i’m not sure people are ready to hand over financial creds to web 2.0 startups. that being said, plenty of cool work being done in money 2.0

When I first started working in venture capital after college, one of the first anecdotes I heard was the “vitamins vs. aspirin” theory of investing. In short, the basic idea is a notion of relative need – people with headaches will seek out aspirin while we all know we ought to take our vitamins and often don’t. The theory holds that the best businesses (traditionally) are more like aspirin (solving an acute need) than vitamins (good for you but not critical).

Unlike esoteric and philosophical arguments about data portability, privacy, and API integration, people have a strong and material interest in making sure that their money is safe and secure – it’s one of the few areas of web 2.0 where what’s at stake is real, concrete, and quantifiable.

I’m very interested in all of the cool start-ups I’ve seen in the personal finance space which I unimaginatively lump together as Money 2.0. Good examples include Mint, Cake Financial, Wesabe, BillShrink, and Covestor. I try to avoid writing about products I haven’t actually used that much but I’m going to do it in this case.

Given that Microsoft Money and Quicken are both getting a bit long in the tooth, it seems like now is a good time to be launching innovative personal finance products. Some thoughts about the whole Money 2.0 space below.

To succeed, I have to believe that these tools are going after people who are non-users of the desktop alternatives. Microsoft Money and Quicken both have large installed user bases and relatively flat growth in net new users. Chances are if you’re interested in a desktop personal finance solution, you’ve already got one. Given the marketing budgets and installed base those products have, I can only imagine that these money 2.0 startups are going after folks who aren’t using these desktop products. Whether or not they’ll succeed in converting these non-users to become active users of a web-based solution depends (I think) largely on the root cause of their non-use. Is it product complexity? Cost? Or is it simply that people know they should be more responsible about their money and just choose not to take action?

Are people ready to trust their financial information to new startups? I think this is going to be a really interesting situation to see play out. There are obviously early adopters in any market and people nowadays seem much more comfortable putting their personal information online in social networks and community sites. I have always thought that money is different than other types of personal information because the consequences associated with disclosure and misuse are so much higher. This will be a good test for how far the market has come in terms of people putting their financial information online.

One thing worth noting is that one of the historical advantages of desktop products is that the information on your computer feels “safe” as it’s under your control – as long as your computer is properly secured nobody can get to it (in theory, at least). Will people be as trusting in the cloud with services offered from new companies? I think there are more people willing to hand over their financial information to companies (start-up or not) who can help them better manage their money than either I or any other pundit today expect. I’m curious to see how large that audience is today, which is really what matters for all of the new entrants.

Is this going to be like Paypal or online bill payment? In terms of historical analogies, I wonder if this will play out more like Paypal or online bill payment. In the former case, Paypal was able to succeed in pioneering a brand new service that existing banks and financial institutions could have provided and in fact did try to provide. In the end, Paypal won for reasons that are too myriad to list here. However, online bill payment has been a different story. Based on data that I’ve seen, the vast majority of users who pay bills online pay them directly through their chosen bank or financial services provider. At this point, I’d be willing to say that it if there is a market for web-based personal finance solutions, start-ups are likely to win here. If any of these companies can build a large enough user base, I think they will be very difficult to knock off, even by a well-funded incumbent.

Right now to me, this market feels more like vitamins than aspirin, but that could change as people start saving money, getting their financial houses in order, and talking about the benefits of these products.

If you’re a user of any of the products mentioned in this post or have thoughts, feel free to leave them below.

Gates to Google: “Your business applications stink” | The Open Road – The Business and Politics of Open Source by Matt Asay – CNET Blogs

(Disclaimer – I’m a former Googler and have been using Google products for productivity and personal purposes for over 2 years.)

Matt Asay, who does a good job covering open source developments, has a short piece where Gates points out the flaws in Google’s web-based productivity suite.

If Google ends up getting meaningful market share in this space (and I believe they will), this will go down as one of those quotes you see in a future version of “The Innovator’s Dilemma” – it’s just classic. This is my favorite pull quote:

“If you’ve seen … the Google tools that have tried to do productivity type things, they really don’t have the richness the responsiveness. You can see that relative [to] the success they have had there. Most of these Google products, to be frank, the day they announce them is their best day and then after that ..”

At the end of the day, Google Apps do not compare favorably to Microsoft Office apps on a head-to-head basis. And it’s likely to stay that way for some time given the richness available from Microsoft’s desktop products. Microsoft has built an ecosystem around Office and many people depend on it every day.

