What’s Up Wednesday 2/6/19

As A Smartphone Owner, This Company Scares the Heck Out of Me

You probably haven’t heard of this company.  You may not; this startup isn’t likely to be a name that’s thrown about much, or that most people will ever know, or that most folks will ever need or desire to know.  But make no mistake.  For anybody who texts, or for anybody who receives texts, you’ll be seeing the results of its handiwork – and the results, I’m afraid, aren’t going to be pretty.  In all likelihood, you’ll curse and swear at the outcome.  Often.  You’ll despise this outcome as a massive nuisance.  But that won’t stop this company (ZipWhip it’s called) or one like it from reaping mountains of money by peddling their solution to unscrupulous advertisers.

The Seattle-based startup (ZipWhip) just garnered a $51.5 million financing round (the company’s Series D round) – giving it over $92 million in total funding to this point –  and keep your eyes open because this startup will undoubtedly continue to grow its revenue and probably see its funding increase).  The D round was led by Goldman Sachs; among the others were Voyager Capital and OpenView.  ZipWhip’s latest round is among the top 15 financing rounds achieved in the U.S. in the last 12 months – it’s also the highest funding round of a Seattle-based startup this year (and while the year is young, it will take some doing for any startup to generate a larger sum).

So what exactly is ZipWhip?  In its simplest terms, it’s a communications company – although it doesn’t exactly communicate with you itself.  Consider the number of ways in which various companies interface with their prospective customers today – they’ll contact you – brazenly – if you download one of their apps, or if you provide them with (or they are able to otherwise acquire) your email address; or they can employ other forms of social media to help get their message out.  Their communications are generally a nuisance.  That’s the problem.  Whose email account isn’t littered with worthless propaganda (a better word for it is SPAM) – my inbox boasts countless offers to purchase products, partake in limited-time sales events, make donations for causes ranging from the political to the humanitarian to the public health to animal welfare and rights – all fine causes worthy of focus and support, but the number of communications from them can be overwhelming.  And ZipWhip’s tools, peddled to eager suitors in the corporate world, propose to make your text messaging as cluttered as your email account is now.

ZipWhip certainly isn’t the only SMS marketing firm out there (SMS marketing entails the dispensation via text message of promotions, urgent time-sensitive overtures, product or event-related updates, reminders of pending appointments, and other alerts and cautions).  In general, the more credible of these SMS messaging firms urge their clients to operate by the following tenets (in an effort to prevent the abuse of power that has in large part crippled effective email communications):

            *An SMS marketing entity should only communicate with individuals or parties that have opted in (in other words, those who have specifically agreed to receive communications; most countries, the United States among them, in an effort to stem the spread of cell phone SPAM, have adopted rules that limit text-message marketing to only those persons who have specifically agreed to its deployment; unfortunately the enforcement of these rules here is lax; offending companies need to accumulate binders filled with complaints before any meaningful government action will be taken – and even when action is taken, the offender will receive what amounts to a slap on the wrist; truth be told, the government prefers not to damage let alone eradicate conscientious employers – in any sector – why few companies are ever pushed into liquidation, regardless of their sins).

            *Since folks keep their phones beside them virtually 24 hour a day, 7 days a week, the disbursement of SMS marketing texts should be limited to normal waking hours (the vast majority of people don’t want to be awakened by the arrival of a promotional message between say midnight and 6 A.M.).  As a matter of fact, France has made it illegal for SMS marketers to send their messages between 10 P.M and 8 A.M., or on holidays or Sundays.

            *SMS marketing senders should be upfront with recipients about where messages originate or who is behind their generation (so that texts don’t arrive anonymously).  This makes sense for marketers.  While text messages (for the moment at least) enjoy a far higher open rate than traditional emails, and a higher participation rate than blind telephone solicitations, anything anonymous is less likely to be viewed.

Traditional SMS marketing uses what’s known as “short codes” to send messages (5 to 6 digits that can, if desired, be shared by multiple senders – this as opposed to complete telephone numbers), and it offers two basic services to its clients: 1) what’s referred to as a “one-to-many” approach – from which a central source disburses news updates, weather alerts, sales promotions, coupon codes, and more simultaneously to a vast number of recipients; 2) the “one-to-one” method is used instead to submit order confirmations, appointment reminders, etcetera only to particular parties or cell numbers.

