Why Online / Offline Mobile Integration is Going to be a Huge Business

Posted on Aug 21, 2011 | 36 comments

Why Online / Offline Mobile Integration is Going to be a Huge Business

“People still want calls …”

When I first got into VC I decided I better have some investment themes. My macro theme was “great entrepreneurs” who mapped to my belief system about the kind of entrepreneurs I wanted to work with.

My background was 8 years of telecoms & mobile and 8 years of cloud computing & SaaS – so these two themes were a given.

But then I had to overlay another filter – what kind of deals could I get proprietary access to?

Digital Media was an obvious theme because it’s one in which LA (where I’m based) and NY (where I spend a lot of time) have strong assets, companies and management teams.

While the media industry is driven by a combination of subscriptions and advertising – it’s clear that the latter plays a unique role in media. So my strategy was to focus on technology heavy companies who could bring measurability and performance to inefficient parts of the digital media landscape. Of the $300 billion spent annually on advertising, 90% of it ($270bn) is still offline and not measurable. (1)

That strikes me as an attractive market for disruption over time. Certain parts of it seem ripe for disruption sooner rather than later.

Every generation of new technology and new media starts out by emulating those that came before them without realizing that things are fundamentally different when you change media types. Early TV programs featured people sitting in chairs and reading scripts as though they were on the radio. Early online newspapers and magazines were merely digital versions of their physical self.

We now know that the medium has changed the news industry leading to blogs, real-time reporting, integration of text and video, two-way discussions, stories surfaced based on what your friends are reading, etc.

Two big themes have emerged in my head in the past 3 years: offline / online integration and mobile computing.

1. Offline / Online Integration: Think about it, when you shop at Nordstrom they should know as much about you as Amazon does when you’re shopping online. The online world uses cookies and link-tracking to know who you are and where you’ve come from. They know what you bought the last time you were shopping. They recommend up-sells and cross-sells of products. Nordstrom sales reps are trained to do this to, but of course they can’t know every customer that walks around the store.

Or can they? I believe that’s what we’re seeing with the emergence of applications like FourSquare (bars, restaurants, hotels, etc.) and Pose (apparel, fashion, jewelry and furnishings).

I believe that offline / online integration is one of the major computing trends that you will witness over the next 5-10 years as computing experiences truly become pervasive.

2. Mobile: When I think about the current generation of mobile monetization in reminds me of people reading radio programs on TV. Banner ads were never very effective on web pages so it baffles me that it’s the preferred method of advertising today on mobile devices. As mobile applications know where you are, who you are and what your preferences are advertising will become a lot more focused.

Stating the obvious – why should I get daily deals to my email box for stuff I never want or buy? It’s clear I ought to get incentivized for stuff I’m doing in the physical world by applications with whom I’ve build trust & rapport. I’d take an offer from FourSquare. They’ve earned a relationship with me. In fact, whenever I check into Starwood Hotels I get an extra 500 points through FourSquare reinforcing both brands with me.

Many of my daily deal email offers get auto-sorted in Gmail and I never see them.

It’s why I’ve argued that the future of advertising will be integrated. What’s more integrated than offering me ads at the point of need based on location, preferences, time-of-day, past behavior, etc.

And while I’m on the topic of mobile, what’s also strange to me is that more mobile apps haven’t realized that they’re building for a device called a telephone. In the Internet era somehow as an industry we’ve subscribed to the folklore that every interaction is best computerized. They’re not. Purchasing high-value or complex products is still way more effective person-to-person.

Study after study shows that for most high-value products, close rates are higher and order sizes are higher when you get a customer on the phone.

So here’s my news for you: People still want telephone calls!

There are currently 20 billion inbound telephone inquiries in the US alone every year with the overwhelming majority generated offline but many savvy application companies have realized the potential to drive calls from mobile devices.  As we increasingly walk around with our computers in our front pockets the distance between impulse to learn more about a product and my likelihood of purchasing it is greatly shortened.

