Chatbots: From hype to “figuring it out”

Chatbots and conversational UI are among the most hyped technologies of 2016. Chatbots are computer programs that can maintain automated text conversations with users through use of artificial intelligence and natural language processing.

Early excitement about chatbots has given way to the realization that many challenges remain in both technology and understanding of what users are looking for when chatting with computers. In the words of Fred Wilson, a prominent venture capitalist who invested in Kik, a popular messaging platform:

“New user behaviors take time to develop and sometimes require a breakthrough app to get things started. That’s where we are with chatbots. The hype phase is over and we are now into the figuring it out phase. That’s usually when interesting stuff starts to happen.”

According to Comscore, smartphone apps now account for half the time Americans spend online. At the same time, the mobile app market has become saturated. It is extremely difficult and expensive right now to succeed with a consumer focused mobile app. The mobile app gold rush is over for all but large deep-pocket publishers. Mobile app developers are looking for the next big thing. 

While many challenges remain, chatbots promise to create a new channel for reaching mobile users alongside mobile apps. That’s why there is no shortage of entrepreneurs and developers taking their shots at “figuring it out” with chatbots.

All popular messaging services, including Facebook Messenger, WhatsApp, Skype, Telegram, Slack and Kik, are opening their platforms to innovation by 3rd party developers. In July 2016 Microsoft announced that 30,000 developers have signed up for the Microsoft Bot Framework. In the same month Facebook reported that developers created 11,000 bots for its Facebook Messenger platform. In August 2016 Kik, a smaller messaging app popular with teens in North America, reported that more than 20,000 bots have been built for Kik, and Kik users have exchanged almost 2 billion messages with chatbots since the company has opened its app to developers. The chatbot group on Facebook has close to 13,000 members, and a new chatbot is being announced almost every day.

The outcomes of the “figuring it out” phase in chatbots will be decided by developers. This is why we included questions about chatbot development in our 11th Developer Economics survey. 8,464 developers answered questions about chatbots and we published full results in the Chatbot Developer Landscape 2016 report.

The data shows that the efforts of Facebook, Microsoft and Slack to promote chatbot development achieved early results. An absolute majority of developers worldwide are aware of the opportunities in chatbots. At the same time, the chatbot ecosystem is still in its early stages and lots of work remains to attract masses of developers to the chatbot idea. Less than quarter of developers who are aware of chatbots are convinced of the chatbot appeal.

It’s notable that Apple and Google, the undisputed leaders of the mobile app world, fell far behind Facebook, Microsoft, and even smaller messaging apps in seizing the chatbot opportunity. Facebook is the undisputed global leader in developer mindshare with over 40% of developers interested in developing for the Facebook Messenger platform.

If you’d like to know more about what developers think about chatbots, take a look at our Chatbot Developer Landscape 2016 report, which answers the following questions:

  • What does the chatbot landscape look like?
  • How popular is the idea of chatbots with developers?
  • How mature is the chatbot developer ecosystem?
  • Which developers are more attracted to the chatbot promise?
  • Which messaging platforms are popular with chatbot developers?

Beyond the ‘chatbot’ – The messaging quadrant

These days everyone and their uncle is talking about chatbots as the next thing after apps. But ‘Chatbot’ is a rather poor name for explaining the changes taking hold in mobile. ‘Chatbots’ are a mental model suited to developers. The term means very little to users. Besides, ‘chatbots’ represent only a small part of what is happening in the messaging space.

The messaging bot quadrant

The tech media and blogosphere usually focus on one of three things when talking about ‘chatbots’:

  • the merits of the conversational UI
  • the promise and reality of AI-based natural language processing, and
  • messaging platforms as an alternative to app store distribution.

In reality these three things are quite independent and sometimes the discussion in the media reminds me of the famous Indian proverb about an elephant and the blind men.

The elephant is really about billions of people relying on messaging as their main person-to-person communication tool and in the process getting used to what Dan Grover, WeChat Product Manager, calls the thread-centric UI.

It’s no stretch to see WeChat and its ilk not as SMS replacements but as nascent visions of a mobile OS whose UI paradigm is, rather than rigidly app-centric, thread-centric (and not, strictly speaking, conversation-centric).

The next natural step is to apply the same thread-centric paradigm to communicating with businesses on mobile. It works brilliantly. It works in China, where WeChat/Weixin is on the way to becoming an alternative to the mobile Internet itself. It works in Brazil, where WhatsApp has become a one-stop solution for everyone, from small businesses to government agencies, to manage everything, from transactions to recipes and relationships.

The messaging quadrant

There are thousands of business to consumer chat services already, from early-stage startups like ChatandBook and AndChill, to large corporations like KLM, Disney and NBCUnversal. To compare and contrast all the different approaches we consider two independent axes:

  1. Apps vs. no apps, and
  2. AI vs no AI.

The “apps vs no apps” axis is about whether the service is delivered as a standalone iOS or Android app, or whether the service ‘lives” inside horizontal messaging platforms (Messenger, Slack, Skype, Telegram, Kik, as well as SMS). The “AI vs no AI” axis is about whether the chat service is powered entirely by human operators or uses AI-based natural language processing to automate all or parts of conversations. These 2 axes give us what we call “the messaging quadrant”.

Messaging Quadrant

Apps without AI: There are iOS or Android apps that connect users with human operators through a chat-based interface. For example, HotelTonight offers a human concierge service called Aces inside its mobile app. Snapdeal, Indian e-commerce service, provides chat-based support to its users by connecting them with human operators, again within the Snapdeal app. Yup (formerly MathCrunch) connects students with tutors over a chat-based app. Wellness specialist Vida connects users of its app with human coaches. Pana connects you with a real travel agent, and on and on.

