Following on from my previous blog post, I’m now going to put my neck on the proverbial technological trainline and predict which of the current darlings of the Silicon Valley VC community are destined to go the way of Boo.com, Myspace and Geocities. From a marketing perspective, it’s sometimes difficult to draw the line between the amazing technological capabilities of a new product or invention, and the likelihood of it being usable, accessible to a mass audience, and something which is going to make a discernible difference to people’s lives. Examples of this are augmented reality apps, and QR codes. The technology behind both of these is exceptional; however neither have truly reached critical mass because users are not prepared to use them in the only way they’re intended.
‘Failure’ or ‘flopping’ or ‘crashing’ or ‘imploding’ are not strictly and specifically defined terms. When I talk about ‘2015 flops’, I’m not necessarily talking about a company being wound up, or the founders going bankrupt. Some of the companies I’m going to talk about are still generating $millions in revenue, and are valued (pre-IPO in some cases) in the $billions. However, it could still be argued in the context of their various funding rounds; their target audience volumes; their profitability, that they have not achieved their launch objectives. I’m also going to use measures of success and failure that we, Joe Public, use, rather than Wall St and Silicon Valley investors. If a product has launched, isn’t user friendly, doesn’t achieve critical mass and then declines from the popular consciousness – then it’s failed, irrespective of what return investors may have made.
So without further ado, here are some of the biggest technology-lead products or services which we think will wither on the vine in 2015.
Opinion has long been divided on the long term potential success of Bitcoin. Having grown gradually but steadily since launch in 2009, Bitcoin reached a spike in value of almost $1,000 per unit in late 2013 before the bubble burst and it fell to c$200 in early 2015. As I’m no economist, I’m not going to offer any predictions on the volatility or lack thereof of the crypto-currency markets, and when I suggest that ‘Bitcoin will fail’ in 2015, I mean as a viable, usable currency which will reach critical mass. As an investment vehicle – it may well recover and prosper in value as awareness continues to rise and more speculators enter the market. Many analysts have hypothesised that the bubble bursting has merely served as a correction in the market, and that the long term trend is still one of significant growth. And they’d be right:
At today’s price of just shy of $300 a unit, compared with the same point 2 years ago (c$50) there’s no doubt that it could be argued that this is a tremendous success story, however I prefer to look at the audiences using Bitcoin, and the wider potential for the currency.
Mass interest appears to be declining/stagnating – arguably as a result of an ‘after the bubble’ lull, however in order to any product/platform to achieve mass adoption, people actively seeking information on it is usually a good barometer.
Ease of use – Many have complained that the process required to create a bitcoin wallet is complicated, lengthy and hard to understand for anyone who isn’t significantly digitally savvy.
Security concerns – as an intangible entity, which has suffered security breaches in the past, many people are reluctant to invest $ into it. It’s the modern day equivalent of keeping cash under your mattress because you don’t trust banks.
Merchant acceptance – in order for a currency to be successful, you need to be able to spend it in places (although it doesn’t appear to have done AMEX any harm).
Square has been around since 2010, and was launched by Twitter co-founder Jack Dorsey, to much fanfare. Square was going to revolutionise the way in which merchants took payments, and enable millions of sole traders (eg florists, baristas, and plumbers) to process credit card payments using their mobile or tablet device.
The company is now processing $10bn of transactions and has received funding $340m, with a valuation of $5bn, which surely makes it a roaring success? However the future isn’t looking quite as rosy. Wall Street speculation now suggests that the initial valuation was inflated due to the ‘Dorsey effect’, and that despite high turnover, profitability is the biggest issue.
By taking a flat 2.75% fee on all transactions, Square aimed to encourage uptake by maintaining a simple and transparent model, however once third party processors ensuring fraud and risk protection have taken their slice, Square are taking cents on every transaction. When customers pay using AMEX, Square actually lose money. Austin Carr, writing for Fast Company likened Square’s business model to ‘taking a lot of effort just to convert a $1 bottle of Coke into a nickel return’.
The other main issue was that outside of Silicon Valley, uptake was slow. Have you ever been served by a merchant using Square? Me neither. In 2012, Square looked like they’d fixed this problem by partnering with Starbucks, who implemented their systems into 7,000 branches in the US, however Square have gone on to lose $25m a year from the deal.
Having registered losses of $100m in 2014, Square are now looking to ‘plan B’ – to develop products and services beyond payments. With Paypal, NCR and VeriFone not running competitive products at far greater scale, it looks like Square is the wrong shaped peg in a round hole.
Mobile gaming looks set to continue its phenomenal growth and is predicted to overtake console gaming as the biggest market in 2015. So surely predicting the implosion of the creators of one of the most successful mobile games of all time is just the sort of thing someone writing a blog and aiming to be controversial in order to create clickbait would do? Well partly, but when you peel back the layers there are a number of other reasons why Angry Birds may soon be extinct.
When they created Angry Birds, Rovio hit it big and quickly rolled out a number of spin off titles, both paid and free in order to capitalise on the buzz around their ludicrously easy to play and annoyingly addictive timewaster. Where they failed, was by not broadening their portfolio and creating a variety of games to spread their offering (and risk). Curiously, their strategy in order to maximise the success of their title, was to move outside of their comfort zone, and focus on merchandising and syndication. Sensible as an incremental revenue stream, yes, but as their only expansion strategy? No.
While a number of online or mobile specific start ups have been very successful – King, Gung Ho, Nexon, the biggest players in the industry are still those whom started in the console or PC space, and have expanded onto mobile platforms – EA, Activision Blizzard, Sony etc. In order for Rovio to compete with them, they need more than one game.
Following the recent announcement that Nintendo will enter the Smartphone mobile gaming space, with gamers looking forward to seeing their favourite Mario titles on a 5 inch screen, it makes the space ever more crowded for Rovio’s Angry Dodo.
Founded in 2009, Foursquare was quick to capitalise on the explosion in Smartphone technology and introduce gamification into a Social Location based networking (SoLo) concept, which was surely destined to change the way which retailers and restaurants advertised themselves to consumers. They ticked a lot of ‘innovation’ boxes, and subsequently received $162m in funding.
Initial uptake was high, as early adopters jumped on the SoLo phenomenon, and took the opportunity to become mayor of their office, but many then wondered “is this it?” Many were expecting to be served push messages based on their location to offer them discounts in the shops that they were in or near, which was (and still is) the ultimate aim. The concept is excellent – marketing to potential consumers who are in your vicinity, rather than those who aren’t is another layer of real-time targeting that speculators said would ‘save the high street’. The reality was that Smartphone technology in 2009 didn’t allow for apps running all day, without killing battery life, and that so few potential advertisers jumped on the bandwagon, that all users were really engaging in was a cat and mouse battle with a complete stranger of who could be Mayor of the 18:23 from Waterloo to Surbiton.
Foursquare relaunched in October 2014 in a bid to reverse their ongoing decline, and rolled out a spinoff app called ‘Swarm’, but early indications suggest that this is merely a sticking plaster over a haemorrhage.
As Google continues to roll out more advanced mobile search location based functionality, and Facebook’s check in continues to go from strength to strength, the reasons to use what was once a groundbreaking app, are becoming increasingly few.
Whether these companies are acquired, broken up, go bust, etc, in 2015 remains to be seen. They’ve probably all got plenty of life in them yet (if Yahoo! are still going, there’s hope for everyone), and despite the detail in the previous analyses, the overriding indicator should be the trends in this chart.