This reminds me a lot of the kinds of comments I heard about web-based email and mobile phones when they were relatively new concepts. My mobile phone is just now beginning to approach the reliability of my landline phone. Somehow mobile phones have managed to grow nonetheless. The reason is simple -for some use cases, the new technology far outshines the previous alternative and renders comparisons meaningless.

The real compelling use case for Google Apps is distributed collaboration. They really shine in a situation where a distributed group is trying to share information or iteratively update a group project. It’s also a great solution for small businesses who don’t want to or can’t afford to implement a full Exchange environment with Office on every desktop.

If Gates’ focus is on penetration among customers who value richness, Microsoft will get blindsided by Google Apps. Google Apps’ existing adopters are people who value the online collaborative elements over the depth of functionality offered by desktop alternatives. If Google does things correctly and continues to both add in popular features from MS Office and do things that simply can’t be done in an isolated desktop environment (like real-time collaboration on the same document where you can both see changes as they’re made, a common spreadsheet that everyone can work on simultaneously, etc), the Apps suite will become “good enough” for a larger number of users.

By the time Google Apps show up AND (and the AND in caps is intentional) are heavily used at major Microsoft houses, it will be too late for Microsoft to do anything about it – Google will have gotten there by improving the Apps suite until it matches the functionality that Office provides.

Aside from the ability to learn about what major enterprises need to have before they’ll flip the switch to web-based apps and the chance to land a few marquee accounts, I don’t see much value in pitching large, entrenched Microsoft houses today. I don’t believe there are a lot of large businesses out there ready to make the wholesale switch today.  There is a much larger opportunity for Google to go after people who don’t yet have a solution (new businesses, web-based SMBs) than to try to convert Microsoft users who have solutions that are more feature rich.

Aside from barking up the large enterprise tree, the real danger I see for Google is focusing too much on MS Office parity. At the end of the day, I’m of the mind that time is better spent building out features and functions that you can’t do on the desktop than simply trying to duplicate every feature in Office.

Last thing, life outside of Google has taught me that there are a lot of people who have really optimized their work around the use of MS Office desktop apps. They don’t “trust” cloud-based apps for their work any more than early mobile phone adopters would have lived without a landline as backup. Getting meaningful usage of Google Apps is going to be tougher than simply getting sales and closing deals – employees are going to have to get comfortable with the tools and see them as a better way to get their jobs done than the status quo.

Blogged with Flock

Tags: google, googleapps, microsoft, office20, enterprise

Overall, I do agree that email inboxes do contain a lot of interesting data about people and how frequently they communicate over email and potentially IM if a vendor offers both products in an integrated fashion. That being said, I don’t see how any of the top web email providers (Microsoft, Yahoo, and Google) can use this email information to build new social networking products. There is, however, an opportunity to use that data to power other people’s applications.

What additional value would I get in using one of these systems over Facebook, MySpace, or my current social network of choice? Details on these products are sketchy at best. However, almost any social networking product worth its salt has a contact importer. Once a user imports his/her contacts, he or she can then determine who from that subset of people he/she would like to invite. Is having a machine prompt to do this for personal social networking of great value? I can see the utility of this auto-population or auto-discovery in a work context (Xobni does do a good job of showing me my own correspondence patterns and I can imagine many things you could build on top of that data – the work use case is different as I think work communication patterns tend to be more dynamic than personal ones). Nothing I’ve heard in the limited details that have come out gives me reason to think that they’re on to something bigger.

I’d also say that if “powering up” this network requires me to create a new profile page, it’s a non-started. I’m out of that business for now unless or until I see a really great application that’s worth the time.

Webmail inboxes are a mess – I have yet to use an email product that has an even decent address book. All of the email address book offerings from the Big 3 email providers feel really dated. For example, the Gmail address book does not do a very good job of de-duplicating contacts. I have folks in my address book who have multiple entries and I’m not interested in going through to manually de-duplicate them; I’m counting on a machine to do that for me.

The larger point here is that I don’t know how you can build a really good, effective social networking product on top of email if you don’t do something to put some good, quality structure around the data. Social networking services who are sucking up email addresses to match a user’s inbox with their database of contacts don’t have the same problem – you just throw away the ones that don’t match (or allow a user to invite them). It’s a very different situation if you want to build a whole new social network product with email as the foundation.

Cross-functional collaboration is not easy inside of large companies – This is a fairly obvious point, but big companies are notorious for having internal challenges when it comes to cross-product collaboration. When one of the products in question is email, I don’t imagine that will be an easy conversation – nobody wants to play around with an interface that touches tens or hundreds of millions worldwide.

