Kantar: With Android Inching Up In Smartphone Sales, Get Set For An iPhone ‘Spike'

With Apple in the middle of its first month of sales of two new iPhone models, the latest figures out from Kantar Worldpanel, a market research division of WPP, indicates that going into September, sales of Android smartphones are the strongest they have ever been. In the last 12 weeks ending August 31, smartphones running on Google’s mobile OS accounted for over 70% of all sales across the five biggest markets in Europe (UK, Germany, France, Spain and Italy), with corresponding rises in all other major markets surveyed, including the U.S., compared to last month.

However, a look at the bigger picture highlights another trend, and an opportunity for the likes of Apple, Nokia and Android OEMs who are not called Samsung. In key leading markets surveyed â€" U.S., UK and Australia â€" the share of sales to Android are down over a year ago (respectively now at 55.1%, 56.3% and 62.1%). And specifically, the analysts note that Samsung has seen a “dip” in sales for a couple of reasons: market saturation in mature markets; and competition from others at the lower end.

After years of increasing market share, Android has now reached a point where significant growth in developed markets is becoming harder to find,” writes Dominic Sunnebo, director of research at the group. “Android’s growth has been spearheaded by Samsung, but the manufacturer is now seeing its share of sales across the major European economies dip year on year as a sustained comeback from Sony, Nokia and LG begins to broaden the competitive landscape.”

Important to note that right now Android and Samsung are at a high-enough marketshare that even dips in specific markets are not doing much to tip the balance overall. In Spain, for example, over 90% of smartphones sold in the last 12 weeks were Android handsets. In China the figure is over 72%.

We have reached out to Kantar analysts to see if they can give us data on Samsung’s current share of sales, and whether they can provide any early indications on what kind of an impact the new iPhone models are having on the market. (We’ll update when / if we get more data.)

Targeting bargain hunters

People have remarked a lot about how the new 5c version of the iPhone is not the budget device everyone had been expecting from Apple (although it is priced at a discount to the premium 5s model). So, notwithstanding the fact that the iPhone 4S is now seeing bargain (and often free) bundling with mobile contracts, this will leave the field open to other players who are targeting the “budget” smartphone market â€" that is, users in both developed and emerging markets that are more price-conscious.

So far, Nokia’s aim of developing handsets to meet that latter demand has been paying increasing, if not huge, dividends, Kantar notes. It says that Windows Phone sales, as led by Nokia, are now in double digit percentages in the UK and France, at 12% and 10.8% respectively, with its share of sales in Europe’s five biggest markets at 9.2%. But other important markets like the U.S. (3% of sales) and China (2.1%) remain huge challenges for both Microsoft and Nokia on the mobile front. All things relative, it is still overall doing better than BlackBerry, which is now down to 0% of all sales in China, 1.8% in China, and nothing over 4.2% in any other market.

Judging by the numbers, it looks like Nokia’s and Microsoft’s best bet would be to keep going for bargain hunters or those who are less inclined to buy premium-priced handsets, which interestingly tap into two quite different demographics. “Windows Phone’s latest wave of growth is being driven by Nokia’s expansion into the low and mid range market with the Lumia 520 and 620 handsets,” writes Sunnebo. “These models are hitting the sweet spot with 16 to 24 year-olds and 35 to 49 year-olds, two key groups that look for a balance of price and functionality in their smartphone.”

Apple’s opportunity

While Kantar doesn’t give any indicators on early iPhone sales, we already know from Apple that sales of the two new models topped 9 million for the opening weekend, compared to 5 million for the iPhone 5 release last year. They haven’t released any numbers yet, but Kantar’s analysts hint that this is a good indication of more sustained strong sales figures for Apple. “This is set to spike in the coming months with the release of the iPhone 5s and 5c,” Sunnebo writes.

For the three months that ended August 31, Apple accounted for nearly 40% of sales in the U.S., up nearly six percentage points over a year ago but down by over three percentage points on last month’s figures (perhaps because of anticipation over the new models). At the time, the new phones could see Apple pulling ahead of Android for the first time in a while. In Japan, Apple’s iOS was nearly level with Android going into September, at 48.6% versus 47.4%, but the phones are now going to be sold for the first time by the country’s largest carrier, NTT DoCoMo, and that “makes it likely that Apple will pull ahead of Android in this key market.”

Kantar is an insight, information and consultancy network. By uniting the diverse talents of its 13 specialist companies, the group aims to become the pre-eminent provider of compelling and inspirational insights for the global business community. Its 26,500 employees work across 95 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at each and every point of the consumer cycle.

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April 1, 1976

NASDAQ:AAPL

Started by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has expanded from computers to consumer electronics over the last 30 years, officially changing their name from Apple Computer, Inc. to Apple, Inc. in January 2007. Among the key offerings from Apple’s product line are: Pro line laptops (MacBook Pro) and desktops (Mac Pro), consumer line laptops (MacBook Air) and desktops (iMac), servers (Xserve), Apple TV, the Mac OS X and Mac OS X Server operating systems, the iPod, the...

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September 7, 1998

NASDAQ:GOOG

Google provides search and advertising services, which together aim to organize and monetize the world’s information. In addition to its dominant search engine, it offers a plethora of online tools and platforms including: Gmail, Maps, YouTube, and Google+, the company’s extension into the social space. Most of its Web-based products are free, funded by Google’s highly integrated online advertising platforms AdWords and AdSense. Google promotes the idea that advertising should be highly targeted and relevant to users thus providing...

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Samsung is one of the largest super-multinational companies in the world. It’s possibly best known for its subsidiary, Samsung Electronics, the largest electronics company in the world.

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1865

August 7, 1994, NYSE:NOK

NOKIA is a Finnish multinational communications corporation. It is primarily engaged in the manufacturing of mobile devices and in converging Internet and communications industries. They make a wide range of mobile devices with services and software that enable people to experience music, navigation, video, television, imaging, games, business mobility and more. Nokia is the owner of Symbian operation system and partially owns MeeGo operating system.

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April 4, 1974

NASDAQ:MSFT

Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company, best known for its Microsoft Windows operating system and the Microsoft Office suite of productivity software. Starting in 1980 Microsoft formed a partnership with IBM allowing Microsoft to sell its software package with the computers IBM manufactured. Microsoft is widely used by professionals worldwide and largely dominates the American corporate market. Additionally, the company has ventured into hardware with consumer products such as the Zune and...

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The Collaborative Power of Berlin-Based ResearchGate

It’s not often you come across a founder that measures startup success by winning the Nobel Peace Prize one day. When ResearchGate founder Ijad Madisch said that to Benchmark partner Matt Cohler a few years ago, he knew that his startup, which has developed a communication and crowdsourcing platform by which scientists can share and publish their research, was going to potentially change the way we solve real world problems with scientific collaboration. Flash forward two years, and Berlin-based ResearchGate is actually seeing progress being made in areas like disease, terrorism and more from collaborations and shared knowledge taking place on its platform.

Madisch joining us on stage at Disrupt Europe in late October, in Berlin, with a conversation with his board member and early investor Cohler.

One of major challenges to plague scientific research and innovation is redundancy. A team of scientists hard at work on protein data analysis publish their results only to learn that a group on the opposite side of the world has just done the same. The collaborative web changes this. As both a physician and a researcher, Madisch decided that the best way to reduce research redundancy would be to create an online professional network in which scientists could easily share data, information and results.

Investors have caught wind of the power of ResearchGate, and to date, the company has raised over $35 million from Benchamrk, Microsoft founder Bill Gates, Tenaya Capital, Dragoneer Investment Group, Thrive Capital, Accel Partners, Simon Levene, Bebo co-founder Michael Birch, Founders Fund, and Yammer CEO David Sacks, among others. The fact that Gates, who doesn’t rarely invests in startups with his personal wealth, is betting on ResearchGate is a big deal.

Matt Cohler
General Partner, Benchmark

Matt Cohler is a General Partner at Benchmark. He’s responsible for identifying investment opportunities in Internet-related companies, in addition to working closely with companies across the firm’s portfolio.

At Benchmark, Matt has partnered with entrepreneurs from across the social, mobile and cloud industries from around the globe such as Instagram, Dropbox, Quora, Asana, Domo, Edmodo, Baixing, CouchSurfing, Peixe Urbano, ResearchGate, 1stdibs, and Zendesk.

