QR Codes: From early adoption to future applications

The QR (Quick Response) code was created in Japan by Toyota’s Denso Wave due to the need to track automobile parts. The advantages of using QR codes for vehicle manufacturers was that it made reading codes at high speeds much more efficient. 

Denso Wave noted several advantages of the QR code relative to bar codes

• Data Capacity - The standard QR code data capacity was 7089 numeric characters which allowed it to encode the same amount of data of a traditional bar code in typically 1/10th of the space.  
• Versatility - There are three black squares on the corner of the QR code which can help determine the position of the code. This feature allows for scanning from any angle while still being able to interpret the code, whereas a barcode is quite limited in that respect. 
• Error Correction - Finally, there are also error correction keys within the code which even allow for the possibility to read codes which might be slightly damaged.

The use of QR codes within Japan quickly shifted from vehicle tracking to mobile phone applications. Mobile phones with QR scanners can be used to quickly and accurately scan codes which can relay individuals with information such as links to websites, information on business cards, coupons, or even engaging individuals with targeted marketing campaigns.  The usefulness of QR codes with marketing firms became apparent because marketers can assess their ROI through response rates.  

QR code readers also continued to grow rapidly within Japan because network connected phones with cameras were available much earlier and were also adopted earlier by users relative to other countries. Moreover, by 2006, almost 100% of Japanese feature phones had a QR code reader that was built in by default. 

QR Code Scanning within the United States

The adoption of QR code scanning in the United States had been quite slow because many phones did not have QR scanners preinstalled in them.  Additionally, there were competing standards like DataMatrix codes. The slow demand is also apparent from research by Forrester, which shows that in September 2010 only 1% of US mobile users have used types of QR code scanning applications within the last three months. 

Despite this, there has been a recent upsurge in QR scanning with the advent of new smart phones and marketing campaigns that utilize them.  Google’s Favorite place campaign is a great example of a marketing campaign which utilized QR codes. Google created window decals for 100,000 businesses in the United States that had unique QR codes. Customers who scanned the QR codes could read reviews and add a store as one of their favorites just by using their mobile phone reader or through a review right upon leaving.

This upsurge in the United States can also be seen when looking at Research from Mobio which indicates that mobile bar code scanning has increased by 4549% on an annualized basis in just 11Q1 alone. What is also interesting to note is that over 60% of the users who scanned QR codes are older than 35 which is strikingly different when compared to the younger userbase within Japan.

With regards to ownership of the QR code technology, Denso-Wave now owns the patent on the QR code and has chosen not to exercise it. As a result standards were adopted for use by mobile phone operators and developers via an ISO Standard. The standard format is ISO/IEC 180004:2000 which defines the QR code models; in 2005 this format was appended to include newer symbols.  

Future Applications of QR Codes

Within the United States, a future application of QR code could be mobile payments; however, it really depends on whether the trend of user adoption of QR scanners continues going forward. Research currently show that only 6% of current scans involved mobile payments, whereas 89% of scans were due to users who were seeking to find more information on a product or service.  It seems that once the issues of user security are taken care of, the use of QR codes for mobile payments should be able to grow much more rapidly in the near future.

Sources:

[1]http://www.denso-wave.com/qrcode/qrstandard-e.html

[2]http://www.quora.com/Why-are-QR-codes-so-popular-in-Japan [3]http://www.swetake.com/qr/qr1_en.html

[4]http://www.hardlink.co.nz/2011/05/4549-year-on-year-rise-in-qr-code-scanning/ [5]http://www.quora.com/Where-can-I-get-statistics-on-the-number-of-users-scanning-QR-codes   

Analysis on Sulia

• Big Idea - Content curation of raw Twitter feeds, essentially using machine learning to get rid of spammy content and provide what is relevant to users. 
• Traction - Publishers Sulia has signed up include - WSJ, Washinton Post, Tweetdeck, etc.
• Value Proposition - its all about the Technology, which can result in helping twitter significantly with their partnerships with advertisers since Sulia can provide good, high quality, relevant content feeds.
  • Algorithm used for calculating which are the best tweets - Because it is utilizing machine learning, Sulia could be doing a number of things weighting the following variables or others which may be discussed in the following link - discusses what variables are used to construct a Klout score.
    
