Mister Beacon Episode #49
Success with Mobile AppsAugust 30, 2017
Have you figured out how to make your apps successful? Research shows that over the past four years, the percentage of companies that do has jumped from 10% to 90%. But having such a strategy does not guarantee success. Phunware have a unique track record of success powering apps from Netflix, NBC Sports and Fox to Cisco and even NFL stadiums. This week, Phunware CEO Alan Knitowski deep dives into every major aspect of what it takes to be successful in mobile apps.
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Steve Statler 00:14
Welcome to Mr. Beacon, the podcast for entrepreneurs location aware IoT solution designers. My name is Steve Statler of Wiliot. Mobile apps are fundamental to an increasing number of businesses. Four years ago, less than 10% of companies had a mobile app strategy. Now in a recent survey, 90% of people said their companies have a mobile app strategy. And yet, building mobile apps remains challenging, the failure rate is astronomically high. With so much riding on it, how do you make mobile apps successful? This week, we talk about the keys to success with the CEO of Phunware, a company that provides the technology in over 1000 apps touching over 700 million users every month. Whether you're building apps, or you're relying on someone else to do it for you, I think you'll find our conversation interesting. So Alan Knitowski, CEO of Phunware, thanks very much for doing the show. Appreciate you coming along.
Alan Knitowski 01:19
Thanks for having me. Pleasure to be here.
Steve Statler 01:21
Well, so this week, I want to talk about apps. And you know, why apps just seem so obvious. They were using them all the time, but as an entrepreneur, where you're making a business case, and I was actually in the situation just earlier this week, and for us purveyors of location technology. And you know, the related technology that sits underneath apps, you have to answer questions about whose apps should you be integrating with? Can apps be successful? And you've made a business out of enabling other people's apps? And so I thought, what better person to speak to than the new and you really have you've been at this for quite a long time, it seems like over eight years. And your technology is in some amazing apps for Fox, NBC Sports, NFL, WWE, the AT and T Stadium. And also, you've had a bunch of awards, webisodes, and you've been in Forbes and Inc. So first of all, just congratulations for flourishing in what is a very challenging environment. But maybe we should start off with you explaining what your company does.
Alan Knitowski 02:32
Sure, so Phunware, actually, the name came from a play on the word Funware with an F instead of a Ph. And that actually means applications that exhibit cam game like mechanics and behavior. So we have a lot of interesting things and how we wanted to think about radically changing the way people engaged in what I call the era of mobile computing. We literally said the idea at first was, how do we reach every human being on the planet with a device connected to a network that uses mobile applications, effectively, using the identities of corporate America, predominantly the fortune 5000. And what you were basically going to use is that identity on these anytime, anywhere audiences through mobile devices. So Phunware, was really set up that if we did what we thought we could do correctly, when he thought about technology, we wanted you to think there was hardware, software, firmware, and firmware. And what we did is went after the entire mobile ecosystem, that meant applications, the media that you use to build, engage and monetize audiences, and then all of the data behind it. So people could not only make smarter decisions about the subsequent versions and operating systems and devices in terms of what those applications did. But they could also use that data to understand how to optimize the interactions and engagements with people so that they were delighted, excited, and were able to effectively preserve or enhance the amount of money they could make through these mobile audiences.
Steve Statler 04:05
So, it sounds like you've got a lot of tools and technology that can plug into other people's apps to gamify them and do the analytics and many other things that we'll talk about. Do you actually just create soup to nuts apps as well?
Alan Knitowski 04:20
Yeah. So what we set ourselves up to do is when we started Phunware, only 2% of the world's internet traffic was mobile. Today, it's 70%. And even worse, 90% of that traffic that represents the internet is now not just mobile, but it's in applications, not browsers, like Safari or Chrome. So what's gotten very obvious now, you know, mobile first, native, first, fully integrated, all these wonderful things. Back in February of 2009. When we started, you know, there wasn't even but maybe five enterprise applications even on the App Store. And what was on there, it was kind of either games or god forbid a fart machine, it was crazy stuff. It was not the identities of corporate America, I think the closest enterprise application back in the time we started Phunware was a Bic lighter, where you can actually swipe the screen on an iPhone and it would light the lighter like you were at a concert, that that was what an app was. And we never really believed that that's what the market would be, we thought, this is really going to be about business to business, it's going to be about providing all the software that was necessary. So if you'd like to build your own applications, we would look like ingredients for people making amazing cake. And then for everybody else, that we're not really a do it yourselfer to make applications but we're kind of an off the shelf or that wanted to have solutions and kind of be able to not figure out how to be a baker with all these ingredients. But they just said I like to eat cake. Give me cake with chocolate, or vanilla or sprinkles. And we wanted to provide both options. And what we found by being very agnostic to saying like, if you like to build, we're a platform, if you like to buy, or least depending on if you have a smaller big budget, we'll happily do that for you as well. And we can license you something you can use as your branded identity, typically starting with iOS and Android smartphones. But ultimately, we support every screen other than legacy kind of desktop. So that means smartphones, tablets, smart television, wearables, in car infotainment, and other forms of digital sign.
Steve Statler 06:39
So what proportion of your revenue comes from kind of the platform providing these ingredients? And what proportion of your revenue comes from someone that just says, hey, we're an apple, give me an app?
