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15 Steps towards Building a Great Product!

Note: I recently gave a talk at The Startup Leadership Program and shared thoughts on Product Management and how to go about building great technology products. The deck I shared is embedded w/t the post.

This for all founders & product geeks (that includes me too) who want to build the next great product. Sharing all this for #StartupKarma (Heard this from Bowei – ‘Continue to give away and help other entrepreneurs with a hope that it comes back to you someday!’)

15 Steps towards building a Great Product! from P J

The Background:
As a startup founder, one gets bombarded with advice on pitching, raising investments, growth hacking, marketing and so on. It comes to us through one-on-one interactions, posts we read or multiple startup events and meetups. Unfortunately there is very little or no advice that actually helps you build your product.

Over months, I have studied product patterns in several successful products (like Facebook, Twitter, Quora and so on). This has made me believe that building great products is not just about picking random ideas and shooting in the dark, its a art and science both put together.

Here is a step by step guide for building a great product. I have taken Twitter in this case to demonstrate the examples, however you will be surprised to see the similarities with other products.

Note: Don’t proceed without understanding #0; and without finishing #1 & #2.

#0 | Think: Product does Marketing
The thumb rule for any great product is that you don’t need to market it; it requires zero marketing spends. Instead, it is the users who spread the word, acquire more users which leads to high growth. High virality and strong engagement are the two striking characteristics of a great product.

So here is the step by step guide towards building the next great product!

</end 0>

#1 | Think: What product are you building?
Have clarity about the product you are building. Make your product statement!

Here are the rules:

Define your product in < 10 words. This is not your pitch statement, its your “product statement”.
Be grammatically correct, include name of your product in these 10 words.
No references with other startups / products. This cannot be “AirBnB for Cars” or “Facebook for Companies”.

Share this product statement with others. Does it communicate ‘everything’ your startup is going to build? If it does not, work on this again!

</end 1>

#2 | Think: Vision
Most startups have beginnings over a random idea (usually this sounds like a billion dollar idea then). Once those ideas get built in 3-6 months, the founders are lost and clueless on what next!

Have a vision around this product you are building. You can run out of ideas, but you can’t run out of vision. Build a product roadmap around this vision. (I mentioned it last year too – point 5 )

Make a note of the vision for your startup / company. Check if the product statement you wrote in Step 1 is the right to achieve the vision you just stated.

Now lets start with building!

</end 2>

#3 | Think: Atomic Unit of Product
I picked this up from Fred Wilson’s post which got me thinking for days on my our own product and even inspired me to rethink on our product / vision.

What is the atomic unit of your product? Example; Atomic unit of Twitter is a ‘Tweet’. For Facebook it is a status update. For Instagram it is a photo. For Gmail it is a email. For YouTube it is a video.

Simple rules about Atomic Unit of your product:

It has to be owned by you.
It should be only one. More than one atomic unit? Signs of trouble!
Your product statement and vision should be centered around this atomic unit.

</end 3>

#4 | Think: Features

Were always confused on figuring out which features to build and which to let go? Answer is simple – build features only around the atomic unit of your product.

Example., Twitter’s core features – reply, retweet, favorite & follow (a user who tweets) are build around its core atomic unit – “tweet”.

Rules to remember:

List down all features you can think / build around the atomic unit of your product!
Strip down all the features you have on your product that are not centered around this atomic unit.

</end 4>

#5 | Think: Engagement
Want your users / customers to engage with your product – ensure that features you have selected to build around the atomic unit lead drive engagement.

Example., In case of Twitter, the engagement is Retweets, Favorites and Conversations that one can have around the atomic unit ‘tweet’. Similarly for Facebook it is – Likes, Comments, Shares and so on.

Don’t getting fascinated by engagement features around popular products and force-fit them on your product. Example., force-fitting the favorites like functionality from Twitter on your product.

Rules to remember:

Drive engagement around the atomic unit of the product.
Be innovate. Try multiple options to figure out the perfect fit around your product.
Engagement should be measurable! (Example., 35 Retweets)

</end 5>

#6 | Think: Flexibility

Most startup founders I meet are not flexible. They don’t want to change their product and want users to follow a certain flow which they believe which is right. When asked why, most of the times the answer is “we don’t want to let user play around the product”.

Think twice. Your product should be flexible and your users ‘must play’ with your product. Your product should be flexible at its core – at its atomic unit! Example., Twitter lets you tweet text, a photo, video, post, location & in multiple languages. Others., Facebook lets your post a status that is a text, photo, video and so on. Same for Quora, Tumblr and the rest.

Rules to Remember:

Give freedom to your user to play with your product.
List down all formats in which a user can express the atomic unit of your product.

</end 6>

#7 | Think: Distribution

Key to success of any platform – distribution. Why does this come so late? – You need to build your product right before you even think distribution.

Most founders think distribution is ‘sharing on other platforms’. It is not! Before you even get to allow users to share & distribute to other platforms like Facebook or Twitter, get users to distribute on your own product.

Example., Retweet on Twitter, Share on Facebook, Upvote on Quora, etc are the best examples of on-site distribution.

Rules to Remember:

Distribution should be centered around the ‘atomic unit’ of your product.
If a user has not distributed anything on your product, very rarely would be distribute something outside of it.
Don’t force-fit social in your product. Users will figure out way to share if they like something!

</end 7>

#8 | Think: Endorsements
Don’t we breath and live endorsements in our every day lives? Why do we forget to build that in the products we create. Great products use endorsements in every element – it brings out relevance & context to information.

Example., If you notice every element of Twitter has a endorsement if you are logged in. This includes – Retweeted by, Follow Suggestions, Profile Views and Search Results.

Rules to Remember:

Endorsements work 100% of the time. Build them in your product.
Anything that is not context is spam. (Said this earlier)

</end 8>

#9 | Think: User Psychology
Most entrepreneurs want users to love their product. Truth is, users don’t love your product. They love the content (or data) on it!

Example., We love to express ourselves on Twitter. Discover best answers on Quora. See moments shared by friends on Facebook.

So if you are building a product, remember to allow users to create their own content and discover relevant content. Don’t try to get users forcefully share something to Facebook or Twitter, it will not work.

Rules to Remember:

Content should be expressed in the atomic unit of your product. Nothing else.
Creation of content is much more valuable than sharing of content.
If a user has created some content on your product, has something he owns – he is engaged.