Apps with AI: In this quadrant we find standalone chat apps that use AI to automate all or parts of the interaction with users. For example, GoButler uses AI to help you with travel planning. Ozlo helps you to pick a restaurant or a coffee shop, Lola Travel reinvents personal travel by combining of AI with human travel agents, and so on.

The mobile app approach makes most sense for companies that already have a significant user base (like Snapdeal or HotelTonight). They don’t have to rely on the broken app store distribution to attract users.

For everyone else, I believe a native iOS or Android app is just a stop gap. The high cost of making, distributing and supporting native apps combined with the distribution power of messaging platforms will push the majority of companies to skip mobile apps completely and deliver their services directly inside messaging platforms. Let’s look at some examples. Operator, a US-based shopping assistant that connects users with shopping experts initially started as an iOS mobile app, but recently started offering its services over Facebook Messenger.

No apps, no AI: In this quadrant we find services connecting users with human operators inside popular messaging apps or SMS. For example, Rogers, a Canadian telecom operator offer access to its support operators through Facebook Messenger. Examples are numerous. If this sounds boring, consider the business potential of replacing millions of 1-800 customer support numbers with 21st century technology and user experience. Just replacing clunky IVR with simple messaging plus custom buttons and asynchronous communication with the agents are huge steps forward. (I hope you’re not listening to some boring hold music over the telephone while reading this post.)

There is also a growing number of services connecting users with human operators and providers over messaging platforms. For example, HealthTap makes its network of U.S. physicians available to Messenger users worldwide.

AI without apps: This area generates most excitement with entrepreneurs. It allows access to users without the costs and headaches of native mobile apps, while promising to be much more scalable than services dependent on human operators. AI can have enormous impact without reaching full automation. Consider that in customer support recognising and automatically responding to the top 10 simple queries, while routing everything else to a human operator might allow a big corporation to cut lots of call centre jobs.

Facebook itself is experimenting with M on Messenger, where it uses humans to train AI and create a fully automated personal assistant. Assist uses natural language processing to connect users with a host of on-demand services over SMS, Messenger, Slack, Telegram and Kik. Meekan automates meeting scheduling for Slack teams and on the way helps you to find the flight. Databot allows you to “speak with your database” simply in a Slack chat. The list of automated chat services grows every hour.

One critically important question remains unanswered: How users will discover thousands and potentially millions of 3rd party services available inside messaging platforms? Slack Bot Directory, for example, adopts an approach similar to mobile app stores. Users can browse selection of Slack bots organized by categories or popularity. Facebook and Microsoft seem ready to take a different approach: Facebook M virtual assistant will be able to recommend chat services based on the current conversation and requests. Microsoft demonstrated how the company’s Cortana virtual assistant automatically summons and dismisses 3rd party chat services in a conversation.

A post-app ecosystem in the making

Stan Chudnovsky, Head of Product, Facebook Messenger said at TechCrunch Disrupt that “tens of thousands” of developers are making messaging bots for the Facebook Messenger platform. Already tens of companies are building tools for bot developers – From giants like Facebook and Microsoft, to startups like Smooch, Kasisto, Reply, Meya, and Init.

It’s clearly the beginning of a post-app wave and the hottest opportunity for developers disillusioned by mobile apps. We cannot wait to share the results of our 12th Developer Economics survey, which includes questions on bot development.



What can a toothbrush teach us about IoT business models?

We recently published a report showing that e-commerce doubled in popularity as a business model for Internet of Things (see Commerce of Things report for details).

But what does an ecommerce business model really mean in the case of Internet of Things? Broadly speaking, a business model describes the rationale of how an organization creates, delivers, and captures value. We add to that the question of how an organization creates a sustainable competitive advantage (a barrier to entry that is difficult to replicate by competitors).

It’s simpler than it sounds. Let’s take Oral-B, a toothbrush maker, as an example. (This example works well in our strategy workshops.) A toothbrush maker creates value by improving dental health. The value is delivered through, well, a toothbrush. The value is captured by sales of toothbrushes through retail channels. Ability to put the product in front of as many shopper as possible is of paramount importance. Therefore, access to the retail shelf-space becomes the key competitive advantage.


Can we use technology to make a better toothbrush? Of course! Let’s make a Bluetooth-connected toothbrush that comes together with a smartphone app. Now the “smart” toothbrush helps Oral-B do a better job in maintaining dental health by “focusing, tracking, motivating and sensing” (whatever that may mean).

The toothbrush is smarter, but the business model isn’t. The connected product supposedly creates more value for consumers, but all the other elements of the business model remain the same. The value is still delivered through a toothbrush device, captured by the sales through retail channels, and access to the retail shelf-space is still the key competitive advantage. Not much business model innovation here.

Oral B
Source: Oral B

What’s next?… Well, let’s make an open toothbrush! Developers will use a Software Development Kit (SDK) of the open toothbrush to make apps that extend the product.

Sceptics, of course, will ask “who the heck needs developers to extend the toothbrush?” But mothers of young kids will see a sea of opportunity here: Someone can make a game rewarding kids for good job in teeth brushing and save the mom the need to “hover over their kids telling them that a couple of brushes is not good enough” (actual quote from a Slack conversation).

Now we are making progress with innovating on the business model, too. Not only do developers improve in value creation, but value is delivered through apps working in concert with the connected toothbrush. Plus, the developer ecosystem formed around our developer program creates competitive advantage that is difficult to replicate. However, we still have to make money by one-time sales of the “smart” toothbrush through retail channels.

(See “5 Ways Developers Can Extend Your Business Model” for deeper discussion on the role developers in business model innovation.)

