As FunnelScope’s founder, I will use this blog to share my thoughts about FunnelScope and the problems we address. First, it may help to have a little background on me. I started out on Wall Street and left to be an entrepreneur. After several years trading complex derivatives, I realized my passion was building companies as opposed to following tickers. The next two companies I founded, Servzone and Tervela (www.tervela.com), were both enterprise data messaging companies targeting problems in financial services. In early 2008, I decided to move away from financial services (good timing) to target consumer opportunities online. That led to the founding of FunnelScope.
Looking back, what I consistently saw on Wall Street and in my entrepreneurial experiences is how often the innovative use of data determined winners and losers. The most successful companies always seemed to figure out how to manipulate and leverage data better than their competitors. Tervela focused on low latency data, which currently provides a competitive edge to high frequency trading firms. In the high frequency trading market, firms have generated significant wealth by being able to trade on data faster than competitors and effectively arbitraging the market (and they are still doing it as it’s one of the few profitable areas on Wall Street).
As I was building Tervela, I watched as smart online consumer startups leveraged innovative data to create enormous wealth. One could argue that eBay’s initial and lasting success was around its feedback data. Amazon focused on recommendations from its data (data that most companies at the time ignored). And review content is arguably the most critical factor in online consumers making purchase decisions.
Content on the web represents a goldmine for data that will determine the next winners and losers. Who wins is simply a function of how creative companies are in leveraging that data. As I was starting FunnelScope, I spoke to numerous online companies in the local and travel space. What was clear is that the best companies recognize the importance of gathering critical data and manipulating it to give them a competitive advantage. These companies are no different than the high frequency trading firms that made billions from uniquely processing data faster. In some ways, both industries are creating an arbitrage.
With FunnelScope’s target market in local and travel search, one may ask where’s the arbitrage in that space? It starts with mitigating uncertainty. Most of us recognize from these volatile markets that uncertainty causes stock markets to crash and stock prices of companies to plummet. Investors hate uncertainty. Why would an online consumer be any different when booking a hotel room? If the consumer could be assured of a good experience, a great room that fit their requirements, and have no surprise costs, wouldn’t that represent value to them? After analyzing the data, I would strongly argue yes. And I would say that consumers would even be willing to pay a higher booking fee to get that certainty since human nature is motivated by reducing uncertainty. Therein lies the arbitrage for online companies: being able to extract greater value for their customers with the innovative use of data.
And that’s FunnelScope’s goal: reduce uncertainty around local points of interest (hotels, restaurants, spas, etc.) such that consumers are increasingly willing to transact, and even pay higher fees to the source that reduces their uncertainty. In my next post, I will discuss specific examples of how we reduce uncertainty for online consumers.