</end 9>

#10 | Think: Content Dynamics
Once you let users create content on your site, ensure you understand the content dynamics – most importantly that user’s need for that content to be seen! This is step 2 of user psychology – he needs activity around it that will keep him engaged through the features you have built around the atomic unit.

Example., If I tweet something on Twitter, who consumes that content? Not all of my 1000+ followers on Twitter, many of them may never notice it. But there are few followers who will retweet that and amplify the tweet.

You need to have features (again around the atomic unit of the product) that amplifies / distributes the content. And users who do these are your content curators! That is all one needs to know about content dynamics!

Rules to Remember:

Great content is created by just 1% of your users; That is amplified by 10% content curators – their actions make things go viral!
When content from your product goes viral, in in true sense your product goes viral.

</end 10>

#11 | Think: One Point of Discovery

Building product with above elements is important, and now crucial is to package that all in to a exemplary product design. The thumb rule here is simple – user should be able to do everything that has been mentioned here (till now) on one screen.

Example., the logged in interface of Twitter, Facebook or Quora (though imo Quora still needs some improvements).

Rules to Remember:

Don’t build a product around design. Build design around the product.
Minimize page views, clicks. User should be able to complete 75% tasks / actions of your product from the screen he is displayed where he logs in.

</end 11>

#12 | Think: Privacy
This point is intentionally left blank. That is all I have to say about privacy!

</end 12>

#13 | Think: MVP
Stop building minimum viable products, users won’t adopt them. Instead build more valuable products, I wrote a full post on this topic - the minimum viable product trap!

Still not convinced, here are some examples -

Bing is a good search engine (if you have not tried it lately, you should). Still we continue to user Google regularly and did not shift. Why? Because there is nothing more valuable it has compared to Google.
Outlook, is now probably as fast as Gmail and with most (of the commonly used) features that users would expect. Yet Gmail continues to lead because Outlook provides nothing more valuable than Gmail.
We did not move from Dropbox to Google Drive. Same., not more valuable.
While in case of WhatsApp, we all moved not just from text messaging to WhatsApp, but also dumped Facebook Chat, GTalk and many other products. Why? – because it is more valuable!

Rules to Remember:

Build something of value to users, that will drive adoption of your product.
Build your product for real users, not for early adopters.

</end 13>

#14 | Think: Growth
If building the right product is the toughest thing to do for a startup, distributing it right is even more tougher. If your distribution plan includes advertising or spending $$$s – then you need to rethink your strategy.

As a startup, you need to completely rely on any existing network to bootstrap your initial growth. Even the existing successful products have, some examples -

Twitter: Live tweets at SXSWi conference displayed on large TV screens.
Facebook: Opened initially in Harward, and more schools later.
YouTube: Nike Advt went viral. Plus many users embedded YouTube videos on then popular MySpace.
Gmail: It was a mail service from Google. Invitation Only. Anyone searching for email services on Google.com was shown advts for Gmail.
Quora: Initially opened to Facebook Alumni network
Zynga: Facebook Feeds.
Dropbox: Invites by Email + Connect Facebook & Twitter accounts.

Rules to Remember:

Bootstrap your growth on other existing successful & large networks.
The networks could be online or offline. Focus on only one!

</end 14>

#15 | Think: Shipping Fast
Many entrepreneurs / founders keep delaying their public beta as they wait endlessly to build a perfect product. This can be very frustrating since the perfect product is always 2 or 3 more features away. Some of the common reasons I hear is – “What if early adopters don’t like the current version of product? what if they rant about it on Twitter?”

Founders should also know that early adopters are very considerate – they know this is the first version of product that is being shipped. In my case, I rarely rant about early stage startups. To communicate something or to share feedback I shoot a email to the founders. In case I really like a product I spread the word for it. Yes, but I do rant if a startup has raised a Series A, in this case I assume you should have a product where silly mistakes are not acceptable

Rules to Remember:

Ship a Imperfect Product. Its OK!
Collect feedback and ship changes fast. Ensure your write to your users and update them when feedback is implemented.

</end 15>

Concluding Notes:
Building products is not easy! Most of the time its shooting in the dark with no clear modelling that lets the product manager believe if a feature you are building will work or not. As startups, we are pressed on time and a wrong feature can cost us time & money.

It took me quite some time to study and understand these unique patterns in several successful products which includes Facebook, Twitter, Tumblr, Quora and others; finally had a chance to put that on a deck and now on this post.

While this product management process has been personally very helpful for us at Wishberg; I plan to update this over time as I learn, understand and implement more. Would also want to hear your thoughts on this, please write to me on pj @ beingpractical.com on your learnings and inputs.

Thank You!

Predictions 2012: Technology Trends; Investments & Biggest Exits in Indian Internet / Tech Space

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This post is a update to one of my earlier post written about a year ago on similar lines.

Multiple new products, investments and its always a good thing for the ecosystem which matures with time. Indian tech industry is changing at a rapid pace, its only fair to go back and recheck those predictions and ensure to keep it up with the times.

Meanwhile, predictions that came true:

Had indicated the possibility of this particular VCs (without naming specifically, though evident who) investing actively in Indian Ecommerce merging its portfolio companies to form an large entity. Just few days over a year after this prediction, Accel and Tiger Global backed Flipkart acquired Letsbuy.
Mentioned that a large player will enter Group Buying deal space. The coupon/deal space was too tempting for many to resist at that time and as I expected, Times Group (Indiatimes) entered this space in May 2011.
Specifically mentioned of Pubmatic being acquired; There were rumors about a possible acquisition offer by Amazon for $300 Mn which was declined as the company chose an IPO over acquisition. Meanwhile Google acquired AdMeld for $400 Mn.
Hinted towards AdMax Network in South East Asia which leverages local inventory and is a leader in these countries. While I expected something like this to happen in India, interestingly Komli acquired AdMax. (Though I did not predict this to happen).

Predictions for 2012 onwards:

Product based Ecommerce companies:

Flipkart, HomeShop18, Infibeam will continue to grow; and (no brainer now) that Flipkart will emerge as the market leader amongst the Indian players. I expect Flipkart and these leaders to attempt the following -

To ensure profitability of logistic operations, either introduce upfront minimum charge for Cash on Delivery below a certain price value or markup its prices by a small amount.
Introduce a co-branded credit card with rewards. Not as a branding or marketing exercise, but to encourage existing users to move towards pre-paid payment mechanisms.
Spin-off its logistics, customer care, operations departments in to a different company to ensure profitability of Flipkart before it hits an IPO.

