Big brands acquire mobile talent; smaller brands seek alternatives
By Mark Hamstra
July 18, 2014
Retailers including Nordstrom, Kroger and Walmart are filling the mobile-talent vacuum by reaching into their own pocketbooks and acquiring companies that come equipped with a wealth of mobile expertise.
Companies without the resources to execute such acquisitions are turning to alternative strategies to ramp up their mobile capabilities, including outsourcing talent to specialty firms and setting up remote offices in tech hubs where mobile talent is more abundant. The challenges for companies in this area are only going to increase, many industry experts say.
“If we find an opportunity where we can accelerate our customer proposition, whether it is talent acquisition or it is some kind of an e-commerce type company, we will do it,” said Charles Holley, chief financial officer of Bentonville, AR-based Walmart, in a recent investor conference call.
Walmart’s social and mobile commerce division, @WalmartLabs, has made three such acquisitions already in 2014, on top of others made in preceding years. The three most recent pick-ups were Stylr, Adchemy and Yumprint (see story).
“These acquisitions can be applied across the big scale of Walmart to make a bigger difference in the numbers,” said Doug McMillon, president and CEO of Walmart, in the same investor conference call.
Walmart recently acquired mobile fashion specialist Stylr
More expensive than ever
For companies without the resources of the world’s largest retailer, the mobile talent shortage is not going away anytime soon. The McKinsey Global Survey of business executives in March revealed that more than two-thirds of leaders cited finding technology talent as a major challenge they faced, and mobile was among the top areas where they faced a shortage. A survey from the Consumer Goods Forum on July 17 revealed similar findings (see story).
“Every year it is getting more expensive to recruit and retain mobile talent,” said Chris Mason, co-founder and CEO of Branding Brand, a Pittsburgh-based developer of mobile apps and websites. “If you look at places like Silicon Valley, they are paying thousands of dollars to high school students to make up for the talent shortage.”
He cited the rapidly changing landscape of programming languages and operating platforms that require near-constant training of developers. In addition, the accelerating pace of mobile adoption by consumers is putting pressure on the demand for expertise in affiliated areas, such as POS technologies.
Mr. Mason noted that companies like Amazon, Walmart, Nordstrom and Kroger — the latter of which recently agreed to acquire mobile-commerce player Vitacost, a Branding Brand client — can afford to augment their talent pools through acquisition. That is not an option for smaller aspiring mobile marketers however.
“Acquiring companies that have mobile talent is the more expensive option,” Mr. Mason said. “It’s a strategy for the few select retailers that have the resources.”
Nordstrom, akin to Walmart and Kroger, has enhanced its mobile and e-commerce capabilities through acquisition. Its 2011 purchase of online retailer HouteLook bolstered its ecommerce capabilities and recently led to the creation of a new Web site and mobile app for Nordstrom Rack.
“NordstromRack.com built on the strengths of both HauteLook and the Rack,” said Blake W. Nordstrom, president of Nordstrom, in an earnings conference call. “It involves the integration of talent, combining the e-commerce expertise of HauteLook, which developed the platform for the site, and the merchant expertise of the Rack.”
The HauteLook mobile site before it was acquired by Nordstrom
Look for culture
Companies seeking to make acquisitions in the mobile space to add expertise and skills need to consider their long-terms needs as well.
“Acquiring a company for its mobile success can result in failure if you don’t also acquire the culture that brought about that success,” said Kevin Jennings, vice president of strategy at Fuzz Productions, a New York-based developer of mobile apps and other digital platforms. “Bringing in proprietary technology through an acquisition without adopting the spirit of innovation from which it was born will require another acquisition in three years to evolve or replace the product.”
He said it would behoove many organizations to think about their digital needs in terms of “mobile first” rather than “desktop first” when seeking to add mobile talent to internal teams through hiring. Making mobile a priority will help recruit talented workers if those individuals realize that their skills will be valued.
“In-house mobile product teams often find themselves and their projects taking a second or third seat to larger digital initiatives in the product roadmap, essentially reducing their contribution and perceived value to simply replicating ‘desktop-first’ experiences into mediocre mobile products, leaving them unfulfilled and under-leveraged,” Mr. Jennings said.
