Bringing Brands Into the Fold, inMarket Touts Its ‘Three-Sided’ Beacon Network
I’ve been studying how to strike it rich in the Bluetooth beacon ecosystem for over three years now. There’s no question that what beacons enable, by bringing the power of digital into the world of the physical, is going to make some very fortunate people rich. Bringing the techniques that made Amazon great to brick and mortar stores is part of the secret, but that doesn’t tell you all you need to know. In this high-tech gold rush, I’ve found a few nuggets of gold. This is the story of one of them.
Writing Beacon Technologies: The Hitchhiker’s Guide to the Beacosystem has been a way of drafting a map of where the gold might be found. The book was pieced together through a prospecting process, interviewing over a hundred entrepreneurs who were all on the same quest.
Since the book was published, I’ve had trouble giving up that interviewing process — it turned out the search wasn’t over. So I’ve started to record my interviews so other “prospectors” could listen to, or watch the conversation and draw their own conclusions. That’s what brought me to a place that you wouldn’t think would be on any high tech gold map.
Most people go to Venice, California, for the beach or to spend money at the shops, galleries and cafes on Abbot Kinney Boulevard. Just opposite one of the best ice cream parlors on that street “Salt & Straw” (the Avocado and Strawberry Sherbet is amazing) is perched the offices of inMarket, hidden behind an anonymous residential door, at the top of a staircase above the street. Despite the unassuming entrance, inMarket is one of a few beacon companies that is generating cash.
Their offices are like a high-tech hobbit’s mansion, a rambling maze of interconnected small rooms, filled with friendly people and computers, a huge massage chair (which you can see in the background of our video), and a “Bathroom of the Future”, complete with heated seat and an alarming electronic bidet.
So what’s the secret of making money with beacons? As I spoke to Todd DiPaola, CEO of inMarket his demeanor suggested that what you need to do is obvious. He joked that many of his competitors behave like “non-profits,” given the rate they are burning through cash.
With hundreds of smart CEOs working hard and still not seeing the cash flow positively, it’s not that simple. It is clear that there are different strategies appropriate for different parts of the market.
DiPaola concedes that his company’s strategy evolved from a frustrated approach to create “one app that could rule them all.” This is a high-risk endeavor. Arguably ShopKick is one beacon company that has succeeded with that quest. Their app has been embraced by the likes of Walmart, Macy’s and Target, and the company sold to SK Telecom for $200 million. inMarket’s Checkpoints app enjoyed success, but not at that level. Checkpoints’ adoption ceiling is what caused inMarket to pivot and open up their underlying network of beacons in retail stores to other apps, a master stroke and an approach that has enabled them to bounce back, eclipsing ShopKick in terms of numbers of users. With dozens of apps, including Conde Naste’s, Epicurious, which offers recipes, or WebMD that offers medical advice, inMarket has a broader scope of use cases that it can enable that goes beyond offering points for prizes.
inMarket’s strategic product is not the app — the value is created by their network. Their network links dozens of publishers’ apps to retailers that host inMarket beacons and, the third stakeholder in the network, the brands, whose products are being promoted. inMarket has created a “three-sided network.” eBay built a “two-sided network” between buyers and sellers. “That was tough” DiPaola said, “but once eBay gets to a certain scale, everyone just goes to eBay.” DiPaola has done something more difficult by getting past the tipping point with his company’s network. Now, he claims, brands, apps and retailers are coming to them.
Rather than presenting ads like Google AdSense, the promotions that run on inMarket’s network are contextually relevant messages that serve the user of the app in question. For Epicurious this might be a reminder to pick up ingredients for a selected recipe as the shopper enters the grocery store (rather than at the end of their shop, as traditional coupons do, when it’s too late). The effectiveness of these interactions can still be measured with CPMs. “Instead of banner monetization that might yield an average of a $1 CPM,” DiPaola claims brands are willing to pay CPMs of $500 to $1,000 for what inMarket offers. He describes his mission as moving advertising dollars from “dead tree media” to “accountable media that has an ROI.”
Many other beacon entrepreneurs are working on creating networks. This is one of the most interesting parts of the Beacosystem. The key for inMarket has been focusing on brands as the main source of funding. Many other startups have looked on retailers as their prime customer, and while retailers may be a customer and benefit from the infrastructure and analytics, it’s the brands that have the larger supply of promotional dollars and the greater need to drive “preference.” inMarket’s dashboards for brands and retailers are all focused on this model. This approach can be described as deep and narrow, the general purpose beacon networks from the likes of Gimbal can power a lot more use cases but their solution isn’t as focused.
Is this the only way to be successful? No, there are others like Kontakt.io (based in Krakow, whose CEO we interviewed a few weeks earlier) that are focusing lower in the stack, offering beacons and fleet management software. They can enable even more use cases, but with even less of a complete solution, they are forgoing value that the likes of inMarket and Gimbal can claim for themselves. Their strategy is “make it up in volume” across multiple apps and multiple networks. For Kontakt.io partners, the fact they lack a complete solution is a virtue; they aren’t competing with the companies that are filling in those gaps. Kontakt.io’s path to success is more like Microsoft’s early strategy, becoming a dominant general purpose platform, as measured by tens of thousands of apps ported, not the dozens of strategic app partners that inMarket has.
More in our interview below:
Steve Statler is a writer, public speaker and consultant working in the beacon ecosystem. He trains and advises venues, retailers and venture capitalists, as well as makers of beacon software and hardware. His book “Beacon Technologies: The Hitchhiker’s Guide to the Beacosystem” is available from Amazon, details and further interviews are at www.hhgb.us.