  • Variables could potentially be:
    
    • Retweets a user gets
    • Professional/Affiliated account vs. personal account.
    • # of followers / the kind of followers
    • Analyzing for different types of sentiment in the tweet
    • Tweet length
    • Different words or article links supplied which are indicated as being high quality
    • Frequency of spammy content to get rid of those users who aren't providing valuable content frequently.
    • Peer index/klout scores
    • Relative measures of all these scores compared to other users in their peer groups for specific subjects, to get the people who really provide/create quality content .

• Business Model / Future Growth Strategies
  • Sulia's current business model does not initially seem to be quite scalable from my readings, if they are basically selling feeds to publishers, then they have to hire a salesforce I assume.
  • I believe there is a potential advertisement revenue split going forward with twitter but i feel the sort of future strategies/opportunities that they can take are limited based on this partnership, despite the fact they can generate significant revenue.
  • If Sulia is really successful, I feel like it will most likely be acquired by Twitter, since in the future they could potentially be taking away a big chunk of revenue that Twitter could be making.
  • Additionally, Fred Wilson discussed Twitter's performance further here in an interview http://www.avc.com/a_vc/2011/08/an-appearance-on-the-digital-age.html, and stated that although Twitter is not profitable yet, they are looking at other opportunities being right now Twitter does two things to make money:
    
    • 1) Selling data relating to tweets
    • 2) Twitter suite which includes selling sponsored accounts etc.
  • Frankly to me, Twitter is all about real-time content so Sulia is the big opportunity, in terms of curating that content.
  • Additionally, this is an interesting article on real-time content curation strategies by Robert Scoble. http://scobleizer.com/2010/03/27/the-seven-needs-of-real-time-curators/
• Competitive Landscape (Consumer Facing Content Curation / Influence Apps - not all are necessarily Twitter Specific) - Flipboard (See my brief analysis on Flipboard by clicking New York Times Future Business Model), Zite, News.me , Storify, Bundlr, Infomous, Pinterest, Summify, Voyurl, Klout, PeerIndex.
  
  • This chart created by Brian Solis (all credit goes to them) has a better list of competitors as well, if you look at the influence and resonance pink line, dashboard, and communication and management line.
  • 
  • Companies also like Curata could be considered competitors in the broader external feed curation market as well. A research report on this particular competitive landscape can be found here:link , which is from the Seybold Group
• Inherent Risks - Twitter partnership (given there are already 80 million + lists on Twitter), for all Sulia knows, Twitter is probably working on a project like this internally being this could be a huge source of revenue. They are hiring similar people as well (Software Engineer - Discovery and Relevance): https://twitter.com/job.html?jvi=oxpPVfwq,Job.

Other Observations

• Sometimes noise is good - Even if Sulia became mainstream, they would have to have a really great algorithm, however there is still one problem. I follow lists because even though my colleagues or friends may post inane or mundane tweets, they may occasionally post real valuable nuggets of information that I could probably get nowhere else. This is an example of why I would use TweetDeck to look at Twitter lists versus using Sulia. I am still learning the ins and outs of machine learning so perhaps this is a problem Sulia can circumvent.
• Stocks - When I was working at UBS on their Trading Floor, the side project which consumed most of my time was thinking about trading on high standard deviation changes in real-time sentiment associated with different sectors by analyzing thousands of news articles, using machine learning. There is a feed out there called stocktwits by Howard Lindzon which has real-time financial news/information, not sure about the track record - and they dont do quite what I am referencing here. However this is definately an opportunity if they can properly curate feeds relating to real-time financial/business news and trade on it, because thats essentially what market makers on trading floors do.
• Photos - A company in our accelerator program, called Olapic, also developed a module for their B2B services -- where they allow publishers to crowdsource photos, called Photorank.me which is an influence scoring for photographers i.e. Klout for photos. Its a really interesting business since photos have been shown to help increase the level of engagement on publishers websites. Additionally, Sulia also has a really great photography content channel feed as well, which may mirror photorank.me in some respects but by analyzing external factors not relating specifically to the images. http://www.pixiq.com/article/sulia-photography-channel-top-photography-content-on-t
• Making Stale content relevant - Twitter typically gets rid of content after 10 days or so, and then it just becomes stale info even though said content could still be relevant, so I am curious as to if Sulia attempts to make such content relevant if its from a quality user.
• Analytics - I assume Sulia's B2B platform for publishers, shows the added value of providing said curated feeds on their website, and a big question for me is does it add significant value in terms of time spent on that site? or do people leave the website to go visit another link from a twitter feed? How much value in terms of $ or minutes does a really well curated twitter feed provide to a website?

