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How I first met Eric Ries and also why I’ve ordered his new Kickstarter-exclusive book The Leader’s Guide

20150321_Dinner-0590
Taken a few weeks ago at dinner, at Mission Rock in Dogpatch

tldr
It’s the last week to order Eric Ries’s new book, called The Leader’s Guide. In a very innovative experiment, it’s being published exclusively on Kickstarter. It’s the only way to buy a copy. I’ve already ordered a signed version and encourage you to support his work too. Here’s the link.

Making entrepreneurship mainstream
Like many of you, I’m a huge fan of Eric – he’s created a compelling, cohesive framework for thinking iteratively and entrepreneurially about products. The ideas are so powerful that the ideas in the book – such as “pivoting” and “MVP” – are now part of industry jargon and have even been featured on HBO’s Silicon Valley.  (Also, isn’t it inevitable that he makes a cameo at some point?) The ideas in Lean Startup are amazingly powerful, and I continue to reference them all the time.

How I first met Eric
Last month in March 2015, I hosted a dinner at Mission Rock in Dogpatch where he was a special guest, and we talked about how we first met back in 2008. Eric and I had our first coffee before The Lean Startup was a real thing, when he was between jobs and hanging out at Kleiner Perkins. (PS. if you’re interested in attending events like this in the future, subscribe to my newsletter and you’ll get email updates if I do this again sometime)

Anyway, here’s how I first got to know Eric- at that point, I was writing a niche, mostly unread blog about tech and products, at the end of my stint as an Entrepreneur-in-Residence at Mohr Davidow Ventures. I had maybe 100 readers total. It was thrilling to find another niche, mostly unread blog full of content I was interested in :) Looking at my referer traffic, I noticed I was getting a tiny bit of traffic from a blog called “Startup Lessons Learned.”

I clicked through, and my mind was blown…

First off, the blog was anonymously written. There were a ton of essays across a bunch of meaty topics – picking products, continuous deployment, landing pages, and metrics. It was obviously from someone who was on the front lines. I couldn’t tell who was writing it, but whoever it was, the content was amazing. I bookmarked it and added it to my Google Reader, and would diligently check for updates every week.

I just couldn’t believe that someone was writing this much great stuff without taking credit for it :) Eventually I found a cryptic email address from the blog, decided to write in to figure out who the hell was writing this amazing content. Soon after, I got a quick reply, and that’s how we first met.

A few months later, Eric told me a few months later he was going to leave Kleiner to work on a book. I was very confused :) Turns out that book he was working on was The Lean Startup, and it ended up doing pretty well!

Fast forward
The success of The Lean Startup has changed the culture of entrepreneurship across the world. And many new ideas, frameworks, and refinements have been built on top of the ideas presented in the original book. There’s a ton of lessons learned from trying to implement these ideas across a wide variety of industries – for example, at the aforementioned dinner event we heard from Eric on how people have tried to apply the ideas to non-tech industries like manufacturing, aerospace, as well as some of the nuances of applying MVPs in a design-centric world of consumer mobile apps.

Because of this, I was thrilled to hear that a lot of these case studies and ideas have been collected into a new book, The Leader’s Guide. I ordered my copy immediately upon hearing about it.

Here’s the link if you want to check it out too:
The Leader’s Guide, by Eric Ries.

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This is what free, ad-supported Uber rides might look like. Mockups, economics, and analysis.

intro

Cheaper and cheaper rides
Free, ad-supported Uber rides are inevitable, and if Uber doesn’t do them, a different competitor – perhaps Google! – will do it. It would be the next step in the industry’s trajectory towards lowering prices. Uber started in the high-end of the market, as “everyone’s private driver” which emphasized quality, but the early pricing was out of range for most. Dropping prices will increase demand, grow the market, and nothing will do that faster than going free.

Starting with UberX and now UberPool, each tier of service has dropped the price, tapping into more and more latent demand. Today, the figures are staggering – in San Francisco, Uber’s revenue is 3X bigger than the city’s entire taxi industry. Worldwide, the company now does 1 million rides per day and is adding 50,000 new drivers per month. Not bad at all.  I wrote a tweet about this concept a few weeks ago and wanted to expand more on this topic.

Free!
The next step is free. Lowering prices drive all sorts of goodness- more rides, busier drivers, shorter wait times – all which powers the company’s network effects. So how would you push the prices even lower than UberPool?

Well, here’s a crazy idea:

UberZero. A free, ad-supported tier of service that’s cheaper than UberPool and UberX.

That’s right, ads. I think it can be done well. And no, I don’t mean the cheesy in-taxi TVs that play ads nonstop, because those are broken for a variety of reasons I’ll cover. Instead, my proposal would be to put the ad units on your smartphone, in the dead time while waiting for your car and when you’re on your ride. And then to connect these ads with the big existing markets for app installs, lead generation, video ads, and local ads.

