Category Archives: Money

Location and Corporate Presence: GE’s Move to Boston


Beta Boston Columnist Scott Kirsner

How much does an active tech scene really inspire a global tech conglomerate — especially one that is as far-flung as GE? That’s a big question, as Edison’s company prepares to move from the distant suburbs of New York to Boston.

Boston tech blogger Scott Kirsner placed his bet on Boston last week in an excellent column. “If GE thinks its future is about deal-making, glossy marketing campaigns, and trying to squeeze costs out of industry sectors undergoing commoditization, New York is the place,” he wrote.

But “if GE thinks its future is about keeping its portfolio of billion-dollar businesses steps ahead of the competition, growing new ones, and recruiting a next generation of digitally-savvy leaders from some of the world’s top schools, that points to Boston.”

That all makes sense to me. Personally, we’ve seen that location is important in providing proximity to capital and people, energy, tech savviness and overall smarts, and culture. All these can be diminished by real estate prices, bad schools and weather. But taxes probably pay the biggest role.

Is Boeing better off for having moved to Chicago? And Gannett in Virginia? Beyond the financial and news companies, are any other companies really better off in New York?

My Podcast Predictions for 2016: I’m on ‘The Digital CMO with Mike Orren’

Can the daily deals model recover? Will beacons be big in retail? Why is the home services space set to soar? How will custom deals be more sophisticated in the new year? And how can marketers decide which “unicorns” to bet on and which to ignore?

Speakeasy CEO and social and hyperlocal media pioneer Mike Orren interviews me — The Local Onliner — about what’s happening in local and media in 2016 for his new show, The Digital CMO. It runs about 34 minutes….Here’s the podcast link.

Sneak Peek at BIA/Kelsey NEXT Show: 6 Things I’m Watching For

“End of Big” Author Nicco Mele Keynotes BIA/Kelsey NEXT Dec. 9-10

BIA/Kelsey’s December event has been local’s flagship, and always ahead of the curve in all of local’s iterations. It has been widely imitated, but never totally duplicated! I‘ve been producing it for a long time, but this year, handed it off in midstream. I’ll be moderating some great sessions, though, and the conference team has ended up with 52 hand-picked speakers, a Tech Expo and two full days of programming. Here are some of the things I’m most excited about:

1. The New Cut on Local and Community. Local’s still at the concept stage in a lot of areas. Why think small? Two leaders from USC’s groundbreaking Annenberg School (my alma mater) will point to the new directions in separate keynotes. First up is Nicco Mele, the author of The End of Big (2013), a tour de Force on “radical connectivity.” He’s also fresh from his stint as deputy publisher at The LA Times, where his team’s efforts to seize new initiatives in local had already produced major new revenue streams. He’ll have a lot to say about what’s going to work. Leading off Day 2 is Dr. Karen North, Director of Online Communities, a dynamic presenter who is focused on Millenial applications and behavior – you’ve heard, perhaps, these kids live on the phone?

2. Keynotes from Google and Facebook: The latest in local from the two dominators and trend setters in local. Danny Bernstein at Google is set to highlight its deep linking efforts (Google Now). He is sharing the stage with Button’s Chris Maddern and Local Seo Guide’s Andrew Shotland.

3. Big Thinking about MarTech: Big Data’s impact on local cuts many ways – analytics, leads, targeting, planning, But it’s only a subsegment of the broader “MarTech” movement. Those in the know attend Scott Brinker’s annual MarTech conference in Boston. Scott, who also runs ionactive, is going to focus on local and highlight what’s important and why for us at NEXT. He’ll be joined on stage by Surefire Social’s Chris Marentis.

4. The Mobile App-Driven Marketplace. The mantra is that it isn’t really about search right now, because Mobile apps are driving the marketplace. What’s that really mean for local? One of the best analysts I know is Mark Plakias, who has been running Orange’s think tank in Silicon Valley for several years. He’ll be joined by Quick.ly’s Paul Ryan and DialogTech’s Steve Griffith. This will be quite a session.

5. Local and The Internet of Things. We’ve been pondering iOT’s impact on local — when everything is linked, from transit cards to vending machines. So has the new venture, Instersection, which is a partnership from Google Ventures and former Bloomberg head and NYC Deputy Mayor Dan Doctoroff. CSO Dave Etherington will provide insights on what they are up to. He’ll be joined on stage by Cisco’s Andy Noronha.

6. Close Up on The New Local Marketplaces. We’ve been saying for a long time that local marketing has gone beyond advertising. Now it’s “closing the loop” with transaction data, offer targeting and complete behavioral profiles reshaping the game. Groupon’s Dan Roarty, Microsoft’s Neal Bernstein and MOGL’s Jon Carder share their insights. Cardlinx CEO Silvio Tavares will add data and help me run this session.

Haven’t got your ticket yet? I have a *little* influence and can get you $400 off. Please use this discount code: LOCALONLINER. You may register here.

Constant Contact’s $1.1 B Sale to Endurance: Is There Synergy with Email and Hosting?