Though many criticize the Samwer brothers (Rocket Internet) for creating copies of successful business models – I see nothing wrong in that. How different are any of the other ecommerce sites with their Amazon.com ambitions? Rocket Internet fellas are aggressive risk-takers, investors and amongst their bets on Indian market, Jabong.com has potential to enter in the top 3 / top 5 spots. At some point of time – they may consolidate Fabfurnish.com and HeavenandHome.com into Jabong and set a stage for IPO or an exit through acquisition (Amazon.com?). Rocket Internet is as smart as any other investor when it comes to getting acquired. Watch them!

Marketplace models like Ebay, Indiatimes, etc may face tough competition owing to their helplessness to control key factors like logistics, operations and product quality; precisely what funded startups are keen to build on.

There are now niche plays coming up – Ecommerce services for Tier II/III towns. Most likely candidates to struggle, conceptually sounds great – but the on-ground reality is much different. Will they not accept user orders if customer is from Mumbai or Delhi? I know you talk about ambitions of Tier III youth, age bracket 20-35, etc – but do they require iPad? if yes – why will not Flipkart serve it.

About Amazon’s India plans – I mentioned of the same in this post about about Junglee.
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Vertical Ecommerce and More -

Many ventures who have raised between $2Mn to $5Mn – are yet to move beyond the 500 transactions per day mark even after a year. Few yet to cross 200; scalability is must for any Ecommerce venture to succeed. Verticalization of ecommerce has happened before time.

Predict more consolidation in Ecommerce industry in vertical investments. Simply for the following reasons -

There will be a Series B crunch. Most investors have already made multiple investments in ecommerce services. Companies will face tough time raising further investments and will require to raise Series B investments from existing investors. Investors hedge risk by investments in multiple ventures, they will require deep pockets to put more money in one venture, diluting founders more and eventually controlling the company. This shall lead to multiple consolidations between portfolio companies (Flipkart + Letsbuy scenarios).
There are multiple vertical funded ecommerce companies in market today. This has happened before time, for verticals to succeed, the horizontal ecommerce play itself should be very large. This is exactly why ventures like Flipkart (books), Letsbuy (gadgets), Snapdeal (coupons) who started as niche expanded into horizontal play.

Few players who have launched multiple sites for focused ecommerce approach, other than doubling costs of user acquisition, the only notional benefit it brings to table is SEO. This might not be even proved in Indian context – though a different vertical, we see that Shaadi.com with single brand focus is as popular as Bharat Matrimony with its multiple brands.

Another trend in Ecommerce is online grocery shops – at this stage most of the ventures are focused in single cities, the challenge for every startup in this domain is to replicate this operations in every city, every locality they expand into in a same or much more efficient manner. Unaware of any investments made in this vertical yet; I’m guessing investors are also looking at same – scaling beyond 2 to 3 locations.

Ecommerce for kids – someone shared a joke with me ‘Probably the rate at which online baby stores are coming up is greater than growth rate of India’s population.’ Very little differentiation between existing players, some of them already moving towards a franchise model (which probably beats the economics of online stores).

Amongst vertical investments – many have happened till date in Fashion. This is an interesting space, however already crowded with no differentiation left. Increased cost of user acquisitions, operations and logistics along with Series B or follow-on investment crunch will take a toll on few players. Funded players will try many things – new brands, labels, etc. The question always will be – what differentiation to bring to table? what exit for investor?

There is also a serious talent crunch with many funded ecommerce players, not just at junior but at middle and senior management levels. Another trend that will come up soon is acquihire deals.

Trend you will notice soon – the last slide of pitches will now read acquisition by Flipkart, instead of Amazon. But in an early ecommerce market acquisitions of competition really makes no sense – will write about this some day.

Group Buying / Daily Deal / Coupon Companies:

Post the Groupon IPO, the obvious was out – this is not a profitable business to be in. Even the leaders moved away from the Group Buying space – tells us the story of Group Buying or Daily Deals. Has suggested last year that funded players will grow, they did but by pivoting to product driven horizontal ecommerce.

The Groupon IPO spoiled the party for many others who were waiting to be acquired by Google Offers or Living Social. Amazon is know to build large profitable businesses, though Living Social has raised a massive $800 Mn+ in investments till date – its fate might be uncertain. Either hit the dead pool or an acquisition by Groupon itself at a very cheap price!

Back to India, there is nothing much left to say now for this vertical, its just a matter of time when large me too companies who joined the party will start calling it quits. Ebay who experimented with it silently abandoned its play, others like Times, Rediff, Mouthshut will too have to review their presence in this vertical in some time.

Some significant players who made presence felt in the couponing space are – online recharge players like FreeCharge & PayTM. It is too early to comment on their exit, however its a interesting vertical (specific only to India) to watch for following reasons – operators doing something fundamentally wrong as own customers pay bills outside, multiple players have entered the segment, players need to retain consumer interest without causing deal fatigue.

Online Travel Companies:

Not much changing in travel landscape. As mentioned last year - Yatra & Cleartrip are clear IPO exits. Last year MakeMyTrip and SAIF acquired Ixigo, Yatra & Cleartrip might as well look at smaller acquisitions in this space, particularly players in holidays/vacations – the likes of mygola.

It has been a while that Naspers/MIH has invested in ibibo; with ibibo.com focusing only on games from now, it might look at some kind of exit with Goibibo.com. Meanwhile, Naspers / MIH / Ibibo might look at acquiring one or two startups either in gaming/travel domain to solidify these two verticals, or to expand in to new verticals since they clearly indicate focused growth now with Gaming (Ibibo), Travel (GoIbibo), Ecommerce (Tradus) & Automobiles (Gaadi).

RedBus.in is the clear leader in online bus ticketing space, it will continue to be IPO candidate or hot acquisition target. Owing to high valuation of RedBus, its now noteworthy competitor TravelYaari will be in better position to be acquired – in all probability by Yatra / Cleartrip or GoIbibo.