The first investment I ever made as a VC, RingRevenue, was an easy one for me because it combined three key areas for me: it combined telephony / Internet, performance-based marketing & a perfect team construct. Their last company was in the telephony meets Internet infrastructure space and the three RR founders were there through the IPO.

Why Pay-Per-Call?

If you’re less familiar with this market please check out this short video RingRevenue made on the market. It’s just a couple of minutes and done in a humorous way.

Affiliate marketing is a several billion dollar / year industry yet the average value of goods sold on affiliate networks is less than $75. Why? Because you can’t do three clicks and buy an insurance policy, a home alarm system, a mortgage or many other high-value products. eCommerce companies that don’t recognize this are turning away business. 77% of online shoppers want live assistance available with their purchases so it’s not surprising that 52% of shoppers re-evaluate or abandon shopping carts because of the lack of live assistance. (2)

Publishers have been reluctant to put phone numbers on Internet ads because then they lose the ability to track the fact that they drove the sale in the first place. Yet every advertiser of a high-value sale wants calls to drive up-sells into higher-value SKUs and for cross-sells of related items at the time of purchase. Call centers provide conversion rates of 10x to 20x that of online shopping and also 1.5x to 2x the average order value.

When you listen to Tony Hsieh talk about his Zappos customer reps in “Delivering Happiness” you get a sense of the effectiveness of call center relationships.

Financial services is an interesting case: 63% of all consumers looking to buy financial services now research online but only 33% actually buy online. (3) Publishers (media companies) are missing out on this revenue by not bridging the offline / online component.

The Impact of Mobile Phones on Advertising

The explosion in smart phones and mobile apps has created the perfect storm for generated inbound telephone calls because you’ve literally combined your computing device with your phone so the journey from impulse to phone call is very short indeed.

And don’t just take my word for it. Google now has more than 500,000 advertisers with click-to-call mobile campaigns lit up. This is becoming a huge business. It’s why Commission Junction, LinkShare, Google, PepperJam & many more now all use RingRevenue to power their click-to-call strategies.

Mobile advertising is now a $1 billion market or 0.33% of the total ad market. How do you think this is going to play out in the world of more smart phones, tablets and future mobile devices? And which do you think is more likely to be effective on a small telephone-based screen – a tiny banner ad or a phone number that you click-to-call? Obviously depends on the type of product / advertiser – I’m not sure Coca Cola is looking for you to dial in. But the local restaurant, car mechanic or spa? Cha-ching.

The Power of the Phone Number in Authenticity

One of the fascinating things I’ve learned in the past 2+ years is just how important phone numbers are to the psychology of consumers. It drives up their belief in the authenticity of the vendor. By simply putting a phone number in an online ad you can increase the click-through rate of the ad by 5-30%! (see here for more details)

To be clear, that is excluding the sales uplift from the calls. It is strictly the phenomenon that when users see phone numbers on ads they’re more likely to click on them. Who knew?

The Future

It’s unclear who will win the battle to serve us up local, authentic ads on our phone and how privacy concerns will play out. My bet is that the applications that win and become huge are the ones that build an authentic relationship with their users by getting you to open up the application for some form of entertainment or utility other than ads. I have never believed in generic coupon applications (gawd knows I’ve seen 50 of them).

And I’m also willing to bet that the mobile applications that become big will find unique ways of reaching you to get relevant offer in front of you that are unobtrusive, authentic, location-aware and specific to your current needs. And I’m obviously betting that telephones will act as telephones. And that people will still want calls.

(1) eMarketer
(2)  Harris Interactive IMShopping Poll (August 2009)
(3) Credit Union Times
(4) eMarketer

Image courtesy of Fotolia.

  • http://twitter.com/Admore David Damore

    How about this …
    In store, think clothing retailer, I’m looking for pants… they are out of my size. Open the Foursquare app, already checked in, click the “Call Me Now” button (Not a real feature yet) and one of the stores catalog operators will call you so you can order the size you want. They will ship to your home, office or to the store. 