Can we take the business model even further? Meet Beam Dental. The Ohio-based company offers a connected toothbrush that comes together with dental insurance and a subscription for the supply of floss, toothpaste, and brush heads—all delivered to your doorstep every 3 months. In fact, the offering is a recurring service that makes money outside the “toothbrush market” going beyond one-time product sales. The toothbrush itself is part of the customer acquisition costs for the much more lucrative dental insurance and dental consumables market.

Beam completely reimagines the business model of a “connected toothbrush”. The value creation is much more comprehensive and includes all aspects of the dental health. Value is delivered through insurance and re-supply service. Value is captured through making money in insurance and consumables businesses. The toothbrush and the app are “top of the funnel” consumer touch points allowing Beam to acquire new users and interact with their customers.

Notably, Beam doesn’t really compete with toothbrush makers like Oral-B. Instead, the company competes in the dental insurance market, where it has decisive competitive advantage in the form of consumer data collected by the toothbrush and the app. This data helps the company to optimise its insurance premiums and offer insurance at prices that are difficult to match for the traditional insurance companies.

Source: Beam.Dental

As simple as they may sound, the series of toothbrush examples shows that:

  • Technology (software, connectivity or data), when viewed as a feature of a product, is hardly a game changer for the product maker.
  • Opening the product to the external innovation by developers can create competitive advantage that is difficult to replicate.
  • E-commerce companies see devices not as source of profits, but as a part of the customer acquisition costs, serving as a vehicle for customer acquisition and engagement. (Amazon Echo or Xiaomi phones are not much different in this respect.)

You can replace the toothbrush with almost any everyday object to see how adding connectivity, developers and data can help reimagine its business model. (See this video on understanding developers.)

— Michael

Messenger vs Skype vs Slack vs Telegram: How to spot the winners

What are the relative strengths and weaknesses of Messenger vs Skype vs Slack vs Telegram? Conversational UI and messaging bots are becoming one of the defining tech trends of 2016. The idea of mobile messaging as a B2B2C channel has been proved in China by hugely popular Tencent’s Weixin/WeChat messaging platform. Messaging dominates time people spend with their phones. Why not use messaging to connect users and businesses? This approach is being imported to The West by Facebook, Telegram, Kik, and now Microsoft, all competing for the leadership of the post-app era.


The lessons learned from the iOS and Android platform wars can help us see future winners in the brewing battle of messaging platforms. [tweetable]The mobile platform war was won by the halo effect between users and 3rd party developers[/tweetable]. Users attract developers. Developer create apps. Apps attract more users, which attract more developers. A very similar dynamic is taking hold in messaging platforms now.

Back in 2011, when mobile app platforms were very new, we created a 5-ingredient framework to help our clients understand why iOS and Android are becoming so powerful so fast and why they soon to become a duopoly. The framework stood the test of time helping us predict the duopoly of iOS and Android, the fate of HTML5, and the demise of Nokia and Windows Phone. I find the tried and tested 5-ingredient framework very useful for making sense of the emerging landscape of messaging platforms.

Successful computing platforms like iOS or Android have 5 key ingredients:

  • Software foundations: a rich set of APIs with managed fragmentation and a toolset for creating apps and services
  • A community of developers writing to the same set of APIs to spur innovation and cater to diverse use cases
  • Distribution (reach) to millions of user across multiple devices
  • A means of monetization, such as payments or ads
  • A means of retailing content (discovery, promotion, recommendations)


Platform owners (e.g. Apple, Google, Facebook or Amazon) control their ecosystems of users and developers by means of two control points. First, [tweetable]platform owners control content creation by locking developers into a proprietary API[/tweetable]. Second, platform owners control content distribution by gating how apps are discovered by and distributed to end users.

The same exact thinking applies to messaging platforms:

  1. The winners and losers in messaging wars will be defined by the strength of the halo effect between users and bot developers, and
  2. The owners of the messaging platforms will battle for rights over bot creation and bot distribution control points.

The 5-ingredient framework helps to see the relative strengths and weaknesses of Messenger, Skype, Kik, Telegram and Slack platforms, as well as where these companies may put their efforts next. For simplicity, I’ll keep LINE and Amazon Alexa outside the picture for the time being.


So far the focus of Western messaging platforms was clearly on bootstrapping their developer ecosystems. This begins with publishing an open API, but the key to success is in creating a vibrant developer ecosystem around this API. Slack and Telegram are in the lead today. Facebook and Microsoft will intensify their developer outreach efforts following their API announcements. At VisionMobile we are measuring how Facebook, Microsoft, Slack, Telegram, Kik and others are successful in attracting developer attention in the upcoming 11th edition of our Developer Experience Tracker survey.

As the messaging ecosystem matures, the focus will shift to distribution, monetisation, and retailing of business accounts and bots. WeChat is already at this phase with their almost 700M monthly active users, the popular Tenpay payment network and widespread use of QR codes in China. WeChat QR codes are used to discover and register for updates from WeChat official accounts.

Facebook Messenger looks the strongest contender for the leader of Western messaging platforms, with 800M monthly active users, integration with Facebook Payments, and the expected announcement of a “bot store” at the F8 2016 conference on April 12.

Microsoft made an impressive set of announcements about opening Skype to developers, the Bot Framework, and integration with Cortana’s AI capabilities, during their Build conference in March 2016. At the same time, Skype will need a credible payment solution to compete with Messenger in the consumer market in the long run.

Telegram was an early leader of the Western messaging bot space introducing its Bot Platform in June 2015. The platform gained substantial traction with developers who created thousands messaging bots for the platform since then. Many of these bots are mere experiments and the lack of an official “bot store” reminds me of the early days of Palm OS developer ecosystem. It’s difficult to see how Telegram can escape its niche status given Facebook and Microsoft are opening their messaging platforms for developers.

