• by William Mougayar
    Venture advisor, 4x entrepreneur, marketer & strategist. I live in Toronto, curate a lot, blog a bit, and help startups.

Disrupting by Owning Something: Can Cryptocurrency Do That?

ownership imageIn a widely quoted TechCrunch article, Tom Goodwin says “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.

That passage aptly described what these companies don’t own. But what do they really own?

What these companies have in common is while they don’t own physical inventory, nor produce and sell their content, they each own something else, and they are known for that ownership. No one can dispute their ownership supremacy, so let’s dissect these ownerships further.

UBER is beginning to own the “movement” business. First, people; soon to be packages and deliveries for anything near you. They are therefore in the “local miles” logistics business.

Facebook owns the “audience”. They realized that, contrary to the old newspaper model, an audience didn’t have to be local to be owned. The audience was suddenly global, and users could be made responsible for putting it together. Facebook’s audience is really made-up of a collection of micro-audiences; i.e. my audience, added to your audience, added to your friends’ audiences, etc.

Alibaba owns “global sourcing” from worldwide suppliers. Alibaba has been years in the making, and is almost as old as the Internet itself. Far from its early days as a cacophonic bazaar of listings, it gradually improved the organization of their marketplace, such that what was once a difficult process (sourcing materials and products) is now within the reach of anyone.

Airbnb owns a “new way to travel” by experiencing it via locals. Airbnb is really in the hospitality business now. You rarely book a place where the hosts sleep in the adjacent room. You’re booking properties that are prepped to be rented out on a routine basis. They taught landlords how to become hospitality mavens and local advisors for their guests.

And we could extend this list to other companies:

LinkedIn owns our resume.
Twitter owns how to break news.
Snapchat is trying to own the teenagers audience.
Skype owned instant communications (although they couldn’t hold on to their early dominance).

I believe this group of “big owners” belong to a segment of companies that are above the Unicorns. They are Giants of the information industry.

What is common about these companies is there was some intentional marketing and leadership genius behind them. They didn’t becoming giants because they had a great product. They decisively chose to become giants by obsessively pursuing a strategy of dominance. There couldn’t be many Facebooks for Facebook to succeed. UBER had to “kill” its competition for it to become dominant. Where else besides LinkedIn would you update your life long work achievements?

What Can Cryptocurrency Own?

This brings us to an important question:

What can Bitcoin and the Cryptocurrency movement own?

In my view, here are some candidates that are ripe for the picking:

Developers – new development platforms have cryptography, consensus models, decentralized stores, smart contracts and new software constructs all over them. If you’re a developer and not tuned to this, you will be missing out.

Microtransactions – in my opinion, any transaction under $10-15 on the Internet belongs to Bitcoin and cryptocurrencies. As a seller, why pay high transactions costs to credit card companies?

Global remittances – it has been the big promise of Bitcoin, but we’re waiting for the dent to happen. Who will displace Western Union?

Peer to peer commerce – it’s obvious that peer to peer transactions without central gatekeepers (but with distributed trust) needs to happen. The question is not when- it’s how big can it get.

Proofs of ownerships – without getting too technical, “smart property” is going to be a big enabler of new forms of value movements, from commerce to law applications. If a property (or thing) constantly knows who its owner is, it’s like putting wings on objects or digital assets, while removing physical boundaries.

New banking – banks are tough to displace, but there will be new banking services brands that will emerge, built on speed, mobile and being global from day 1. Paraphrasing Marc Andreessen, the whole of financial services can be re-invented.

Own or Be Owned

As a startup, you need to emerge and figure out what you want to own in your space. And you need to “Take that Ownership” yourself. No one will hand it to you.

You can either invent a new space, or create the need for a new one, but you need to grow fast to own it, both inside the minds of the market and in the hands of users. If you don’t claim that ownership fast enough, the whole thing gets fragmented and weakened, which is what happened in the online music business for example (for a variety of reasons).

At the end, the outcome is telling:

The importance of what you own is directly related to the benefits you derive from such ownership.