Further Notes on the Daily Deals Space

The following is some notes I had completed on the daily deals space, which I had left in a notebook for the last few months but figured it may be helpful to post here. I have used some of these facts to complete an analysis which is several articles back.

Deal Aggregators:
- Deal Aggregators out there include Yipit and Coupost, they make money through affiliate commissions and the latter also does so by selling reports which consist of analysis on deals to Hedge funds who are trying to make sense of the Groupon IPO and whether to invest or not.
- Yipit has a Revenue Index which is Revenue of a Deal / Average Revenue for a Deal from a Daily Deal site for the last 60 days. This allows for them to figure out which merchants are awesome while holding the size of the daily deal site constant.

Potential Ideas relating to the Daily Deal Space:
- One can also build off an API/auditing service/marketplace to sell deals people no longer want, including white label solutions involving daily deals.

Groupon
- The value proposition Groupon is trying to provide is increased savings for custmers and more customers for businesses.
- Groupon currently has a high customer acquisition cost being $27, with the cost of a list subscriber being between $6 and $7. Groupon relies on Google, Facebook, which is a concern being these are competitors since both have daily deals as well.
- The poor economy is why they were quite successful, close to half of the deals which are sold were to existing customers of the businesses which put up the deals, which was a serious blow to them.
- Groupon's main expenses include salesforce/advertisements.
- Groupon calculated their Financial Statements using a metric called Adjusted CSOI which is Consolidated Segment Operating Income. This was done by taking  the Revenue from a deal, subtracting what is paid to the merchant, and excluding subscriber acquisition, marketing, and sales costs. Groupon states that this is irrelevant, but incorporating marketing costs is important for this to be considered a true GAAP measures, additionally cash flow is king.
- Growth has been through acquisitions and not through organic growth
- The number of employees has been near 7000, and has increased to 9000 from 2000 employees hired some 45 days ago.
- The key metrics that are important in assessing Groupon's performance and long term growth is asking how many refunds and unsubscribes there were, churn, email subscription, and open rates, which is important in asking are these people really subscribed and care for Groupon Deals. These are all data points which are conveniently left out from the S-1 materials.
- Customer/Subscribers ratio has decreased from 2009 to 2010 from 20.75% to 17.86%
- Coupons Sold/Subscribers ratio has decreased also from 2009 to 2010 from 70% to 60%
- Rapid increase in # of deals allows competitors to tell merchants they can deliver more customers, but the question is are they delivering more customers relative to the competition.
- Risks - The inherent risks for Groupon and other daily deal sites include [Acquiring and retaining Merchants] - not getting new people/ trouble retaining customers and revenue split being unfair, [Subscribers] - acquiring new subscribers, and addressing churn, [International] - includes exhcange rate fluctation, [Operations] - includes refund rate and not being able to utilize the same marketing channels going forward.

Facebook Offers
- Facebook is said to hire another 1000 sales people to make this happen.

The common themes among the big deals sites include:
- Revenue per customer is declining
- Cost per customer acquisition is increasing
- Level of personalization/sales increasing

Lessons learned from working with an Accelerator Program

I spent my summer working with an accelerator program instead of going on the typical Investment Banking/Consulting route like most of my friends at NYU Stern. Overall, I really don't regret my decision. The time I spent with the companies in our accelerator program was pretty awesome. You can read more about the companies by visiting www.nycseedstart.com and clicking the Portfolio link. They also received some initial press in GigOM and Xconomy.

In addition to working on the accelerator program I completed due diligence on potential investments as part of a early stage VC firm, prepared a presentation showing the current status of all the portfolio companies to our Investment Committee, and also helped incubate two companies internally for the MD of the firm, Owen. I also worked with two Columbia MBA students, Matt and Victoria.

The following were lessons I learned or embraced, and a few share some overlap.

