This is a repost of Winners and Losers in The Last-Second Economy from James Slavet (follow him @jslavet) on Forbes.
Last week I was in San Francisco and experienced a series of events that foreshadow the coming importance of what I call the last-second economy.
I’d scheduled five meetings with start-ups in different parts of the city that day. Rather than dealing with the hassle of finding parking at each, or trying to hail cabs, I used a mobile app called Lyft to get rides from place to place. Lyft is a peer-to-peer ride-sharing network, serviced by regular people driving their own cars — not professional taxi or limo drivers. You pull up the app on your phone, press a button to order a ride, and you’re notified who your driver is and how many minutes it will be until he picks you up.
I finished my second meeting of the day in Jackson Square and needed to get over to the Financial District. So I pressed the button on my phone and the app informed me it would be six minutes. Just then, I got a text from my wife asking where we were meeting for our date night. Argggh! This critical fact had escaped my mind, and I needed to immediately book a restaurant reservation. I pulled up my Open Table app, booked a table for 6:45 pm at a great spot in the Mission called Range. I matter-of-factly returned her text with our plans for the night. Just then my ride pulled up.
We are increasingly living in a last-second economy. The Web, email and social networks have compressed planning cycles. And now mobile is further accelerating that compression. The mobile form factor drives a habit-inducing simplicity that will grab and take hold of more and more consumer spending. The mobile-first consumer will plan and buy at the last-second, with high confidence, and high expectations of service quality.
My mobile phone is increasingly the help button for my life. My parents made plans and bought tickets weeks in advance. If they wanted a night out, they’d lock down the details well ahead of time. We can now make things happen at the last second. We can get a ride, book a table, get tickets to a show, find a hotel or even a house to crash in, and buy a gift, each with a couple of clicks of an app, and all at the last second.
If we need to get stuff taken care of at home, whether our dishwasher is broken or our place is a mess, we’ll have a primary app for that. If our car needs servicing and we don’t want to wait for hours at the dealer while it happens, there will be a go-to app for that too. We’ll be able to order high quality service with a few clicks, and get clarity on the precise location and timing of our service provider as he makes his way to our house.
The shift in consumer behavior creates substantial opportunities for businesses that fully understand and capitalize, and it will erode the market share of those that don’t. The last-second economy has significant implications. Here are four:
The Best Last-Second Apps Combine Utility Plus Magic
There will be a number of mobile-first startups that break out and build valuable businesses. It’s not easy to build a sustainable model on mobile; just look at the decay curves for most mobile app startups. They launch with great promise and then struggle to retain users. The most recent industry-wide data I saw from Flurry was a 94% average app decay six-months post install. This means that if a user installed your app in June of this year, there would be a 6% chance he’d actually open your app this week. Mobile app entrepreneurs and investors are all facing the realization that just because you can get someone to install an app, doesn’t mean you can drive ongoing usage.
One of the best paths for an entrepreneur to build a winning business on mobile will be to provide last second service, in a high frequency area of consumer spend. Startups like Lyft, WillCall, HotelTonight, Wrapp and Just Eat are vying to be defining apps of the last-second economy. [Disclosure: Greylock is an investor in Just Eat and Wrapp.] The very best of these apps will occupy permanent real estate on consumers’ phones, and will have high repeat usage. They’ll have your credit card on file, and you’ll be able to book with addictive ease. The best will deliver experiences that deliver utility (my ride shows up on time) with just the right sprinkling of magic (my favorite Pandora station is already playing when I open the car door). These apps will each be a form of vertical wallet in key areas for the consumer, including gifting, ticketing and live entertainment, transportation, dining and others. The startups that succeed will have capabilities that extend beyond pure front-end software development, including logistics, inventory optimization and distributed workforce management.
A Second Look For Web 1.0
Some of the winners in the last-second economy may be established Web 1.0 companies like ServiceMagic, Stubhub or Expedia, if they evolve to deliver the right experience. Consumers will increasingly expect that they can research and transact faster and more efficiently than these Web 1.0 experiences allow on the desktop. I don’t want to scroll through the reviews on 15 different plumbers. For most things, I want to make a decision and transact in 10 seconds or less. Give me personalized recommendations on the top 3 options based on my location, or better yet, let me press a single button to book the one recommended provider who is available now.
Traditional Service Providers At Risk
Consumer expectations of traditional service providers like Comcast or Sears are going to go way up. It will no longer be acceptable for Comcast to provide us with a four-hour service delivery window. That won’t fly in the last-second economy. We’ll expect to press a button to request service, and to track the precise location and arrival time of our Comcast installation guy. If the Sears dishwasher repair guy is late showing up, we’ll give him a one star rating directly in the app, and Sears had better use that feedback to adjust to whom they route jobs. Positive and negative sentiment spreads faster than ever before through the social web and mobile. A few of these large companies will adapt to the last-second economy and raise their game. Many will not and their reputations and businesses will suffer.
New Software Companies Emerge For Back-End Logistics
As consumers increasingly wait until the last second to book, this will put more pressure on all businesses to more effectively yield-manage their inventory, and to have systems to promote and sell their last second available inventory. We’ll see the pricing and yield management systems that exist for hotels and airlines carry over to a broader range of businesses. The pricing of a last-second spa appointment, even at high-end places that do plenty of business, will be dynamically reduced for a last-second Wednesday mid-day appointment relative to what it costs for a reservation booked well ahead of time for a Saturday afternoon.
Delivering last-second services requires sophisticated logistics and routing. Federal Express built its network before the last-second economy. New systems and delivery networks are required for providing efficient last-mile service. New software companies will be built that service the back-end logistics required for the last-second economy. And new transportation and delivery networks will be built as well.
As consumers in the last-second economy, we’ll live more dynamic and spontaneous lives. We’ll have more freedom to explore and experience new things, without the barriers of long-range planning. And we’ll have to exercise greater discipline and restraint when buying is as easy as pressing a button. The bar will be higher than ever before for businesses to deliver seamlessly on our expectations. But those that do will become indispensable.
James Slavet is a partner at venture capital firm Greylock. His current investments include Coupons.com, One Kings Lane and Redfin. Prior to joining Greylock, James spent a decade in operating roles in consumer technology companies. James was named to the Forbes Midas List of top technology VCs in 2012. You can follow James on Twitter @jslavet.