Think about the refresh cycles for webmail systems. How often do Gmail, Yahoo Mail, or Hotmal get updated? Not that often, and I have to think that touching those interfaces requires a lot of signoff and a strong conviction that the proposed changes will positively impact a wide number of people. Otherwise, you might end up with angry users. I have a hard time seeing any of these companies acting aggressively with one of their web crown jewels.

The end game ought to be to make this information available to other services and make mail the data platform, not build new applications. Sadly, I don’t think that’s a very interesting business to be in – I don’t know how you re-establish yourself as a major player in social networking by simply providing the data layer that powers other applications.

So what’s next? Well, I think what’s next (and by far most interesting) is some concept of the “strength” of a connection. Specifically, today I can see a lot of my friends’ social networks, but I have no idea for the relative strength of connections. Sure, if I see Person A knows Person B, I can always make an offline inquiry to see if that connection is strong or weak. But very soon I think we are going to have tools like Xobni that profile communications patterns and surface that information both to end users and to other applications. And it won’t be just social networking and community applications that benefit. Enterprise applications (collaboration tools, CRM tools, HR/recruiting systems, etc) will all benefit from having access to some of this information. We’ll call this contextual “strength” Phase III.

Phase III is really interesting to me because I think it has to be a largely machine-driven approach. Communication patterns are too dynamic for any user to bother continually updating “strength” of connections. Also, as Xobni has shown me, if you are a power emailer you’re likely to be surprised by who shows up as ranking highly. There’s no reason the same can’t be done for IM. I’m not sure that I’m going to turn my phone logs over to some 3rd party analytics company, but IM and email would be a pretty decent picture of what I do and with whom I communicate. Passive profiling of communications patterns is going to be really interesting and I think will expose really interesting information about the nature of communications. I think Xobni is on to something really cool and big as it’s delivering value to me today (even though I have to use it in Outlook) and I can see a path to a lot more value in the future.
As an aside, I think this is the best shot that Google, Microsoft, and Yahoo have to wedge their way back into social networking relevance. They already own the message stream and have the data they need to get a sense for who knows whom. It will be interesting to see whether they choose to open this information up and let other applications take advantage of it or whether they use it for the bedrock of their own auto-generated social networks.

• The interface is quick – The Gmail interface is really snappy. It loads quickly and refreshes automatically. As is the case with most Google products, speed is clearly a high priority and it works really well.
• I can process/triage messages very quickly – Once you master the key keyboard shortcuts (j,k,x,n, and p are the crucial keyboard shortcuts to master in my opinion), it’s really easy to blast through a bunch of messages in your inbox and quickly triage them or otherwise mark them for future reading/evaluation.
• Search trumps foldering once you make the big leap – I am an active labeler in Gmail, but I’ve gotten lazy/sloppy with some of my labels over timer. The key “ah ha” moment in most Gmail user’s evolution is the moment in which the light bulb goes off and you realize that search is a more powerful navigation paradigm for email than foldering. It’s a leap of faith until you make the change.

One thing worth noting about the three things that I like most about Gmail – they only really matter if you are in a position where you need to manage (read, write, retrieve, and share) large amounts of email. If you don’t get a lot of email, most of these features and benefits don’t buy you much. In fact, you probably would not even bother mastering these things if you are not a power emailer.

The subject of to whom Gmail-like interfaces appeal is a subject for its own post. For the purposes of this post, we’ll just say that things like Gmail are designed for expert power users and have a high bar to adoption. However, once you adopt, it’s hard to switch.
After trying to go back to Outlook as my every day mail client, I’m finding it to be a very difficult adjustment. There are 3 things that stand out after a few days of non-Gmail email existence:

1. I miss keyboard shortcuts – a lot. After being out of the Outlook experience for over two years, I find the keyboard shortcuts to be a bit slow. Also, with the myriad number of formatting and presentation options that Outlook offers, it’s hard for me to actually remember all of the keyboard shortcuts at my disposal. The relatively short list of Gmail shortcuts that I can use really do the trick and allow me to get my work done quickly.

2. The Outlook client feels really slow. The time spent selecting messages, opening them, waiting for them to open, and then closing them and moving on to the next message just feels a lot slower in Outlook. I don’t know whether it’s because I’m less familiar with the interface or if there is something else at work. It just feels like it requires more keystrokes and work to get through my email using Outlook.