Constant Contact, the king of SMB email newsletters with 600,000 overall accounts, has been sold for $1.1 billion in cash to Endurance Holding Group, one of the largest web hosting, presence and domain companies with 4.5 million accounts and brands like HostGator and Domains.com.

The deal – which might be seen an SMB version of Salesforce’s $2.5 billion acquisition of ExactTarget in 2012– potentially represents a way to “save” Constant Contact, which is constantly under attack by marketing rivals. It also represents a way to add to Endurance’s average customer revenue, which currently runs about $10 or so a month (for hosting). CCI typically receives $20+ a month for its marketing services.

For CCI, the deal is the culmination of a multi-year effort that began with its founding in 1995; its IPO in 2007; and a more recent effort to provide comprehensive SMB marketing efforts. Indeed, its stock price fluctuations tell the story of a company that still depends on email in an age of email fatigue, spam and messaging; but remains the envy and target of every SMB marketer.

In fact, CCI has managed –with some success — to move its customers from one that is solely about email to a deeper relationship with extensions such as social media (Facebook ad management) events management, search, loyalty and other services. Via its costly, $65 million acquisition of Single Platform in 2012, it also added presence management, contact management and in some cases, larger customers.

None of the “new” services have been the home run that Constant Contact’s email services represent. But all of its efforts act on Constant Contact SVP Joel Hughes’ observation at BIA/Kelsey’s SMB event in Denver this September that “the two changes in SMB marketing are the advances in audience targeting, and the rise of native advertising.”

Can the two companies ultimately help each other? Endurance is not known as a deep integrator among the 40 companies it has acquired over the years, and its brand names don’t have high awareness outside of their customer base. In terms of brand awareness, it is no “Go Daddy.”

But its brands have deeply loyal customers like me (Local Onliner is hosted by Host Gator). Loyal and trusting customers may be more likely to buy enhanced services. It also has a reputation for low cost customer acquisition. This is a major plus, given that Constant Contact and its competitors in the SMB marketing space have a reputation for high cost customer acquisition.

For the two companies, it also seems like an easy merger. Both companies are headquartered in the Boston area, and already work together as marketing partners. Five percent of CCI’s new customers come from Endurance leads. Endurance says the combination will allow the two companies to reduce duplicated resources, saving millions of dollars a year. The current employee count is 2,500 for Endurance, and 1,400 for Constant Contact.

In our view, the CCI/Endurance combination gets it right in combining presence and marketing. Together, the two features represent the stickiest parts of the SMB marketing arena.

But the combination of Endurance and Constant Contact is going to have to fend off a lot of other players. Many of them will have a higher profile. In fact, extending the platform is the real quest for every company in the SMB space right now. Will email marketing and hosting turn out to be the right anchor for an SMB platform? Or will it be search? Or Deals and loyalty? The list goes on. In this case, timing and execution will be everything.

I like what Constant Contact co-founder and current PagePart CEO Randy Parker told me today – focus on the consolidation of this space. “It really is coming and there will be few companies acquiring the SMB,” said Parker. “The rest of us will just get ‘distributed’ through them.”

Constant Contact CEO Gail Goodman Keynoting at ILM East

Square’s S1 Filing: Diversified Customer Base, Good Growth, High Deficits

When Square launched its credit card processing reader for smart phones in May 2010, it was one of the most enabling services for very small businesses we’d ever seen. It allowed businesses to affordably process payments at 2.75 percent of revenues instead of paying 5-6 percent; and take credit cards without investing $1200+ for POS; it also provided a complete set of analytics so that businesses knew how to target.

Since then, the challenge for Square has been scale up to include larger and more lucrative businesses; fend off increasingly stiff competition from players with arguably deeper ties to the SMB community, including PayPal, Intuit Amazon – as well as new cloud based POS type products from First Data’s Clover and Poynt as well as traditional POS players such as Verifone ; expand internationally – currently there are only some sellers in Canada and Japan; and build a complete eco system around its core processing services, including – Windows style — the development of a wide range of third party apps.

Success as an ecosystem would allow Square to become a true disruptor for all kinds of SMB services, back office logistics and marketing. In addition to Square Analytics, these services have now come to include Square Capital, a fast SMB loans service based on payments; and Caviar, a food delivery service with 1000 restaurants in key cities. But the company faces competition in each of these areas – a factor that has forced it to give up its initial hope for instance, to charge for its readers and stands.

It hasn’t been an easy climb. A 2012 deal with Starbucks to process all its payments gave Square credibility and brought Square up to scale very quickly. But it has also been a yoke around its neck, resulting in hundreds of millions of dollars in losses. That deal has proved unsatisfactory for both sides, and is likely to end soon. Talent wise, Square has suffered from high turnover and earned a reputation as a disorganized, difficult place to work.

Yet, the company continues to grow, provide exciting new services, and has taken its place as a major enabler and innovator of the new SMB economy. In 2014, sellers using Square processed payment transactions worth $23.8 billion generated by 446 million card payments from 144 million payment cards. Square’s own revenues from transactions and other sources amounted to $850 Million in 2014.