It’s still very early days of the post-app era. Many questions remain. Will Apple, Snapchat, Viber or even Google join the game? Which messaging platforms will gain the most developer traction? Will discovery and recommendations of bots be done through a “bot store” or some other mechanism? What new use cases will stick across ecommerce, customer support and entertainment?

We will continue following this exciting space in our developer surveys and in our analysis of the messaging platform landscape. Stay tuned for the results of our first-ever bot developer survey coming with our upcoming Developer Experience Tracker.

— Michael



Look Ma, no apps, just messages

The fact Donald Rumsfeld is now in the app business is not the only reason to believe that mobile apps have reached a plateau.


The mobile app industry, it seems, is settling down: Android and iOS have formed an entrenched duopoly, the same few familiar publisher names dominate app store rankings, while the rest are fighting for every app install. But…

Just as mobile app industry starts to mature, things are about to turn upside down again

The days when almost every mobile use case required a dedicated mobile app may soon be over. As it looks, fancy graphical user interfaces are about to give way to spartan-looking messaging bots.
Such messaging apps as WhatsApp, KakaoTalk, Viber, Weixin, LINE, consistently lead in usage and sessions per app. Mark Zuckerberg, Facebook’s CEO, acknowledged in 2014 that:

“Messaging is one of the few things people do more than social networking.”

Messaging apps trained hundreds of millions of people to use a text-based user interface to message their friends and family. Now this user interface paradigm is being extended into communication with brands, companies and services. At the same time, [tweetable]messaging apps are transforming into messaging platforms[/tweetable].

The transition to a conversational paradigm is already in full swing in China. Weixin (known as Wechat outside China) allows users use the messaging app to hail a taxi, order food delivery, buy movie tickets, play casual games, check in for a flight, send money to friends, book a doctor’s appointment, get banking statements, pay the water bill, find geo-targeted coupons, search for a book at the local library, get updates from their kids school, get a loan, donate to charity, and even participate in court proceedings.

In 2010 reaching mobile users was all about apps. In 2016 messaging platforms emerge as the next frontier in tech after apps, social and the web itself.

Facebook is the undisputed leader in messaging platforms – Outside China

Facebook Messenger and WhatsApp (owned by Facebook) have amassed 800 million and 900 million monthly active users respectively, becoming the largest messaging platforms second only to SMS which has 3.8 billion users. Both Messenger and WhatsApp are shifting their business models from person-to-person messaging to B2B2C, that is helping businesses to interact with mobile users.

This is very worrying news for Google’s B2B2C business. Hangouts, Google’s own messaging app, failed to make a dent and win substantial user base. Surprisingly, this is despite that the app has over 1 billion installs – every Android handset maker has to pre-install Hangouts together with Search, Gmail, Google Maps, YouTube and other Google apps. However few people use the app – Most Android users don’t even know that the Hangouts app is installed on their handsets.

Apple can potentially become a player in messaging platforms with its iMessage service. However, learning from the history of BlackBerry Messenger (BBM), Apple will need to make iMessage available on Android to provide comparable user reach. Coincidentally, Microsoft is a ‘no show’ at the messaging party, despite having had a head start with the Skype acquisition – another miss for the Redmond company.

Calling all chat bot developers

Facebook has began turning Messenger into a B2B2C channel by working with a small number of partners, that includes Uber, Hyatt, Walmart, and KLM airlines, as well as smaller e-commerce company JackThreads and startup Assist.

There is no doubt that as soon as the Messenger SDK is ready for the prime time, Facebook will make it available to all developers. Today messaging startups, such as Operator, Agent Q and Mezi in shopping, Magic in virtual assistants, Digit in personal finance, Pana in travel, have to either use SMS or build their own messaging apps. When Facebook opens the Messenger SDK (and presumably WhatsApp later) we will see a burst of innovation with all these startups moving to the platform with hundreds and thousands of new developers joining them.

The shift from apps to messaging platforms brings upon new opportunities to developers. They can innovate in creating engaging user experiences without fancy graphics, and leave behind the issues of dreaded App Store approval, app updates and OS fragmentation. This excellent post by Meekan, a calendar assistant bot, gives a glimpse on what it takes to “cheat on the Turing test”.

Moreover, building conversational bots costs less and takes less time than building and maintaining apps for iOS and Android platforms. This will allow developers to iterate much faster and discover new messaging use cases we just cannot imagine today.

We at VisionMobile believe that much like in mobile apps [tweetable]developers will be the kingmakers of the messaging era[/tweetable] – We will begin tracking the experience of messaging bot developers in our upcoming 11th Edition of the Developer Economics survey.

This time the developer-led innovation will shift from the walled gardens of Apple App Store and Google Play the the walled garden of Facebook. Discovery, recommendations and monetisation of messaging-based services will be controlled by Facebook in a sort of a messaging bot “app store”. How exactly such an “app store” will look like it’s too early to say. For example Slack, the messaging leader in the enterprise, takes the traditional app store approach for showing users all the bots and integrations available on the platform. (I’m not convinced that this is the only way – I’d like to see something as friendly as Meekan to help me connect with the right services.)

While many questions remain, it’s clear the tech industry is ready to move from the “there is an app for that” world to the “there is a bot for that” future.

— Michael

5 ways developers can extend your business model

Developer programs and third party software developers used to be important only for companies making computer operating systems like Microsoft, IBM or Apple.


Many people still remember how Steve Ballmer, CEO of Microsoft, rallied his troops chanting the word “developers” 16 times.