Alan Knitowski 06:51
Sure. So on a, I guess an overall basis, over 90% of all of our revenues are either subscriptions or transactions. So the subscription side of our business would look like SAS we call it mass started as mobile as a service evolved into multiscreen as a service. And that would look exactly like you would think about Amazon, AWS, if all Amazon AWS did were fortune 5000 mobile application portfolios. The other side of the business transactions are really dealing with media buying. And it looks a lot like Facebook. And for the same reasons, based on the size, scale and reach of who the audiences are. People buy media so that you can do application discovery, user acquisition, you build the audience, and after you build it, then you use media buying to engage and monetize it. So in our world on a bookings basis, think of it about two thirds 1/3 subscription to transaction with over 90% of all of that being subscriptions and transaction, very minut amount of services single digit, but on a revenue recognition, it's inverted, to third transaction 1/3 subscription basically. And the reason for that is, you know, when when we use a Visa or MasterCard, you swipe your card, and you bought something. So the bookings and the buildings and the revenue are all one in the same and it happened right now. But when you license software over one to five years, typically you would win a deal, and then you would put it into backlog. And then you actually would recognize that typically over 12 to 60 months, depending on if you have a one to five years software licensing contract. And that's kind of how the nature of our business works. It's like Amazon AWS on one side, Facebook on the other end, overwhelmingly, we just try to focus on winning the bookings game, because the revenue game is a lot more about a GAAP accounting and scorekeeping of when you can recognize that which you already won.
Steve Statler 08:49
So if if I am a venue that needs an app, if I'm an airport, how much should I expect to budget to build an app.
Alan Knitowski 09:00
So, typically, I say when you are building very high end, and lots of semi Custom and Custom extensions, you'll see people spend to do it the right way, I'm going to call it you'll see them spend one to $5 million budgets, to do something that is really high end and custom. We have, you know, immediate customers that might spend seven digits per month, for the entire year, to keep up with all of the various mobile identities that go along with what you would see for their networks or their shows. Whether that's the sports side, the news side, the media side, the internet side, when you're dealing with like airports and others, often you'll see that instead of buying the Ferrari at one to 5 million, they'll lease the Ferrari for one to 500,000. So it's their brand, it's their content. But at the end of the day, they're effectively licensing a right to us. You know, in the in the airport example You said That would be licensing the traveler experience for the aviation vertical at airports being the physical venue, it would be no different if it was a stadium or arena, you could often license the fan experience for the sports vertical specific to stadiums and arenas. And we do that vertical by vertical. But on average, I think you see people that are renting one to 500,000, buying one to 5 million. And there's always, you know, exceptions on every rule. But that's probably a good way to tell people to think about is to do it right, you're probably going to spend 150,000 per application per platform, as a bare bones to do things the right way over what period of time? Well, it just could be in the inversion one in what you do. And it could be just for an iOS smartphone, that could be $150,000. Without even defining what are the feature sets and use cases, again, to do it, right can be the same with Android. And suddenly, you could have 300,000 for two of them. And then you have to add probably 20% for an annual support maintenance subscription. Because what happens iOS and Android change throughout the year, you have to revise and update it. And then you still have to license all of the capability sets based on whatever features you may want. So that's why I say it's usually at the end of the day all in for the first suite of an application portfolio on iOS and Android, you typically see people leasing the right to use between one to 500,000 per year, or you see people investing one to 5 million if they're really trying to go much, much more high end. And it really just depends on what kind of revenue or monetization they have as to where those budgets fit. And also just the desire, some people don't have the time and inclination to figure out things. And if I was an ingredient provider and gave them sugar, and flour and water and vanilla, they're like, look, I don't want to figure out how to be a baker, just give me something that works. We don't have the time or inclination to figure that out. And so we do it stay agnostic. Let's say whatever you need, we'll help you out. And ultimately, that's just to deliver the applications. And then the next step is after you've made them or brought them to life or leased them, then you have to do application discovery, user acquisition and audience building. That's usually media buying. And then each vertical has different monetization, once you build an audience, so it's not dissimilar, when you think about a television commercial, you know, coming up with the idea of building the commercial is one thing, paying to have it distributed. And the airtime that goes with it are completely different.
Steve Statler 12:45
So yeah, this is significant amounts of money. And so I want to later I want to get into actually going through several of these verticals and just talking about what's the what, what is it that's justifying people spending upwards of 150,000 to, to one and a half million or more on an app. But before we get into that, can you just kind of give us some hope about the fact that it's actually worth doing this, that if you build it that people will come and I think what you've said is if you build it, they won't necessarily come unless you need to spend more money on actual acquisition. But what is achievable in terms of people using your app, because I kind of look at it as almost like the lottery or, you know, loads of us want to be a movie star, or we want to be a, you know, an NFL player, but reality is most people aren't. And there's a litany of statistics that say that most apps that get built fail, they don't hit their business objectives, and not enough people use them. So can you give us some hope as to why you should do that and what one can achieve? And I don't know what success is, but I'm sure you do.