Repeat – Dear Railway Ministry, please list IRCTC on stock markets. Massive opportunity.
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Online Car Rentals:

Just two years back we saw host of daily deal sites, in last month we have seen about 4 investments made in Online Car Rentals space – Ola Cabs, Savaari, YourCabs and TaxiGuide. Predict Ola Cabs to take a lead in this space – and be a possible acquisition candidate for Uber.

This prediction is not based on the fact that they have raised highest of the lot – because its strategy is right. To be successful in this space, they need to concentrate only on the top 8-12 metros, 90% of their target customer base is in these cities. A smart online car rental service will start only in cities where fleet cabs like – Meru Cabs, Easy Cabs or others have significant presence and created the market. For now, more cities just looks good on paper.

Time will prove this right or wrong – as for now, this vertical has just started showing signs of growth (and already getting crowded). It kind of makes sense for Ola Cabs to make a small acquisition in this space and expand quickly.
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Advertising Networks – Web / Mobile:

Last year I suggested that this particular vertical is hinting saturation of market. Out of the existing lot (Tyroo, Komli, Ozone Media, AdMagnet, and other players) – clearly Komli has grown out of India and with its series of acquisitions (Aktiv, ZestAds, AdMax) is trying to position itself as large digital advertising company in Asia, indicating its preparation for an IPO or could be acquired by large agencies like WPP, Dentsu, Publicis or similar.

Unfortunately for India, there is not much technology play in advertising networks, most end up working in model similar to agencies (except the creative part). But few niche technology players in this domain are Sokrati (Paid Search) and Vizury (Display Re-targeting). Both have raised smaller investment rounds earlier and could be good acquisition targets; unlikely for Komli for its partnership with Efficient Frontiers (for search) and display re-targeting has been mastered by many now. Of all players, Ohana Media* could be a acquisition target – its behavioral marketing techniques that combine audience data across channels is amongst the best differential technology available in India today.

Tyroo recently acquired DGM India for $0.6 Mn. DGM was India’s largest affiliate marketing company – a small acquisition size may play spoil sport for couple of startups wanting to monetize through shopping / affiliate related models and currently looking to raise funds.

InMobi continues to be the hot IPO candidate in this space. Google acquired AdMob when advertising on mobile web was at its peak time; current mobile advertising focus is shifting towards in-app advertising, which might even make it a acquisition target for Google (Android) or Apple (iOS devices). New players like Vserv or others would have to build a product sweet sport – number of publishers, impressions available per day and so on, very early days for them.

Guruji seems to now have completely focused its efforts on AdIquity – its mobile advt yield optimization and mobile RTB platform (similar to Pubmatic, but for mobile). Good strategy, may provide exit for its investors by a quick acquisition by InMobi or even by Pubmatic or other web based RTB players like Rubicon Project). As Google continues to mess up its core product – search, it is high time Guruji re-look its search business, not for India but for the world (like duckduckgo).

Pubmatic – is IPO bound. Last year I mentioned them as a potential acquisition target. Its obvious Google spoke to them before acquiring Admeld, they reportedly reject Amazon’s $300 Mn acquisition offer.

*full disclosure – I was earlier associated with Ohana as head of product & marketing. the name was skipped last year due to my association.

Education:

Many people in investment circle say repeatedly that Education along with Healthcare are hot segments ripe for disruption. Well it is, and a majority of them don’t have a clue what that disruption will be (this includes me). There are already multiple investments made in this Education domain till date, most of them unfortunately will be write-offs and struggle for their next institutional round.

Startups / Investments in Education sector can be classified following segments -
a. Entrance Tests (Online test preparations services)
b. Online Applications (Choose college, careers for India & Abroad)
c. Virtual Classrooms, Online Tutors (self explanatory)
d. Hardware Plays (Education Devices & Tablets)

Startups in A & B -

Over crowded space (many funded players, pivoted players, existing players with deep pockets)
Though India has lacs of students every year; the choice of colleges are limited – Top 25 colleges are key in every stream (MBA, Engg, Medical, etc). The long tail of 10,000+ institutes does not matter. For the skewed supply-demand ration, these top 25 colleges will attract students anyway. If startups are paid commissions for referrals from Tier-2/3 institutes – to monetize these startups might be recommending colleges that they should not otherwise.
Consumer value does not extend beyond 1-time use of service.
Students & Parents rely more on taking (free) advice from their friends and family; or people in social circle who can share recommendations.

Startups in C -

Fancy names – cloud campus will not do much for its business. Internet is and always was cloud.
The best content driven organization – Khan Academy. Its free.
Changing syllabus, all online courses need to be revamped. Content heavy services, high cost of content creation; no control on content piracy.

Startups in D -

Foolish attempts. Anyone who thinks they can proliferate new tablets for education only are bad students of internet.
Education is a content play; not hardware play. Students today have access to computers, laptops and soon Android tablets (steep decline in prices). Instead of building new devices – try delivering content to devices students already have access to.

Education by nature is largely offline category and service oriented. Most of these startups are attempting to package them as products, but will be largely service driven plays behind curtains. Investors care about multiple returns on their investments – will they get 10X returns, I doubt.
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SaaS Products:

The fascination for SaaS products continues with investors and will go on for some more time. Since these investments are in very early stage, it will not be appropriate talking about exits. No one has tried to classified SaaS products yet (not to my knowledge) – but let me attempt it as following:

There are Consumer SaaS products that follow a freemium model – Dropbox, Evernote, Hootsuite, Skype and so on, and there are Enterprise SaaS products.

Business SaaS products priced by usage – Typically products that cater to large business spends. Example., Clickable (catering to online advertising), Interview Street (Hiring) or Amazon AWS (Hosting & Computing), Box, 37 signals, etc.
Companies will continue to spend more on advertising, hire more with time – hence more revenue potential for these startups.
Business SaaS products priced by features – Bill.com (Online Billing), RingCentral (Virtual 800 number), Xero (Accounting), etc. Best way to identify them is the pricing, the revenue potential of such products will not grow significantly as its users grow.

Restricting only to Business SaaS products – Type 1 SaaS startup will maximize its revenue per user as its customers continues to grow, spends more on advertising, hire more, use more hosting, etc. Type 2 SaaS startup will require more clients to maximize its revenue.

