:

  • Decreases the ability of “doing stuff” via apps (e.g., self-maintaining content)
  • Makes it more embarrassing for a brand to not actively post updates since their page starts off as a wasteland. Thus, it…
  • Increases the importance of providing frequent updates and engaging your fans
  • Makes it easier to see who’s interacting with a page

Page apps became a casualty because they discouraged page owners from using Facebook like Twitter. Previously, brands could hide crappy walls by having cool apps and a nice splash page with a “Coupon for a like” message. Those days are gone. And Facebook did it on purpose. It’s probably for the best, but as a developer, it still hurts to think about all the blood, sweat, and tears that went into building those amazing Page Apps.

Come on, Facebook

Facebook just had their annual F8 conference, and it was a snooze-fest to me. Examples of things they could have done that would be ACTUAL game changers:

  • An HTML5-based social application platform (currently missing from their mobile strategy and making embedded FB apps less important on mobile)
  • Embedded contextual ads on existing Facebook widges, complete with rev-sharing – yep, it would be hated
  • A truly threatening Adsense competitor for off-Facebook publishers – yep, could be hated too
  • A FB credits fee of 5% (from 30%), and enable physical e-commerce – yep, threatens a working business model
  • A connect-to-pay Paypal clone – yep, would increase Facebook’s financial liabilties

Yes they might harm them. Yes they’re risky. But they’re game changers. They flip the market upside down. They make existing competitors freak out. It pushes you even further as a leader. And, thus, the absence of such a risk shows how conservative Facebook has become.

Instead, they announced a glorified scrap book and some cool automated like buttons.

I’m sorry, but the timeline is hardly revolutionary. How is this remotely on par with the introduction of apps or the Graph API at previous F8 conferences? As a company approaching IPO, this was their moment to really show the world what Facebook’s potential could be. And so they showed off a bunch of visual fluff. The press is fawning over the newly released changes like the second coming of Jesus.

Not to mention all of these new integration points don’t even work on their current web-based or native mobile applications! What am I missing here?

I am disappointed.

“Michi’s Minions” – On Respecting Co-workers

In my relatively short, but unusual, career I’ve heard the phrase “Michi’s minions” a number of times. People use it to jokingly refer to my staff. They say it in private, so I think some people might conclude it’s just a crass joke. Perhaps. For people that know my crude sense of humor, my offense to this joke probably takes you by surprise. Every time I hear that phrase, I immediately conclude the other person is not somebody I want to work for and that they have a naive understanding of professional relationships. History usually proved that conclusion correct.

To me, it indicates a certain condescending/naive attitude that the person has toward employees that is absolutely unacceptable. I once heard the analogy that management is like a rowing team. You’re the coxwain that helps keep the rowboat straight. Yet, when you think about it, you don’t lift a finger to help the results get done. If somebody gets tired or wants to quit, you can’t take out a whip and start cracking. At the same time, without the coxwain, the team will never make it to the finish line. You both need each other. All of my greatest accomplishments as a leader in an organization were because of the hard work the team put in. To forget that your staff were the ones furiously rowing is ignorant if not insulting.

When somebody thinks that “managing” equates to “having minions,” it’s not pretty to watch them get a little power. I’ve seen this a few times now and it had disturbing results every time. The usual trend is:

  1. They give their staff all the boring, dirty work
  2. They scold in public and praise in private (if at all)
  3. They say, “I don’t need to be liked as long as work is getting done”
  4. People start quitting

I want to address #3 really quickly. “Being liked” and “getting things done” are not mutually exclusive. A good leader will get both done together, every time. If you can’t create a work environment where people are happy, you aren’t qualified to be a leader. Think about the last job where you constantly went above and beyond. Did you like your boss? I bet you did. I am very confident in the importance of having a good relationship with those you work with.

This post isn’t about watching your language. It’s about watching your attitude.

You need your staff more than they need you.

Social Payments: the Future is Unified

Physical credit cards will soon be a thing of the past. Is the rest of the US startup industry ready?

The next real-world cash-replacement could be powered by Facebook, Google, Apple, Square, Intuit, Paypal, or some other company hiding in the wings.  There’s a few obvious names in there, and then there’s a few left-field ones to some people. This post isn’t about how those left-field plays could happen. I simply wanted to explain how the landscape is changing.

There’s a convergence happening right now between social, payments, and e-commerce. Imagine this predictable future:

You buy some coffee at Starbucks. You take out your phone and swipe it at the terminal. Your [insert phone app name here] Bucks (from here forth known as: “Phone Bucks”) are deducted from your account. Your purchase is optionally posted on your Facebook/Twitter stream. You get highly-targeted Groupon-clone notice for a Starbucks coupon redeemable online immediately. You decide to buy it using your Phone-Bucks — no signing in, no additional authorizations — by clicking a button.