    Problem: Out-Of-Stock
    Solution: Connect with person that can get you what you want, the out-of-stock item.

    Must: Deliver a painless and nearly frictionless transaction. *Foursquare would have your credit card number to make this happen. Foursquare would also have your home shipping address and possibly a work mailing address on file.

    *This could be done by Foursquare or some other startup.

    What would be the ROI of completing the sale when the customer would have walked out empty handed?

  • Anonymous

    Mark – agree totally on pay per call ( I have been in the space, too ). I think tech people forget that most people are not technical and they do not crave information, they crave interaction.

    O your other theme, one of my rules is to measure the number of prices required to deliver a value prop. Too many pieces means an innovator cannot consistently control or deliver the right value / experience. I believe that is what makes personal, offline / online, real time, real location advertising an unlikely breakthrough: ascertaining what the user wants is too difficult and delivering it consistently is more difficult, due to the breadth of consumer wants.

    Outside ad spend efficiency, do you see other themes in online media?

  • http://bothsidesofthetable.com msuster

    This is exactly where I see potential for the future of Pose.

  • http://bothsidesofthetable.com msuster

    My other big theme is online TV … I’ll be writing about that shortly.

  • http://www.twitter.com/biggiesu Mike Su

    The trick with ad technology (and why i suspect mobile ad banners are well received) is the customer that’s purchasing it. No matter how awesome, targeted, and amazing some ad product is, at the end of the day many of the decision makers on the brand side stick to what they know. Even though audiences have moved en masse online, you will still find major brands who say, “I know TV. I know when i spend $X million on a super bowl ad, I can predictably get a Y% bump, and I don’t know what a CTR is or how it translates to butts in seats or feet in stores”. So the challenge is not just in building the right technology, but understanding how to convince that guy who has been using the same spreadsheet to buy media to chuck that and go with you. Or she *just* figured out how to buy banners effectively, and now you want her to learn a new way to buy mobile ads? Not easy. Or you’ll just have to wait til he retires and is replaced by an online savvy kid 😉

  • http://blog.ideatransplant.com Jan Schultink

    A telephone call is a pretty efficient sales closing channel for certain products. Books can easily be bought with a button. For products with lots of options it is handy to have a human guide you through the process.

    Second thought. It surprised me how long it takes for some of these fundamental developments in technology to become reality. In 2000, people were talking about the nirvana of “mCommerce” integrating seamlessly with physical commerce. Same for TV, in 2011, there is still no real replacement yet for this 1950s channel. Hopefully it will happen soon now.

  • Janet Kosloff

    Mark, thank you for such a thought provoking blog!  As the CEO of a real-time medical market research start up (InCrowd, Inc.)  you have stimulated my thinking about how to leverage our “crowds” (primarily physicians) beyond real time quantitative data.   To use the phone (which we are already sending questions to) as a phone, by sending invitations for “in the moment” conversations between our clients (drug companies or their agents) and the experts they look to for direction makes all the sense in the world.

    I love your blog and can’t tell you the number of times they have helped me understand and/or think through various issues that we have needed to deal with in our young company’s history…thanks!

  • Anonymous

    Mark – this question is a little off topic, but if a startup liked your approach, was in SoCal, but did not fit your themes, should they talk to someone else @ GRP or someone else altogether? What if the startup had a theme of it’s own that it would lay out for you?

    If you have a blog entry on this, my apologies…..

  • http://www.matthewmclaughlin.com/ Matt McLaughlin

    Great post!  We are a huge believer in the 

  • Dave W Baldwin

    Another great post!  Amazing we still have the hangover regarding local designers not placing the phone # on the site/ad.

    Wouldn’t you say, looking forward, that Interface is what can bring this together?  The end run is to establish the most comfortable way responding to impulse where the potential customer can have all options in front of them, no matter what they’re doing and/or where they are.