Prior to joining Benchmark he served as the VP of Product Management at Facebook, where he led the development of new strategic initiatives for the company. As the seventh employee at Facebook, Matt played a crucial role within the team during many critical growth phases. Previously Matt was Vice President and General Manager at LinkedIn, where he was a member of the founding team. Matt also has been a consultant in McKinsey & Company’s Silicon Valley office and worked in Beijing for AsiaInfo, the Chinese startup that built the infrastructure for the Internet in mainland China. Matt’s writings on the startup economy have been published in Harvard Business Review. He holds a bachelor’s degree with honors and distinction from Yale University.

Ijad Madisch
Co-founder and CEO, ResearchGate

Ijad Madisch is the co-founder and CEO of ResearchGate, the social networking site for scientists and researchers to share papers, ask and answer questions and find collaborators.

Ijad holds a M.D. and Ph.D., and studied medicine and computer science in Hannover at Harvard University. In 2005 he received the RSNA Young Investigator Prize for his work on ultra high-resolution CT Imaging of tissue-engineered bone growth.
After several years in Boston, where he worked as a radiology researcher at the Massachusetts General Hospital, Ijad moved to Berlin and founded ResearchGate in 2008. The company is now based in Berlin and has offices in Cambridge, Mass. Ijad has stated that he wishes to win a Nobel Prize through the site by disrupting the way in which science is conducted.

As we mentioned above, the real power of ResearchGate is in the actual discoveries and advancements in science being made through the platform. Here are just a few of the many examples of how ResearchGate is changing scientific collaboration.

• Emmanuel Nnadi (Nigeria) and Orazio Romeo (Italy) recently discovered a deadly pathogenic plant yeast together. This yeast killed a 38-day-old baby girl in Emmanuel‘s hometown in Nigeria. It was the first time report of a death caused by this pathogen. Orazio and Emmanuel sent the yeast to a lab in the Netherlands where it‘s currently being investigated further. The unlikely team who got to know each other through ResearchGate previously found the first time occurrence of another pathogenic yeast in Nigeria, and published a paper about it in a peer-reviewed journal.
• Rafael Luque, professor for organic chemistry at the University in Cordoba and Rick Arneil Aracon, graduate student from the Philippines also found each other in a forum. The unlikely pair discovered that the leftovers of corncobs make highly effective and eco-friendly catalysts for bio-fuel made from old cooking oil and published a paper on the technique.
• David Chau stumbled into a discussion that had a huge impact on his current project. Through ResearchGate, he managed to connect with colleagues from different departments within his university and, as a result, gain access to equipment for the experiments he was conducting. He is now working on a new technique to detect tiny quantities of water in biological samples.
• Hector Vazquez-Leal, professor for applied mathematics at the University of Veracruz in Mexico, was looking for a research partner on ResearchGate. Here he found Guillermo Fer Andez-Anaya. They collaborated and discovered a new solution to Troesch’s Problem which allows the improved determination of the movement of gas in a confined environment. They published their result in a peer-reviewed journal. Vazquez-Leal is currently working on two more projects in the same field with
  research partners he found on the network.
• Sohail Malik (Political Science and Engineering, Pakistan) was looking for help in statistics, when he found Michael Sandholzer (Radiologist, UK) on ResearchGate. Together, they worked on Malik’s project to identify risk factors generating terrorism and insurgency in Pakistan. Their article has been accepted by a peer-reviewed journal and will appear in 2014.

“ResearchGate will change how we conduct science in the future,” says Madisch. He says that similar to the way that developers can code on engineering projects from across the work, there is the same opportunity in the scientific world.

Madisch tells us that 56 percent of research papers published in 2013 include an author that is on ResearchGate. From 2008 to 2011, 1.4 million papers were added to the profiles of scientists on ResearchGate. Now the network is seeing 1.4 million papers added each month, with 27 million papers uploaded in total. And much of the collaborative power is in sharing the raw data between scientists, and Madisch says that every two days, 1,300 data sets are uploaded. “The engagement is just growing exponentially,” he says.

However, ResearchGate isn’t the only company to have recognized the power of this collaborationâ€"Academia.edu is also competing in the space.

How Madisch will continue to grow ResearchGate as a network, and use technology for this purpose will be part of the discussion with Cohler on stage at Disrupt. And we’ll also hear from him about the challenges and benefits of starting and maintaining a startup in Europe (Cohler believes Berlin will be the next big startup ecosystem).

Disrupt Europe will take place from October 26-29 (Hackathon on 26-27; Main Event on 28-29) and lots more info can be found here.

If you would like information on sponsorship opportunities, please contact our sponsorship team here sponsors@techcrunch.com or get more info here.

ResearchGate is the leading social network for scientists. It offers tools and applications for researchers to interact and collaborate. ResearchGate offers a social, crowdsourced platform designed for researchers. The platform provides a global scientific web-based environment in which scientists can interact, exchange knowledge and collaborate with researchers of different fields. The results of ResearchGate’s new search engine, called ReFind, are not merely based on keywords, but selected in an intelligent way based on semantic, contextual correlations.

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Ijad Madisch is the co-founder and CEO of ResearchGate, the social networking site for scientists and researchers to share papers, ask and answer questions and find collaborators. Ijad holds a M.D. and Ph.D., and studied medicine and computer science in Hannover at Harvard University. In 2005 he received the RSNA Young Investigator Prize for his work on ultra high-resolution CT Imaging of tissue-engineered bone growth. After several years in Boston, where he worked as a radiology researcher at the...

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Benchmark, Venrock, Peixe Urbano, ResearchGate, 1stdibs, Edmodo, Asana, Domo, Quora, Couchsurfing, Instagram, Facebook, LinkedIn

Matt Cohler is a General Partner at Benchmark. He’s responsible for identifying investment opportunities in Internet-related companies, in addition to working closely with companies across the firm’s portfolio. At Benchmark, Matt has partnered with entrepreneurs from across the social, mobile and cloud industries from around the globe such as Instagram, Dropbox, Quora, Asana, Domo, Edmodo, Baixing, CouchSurfing, Peixe Urbano, ResearchGate, 1stdibs, and Zendesk. Prior to joining Benchmark he served as the VP of Product Management at Facebook, where he led the...

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The Science Behind Using Online Communities To Change Behavior

Editor’s note: Sean Young is a family medicine professor and director of innovation at the center for behavioral and addiction medicine at UCLA. He writes about topics related to psychology, technology, and public health/medicine at seanyoungphd.com.

Is it just me, or is it impossible to talk to technology entrepreneurs without mentioning user engagement and behavior? I’m a behavioral psychologist, so that might be why I keep having conversations about engagement, but I don’t think that’s the only reason. I think it’s because entrepreneurs have realized that behavior change and engagement is critical to technology development (and to everything else in our lives). Whether we’re trying to get people to download or keep playing our fantasy sports applications, convince ourselves to avoid that extra scoop of ice cream, or get our neighbor to stop hitting her snooze button at 5:00, 5:10, and 5:20 a.m., we understand how difficult it can be to engage people and change behavior.

Before talking about how to do this, it’s important that we’re on the same page that being able to change behavior is a powerful skill that could be used for good and/or evil. As entrepreneurs seeking to improve the world, we first need to make sure that 1) the products we are creating will benefit (rather than harm) society, and 2) the behavior(s) we want to change to be able to help us achieve those objectives. Once we’ve gotten past those steps, how do we change behavior?

Fortunately, there’s a science behind how to change behavior, and the answer to engagement and behavior change lies in understanding people’s psychology. By addressing people’s psychological needs and reasons for not changing behavior (including their social environments, cultural values, and emotions), we can be more effective at behavior change. Once we understand people’s psychologies, then technologies â€" online communities in particular â€" become really useful as platforms to rapidly change behavior.