  1. kinetiktrader

    How many bitcoins is JLO’s butt worth?

  2. p_air

    Liked your post William, but am not sure that in your final analysis it’s an apples-to-apples comparison. Note, in talking about the giants, you’re addressing private and public companies, of which Bitcoin is not one, but rather a currency (or property if the IRS is assessing it 😉 or a protocol. The Bitcoin movement will not and cannot own anything because it’s not an entity with ownership potential, unless you want to compare it TCP/IP and the Web. We can look at companies that are making use of Bitcoin and explore how they might own new or emerging markets, but I’m not clear on how you are interchanging what these companies have done with the potential of what Bitcoin might do. One thing all of those companies have in common however, is that they are software companies and that their novelty is tied to the data flows and data relationships they have enabled. When looking at each of the companies you listed, what they have managed to own is information. Calling Linkedin’s ownership that of a “resume” or Alibaba’s that of “sourcing” is really putting a metaphorical construct around a set of data relationships. Like you, I’m giving a lot of thought to what sorts of data relationships bitcoin is enabling that could be captured by various different types of companies enabling them to solve problems many of us do not see today.

  3. William Mougayar

    Thanks. Maybe I should have further clarified that my analogy was focused on Bitcoin as the overall technology, same as the Internet. But you’re right that this is on 2 levels:
    a) Bitcoin as a technology (same as Internet)
    b) Bitcoin related companies (same as you’d put eBay, Amazon etc. in the Internet companies category)

    Actually, I had 2nd thoughts about changing the title slightly to “Cryptocurrency Startups” not just Cryptocurrency. But my intent is a double connotation. For e.g. you could say: Does the Internet own travel bookings? And then you go down the list of companies that are known for that.

    Owning is a figurative way of saying “owning in the mind”, not meant to be perceived as “owning the data”, although in some cases they do, but we give them that permission.

  4. p-air

    Makes sense. To further complicate things however, when looking at Uber and Snapchat in particular (perhaps the others to a lesser extent), they’re less a pure Internet phenomena but rather a mobile app one. It still flows back to the Internet, but using the “Internet” as the classifier no longer holds much value given that even Bitcoin is a technology that lives on the Internet. If we take Internet out, then we’re left with the Web, Mobile Apps (not including HTML5 which I’d leave as a Web artifact) and bitcoin.

    I feel that the bitcoin technology has more to contribute than merely at the company level however. TCP/IP had a capability that was never exploited because there was never any consensus around payments and tracking the value of packets. This led to applications that took advantage of the Internet commons (arguably YouTube falls into this category). In other words, much like we take the Internet as a transport mechanism for granted, so I would expect that we take bitcoin as an accounting mechanism for all types of Internet transactions for granted. This could greatly improve the ease with which business models could be experimented with and deployed. Uber could still rule the roost of the “movement” business while leveraging bitcoin for its accounting and payment needs, as could Facebook continue to deliver “audience” while leveraging bitcoin for its accounting (tracking) and payment needs. The value propositions I’m seeing and hearing about from some of the private market blockchains come primarily from the members’ needs to reconcile transaction histories quickly and easily across their various systems.

    When viewing much of the opportunity potential of the Blockchain, I really see it as the super-duper friction remover of electronic interactions, where accounting for those currently adds a lot of friction. Having artifacts like “smart contracts” doesn’t remove the need to have rules and conditions around interactions, but it greatly automates the process hence removing the friction associated with the accounting need.

  5. William Mougayar

    Great comment. Couple of things:

    1/ Blockchain apps are not for everything. We must ask hard questions before assuming that any app or business makes sense on the blockchain. I’ve written about that here: http://startupmanagement.org/2014/12/30/blockchain-apps-moving-from-the-jungle-to-the-zoo/
    2/ “Having artifacts like “smart contracts” doesn’t remove the need to have rules and conditions around interactions.” True, and that’s where Ricardian contracts will come in. They have rules and conditions in them, and they will be implemented in decentralized trust apps, such as OpenBazaar for example.