Alan Knitowski 13:57
Sure. And the reality is why you see most things fail is that the concepts of how people are thinking about this are incomplete. And they're setting themselves up for absolute failure before they ever even start. So when I think about defining Mobile Application Lifecycle Management, independent of your idea for an app, whether you're doing a game, whether it's a network or a show, clearly, there are certain brands and certain content that have an advantage when they're providing it on mobile. For instance, if you're dealing in the sports vertical, there's only one National Football League. And if you want to watch the National Football League on a mobile device, there's one application you're going to launch and there's one interface to it. Barring them licensing, you know, to Twitter or someone else, you know, Thursday night games, but the reality is that you already have a captive audience. World Wrestling Entertainment has a captive audience of fans. Now that doesn't mean you're guaranteed success in mobile And let me use an analogy, you know, because I like to think about defining Mobile Application Lifecycle Management like a clock 12 369. And then back to 12. And what happens in most companies is everybody is siloed. Nobody is thinking about the problem holistically, you might have one thing I'm looking for use cases on, you know, what I need to do for the shopping experience at a mall? Someone else might be thinking, no, no, I want to think about what the fan experience is like for me to watch instant replays at a stadium. In someone's I need analytics and someone else goes, no, no, we need to get content. Nobody has a taxonomy that thinks holistically about what is it you're trying to do and why. And it would be like that. So if let's say you and I were challenged to build the next Mercedes sedan, we'll call it the s 750. Right will make one up. So 12 o'clock would be you. And I say, Okay, we've been tasked to design the s 750, luxury sedan for Mercedes, we're going to come up with every feature, all of the horsepower of the engine, the amazing luxury, we're going to put into it, and on and on and on. So think of that as defining the luxury Mercedes experience for the s 750. And that's 12 o'clock, after 12 o'clock, you'd then migrate to three o'clock, and three o'clock would be now you and I take that idea. We go to the manufacturing plant, and we bring bring that s 750 to life on the production line. Well, in most corporate America, when you go backwards, and now you defined the way you would think about that in mobile, they would just say we're done. And you go, Wait a minute. That doesn't make sense. Like if we define the f7 50, sedan, at 12. And now we went to three, and we manufactured it, don't you think we might have to go to six o'clock, and take the cars to the dealerships. So now you can build an audience of lease ORs and buyers. And then once you've done that successfully, you go from six to nine o'clock, which is the aftermarket, the warranty, the concierge service, and the closed loop experience of your interface with Mercedes, the manufacturer in your dealership so that when you go from nine to 12 o'clock again, and you're done with the useful life of your car, or the lease is up, that when you get back to 12 o'clock, you're going to buy the next Mercedes instead of an Audi, a Lexus, a BMW or something else. So now think applications on mobile, using the same analogy? Well, most of corporate America, when they thought about things like digital transformation, they never really thought about, okay, well, that means the customer experience or the customer journey. And if I'm in the retail vertical, that would be about the shopper experience. When you're in the aviation vertical, that would be the traveler experience. When you're in the healthcare vertical, it's the patient experience, and so forth. So in that place, you might have someone defined at 12 o'clock, the most amazing mobile experience in the world, for those patients or those fans, or whoever that audience is, use cases, feature sets, devices, operating systems platforms. So that's 12 o'clock will jokingly call that strategically. They may do that internally, they may use an agency of record, they may hire consultants, they may ask us for our thoughts and opinions. But at 12 o'clock, you define what's the most amazing mobile experience for my audience. Now, now that you've done that, you go from 12 to three o'clock. And then you have to do what you have to bring that mobile experience to life in the form of a mobile application portfolio that houses that wonderful experience to find at 12. And where corporate America got it wrong for so long, is they would stop, they would say, hey, we define this great app. We built it, we're done. And he would say again, like the Mercedes analogy, no, you're just getting started. Now you've provided this application portfolio three, for that amazing experience at 12. So what do you have to do, you now have to transition to another part of your company who controls your media buying. At six o'clock, you have to facilitate app discovery, user acquisition and audience building. So you can build a global user base around the world with media dollars as real investment in advertising and marketing, just like any other product or service. And that investment is going to now build an audience at six that uses the mobile application to find it three for that amazing experience to find 12 Okay, so now we've done that we're done. Now, we're still not done. Now we go from six o'clock to nine o'clock. Because now that you've built an audience, you now have to do what you have to engage and monetize the audience that was built at six consuming that application portfolio at three He that's enjoying that amazing experience at 12. And then once you've done that, across the Chief Digital Officer, typically doing 12, and three in terms of defining the experience and bringing it to life, typically, they then hand off at six and nine, to the Chief Marketing Officer. And whether on direct buying or through agencies of record, what do they do, they're the ones who do the insertion orders and media buying to build the audience, and then engage in monetize. And then finally, after all, that, you take all the data that you've now captured through that whole process of usage. And now you do two things, you hand all that data to the chief revenue officer, or the chief financial officer, or whoever runs the profit and loss that goes along with that product. And they use that data for two reasons. One, to feed back to the Chief Digital Officer, how the engagement and monetization works, so that they can optimize it and hopefully grow it for future releases. And most importantly, to figure out how people use it, what they like, what they don't, what they do before they get to a venue, what they do in their on site, what they do after their leave, and how to feed that in to do the roadmap for version two, and three, and four, and that clock never stops. So 12 369, and then back to 12, inclusive of the application portfolio, all of the media and all of the data. Now guess what I just did with mobile application lifecycle management, I reunified the entire C suite, so that nobody is operating, throwing things over the fence. But they're saying, this is our identity on mobile, we are going to succeed or fail by this. And we've defined it, we've brought it to life. We've built an audience, we've engaged and monetized and we use data to make better decisions. And we continue that process. And honestly, if I went back to everyone that had an idea for an app, they think that oh, no, we'll just finish our application. And it's going to grow virally. The biggest brands on the planet, with the biggest brand recognition on the planet, I can assure you, they're not virally building their mobile audiences even slightly. The only one that maybe does that would be like a dating app like Tinder. Outside of that, which could go viral. The reality is that every audience on the planet is bought and paid for with media dollars. And when people say, oh, you know, we don't have the budget for this, it's so expensive. No, you really do have the budget, you're just miss allocating how much budget goes to mobile, versus the mobile web versus social, versus the internet, versus radio versus television versus print. And you see it on a Mary Meeker slide on the state of the internet once a year, here is the massive $30 billion dollar of spend that needs to shift. So think about it 70% of all internet traffic is mobile. And you know what the spend allocation is to mobile in the Fortune 5000. It hasn't even hit 10%. So seven to one difference between audience and budget. It shouldn't be one to one, but it should be like two or three to one. And you should be spending 25 to 35% of your budget on mobile. Because 70% of the audience is in mobile and 90% of that audience are in applications.