Ballmer was right – Microsoft won the battle for dominance of personal computing by winning developers. 20 years later, however, Microsoft lost the battle for dominance of mobile to Google and Apple; by losing the support of developers.

Today access to developers has become a competitive advantage in almost every industry, from games and media to banking and agriculture. Forward-looking companies invest millions of dollars, and their best minds, to create APIs and developer programs. No matter how a company runs its business, developers can extend the company’s business model in five major ways. How? Let me explain.


A successful developer program can boost all 3 aspects of a company’s business model: value creation, value delivery and value capture.

1. Developers as customers

The most obvious way of thinking about how 3rd party developers can make you money is to see developers as paying customers, i.e. capture value by selling to developers. For example, Amazon Web Services, Microsoft Azure, Google Compute Engine or Salesforce App Cloud.

There are also many companies for which selling services and tools to developers is the only business. For example Twilio, a startup company that has created an API on top of standard telecom services, has built a $100million-a-year recurring business (2014 figures) by providing tools for developers to integrate SMS and telephony into their apps.

2. Developers as product extenders

Developers can also boost your business by adding new features you never designed or even thought of – thus making your product more valuable to your paying customers.

The most obvious example is the Apple iPhone. Apple’s developer program led to the creation of over one million apps for the Apple App Store. These apps are 1+ million features that make the iPhone more valuable for the users. Often the value is added through new functionality provided by the app, but sometimes it’s just about constant supply of cool new things. Essentially the iPhone is not a phone, but a computing platform allowing 3rd party developers to extend it beyond anyone’s imagination.

There is an ever-growing list of companies which work with developers to extend their products making them more useful: From SmartThings (recently acquired by Samsung) in smart home, to Automatic and Ford in connected cars, and DJI in drones.

[tweetable]Developers can extend products through informal partnerships[/tweetable]; consider how someone using IFTTT can get a Nest thermostat to talk to a Philips light bulb or Amazon’s Echo smart home hub. All without the need for closed-room partnerships, consortia meeting in exotic locations, or even NDAs.

3. Developers as data harvesters

Google and Facebook, both data-driven advertising companies, turn to developers to make their their ads more effective for advertisers. Android, Google’s mobile operating system, helps the company to harvest data about mobile users. Developers make Android more valuable to users through 1.6 million apps available on the platform. More Android users means more data for Google making Google ads on the desktop more effective, and therefore more valuable for advertisers.

Facebook works with developers to integrate their identity services into as many apps as possible. The reason is simple: the more apps use Facebook’s login system to identify the user, the more Facebook will know about their users. Similar to Google; developers help Facebook to harvest user data to make their ads more effective and make more money.

4. Developers as distributors

[tweetable]Developers can help deliver your product to new markets and new users by being a distribution channel[/tweetable] for your business.

For example, Uber works with developers to integrate the company’s on-demand transportation services into new apps and services. The company works with large partners (United Airlines, Hyatt), successful Internet companies (OpenTable, TripAdvisor) as well as young startups (Momento, Tempo) to make Uber’s “take me from A to B” services accessible in wide array of use cases.

Developers also help Uber to sign up new users. The company’s affiliate program rewards developers for each valid first trip in the U.S. by a new user whose trip request originated through their app.

5. Developers as resellers

[tweetable]Developers can also help resell your product by being a sales channel[/tweetable] for your business.

Amazon works with developers to boost sales of physical and digital products. Amazon Mobile Associates program allows developers to earn up to 6% as revenue share on purchases made through their apps and games. Amazon Replenishment Service enables connected devices to order physical goods from Amazon when supplies are running low.

Seeing developers as a sales channel is not limited to the realm of Internet companies. Wallgreens, the largest drug retailing chain in the United States, also works with developers to boost sales of its digital print services. The Walgreens Photo Prints API allows users of mobile apps to print photos to any of the 8,000+ Walgreens locations in the US. The mobile app developers earn a revenue-share commission with every photo order that’s placed through their app.

Building a developer program and an ecosystem quickly becomes the norm and the baseline for competition in almost any industry. In fact, checking whether a company has a developer portal (typically at is a leading indicator of how well the company is prepared for the future.

— Michael

Self-driving cars are about platforms, not about cars

There is growing consensus that fully autonomous cars will become a reality by 2020. Google self-driving cars have driven over 1.2 million miles. Elon Musk, Tesla CEO, predicted in September 2015 that Tesla cars will have fully autonomous capability in 3 years. Zvi Aviram, CEO of MobileEye, a supplier of self-driving systems to many car makers, expects their technology will support fully autonomous driving by 2019.

Most traditional car makers still see autonomous driving as a feature of the car, rather than a market shift that will open the path to the creation of a completely new winner-takes-all industry. It’s just like PC makers focusing on adding connectivity to their products and missing the transition to the Internet platforms (Google Search, Amazon, Facebook). Or telecom operators focusing on adding always-on fast data connectivity to their networks and missing the transition to the mobile platforms (Google Android, Apple iOS).

Is the same about to happen in the car industry? Are car makers about to miss the transition to transportation platforms in the same way as PC makers missed the transition to Internet platforms and telecom operators missed the transition to mobile platforms?

The future transportation value stack will be very different from the existing automotive industry. It quite remarkable that only two companies, Google and Uber, are present in all layers of the stack that are necessary for creating a dominant transportation-as-a-service platform.


The car hardware (the body, the power train, the wheels) increasingly becomes a commodity. Modern cars are good-enough for typical everyday use offering little opportunity for differentiation. Car commoditisation will only accelerate with the transition to electric vehicles. Electric vehicles are much simpler mechanically and easier to make, which opens the gates for new players, including such electronics and Internet services players like Apple, Google, LeTV and even Acer. It’s also notable that Tesla ‘open-sourced” their electric vehicle patents in 2014 pledging not initiate patent lawsuits against anyone who, in good faith, uses Tesla’s technology.