1. Build Lean/Build Quickly/Do Customer Development - You dont need tens of thousands of dollars to build a basic MVP as per Eric Reis's formalized lean startup methodology (so much hype around it, because he is a good marketer similar to Tim Ferriss). In fact you can argue, sometimes you don't even need to build an MVP, but you should talk with your target segment/and do customer development, and see whether they want your product/service or not. See if people or businesses really want what you are building before you build it. Build the critical features, and then build based on what is demanded. Your time is limited, so don't waste it.

2. The need to be honest with yourself as a CEO / don't be in denial- There is a fine line between blind delusion and passion for early employees. i.e. the ability to pivot when needed, the ability to embrace suggestions/comments/out of the box thinking even when they are outside one's typical mindset. I have met a lot of CEOs who are extremely resistant to any outside change or even outside input, so I think the ability to listen to what the market is telling you is beyond important. CEOs should be strong enough to accept challenges to their ideas, and have answers to those challenges as well, because after all, they are guiding the company and employees are trusting their livelihood/next 6 months-1 yr's pay/even families if they are older, with that individual.

3. Managing all your relationships - Going off of the earlier point, before and after your company gets funding, you have to be able to manage the interests of all your constituents. You need to be a strong leader that listens first to everything around him or her and then responsibly implements while being cognizcent of one's inherent responsibilities to employees and shareholders. Other stakeholders, include clients, etc. It is just trying your best to manage and align what is usually shorter term visions when it comes to the other parties with your longer term company vision. Particularly for early stage companies, the people I have seen who have been successful are just people who are genuinely nice and treat others with respect, not just key constituents but just anyone. I believe in building real, honest relationships with people where you add real value to the other party not  "networking for the sake of it" which is often quite one-sided.

4. Learn from other Entrepreneurs and Competitors in adjacent markets even if no direct competitors really exist - Although, I haven't built any companies and am only 21, I have been able to advise many different companies and entrepreneurs because I simply read alot and just engage in constant pattern matching. I read tons of research reports, interviews with entrepreneurs, and used my last semester in college to just see all the different spaces out there, whether it be education, healthcare, enterprise, etc. The advantage to fully understanding competitors in adjacent markets for Founders, is that you can understand how best to position your company for future growth. Additionally, you can see what works and what doesn't while identifying spaces with potentially large markets that truly are untouched rather than not doing so and being completely naive.

5. Creativity - I remember when we were listening to David Kidder, the CEO of Clickable, talk about his background in Design and how that helped him build his company. I do agree with him, that Entrepreneurship requires some level of creativity when developing your idea but also in terms of executing. I have sat with countless entrepreneurs that have user acquisition problems, but often mention tried and moderately true channels they can use. However, I think nowadays users are just getting bombarded with so many new sites (if you are consumer facing), and entrepreneurs really have to go above and beyond to think of ways to get users on board and keep them engaged. On the last point, I always hear of people who want to build the next app, rarely in my opinion is an app a real fundable and sustainable business, because there are thousands of others in the iPhone store and although the app may have a lot of users, the level of engagement is usually quite low to build a business around, given some exceptions of course.

6. Always have a short concise pitch ready - Imagine if Mark Zuckerberg walked in a room with you and 20 other Entrepreneurs. What would you do or say? Would you be the first to run up to him and say Hello? How would you pitch your company? What if it was Bill Gates? Lets say if it was the MD of a well known VC Firm, what points would you cover if you had a minute or two with him or her? Lets say if it was a new potential client? To add to this point, pay close attention also to his or her body language, and your own body language as well, you can generally pick up signals or unconciously provide ones you would or wouldn't want to.

7. Believe in your gut/instincts - I really believe that the first minute or two when you meet someone you can generally size them up, and you can come to a conclusion internally which may or may not run counter to all available facts. Additionally, I have also been in many instances where you have to make a decision, and the facts say something, but you feel differently. I would take those gut reactions as an additional data point when making decisions, and if you are astute at making observations subconsciously then I feel it should obviously have a larger impact in decision-making (obviously this is much harder to do when you scale your company - in terms of explaining decisions to your board...). So many times, I hear people say, "I knew this from the beginning, If only I had I had done X and Y instead, Z would not have happened"...when you're company is super early I would take your instincts into account. The caveat again is there is fine a line between delusion and passion if your company vision is solely based on your gut.