Steve Statler 23:39
So I love, I've let you talk for a long time, because it's really great stuff. And I love the metaphor, and it speaks to many things it speaks to, I mean, you you tied it in with all the very senior stakeholders that need to buy into that speaks to the fact it's not just something you throw over the wall to the technology guy to build. And you speak to the fact that this is this is actually a major endeavor that requires sustaining, building, sustaining and iteration. There's so many things that could come from the metaphor that you use. But I do want to go back to the original kind of premise of the question, which was give us some optimism and some basis for thinking that all of that work is worthwhile, what results have people actually got from, from spending the money and going around from 3 to 6 to 9 to 12?
Alan Knitowski 24:32
So what I would say though, is you know, if you're an independent developer, you have your own idea. The reality is, that's like the gaming business where it's hit or miss. You're trying to pick a winner. I mean, even Rovio, right, everybody knows about Angry Birds. Do you realize that that was about the 60th application attempt that they made with 59 failures before Angry Birds became a runaway success? Right? So the reality is even before we Started fun where we thought, you know, let's set up a fund. And we'll invest in applications. And that's the right way to benefit from the largest and fastest growing market in the world. But in reality, we realized, no, that's like a hit or miss that's picking winners. That's like throwing a dart at a dartboard and praying that it's going to work. I mean, think of like, not even in mobile, think of like Minecraft, who would have thought that, you know, graphics, such as Minecraft would resonate worldwide. Who would have thought that Flappy Bird not Angry Birds, which was this old, archaic little ridiculously difficult thing would just go crazy, right? I mean, those are like impossible things to guess. Now doesn't mean you can't work really hard, have a good idea, get it started, and hope to make it into its own franchise. But again, unless you have the budget to plan for it, bring it to life, launch it, engage and monetize it, and then take the data and learn from it, you know, take King in Candy Crush Saga, you know, they get down to a science, you know, we have all these customers King Machine Zone cabanne, Disney Warner Brothers, everybody that does gaming, I can assure you everyone who doesn't well knows exactly what the value of a quote unquote free user is. King and others will invest in 100 paid installs for user acquisition, because they know that if three of them or four of them, buy in app virtual goods through Candy Crush Saga, it pencils with a good three month ROI on the investment. And you just keep plowing more money into that investment and new users until the math stops.
Steve Statler 26:50
So it seems like there's two, maybe two classes of of app Well, there's many classes, but I want to slice it this way. One is the kind of the hits, which can be one hit wonders, or they could be a franchise and it's a game. And then the other one is the kind of franchise where where WW II or where some a sports team or some some essential content or place that were an app, they've decided we need an app to be part of this. And it sounds like you can help both.
Alan Knitowski 27:28
Yeah, we so you definitely can help both in a lot of the stuff that we started with. We're in the passion, verticals of media and entertainment and sports, because that's where the adoption started. It was our favorite shows our favorite networks, our favorite teams, our favorite leagues, our favorite pastime, right? The reality when you look at all those things is that every brand, that's a fortune 5000 company should have its own branded identity, which is that high value touch point between their brand and their company. And they're anytime anywhere users. And that is their livelihood. If you know I have four kids, if my kids look at your application, they don't like it. They don't care who built it, how much your budget was, whether you really worked hard at it, or you didn't work hard at all. They just say look, I like it, or I don't there's something in it utility wise for me. And I need it or I don't. And if they don't, you're deleted and in mobile. And now for all these companies. That's a life or death scenario when 70% of the world's traffic is mobile. You know, this isn't back in 2009. When 2%. If you have someone delete your brand on their mobile device, you're in trouble.
Steve Statler 28:45
So there's a set of yeah, there's so there's a set of companies where having a mobile app just isn't an option. If I'm a television network, and I don't have a mobile app, then something is deeply wrong with what I'm doing. But there are other places where maybe the mobile app is more of a marginal thing.
