Do legal tech startups have the right focus?

“If it ain’t broke, don’t fix it”. While this may be used to justify giving the same speech over and over again, it cannot apply to the legal industry.

High legal fees have been the subject of viral videos, and claims that the legal market is indeed “broken”. A staggering 71% of low-income households’ legal needs are currently not met.

Yesterday, Christina Farr gave VentureBeat an excellent account of how a new wave of legal technology start-ups are looking to fix the professional services industry with the second highest revenue, but perhaps the shortest entrepreneurial history.

The consensus is that the legal industry requires a shake up, and that money can be made in the process. Richard Granat, blogging about his experiences at the “Law + Tech - The Unpopulated Multi-Billion Dollar Industry”, classifies these startups into:

1. companies aiming to connect consumers with lawyers, 2. companies aiming to help increase firms’ productivity, and 3. companies aiming to provide legal services directly to consumers.

Especially the third category has seen a lot of recent activity across the startup community and the Blogosphere. Following the success of RocketLawyer and LegalZoom, which together raised just under $100 million in order to improve their respective document automation services, similar business models have popped up.

Many of these startups plan to offer more tailored legal services than the two market leaders. Examples include DocRun.com, which aims to achieve this by asking users a series of intuitive questions or

I have a dream... about Internet lobbyists

When Martin Luther nailed his proclamation to a Church door he began a fine tradition of citizens challenging the status quo and the elites through the power of the written word.
On the 18th of January this tradition was continued as over 75,000 websites launched a protest against the bills SOPA and PIPA.

Many opted to simply blackout their site and instead display information about the two bills. Some, like Google, continued to function but had prominent links on their homepage on how to oppose the bill. Perhaps the one with the most impact was Wikipedia’s blackout - it reportedly led to 8 million US citizens looking up their representatives.
If you have missed the debate about SOPA I encourage you to check out this excellent video so you can bring yourself up to speed.



If you prefer to read then reddit’s FAQ is a good place to start http://www.reddit.com/help/faqs/sopa#WhatisSOPA

This protest was a dramatic reversal of power from the news elites to the people - America's mainstream media had, by and large, ignored the Internets’ objection to the two bills because their parent companies were those who would benefit most from the new legislation. This is a perfect example of crony capitalism and the dangers of press being controlled by a very narrow set of special interests.

It seems obvious to state but: news corporations owned by entertainment giants will be limited when discussion of intellectual property rights, file downloading and open access arises. They desire passive consumption and the Internet allows for creative re-imagination. The protest directly highlighted this creative side of the net.

What is interesting to consider is how the protest took place and the global impact it had - Wikipedia effectively denied access to their English language website, reddit denied access to their entire network. They were giving us a taste of the great firewall. The blackouts demonstrated how important access to online information is and how basic a right we in the west see this as. It also illustrates how a global network can still be seriously impacted by the world’s declining super power. The globalisation of the Internet still appears to be tied to the globalised control American can exert.

The debate about piracy is an ongoing one - measures to tackle it are going to be introduced - the danger is in government passing bills written by Hollywood that would crush free speech and creativity. More are coming, ACTA for example, and it is clear that the entertainment industry is going to continue to use the US legislative system as a delivery system for their goals.

The success of the blackout has been the shelving of these bills but people must remain vigilant. The energy required by ordinary people to motivate against these two threats was monumental. We all have real jobs, families and lives to live - lobbyists exist to create influence with government and push these bills. Senators and Congressmen have all day to be courted, to be bought. Perhaps what the Internet needs is its own set of lobbyists funded by people from around the world who will campaign against censorship and for an open and free society.

New posts coming soon!

We hope you've all had a cracking Christmas and a fantastic start to 2012! Our New Year kicked off with our good friend Dom Small joining the blog. Now that celebrations about this have been put the rest, we've started working on some exciting new posts, so please continue to watch this space!

Viva la Online Legal Services Revolution

In 2001 Clement Mok claimed “Five years ago we thought of the internet as a new medium, not a new economy”. This was three years before Google’s IPO, at a time when Marc Zuckerberg was still a High School fencer, and Microsoft was still King of the tech Hill.