8. Hire the best people - As you start to scale up the key is to just hire the best talent possible while plotting general strategy/vision. You want a team that can help support you in doing this. You want people who get you, your vision, jive well, but aren't afraid to ask the big questions. enough said.

9. Happiness -  Entrepreneurship isn't for everyone, for some it helps them convey their passions to the rest of the world, and others its just about making tons of money/and the exit (which are all perfectly good reasons). But asking the questions, am I happy with where I am/what I am doing? If not, ask yourself what should you be doing differently..and make a move. This was noted by Jerry Colonna when he came to speak to us. This is always a good question in my personal opinion to ask. I stopped working in banking and consulting cause I lost touch with what I really wanted to do at the end of the day since I have always wanted to build something of my own. As a result, I looked at VC/the accelerator program not as an end in of itself, but more as a means for me to learn different competitive spaces thoroughly so I can have the right strategic mindset to build a company at a later point.

Analysis on Foursquare and other location based services

Analysis on the Future of Foursquare (OLD VERSION - TO BE EDITED)

Foursquare adds a layer of technology on top of the real world to help make the real world easier to use. It is a location based social network for mobile phones which allows users to discover new places and experiences. It has a rewards system in place which rewards users with points and badges when they check into locations/venues.  This also allows local merchants to connect with customers.

Some Interesting Points Include:

Foursquare has 10 million users

• Although Foursquare states it has 10 million users, a question that arises to me is how many of these users are actually engaged users, and also the level of engagement.

Foursquare has 500,000 businesses on board

• Additionally it also has 500,000 businesses on board, but the question remains is what exactly does this mean, are they actively using the service?

Features

At the end of the day Foursquare needs to provide added value to both users and businesses.

• Users: They care about reputation, which result from game mechanics. This is the reason why users keep coming back and forth to Foursquare.
• Businesses: Providing businesses with a better analytics platform, includes the 500,000 number which was mentioned earlier. Allows users to interact in real-time with individuals who  are repeat users. Redefining customer loyalty by remembering the customers name/order
• How many of these are SMBs.
  • How much does it acquire to get these guys on board.
• Build Heat maps in realtime for businesses
• Free Version/Paid Version: Better analytics offered
• Publishers: Crowley also mentioned integration with Publishers like NYT with a Do It later button, so you can be reminded of a place when you are nearby that you may have bookmarked (Acts as augmented memory)
• Daily Deals Sites: Foursquare recently announced a partnership with Living Social and Groupon, Gilt, AT&T, and Zozi which to me indicates an interesting foray into the daily deals space. Foursquare is huge because it can offer daily deals to repeat users while measuring this as well. This is extremely important, particularly for a site like Groupon being that less than 1% of Groupon’s businesses according to a dataset by Yipit did a deal more than once between April and June.
• It helps Groupon because they can cut down potentially on both merchant and customer acquisition costs significantly. This is particularly true being that two of the methods in which they acquire consumers are via google adwords and facebook adwords which have proven to be quite expensive and both sites are also introducing their own daily deals as well.
  • Partnership with American Express can make it easier to get deals, the discount is automatically applied to checkout.
  • Events: The ability now to check into events
    • The Yield Management Space for Daily Deals makes that much more sense.
• Infrastructure: Speed improvements are needed because checking in is both clunky and heavy

• Predictive Analytics (Explore Feature): Helps predict/hint users to checkin places they haven’t been before, by using the almost 600 million checkins from the prior year. At the same time it makes sense to me to try to help me meet people that check into the same locations that I might share similar interests with, etc. This is definitely the advantage Facebook has by leveraging their social graph.

• API: Allows the community to build tools that they cannot. Examples include the venue project which will be used for the main purpose of harmonizing place databases that are used by other sites. More up to date that other sources like Google

• Utilizing more data: Leveraging tools such as compass, weather, etc to make the user experience that much better. For instance, utilizing the accelerometer to determine whether the user already had lunch or not.

• Communities around Topics/Local Q&A: Allows for building niche communities/its more than just playing a game but actually meeting people. Much of the action takes place on a phone, however one could argue that a lot of one’s time is spent in front of a laptop/computer.
  • There are several sites out there such as Local Response, Buzzd, etc.