Alan Knitowski 29:03
And so I will respectfully disagree, though, okay, everyone needs and let's go by vertical. So we know that gaming, but that's a one hit wonder or hit business or big companies and independence and all that other good stuff. But all of the monetization, typically a little bit of advertising or sponsorship, but predominantly, it's about virtual goods. And that's the methodology of saying, Where does the ROI come from? You're gonna make an investment, and you're gonna monetize through the game, ideally, through gameplay with virtual goods. And if not, maybe you're going to get a big enough audience that are tolerating, you know, sponsorship, or advertising. Now, get out of that vertical and jump into media, entertainment and sports. Typically, the monetization there is very known. It's tied to your cable or satellite subscription, where you have access to those networks or those shows, or it's tied to your season ticket package, or Something else depending on if you're physically go to these stadiums, or, you know, you're just consuming it through NFL mobile, or through major league baseball, or whatever your favorite league is, right? So sports is kind of known, you have some, like the Masters brought to you by IBM or American Express, or the Olympic games that are brought to you by a series of Olympic sponsors, with the NBC Sports live extra application portfolio. So in those cases, you know, you might have a billion dollars of advertising and two thirds of the billion of digital rights. And it's a live events, or it's an ongoing thing. Like once a year, there's Wrestlemania, but 12 months of the year, three times a week, 50 weeks of the year, there's live events, Smackdown, Monday Night Raw, you name it, all of it. And the reality is that every one of those are either paid subscriptions like Ott, like the WWE Network, or HBO go direct to consumer, or it's bundled in this traditional model of where you're paying for your subscriptions. Now, let's go to the ones you said that, Hey, who the heck needs this? And these other verticals? Okay, let's jump into insurance. Every insurance company needs one because all of us that might be for life insurance, could be for homeowners insurance could be auto insurance claims, you name it, right? It's the ROI has nothing to do with the application except the application as a remote enabler to access the services that you're paying for through your premiums. Same thing happens with banking. So whether it's a brokerage, like Charles Schwab, or a bank, like Wells Fargo, it's the same idea, but they're going to monetize, not the fact that you're going to pay for the download, or there's advertising or sponsorship, there's not a subscription, you're paying because of the methodology of your financial relationship, trading stocks, having deposits, transferring money, whatever it looks like, now jump out of that, and we get into healthcare. Okay, why would you need that? Well, I need the application to represent Kaiser, or Cedar Sinai or Dignity Health, or Houston Methodist, where I am either one of two groups, I'm either a patient who use that, to optimize the experience, before I'm there, when I get there, after I leave, or the doctor, the nurse or the staff, the administrators that lose 25% of all scheduling, because they don't have the right doctor, the right nurse the right equipment, the right room at the right time. And if that doesn't happen, they lose on average each hospital 8 million per hospital per year, because 25% of us didn't show up and they can't invoice Medicaid, Medicare, or your health insurance plan. So their ROI is about a reduction in scheduling losses that they can quantify at 8 million per hospital. And if you're Kaiser with over 700 hospitals, do the math. And you'll see pretty quickly where that comes from. When you jump into retail, okay, now you start saying I want to drive in store traffic to buy. I want to drive online traffic to purchase or in app traffic to purchase and they're going to make money by selling goods. And in each vertical, there isn't one you could tell me from your real estate investment trust or a property management firm. Well, of course, you need mobile applications. Because if I'm going to your mall, I'm going to get the shopping experience like we do at the grove in Los Angeles. Or it could be a mixed use facility like Brickell, City Center in Miami, where you're one of two audiences using the application. One you're just going to shop or to you bought a condominium, you were provisioned into the condominium as an owner. And you're not only going to use it for the shopping experience on site, but you're going to use it for your guestlist your package delivery, your trouble tickets, and every activity that you do as an owner within the condominium complex.
Steve Statler 34:15
Okay, so I think you've put a really good case as to why everyone should build an app, but reality and, and theory aren't always aligned. And so you know, I look at an airport. And, you know, the, the CEO of the airport probably knows very little about mobile apps. They've got a marketing department, but they're focused on doing a certain kind of marketing the, the posters and they're trying to sell parking and drive people into concessions. But, you know, do you do they really have a right to win if I'm an airport, and I've got United Airlines now I'm going to use an app and an airport and it's going to be united or delta. Can we really expect you know, a quarter of a million or a half million dollars? has to be spent from a medium size airport, I get Atlanta and DFW maybe they would buy an app, but is there really a case that can be made realistically for, for airports to be building their own apps when you have Travelocity and you have, you know?