    Keep hitting with advice toward high tech- remember the rev in retail is coming from those lower tech… and their job is not figuring every confusing way to use the so-called higher.

  • Anonymous

    Dave – love the no phone # comment. What is the likelihood that I am looking for a local retailer’s site so that I can phone them? Apparently, many designer’s believe it is zero.

  • Pete Griffiths

    very interesting post – thanks

  • Dave W Baldwin

    Thanks.  The main thing is connecting the dots and dem dots will be connected via raising the bar re interface. 

  • http://joeyevoli.com Joe Yevoli

    So far, with HomeField, putting a number on the site and in all marketing emails has had two effects.

    Like you said, it definitely increases the legitimacy of the marketing effort.  We’re relatively new to the scene compared to some other competitors, so the fact that our customers can see a number to call immediately puts them at ease.   I get hundreds of calls a month based off these efforts and they’re all hot leads.

    Two, they sometimes call for reasons they probably shouldn’t call for.  For example, I got a call this morning.  “I’m on the site right now, I’m ready to set everything up, how do I start an account?”  My answer – “Click the giant “Start an Account” button on the bottom right of the page.

    Both calls are obviously welcome.  The second type of call, while a little annoying, is just another chance to build rapport  with a customer.  That rapport has been absolutely crucial, therefore the phone number is absolutely crucial.  We try to put it everywhere we possibly can.

  • Anonymous

    Mike, you are right on about the media buyer. That’s why you have to put the numbers together for them and make it painless and simple. You’re talking about the “no one gets fired for buying IBM” syndrome, but in advertising there’s also a “I need to spend X million as quickly, painlessly and easily as I can so I can get back to golf” syndrome which if you are savvy enough is possible to take advantage of.

  • Anonymous

    Love the post. Another potential change that mobile is bringing on these lines is the spread of internet content into the physical world. What’s your take on connecting things with information about them? 

  • Staff

    Picpollnow.com is better!

  • http://life20.tumblr.com/ Peter Fleckenstein

    Awesome post Mark. I think we need to go farther and completely disrupt, turn upside down, and move towards the goal of dropping jaws if we truly want to integrate online and offline.

    It’s about the individual. It’s about identity. It’s about frictionless. It’s about being there but not noticed.

    – The individual confirms his/her identity without having it up on 1000 different vendor central servers.
    – The individual owns his/her data and uses it as they see fit not as advertisers see. (Think small data vs big data.
    – The form factor is irrelevant.
    – The individual has no need to tap, wave, or pull any cards, coupons, loyalty cards, etc. (a true frictionless solution(s))
    – The individual experiences life naturally rather than being in a constant push/pull state.
    Exciting times indeed and if I may paraphrase some of your last paragraph:

    I’m willing to bet that what will become big are solutions, regardless of form factor, which will enhance and drive value to the individual regardless of what they are doing or where they are at or who they are with.

    Thanks again Mark!

  • Anonymous

    Great post, brings to mind many possible opportunities for employing a service like Twilio, which as I understand it can turn any phone into a “smart phone” by virtue of using text messages or voice prompts to access data on a web page through twilio.   Another thought is that maybe mobile will be the key to accessing the large relatively untapped market of “older” shoppers that aren’t as tech savvy.  The question is how to design a signup or access process that is simple and non-tech enough to get these users into your recommendation system.

  • Greg Flores

    Exactly! – We
    believe that brands want to truly connect more with their customers and people
    want to feel that the brands actually care about them as customers. The current
    iteration of social consumer marketing is still just putting lipstick on a pig.

    Drawing from experience,
    we recently pivoted SparkCrowd to focus on social engagement at events. When
    the brand and products are integrated into a fun real-world social experience,
    the brand affinity, referral and brand ambassador engagement rates can go up
    exponentially. It’s about integrating the digital social with the physical

    The perceived positive
    impression as the result of a visible phone number is great insight and we’ll have
    to work it into the mix too.