Autonomous driving is about guiding the car along the road, following the rules while avoiding obstacles and crashes. It involves lots of sensors, computing power and sophisticated software, but the most important part here is the ‘data’. Self-driving systems are machine learning systems that are trained to evaluate the environment and make fast decisions on how to react.

The ‘data’ represents all the collective experience learned by multiple cars driving in test and real-world conditions. The more cars you have on the road and the more miles these cars have driven in all possible conditions, the more experienced, safe and precise the self-driving system becomes. Google is undisputed leader here having its fleet of test cars driven over 1 million miles. Tesla’s Autopilot feature introduced in October 2015 on Model S cars will allow Tesla to start training its self-driving system in real-life conditions on tens of thousands of cars.

Uber seem to be behind in terms of putting real self-driving cars on the roads. The company poached 40 researchers and engineers from the Carnegie Mellon’s robotics lab in March 2015 and partnered with University of Arizona on optics research for self-driving cars.

Navigation is about figuring out which roads and streets the car should drive on in order to get from point A to point B. Google is again is a clear leader here with Google Maps and Waze. A consortium of German carmakers (Audi, BMW and Daimler) is trying to uphold an alternative acquiring the Here Maps business from Nokia in August 2015 for $3.1 Billion. Uber also works to create a proprietary mapping platform winning independence from Google and Here Maps. The company acquired San Jose-based deCarta in March 2015, absorbed part of Microsoft Bing mapping assets in June 2015 and has partnered with TomTom in November 2015 to use its mapping and traffic data. (Is Microsoft about to miss the huge opportunity in the future automotive and transportation markets?)

Fleet routing this is where it gets much more interesting. Self-driving cars combined with Uber-style on-demand services make individual car ownership less and less attractive. Some people even claim that hardware-as-a-service is the end game for Tesla. The shared usage models will turn car market into something that looks like a public transport platform, where operators will match in real-time the demand for transportation with the location and the capacity of self-driving vehicles. In other words, fleet guidance is about deciding in real-time where every car needs to go. Which car needs go to a specific pick up point? Shall the car drive to where the demand is expected in the coming 15 minutes? What is the optimal time to recharge or refuel? When and where to go to do the service and maintenance? Where to park, and more.

This is a very complex computational problem to solve at the scale required to support fleets of thousands of self-driving cars. Bill Gurley, one of Uber’s early investors, gives a glimpse into how difficult it is in his blog explaining why UberPool is the new Uber’s “Big Hairy Audacious Goal.” (BHAG). UberPool helps the company to build capabilities that will be directly relevant for the optimal routing of large autonomous fleets.

I’m sure Google is not standing still here as well. Being a machine learning company, it has the scale and the technical depth to become the leader in this space. Add to that real-time bidding capabilities with extremely complex optimisations that Google has mastered for its online ad business. One can even argue that building such transportation platform is the reason for Google’s interest in self-driving cars.

It’s very difficult to see how traditional car makers will be able to compete with software-centric companies in this space.

Finally, the transportation platform is the most intriguing part of the value stack. Moving people around Uber-style is not the only use for self-driving cars. What else can we do with the fully autonomous fleet of robotic vehicles, given that they don’t not have to look as Uber or Google cars of today? These robotic vehicles can be specialized delivery vehicles (see this Domino’s Pizza car as a hint for how they may look like), small delivery drones like Transwheel or StarShip or even autonomous motorbikes, like Motobot by Yamaha.

The number of possibilities and applications for autonomous transportation is mind boggling. No single company, even as nimble and well-funded as Google or Uber, will be able to address all possible needs and use cases by themselves. The recipe for addressing these yet to be known needs and use cases is in plain sight. It is a platform connecting vehicle manufacturers, vehicle operators, service providers and application developers with users (much like Google did with Android).

The platform will harvest permissionless innovation by startups and developers to discover and deploy new services and applications we cannot even imagine today – in the same way that no one could predict Instagram, Snapchat or WeChat on smartphones. Uber already works with developers extending its service into a platform. Google also has a long history of relying on permissionless innovation by developers to win its competitive battles, from Google Maps to Android. It’s only natural that Google will use the same approach to dominate self-driving cars.

It’s still too early in the game to say which companies will dominate the future transportation market. One thing is a safe bet: The future transportation ecosystem will look very different from the existing automotive industry. It will resemble modern technology ecosystems with their platform business models, permissionless innovation by developers, and domination of software-centric companies.

— Michael

Messaging apps: From counting users to counting bots

Back in 2008, Nokia sold 468 million phones making the company the undisputed king of the mobile phone market with over 40% market share. This same year, Apple sold little over 10 million iPhones and launched iPhone App Store with just 500 third party apps. By the end of 2010, when Apple App Store had over 300,000 apps, it became clear to all including Nokia that the number of apps is much more important than the number of devices. Apps drive demand for phones creating network effects between users and 3rd party developers. Smartphone users attract developers. Developer create apps. Apps attract more users, which attract more developers.


A very similar dynamic begins to unfold in messaging platforms. Popular messaging apps evolve into developer-centric platforms having the same kind of network effect as iOS and Android. Soon we will compare messaging apps not by number of users, but by the number of bots/integrations available on the platform. Messaging users attract developers. Developers create bots. Bots attract more users, which attract more developers.