Alan Knitowski 35:17
Well, so I would suggest Absolutely. And we work with lots of airports. And you know, it's not just about Dallas Fort Worth, or Dubai International Airport. It's about Fort Lauderdale Airport. So if you download the Fort Lauderdale Airport application, they've not only invested in the applications, but they've invested in 1500 battery powered physical beacons, so that you can get sub one second blue dot experiences inside the airport, no matter where you go. Because ultimately, they want to know who the travelers are before they get to the airport, who they are while they're on site. So that they can make their experience better, whether that's, here's the services where you can go get a massage, here's the specials on food or drink, here's where you can go shopping, here's where you can get rest, here's we can take a shower, everything about your experience on site, when you have a better experience in those airports, people tend to fly through them more. And honestly, same thing, if your experience on the airlines you pick, you use them or don't use them again, based on how you feel as a passenger. So when you take extreme examples, you know, 100 million people go through the Dubai International Airport every year. And the team on site there only knows who 600,000 of those 100 million are. That's crazy. If you're the Chief Marketing Officer, the Chief Digital Officer, wouldn't you like to know who's coming? Would you like to know how to engage them for the benefit of everybody that's spending money to lease if you're a food beverage shopping services staff. You also have just like I said, the passenger side for you and I while we're flying. You also have for the facilities groups, for real time crowdsource feedback, where there might be problems, whether it's the bathroom, a disturbance, an issue, getting your TSA wait times more simply getting from parking, keeping track of where you parked, what services there are, how much time it takes, where you should route yourself through which TSA lines to get through quicker, there's so many things that can dramatically affect the value of what can happen in those touch points. So we see airports like Fort Lauderdale, airports like Toronto, Pearson, that are by no means, you know, Chicago, or Atlanta, or Dallas, Fort Worth is a hub. And they do these and it's dramatically altering the way they think about things. As a country. Take the most extreme example, you know, the budget for the 2020 World Fair, in the United Arab Emirates and Dubai is $75 billion of that 25 billion is for technology. Do you not think that on investment like that, that people really want to know how you're going to download an application, so that you can know about them before they get to Dubai's airport, while they're on site. Everything through Abu Dhabi, and Dubai and the other emirates, it's a really big deal. And when people are saying, well, oh my gosh, like one to 5 million a year, let's say even that, wow, that's millions of dollars. Think about it, though, if you went to Las Vegas, and you're the Wynn hotel, you just spent $2 billion on the casino $2 billion on AT and T Stadium. So you're investing in the physical world with a brand identity that is immaculate, the best of the best of the best that the winner would be when they used to have you in the Ferrari dealership, they would have Picasso's, it is the highest end physical branding ever seen. So what would be the approach on mobile or digital or virtual? That you should do it similarly to have brand consistency in the virtual and mobile world like you do in the physical? Or should the wind say You know what? We should really invest in mobile like it's a beat up use Truck Sales dealership in the middle of the hotel, or a child's finger paint instead of the Picasso? Yes, there cannot be a disconnect between the physical and the mobile world because 70% of those engagements in touchpoints. Whether it's a casino, whether it's a mall, whether it's a museum, they're going to be through those mobile devices.
Steve Statler 39:54
Now that's a case well made. Let's let's get into the weeds a little bit deeper. Some more inside baseball. On technology. This is the Mr. Beacon podcast. So you mentioned beacons. And I think actually the first time I found you guys was you had a partnership years ago with Zebra who did some interesting stuff in, in beacons. It's a big complicated market. But what's your view of it? Are Bluetooth beacons, an important part of linking that kind of virtual world with the physical world? Or?
Alan Knitowski 40:30
Yeah, absolutely. I mean, we see that, you know, whether you have a stadium, or whether you have a retail store, or whether you have a museum, everything is identical, you have to figure out how do I engage people before they're here? How do I engage them when they're on site? How do you engage them when they leave, by default, that means you're going to be using GPS outdoors, the way you're used to using Apple and Google Maps. To get that blue dot experience from mapping navigation wayfinding triggers with geo fences, you're within a five mile radius of a mall. So come, we're gonna have specials, because it's light traffic day, or whatever. So all these things feed on themselves. But when you finally go from outdoors to indoors, you transition off a longitude, latitude, GPS based system with an x and a y coordinate, to an indoor environment, where most things go blind. Well, the way you avoid going blind is you have higher low density Wi Fi. So you can hand off from GPS to Wi Fi. And then you hand off from Wi Fi to physical or virtual beacons. And what that does is give you increasingly more granularity. But you also get an x, a y and a z coordinate. Because now you know whether you're on the first floor or the 55th floor of that building. And you can actually activate workflow, and policy enforcement and asset management, and loyalty points, and marketing interactions, and messaging and reminders, and advertising, and all sorts of amazing things, specific to those from very small to very large geo fences, which all depend on sub one second updates. So outdoors, you get that already, but when you go indoors, the fastest Wi Fi in the world will refresh only every 10 seconds, which is great. But that's nine seconds too slow. So physical beacons with battery gets you down to sub one second, virtual beacons, which is more like one per access point. That'd be more like three to five seconds. And so a combination of things like our software, with whatever hardware, whatever network is, or isn't available, what may be working well or not working well. You have to take all those inputs, and make them seamless so that your experience on mobile is fantastic. You don't need to know why and how it works. You just need it to work.
Steve Statler 42:57
So you you reference virtual beacons that which I think it's the first time I've heard someone raise that, who hasn't been, you know, working at Mr. Cisco. Are you seeing that? I think it's a great concept. Are you seeing any traction with virtual beacons?
Alan Knitowski 43:14
Yeah, I mean, just think about it from the management perspective. So in an instance, like Fort Lauderdale, that I was mentioning, are other airports and other museums that they want to use physical beacons. Now there's nothing wrong with that could be more cost effective. There's a lot of battery management, there's a lot of overhead and maintenance that goes along with that, because they're useful until someone yanks it off the wall. They're useful until the battery goes dead, or there's a hardware problem. And that's great. The flip side is virtual beacons make that easier to manage, but it's a more expensive solution. And so it really depends on the environment, the use cases, the ceiling heights, you know, what you do at a Home Depot, or Lowe's or Costco, or a stadium is quite different from what you would do at, you know, a normal business or office or environment where you're not dealing with those kinds of challenges. So I think that from our standpoint, you know, we're an enterprise software company. So when you think about people saying the Internet of Things, that's the sensors, the chips, the connected devices, the networking gear, and the network. Phunware is really like the software of things, taking all this software, putting them into applications to show off the amazing value of those sensors, and chips and devices, networking gear and networks. And all of that should be transparent just like you and I right now. You know, we're using Voice over IP through Skype. Well, guess what? It doesn't matter. Could have been Voice Over Cable. Could have been CDMA TDMA GSM cell phone, who cares could have been landline. It's just We're talking, it works all is get how it's happening, who cares?