The past 10 years make this statement now seem almost obvious. The information economy is growing by the second, and now counts more than 2 billion consumers. What Joseph Schumpeter would undoubtedly call a “creative destruction”, the internet has affected every industry, some at their very core. Newspapers are replaced by a combination of Craigslist and Google News, YouTube has reduced TV to the likes of “Jersey Shore”, and iTunes has shifted the power in the music industry into the hands of Tim Cook. However, not just the media experienced an overhaul. From personal finance to the airline industry, few have remained unaffected.

Without exception, this change has benefited the consumer. The virtual marketplace brings together people from all over the world to exchange ideas, trade, and share cat videos. In what is partly the result, and partly a reflection, of globalism, this increases competition and the information available online. Both force down prices across the board.

PlentyOfVirtualLegalAdvice.com

This change has finally reached the legal profession, an industry notoriously resistant to change.

While LegalZoom.com has been causing distress among lawyers with catchy commercials and a 2011 revenue rumored to have exceeding $100 million, Google Ventures shocked the industry by investing $18.5 million into RocketLawyer.com this August. Both sites offer legal document creation services in categories ranging from wills to pre-nups, and include a directory of lawyers who can review documents.

LegalZoom been in business since 2001, and remains the name to beaten. However, if RocketLawyer can take advantage of Google’s brand penetration and cloud-based services, this can certainly change.

Another model has developed around Q&A sites. Avvo.com, allows users to post legal (or medical) questions publically, which any of the over 12,000 registered lawyers can choose to answer. LawPivot.com offers this service too, but also gives users the option to ask questions privately. The confidential question is then directed 10 lawyers algorithmically based on the key words used. In both cases clients can post and lawyers can register for free. Both are effectively social networking sites, where lawyers aim to “get a foot in the door” with new clients. And this case can be made. 21% of Avvo users claimed they would hire a lawyer who provided a question, and 47% answered maybe.

Alternative Dispute Resolution, i.e. dispute resolution outside litigation, is also increasingly conducted online. While VirtualCourthouse.com or ZipCourt.com provide ‘live’ neutrals who can resolve disputes online, Cybersettle.com achieves this through an automated bidding process. More creative sites include PeopleClaim.com, which lets one party post a complaint, which, if not responded to within four weeks, can be made public on the site - Naming and Shaming in the information economy.

Pooling profits

It is no secret that many legal documents are based on templates, and therefore require more common sense than years of industry experience to be compiled. Indeed, often junior lawyers draft documents,
only to have partners attach the cover email, thereby pushing up the hourly rate.

Ironically, while many lawyers are keen to criticize virtual firms (often citing a lacking “personal connection”), most have not shied away from using technology to their advantage. Documents are stored on case management services as future templates, printing costs are cut, and work is being outsourced to as far as the Philippians.

The internet is increasing competition, in form of both more lawyers and more free information. This is increasingly forcing firms to reflect this cut in expenses in the client’s bill. The virtual market is correcting the offline market.

The bottom line

Darvin famously claimed “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”

With the rise of various different online legal services providers, there was never a greater need for firms to bear this in mind. The internet has created a level playing field in the business of commoditized legal services. Office locations and sharp suits pale in insignificance when compared to clients’ overriding considerations when wanting a will or the registration of a trademark: price and speed.

In the short term this will therefore mainly affect high-street firms. However, as more competitors and free legal expertise sprout up online, more and more legal services may become commoditized upmarket.

To avoid becoming outpriced, firms must therefore embrace this technological change. Berwin Leighton Paisner’s “Lawyers on Demand”, which makes freelance lawyers available for individual projects, and DLA Piper’s range of “online services”, which include a guide to commercial transactions that is not unsimilar to LegalZoom, are two business models that show how adapting can pay off. Alternatively, firms must invest in smaller, nimbler firms who can specialize in the market for online legal services.

iAfrOS: Africa, smartphones and the internet

Planning to get a new smartphone? You will probably consider an iPhone, a Samsung Galaxy, maybe a Blackberry or an HTC? Unless, of course, you happen to live in rural Africa. Then there is 2 in 3 chance that you will settle for a Symbian-based Nokia, or if you're not a fan of the once-omnipotent Finnish brand, you will most likely get yourself a basic Sony Ericsson or Samsung phone. Not to mention that there is only a 15% of chance that you will be getting any smartphone at all.