3. Working offline is not as big of a bang as I had thought originally. Now that I have a broadband access card for my laptop, there is relatively little time when I cannot be online if need be. Suddenly the ability to use my mail client offline is of less value as I find myself offline with declining frequency.

At the end of the day, I think that has big implications for folks who are building apps that plug into Outlook. Sure, not everyone in the world who uses email will switch from Outlook to Gmail. However, I know a lot of power email users who are moving away from Outlook and adopting Gmail. Given that so many of these interesting email products target power users, I am curious to hear how they will deliver their solutions to the (relatively) closed environments that we find in webmail. Greasemonkey scripts? Biz dev deals to get access to the platform? Lobbying hard for more opennes and APIs? I’m sure they’re all thinking about this stuff and what it means for their businesses.

As always, comments are welcome.

Is it just me or does there seem to be a subtle (or not-so-subtle) recasting of web office suites to be less about new functionality and feature differentiation and more focus on the price differential versus Microsoft Office? Early in the web office discussion, it seemed to me that there was a lot more conversation about the benefits of using web-apps (no VPNs, universal accessibility, easier to manage and deploy, etc) versus traditional desktop applications. Repositioning the conversation around price comparisons is a shift, it seems – there are certainly folks for whom price is the major impediment but this recasting strikes me as an admission of how far the industry has to go to reach real competitive parity.

Also, it’s important to note that some of these “disenfranchised” folks who do not have desktop productivity applications on their computer don’t need them. If you are in a task-oriented job where you enter data into a system, you might as well have a terminal as opposed to a full-fledged PC. Why would you need access to spreadsheets, word processing, and email?

More than revenue and sales, this partnership could give Google much more insight into what corporate IT folks need to see out of Google Apps for Enterprise before they start writing checks. It’s worth noting that Google has one major touchpoint with enterprise IT folks today and that’s the Google Search Appliance. The folks who are managing online advertising spend are likely not the same folks who make IT infrastructure decisions. Working with a large system integrator is a good way for Google to get a handle on the key requirements they’ll need to address to make GAFE a more palatable product for larger organizations. I also wonder if spending more time with the guys over at Salesforce.com might not also be the answer – those guys seemed to have cracked this nut before and I bet they’d be willing to share parts of the playbook.

From my experience, many employees struggle to use the tools that they have at their disposal today – adding more tools in might just make life more complicated. I’m sorry, but the whole “Team Productivity” moniker just sounds weird to me. I’ve worked at a handful of places and in almost every case I’ve seen employees befuddled by the full range of things you can do with the existing tools at their disposal. Adding in a new layer of tools and interfaces to learn when the existing products aren’t being fully utilized today might make life harder (as opposed to easier) than it is today. The history of groupware and group-oriented productivity applications has shown that it’s a tough nut to crack. Often times, the individual must find a way to be productive before he/she can worry about improving the productivity of the whole.

All in all, it’s an interesting announcement. I expect it will generate modest amounts of sales for both parties but will help Google get smarter about how to sell, develop, and position their product for a more sophisticated audience.

I would hate to see Microsoft buy RIM – I think the Blackberry is an iconic device and I’d hate to see a larger company saddle it with all of the bureaucracy, infighting, and internal competition for resources that would saddle the RIM division of Microsoft. Even worse, I’d hate to see Microsoft try to stick Windows Mobile on the Blackberry. Buying RIM would be tantamount to admitting that Windows Mobile just sucks and plain doesn’t work.

Ironically, I think that admitting that Windows Mobile doesn’t work and isn’t very good would be a very liberating thing for Microsoft to do. I have no idea how many engineers, product managers, and business development people they have working on making Windows Mobile a viable OS, but I bet their energies could be better directed elsewhere. Perhaps admitting defeat and starting over would allow the company to take a fresh look at building a new mobile OS. Who better to further the future of a closed, single vendor device than Microsoft? I can only think of one company, and they already have the iPhone…

Keep RIM independent unless it goes to a better home. I’ll have more to say on this later.

Despite my love for Firefox and Safari, Internet Explorer still is the dominant web browser platform worldwide for most users. I think it would be interesting if Microsoft were to use its position in the browser market to drive deeper into analytics. They could build in a simple Alexa-like toolbar that would send back anonymized info about where IE users go on the web. Would it be invasive? Sure, but no more invasive (from a privacy standpoint) than just about any other toolbar out there designed to track user behavior. Would there be anti-competitive concerns? Absolutely. In spite of all that, however, I think it would be really interesting to have a more credible source for web usage data than what we have today.

This is one area where I do think Microsoft could use its existing assets to actually do something interesting on the Internet.