Changing behavior one social network at a time

Although social media and online communities might have been developed for people to connect and share information, recent research shows that these technologies are really helpful in changing behaviors. My colleagues and I in the medical school, for instance, created online communities designed to improve health by getting people to do things, such as test for HIV, stop using methamphetamines, and just de-stress and relax. We don’t handpick people to join because we think they’ll love the technology; that’s not how science works. We invite them because the technology is relevant to them â€" they’re engaging in drugs, sex and other behaviors that might put themselves and others at risk. It’s our job to create the communities in a way that engages them enough to want to stay and participate. Yes, we do offer to pay them $30 to complete an hour-long survey, but then they are free to collect their money and never talk to us again. But for some reason, they stay in the group and decide to be actively engaged with strangers.

So how do we create online communities that keep people engaged and change their behaviors? Our starting point is to understand and address their psychological needs.

In most of the studies, we first need to answer their questions about privacy issues (what is being done with their data) and then build a trusting community. Unlike other communities, where people typically join out of interest, we need to create their interest and keep them engaged enough to want to stay and participate. To do this we have to slowly educate them about behavior change so that they feel comfortable and not pushed into changing. Little things such as liking a comment saying, “Everyone having a good day?” help them to feel safe and let them know they can be themselves and have fun connecting with others, without being forced to talk about health. After addressing these needs, we can then educate them and provide concrete, easy steps for how they could change their behavior.

You might think that most people wouldn’t actively participate in an online community unless they wanted to be there in the first place and thought it was relevant to them. Well, results from our three-month study released this September in Annals of Internal Medicine, found that over 80 percent of people who joined our groups were actively involved, and people in the intervention study groups were more likely to change their behaviors compared to people who were not. Interestingly, we keep finding that these research groups become actual online communities; in our first study, the actual intervention ended over two years ago, but people continue to actively use the community to reach out and support each other.

The Core Components

Throughout our research, we find that newly created online communities can change people’s behaviors by addressing the following psychological needs:

The Need to Trust. Sharing our thoughts, experiences, and difficulties with others makes us feel closer to others and increases our trust. When we trust people, we’re more open-minded, more willing to learn, and more willing to change our behavior. In our studies, we found that sharing personal information (even something as small as describing what you did today) can help increase trust and change behavior.

The Need to Fit In. Most of us inherently strive to fit in. Social norms, or other people’s attitudes and behaviors, heavily influence our own attitudes and behaviors. Each time a new online community or group forms, it creates its own set of social norms and expectations for how people should behave. Most people are willing to change their attitudes and/or behavior to fit these group norms and fit in with the community.

The Need for Self-Worth. When people feel good about themselves, they are more open to change and feel empowered to be able to change their behavior. When an online community is designed to have people support and care for each other, they can help to increase self-esteem.

The Need to Be Rewarded for Good Behavior. Anyone who has trained a puppy knows that you can get him to keep sitting as long as you keep the treats flowing to reward him, but if you want to wean him off the treats and really train him then you’ll need to begin spacing out the treats to make them less predictable. Well, people aren’t that different from animals in that way and can be trained with reinforcements too. For example, “liking” people’s communications when they immediately join a network, and then progressively spacing out the time that their posts are liked (psychologists call this variable reinforcement) can be incorporated onto social network platforms to encourage them to keep posting content. Eventually, these behaviors become habits.

The Need to Feel Empowered. While increasing self-esteem makes people feel good about themselves, increasing empowerment helps them know they have the ability to change. Creating a sense of empowerment is one of the most powerful predictors of whether people will change their behavior. Belonging to a network of people who are changing their own behaviors, support our needs, and are confident in our changing our behavior empowers us and gives us the ability to change our behavior.

Throughout my research career I’ve found that understanding psychological needs is the core of behavior change and engagement across all domains. People are complicated, so this list is by no means comprehensive, but addressing these needs should get you a long way toward how you can use technologies to change and sustain behavior.

Bizness Apps Launches DIY Website Builder, Looks To Become A Full-Service Digital Marketing Suite For SMBs

Once upon a time, if you wanted your own website, you either had to speak fluent Internet, or write a large check to someone who did. However, thanks to the laundry list of companies and services that have sprouted over the last five years â€" like Weebly, Wix and Squarespace, to name a few â€" the barriers to building a snappy website have vanished. Today, website creators are free, and the only technical skill required is the ability to locate the Internet.

Today, as smartphones flood the market, a similar story is unfolding in app development. With their customers going mobile, businesses are eager to do the same. A bevy of services emerged to meet the growing demand, offering businesses a quick and easy way to create their apps for iOS, Android and beyond. Bizness Apps launched in 2010 to do just that, providing companies with a low-cost way to build their own mobile apps and website without needing to know how to code.

But with so many options for DIY site builders, both mobile and desktop, these services have to differentiate themselves from the competition if they’re going to stand out â€" and survive. As a result, many choose to specialize, offering the same basic features as everyone else, while focusing on adding more features and value around, say, social networking, flier creation or shopping.

Like SnapPages, to differentiate itself in this crowded market, Bizness Apps developed a white-label program to allow both companies and businesses to build mobile apps for their existing clients or SMBs in their local area. Shortly thereafter, the startup added a CRM platform to help its white-label resellers sell apps and websites to startups and other SMBs, and today Bizness Apps is adding the last piece of the puzzle.

In a platform play that aims to round out its self-service development suite and sees it moving into the realm of the Weeblys, Wixes and Squarespaces of the world, the startup is today launching its own drag-and-drop, DIY website builder, called Bizness Web.

The website creation service will allow SMBs to quickly design and publish a fully-functional website for desktop, smartphones and tablets in under 10 minutes, says founder and CEO Andrew Gazdecki â€" regardless of technical skill. In an effort to provide businesses with a feature set that’s comparable to its competitors, the website builder will offer a library of hundreds of templates, designed to make it easy to get started, along with SEO tools, post-publish editing capabilities, social media integration, custom contact and lead form creation and analytics.

The new product intends takes a similar strategy and focus to its white label reseller program, which provides companies and individuals with the ability to launch their own mobile marketing businesses and develop mobile apps and mobile websites that can be customized and branded according to their client’s preferences. The white-label resale tool allows these pop-up app development businesses to set their own prices and provide services developing apps for their local small business market.

The reseller program has also been the company’s most lucrative product, driving the majority of its revenue, the CEO tells us. The startup raised a small, $100K round of seed funding after launch, but has been bootstrapped since and is now profitable thanks to a reseller-driven $8 million annual run rate, which the company expects to hit $9 million by the end of the year.

But what makes the CEO think that its new DIY website builder will find an audience and can compete with the most popular services, which today dominate most of the mindshare in the market? Gazdecki says that he sees the small business market existing in two segments, one of which is willing to use DIY marketing tools, and other, which would rather pay a premium to essentially, “hire a pro,” as they say.

While Weebly and Wix are mostly focused on the former, the CEO says that Bizness Apps wants to leverage its existing reseller network to provide a more hands-on approach to mobile and website development â€" even if that requires charging a higher price, and therefore the risk of losing looking for free DIY options. Furthermore, even though the company is playing in an “extremely crowded market,” he says, 58 percent of small businesses still don’t have a website and the chief reason for this is that they lack the confidence to build their own.

At its core, Bizness Apps’ mission is to allow anyone to start their own local marketing company and help local businesses get online, go mobile and manage customers through its three main products. “In the end, we’ve found that small businesses would rather have marketing services built into this kind of platform,” the CEO tells us, “even if it means paying an extra fee.”

Today, the company has 5,000 active resellers around the globe, hailing from over 50 countries and offering services in dozens of languages. Just as its reseller program aims to solve related pain points by giving clients the ability to learn how to market their business and how to approach and sell to small businesses â€" beyond offering branded apps and websites â€" looking forward, Gazdecki wants to include more features that help customers get more value out of the platform.

Its resellers often add custom features depending on the market and the client, like a mobile food ordering system, payment gateway and menu integrations for restaurants â€" so that they don’t have to fumble with receipt printer integrations, among other things. Down the road, the CEO says he wants the new website builder to incorporate features like online food ordering, reservations and eCommerce tools.

The company offers its original DIY app product for $59/month for each platform, which includes a native iPhone app, Android app, iPad app, Android tablet app and mobile website, and will be selling its website builder under a three-tier pricing scheme, starting at $10/month under its “small business” option. Its business tier will run $100/month, and includes 10 websites, marketing materials, sales training and a free Bizness CEM account, whereas its “White Label Reseller” plan includes all of the previous options, with the ability to create an unlimited number of websites.