A parallel smartphone war

All of the statistics indicate that price is by far the largest factor when it comes to picking a smartphone in Africa. Most households have low income (at least by Western standards), while the majority of the Smartphones available on the market are priced at levels which make even a comfortable middle class American think twice before getting "the newest model". This explains the popularity of Nokia and Sony Ericsson gadgets, which might not be very advanced, but are definitely priced competitively.

As smartphone penetration is still low while the demand is high, no wonder that there are other companies which would like to tap into this market. Huawei created IDEOS, which is sold for $80 and is proving popular. Google has recently announced that together with its partner Motorola it plans to create its own cheap smartphone too (it is supposed to cost less than $80). This parallel "smartphone war" could further damage sales at Nokia, a loser in the Western gizmo race but currently the champion of the market for cheap smartphones.

WorldWideWeb?

While the likes of Nokia and Huawei are aiming at simply selling their mobile phones, Google has a greater ambition: connecting them to the internet. Internet usage across the continent is still quite low, but is surging quickly thanks to the growing use of phones with web capabilities. According to Intelligent Life magazine, there are currently around 89 million mobile phones with online accessibility in Africa (that's just 80 per 1000 people).

More devices with web access mean more business for Google, which already ranks as the second most popular website in Africa (after Facebook), according to the State of the Mobile Web report created by the team behind the Opera mobile browser. The Mountain View giant sees Africa as its next boom market, and promotes the internet there with initiatives such as "Get African Business Online" or the "Google Trader" app. More advanced smartphones could now allow its cloud-based services to become more accessible, and with the increasing demand for memory (relatively low in mobile phones) Google's cloud could be a hit.

Everyone benefits

Internet accessed through mobile phones could empower everybody, not just Google. There are many stories of how connectivity can transform people's lives. In October 2011, The Economist ran a story about how Ghana's shea nut pickers are benefiting from a smartphone app developed by the German software maker SAP. This example illustrates that the business interests of the tech giants and normal Africans can go hand in hand: as the harvesters' productivity and profits rise, SAP will demonstrate to its users the benefits of its technology, and hopes to eventually charge for the service. Everyone benefits.

There are many stories about how mobile internet can make life easier. Increasing productivity by adopting business IT solutions like the one in Ghana is one end of the story, and making life easier for consumers and 'mass' businesses alike is another. According to Craige Fleischer, the Regional Director for Southern Africa at RIM, smartphones can make it easier for people to shop and use financial services online, while driving new business to shops, banks and advertisers.

Internet connectivity isn't just about business though. It brings entertainment as well as profits, and this is as true in Africa as anywhere else. According to Opera's State of the Mobile Web report, game and music downloading and social networking are on average the most popular online activities among the smartphone-wielding Africans. However, search and email are also widely used, and these service can have business as well as entertainment purposes.

The bottom line

Africa is the continent with the lowest internet access levels, yet this is changing quickly due to the widening access to smartphones. Back in 2000, the online penetration levels in Sub-Saharan Africa stood at mere 0.6%. By 2010, this number rose to 10.5% (or 1/3 of the world average). Wider access to smartphones and the internet benefits individuals, small business and large corporations alike, and this realisation is the key to a common success. Supplying Africa with cheaper phones is definitely a good step forward. As the competition increases, the gadgets will get more and more technologically advanced, and thus will be able to provide more efficient business and entertainment tools to their users.

Dropbox – Here to stay?

Four years ago on a bus, after realizing he left his USB stick in his dorm, Drew Houston realized that he was too dependent on a device. He went onto co-found Dropbox, the web-based file hosting service, that now claims 45 million users, a billion new files each day, and revenue that is expected to exceed $240 million. Dropbox went from an undergraduate idea funded by Y Combinator, to rejecting a 9-figure offer by Apple, and now finds itself on the cover of the latest issue of Forbes, and in midst of a fight for technology’s most desired prize: the Cloud.

How did this happen?

