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

Amazon’s Fire phone — and what it means

Hello everyone!

I wrote this post about the Amazon Fire phone yesterday morning.

At the time I wrote it, I didn’t yet know what the phone was called or any of its exact details — that came later in the day, with Amazon’s official unveiling. But, thanks to excellent reporting by VB writer Mark Sullivan and solid context from the rest of the VB team, I was able to put together a pretty good picture of what it would likely mean.

What Amazon’s ‘Fire Phone’ means — and why it could be a real contender

Why does a company that started as a bookseller, evolved into an e-commerce giant, and has seen some success selling Android tablets think that it can take on the ruthless market of smartphones?

What we have, in Amazon’s Fire phone, is a first draft of a smartphone from a company that has all the advantages of an Apple or a Google — and then some.

Amazon, in my opinion, is one of the few companies with a “full stack” of technology to back up a consumer electronics business: cloud services, software, an app store, content. In addition, it has an enormously efficient retail operation and it has credit card details for millions of consumers, making its phone a powerful potential digital wallet.

What we didn’t know is the extent to which Amazon would try to use its product knowledge — via its “Firefly” image recognition feature — to insert a wedge between its customers and the retail outlets they usually frequent. Imagine standing in the aisle at Walgreens, picking up a bottle of Excedrin, and pointing your phone at it. The phone recognizes the bottle, gives you details on what it contains — perhaps more than you can easily get from the label — and offers to ship you the bottle for substantially less. Because it has text recognition capabilities, the phone knows exactly what price Walgreens is selling it for, so Amazon can always undercut that price.

So far, nobody seems excited enough about this phone to actually buy it. But this is just the first version. I will say this, I’m getting a little scared of Amazon.

I’d like to hear what you think!

Some more coverage of the Amazon Fire phone from VB’s team:

 

 

In other news, I went to Paris last week to learn about the French tech economy. (I had some pretty good meals too.) What I saw was substantially different from what I expected. Here are some of the highlights:

 

 

Amazon’s Fire phone — and what it means

This French tech school has no teachers, no books, no tuition — and it could change everything

PARIS — École 42 might be one of the most ambitious experiments in engineering education.

It has no teachers. No books. No MOOCs. No dorms, gyms, labs, or student centers. No tuition.

And yet it plans to turn out highly qualified, motivated software engineers, each of whom has gone through an intensive two- to three-year program designed to teach them everything they need to know to become outstanding programmers.

The school, housed in a former government building used to educate teachers (ironically enough), was started by Xavier Niel. The founder and majority owner of French ISP Free, Niel is a billionaire many times over. He’s not well known in the U.S., but here he is revered as one of the country’s great entrepreneurial successes in tech.

He is also irrepressibly upbeat, smiling and laughing almost nonstop for the hour that he led a tour through École 42 earlier this week. (Who wouldn’t be, with that much wealth? Yet I have met much more dour billionaires before.)

Niel started École 42 with a 70 million euro donation. He has no plans for it to make money, ever.

Free founder Xavier Niel, speaking at Ecole 42, the free engineering school he created.

“I know one business, and that’s how to make software,” Niel said. “I made a lot of money and I want to give something back to my country,” he explained.

To make the school self-sustaining, he figures that future alumni will give back to their school, just as alumni of other schools do. If a few of them become very rich, as Niel has, perhaps they, too, will give millions to keep it going.

The basic idea of École 42 is to throw all the students — 800 to 1,000 per year — into a single building in the heart of Paris, give them Macs with big Cinema displays, and throw increasingly difficult programming challenges at them. The students are given little direction about how to solve the problems, so they have to turn to each other — and to the Internet — to figure out the solutions.

A student at Ecole 42 explains how he created a ray tracing program. Six months before he knew nothing about programming.

The challenges are surprisingly difficult. One student I talked with was coding a ray tracer and building an emulation of the 3-D dungeon in Castle Wolfenstein within his first few months at the school. Six months earlier, he had barely touched a computer and knew nothing of programming. He hadn’t even finished high school.