Amongst Indian SaaS products, currently Interview Street is probably in the best position to be acquired (may be by LinkedIn). Freshdesk is also a great product, that has a long way to go building a differentiated model from its competitors (which are in plenty). Another Indian SaaS startup I am a big fan is Practo, but it might take them a while to be considered for acquisition since technology is yet to transform health industry, most big giants in health-care yet to embrace tech.

Online Gaming:

We will continue to hear of online gaming for few more years, examples of Zynga or Rivio (Angry Birds) for some more time to come. Will there be a exit for any player – No. Take clues from Zynga’s $200 Mn acquisition of OMGPOP – it takes a hit game like Draw Something (massive traction with over 10Mn installs in first 30 days of launch, and cross 50Mn+ early this month) to be noticed and get acquired.

Same happened with Rivio for Angry Birds. The key is simple – keep building till you get that winning game on hand.
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Online Matrimony:

Nothing changes here. Bharat Matrimony is profitable play to my knowledge and is looking for its IPO towards the end of this year or early 2013. With Shaadi.com – unsure of its IPO happening any time soon, just as Ias mentioned last year, very unlikely before Consim Group.
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Online Classifieds:

JustDial as known by everyone is heading for IPO. The online-offline model and discovery through phone & web seems to have really worked for them. Really wanted to write something about other players in this segment, but they seem to be busy monetizing more through Google Adsense – so leaving them to rust in peace.

The whole hype about Craigslist was probably the reason why everyone got on to this play. Having said that, not just in India – but globally the online classified vertical is now open to disruption – there are interesting startups like Taskrabbit, Zaarly and more.
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Applications:

Waiting for an Kodak (Oops, I meant Instagram) moment? You may see it soon with Saavn. Amongst all the apps I have seen till date, Saavn is the hottest in terms of distribution, reach and usage.

Tweeted this once – Flipkart should acquire Saavn. There are multiple synergies – Saavn has a vast catalog (subset of Flipkart’s digital service Flyte) and Flipkart has no mobile presence for its digital service. Rather than building a mobile app, waiting for its distribution, Flipkart can start monetization with Saavn’s near 10 Million users from day 1.

Expect in next year or two, this section will have more (and interesting) names!
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Other Exits related to India -

Slideshare – expect it to be a great exit story. LinkedIn should probably evaluate the opportunity, once business contacts are made – its time to prove move ahead on keeping them engaged with business content, Slideshare is an excellent fit for then; the other player is of course Quora as written earlier.
BookMyShow is another super product in making. Scalable web business models are all about aggregating demand/supply – BookMyShow is well positioned and has all potential to be the largest entertainment company in India.
One97 is also set for IPO.
Another company I admire is Zomato – but for whatever reasons the company is focused on content and is not building a great product. There is so much more they can do in this space, not sure why they are happy with old & simple play of content + advts.

No Clear Exits:

My list of no clear exits has some new names. Like last year – SMS Gupshup, PayMate, mChek continue (read: what problems are mobile payment services trying to solve); will add SeventyMM, SatNav & MapMyIndia to that list (Google Maps and GPS on smart phones has played flattener for their offerings). For reasons mentioned earlier – majority of players in Online Classifieds & Education vertical have no clear exit plans. Also Onward Mobility (if continue with offline distribution of their apps) is on the list.

Have taken off Guruji from the list – for reasons explained above. They will exit for AdIquity, not for its search business.

Concluding Notes:

All views are personal opinions indicative of on-going trends, don’t take them too seriously. I was outright rejected by one VC when applied for role as technology (internet + mobile + new media) investment analyst for lack of relevant experience. A top consultancy firm thought it was in our mutual interest not to join them

The only unfortunate part of this post is taking names of startups/companies, many of them founded / managed / invested in by people I know personally and have great respect for; few as friends, entrepreneurs & acquaintances. Having said that, I analyze trends and will be really happy to be proven wrong by passionate entrepreneurs. When it comes to investors, admire those who have placed their bets on companies or products where exits are/were not obvious. That is what risk-taking is all about!

Cheers till them. Will revisit these predictions next year.

Have a different opinion, would be great to hear. Write to me on pj@beingpractical.com / follow on twitter.com/beingpractical.com

Junglee and how it impacts Indian Ecommerce

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Junglee has once again got us to debate on our current favorite topic – Ecommerce. Many of us doubting that if current Ecommerce models did it right because Amazon chose an completely diagonal approach to enter Indian market with Junglee.com.

Facts first – Junglee.com has not invented product discovery and price comparison. Pricegrabber.com is one of the best products in this space for US. Shopping.com is owned by Ebay, and many other players in India as well.

There are already lot of posts talking about how Junglee has got it right and it will be the door or gateway to drive traffic and enable transactions on Indian Ecommerce sites. Well that may be true, but honestly I find this really weird, just because Junglee is backed by Amazon – does not mean it will be success or that it is the correct approach. Herd mentality thinking! I guess it is too early, driven by speculation without valid reasoning.

Google Buzz went wrong; Google+ is a disaster; Google Search plus your world is a messed up product. Facebook withdrew from daily deals, Twitter launched activity tab (silently withdrew that in new roll-out) or Netflix tried Qwikster. Point is – big companies make big mistakes.

On the other hand – Amazon has a thing of entering market at very early stage by introducing new products/verticals like AWS, eBooks, Kindle or making an very thoughtful late entry like Kindle Fire (Tablet) or by acquiring category creator or owners like Audible, Diapers or Zappos.

Here are some points I would want to specifically highlight about Junglee -

Competition -

Junglee is not competing against Flipkart or Letsbuy or any other Ecommerce player in this market at this stage. Product discovery & product transactions are distinctly different verticals., but what Junglee is attempt affects these players.
Junglee is not competing even against Google. With 1.2 crore products, it means Junglee will contribute more pages to Google’s search index than any other Ecommerce site in India. Most consumers will discover Junglee through Google.
Amazon.com has unmatched resources/experience in Search Engine (paid & natural) expertise; it clearly highlights it as one of the reasons for partners to list on Junglee. (Read point 3 here: http://services.amazon.in/services/product-ads/how-it-works/#/services/product-ads/faq/)

How Junglee might change the rules through discovery -

Ecommerce services have limited options of online marketing – Direct Traffic, SEO, SEM, Display Advts, Affiliate Marketing, Email & Social Media. (The funded ones get to do – TV, Radio & Outdoors). Compared to the cost associated with other formats of marketing – SEO guarantees long term and sustainable traffic acquisition mode. Overall high cost of acquisition in other formats of marketing is leveled down only through Direct traffic or SEO. Yes, Social is free but cost of acquisition is still a big proportion as users are acquired through discounting coupons.