After all, advertisers are already comfortable paying a couple bucks for a variety of direct response actions from users. Individually, or together, you could imagine the above budgets making a big dent into the price of a single ride. In some cases, it might just be a discount of $1 or $2 off. In other cases, you might make the ride completely free.

Mockups for four potential ad units
Here’s four potential ad units that might work. These mockups were done in collaboration with the talented Chris Liu (@machinehuman), who’s done UX at Mercedes Benz, Alexa/A9, and IMVU. It was fun to throw together a couple designs.

Without further adieu, some of the concepts:

1) App Installs
The first and most obvious opportunity would be to tap into the ecosystem of paid app installs. Most of the $10B+ market for mobile ads is from driving app installs.

The user experience would be something like this- today, right after you book a ride, you often just sit there, staring at your phone, wondering how many minutes it takes for an Uber to travel a few blocks in San Francisco. Instead of just twiddling your thumbs waiting, how about getting a buck or two off your ride just from downloading and playing with an app?

Or similarly, imagine your current in-car experience. I often get into an Uber, pull out my phone, and do a little email during the ride. It would be easy to simply redirect my attention to an app, or a video ad, or some other activity that creates value for both myself and an advertiser.

It might look something like this:

app-download

As mentioned earlier, app developers are often paying $3-10 per install, especially in the games and commerce categories. This is a meaningful % when UberPool currently lets you go anywhere in San Francisco for $7 flat fee.

The biggest problem with this is that this is an incentivized install, which performs worse and Apple doesn’t like it. The plus side is that the folks who are really spending money in this area direct marketing-oriented and will back out the proper Cost-Per-Install to bid given all of that. As for Apple’s dislike of incentivized installs, you could certainly combine it with other ad units, and make the install a completely optional thing, which brings us to the next idea…

2) Video ads
One of the most compelling new ad formats for mobile is video, which are commanding high rates, especially when combined with a call to action to install an app. This is one of the many reasons why ad-supported companies like Twitter and Facebook are doubling down on in-stream videos.

So while you wait for your car to arrive, or once you get into the car, just watch a short clip that does a full-screen takeover of your phone. Then after you watch, the ad presents an optional action to download the app, which is a double dip on value. This packages both a brand ad with some a direct response ad unit, making for a powerful combination.

In Snapchat’s early tests on video advertising, Adweek and others have reported they are asking $750k, equivalent to a $100 CPM to participate. There’s no reason why Uber wouldn’t be able to command similar rates, especially for endemic advertisers in travel, shopping, and local.

It might look something like this:

movie-trailer

The key problem here would be to provide context and targeting. A classic TV ad against a show like, say, Oprah, provides both context, targeting, and a brand halo effect. An ad to an anonymous passenger isn’t compelling until you know a little bit more about them.

This begs the question, what do we know about a passenger? What would make sense from a targeting standpoint? Targeting is interesting because it’s an anonymous segment of people, which you could make off a number of interesting values:

  • Name
  • Contact info (email/phone)
  • Location
  • Where they’re coming from and where they’re going
  • Work or personal credit card

Of course from a targeting perspective, you’d never pass on the personally-identifiable information to an advertiser, unless there was opt-in (more on that later!). But how compelling would it be to for example target people in a segment like the following:

  • Passengers heading to a movie theater
  • Passengers coming from SFO airport, heading to SOMA
  • Passengers with email addresses like @google.com and @fb.com
  • Passengers traveling in a group of 2+ going out on a Friday night
  • Passengers heading home from work, or vice versa
  • Passengers heading to the Dreamforce conference
  • … and many more combinations

Now ask yourself, who else is able to deliver targeting ad inventory like this? There’s a very short list of companies that could even contemplate it. Of course it’ll be up to Uber as well as passengers to decide whether or not this kind of targeting criteria can be aggregated anonymously for ad targeting, but history has shown that ad targeting options tend to increase rather than decrease over time.

If you found the examples above compelling, imagine an instant rebate on your ride that relied on opt-in from the passenger to share this contact information directly. There’s a whole world of leadgen that’s willing to pay big bucks for accurate contact information for people who are in the market for targeted services and products.

3) Lead gen, especially for SaaS/B2B
I find leadgen an especially intriguing possibility because it’s commonplace for advertisers to pay something like $10 for an email address. For a SaaS/B2B advertiser, that number is even higher, as much as $30-50 in some cases. And if you’re talking about getting a credit card alongside an app install, that might be as high as $200 or more.