Whilst Drew Houston’s idea was hardly revolutionary at the time, Dropbox’s rise is unprecedented. This is reflected in the company’s structure. Most of the 70 employees are engineers, and, instead of hiring PR specialists, Dropbox focused on word of mouth marketing. Houston attributes both factors to having learned that “best practice is not necessarily best practice”.

Simplicity is the key

Surfing the web and using devices to store data have become daily routines for most of us. Emails have dominated corporate culture since the mid-90s, yet we still haven’t figured out an effective and simple way to store and send files. Simplicity was perhaps the key reason Jobs believed that an acquisition of Dropbox would be a “strategic asset”, and it has certainly been the reason for its success. It is extremely simple to get to grips with. After you install the application a blue box appears, in which you can drag files into. These are then replicated across all your devices. It’s so easy that Houston summarizes the concept in a 4 minute clip, whilst adding inside jokes a plenty (http://www.youtube.com/watch?v=7QmCUDHpNzE). The name of course sums up the process, and therefore the company, perfectly. Along with the minimalistic website it echoes Job’s “focus and simplicity” mantra.

Dropbox is centered around an idea – an idea that can make life for anyone storing files on several devices much simpler. It shifts the focus from the device to the content. Now, it doesn’t matter whether you forget your USB stick before boarding a bus or you leave your Exam notes on the kitchen table.

Share thy files

Besides simplicity, there is another explanation for Dropbox’s success: it allows for files to be shared with other users. Virtually anything can be shared from individual files to whole folders to HD movies (if you pay up for the extra space). This has made Dropbox a hit across campuses, in offices and with the authors of this blog. as it allows for the seamless co-editing of documents. Add to that that Dropbox works on all major platforms (including the mobile OS systems), and it has a massive competitive edge over the likes of Amazon's Cloud Drive, Microsoft's Sky Drive or Apple's iCloud. On the other hand, it faces fierce competition from other success-hungry startups such as Box.net or SugarSync, which are busy marketing their file sharing capabilities. Although Dropbox still boasts more VC funding attention than any of its young rivals, it's not the new(est) kid on the kid trying to claim the collaborative cloud.

Housing problems

Perhaps Dropbox’s biggest cause for fear is also the main problem many cloud startups face - the cost of infrastructure. Data centers are expensive (Apple recently shelled out $1billion to build its newest one), and companies such as Dropbox can't afford to build their own. In light of this, Dropbox teamed up with Amazon to use its hosting spaces, but Bezos' online empire launched the Amazon Cloud Drive at the end of March. This highlights a big problem for Dropbox: its competitors, whether Amazon, Google or Oracle, have far greater economies of scale, and can therefore deliver similar services at lower internal costs. Dropbox can either charge higher fees, which risk putting users off, or run on lower profit margins, which does not bode well with investors.

The bottom line

Dropbox’s meteoric success is explained by designing a straightforward solution to a problem that is as old as the internet: How can I best access and share my files from any device. By rejecting a series of possible buyouts, Houston again signalized his intent to build “a big company” (as he explained to Jobs back in 2009). However, to do so it must compete with the web’s big players. Dropbox being smaller and (especially internationally) far less well-known, makes this no easy feat. Whilst it teamed up with HTC last week, hoping to capture the Cloud in the Android world, it now has to compete with Google Storage, run by Android’s parent company. Furthermore, Google is rumored to be introducing Google Drive, a storage device which is free AND gives users twice the space of Dropbox.

Dropbox illustrates the current situation of the software industry well: it's effectively run by an oligopoly that provides a full range of services, from operating systems, to email accounts to IaaS-based storage. Dropbox has managed to break into this exclusive circle. However, to remain in it, it will have to innovate beyond the “focus and simplicity” mantra, raise its profile, and find a way to make up for its far smaller economies of scale.

Google almighty?

It seems difficult to disagree with John Batelle’s tech-maxim that “the only thing Google has failed to do, so far, is fail”. Since making the statement in 2009, Google has pioneered Google Googles, perfected Google Maps and leveraged its Gmail empire in the ongoing Cloud Battle. Add quarterly profit increases that have exceed 20% since its IPO in the pre-crunch days of 2004 to that and any attempt to disagree seems futile. Cut your losses.