For more on Bizness Web, find it here.

Bizness Apps makes iPhone, Android and HTML5 apps affordable and simple for small businesses. We’re a do-it-yourself Mobile App platform that allows small businesses to easily create, edit, and manage an app online without any programming knowledge needed. The mobile app industry is exploding and only large businesses can afford to create a mobile application. This is where Bizness Apps comes in - we’re allowing small business to create an app for as low as $39 a month with no...

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Where Webvan Failed And How Home Delivery 2.0 Could Succeed

Editor’s note: Peter Relan was VP of the Internet Division at Oracle, founding head of technology at Webvan from 1998 to 2000, and founder of the YouWeb Incubator program in 2006 and the recently launched 9+ accelerator program. Follow him on Twitter @prelan.

Webvan is well-known as the poster child of the dot-com “excess” bubble that led to the tech market crash in 2000. Business schools around the nation study Webvan’s overly ambitious rush to the biggest IPO to date in Silicon Valley, as a prime example of what to avoid doing while scaling. Ironically I recall guest teaching the first case study on Webvan at Stanford, the day before the market crash in 2000. While it’s true that the impatience to go public helped steer Webvan off a cliff, the once darling company made two other critical, but often overlooked mistakes.

Are those mistakes being repeated a dozen years later in the slew of activity â€" even excitement â€" in the home-delivery space? If not, why? Is it simply a matter of investors needing a decade to reconsider home-delivery plays? Or is there more to it? Are today’s home delivery specialists realizing that they can avoid these mistakes to slowly but surely conquer an untapped market?

Mistake No. 1: Wrong Target Audience Segmentation And Pricing

Webvan’s go-to market strategy in each city was: the quality and selection of Whole Foods, the pricing of Safeway, and the convenience of home delivery. In other words, it was a mass-market strategy (unlike Whole Foods which is an upmarket strategy). The target audience therefore was not selected to be “price insensitive.” If you advertise yourself at Safeway pricing, you will attract a price-sensitive audience. Whereas those who go to Whole Foods are more price-insensitive: They believe they are getting a higher quality of selection and product, so price matters less. 

The customers who would have made Webvan profitable were those who said, “Wow, I can get quality selection and products delivered to my home: heck I’ll pay anything for that.” Yes, that’s a smaller audience than a mass-market audience, but after all, even smartphones started out as a tool for stockbrokers and corporate executives before becoming mass-market devices. Webvan should have priced at least 30 to 40 percent higher and ignored the customers who didn’t want to pay those prices. A company must be clear on what it is providing and price for it â€" Webvan was providing a luxury; an ability to order sushi and organic fruits directly to the home, and thus it shouldn’t have tried to compete with Safeway’s prices.

Mistake No. 2: Complex Infrastructure Model

Webvan decided to build its infrastructure from scratch. I was responsible for the hundreds of engineers who built the software algorithms to make five miles of conveyor belts in our Oakland Distribution Center (DC) transport 10,000 totes around the DC daily. After conveying the item to automated carousel pods, which would spin like juke boxes to transfer the item in question into the tote, the entire process would rinse and repeat until the order was completed and integrated at the shipping dock. Additional real-time inventory management algorithms would make sure that if a customer ordered milk on the website, it was currently in stock; software algorithms would route delivery vans to multiple delivery stops while minimizing drive time; and software on Palm Pilots in drivers’ hands would deal with real-time delivery confirmation or returns. 

Combining mistakes Nos. 1 and 2 was a dangerous cocktail of the lower margins of mass-market pricing, and colossal capital expenditure associated with complex infrastructure. This cocktail, combined with mistake No. 3, pushed Webvan over the edge.

Mistake No. 3: Too Much Money, Expanded Too Fast

This is the more well-known and final mistake. Most people view Webvan’s capital raise of $800 million as excessive and ill-spent. The pressure to “grow big fast” in those days blotted out all other considerations. This desire for massive, immediate growth was so intense that we started launching in new cities on the thesis that the unit economics of home grocery delivery would be profitable. Our DCs and vans rolled out in the Bay Area, Seattle, Chicago, Atlanta, and each city’s capital requirement was well over $50 million just to start. We touted our 26-city expansion plan, signing a $1 billion Bechtel contract to build several state-of-the-art warehouses worth more than $30 million each.

Today the most popular acronym in the valley is MVP (Minimum Viable Product). In the dot-com era it was GBF, or Get Big Fast. The problem was the Bay Area model was taking a long time to iron out, and in the meantime, all our cities were burning through the cash. Our entire strategy depended upon the reassurance that the Bay Area model would inevitably become successful. Maybe it would have eventually succeeded, but we would never find out: With the market crash of 2000, capital dried up and the company was starved into a forced asset sale to Kaiser Permanente in 2001. The infrastructure in Oakland, as well as the software systems, were bought by Kaiser in order to deliver drugs and supplies to its hospitals.

Are Today’s Home Delivery 2.0 Startups Doing It Differently? 

Instacart and Postmates are both avoiding the infrastructure model mistakes. They are leveraging the existing infrastructure of grocery stores, not building their own infrastructure. They focus on two areas, delivery and customer service, and concentrate their resources on excelling in those departments. Good start: Mistake No. 2 avoided. 

Instacart prices its items very cleverly. Rather than charging a delivery fee, they simply “mark up” the prices on the items so the “real” prices are not visible. In a certain sense they are following the target audience and pricing mantra I think Webvan should have used: They are focused on convenience-oriented customers who will ignore the mark-ups. Those who follow and remember the hundreds of prices of grocery items are not likely to be their target audience. Plus they charge a small delivery fee of $3.99, which in itself is not enough to pay for the unit economics, but along with the price mark-ups it probably works. And they have an Instacart Express model like Amazon Prime, which makes sure that if you order enough and subscribe for $99/year, delivery is free. Sir Michael Moritz of Sequoia was on the board of directors of Webvan, so he knows the math well and is an excellent adviser to Instacart.

From what I can tell, Postmates doesn’t directly mark up prices, but it recognizes that delivery economics is very central to overall unit economics. So they charge a delivery fee based on their proprietary algorithm for determining how “expensive” your delivery will be. It’s a classic “service platform” model, like AWS almost, where they build in a margin per delivery requested. That way they won’t lose money on orders overall, even though any particular order may not be profitable.

Instacart and Postmates have studied the history of home delivery. They are avoiding mistake Nos. 1 and 2 that Webvan made. Now only two questions remain. How profitable will their models be? And how quickly will they expand nationally. Stated otherwise, will they avoid mistake No. 3? Time will tell. I would love to hear your opinions.

[Images: Shutterstock, Flickr/Mark Coggins]

Instacart (YC S12) is a same-day grocery delivery startup offering delivery in as little as 1 hour. Focused on delivering groceries and home essentials, the company is looking to expand to other verticals very soon. Instacart already has over 70,000 items from local stores in it’s inventory. Customers can choose from a variety of local stores including Safeway, Trader Joe’s, Whole Foods and Costco, and can mix items from multiple stores into one order. Instacart is live in the San...

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Postmates is a revolutionary same day urban logistics & delivery platform. It enables anyone to ship any product within a city in under one hour. In April 2012 Postmates launched their new Get It Now service in closed beta. Get It Now extends the Postmates delivery service with the ability to purchase goods on behalf of the user at any retail store or merchant in a city. The company was co-founded by Sam Street, Sean Plaice and Bastian Lehmann...

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TechStars London's Debut Demo Day: Meet The Ten Startups Who Presented

TechStars London held its 2013 Demo Day today, with a cohort of ten startup presenting, having graduated from the bootcamp-style 13 week program.

The startups presenting span a variety of industries and trends â€" from collaborative consumption to mobile payments and financial services, to game development and audio and video search.

TechStars previously said it received four times more applications to its London program than under the old Springboard operation, with a total of 1,302 applications from 72 different countries.