One talent recruiter who specializes in mobile hires said there is a distinction between mobile marketing talent and mobile technology talent. It is often easier for companies to find skilled mobile marketers in existing marketing silos than it is for them to hire mobile-app developers, for example.
“Mobile is a new area for a lot of companies, and there is a strong need for this expertise,” said Jose L. Tamez, managing general partner, Mobile Search Partners, Golden, CO. “There is way more demand for talent than there is supply right now, and a lot of the talent is very young.
“A lot of the mobile marketing talent is coming from traditional marketing segments at consumer goods companies and media, but it is the people on the tech side who are really in demand.”
He said the strategies companies deploy to ramp up their mobile expertise depend in large part on the priority they take toward mobile in their companies. Is mobile a “nice to have” feature, or is it “mission critical” at the organization?
“As far as developing talent from within, companies today are not set up to train in emerging disciplines,” Mr. Tamez said. “Training in core areas of the company’s business model still gets funding, but new areas garner little to no appetite.”
Mr. Tamez authored a report on the topic called “Skilled Mobile Talent: Why the Shortage and Ways to Solve” in which he noted that the young nature of mobile talent is having an impact at organizations. These mobile workers — often placed in managerial positions in their 20s — are not as fundamentally equipped to handle the rapid change of pace in the business as their older, more seasoned managerial counterparts.
“Senior executives have shared with us that the magnitude of what is at stake in the mobile initiative is not fully grasped by the workforce in this age group,” Mr. Tamez said.
Smaller companies can borrow mobile expertise by outsourcing to such companies as Branding Brand and Fuzz, and large companies can find success in outsourcing some of their mobile needs as well. For large companies intent on having a major presence in mobile, outsourcing should not be the primary resource for mobile innovation, however, some observers said.
“For a company that is sizable and has the resources, I am never a fan of outsourcing, because mobile is so huge,” said Adam Foroughi, co-founder and CEO of AppLovin, a service provider for attribution, targeting and acquisition in the mobile space. “I never see outsourcing as something that will be core to your business.”
Mr. Foroughi added however that while he does not support outsourcing of development, he does advocate the outsourcing of design functions.
“Finding the right designers to work with is key,” he said. “Find a good partner to work with on design, then hire developers to work in-house.”
He noted that with most mobile developer talent located in a few key markets like New York and San Francisco, hiring developers to work in-house is a challenge for companies located elsewhere in the country. This is part of what has contributed to the acquisition of smaller start-ups in these geographic areas. It is also contributing to a phenomenon whereby some companies — such as Walmart with its San Francisco-based @WalmartLabs — are opening up outposts in talent-rich areas.
Pressure from start-ups
Nathanial Trienens, CEO and co-founder of Fuzz, said mobile start-ups, while often the target of acquisitions, are also putting pressure on the supply of mobile talent for everyone in the space.
“There is an acute shortage of mobile talent in the labor market, and that extends beyond developers, to user experience experts, designers, strategists and project managers,” he said. “We see this in the ever-increasing salaries for these positions, and in the ‘perk war’ in the tech industry.
“There is added pressure on the supply of mobile expertise from the ongoing start-up boom. Brands and agencies aren’t just competing against each other, they are also competing against startups offering equity and the chance to build something totally new in a fast-paced environment; the draw of that option can outweigh salary for young, ambitious talent.”
When it come to talent accrued through mergers, it is not a one-way street however. Smaller companies can also often benefit from the culture of the larger, established companies that buy them.
Jan Koum, CEO of WhatsApp, which is being acquired by Facebook, said WhatsApp is looking forward to learning from its acquirer.
“Facebook is a social network and offers many different and important functionalities than WhatsApp offers to the communication service, and we're excited to benefit from the unique expertise, knowledge and infrastructure that Mark [Zuckerberg, Facebook's CEO] and the team have built out over the last decade,” said Mr. Koum. “We think this will open up many new possibilities for our product and community.”
Mark Hamstra is content director at Mobile Marketer, New York.