Steve Statler 45:04
So beacons are on this continuum, I think you've done a great job of positioning that. And part of the Nirvana is, in so many use cases about getting the customer to the right place, getting them to the concession or seeing what their dwell time is in a, in a store, I can mention the dwell time of where they are in the store without them using a map. But do you think I mean, is it viable for brands to deploy wayfinding navigation and blue.in their app with when you're essentially competing against Google Maps and Apple Maps that really seem to they seem to be doing a pretty good job? And they have quite a focus on indoor mapping? And what are your thoughts on that?
Alan Knitowski 45:50
Well, so Google's Google, you know, apples, apple, the reality is that it's not hard to crush them indoors, honestly, you know, we had to beat Google head to head for all of Kaiser's business in the United States. So here's the use case, they have to be able to solve if they want to do these kinds of things, you know, driving trucks by a building, and sampling access points and try to reverse engineer what's happening is very different than having a multilayer vector map with enterprise points of interest. And no matter how great Apple and Google are, they're inherently biased to want people in the Apple ecosystem, or the Google ecosystem. We're agnostic, and don't care about any of those. So the first challenge is, grandma's at the bottom of a basement, she needs to get to the fourth floor to get an x ray, because she's going for her appointment. So the network doesn't exist. There is no hardware, no physical beacons, no virtual beacons, no higher low density Wi Fi, everything's gone wrong, the bandwidth has failed. You're near the basement where it's all metal, take your pick, it sounds grandma to the fourth floor of a turn by turn directions. Oh, and by the way, Grandma is blind. So she has a hearing impairment. And she's also deaf. I'm sorry. So both blind and deaf. So hearing impaired visually impaired, okay, ready, go. solve that. So that was why we won Kaiser and why others don't. Because you have to be able to solve for no network, no gear, visual impairment, hearing impairment, and have a seamless turn by turn set of directions. So when you really look at outdoors, and we stitch all of our indoor mapping functionality and capability right into iOS and Android, it right on top of Google and Apple Maps on their API, because people are used to using them. But then in ours, you can zoom right in, go right through the roof, go through the different levels. And also, when you talk about accuracy, I think Google and Apple Maps will probably get to maybe a meter of accuracy indoors, assuming you're using Apple specific beacons on the Apple side, or Google specific things on the other side. Whereas most consumers use both if you're a brand, you can't pick like when you're going to see them, everyone's going to have an iPhone that goes to your mall? Of course not. Or everyone's just going to have an Android device. Of course not. So their desire to lock everybody into their vertical walled garden is why our stuff works better. And also, when you're getting down to one to five centimeters of accuracy. That's very different than one meter of accuracy. In fact, go to Google Maps and zoom in, zoom in as much as you humanly can, and test your theory about indoors, and it stops, you can only zoom so much. And if you said zoom me down to one to five centimeters, not possible, struggles to even get to a meter.
Steve Statler 49:00
But, you're not saying that you get down to five centimeter? I mean, it seems like one meter is pretty good if you're trying to navigate around public infrastructure and so forth. Yeah. How did you get Graham out the deaf blind grandmother who doesn't have a smartphone out of the basement with no wireless coverage? I was.
Alan Knitowski 49:19
Yeah, so actually, the solution to that is that because we also aren't just a point solution where the entire ecosystem and one company, we can draw from every single thing we have available across everything in our tech stack simultaneously. So we do is we know that when grandma in that instance, first downloaded the mobile application, to even get it on her phone to do that, she had to have what been connected at the time to download the application. So once it's on her phone and download, we're smart about downloading all the multi layer vector maps, all the workflow, all the guidelines, all the turn by turn directions, and everything that goes along with those multi layer vector maps. HTTPS and routes, including what routes are possible for visual or hearing impaired, including what pieces of the building are static, or dynamic. And once we know that all that payload has been downloaded when you download the application, then the nuclear scenario if there is no network, there is no hardware is grandma can open it up. And it can ask her, where are you at right now. And she can pick that I'm in the basement, where are you going, I'm going to the fourth floor. And then instantly, she can follow the turn by turn directions, walking down the hall, over to the elevator, get to the fourth floor and walk every single thing along the way, inclusive of in her case is because of the hearing and visual impairment, the actual vibrations in her hand, as she's walking five paces to get to where she needs to, and can interact through either flashes. Or if you're dealing with situations of only, let's say, hearing impaired but not visual. And then vice versa. You can deal with touch, where you're actually doing static feedback and things like that.
Steve Statler 51:15
Totally makes sense. So you're I mean, that's the advantage that you have is you're solving for a given venue and a set of specific use cases. Whereas Apple and Google are they're trying to have one app that works everywhere for everything. And so it doesn't make sense that you could, you could do a better job of solving that wayfinding problem. And hopefully integrating maybe even with the hospitals, enterprise apps and scheduling. And I mean, the dream for me is not having to wait in that line. When I get into the doctor's surgery, if I could just arrive and I just get checked in, I think you'd have a huge number of people using that app because it just saves them a huge amount of pain and delivers some real value.