We’ll be breaking out our top picks later, but in the meantime here’s a round-up of the 10 startups that presented:

 Iptvbeat

Real-time analytics for TV viewing habits, delivered in a web dashboard form. The Slovenia-based startup was set up last year to serve national broadcasters, and reached 100,000 households thanks to those partnerships. Currently, the startup covers 250,000 households (with a third partnership announced today that will enable them to reach 1 million), already far more than competitors Nielsen and TNS, and it provides all the data live to broadcasters, which means they can actually see churn rates and watch users changing the channel or tuning in as it happens. Unlike existing solutions, Iptvbeat also enables tracking of time-shifted, DVR and TV Everywhere viewing, which is increasingly valuable data for TV service providers, broadcasters and advertisers.

Modabound

Monetising unworn clothes by building an online marketplace for women to buy and sell clothes locally, connecting them with other women in their area. Creating and publishing listings works with the same mechanics as posting a picture to Instagram, and payments are handled in-app via a third-party transaction processor. Modabound collects a commission on each transaction. Different from most online fashion resale marketplaces because of the tight focus on local. Modabound is targeting the Sex In The City Set first (aka New York City).

Moni

Person-to-person mobile money transfer platform, aimed at simplifying the international remittance market. Moni is taking on the likes of Western Union, PayPal, banks and others who are already offering people the ability to send remittances to family in other countries in a market that is worth billions of dollars. The claim is that they are able to do it in an easier, more cost-effective and more ubiquitous way than any of the existing, big players, with a four-step process that lands money to the recipient’s bank account within 24 hours of it being sent. Co-founder Laurence Aderemi is an ex-Googler, where he was most recently head of mobile partnerships until leaving to form Moni; his co-founder Fernando Saturno had been an exec at Yahoo. Aderemi says that he was inspired to start Moni when finding out what a nightmare it was to send money to his mother in Nigeria. They have a prototype and regulatory approval in place already.

OP3Nvoice

Pronounced “open voice”, OP3Nvoice is a platform enabling developers to add audio and video search to any application, to make that content searchable. It claims to be the “only” API to do voice and video search in this way, and say it’s providing “enabling technology to a whole new ecosystem.” They see opportunity for the tech in a huge number of verticals, from emergency response, to customer support, to investment banking, all of which they claim are looking for ways to unlock the value of the unstructured data housed in hours of audio and video recordings.

Osper

Digital tools to teach young people how to manage money responsibly. The company has spent the past year speaking to families in the UK trying to find out how parents talk to their kids about money. It’s currently looking to recruit more families with kids to test its platform. The ultimate aim of the company is to help young people manage their own money with confidence (they describe themselves as a sort of “bank for young people”), but they appear to be pretty early stage, and focused on recruiting talent.

 PayMins

A platform enabling online businesses to easily add the ability to accept mobile operator billing payments in a single click, with the idea that the easier experience will increase mobile customer conversion rates. “The only way you could get lower friction is by buying the thing just thinking about it,” said co-founder Patrick Walsh. The value proposition of PayMins lies in its ease of implementation for developers; “a single line of code” is required to get it up and running. As for why it has an advantage in an admittedly crowded space, the company has successfully lobbied government in the UK to change regulations around accepting payments to make sure its model is applicable, for one.

Peerby

A peer-to-peer platform for borrowing items you need from your neighbours. It’s a play on collaborative consumption that intends to capitalize on the fact that people are unaware that it’s possible to borrow things from others they don’t know, but seem to be keen on doing so with a proper infrastructure in place. The startup already has a strong foothold at home in the Netherlands, and is looking to expand to more neighborhoods internationally. “The world is moving to an economy of sharing, and Peerby is the next step in that,” co-founder Daan Weddepohl said today.

PlayCanvas

Web-based game development tools, enabling developers to collaborate in real-time, find dev talent within the community and publish games hosted on PlayCanvas’ servers. PlayCanvas also offers a marketplace for instant distribution, and since its games are HTML5-based, they’re instantly playable in any browser on desktop or mobile. It also offers APIs for monetizing the games. Games built with PlayCanvas appear much more advanced than browser-based games of old, based on what they showed off on stage.

QuanTemplate

A cloud-platform taking the insurance trading market online, including document management, risk analytics and regulatory reporting. QuanTemplate says that the market they’re address is worth $4.7 trillion, and has been left behind compared to other financial trading industries. Brokers still physically queue to meet underwriters, for instance, and deal with reams of actual paper they lug around.

VetCloud

SaaS and CRM for vets to help with front-end office management, appointment tracking and providing portable electronic health records for pets, with a long-term goal of becoming a big data platform for the pet industry and animal agriculture. In some markets, the startup is parntering with local government, and hopes to be able to eventually help contribute to the public interest, by doing things like detecting outbreaks of bovine maladies as soon as they start to appear, for instance.

Jeff Bezos, Switchboard Operator

I drive a rental car through the rich gray green of overwatered, undersunned Seattle suburbs that border a city rising like a prize at the end of the road. The trees are the color of dried oregano, the air dense and wet. I’m going into Amazon country to meet Jeff Bezos, the king of this lush land (these days the old king, Bill Gates, is resting comfortably by the water saving the world).

It’s my first time here â€" I’ve been covering Amazon products for years and our household could probably be re-papered in Amazon-branded cardboard boxes â€" and I’m excited to make the man’s acquaintance. I’m led into a room by an assistant and there he is, impeccably dressed in close-fitting jeans, a dark button down, and wingtips that looked like they came out of the closet of Rick Deckard, Blade Runner. In preparation I asked around to see what folks had experienced while interviewing him. One reporter noted that he rarely wore belts. This time he was wearing a belt.

“They were kind enough save a few surprises that I can share,” he says, offering me a seat in a sunny, well-appointed meeting room with a whiteboard and a television. He’s really excited. It’s rare for him sit down with media like this. Usually he launches on stage and this is a unique opportunity to hear the man who shipped a million (plus) books.

“A third leg of our strategy and vision is going to reveal itself,” he says.

I was ready. He got up to scribble on the board like a professor in a catch-up session. He outlined the three legs of Amazon’s success â€" the keys to the kingdom in blue dry-erase ink. “We sell premium products at non-premium prices. We make money when people use our devices, not when they buy them. I see people with five-year-old kindle ereaders and I don’t have to be discouraged by that. They don’t have to be on the upgrade treadmill,” he says.

“The third one, which is new, is the intersection of customer delight and deep integration throughout the entire stack. One of the hardest and coolest things that you might do occurs right here. When I talk about the entire stack I’m thinking about hardware at the bottom, the OS, the key apps, cloud, and even services on top of that.”

That’s when the new products came out. He was here to show me the new Kindle Fire HDX as well as the new Kindle Fire HD. Like a proud parent he pulls them out of a leather satchel and places them, one after the other, in front of me. I had seen them a few minutes before but the way he reverently handled gave them fresh meaning. This was a father showing off his kids and he was duly proud. He wanted to show me what he was talking about when he spoke of starting at the bottom and working through the stack.

He picks up a Kindle HDX and swipes down from the top. A list of icons appears. There was a new, unfamiliar one that looked like a little life-preserver.

“We’ll click on this button here,” he says. “It’s called Mayday. What do you think that will do?”

A little window pops and a smiling Amazon tech appears. “Hi, I’m Dylan. I see you activated Mayday. How can I help you?”

It was a canned demo, to be sure â€" Dylan definitely knew his boss was about to call â€" but it was a fascinatingly human moment. Dylan kept smiling throughout.

“Hi Dylan, it’s Jeff here, I’m going to show off Mayday,” says Bezos. “One of the things happening with these devices is they’re sophisticated enough and they have quite a number of settings.”

He calls Mayday “on-device tech support.”

“Dylan, first of all, move yourself on the screen. Maybe move yourself onto the upper right hand corner for a second.”

Dylan’s window moves into a corner.

“What’s a hot game that everybody’s buying these days?” he asks.

Dylan brings up Angry Birds Star Wars II. Bezos, the guy who runs all this stuff, needed a little help picking a game.

“We think mostly people will want to be taught how to do things but we can show them as well. This service is 24/7, it’s free, and we set an internal goal of answering Mayday sessions in 15 seconds or less.”

“Doing this requires a lot of heavy lifting.”

Bezos says he’ll be ready for Christmas morning when support usage spikes. He talks about how difficult it is to do tech support over the phone and how hard it is to get this thing to work. There was a concerted effort to build this from the core of the device, all the way down to the packets transmitted to ensure a good connection.