However, Google is not flawless: Harrison Weber of The Next Web calculated that Google fails at around 36% of all its projects. If this is surprising, Weber’s claim that Google’s social media failures amount to a staggering 90% is almost incredible.

GConcept still relevant?

Part of the reason why Google hasn’t yet managed to crack the social web (except for YouTube, which was acquired – rather than developed internally – for a whopping $1.65 billion) lies in its very nature. If Facebook is a suave lounge or cozy café, Google is a reliable, uncomplicated GPS system. Google was founded as, and remains to this day, primarily a search engine – both in terms of the extra features and because the search engine is the default starting point. A search engine,(like most other engines) cannot be described as a social thing. Why? Searching in the age of information is a means to an end. Weaving through the web’s endless information is tiring, not the basis of a fun communal activity.

Many claim that it is only a question of time until searching the web will gain a social dimension. Google would then be at serious risk of loosing its monopoly to social media platforms. These seem keen on getting a share in the hugely profitable web search market, whilst their main businesses – virtually connecting people – can only keep growing. Faced with this, Google could soon feel like an aging rockstar, desperately trying to hide the wrinkles and ‘connect’ with the younger generation.

The social business

Companies making hardware or flower pots have it easy: the better their product, the more likely they are to win over the competition. Consumers tend to be flexible when it comes to picking most products, and don’t hesitate to switch to a new provider if they feel they can get a better deal. This is perhaps best demonstrated by Apple’s innovation being based on improving existing products (as discussed below).

This isn’t the case with Social Networks. People use Facebook to interact with friends and potential friends; the better the forum for this, the more users ‘like’ the service. Since social networks are essentially communities, it is crucial that members regularly contribute. Users will stick with the platform as long as this is ensured. Therefore, despite Facebook seemingly getting a weekly facelift, there is no great need to innovate so long it ensures that existing members keep posting in new groups and new members sign up.

Picking the right cherries

Google boasts some truly impressive and successful products. Google Apps, Gmail, Google Analytics or Cloud Storage are all thriving in terms of popularity. They share other also all cloud-based services, and therefore especially appealing to business users. Whey then is Google seemingly digressing from its current online-starlets and attempting to break into social media?

Google spent nearly $600 million on developing Google+. The service is criticized internally and will be lucky to ever surpass Myspace.com in terms of active users. This is not an extravagant sum for hi-tech, but it light of Google spending only $3 billion on R&D a year, it’s clear that Google means business. $600 million could buy 9 years of R&D at Salesforce, or 600 Ferrari Enzos. Could Google be better off sticking to what it does best then? Why is social media so important to Google?

It’s all about the money

Even if Facebook doesn’t become a major player in the online search market, it still manages to cash in on adverts. For the world’s largest add broker, this is annoying to say the least. Facebook is on track to exceed $2billion of advert revenue in 2011, or 28% of Google’s marketing revenues. Beyond that, Facebook’s user base is constantly growing, making it an increasingly attractive advertising market.

While it is only natural that Google’s trying to shave off some of these staggering profits, the intense focus on social media is puzzling. As current and potential profits are metaphorically in the clouds, the only explanation that comes to mind is that Google would like to dominate the internet. Increasing convergence would suggest that this is necessary, however, with Google+, Google runs the risk of starting a war it cannot win. It remains to be seen whether this surge into social networking will prove more damaging than valuable to the brand.

The Bottom Line

What are Google’s options in light of all this? This depends on what people want, or what people are told that they want, to quote the late Steve Jobs. First of all, users won’t necessarily switch to a more ‘social search’. Searching through the social media has some downsides, including the risk of being trapped in a bubble of highly targeted content. Add to that that Google is the number one search engine in all U.S. States - bar Iowa - , and its fairly certain that Google will continue to cash in on online adds, even if it falls short of Facebook’s profits.

If, however, online search does go 2.0, Google will have to seek other sources of revenue. The safest bet seems to be the cloud, or possibly a more specific social networking site, such as LinkedIn. Either way, Google failed to win the social media market back in 2004 when Facebook piped Myspace to become people’s favorite online procrastination, and is now paying the price for it. This is a yet another proof that in the IT market, right timing is king, and that missing out on key market developments sets anyone up for failure.