How Kleiner Perkins' iFund Can Help Marketers Navigate Mobile Apps

The Keys to Long-Lasting Success? Multiple Revenue Streams, Virality and Wide Appeal

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NEW YORK (AdAge.com) -- Aileen Lee is a partner at Kleiner Perkins Caufield & Byers, working on the firm's $100 million iFund, which seeks out investment opportunities in the mobile-apps space. The iFund team has reviewed 3,300 ideas, she said, and invested in seven. That's because while there are a lot of fun, one-off ideas out there, very few have the combination of ingredients to become a long-term platform success, namely multiple revenue streams, the ability to go viral and wide appeal.

The response to Benjamin Moore's Ben Color Capture app has been very positive with month-over-month increases in downloads.
The response to Benjamin Moore's Ben Color Capture app has been very positive with month-over-month increases in downloads.
She spoke to Ad Age at yesterday's Apps for Brands Conference about how marketers can work with a firm like hers to better understand the apps space.

Ad Age: How should marketers view the iFund?

Ms. Lee: I think they should view us as a resource. We're in Silicon Valley, and we have a good view of a lot of the things going on in the mobile ecosystem and not just on the iPhone/iTouch platform. When I go through the App Store it really surprises me I don't see more brands. You go to the health and wellness section, for example, and I think there's maybe one brand that has a "sponsored-by" app and yet there are apps like Temperature Tracker -- I don't know why that isn't sponsored by Becton, Dickinson or Johnson & Johnson. These are things that are really useful -- if someone's got a health issue and they're trying to use their mobile phone to help themselves, that's where you want to be as a brand.

We're in very early stages of this -- or it's maybe even beyond that with the stickiness, the pervasiveness, the utility. It's so integrated into someone's daily life -- apps are very powerful things -- and we'd love to work with brands as a resource or potentially more, maybe as a partner to help lend some insight.

Ad Age: Do you have companies, ideas, startups, etc, that can help brands in this space?

Ms. Lee: That's a good point. We have lots of portfolio companies that will work with brands to help them achieve their objectives. For example, we have a portfolio company called Mobshop, which is still in stealth mode, but it's basically a company that's using mobile applications to drive traffic to physical stores. So that's all they'll do, all day long, is work with brands that are trying to drive real-world traffic.

AdAge: You cited something like Temperature Tracker as a perfect fit for J&J or a similar marketer. Should those marketers do something one better and make it their own or should they go out there are sponsor something existing?

Ms. Lee: I guess the answer is both. I'm curious to know why aren't more brands here. One question I have in my mind is, are people afraid? Because Johnson & Johnson -- and I don't mean to call them out for any negative reason -- but they're a five-star brand. And very few applications are rated five stars in the app stores. They start out as two stars, maybe two-and-a-half. For example, I thought the Benjamin Moore application was super cool and it's a two-and-a-half-star application. But you have to be willing to get out there, get started, learn and get the data and figure out what works.

AdAge: What kinds of information do band managers need to persuade their companies to take this jump and make the investment? Can iFund help with that?

Ms. Lee: We're in the early stages of building out ecosystems to help with application discovery and monetization -- the advertising, the commerce, the virtual goods, all the tools you need to make money, or track users of your apps, to use mobile to drive your consumers to purchase or connect with your consumers. We've got lots of data we can share with brands.

A couple of brands came up to me after [my panel] and said, "Can I use your slides to show my boss?" because this curve around smartphone adoption and the multiplier effect apps have on mobile behavior is staggering. And we're only at about 50 million smartphone devices; we'll be at 150 million next year. There are a lot of opportunities for us to work with brands, both through our portfolio companies and by using us as a resource.

AdAge: The iFund has reviewed 3,300 funding proposals for and engaged seven. Are there just a lot of crummy ideas out there?

Ms. Lee: There are a lot of ideas that can make some nice money for two guys in a garage. But they're not companies or platforms that will be around five years from now. We're watching the establishment of this app economy and it's true there are a lot of paid apps in the app store but the majority of downloads are free to 99 cents -- so there's a lot of downward pricing pressure on how much one can charge to get a lot of downloads. And for premium content owners, that could be worrisome.

It's a mistake for brands or other companies to not think of mobile totally differently from the web ... the apps need to take advantage of the inherent properties of the phone. It needs to not just have content, but take advantage of the mobile context. There needs to be instant utility and ideally something that creates high-frequency use. Virality is also important, building in features where you're so invested in an app you e-mail it to other people and there are network effects, where the more people are on it the better it gets. It has to be a large market opportunity. Ideally it has the opportunity to have multiple revenue streams -- maybe it's virtual goods, mobile commerce, ad-supported models.

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