“Are we in charge of our devices or are our devices in charge of us?” he asks. With Mayday he hopes to put control back into the hands of the users.

“What are you guys now? Are you a hardware company now or services company,” I ask.

“Yes. People always ask me this one. ‘Are you a technology company or a reseller?’ And I would say yes. We’re a technology company and we use technology and everything else to help our customers.”

He says Amazon is full of talent. “This stuff comes from everywhere. We have people from our video, music team, or ebooks team, Lab 126 in Menlo Park. We have people writing software in many places.”

“Good hardware is hard. Getting that hardware to that weight, getting 11 hours of battery life, 17 hours of reading. These things were very hard. But the software is very hard, too.”

He laughs. He’s got a great laugh. I can imagine it booming through an Amazon warehouse somewhere, making someone flinch: Bezos is in the room.

“There’s really nothing easy in that whole stack. Hardware is hard, the cloud integration is super hard, layer services on top like tech support, nobodies attempted to do that.”

“How would feel if you never had to ship a CD or a book again?” I ask. I wanted to know if he would be happy never having to ship another physical box.

“I think that’s going to take a very long time. What we’re finding right now is that even our heaviest Kindle ebook customers are still buying physical books. We’re seeing a lot of vinyl sales.”

“Clearly if you look far enough into the future, I don’t know how many years, it’s very rapidly going towards digital items. Our point of view is that we did the very best we can in the physical media products and the digital media products and our customers choose what they like best.”

“But you’re a guy who has a bunch of warehouses. Would you be happy on that day?” I ask.

“To take it out of philosophical into the practical, we sell a lot of shoes and diapers. For Amazon, it’s not just about media products. The vast percentage of what we do is non-media products. It’s mixers, diapers, and shoes. It’s stuff you can’t download. Even the very best 3D printers can’t print a tablet.”

“I think 3D printing is one of those incredibly exciting arenas. We’ll have to see how it interacts with Amazon but it’s two early to see. We have Createspace to make books and we do similar things for music CDs,” he says.

“In terms of local, is anything changing there?”

“We’ve been doing Amazon Fresh in Seattle for a number of years and we recently launched it in Los Angeles. We’re excited about it. It’s still super early. It’s an entirely new last mile logistical chain, even upstream from that there are quite a few new logistics. That’s why we experimented with it in Seattle for so long.”

“It’s so cold here, so you can keep the food fresh,” I quip.

That laugh again.

“But you gotta keep it dry,” he says.

Who is Jeff Bezos? I try to break the ice at one point by saying my wife is having trouble with her diaper subscription. We get a box of diapers monthly through Amazon and she’s been getting them in the middle of the month. I ask if he could handle some customer support and get that changed.

“I’m a good switchboard operator. I know exactly who to call,” he says. The answer struck me as being surprisingly simple and accurate. Amazon has 97,000 employees and Bezos is at the center, making calls. His focus is constant contact â€" from emails that offer discounts on items you drunk browsed idly one Friday (the Canon G15 pops up in my mailbox every few days simply because I looked it once, long ago. Tellingly, I don’t even care about the intrusion.)

Amazon isn’t a tech company or a reseller or a services company. It’s a centralized repository for commerce. Products flow in and leave with as little friction as possible. When you have a problem you simply write a few lines and your return is processed. When your Kindle breaks, you press a button and Dylan pops into your world and helps you out. When something slips, Bezos knows how to route around the damage.

As I leave the appointment, I think about getting some Bezos-style wingtips. I’m almost certain they’re there, somewhere, waiting for a click. That’s what he does best â€" getting things to people.

It’s too early to tell if those diapers are going to hit at the beginning of the month, but I like to think that Bezos made the call.

Singapore App Maker MyHero Raises $10M Series A For Its Stock Market Trading Gamification App, TradeHero

An app that lets people play the stock market without the risk of losing any real money has turned its virtual cash game into a pile of actual Benjamins, by closing out a $10 million funding round â€" one of the largest Series A rounds for a consumer startup in the region, it claims.

The app in question, TradeHero, is made by a Singapore-based developer MyHero. Investors in the round are Kleiner Perkins Caufield Byers China fund (KPCB China) and IPV Capital.

TradeHero users start out with $100,000 in virtual cash to spend, choosing which and how much stock to ‘buy’ â€" there are no live trades going on here, it’s a simulation â€" and getting to see whether their trading decisions would have panned out IRL because the app follows actual market movements.

Dinesh Bhatia, CEO and Founder of MyHero Ltd, the holding company for the TradeHero iOS app, describes it a “financial literacy tool” that uses gamification to engage users and help them learn how to improve their trading.

It’s part ‘fantasy football’ style game, part trading learning tool, part stock market tip resource â€" the latter aspect because TradeHero’s most successful traders become part of a leaderboard that other users can pay to follow so they get the inside track on their (successful) trading decisions (leaderboard members also share in these winnings â€" giving them an incentive to keep virtually trading on TradeHero’s platform).

Has TradeHero made Bhatia a better trader? I ask because he got the idea for the app after losing “a lot of money on the stock market” by betting on Palm’s webOS rebirth. Oops… “It has,” he says. “If you followed me [on TradeHero] I’m up 50% from January this year when the app launched. The market has been good this year, but still that’s pretty good. But I’m nowhere near the top [of the TradeHero leaderboard].” Ergo, there’s still lots to learn.

Other aspects of TradeHero’s business model include in-app purchase options, to monetise engaged users â€" by offering them things like the ability to buy more virtual cash so they can increase their liquidity, or the ability to reset their portfolio entirely so they start again afresh. TradeHero also has a b2bc revenue stream via tie-ins with financial companies wanting to reach an engaged community of users â€" provided whatever they’re trying to get access is relevant to its audience, says  Bhatia.

“Most of our [learn how to play the stock market] rivals do live trading [such as the eToro social network]. We are more about monetising off the information brokerage. In a way we’re focusing on the research â€" we can call it micro-research â€" which is user-generated… rather than focusing on the trading. These are tips that you can then use, once you subscribe to TradeHero to actually bridge the gap to live trading, and hopefully make better decisions,” he adds.

So now it’s landed a $10 million Series A, what does MyHero intend to do with the money? Bhatia says it plans to spend the funding on a big marketing push for TradeHero over the next 18 to 24 months. The app launched seven months ago, and has since built up a user base of around 280,000 â€" three-quarters of whom he says are active on a bi-monthly basis, emphasising that those figures have been achieved working with relatively limited resources.

TradeHero was actually incubated out of TNF Ventures, taking in a seed round of around $500,000-$600,000 about a year ago, with backing from Singapore’s National Research Foundation. Landing such large follow-on funding will allow it to ramp up its marketing efforts on several fronts, he says, including targeting user-acquisition effects at markets such as the U.S. and Europe which it hasn’t really had the “firepower” to focus on to-date. It’s also planning to translate the app into more languages to help grow its reach further.

Markets where TradeHero has been getting traction to-date include Asia and South America, with Bhatia specifically singling out Thailand, Singapore, India, Mexico, Vietnam and also the U.S. as places where it’s garnered a following. “TradeHero is available in more than 200 countries. We’ve been number one in the finance category on the iOS App Store in 75 countries. And top 10 in about 100 countries right now,” he adds.

Part of the new funding will go on ramping up the startup’s headcount, to support its marketing efforts and market growth push. In the latter area, China will be a key focus over the next three to six months. ”We’ve got our sights on China. China has a lot of online accounts, brokerage accounts. The interest is potentially very, very high in something like this,” he says. ”We have tried and tested in markets like Hong Kong, Singapore and Taiwan where the mindset is very similar. China is a very, very big market for us.”

The Series A round is actually double the amount TradeHero has previously said it was aiming to raise this year. Expect the extra money to go towards a new, presumably complementary app â€" although Bhatia won’t comment specify on what it’s working on yet.

But fuelled by at least some of that $10 million â€" and the addition of an Android app to expand TradeHero’s mobile platform reach â€" this time year he says he’s hoping the app will have amassed a user-base that’s “in the couple of millions”. ”We’ve done close to 300,000 users now with seven staff, with a very limited budget, with just iOS. I’m very confident that we can hopefully be in the two to four million user range,” he adds.