Taking previous point ahead, SEO is pure content play and Amazon is master at that. With 1.2 crore products – Junglee will add approximately 3Mn+ pages to Google index, index size is typically 3X-4X for factors like review pages/ recommendations pages / category pages and so on. Due to this sheer size of index and high quality content placement, Junglee will quickly start rising in its natural search rankings. This will affect both – partners who has listed on Junglee and others like Flipkart who have chosen not to.

Here is why -

All products listed on Junglee (or any Ecommerce site) can be classified as two

Standardized catalog products (Books, Digital Cameras, Laptops, DVDs, etc)
Non standard products (Jewellery, Toys, Clothing, etc)
For standardized product like say this Canon Digital Camera - the content includes product description which is standard on every site; but will be enhanced on Junglee with recommendations, reviews and more.
For non-standard products like this Mayur Pendant Sapphire offered by CaratLane, despite content being exactly the same, even without reviews or recommendations – Junglee will quickly be listed above CaratLane for multiple factors, key being vastness of catalog for Pendants & Jewellery.

And this is one of the key reasons why natural search traffic on both websites listed or not listed with Junglee will be affected big time. Over time, a high proportion of natural search traffic will be taken by Junglee and will be distributed by it.

This also provides a very large opportunity for small players (including unfunded) or offline retailers (who are lost at times on online marketing) to acquire qualified users.

For those who have not listed, it makes some perfect sense to get their products listed on Junglee as they will witness a gradual decline in natural search traffic. And to get traffic & acquire those customers from Junglee – they will require to be competitive on pricing.

Product listings are Free.

Really? and you believed that.

Amazon is selling Kindle Fire below its cost, because it is confident that it will recover revenues of the device through content consumption. If you are thinking that Amazon will not make anything out of Junglee.com – you are wrong. When it comes to churning out online user behavior data and consumption patterns, no other Ecommerce service can do it better than Amazon.

Junglee has the entire product catalog required for Ecommerce. Soon Amazon will have all the insights it wants to know about Indian consumers – Products consumer are searching for, Product-Price ratios or even Demand / Supply for all products categories.

Challenges for Junglee -

A product discovery catalog with 1.2 Crore products is not easy thing and Amazon is doing this more efficiently than anyone else with its own core product – amazon.com. Challenges for updating inventory, prices, reviews or recommendations exist, but are not big for Amazon. Junglee can really force upon real-time price and inventory updates to its partners and get them to standardize it.

What would be more interesting is Amazon could localize the product – showcasing partners who can ship in least amount of time to say – Panaji or Kolhapur; deep integrate with offline retailers and help making purchase decisions – like a Apple iPad 2 is available now in Croma (2 Kms away from your location) at Rs.500 discount than buying at an online store.

From what I know – Croma maintains a list of products available for sale in every store on its central inventory management (I was once asked to visit another Croma store to pick up an mobile phone, the staff kept the last piece off shelf). Currently Junglee.com is a minimum viable product, but can Amazon get to this?

Where does this all lead to for Amazon -

Two options ahead for Amazon -

Amazon Market Place
If Amazon is keen – this can happen tomorrow. Junglee has the product catalog, simply enable an payment gateway and instead of redirecting traffic to partner sites, start sending customer transaction orders which its partners can fulfill.
Amazon Store
Keep it slow, learn more about users / markets. And when the time is right launch a full fledge Ecommerce service.

And its very likely that Amazon will take the route two. Feel like investing in Amazon now? Ouch.

Google in its mid-life crisis!

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Few days back, read an article about Larry Page, Founder and now-CEO of Google attempting to pull Google out of its mid-life crisis. The article headline was catchy, but no justification of what exactly is this mid-life crisis about.

Below are my views on what I believe are the 10 biggest challenges Google is facing right now and why it might be a tough-time forward for the Internet giant. Flip through the presentation below or read the long post below.

Google in its Mid-Life Crisis

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1. Search

Yes – Search. Google’s core product is facing threat from another format of search: Real-Time Search.

Google continues to add more capabilities to index real-time information to its search algorithms; but fails to realize that traditional web-index based search is different from real-time search. Last year (April 2010), in its caffeine update Google claimed to provide 50% more fresher results. Nov 2011 it rolled out another set of changes to its search algorithms that affects 35% of all search queries. Again same month, it was discovered that Google started indexing comments on Facebook.

In real-time search, the context in which the information retrieved is no longer valid after sometime. In case of Twitter it does not last beyond a day. Or a week? Same with Facebook. At this same point while consumer search for this information on Google – it is impossible to figure out the context of that search query – real-time info or traditional.

Example. Apple launches its next smartphone – iPhone 5. Consumers looking for “smartphone” on Google Search are shown iPhone 5 results, even when they are not looking for it.

Methods of information indexing, querying, trending, and even consumer mindset for real-time search are different than traditional search. Google may end up killing product experience of Traditional web search with such attempts.

Content index based web search & real-time information search are different products. If Google intends to capture a mind-share of Real-Time web search; it needs to build a different product.

2. The Rise of Discovery Platforms

For years, Search was our only means to discover websites, content, products, services. Google was our gateway to the Internet.

Today, with social networks like Facebook, Twitter, LinkedIn and similar; consumers are discovering more and relevant websites, content, products or services. They come to us with recommendations, shares, comments from our contacts – and are more relevant. Interpret this as – Google is no longer the only discovery mechanism.

User adoption for Social Networks is increasing; they continue to have high mindshare and also consumers are spending more time on social platforms today. In addition to this, a whole new wave of innovative products are launched on top of Social Graphs enabling contextual discovery.

Social discovery methods are threat to Search.

3. Social

After 750+ Mn users on Facebook, 380+ Mn on Twitter, 115+ Mn on LinkedIn; Google now does understand the importance of having a Social Product.

Its earlier attempts – Orkut, Buzz, Wave failed. It is making a big push with Google+, trying to create a new Social Graph, without realizing that they are already established.