Of course you could never pass along a passenger’s contact info + credit card number without their consent. But what if you made it frictionless to consent? Then that previous list of attributes could all be sent in a series of confirmations: Name, contact info, payment information, etc.

At the heart of this is the fact that segmentation/targeting makes some audiences much more valuable than another. Today, a service like Uber charges a C-level executive the same price as the Average Joe. Imagine if you could have a leadgen campaign where an advertiser  decides that someone with a “name@google.com” address is pretty valuable given that they’re a Google employee. Or perhaps it’s interesting to know that they are coming from a Salesforce conference.

You might provide a call to action like this:

free-ride

This would make obvious sense for the high stakes world of SaaS/B2B leadgen, but it might also make sense to target a wide consumer base, especially around commerce. For example, targeting travelers who are arriving from the airport, to target them with highly personalized hotel/tour offers. Or targeting hardcore movie or concert-goers for their next night out.

Similar to the video ad scenario, the targeting capabilities would be key. Targeting based on location and context is key. And as I think about this, the most compelling part of the whole thing is that Uber/Lyft have data and context that is unique in the industry. They know where you are going, and where you are coming from, and enable you to go from Point A to Point B.

You know who else is like this and has created the most profitable and targeted advertising ever? Google, of course.

Google’s superpower is the Power of Redirection. When you search for something, Google can understand that intent and gently redirect you to the right place. Sometimes this is a destination that they deem relevant based on their algorithms, but sometimes, they just take you somewhere that’s paying them a bunch of money. This superpower is very valuable.

4) The Power of Redirection for local ads
Uber also has the redirection superpower, albeit in a different flavor. Similar to Google, when you plot a destination, there’s intent built into that. All the examples I’ve used previously indicate this- heading to Facebook’s HQ means something. Leaving from SFO means something. Heading to the 49ers stadium on a Sunday means something. And it would be easy for Uber to take you to your destination, but maybe they can suggest somewhere else to go, or perhaps they can suggest a complimentary product/service.

And using the analogy of organic versus paid search, perhaps there are organic destinations and there’s also paid destinations. In the case where a ride can be redirected to a paid destination, then Uber can literally, actually drive foot traffic. Pretty amazing!

For a trivial example, you might imagine something like this, that redirects you to a nearby Starbucks as a detour on your ride:

starbucks

CBXZ5V3W4AArWJn

(The second mockup that bundles in restaurant reservations was sent in by Marc Köhlbrugge, founder of BetaList – thanks!)

You could imagine a clear application for travelers of course. Heading to the W Hotel? Why don’t you try an Aloft hotel and get $X off your stay. Think about how compelling this is compared to other forms of getting local foot traffic. Billboards? Radio? Well, in this case you can literally get someone to your footstep.

I think this could be fundamentally a new market, although it would make sense to tie this back to the $4.5B mobile/local ad market. Or you could tie it back to the unit economics of something like pay-per-call, where local vendors are willing to buy a live phone call with a customer for $10. Nevertheless, still super compelling when you are talking about tens of billions of local ad dollars moving to mobile over the next decade.

Lots of practical challenges
But wait, could you really make all rides free all the time? Maybe not. After all, there’s aren’t infinite drivers. Won’t this make the ride UX horrible? Maybe, which is why you’d have to be thoughtful with the design. Another issue is that advertisers won’t pay for passengers to download the same apps over and over again – they’ll want frequency caps. And Apple doesn’t like incentivized installs, or maybe passing PII to advertisers will be frowned upon by the press. All very real issues that will have to be worked out over time.

And in the end, maybe it’ll turn into free* with an asterisk, limited to 1 per day within your city and only in the morning. Or just another way to decrease fares by another 25%. Whichever way it’s done, I’m convinced it will be done, because the benefits are too great.

Isn’t this perfect for Google?
If Uber doesn’t do this, perhaps Google will. There’s been rumors that they’re working on some kind of Uber-competitor, and they already have all the advertisers to make the above ad units work.

Providing free, ad-supported rides would certainly be a unique way to enter the market. Even more so, there’s network effects. Ad networks are fundamentally marketplaces, and they have tremendous network effects at scale. You could see the following virtuous cycle:

  • Free rides = way, way more rides
  • More rides = more advertising reach
  • More reach = more interesting targeting options, and drivers
  • More advertisers = more profitable yet free rides
  • Which leads to more drivers, customers, and more

At scale, a network like this would be very hard to attack, especially when combined with existing ad businesses like the type that Google possesses. Thus, if we see Google launch an Uber-competitor, I think it’d be a matter of time before they experimented with this.