Messaging has emerged as a new interaction paradigm on mobile, with leading apps (Whatsapp, WeChat, Facebook Messenger, KakaoTalk, Line, Viber) amassing hundreds of millions of users. David Marcus, vice president of messaging products at Facebook says in his interview to the Wired magazine:

“The messaging era is definitely now. It’s the one thing people do more than anything else on their phone.”

So far, competition between messaging apps is based on number of users. In Q3 2015, Whatsapp (acquired by Facebook for over $19B) has 900 million monthly active users; Facebook Messenger – 700 million; and WeChat – 600 million. But now things start to change.

While Facebook leads in number of messaging users, Chinese Weixin, or as it is known in the West WeChat, is a clear leader in turning messaging into a platform.

WeChat at its core is a messaging app for sending text, voice, and photos to your friends and family, but it is also much more. Connie Chan, Partner at Andreessen Horowitz, explains on the company blog:

“Along with its basic communication features, WeChat users in China can access services to hail a taxi, order food delivery, buy movie tickets, play casual games, check in for a flight, send money to friends, access fitness tracker data, book a doctor appointment, get banking statements, pay the water bill, find geo-targeted coupons, recognize music, search for a book at the local library, meet strangers around you, follow celebrity news, read magazine articles, and even donate to charity … all in a single, integrated app.”

WeChat achieves this by supporting lightweight apps that are called “official accounts”. There are well over 10 million official accounts on the platform: from celebrities, banks, media outlets, and fashion brands to hospitals, drug stores, car manufacturers, to internet startups, personal blogs, and more. These lightweight apps are approved to access exclusive APIs for payments, location, direct messages, voice messages, user IDs, and more. Essentially, WeChat is not only messaging app, but a developer-centric platform allowing developers to add value to the service.

Facebook has no choice but to follow WeChat. Facebook’s David Marcus said at the Code/Mobile conference in October 2015:

“Messaging is really, truly the next frontier. The Asian paradigm has shown there’s a there there.”

Having introduced Messenger platform at its F8 developer conference in March 2015, Messenger has adopted the WeChat approach and will now be open to 3rd party developers to build new “tools for expression” and also let users communicate with businesses through simple conversation threads.

WeChat and Facebook are not alone in their attempts to take messaging to a new level. Telegram, which started as a more secure Whatsapp clone, evolves into something much more interesting with the announcement of their Telegram Bot Platform. The developer-centric platform allows 3rd party developers to create Bots, which are simply Telegram accounts operated by software sporting AI-like features.

The same trend shows itself even in the more conservative enterprise space with Slack Technologies Inc. having risen to $2B valuation in less than 2 years. Slack is a messaging app for teams designed to enable integration of messaging with popular enterprise apps and services. The company has 1.1 million daily active users, but also 100 integrations with 900,000 integration installs on the Slack platform.
These range from Giphy gifs to expressing feelings to co-workers; to MailChimp email marketing service; Crashlytics to monitor mobile app bugs; Trello for tracking tasks or manage help tickets from Zendesk.

The Slack Platform also supports bot users allowing companies automate many processes. A bot user is a special kind of free user account optimized for writing automated bots that connect to Slack using the Real Time Messaging API. Users can interact with bots using direct messages or even invite bots to private groups.

For example, The New York Times data science team has built a Slack bot to help decide which stories to post to social media.
The bot, called Blossom, predicts how articles or blog posts will do on social and also suggests which stories editors should promote. All within the framework of the messaging app.

Slack evolves into an enterprise developer-centric platform. There are already several startup teams experimenting with building companies on top of Slack messaging platform.

Similar to what happened in mobile platforms, the basis of competition in messaging apps changes from the number of users to the number of bots (integrations) and the messaging apps themselves evolve into developer-centric platforms.

Today Whatsapp is the largest messaging network with 900M users. It does one thing, messaging, exceptionally well. But it increasingly starts to resemble Nokia. Nokia also did one thing, mobile phones, exceptionally well, but missed the transition to developer-centric platforms, where the winners are decided by developers.

Facebook’s next pivot

Facebook is now starting to hit physical limits to its digital growth. Three quarters of the company’s revenue are coming from North America and Europe where user growth is slowing down. Facebook’s average revenue per user in the “rest of the world” region, which includes many developing nations in South America and Africa with highest user growth rates, is 10 times lower than the average revenue per user in North America ($0.90 vs. $9.30 per user respectively). To grow its business in emerging economies [tweetable]Facebook needs to look into business models beyond advertising and app installs[/tweetable].


Signs are that Facebook is preparing its next pivot. Piecing together Facebook moves and hires, we believe that [tweetable]Facebook will be launching a social marketplace combined with financial services[/tweetable]. This will unlock new multi-billion dollar markets in the world’s fastest growing economies. A pivot which could be 10 times bigger than its pivot to mobile, which since starting in 2012 was responsible for 76% the company’s ad revenue in Q2 2015.

From social network to social marketplace

BuzzFeed recently reported that Facebook is experimenting with building out shops within Facebook Pages. E-commerce shops within Facebook pages will turn the social network into a humongous social marketplace where the entire shopping experience will occur within Facebook — from product discovery to checkout.

Facebook has created a sprawling mobile messaging empire with its Whatsapp, Facebook Messenger and Instagram apps – reaching 800M, 700M and 300M active monthly users, respectively. In doing so, Facebook is not leading, but following. Facebook is copying the business model of WeChat, Line and KakaoTalk, the asian social messaging apps, which proved that mobile messaging can be monetised through e-commerce. WeChat, Line and KakaoTalk evolved into all-encompassing ecommerce platforms where users can shop for everything from stickers and games, to groceries and cars, and even book taxis and flights.

Instagram is already used by people to sell everything from goats to art, and Facebook should be able to turn it together with Messenger and Whatsapp into powerful mobile e-commerce platforms.