Facebook Messenger and WhatsApp (and other smaller marketing firms, have been offering communications solutions for companies – many of these solutions, to be used, first require the downloading of an app.  What separates ZipWhip’s communications solution – and what in my mind makes it so insidious – is that the software enables landline telephone numbers to send texts (the ZipWhip software can also be used – perhaps more disturbingly – with a voice over IP phone, or 1-800 number – hello to the telemarketers out there who doubtless can’t wait to get in on this action).  While John Lauer, ZipWhip’s CEO, decries the battery of notices and messages that these apps can produce, what his startup markets is the capability to do the exact same – without a specific app – which, as I read it, will allow any subscribing company to bombard any consumer whose cell number appears on a call list that’s been purchased or generated internally with whatever message or promotional propaganda it chooses.  Currently ZipWhip has roughly 10,000 customers.  In 2018, it nearly doubled its revenue.  Lauer sees a “huge market” out there for his company to exploit.  I’m concerned that a lot of this exploiting will come at the hands of hapless consumers, people like you and me, forced to endure the same nuisance that has plagued – or destroyed – our email accounts; while ZipWhip executives rest their feet on polished tables, wave around Cuban cigars, and celebrate massive profits.  I agree with Lauer about one thing.  The market he’s referencing is pretty much unlimited.

Lauer, at least publicly, doesn’t foresee SPAM being a significant concern, can’t see it taking over your smartphone or mine.  He points to the other companies, ZipWhip’s competitors (one of which, Open Market, Lauer himself helped found back in 2002), as proof that this burgeoning market can police itself.  There is also last month’s FCC ruling that declared text messaging to be an information service instead of a telecom service (remains to be seen if that makes any difference).  This industry, Lauer claims, itself abolishes SPAM.  SPAM, he says, has no place in the industry he represents – however at the same time he cites the demise of email, in part due to the bombardment of unsolicited communications (junk, let’s face it) that all users endure.  Then he admits that – well – you may have seen an undesired text or two on your phone recently (from his company?  That’s what it sounds like).  But this won’t be a problem because (somehow) the trend won’t continue.  My answer to that is simple enough.  Bullshit.  Telemarketing by SMS service is such an untapped, virgin source of profit that at least one of the companies in this space is certain to explore it (even if Lauer is correct and the majority of SMS marketing firms resist the practice).  We’ve seen this with the proliferation of personal injury attorneys – a group that clearly has no capacity to police itself.  Traditional telemarketers are in the same vein.  Bill collectors, too.  You can throw others into the mix – the predatory same-day lenders occupying street-corner shops; and then there are pawnbrokers.

When touting SMS marketing, people involved constantly spew the “ubiquity” of smart phones (75% of the United States population currently owns one – and that percentage is likely to go up as progressively fewer basic phones are available).  You’ll be surprised how often ubiquity is mentioned, on websites offering these services, in articles on the topic – and if you have occasion to greet somebody in the SMS marketing sales force, I’m warning you in advance that you’ll probably hear it.  What begins as a tool to send out reminders that appointments are at hand – for doctors or dentists, tax preparers, attorneys, hair stylists, mechanics, veterinarians, any of the folks with whom we interact professionally, or for billing services to keep us abreast of payments that we owe, or for clubs and organizations to remind us of upcoming events, or for non-profits we’ve worked with or helped support to solicit donations – before long this wonderful tool will devolve into the aggressive (and ubiquitous) world of SPAM.

For the most part, until now, texting has been a sacred place.  It is a sacred place.  It’s been resistant to the forces that now permeate our email, our postal service deliveries, our television screens, our radio speakers – if you listen to radio politics or sports talk you’ll hear as much SPAM as you do content (my own solution to avoiding this frustration is to stream music when I’m behind the wheel, reminds me of our modus operandi in high school, when we couldn’t travel anyplace without (in those days blaring) rock music) – if texting is or has been a sacred place (in terms of marketing it has certainly), I’m afraid that ZipWhip is on the verge of changing that – for the worse.

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