Social Graphs are reflection of our Social Relationships in real world. And they are:

Close Relationships: Facebook
Family, Friends – People you know personally!
Professional Relationships: LinkedIn
Colleagues, Partners, Business Relationships
Loose Relationships – Twitter
Celebrities, Domain Experts. People you know, but they may not know you.

There is no room for creation of another graph. And for Google+, I strongly believe that it will fail again as it is still miles away from being a great social product.

On other hand – Spotify, Netflix, Hulu and many other products and startups are riding the Facebook Open Graph / Social Graph to increase social engagement and usage. While Google is missing the opportunity by not leveraging Facebook’s reach for its own products like YouTube, Google News and similar.

Social is not in Google’s DNA.

4. Continued Fascination with Google+

The rule to build successful products is – “Build quickly, learn, build, deploy. Doesn’t work, discard. Start again.” Google taught us this rule; and is now breaking it again and again.

Google should rather focus on building Google+, showing users the value proposition in this platform. Instead it is doing its biggest mistake – forcefully including Google+ in its other products. And in this process killing the user experience and usability of its successful products.

Search: Introduced Google+ profiles of users who shared respective URL in search results.
Adwords: Introduced the +1 button to Adwords display advts.
YouTube: Introduced videos shared by Google+ users on YouTube homepage.
Gmail: Introduced notifications on Google+ updates on Gmail header toolbar.
Google Reader: Introduced sharing options, adding users to Circles from Google Reader.

In any of the above products, Google+ additions are not enabling any core-feature of the main product. These would have been great things to do if Google+ had proved its own value to users. Google is simply leveraging successful products to promote Google+.

Didn’t Yahoo try his before – everything Yahoo. I didn’t work earlier, it will not work now.

5. Fixing whats not broken

Google wants to act fast and speed up its innovation. While doing this, it is actually fixing whats not broken.

Gmail -

The new design update Google is planning to push to all its users – is uncalled for. The functional updates are great thing to do, but the changes to its look are at the expense of product usability and could have been avoided.
Google announced launch of a very buggy version of its Gmail client for iOS; and recalled the same from app stores within hours.
Stops support for native Blackberry App. While Blackberry itself is on a decline, it still has a significant 19.7% share in US smartphone market and continues to grow in countries like India.

Search -

Started with its Caffeine roll-out in June 2010 to include fresh content.
In Nov 2011 – it pushed another big roll-out that impacts 35% of search queries.
Labnol discovered that Google is now indexing Facebook comments.

In search of freshness, Google is playing too much with its core search product. As mentioned earlier in this post, Real-Time search needs to be a different product.

Google Maps -

Announced pricing for Maps API High-volume usage.
Location is a key to future product innovation on top of Maps. This move is likely to affect a lot of startups innovating on top of Google Maps.

YouTube -

Homepage displays videos from People you follow on Google+

Google is also implementing design standardizations across all products – Search, Gmail, Reader, News, Books and more others. Google is killing uniqueness of its products by standardizing its look and feel and continuing with its fascination of Google+.

6. Siri

It may not be easy for anyone to dismiss Siri as a feature on iPhone 4S. Siri is not just voice recognition; it is another input methodology. Siri’s natural language interaction is far more superior than the syntax driven VA (Voice Actions for Android). VA is anywhere between 1-2 years behind Siri. That is a (HUGE) advantage Apple holds.

As the technology improves, one can start talking to Siri as -

“Siri, search for ‘MP3 Player’, take me to the best result!”
“Siri, show me the map of Mumbai.”
“Siri, who is offering the lowest flight ticket from Mumbai to London.”

There are infinite possibilities what Siri can develop into quickly. Most importantly – the potential it holds can make many Google products and services around it irrelevant, like -

Search – Ability to discover new websites and relevant services without using Google Search.
Adwords – Google relies on clicks for monetization. Siri means no clicks, just talking.
Maps – No longer view maps while driving, Siri will look up to them and speak out the directions.
SEO – What happens to the SEO ecosystem around Search? Will the new optimization be SVO (Siri Voice Optimization)? How will it work?

Google mastered the standard text-input methodology on Internet (Computers + Mobile). But the threat from Siri is Real. Of all challenges Google faces, Siri is the biggest. The last known big transition for input methodology was finger-based touch inputs (introduced with iPhone). In last couple of years, it replaced traditional keypads on all smartphones.

Siri should be a big bouncer to folks at Google; caught them off-guard and completely unprepared.

7. Android v/s iOS

Google scores a big thumbs up with Android capturing 43% of US smartphone market. Apple lost opportunity in developing countries due to its high-priced iPhones while Android phones & tablets flooded the markets with price points from $75 to $1000.

In my own view – I find Google strategy to enter smartphone market extremely fascinating. Samsung, Motorola, HTC, LG and many others were excellent hardware manufacturers with poor software / applications / user experience capabilities compared with Apple or even Nokia. Google gave what these partners lacked – an mobile operating system and ecosystem of applications.

Distribution of Android phones provided Google the opportunity to monetize the mobile search queries. Current trends in mobile are slightly more inclined towards building Apps & HTML5 websites, most developers and product companies want to ensure a seamless experience on phone and also presence with a native client. Google also aligning itself by directing mobile publishers to Adsense and enabling AdMob for Mobile applications.

Google acquired Motorola Mobility to debut itself as an Software+Hardware play (like Apple?). But it may have limited or no advantage with its own hardware play (through Motorola) as it will face tough questions from global Android partners like Samsung, HTC, Sony, LG and others who are responsible for large distribution of Android OS and its popularity. For now, the Apple dream may look difficult.

There are also few more challenges facing the Android ecosystem -

Apple still largest and extremely focused contender with its one-phone market strategy for iPhone
Android being open; Consumers have a huge choice for Android phones from $75 to $750.
Only differentiation between Android phones are hardware capabilities; hardware edge is tough to maintain.
Brands like Samsung, HTC, others will require to have devices at all price-points to ensure growing market share. Only significantly high volumes will bring profits.
Tough competition on price from Chinese and low-cost android phone manufacturers.

8. Monetization

2004: Google’s largest contributor to its Revenue: Adwords
2011: Google’s largest contributor to its Revenue: Adwords

In 2004, Advertising was only large scalable online monetization model. In the quarter Google debuted on Nasdaq; Amazon reported profit of just $54 Mn.