Why old in-taxi advertising systems suck
The final point I want to make is to contrast all of these ideas with the old in-taxi ad systems we used to see. If you need your memory jogged, they used to look something like this:

IMG_5315

These systems suck. And they can’t generate the kind of economics to power the subsidy we’d want to see to make a dent on the actually fare price. The point isn’t to actually make money via advertising- the point is to drive down the cost of a ride so that the market is more efficient and liquid, creating network effects.

These old advertising displays are archaic:

  • Passive advertising content
  • Doesn’t know anything about you or your trip
  • Can’t get you to download an app
  • Limited internet connectivity

These systems are ineffective because ultimately, this display belongs to the taxi and not you. As a result, it lacks some of the key ingredients that an advertiser finds valuable: an easy way to get your contact info, or to get you to install an app on your phone. It’s good for display untargeted video ads and not much else.

That’s why Uber sits on a special opportunity to build an ad platform that’s never existed before. It’d be an ad platform that has unique access to context, intent, and built on your personal device. If it’s done well, advertisers will love it and consumers will be grateful to have free/discounted rides.

Yet another reason to be bullish about the company, in addition to all the great momentum they already have.

(Special thanks to Chris Liu collaborating on these great mockups that really make the discussion in this essay pop!)

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Meet me and Eric Ries at a private event on March 21st – here’s how to attend

Eric Ries (Lessons Learned) on stage at Web 2.0 Expo SF 2010.

Hi everyone,
I’m hosting a fireside chat (whatever that is!) with Eric Ries on 3/21. It’ll be at a private event in the Dogpatch neighborhood of SF, and I’ve saved a few seats available for my regular readers to attend.

A couple topics I plan to touch on:

  • How Eric and I met in 2008 as unknown/unread bloggers :)
  • Going from zero to global movement for the Lean Startup
  • Biggest lessons – what worked and didn’t
  • The new Kickstarter campaign he’s putting together
  • How growth fits into the Lean Startup framework
  • What’s Eric’s up to now, and what he’s working on next
  • … and lots of time for audience Q&A

[UPDATE: Also, I’m happy to announce that Sean Ellis, who coined the term “growth hacker” and ran growth for Dropbox, Eventbrite, and others, will join us for a quick chat]

If you’re interested in attending, I made a quick form where you can tell me a bit about yourself and get an invite.

[REGISTRATION CLOSED: The event is full.]

Thanks,

Andrew

PS. Get new updates/analysis on tech and startups

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Personal update: I’ve moved to Oakland! Here’s why.

The most common mistake when forecasting growth for new products (and how to fix it)

The race for Apple Watch’s killer app

My top essays in 2014 about mobile, growth, and tech

Why messaging apps are so addictive (Guest Post)

IAC’s HowAboutWe co-founder: How to Avoid Delusional Thinking in Start-up Growth Strategy (Guest Post)

Mobile retention benchmarks for 2014 vs 2013 show a 50% drop in D1 retention (Guest post)

New data on push notifications show up to 40% CTRs, the best perform 4X better than the worst (Guest post)

Why Android desperately needs a billion dollar success story: The best new apps are all going iPhone-first

Early Traction: How to go from zero to 150,000 email subscribers (Guest Post)

New data shows up to 60% of users opt-out of push notifications (Guest Post)

Why aren’t App Constellations working? (Guest Post)

There’s only a few ways to scale user growth, and here’s the list

Lessons learned adding messaging to a notes app (Guest Post)

Retention is King (Guest Post)

Why consumer product metrics are all terrible

How to solve the cold-start problem for social products

How to design successful social products with 3 habit-forming feedback loops

Congrats to my sis Ada Chen, who’s joining SurveyMonkey as VP Marketing

How to make content creation easy: Short-form, ephemeral, mobile, and now, anonymous

My 2013 essays on mobile, startups, and tech

When a great product hits the funding crunch

A clever way to buy Facebook ads based on what your users like (Guest post)

Use this spreadsheet for churn, MRR, and cohort analysis (Guest Post)

Zero to Product/Market Fit (Presentation)

The Rise of Fat Venture Capital

How Google and Zynga set & achieve meaningful OKRs (Guest Post)

Case studies from “Why you can’t find a technical co-founder”

Congrats to my friend Steve Chung of Frankly on their new $6M investment by SK Planet

Easter Egg Marketing: How Snapchat, Apple, and Google Hook You

How is Yahoo really doing? Here’s the Google Trends data (Guest Post)

Ignore PR and buzz, use Google Trends to assess traction instead

Books I’m reading (2013)

Constrained media: How disappearing photos, 6 second videos, and 140 characters are conquering the world

The highest ROI way to increase signups: Make a minimal homepage (Guest Post)

9 ways a billion dollar new mobile company might be created (Guest Post)

Mobile traction is getting harder, not easier. Here’s why.