The Business of Design Ethics?
In 2015, I attended a workshop with a futurist named Tristan Harris about his ideas for the new ethics of design. Tristan believed that large tech companies needed to shift their focus from metrics that measure total engagement time (user traffic; minutes spent on the app; banners clicked), to ones that stress positive impact on their users lives net of time spent tapping the screen. For example, an app that facilitates couch-surfing should measure its ‘success’ in time spent making personal connections with new people, net of time spent booking the trip online. I spent that workshop re-imagining the iPhone user experience for a working mother of two school-aged children first thing in the morning, so that she could maximize her time with the kids. From the get-go, we decided she didn’t need to check email until they’d left for school, so we locked the phone to all functions besides turning off the alarm and checking the weather. Eventually, we determined that this family should simply ditch the phone altogether, buy an alarm clock and go outside to check the weather for themselves.
Can the Design Ethics ethos work in big tech companies? I don’t think so — certainly not in the way Tristan imagines. There may be a middle ground of opportunity, however. Instagram recently admitted to testing out a new feature that would give users the option to make their photos’ “likes” invisible to their friends. Frankly, likes are not great metrics for advertisers. Gen Z-ers are known to delete photos after five minutes if they don’t pass a threshold of likes and repost with a different angle or filter. Users usually return to the app to check their likes and stay for another 15 minutes of scrolling and ad exposure. This behavior results in content reverting to the mean, insomuch as experimentation and originality are dissuaded. From a machine learning perspective, this could reduce the amount of differentiating information available about a user. Less accurate user profiles mean less accurate ad targeting, which means cheaper ad space. From a content production perspective, lower self esteem also means fewer posts, and fewer times returned to the app each day. Even the perfect user profile is useless without a recurring user. Far more valuable metrics for advertisers would include overall in-app screen time, content that is saved to “collections” (an Instagram feature than mimics Pinterest’s “pinboards”), and the content posted in accounts that are heavily engaged with.
Design Ethics have historically put the big tech companies in their crosshairs, yet groundbreaking user experiences don’t make money for big businesses like Facebook and Google — ad sales do. Apple may have introduced “Screen Time” in 2018 in a (belated) response to public outcry around screen addiction, but move was largely done to boost PR. Guilt tripping users with a quantified view of their screen addiction doesn’t undercut the efforts of scores of highly paid designers and engineers whose job it was to facilitate that addiction. One all too easy solution — the same one we stumbled on during Tristan’s design ethics workshop — is to shut the device off altogether. This may not be realistic for many adults, but it is certainly a service that parents will pay for to protect their children.
Enter: Circle.
According to their website, Circle’s mission is to “make families’ lives better, online and off.” Circle Media Labs, Inc. is a B2C Electronics company that delivers screen time management and parental control solutions to families through hardware products and D2C software. The company recently closed a $20M B round lead by NETGEAR, T-Mobile and Third Kind Venture Capital, a NY-based firm that closed their first fund (<$50M) in 2017 and whose website contains nothing except a contact form that declares, “we are searching for aliens,” and Relay Ventures. Relay oversees an early stage mobile-focused venture fund (the company’s 9th fund since inception in ’96) based in SF with an investment portfolio that includes Bird and Swift Medical. The round brought Circle’s total funding to about $34M.
Research about the neurological damage caused by digital mobile devices is becoming more mainstream, creating opportunities for business to create value by counterbalancing FANG shareholders’ appetites for growth. Prominent tech moguls, including many early investors and product engineers at Facebook and Google, have famously declared their trepidation about excessive screen time. Jack Dorsey recently stated that building out “likes” was a UI mistake for Twitter from the get-go. Even UNICEF has a campaign to promote awareness of mobile devices’ harmful effects.
According to Jalani Memory, Circle’s CEO, the average US kid gets their first smart phone at 8 years old. The American Academy of Pediatrics (AAP) still recommends parents allow their children under 6 years old to consume a maximum of one hour of media, but for older children they suggesting placing “consistent limits on the time spent using media” and make sure to carve out family time that doesn’t include screens. More realistically, parents don’t want to cut their children off from their digital devices altogether. Educational apps, or time spent writing a school paper in a shared google doc, for example, are productive uses of time. This is where Circle’s ability to work across different internet-connected devices, as well as app-by-app, comes in. Circle’s website cautions against enterprise solutions due to complicated logistics of working with such a high volume of different devices, although the app is designed to simultaneously control up to 250 of them.
Market Size:
There are 83 million families living in the US, and 41.4% of family households have children under 18 living in the house. That would make Circle’s TAM in the US roughly 34.4 million families. The percent of families with children has been declining in recent decades, losing ~3% each decade since the 1970’s. The decline has accelerated slightly in recent years. Assuming that, at a subscription price point of >$120/year, likely customers are families whose income falls into the $75K+/year range, in the US in 2017 there were 19.63M addressable customers, according to Census data.
