ILM East: Ted Leonsis — Local’s All About Scale, ‘New Currencies’

Ted Leonsis, Groupon vice chair, American Express board member and Internet pioneer, emphasized the importance of scaling for local in a global economy during a keynote at ILM East yesterday. “Indiana really matters. India matters more,” said Leonsis, pointing out that for larger companies, most growth will come from outside the U.S.

The way that growth is measured, however, is rapidly changing. “I try to follow the new currencies: time, attention and clickstreams,” he noted. “Now you see payments in pixels, Facebook newsfeeds, or points and rewards. AmEx has trillions of points.

While growth for “the biggest companies” comes from serving the entire international marketplaces, local needs are universal.

“I love local; we built Internet on businesses created about ‘you,’ ” said Leonsis. “There is no bigger business imaginable.” He noted special opportunities in “MoSoLo….the convergence of mobile, social, video.” Mobile will make up 88 percent of digital advertising, he suggested, citing analyst projections. “One thousand cities are ready for MoSoLo.”

Leonsis believes that the largest companies will soon be making spending sprees in the local arena. Local entrepreneurs should realistically shoot for selling their companies because only a couple of companies end up IPOing in the public market, added Leonsis, who is, of course, a major investor.

Leonsis noted that the largest companies such as Google, Microsoft and Cisco are sitting on almost a trillion dollars of retained earnings. “That’s pent-up cash. They will want to fill in their value chains.”

Channels are also changing, and quickly. Email usage is way down and has “become a deliverer for e-commerce push. Email is for manicure or pedicure deals,” said Leonsis, noting that Groupon and Facebook are really poised to leverage this with their massive email lists. Phones, meanwhile, are for texting. The average teen sends 70 texts a day and barely use any minutes to talk.

But Leonsis predicts that video will emerge as the new killer app as it becomes the core medium for self expression and sharing. “The YouTube phenomenon is truly amazing. We’re all becoming cable MSOs.”

Video also will be key to the future of retail and education. Retail site visitors who view video are likely to stay on site two minutes longer on average and are 64 percent more likely to purchase than other site visitors, said Leonsis. Video is a foundation for “next generation commerce.”

The pursuit of closed loop network is the really big game here, Leonsis noted. Amazon has made everyone an affiliate and a reseller. Similarly, PayPal made made everyone a small business with 100 million-plus accounts for money transfers and payments. EBay has made everyone an entrepreneur.

Moreover, Google has 8 million advertisers on file, and invoices 20,000 advertisers. AmEx has developed a closed loop system of its own, and Groupon has created “curated local commerce.”

But Leonsis is skeptical that the world of interactive local commerce is something that start-ups can gain traction in. “No one will give an eight-person start-up their social security number. Payments are not for the faint-hearted. Start-ups are better off looking for margin opportunities.

“I don’t want to see any business plan saying ‘I’ll be the next Groupon.’ Verticalization happens.”