Founded in 2012, TradeHero’s mission is to provide a platform for traders to monetize their investment expertise, by democratizing trading in a social and gamified mobile app. TradeHero is a free stock market simulation app, which draws real-world data from stock exchanges to create an unrivalled global social investment network. Users can compete with friends from their social networks, or on the global leaderboards with users from across the world. The app brings novice and knowledgeable traders together, allowing...

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Disposable Phone Number App Burner Grabs $2 Million In Seed Funding

Before the world was informed of the massive and invasive government spying programs run by the NSA and other countries, a mobile app called Burner appeared on the scene offering users disposable phone numbers which they could use to protect their privacy, or for other purposes. For example, the anonymity Burner provides makes sense for things like Craigslist postings or online dating, for when you need a virtual number while traveling, or for cheating on your…oh, um well, you know…other stuff. Today the company is announcing $2 million in new funding, led by Founder Collective and Venrock, along with a redesign for iOS 7 and updated feature set.

Other investors in the round include TenOneTen, run by L.A. angels Gil Elbaz and David Waxman. David Frankel of Founder Collective and Marissa Campise of Venrock will also now join Burner’s board.

Previously, the company had raised angel funding from 500 Startups, David Cohen, Ted Rheingold, and others, bringing Burner’s total raise to date to approximately $2.5 million.

The app, developed by a startup called Ad Hoc Labs, is today available on both iOS and Android, and is fairly simple to use. To get started, you pick an area code for your Burner number and tell it which phone number to forward things to. The app lets you both place and receive calls, as well as send and receive SMS text messages. In addition, you can set up custom voicemail greetings, and configure different ringer and SMS notifications for each burner number you use.

With the new version of the application, the app has an iOS 7-friendly redesign with a focus on improved usability, Now the dashboard is the primary view in the application, allowing users to better manage multiple numbers, which can each have their own greetings, and voice and text message centers. Other improvements are focused on performance, as related to texting, address book integration, and number lookups.

The company generates revenue by selling packs of credits to users. For free, users get one-time trial for 1 day or 5 free voice calls or 15 free texts. To use the service more, they have to purchase other options that let them use Burner for a week or a month, or to make more calls or send more texts. This is where things can get a little murkier, since you don’t just buy a Burner pack for a set dollar amount, you have to purchase “credits” which in turn can be applied toward the various packs Burner sells.

Competitors have taken advantage of this potential confusion around pricing to launch their own alternative apps. Burner even engaged in some finger-pointing in the past, referring to one competitor, Hushed, as “an obvious clone.” Hushed built on Twilio’s SDK, allowing it to quickly work in more countries, while Burner has instead limited itself to markets where it can offer numbers that look and act “real,” â€" that is, they respect the formatting and prefixing that some countries require, and they all support SMS. Today, it works in the U.S. and Canada.

While co-founder Greg Cohn declined to share current user numbers, he would say that the company has seen steady month-over-month growth and revenue since making the app a free download, as opposed to a paid app that came with pre-paid credits. These days, when users return to the app after their initial free calls and texts are spent, they have to convert to paying users to continue to use Burner, and many do. (The app ranks just over #200 in the Utilities category on iOS, and around the same in Google Play’s Communications category.)

Cohn also says that what’s interesting about Burner are the long-tail use cases. “We really see everything, from dating and Craigslist and things like that you might expect, to teachers, lawyers, musicians, midwives, people posting lost-dog posters, and even celebrities,” he says. Those who use Burner for Craigslist and other user-to-user transactions represent Burner’s largest customer base, but for a lot of Burner’s users, it’s not just about having a throwaway number on hand. “Knowing you can burn a number if you want to is sometimes more important than actually burning it,” Cohn explains.

Longer term, the focus for Burner is on more than just disposable, private numbers, but on building technology where phone numbers are smarter and act more like software, he says.

The company today has fewer than ten people, and with the additional funding, they will begin hiring immediately, mainly engineers. Plus, having its own revenue streams to tap into will allow the company to also focus on other growth opportunities, including customer acquisition and distribution.

Burner’s funding comes at a time when there’s a surge of growth in the mobile messaging space with dozens of applications fighting to become the software-based alternative to traditional phone behaviors like calls and SMS. These range from consumer-focused, social apps (e.g., Whatsapp, LINE, Snapchat, Viber, WeChat, Path, etc.) to those aiming for business customers (e.g., SendHub, Ansa, etc.), and everything in between (e.g., Voxer, GroupMe, Hangouts, etc.). Burner fits in this large lot as the tool to handle everyday transactions via your mobile phone, where you need to communicate with those who aren’t friends, family or colleagues.

“We’ve barely scratched the surface of privacy and identity on mobile, and carrier telephony is a ridiculously large market that doesn’t do innovation too well,” says Cohn. “There’s a lot of opportunity here, broadly speaking, and we believe our approach to having a voice-and-text communications vector that’s not carrier- or social-network-based is very attractive to a lot of people â€" as evidenced that people are willing to pay us for it.”

Burner is a privacy layer for your phone, providing alias phone numbers at the push of a button.

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Elop Conspiracy? Not So Much

If you read the news yesterday, you might have run into a few articles discussing the exit of former Nokia CEO Stephen Elop, the terms of his exit, the cost of said exit, and how he was a mole in the Finnish company determined to bring it down in flames.

Well, maybe not that last bit, but people did write it. There is some thought in the market that, perhaps, Elop (a former Microsoft employee) purposefully tanked Nokia, thus forcing a sale to an outside party (in this case, Microsoft), triggering a bundle of cash for himself. Fun to think about, but is it fair? Let’s find out.

As the Financial Times noted earlier this week, “Mr Elop’s contract â€" according to a 2012 SEC filing â€" stipulated that if he resigned after a change of control he would be entitled to 18 months of compensation and” accelerated equity vesting.

So, if Elop left the firm following a “change of control” he was entitled to a chunk of money, coming in the form of salary, management incentives, and stock. But he had to quit. The accelerated vesting portion of the above matters as, it turns out, that’s the largest piece of the total compensation package.

Nokia changed its contract with Elop at the same time that the Microsoft deal came together, essentially altering the wording so that it would allow Elop to receive the accelerated vesting without resigning. Note that in the above, Elop had to resign.

He didn’t. Instead, he stepped down from his role as CEO to become Nokia’s Executive Vice President of Devices & Services group (what Microsoft is buying). We now turn to an SEC filing to get our heads around the situation. Strap in for some dry English:

We entered into an amendment with Mr. Elop to his service contract, which became effective on the date of the Purchase Agreement. Under the terms of the amendment, Mr. Elop resigned from our Board of Directors and from his positions of President and Chief Executive Officer as of the date following the date of the Purchase Agreement, September 3, 2013.

This is as stated above: Elop had his contract modified at the time of the Microsoft deal. Nokia, below, enacts changes that to allow him to not resign, and still get the equity en masse.

What you need to get from the next two paragraphs is the nuance of the previous contract situation between Nokia, and Elop [emphasis mine]:

Under the amendment to his service contract, Mr. Elop agreed that the change in his position (described above) would not entitle him to terminate his service contract for cause under the terms of his service contract, which provide for payment of 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards upon such a termination by Mr. Elop for cause.

Under Mr. Elop’s original agreement, if Mr. Elop’s service contract was terminated without cause, or he resigned as a result of a significant reduction in his duties and responsibilities, in either case within 12 months following a change of control, he would be entitled to receive 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards.

Elop would get the money, however, even if Nokia didn’t sell itself, or a big part of itself, which matters, as it indicates that Elop would have been entitled the funds regardless of the sale to Microsoft (this cuts at the conspiracy theory a bit, of course):

Under his original agreement, Mr. Elop would be entitled to these same benefits if he terminated his employment for cause at any time regardless of a change of control, but would be entitled only to the same cash severance benefit (but not the acceleration of all equity awards) if his service contract was terminated by Nokia without cause prior to a change of control.

So, if Elop quit “for cause” he got the full bank account, but if he was fired by Nokia “without cause” or change of control, he only got the cash and not the stock. So, being fired would have been financially detrimental to Elop. That’s reasonable.