Alan Knitowski 51:57
And also the Apple and Google Maps indoors, the fundamental thing it needs to provide as a trigger, and it's not. And what you need to do is to say, okay, based on you being in some location, you may need the best interaction with you is to reward you with loyalty points that you can use later for freebies, the best interaction for me might be a digital or physical offer to buy something for someone else, it might just be to activate content. For someone else, it could be a marketing automation or geo conquesting type of use case. So we think of the entire planet as very small geo fences. In fact, the Phunware logo, you see a circle with a PW inside that's meant on purpose to define a geofence. And the question is, what of 50 different interactions Do you want to trigger because the ultimate goal that we care about, and we now have over 2 billion Phunware ideas, which are over 800 million monthly active user devices through more than 5000 application portfolios of the Fortune 5000. The ultimate Holy Grail is what we're way along the way on, which is one to one indoor outdoor targeting and triggering, based on who you are, where you're at, what you're doing, what you like, what you don't, who you know, who you avoid your value to the brand in real time, so that the brand can determine how to best interact or ignore you. And you can get the most optimal interaction for who you are and what you care about. And that requires you to think holistically. About everywhere in the world. You've seen somebody physical venues, malls, airports, hospitals, virtual venues, you know, the NBC Sports live, extra app, The CW Network, CBS, or anything else? Or live events, the Oscars, the Grammys, the World Cup, the Olympic Games, where have we seen you? What do we know about you in the real time world, the virtual world, the physical world? How do we wrap all that together so that every single interaction when you and I walk into Starbucks, we each get treated differently? When you when I walk into Home Depot, it changes again, when you and I go to a mall, it changes again, when we show up in Vegas, I might be viewed as a well, you might be viewed as an attractive demographic. So you're gonna get some offers to test that. And everyone does this every day. And what we're doing is enabling the entire mobile application lifecycle management of all of these things at once. Not trying to say like, people want to say, what's the silver bullet? You know, what's the panacea? The reality is that's different for every human being on Earth. And it changes brand by brand, team by team content, all of it. And what you need to be able to do is to let people be who they are, and engage with your brand in the way they care about doing it. My mom may only care about interacting with Kohl's through Kohl's bucks. That's great. I'm a They only care about one show on Discovery Channel. You might like the whole network. Let people be who they are. And what you see the biggest mistakes is most people try to come up with, what's this use case that's going to trigger everything. There is no nirvana. There is no silver bullet. There's no panacea. It's not like when you say I love a Tesla sedan. What does that mean? You like the brand, you like the speed, you like that it's gas free. You like the beautiful display? You like all of it. There's always different motivations about why people buy and interact with things the way they do. Our goal is to take advantage of all the investments people made and their brands and activate them and let people be who they are. So that their application is almost created and dynamically transforms as if it was built for no one other than just you.
Steve Statler 56:00
Yeah, I remember when the mass customization first became kind of popular, and that was a few decades ago. And they were kind of thinking about making a specific bicycle for a specific person. But really, it seems like the mobile app is the ultimate way of mass customizing experiences. And I think you've done a great job of making the case for why mobile strategic and you've got some pretty good evidence given your your customers. So I've got loads of questions, I'd love to ask you. But I think we're running out of time. I'm going to I'm going to just thank you very much for spending time with us, Alan, and I'm making the case for why apps are so important in for those of us that are in the widget business, it's good to know what the rest of the machine is, is looking like and you guys have certainly had a lot of success making it happen.
Alan Knitowski 56:53
Well, thank you very much for having me and happy to come on another time and continue the discussion if you'd like to.
Steve Statler 57:07
You into music, your musical guy or not?
Alan Knitowski 57:10
Well, I can't play music or sing music, but I love music.
Steve Statler 57:15
What what do you like to listen to? So if you had to, like take three songs on a long journey to Mars or to San Diego to your office here? What are the three songs but if you can only have three?
Alan Knitowski 57:28
Well, when I think about the artists versus the songs and then you know, like just about everything they do. It's Jimmy Buffett, Bob Marley and The Offspring. Alright, so I can literally get out of the Florida Keys, crank on some buffeted Marley and just go into a different world and then I need to get kind of get pumped up, get back in the swing of things go back to The Offspring. You know, they just have an immense amount of great stuff. I like everything that they do.
Steve Statler 57:57
But if you had to choose one off Spring Song?
Alan Knitowski 58:02
Steve Statler 58:04
Alan Knitowski 58:07
Jimmy Buffett I'd probably go and Margaritaville. Air changes in attitudes changes in latitude is one of those two, but it goes back and forth. I love Margaritaville vintage with Bob Marley. Don't worry, ever the old thing is gonna be all right. You know, just all right. Every little bit of a I even went to school with Bob Marley's kid at the University of Miami. He was a middle linebacker is like a five foot eight guy. It was crazy.
Steve Statler 58:39
There's an amazing documentary on Bob Marley. I think it's on Netflix and just kind of tragic. That seems like so preventable. His death compared to good treatments die of toe cancer. I mean, yeah. Who would have thought it? Exactly. All right. Okay, so that was great.