In fact, 40 percent of École 42’s students haven’t finished high school. Others have graduated from Stanford or MIT or other prestigious institutions. But École 42 doesn’t care about their background — all it cares about is whether they can complete the projects and move on. The only requirement is that they be between the ages of 18 and 30.

“We don’t ask anything about what they’ve done before,” Niel said.

Yet École 42 is harder to get into than Harvard: Last year, 70,000 people attempted the online qualification test. 20,000 completed the test, and of those, 4,000 were invited to spend four weeks in Paris doing an intensive project that had them working upwards of 100 hours a week on various coding challenges. In the end, 890 students were selected for the school’s inaugural class, which began in November, 2013. (The average age is 22, and 11 percent of the first class is female.)

890 students out of 70,000 applicants means an acceptance rate a little north of 1 percent, or if you only count those who completed the test, 4.5 percent. By contrast, Harvard accepts about 6 percent of its applicants. And, even with financial aid, it charges a whole lot more than zero for its classes.

The upshot: If it works, the school’s course of education will produce coders who are incredibly self-motivated, well-rounded in all aspects of software engineering, and willing to work hard. (The four-week tryout alone, with its 100-hour weeks, blows away the French government’s official 35-hour-work week.)

Nicolas Sadirac, a French entrepreneur and educator, is the school’s director. Before École 42 he ran Epitech, a well-regarded, private, for-profit school that trained software engineers.

Ecole 42 includes a few extra amenities -- like a hot tub on the roof deck.

All of École 42’s projects are meant to be collaborative, so the students work in teams of two to five people. At first glance, the École’s classrooms look a little bit like a factory floor or a coding sweatshop, with row after row of Aeron-style chairs facing row after row of big monitors. But a closer look reveals that the layout is designed to facilitate small-group collaboration, with the monitors staggered so that students can easily talk to one another, on the diagonals between the monitors or side by side with the people next to them. Students can come and go as they please; the school is open 24 hours a day and has a well-appointed cafeteria in the basement (with a wine cellar that can hold 5,000 bottles, just in case the school needs to host any parties).

Students share all of their code on Github (naturally). They communicate with one another, and receive challenges and tests, via the school’s intranet. Everything else they figure out on their own, whether it means learning trigonometry, figuring out the syntax for C code, or picking up techniques to index a database.

Tests are essentially pass-fail: Your team either completes the project or it doesn’t. One administrator compared it to making a car: In other schools, getting a test 90 percent right means an A; but if you make a car with just three out of four wheels, it is a failure. At École 42, you don’t get points for making it part way there — you have to make a car with all four wheels.

The no-teachers approach makes sense, as nearly anything you need to know about programming can now be found, for free, on the Internet. Motivated people can easily teach themselves any language they need to know in a few months of intensive work. But motivation is what’s hard to come by, and to sustain — ask anyone who has tried out Codecademy but not stuck with it. That has prompted the creation of “learn to code” bootcamps and schools around the world. École 42 takes a similar inspiration but allows the students to generate their own enthusiasm via collaborative (and somewhat competitive) teamwork.

Exterior view of Ecole 42.

Sadirac and Niel say that some prestigious universities have already expressed interest in the school’s approach. The two are considering syndicating the model to create similar schools in other countries.

But even if they never expand beyond Paris, École 42 could become a significant force in software education. France already has a reputation for creating great engineers (in software as well as in many other fields).

If École 42 adds another thousand highly-motivated, entrepreneurial software engineers to the mix every year, it could very quickly accelerate this country’s competitiveness in tech.

And the model will force schools like Harvard to make an extra effort to justify their high tuitions. If you can get training like this for free, and you want to be a software engineer, why go to Harvard?

Disclosure: My airfare and hotel to France were paid for by BPIFrance, a state-owned investment bank.

This French tech school has no teachers, no books, no tuition — and it could change everything