    Thank you for
    the time you spend on sharing your insight.

  • http://www.apptegic.com Karl Wirth

    Mark, I like how you talk about not “realizing that things are fundamentally different when you change media types.”  One of new, revolutionary characteristics of online/mobile services is that you can measure everything.  As you point out, this is what enables Amazon to provide orders of magnitude better customer service than a physical store.    And this is what will make it possible for “ads at the point of need based on location, preferences, time-of-day, past behavior”   Your blog inspired me to write more about this today on my blog:  http://bit.ly/oUX2kj

  • http://www.facebook.com/people/Allen-Laudenslager/100000631292091 Allen Laudenslager

    One of my big fears of “Google curation” is that I will miss some idea or product outside my normal routine. I try clothing, books, and food that are not part of my regular choices to learn and grow. If I only see adds based on what I “usually” buy then I will miss the online equivalent of channel surfing! If I only buy that odd ball book or shirt or meal once or twice a year, will those adds still show up for me at those online services?

  • http://about.me/adriansanders Adrian Sanders

    I think some of the best moves in this space are leveraging the social media frameworks we already have. 

    Add on services and applications are like filters or curators for the mood I’m in but directly communicating with brands seems to me to be clear (TW, FB, direct call, email). 

    Point of sale is like the holy grail for so many entrepreneurs looking to bridge the virtual / real life gap (myself included).

    With the emergence of Square, NFC, and Google Wallet, I think there are more opportunities to track point of sale revenue against social media interaction and customer engagement. That’s the tree I’m sniffing up anyways…

  • http://www.huntingblindwarehouse.com Hunting Blind Warehouse

    I can see the days where you walk by a counter and the sales rep at Nordstroms will know your name, age and what you have bought before just by your cell phone moving by her counter.

  • http://twitter.com/Riezner Daniel Miesner

    Would it be genuine though? The consumer doesn’t want to feel played. When I go to the gym and they scan my card, they look at the screen to see what my name is then say “Hey Daniel” – it’s not a genuine interaction. I don’t want a dept. store employee scrambling behind the desk to read the customer scanner so she can ask if I like the socks I bought last week. 

    It’s going to be extremely tough to translate online recommendations/alerts/discounts to the offline store. A lot of earned trust needs to be established before it’s cashed in on. Which, I’d imagine, most offline stores won’t bother nurturing. 

  • http://www.facebook.com/breinlinger Josh Breinlinger

    >> People still want telephone calls!

    I couldn’t agree more – that’s part of my fundamental thesis behind my latest venture – http://qwiktalk.com.  There are TONS of Q&A sites out there and great expert networks, but how can you just get an expert on the phone instantly?  It’s actually surprisingly difficult. 

    In my opinion, the good ol’ fashioned phone provides  a bunch of advantages:  Iteration, Synchronous Communication, Instant Answer, Confidence, and all the Non-Verbal Communication.  It also tends to establish better / tighter relationships than purely online interactions. 

  • http://twitter.com/TonyNicalo Anthony Nicalo

    Great post, Mark. I was surprised you didn’t mention the world’s biggest industry, food, after seeing the grocery shopper in the photo. Of that $300 Billion a year spent on advertising, over $40 billion is spent on food advertising. Given that most food shopping (both at restaurants and grocers) is happening offline, it is a space ripe for disruption.

  • http://twitter.com/iofferdeal Chris Vo

    This blog helps me a lot for my project thanks, Chris Vo.

  • Jeff

    Click-to-call is a good next step for ShopKick!

  • http://www.clubvision.tv Doug Wulff

    Mark, showing people where to find the opposite sex and bringing the social experience real time in hi fi video + sound to mobile & PC is entertaining content people want to consume online & off.  How does eight minutes of viewing ad content sound?