We’re talking about a future where your online wallet (today, known as Paypal, Facebook Credits, etc.) follows you into the real world and ties directly into your mobile phone. This represents a single unified wallet. And it makes sense. That’s the future. That’s where we are headed now. I’ve been watching this trend happen for the past few years, and it’s exciting to finally see some big players waking up to this reality. Which players are the closest to achieving this? In this order:

1. Facebook – Due to its large install base (virtually all smart phones) and an existing currency platform (Credits), they are best positioned to move into the real world. And they recently made a huge move indicating a desire to do exactly this (creating a subsidiary is the first step in buffering liabilities that come with real-world payments).
2. Square (or Intuit depending on how things play out) – They would solve this from the other direction: they have a stronger real-world presence, and moving into the digital space might be easier than vice-versa.
3. Google – They will approach this from the platform (Android) by opening it (Google Checkout 2.0) up to developers and creating an ecosystem. They also recently stole a key exec from Paypal, so you know they’re serious.

It’s my belief that any startup entering the e-commerce landscape right now needs to make sure they are thinking about this convergence. To get big valuations, I think a startup needs to not only understand these trends, but be the first to market in the new paradigm that will be coming (really soon!). This convergence will create an opportunity for new players to emerge and destroy existing leaders. All mobile startups around commerce, Groupon, Paypal, and even the advertising arm of Google are probably already adjusting to these trends. Is your startup?

Think about it.

Did Digg Miss the Boat Again?

So Digg released a new layout the other day, and I feel like another boat was missed. They made a big splash about this and it was covered in numerous places (for example, TCMashable). The new layout is noticeably faster to load, which is a huge plus. They tout that this new version emphasizes a “My news” approach to Digg, where they personalize the Digg site based on what you dugg in the past. In practice, unless you’re a power user, your news ends up spammed with news from one or two blogs you frequent.

I feel they are addressing their threats in the wrong order. Their website wasn’t perfect, but it wasn’t their weakness either. Consider:

  1. The Like button is dominating right now. Virtually every blog has it.
  2. Facebook is a HUGE news traffic driver. Way bigger than Digg.
  3. A lack of personalization was never Digg’s problem. Plenty of news sites on the web are popular with no personalization functionality.

First, Digg needs to figure out a way to make article submission “fair” for the little guy (read: long tail of users). They should have fixed the fundamentally flawed “democracy” where certain users effectively had 1000 votes. Personalization is an approach to the problem, but it ultimately doesn’t stop popular individuals from heavily influencing all of their followers’ feeds (and thus accumulate votes). The main complaint was that only power users could effectively get articles to the front page. Perhaps the algorithm should better incorporate Digg-to-viewer ratios or weight Diggs from non-followers as greater. The point is, until this is fixed, Digg will never fully engage its non-power users due to a lack of incentive. This represents the vast majority of its user base.

Second, Digg needs to up readership engagement. They should really look at their Digg button and see how it compares against the infamous Like button. It needs to be as brainless as the Like button. Clicking on “Digg This” should instantly submit the article to Digg. No windows; no dialogs. This is how the Like button works, and its pervasiveness shows how simplicity can trump everything else. Of course, doing this might mean changing how article submissions work on Digg — no problem: let power users check a setting where they ARE prompted for a custom title or description. The point is, the process needs to have as few places as possible where a user can change their mind about participating in the Digging process.

The website, I think, was never the problem.

Incentives and the Related Dangers

Incentives are just as dangerous as they are powerful. I have the running theory that most incentives can actually do the exact opposite of the intended goal when executed wrong.

Let’s start with an example to illustrate. You’re in charge of a small company that picks up garbage after events like street fairs and parades. However, you just got an angry call from your customer (the city) that your company has been doing an increasingly poor job and they are threatening to cut your contract.

You can fire and hire people, but ultimately, you or some new manager will need to fix the culture of the team. Aside from the obvious choice of talking to your staff about goals and values, let’s assume that incentivizing performance ends up being the option you go with. It’s time to play with fire.

What are some obvious ways to incentivize good cleaning efforts? There are many, but I’ll focus on a really obvious one for this post: Tie bonuses to volume/weight of trash picked up.

Is this a bad incentive? Not necessarily. But if executed poorly, it can be disasterous.

Which is more important to pick up? The pile of 50 napkins or the four empty soda bottles? Under this solution, people would be incentivized to ignore napkins, ciggarettes, and plastic bags while encouraged to chase after bottles (bonus points for liquid content) and discarded food. In fact, once employees start realizing this, they might even start picking up rocks and dirt instead of actually cleaning — in effect making the situation worse.

The situation above is universal across all industries. In software, the oft cited “Dilbert” situation is when performance gets tied to lines of code written. The point is, any system introduced that attempts to incentivize a certain type of behavior can cause employees to focus on the wrong thing. If you tell your staff that closing bug tickets is tied to bonuses, your entire team will focus on that metric like a laser. This will be good at first until you realize that everybody is spam-fixing the “mispelled text” bug tickets and nobody is bothering with the REAL problems.