This week, Square has optimistically filed an S1 that reveals a great deal more about the 1,171 employee, tight lipped company than previously revealed. Among the highlights:

Revenues still come mostly from payments and POS services. 95 percent of revenue still comes from payments and Point of Sale services. This suggests that efforts to diversify are taking some time.
Customers are becoming more diversified. While Square has a reputation as mostly serving coffee shops and flea market vendors, its customer base is now comprised of 21 % retail; 17% services; 15% food; 14% contractors and repairs’ 11% health and beauty; 9T individuals; 6% health; 4% charity/education; and 3% transportation.
Larger businesses are beginning to adopt Square. 11 percent of transaction revenues come from companies earning $500k or more; 26 percent comes from companies making between $125-500K. The ratio of transaction revenues for companies making less than $125,000 has fallen from 92 percent in 2011 to 63 percent.
Larger companies use a wider range of services. On average, more than 70% of sellers who process more than $125,000 per year engage daily with analytics in their Square Dashboard.
Square’s digital receipts are a powerful feedback mechanism with customers. More than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts
Square’s cumulative deficit has been $473.2 Million. It needs for the IPO to be successful.

The $3 Billion Sale of Here: Possible Impacts on Local Search, Discovery and Delivery

Mapping is poised to be one of the next critical elements of local search, discovery and delivery. As mapping develops, its ramifications on localizing big commerce, the rise of local delivery services, and the development of the Connected Car loom large.

Google certainly sees it, hence its huge investments in Google Maps. Apple sees it, too. But other mapping sources are few and few and the reliance on Google as a common carrier for mapping information makes some parties uneasy.Hence, Nokia’s announcement this week that it will sell its Here mapping division for $3 billion to a consortium of German automakers made up of VW, Daimler and BMW. Here includes the NAVTEQ mapping sources, which were sold to Nokia in 2007 for $8.1 billion.

When the deal closes some time next year, Here will be operated as a separate company and will continue to license its technology to a wide range of players, including Amazon, Fedex and others.

The automakers are already major customers of Here, comprising more than half of its current earnings, which were $319 Million in Q2. As the automakers continue to develop dashboard integrations with mapping – including live search and commerce – they’ll become even more important.

Did the sale to the German automakers make more sense than a sale to Uber, which had also been in negotiation for similar amounts before dropping out? Probably. As we noted in a May 11 post, Uber adds value to its drivers and creates efficiency via mapping. But Uber is able to license its technology to the same effect. While Google could conceiveably compete in some ways down the road (auto hardware and product deliveries?), it isn’t a pressing issue.

AOL’s Sale to Verizon: All Eyes on Mobile and Video

Verizon’s announcement today that it will buy AOL for $4.4 billion is a bid to get beyond dumb pipes and airwaves to get deeply into mobile and video. By doing so, Verizon, a $200 Billion company,  hopes to play on more of a level playing field with other major telecom players combining access to content and personalization services, especially Comcast (with NBC U) and  AT&T (with Direct TV.)

The all-cash deal provides a 150 percent return for shareholders in AOL from when CEO Tim Armstrong came on board in 2009. The price is 17 percent above the current stock price. And at the lower price – which may ultimately be even lower if some of the content properties are sold – a lot less is riding on it.

Have you seen this movie before in 2000, when AOL was disastrously sold to Time Warner for $165 Billion?  A lot of the same synergies are being discussed:  video on demand, personalized content and subscription revenue.

But this time, it is really all about mobile; video on mobile; and the prospect of converting (or selling) 2.1 million dialup subscribers that continue to be AOL’s biggest moneymaker. Indeed,  AOL has built or bought a powerful arsenal of mobile ad serving and video tech, especially LTE Multicast, which uses its cellular network to broadcast live video.

In our view, content is not likely to be an important factor here.  It would have been more important if AOL had merged with Yahoo, or with Microsoft.  The biggest “what if” probably involves MapQuest, which has technically lagged behind mapping leaders but retains a powerful, verb-like brand in that space.  Given Uber’s $3 Billion bid to buy Nokia’s HERE, it may ultimately emerge as an important factor in the deal – much more so than Huffington Post.  AOL’s sizable effort to make Huffington Post into a super content portal, including a major local dimension, failed dramatically last year. Similarly, Armstrong’s huge, multi-hundred million dollar effort with hyperlocal site Patch amounted to very little.

To some degree, we also see Verizon’s acquisition of AOL as an acqui-hire. Verizon has  stumbled around advertising for several years but not had an impact. It also has made some small investments in content and classified properties, but hasn’t been confident enough to really spend. Its biggest effort was a promotional program with the NFL to broadcast games for free.

We like the statement issued in the name of Verizon CEO Lowell McAdam, who we note, has long had his eye on geotargeted advertising. “Verizon’s vision is to provide customers with a premium digital experience based on a global multi-screen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”