Really interesting post! One thing that came to mind is the mosaic theory we learned about in FRC. In essence, it is fine to collect a combination of public and non-public information in small pieces to inform your decision about the bigger picture.
What is interesting in this case is that the hedge funds purchasing this data are able to obtain an advantage by directly looking at the big picture, without doing the research effort to collect it. As pointed out in the previous reply, if all hedge funds purchase the data then they will likely continue paying for it to avoid losing their competitive advantage. But in reality, these hedge funds will be making money at the expense of the average uninformed investor. I wonder what type of opposition they may face from the day-to-day retail investor. At the same time, money managers have always paid for data (e.g. Bloomberg terminal, industry reports), so perhaps this could be viewed as an extension of this practice.
I have used Mint and never really thought about the security issue (yikes…). I agree that Intuit should be focusing on this area to assure users of the safety of their data.
I am not sure that it would have been a good idea for them to partner with Amex or BofA. The value proposition for Mint is that it acts as an independent financial advisor. It will look for the best checking accounts, savings accounts, and credit cards for you based on your goals and spending patterns. By partnering with a bank or credit card company, it would then limit itself to recommend to customers products from those banks. As an example, Mint will oftentimes recommend high-yielding savings accounts through online direct banking, something that it would not be able to do by collaborating with these banks.
One threat I can think of is digital wallets. If Google or Apple obtain significant traction through these applications they could presumably collect more data and surpass Mint in its ability to learn from spending patterns and make good recommendations.
Really like this post! I use Hubway quite a bit and to answer to this and the previous reply their mobile app is extremely helpful. It helps you locate the closest station and informs you about the availability of bikes. You can also check if there is available space at your drop-off location. Before using the mobile app, I was extremely frustrated when I arrived to my destination and discovered there was no space to leave my bike.
The app has access to your location (since it suggests where the closest station is) but they probably can not track your location during your trip. They could consider enabling location tracking during the course of the trip and learn what are the fastest routes. They could then integrate a direction system guiding you to the next station through the fastest route. This would help them by increasing the utilization of each bike.
Interesting post. From a strategic point of view, I think it was critical for Facebook at the time to move fast and establish its dominance globally. Crowdsourcing seems to have been a great way to establish a global presence before the emergence of local, copy-cat versions. As you point out they attracted some criticism too. I do not see a problem with this crowdsourcing approach unless quality goes down or user experience deteriorates.
Really interesting post. Any B2C company needs to stay really close to its customers and this is a great way to stay relevant. This reminds me of the Nivea case and the biggest challenge is to understand if these vocal, loyal customers represent the average buyer. This can be particularly difficult in a franchise like Starbucks, where standardization brings down costs and brand really matters. Introducing new products which may be really popular but only with a very small subset of customers is the main risk here. If this gains traction it will be a very powerful tool as long as it is used in conjunction with their typical market research process.
Great post! I agree with you that tracking offline activity is the next frontier for information / advertising giants like Google. If they market this well and create a low-friction experience this would be very valuable data for Google. A combination of mail, calendar, apps like “Who’s Down”, and wearable technologies will paint the full picture of how consumers are spending their time and what they need…
Vlad, from what I know pharmas have gone through consolidation and acquisitions to diversify and reduce project risk. Even then, however, I do not think they have the scale to truly reduce the risks of drug development. In addition, since they are public, they face pressure to manage earnings quarterly. While their growth engine still depends on blockbuster drugs and R&D, the incentives to invest in long-term, capital-intensive, and uncertain projects (especially in cases such orphan diseases) are not always there.
Your observations on implementation are spot on. I do see an opportunity to attract capital from philanthropy and mission-driven individuals. In theory, once you reach a certain scale there should be no need to have lower return expectations. The returns are high (double-digit), but the challenge is raising enough money to diversify and bring down the risk. As you point out, raising this money (~$15bn) for a new venture is tricky. By comparison, the total size of the VC industry is $150bn and the size of the U.S. bond market is $30trn. To succeed you would need to come up with a test market for proof of concept. Early support from mission-related investments could really help. I remain optimistic since new asset classes have surfaced in the past to adapt to needs of society. Private equity, venture capital, hedge funds all arose in the second half of the 20th century so I see room for new methods of financing.
Thanks for the comments. Gonzalo, my first reaction is that pharmaceutical companies would not oppose this effort, since it would provide access to more and cheaper capital. On the other hand, I realize they may start losing control over the R&D process, which is vital for their success. One thing you could see under this model is the role of pharma becoming mostly distribution and marketing of drugs. Startups would focus on R&D and rely on pharmas to commercialize the drugs. I can see how the balance is delicate and pharmas could feel threatened.
Really interesting post! From a strategic standpoint I understand they are looking ahead to where the market is heading. Companies like Uber in the future will have much larger bargaining power on price vs. individual consumers. It makes sense that car manufacturers want to get ahead of the curve. But from an M&A standpoint, Daimler needs to find ways to create value through such an acquisition. I could see Daimler adding value through better maintenance of the platform’s fleet, thus building more trust with users. Uber has a poor reputation of treating drivers so this could be another point of differentiation for the platform. Although paying drivers more may result in higher prices, Daimler can use the Mercedes brand to position the platform as a higher-end offering. The combination of quality, service, driver loyalty could create strong network effects.