Adding payment services to Facebook’s messaging empire makes perfect sense. David Markus, who left the position of Paypal CEO to lead Facebook messaging platform, said in his interview to Wired:

“VOIP is just one way that the company hopes to use the messaging app as a platform for much bigger things, including online payments.”

In March 2015, Facebook unveiled a US-only peer-to-peer payment service for Facebook Messenger that lets you connect your Visa or Mastercard debit card and tap a “$” button to send friends money on iOS, Android, and desktop with zero fees.

From to

For now, the Facebook payment service is an extension of a traditional banking service. But what about the countries where Facebook pushes its initiative for affordable Internet access? To make payments work in countries without established banking services Facebook needs to create its own “backroom” infrastructure for “storing” money and become a digital bank.

The initial opportunity for Facebook is remittance services – a global $583 billion market controlled by  Western Union and MoneyGram. But this is just the beginning.

A bank is a financial intermediary that accepts deposits and channels them into loans, where banks make most of their money. In other words, [tweetable]a bank is a platform connecting customers that need credit with customers that have capital surpluses[/tweetable]. To be successful, a bank needs to manage risk and minimize defaults.

Financial services in emerging economies require new business models and approaches to managing risk. For example, InVenture runs a Mkopo Rahisi service in Kenya that with the help of an Android app creates a reliable credit score by analysing more than 10,000 data points from the activity on a customer’s mobile handset. Instead of giving this score to banks, InVenture services the loans independently. Shivani Siroya, founder & CEO of InVenture writes:

“Since our app launched in Kenya last spring we’ve provided millions of dollars of loans to tens of thousands of customers. Our repayment rate is at more than 85% and more than 90% of our borrowers come back for a second, third, fourth, even fifth loan.”

Facebook’s ability to manage credit risk based on information from its social network would be second to none. Imagine how big such lending service for the unbanked can become at Facebook scale!

Facebook was always an interesting company to watch. It could well happen that Facebook’s advertising and app install businesses that get so much attention today are just a stepping stone to a much bigger ambition. The ambition of becoming the ecommerce and financial infrastructure for the world’s fastest growing economies.

Skate to where IoT is going to be, not where it has been

[First published in Mobilbusiness, a Swedish online news and analysis publication that uncovers the latest and most relevant news on mobile innovation, market trends and enterprise mobilization.]


IoT companies that focus on wrong types of innovation will be left behind. Wayne Gretzky, a legendary athlete, explained why he was so good at the fast-paced game of hockey:

I skate to where the puck is going to be, not where it has been.

The mobile market is a powerful example: Nokia, BlackBerry, Microsoft, Palm and many others missed the market shift and were left behind. The same will be true for the Internet of Things (IOT): five years from now the IOT market will be very different from what it is today. [tweetable]The future IOT winners skate to where IOT is going to be, not where it is today[/tweetable].

IOT: create a market or vanish

Harvard Professor Clayton Christensen explains in “The Capitalist Dilemma” that innovation, comes in three varieties: one is performance-improving (sustaining), another efficiency and a third one market-creating.


The history of the mobile handset market is an excellent illustration of how market-creating innovation drives growth and reshapes huge markets in the matter of a few short years.

Before 2010 both Nokia and Research in Motion (RIM), the maker of popular BlackBerry devices, were at the top of their game. Nokia owned then 40% of the global handset market, netting $2.6 billion in Q4 2007. Fortune named RIM the world’s fastest-growing company in 2009. But then the tide turned: Market-creating innovations by Apple and Google completely reshaped the industry, wiping out once all-powerful companies.

Instead of competing with Nokia and RIM on sustaining and efficiency innovations, Apple and Google created a new market for mobile computers. In this new market demand is driven by apps catering to all possible needs and use cases. More precisely, the demand for mobile computers was (and is) driven by app entrepreneurs who work to discover and address unimaginable variety of user needs and use cases. The entrepreneur-driven demand has created huge new markets that are several times bigger than the existing mobile handset market could ever become.

3 million IOT innovators today

The data from VisionMobile’s Q1 2015 Developer Economics survey of over 4,000 IOT developers reveals that the forces of the market creating innovation are already in full swing. Already, more than half of mobile developers (53%) are involved in IOT development. We estimate that this amounts to over three million developers innovating in IOT today.

The evolution in the mobile industry holds a clear lesson for companies eyeing the IOT opportunity. Much like in mobile, market-creating innovations will define where the IOT market will be in the future. And just like in mobile, companies that focus solely on sustaining and efficiency innovations will be left behind destined to skate where the market has been.

Today analysts forecast billions of connected devices in the market by the end of the decade. But is the number of devices even the right metric? Just like smartphones, the amount of IOT devices shipped is the end-result, not the driving force of the market. Just like in mobile, the demand for IOT products will come from an army of IOT developers/entrepreneurs discovering and addressing thousands of needs and opportunities for consumers and enterprises alike. Just like in mobile, developers/entrepreneurs will decide who will be the winners and losers in the emerging IOT market.

The same companies that took the lead in the mobile market now reuse the playbook of market-creating innovation building developer ecosystems on top of their IOT platforms. VisionMobile’s IoT Developer and Platform Landscape 2015 report shows that Apple, Google, and Samsung (who also acquired SmartThings) are the clear leaders attracting most developers across Smart Home, Wearables, Health and Wellness and Connected Cars verticals.


[tweetable]The future IOT market will not be the larger version of today’s market[/tweetable]. It will be dominated by developer-centric platforms, operate based on new business models, address needs that we cannot foresee today and serve new categories of customers. To win, skate to where the IoT is going to be: work with developers, play in the consumer market and try new business models.