What Yo’s $1.5M round tells us about the state of tech marketing

The guys who invented Yo are not stupid.

Their app may be — depending on who you talk to, the idea of an app that does nothing but send the message “Yo” is either charmingly clever or incredibly annoying — but the founders are not.

Moshe Hogeg is the CEO of photo- and video-sharing site Mobli and the instigator of the Yo app. Or Arbel developed the app — in about 8 hours, he says — and now serves as the “CEYo” of the new Israel-based company.

Amazingly, Yo now has 2 million downloads just a few months after its launch on April 1 (yes, it was April Fool’s Day). One million of those downloads happened in a whirlwind span of four days last month after the press picked up on the app and turned it into a worldwide phenomenon — for now.

But how long will the party last?

We don’t know, for instance, how many of those 2 million people who downloaded Yo are still using it. Six months from now, will it still seem as cute or as fun to send a “Yo” to your wife or your coworker?

For instance, during the World Cup playoffs, Yo could send you a notification whenever someone scored a goal.

That added up to a lot of Yos when Germany was beating the crap out of Brazil last week. It was a little less interesting when Netherlands and Argentina played 120 scoreless minutes.

But suppose Major League Baseball lets you get a Yo whenever someone scores a run during the World Series this fall. Or suppose the NFL gives you the capability to get a Yo when your favorite team scores a touchdown. Will anyone still care — especially since you can get notifications like this from a host of sports and news apps?

The fact is, Yo could fizzle out almost as quickly as it blew up.

When I asked them about their plan B last week, Hogeg and Arbel answered that they were working on building as much momentum as possible. With enough people using it, plus brands using the app to communicate with their own customers in idiosyncratic ways, Yo might have a chance of staying viable.

Money will help. Yo has closed on $1.5 million in funding so far, Hogeg told me, and may raise even more. Investors include his own seed fund, Singularity, as well as other angels and a Silicon Valley venture capital firm.

Note: Against rumors that the funding was merely promised, not delivered, Hogeg says “most of the money is already in the bank.” And his own fund is far from the only investor.

The challenges the company faces now, though, are not technological: They have to do with securing marketing partners, signing on big brands, figuring out which features to add to the app, and retaining those early-adopter customers.

Moshe was clear about this. He said that Yo’s advantage is not technological: It’s related to marketing, momentum, and customer lock-in.

Product-market fit is all you need

What Yo is going through now is a pretty classic story in tech. In some ways, even though Yo came from Israel, it’s the Silicon Valley story of the past two decades. It’s the playbook that we learned from Clayton Christensen and Geoffrey Moore and countless other pundits and gurus: Figure out which direction the market is moving. Make a product that is incrementally better than what the incumbents offer, or which is radically cheaper, or which captures people’s interest somehow. Test, iterate, and repeat until you find what works. Then scale like crazy until you have built an insurmountable barrier to would-be competitors — what the VCs like to call an unfair advantage.

That unfair advantage could come from the network effects of your customer base, which make your product valuable simply because of the sheer number of people using it — like Facebook or Twitter. Or some kind of customer lock-in that makes people reluctant to leave your product behind — like Google Docs or Microsoft or Salesforce. Or sheer brand credibility that makes people love using your product, trust you more than anyone else, or feel like your product is an indispensable part of their lives — like Apple or Evernote.

The thing is, and Yo shows it to be the case, is that you don’t need anything particularly techie to make this happen.

Now, as a tech reporter, I’m a little sad about that. My fundamental bias is toward cool technology. My favorite billionaires are the guys who make amazing things, like Steve Jobs and Elon Musk, rather than the pure marketers or brand builders or business optimizers, like Michael Dell or Jeff Bezos. So I’d be happy if there were more really outstanding hardcore tech stories to talk about.

And in the long run, I’m convinced that hardcore tech is what it takes to create a lasting advantage in the tech industry. Marketing that tech well is always going to be critical. But it won’t be in the driver’s seat forever. So as the frothy enthusiasm for advertising- and social media-driven startups starts to fade, I’m looking forward to hearing about a new crop of startups focusing on chips, wireless tech, new materials, batteries, robots, and more.

Until then, though, smart marketing rules.

Yo!

What Yo’s $1.5M round tells us about the state of tech marketing

How Microsoft can break the logjam of carrier anti-innovation

In my column this week, I return to the subject of Microsoft — and suggest a way that the company can give its Windows Phone OS a boost.

Carrier subsidies are increasingly standing in the way of innovation.

“We’re drunk off the subsidy model,” IDC analyst Ramon Llamas told VentureBeat last week.

The lure of cheap, subsidized phones underwritten by massively long two-year contracts stands in the way of competition and innovation. The big carriers use their contracts to lock in profits and help limit the customer “churn” that would otherwise make their revenues too unpredictable. But those two-year contracts keep people from upgrading as quickly as they would otherwise, stifling handset makers’ ability to get the latest models in our hands.

Carriers also stifle OS upgrades, keeping you from upgrading to the latest version of Android because they don’t want to invest the time to make it work with a string of older phones: They’ve already got you locked in to a contract, so why would they want to make your phone any better than it already is?

The U.S. is not unique in its dependence on carrier subsidies, but it’s not the only way: In many European countries, for instance, people buy their phones and SIM cards separately, without long, onerous contracts.

Some carriers are starting to see this as a wedge issue. T-Mobile, for instance, promises to do away with contracts and subsidies altogether. The carrier sees it as a more honest, direct model, and I agree: I’m done with contracts. I recently paid $245 to get out of my contract with a large carrier after I had endless problems with its service and its phones.

In an earlier column, I blamed Microsoft for not being able to solve these problems. It was an unfair criticism, but it does reveal an opportunity for the Redmond, Wash.-based software company.

We need someone to break the logjam. Could it be Microsoft?

Instead of standing by and playing the same ballgame as every other mobile phone maker, Microsoft should take a page from Apple’s book and rewrite the game. It’s got the leverage, it’s got the installed base, and it’s got a powerful weapon: cash.

Read the full story: http://venturebeat.com/2012/12/11/dylans-desk-carrier-subsidies/

How Microsoft can break the logjam of carrier anti-innovation