In the little world of local tech, there’s little that excites us more than offline analytics. The technology, which allows brick-and-mortar stores to measure foot traffic and track behavior in the real world, has caught the eye of a much wider swath of the public, ranging from senators and privacy advocates to retailers, consumers, and venture investors. But beyond a glove-like product-market fit, the technology and its pitch resonates with a much more basic, ontological thesis for the local web, and technology as a whole: that the Internet is at its best when we cannot see it.
The invisibility thesis, so to speak, is not new. From Steve Jobs to Eric Schmidt, leaders in the tech industry have waxed poetic about moving technology out of sight for years. “I think the best technologies — and Twitter is included in this — disappear,” Jack Dorsey, the founder of Twitter and Square told Charlie Rose in an interview last year. “They fade into the background, and they’re relevant when you want to use them, and they get out of the way when you don’t.”
Today, the local web, the network of technologies that help business and consumer interact locally, is far too opaque. Amid the rush to innovate and revolutionize the way we buy or sell goods locally, the industry has amassed a muddled soup of software that’s marked more by it’s complexity than its capability. If the last decade was about building the technologies that bring our local experiences online (digital marketing, local data, user-generated content), the next ten years will focus on making those technologies go away.
However, that complexity is a common phase in the maturation process of a new technology, or industry. Whether it’s the car or the smartphone, technology industries tend to evolve similarly: a number of companies develop the basic technology in the early days of an industry and then (often) a different set of companies figure out how to shape that technology to the market. Ford opened the automotive industry by simplifying the ways cars were produced and passing the savings onto the consumer. Apple used design to simplify mobile software, making the smartphone valuable for users. The question for local is where will its simplicity come from?
Simplifying Complexity Through Automation
It might be helpful to start by laying out what I mean by “local.” Famed venture capitalist Fred Wilson often speaks about the atomic unit, or defining product or behavior, of a startup — and the same can be said about an emerging industry like local tech. For all intents and purposes, we define a local firm as a company that’s building technology which helps facilitate the buying and selling of goods locally. That includes everyone from local data and discovery companies that help consumers find local businesses to software firms that help businesses accept payments or schedule appointments.
Local is unique in its fragmentation. In the U.S. alone, hundreds of millions of local consumers and the tens of millions local businesses interact every day, and for years the technology business built software that took those consumers and businesses right up to the interaction, and then effectively dumped them off to the legacy infrastructure (phones, walk-ins etc). The actual interaction between a business and its customer — whether a transaction, a reservation or merely a visit to a store — was a black hole.
That’s starting to change. As the back-end systems behind local businesses come online, technology companies will have the ability to automate, and thus simplify, the interaction between merchant and consumer. Whether it’s allowing you to pay without reaching into your wallet as Square has done or hailing a cab on your phone via Uber, there’s a massive opportunity for companies to make the swath of technology available to merchants and consumers every day invisible. (Street Fight takes a deep look at the impact of automation on local marketing in a new report, which you can find here.)
More Hacks, Less Platforms
During preparation for a panel at the Street Fight Summit in New York last week, I asked Aron Schwarzkopf, the founder of Leaf, the point-of-sale startup, whether he thought Square was making a mistake by building all of its products internally. “No,” he said. “I would probably do the same if we had $400 million in the bank.”
The point being that while a handful of companies might be able to bring together supply under one brand, most will not. The deep fragmentation, and implicit lack of connectivity in the local marketplace, means that consumers and business will likely use a number of services to do a number of activities. The companies, which will succeed, are not necessarily the firms that own every part of the stack. They will find value in the existing technology, making sense of the vast streams of data in new and valuable ways without asking consumers or businesses to change their behavior.
That’s the beauty of offline analytics companies like RetailNext, Euclid, and Prism Skylabs. Instead of introducing a new platform or behavior, the technologies rely on sensors that already exists, pulling information from either wi-fi routers or surveillance cameras that most store’s already have installed to analyze data and extract meaning. It’s more of a hack, than an invention, and that’s what makes it so valuable for investors and so ominous for regulators.
E-commerce had the advantage of building from the ground up. Local doesn’t. It will be harder, but when it works, it will be far bigger than one can imagine.
Steven Jacobs is Street Fight’s deputy editor.