Circle Home Plus, a sleek white box, retails for $120 and comes with a 1-year subscription to Circle Premium. Customers can opt to renew this subscription for $10/month after it expires. The premium features are the most exciting, giving users the ability to set time limits, dictate “off time”, and “pause” internet access on demand. Assuming 10% of the addressable market subscribes to this service, they would see about $235M in annual revenue from the US.
In 2017, Circle announced that they intended to aggressively expand internationally. This is crucial for growth, especially given the EU’s acceptance of regulation around tech and digital identity control. Since 2017, they have doubled their team size from 30 to 60 but have not opened offices abroad. Assuming Circle does expand internationally prior to an acquisition, their total market will increase substantially. There were 220M households in the EU in 2017. 1/3rd of those had children, which would add 65.4M customers to Circle’s total addressable market, 4x to roughly 85M customers globally and more than a $10B total market.
Team:
The Circle team is diverse and interesting. Co-founder Jalani Memory ran a successful freelance film and photography business prior to starting the company. He is a self-described artist, and is the most vocal of the founding team. A 2nd cofounder, Kyle Wiley, has a background in marketing and creative direction across a range of industry verticals. CTO and 3rd co-founder Tiebing Zhang has a systems architecture and engineering background, and spent nearly a decade at a company he founded that according to LinkedIn, served “clients ranging from Depart of Defense to Industrial Control, offering technologies ranging from WiFi, WiMaX, Bluetooth, Satellite, to wireless sensor networks.” A 4th co-founder, Crystal Wiley, has not been active with the company since 2017 according to her LinkedIn page. The 5th Co-founder, and current CEO is Lance Charlish, who has had a more traditional career with 20 years of experience in selling enterprise software, serving in executive roles at two software and IT companies. Circle’s president, Darren Brady, started in investment banking and went on to hold business development and executive roles in energy, finance, IT and consumer technology companies.
I, myself, have a degree in studio art. While I have not worked extensively as an artist, I have a lot of faith in the way that these people approach team-building and execution. Being an artist makes you tenacious and scrappy, succeeding as an artist is a hallmark of entrepreneurship. Jelani describes his product design approach as “the jazz band approach. But not just any band, an improv jazz band.”
Jelani raised the company’s first few rounds, but his last Medium post was in 2017. The company’s most recent raise was in February of 2019, lead by CEO Lance Charlish.
Risks:
Parental controls for Internet-enabled devices is not a whitespace. Apple, Google, and even Comcast have native products on their devices, while software companies like Norton, Asus and D-Link offer parental control as a feature. Other startups also operate in the parental control space, such as Luma, Eero and Qustodio. Qustodio an app-only product that offers three pricing plans starting at $40/year. On the other hand, Eero and Luma are smart routers, similar to Circle. Luma and Eero are smart mesh network wifi routers with parental control functionality. Luma has not done well recently, and their devices have come down in cost from $150 to around $50 (although mesh system customers usually buy multiple devices, or nodes). Eero’s devices cost $199 for the first device and $149 for subsequent devices, and offers a premium subscription for an additional $99/year.
As with any hardware company, that customer willingness to pay usually decreases over time. Luma was unable to work as a standalone company, and was acquired in 2018 by First Alert, a carbon monoxide detector device manufacturer. Eero ran into trouble in 2018, as well, laying off 20% of its workforce overnight. It was acquired by Amazon in February 2019 for $97M after having raised ~$150 in total venture funding. The company had also attracted funding from Relay Ventures, which assumedly exited at a loss. Circle is not immune from this risk, but the precedent transaction value implies that the company’s valuation may have a lot of growth ahead.
Device manufacturers with control over native app stores, such as Apple and Google, pose a palpable risk since they have clear incentives to shut down any app that seeks to reduce time spent on their devices. In fact, earlier this year, Apple shut a number of third party screen time apps out of their app store. The company claimed that this was done as part of a routine review of app store policy, but controversially had released their own Screen Time product around the same time. General screen time management applications that are not specifically focused on parental controls, such as Mute and Moment, have less of a monetization angle are easier targets for app store gatekeepers.
Another risk that I want to highlight is the shift to 5G and what that could mean for WiFi providers. With much lower latency and 100X speed increases over 4G, it is conceivable that 5G data will be a cheap alternative to WiFi. The debate goes both ways. If 5G does spell the end for WiFi, smart routers may become a thing of the past. If Circle is not acquired or does not go public within the next 5–10 years, any value created by Circle’s hardware would be wiped out.
Joint Ventures are a strong option for keeping smart parental control devices free-standing businesses, and may be necessary in the event that 5G dis-intermediates WiFi. Indeed, Circle has formed join partnerships with both NETGEAR and Disney. NETGEAR offers a wireless router with Circle smart technology baked in that can be controlled through Circle’s app and works with its premium subscription. The JV with Disney gave users access to a selection of Disney’s original content, although for undisclosed reasons that partnership was recently dissolved. Circle may need to partner with a 5G provider such as Ericsson or Nokia if the above 5G prediction comes to pass.
In conclusion, screen time management presents a very compelling investment opportunity. Circle has emerged as a strong player in that space worthy of consideration, has a diverse team and a lead on competitors.