However, under the change of control provisions of Mr. Elop’s agreement as amended, Mr. Elop may terminate his employment on or following the Closing (and assuming he has not materially breached his service contract prior to such termination) or Nokia may terminate his employment without cause prior to the Closing, and in either such case, Mr. Elop will be entitled to receive 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards.

Now, however, regardless of how Elop leaves, he gets the full accounting. Generous? Slightly, but keep in mind that the new agreement was inked at the same time the deal with Microsoft was. So, the risk here was essentially nil, with Nokia stating that Elop would be compensated as he would have if he had quit.

Here’s the bit about how much money Elop gets his hands on:

Although the actual amount of these termination payments and the value of equity acceleration will not be determined until such termination occurs, using compensation values and the Nokia closing share price of EUR 4.12 per share on September 6, 2013, and an assumed Closing Date of in the first quarter of 2014, such pro forma amounts are estimated to be approximately EUR 18.8 million in the aggregate. This amount includes: base salary and management incentive EUR 4.1 million, value of benefits EUR 0.1 million and pro forma value of equity awards EUR 14.6 million.

Who pays the tab? Interestingly, Nokia is only paying the tip, with Microsoft picking up 70 percent of the costs at hand.

Once the actual amount is determined, pursuant to the terms of the Purchase Agreement, 30% of the amount (EUR 5.65 million) will be borne by Nokia and the remaining 70% of the amount (EUR 13.17 million) will be borne by Microsoft pursuant to the purchase price adjustment mechanism described in “The Purchase Agreementâ€"Purchase Price Adjustments” beginning on page 41. Mr. Elop is subject to a covenant restricting him from working for certain specified competitors of Nokia, provided that upon Mr. Elop’s commencement of employment with Microsoft, Nokia will waive his competition restriction as to Microsoft.

Why all the above? It’s a good question. The Financial Times has notes from Risto Siilasmaa, the chairman of Nokia’s board, explaining their thought process: “He explained why Nokia had amended Mr Elop’s contract at the same time as the Microsoft deal, saying that otherwise Mr Elop had the right to ‘call a breach if we change[d] his role considerably’”

So, bumping him down from CEO would have been an issue (he could have deemed the demotion of “breach” of contract), and (as noted in the first quoted paragraph of the filing), both Nokia and Elop felt that the move didn’t count as a resignation. So, to keep the deal train on the rails, the contract was amended to ensure that Elop got his full potential exit stash, while not forcing him to actually resign.

Note that in the above filing language, if Elop resigned, he was entitled to all the money. So, Nokia had incentive to keep the guy around. Thus, the late contract changes solved all problems: Nokia got to keep Elop until closing the Microsoft deal, Elop got all his money, and the sale had no legal hangups.

The kicker for Nokia is that it got Microsoft to finance 13.17 million Euros of the package. The equity that Elop gets as a result of not resigning and the contract shuffling is 14.6 million Euros. So, Nokia is paying Elop to stick around using someone else’s bank account. Nice trick. Microsoft has essentially unlimited foreign cash reserves, so it won’t miss the few dollars.

All the above is a boring and tedious exercise in corporate contracts. You are welcome. We now turn to the second question.

Yes, But

If the last-minute changes to Elop’s contract were boring and not impactful (except to Elop and a single Microsoft bank account), what about the supposed alleged initial sin of having performance incentives for Elop that could be triggered by a sale of Nokia itself?

We must rewind slightly: Nokia screwed up. Risto Siilasmaa (again, Nokia’s chairman), told the press that Elop’s contract was all but the same as the contract of his predecessor. That wasn’t true. It is quite likely true that the two were greatly and substantially similar, but, there was a key difference: Elop gets quite a bit more money than his predecessor would have in similar circumstances.

In fact, if I have this straight, the CEO before Elop would not have been entitled to the quick vesting in the event of a sale, change of role, resignation, or breach of contract by Nokia. So, Elop is doing better than the guy before him would have in the event of a sale of Nokia, and would have come out ahead â€" again, it appears â€" in other circumstances, as well.

This is where the conspiracy cranks to over 9000: Nokia baked financial incentive into Elop’s contract should he sell the company. Therefore, didn’t it incentivize him to sell the company? Oddly, not really. Recall this: “Under his original agreement, Mr. Elop would be entitled to these same benefits if he terminated his employment for cause at any time regardless of a change of control.”

The man had the same bucket of cash if he checked out without selling a damn thing.

It appears instead that the sale of the company was one of several contingencies that were discussed as potentialities, and Elop wanted to have his financial ass covered for all of them. The dollar amount, please recall, ain’t that much: $25 million or so between two companies moving more than $7 billion across the table is crumbs. And Elop will be taken care of in Redmond as well, where he might become the new CEO.

So, to believe that there is a material conspiracy at hand you have to believe that Elop negotiated his contract at the start of his tenure as CEO of Nokia with the aim in mind of fucking the company, that he wanted a clause that would allow him to hurt Nokia until it was sold off, so that he could pocket $25 million.

Kicker: He was a well-paid CEO. Note that his salary as listed above for an 18-month period was 4.1 million euros. Kill the company for another 13.7 million euros that he would have received to boot if he had stayed or quit? It just doesn’t feel reasonable.

Misplaced Anger

So much of the vitriol toward Elop concerning the payment appears to be misplaced anger: People are utterly pissed at the decline of Nokia as a global smartphone power, and they place that blame on Elop. Therefore, for him to receive a single damn dime is too much for them.

And, as most folks don’t take the time to dig into the weeds to uncover the details, it appeared to some that he was being bought off for selling the local corporate crown jewel.

When Elop came to Nokia, he released the now famous (infamous?) Burning Platform memo that essentially stated that if Nokia didn’t dramatically change its operations, it would die. Full stop. Dramatic language? You bet:

I have learned that we are standing on a burning platform. And, we have more than one explosion â€" we have multiple points of scorching heat that are fuelling a blazing fire around us. [...]

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind. [...]

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

It was almost brave in its stern condemnation of Nokia’s market position and prospects. Elop and the company’s board eventually picked Windows Phone as their future platform, a decision that brought with it a huge amount of Redmond cash. Nokia now controls around 90 percent of the Windows Phone market, which could hit 10 million devices in the fourth calendar quarter of 2013.

Nokia is diminished, and will now be snapped into pieces and sold off. Fallen giants don’t always die as a unit; in this case, Microsoft is buying body parts instead of a corpse. I bring all this up to indicate that Elop didn’t act in a manner that befits the idea that he was out to hurt Nokia.

That would have been simple: Do nothing and watch it die.

â€"

To sum, the recent contract changes to Elop’s deal with Nokia were to prevent breach, and not force him to resign before exiting to Microsoft. Microsoft is bearing nearly all the financial burden of the change. And, Elop had a better (in personal financial terms) contract than his predecessor that covered multiple contingencies, including a sale of Nokia.

There is not much else to say.

Top Image Credit: Sam Churchill

Stephen Elop joined Nokia as President and Chief Executive Officer as of September 21, 2010. Most recently, Stephen served as president of Microsoft’s Business Division and was a member of Microsoft’s senior leadership team responsible for the company’s overall strategy. In this position, he oversaw the Microsoft Office systems and other communications tools and applications for consumers, small and mid-size businesses, as well as large organisations and enterprises. Previously Stephen was Chief Operating Officer of Juniper Networks, a leading provider of...

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1865

August 7, 1994, NYSE:NOK

NOKIA is a Finnish multinational communications corporation. It is primarily engaged in the manufacturing of mobile devices and in converging Internet and communications industries. They make a wide range of mobile devices with services and software that enable people to experience music, navigation, video, television, imaging, games, business mobility and more. Nokia is the owner of Symbian operation system and partially owns MeeGo operating system.

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April 4, 1974

NASDAQ:MSFT

Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company, best known for its Microsoft Windows operating system and the Microsoft Office suite of productivity software. Starting in 1980 Microsoft formed a partnership with IBM allowing Microsoft to sell its software package with the computers IBM manufactured. Microsoft is widely used by professionals worldwide and largely dominates the American corporate market. Additionally, the company has ventured into hardware with consumer products such as the Zune and...

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