    And giving local retailers a way to deliver relevant offers on their own channel while not interfering w/ the media experience not only benefits consumers, but binds retailers to you like glue. They go from ad placers to ad takers…plenty in their ecosystem want to talk to a buyers-only audience.  Not to mention big brand plays w/ privacy breaks that don’t interfere w/ audio. 

    Andrew Warner introduced me. Never heard back. We created what you want. You don’t
    have to imagine a thing. I’ll email you the link to our alpha site if you ask.

  • http://twitter.com/STELLAjordy Jordy Leiser

    People still inherently want (and in many cases need) the option of human interaction to facilitate and high quality customer experience. It’s human nature. At STELLAService we measure and benchmark the customer service capabilities and performance of 2,000+ online businesses, and our data shows us just how many companies still don’t get it (yet).  Blows my mind. 

    Pointing people to the successes of companies like Diapers.com, Zappos, 1800Contacts.com and BlueNile.com, which all go out of their way to make phone numbers available to consumers at every step of the experience, should be enough proof…long term loyalty and sustained business growth come from providing great service and genuine customer relationships.  Super simple.   

  • Kanwar Dhaliwal

    Agree in general.  It is surprising that a mobile phone combines voice, browsing, messaging, camera, location awareness and multimedia capabilities into the most personal device and yet we have CPC banner ads ruling the day.  

    Also, call tracking is important not just for tracking the performance of a publisher’s inventory but also for throttling traffic.  Advertisers buying clicks don’t care much if the traffic is bursty since all it takes is cheap computing power to handle it.   OTOH, advertisers buying calls have very high fixed costs due to a staffed call center with live agents operating on fixed hours – and they HATE bursty traffic because either they are losing money or leaving money on the table.  A click-to-call network should be able to generate sustained high quality traffic from x to y hours and real-time call tracking is essential for that.  My company has been doing this for some time now.  See http://venturebeat.com/2011/03/11/moolah-media-call-reporting/

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  • http://www.boilingice.com Patrick Kedziora

    It confounds me that when I go to a company or product website most of the time there’s no telephone number. The lack of telephone numbers has actually gotten much worst than that. Recently, I’ve been helping a company develop their US market presence in financial services and whenever I call a potential customer it’s absolutely impossible finding the person you need to talk too. I remember the time I could call a company’s switchboard and they knew exactly who I needed to speak to. We’ve put sand in the cogs of business thinking that eliminating switchboards and people on phones would increase efficiency. It has in some ways, it’s efficiently given those of us who still use a telephone a competitive advantage. In fact I blogged about this on my site at boilingice.com. The problem is even greater overseas. Everyone overseas wants to use Skype to talk. The problem being that the connection is not always great and if you want to speak to a US customer you shouldn’t require that they call you using Skype. Thanks for the blog Mark. Always interesting reading what you have to say.

  • http://eastagile.com kenberger

    “I’m not sure Coca Cola is looking for you to dial in”:

    Actually, now they are. I can’t remember the precise study, but in the last decade a big brand (thought it was coke or pepsi) starting including a phone number on the cans, something like 1800-call-coke, for some unrelated reason. The result was overwhelming and they needed more call centers.

    Something about people simply wanting to identify with the brand via human interaction. Which would seem to strengthen your main point further.

  • http://www.peexter.com Geolocation App

    Increase the mobile users and many are using different apps for shopping, discount and more. It is best for the increase business.

  • http://twitter.com/GarrettSmith Garrett Smith

    I think the future in offline/online retail is the ability for in-store personnel to know who is the in the store. An application on a tablet that use’s the API’s form location aware services (foursquare, facebook, yelp, etc) to build a “profile” of that visitor which personnel could view would give them a better idea of who they are dealing with. Given enough cross platform data that most users give up willingly, you could learn A LOT about a buyer. I also foresee a move towards more self-checkout, where the “checkout” is similar to the online process, as well as more “receipt to email” requests.