Great analysis Vlad! It seems like the user base and needs largely changed since the early days of PayPal. They were really slow to adapt to the mobile trend and as you point out local networks sometimes become more important than wider networks. I am surprised they never integrated with facebook in order to locate friends or acquaintances and facilitate transactions.
Despite the convenience of platforms such as Venmo or Square Cash, PayPal seems to have maintained a reputation of trust. People still seem hesitant to use Venmo for larger transactions such as rent. I agree the platform’s scale is keeping them afloat and believe this is one of the reasons for their reputation of trust and security. I am curious as well to see what Google and Apple’s next moves will be.
Great post! Indeed, network effects here are extremely important. You need a critical mass of users since there are many variables: available dates, vehicle class, location, price. If you take the different combinations of these variables you need a large network in each city to successfully match supply and demand.
I worked for FlightCar this summer which operates exclusively in airports. It is an attractive market and it makes sense for owners to rent un-utilized vehicles while they are away. However, peer to peer becomes difficult in airports since it is difficult to time the vehicle exchange for the owner and the renter. You need an intermediary to facilitate the transaction. This is doable but as you pointed out you need an attendant, partners, possibly real estate, and more capital. It is doable but since it is a different business model I am curious to see how they will execute and how much they will expand in airports.
Peer to peer transactions are indeed challenging. You need excellent customer support and technologies to make these transactions easier. You are relying on the owner and renter to go through important procedures: inspect vehicle condition, mileage, gastank etc. Most of the time these go smoothly but when things go wrong there are liability implications. Standardizing these processes to make the exchange process smooth is key.
I worked for a company called FlightCar (https://flightcar.com/) this summer which wants to tackle a lot of the problems in the car rental market through a sharing platform. They are now in 17 locations. Owners flying out park their cars for free at the airport, and the company rents them out to renters arriving to the airport. Since there is no fleet investment, they are able to offer lower rates. Relay Rides is a competitor operating primarily outside airports.
As you mention, the car rental market is very problematic. The main reason being that it is a transactional business. Similarly to airlines, companies can afford to treat customers poorly – delays, hidden fees, penalties. Renters will have similar experiences across companies and may not travel frequently enough for brand loyalty to be a decisive factor.
Because of the liabilities involved, it is difficult to truly eliminate some of the hassle involved with paperwork and complicated policies. Curbside pickup/drop-off can also be a challenge due to different airport regulations and the unit economics. Technology can certainly help to improve the customer’s experience. Having an app can allow you to check in in advance, ensure a smoother pickup experience, and familiarize yourself with the rental policies.
My primary doubt is the ability of a company like Silvercar to tackle a “quality” and “low-cost” play simultaneously, especially if it does not have the necessary scale. The industry is very competitive and to eliminate the hassles involved with car rentals you need to invest in excellent customer service. This requires an investment in technology, as well as highly-paid and motivated employees on the ground, generous reimbursement policies, and training. In pursuing this “quality” play the company would lose any cost advantage. That being said, I think there is an attractive market for a “quality” offering, but you need to build brand loyalty and a seamless, more expensive experience, for long-term customers such as business travelers.
I agree that Tilt has solved a customer pain point in a space where company competition was limited – as you point out competition is group leaders / treasurers owning the initiative and logistics. I have some doubts regarding Tilt’s ability to maintain its position in the future: a) outside of MBA communities I have encountered few people with brand awareness; b) given the importance of network effects, I could see other companies with larger networks adding campaigns as a feature (eventbrite, venmo, splitwise, kickstarter going downstream); c) increased competition could place pressure on the 2.5% fee. Tilt has built a niche market and may sustain it position, but I am curious to see whether it will become absorbed or outpaced in the future by competition in payment services and social networks.
This is indeed a very promising space. In terms of creating value to consumers, there is no doubt that an online grocery model is the way to go in the future. Fighting with the giants in this space (Amazon, Google) will be a challenge as David pointed out. I believe another big problem is food delivery in non-metropolitan areas. Because of fleet utilization issues, it is extremely difficult to deliver to certain suburbs or rural areas. The U.S. is generally more scarcely populated than Europe so this is something to consider. Perishables also pause huge challenges. As things stand we waste close to 1/3 of fruit and vegetables before they reach consumers. Online grocery delivery can improve on this process by reducing the number of middlemen in the supply chain. This shortens the time to delivery and brings down costs and waste. But once again, if you eliminate the middlemen then you run into fleet utilization issues. Startup company FreshRealm (http://freshrealm.co/) is really young in this space and attempts to achieve these two goals (utilization, direct delivery) through a reusable vessel for fresh produce. Meal delivery (e.g. Blue Apron) are also competing in this space, although with different business models. I am excited to see how things evolve.