In 2011, there are various scalable monetization models:

Online Advertising / Search & Display (Google)
Online Advertising / Social (Facebook, LinkedIn & similar)
Mobile Advertising (Google, InMobi & others)
Local Advertising (Groupon, Foursquare & similar)
eCommerce (Amazon & others)
Enterprise, CRM (Salesforce, Box.net & others)
App Stores (Apple)
SaaS Products (Dropbox, Evernote, others)
Payments (PayPal, Square, others)
Smart Computing Devices / Tablets, Kindle, Smartphones (Apple, Amazon, others)

Multiple scalable monetization models evolved over last few years. Google unfortunately has not moved beyond Adwords.

9. Lack of Innovation

Over years, Google is struggling with innovation. Many existing and high potential products are on decline.

Blogger: Introduced the world to blogging. Lost battle to WordPress, Tumblr, Posterous.
Google Books: eBooks store of the World? eBook for Android phones?
Google Docs: Never really went beyond Gmail attachments. Evernote? Box.net?
Google News: News recommendation service or aggregation. Pulse?
Google Apps: Endless opportunities in Enterprise services.

Google also abandoned or mis-managed on some the big ideas -

Chromebook:
Post launch announcements, not much has been heard about Chromebook project. If Chromebooks were built to optimize over web, why did it not follow the Android platform? Ideally it should have built and optimized version of Android for laptops & tablets (Android 3.1 Honeycomb for tablets came much later).
Orkut:
Google never realized the potential of Social until too late. Orkut which could have been the default Social Networking destination for world, never innovated beyond UI changes and probably never got the resources that it deserved.
GDrive:
Google was to launch an online drive for storage back in 2007; much ahead of Dropbox’s launch. The project was abandoned and Google is reportedly working on its revival once again post Dropbox’s success.

Over years multiple products have evolved that Google has not paid attention to. Some of the hottest startups and businesses today are in product domains like – Multiple SaaS domains, Social Commerce, Social Products, Local Businesses and so on.

10. Failure to execute Acquisitions

If you can’t build it, acquire it. Google has done some awesome job with many of its acquisitions, but unfortunately not the ones in Social. The big lost opportunities here are Aardvark, Dodgeball and Jaiku.

Jaiku:
An micro-blogging service that launched well before Twitter and acquired by Google in Oct 2007 had the potential to be Twitter or a tough competition. Twitter today has over 380+ Mn users and valued at an estimated $8 Bn.
Aardvark:
An social QnA service created before Quora was acquired by Google for $50Mn in Feb 2010 had enough time to learn and innovate. Google announced its closure in Sept 2011. Lost opportunity – Quora is now valued at over $1 Bn.
Dodgeball:
One of the earliest location based social products for mobile was acquired by Google in 2005 and discontinued in 2009. Dodgeball’s founder Dennis Crowley launched Foursquare which is one of the hottest location based products today with over 10 Million users.

Ending Notes

Design standardizations that kill identity of products. Inability to build competitive products and match speed of innovation. Failed attempts at Social Networking. Fascination to promote / push Google+ through its successful products. Failed acquisitions.

Google is currently showing all signs of being the next Yahoo. At this pace, engineers will sense more challenges and opportunities to innovate outside of Google. Its not too late, but yes – Google is in its mid-life crisis.

Concluding Notes for myself and other startups – “Don’t try to do something in everything. Rather focus on doing everything in something.”

Why Consumer Social Products should monetize at Scale

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This post is written in context of – why consumer social products should never monetize without scale.

1. Because Users sign-up in context of Product -
Every social product is more about users and their connections / contacts together with a context (its product use-case). Users expect to interact with their contacts with this context.

For Zynga, the context is playing games; for Quora, the context is asking questions. At this stage – nothing is more important that making the context important. Focus on building the product.

2. Because Engagement is more Important -
Only value a social product should provide to users is engagement (both frequency and quality is important). Hence, the only metric that matters for any social products is engagement. That should be prime focus for any social product in its initial 24-36 months.

Over a period of time this engagement should evolve in to habit. Habits are tough to break. Facebooking, Tweeting, Checking-In are habits.

A QnA site like Quora with about 1 Mn ‘engaged’ users is more valuable that 50Mn+ users on Google+ who don’t talk to each other..

3. Because you need to Learn from Others’ Mistakes -
Learn from successes and failures of other products. All (successful) social products monetized at scale, till then they were just building the product and even continue to do so today.

Majority (if not all) of social products who tried to monetize early have hit the dead pool or pivoted.

Don’t want to name any specific failures, but look around – there are many social products that attempted to monetize in its early days.

4. Because your Users won’t like it -
You like it or not – large social products & platforms eventually monetize with advertising products but with its own product context. Facebook did with advts targeting by demographics; Twitter with promoted accounts, tweets & trends; Foursquare by local advertising deals for check-ins; with a exception of Zynga that sells virtual goods.

At early stage, users would expect a better product experience; not advts. If you plan to monetize with transactional services like eCommerce – think about it. Will users want another service that spams them through sms / email or advertisements? You don’t want to put off your users.

It is a tough decision with a simple answer – Focus on what users want; not what you want or what your investors want.

5. Because your Merchants or Business Owners won’t be happy with you –

This is strange but true. Let me explain this with example – Imagine a hypothetical social product for shopping with 100,000 registered users. You sign-up with the top-20 eCommerce sites in India for monetization through affiliate model – you pat your back and give yourself a thumbs-up.

- Assume decent engagement levels @ 50% user base (50% of users login minimum 2 times a month).
- That is 12,500 users per week logins
- Take standard 1% ratio of conversion at merchant end
- Gives you 125 transactions per week; 500 per month
- That is about 25 transactions per merchant ~ approximately less than 1 transaction per day for eCommerce partner.

Consumers will not do eCommerce transactions every month. Next month, this picture might be more difficult.

4 of these 20 eCommerce services says, “Sorry! its not worth our efforts on integration and time spent. Please delist us.” Community is small, people change jobs fast and the word spreads quickly amongst the partners – “This product does not work!”

Now, the same scenario at scale;

- On a 1Mn user base: 8-10 transactions per day to every partner
- On a 10Mn user base: 80-100 transactions per day to every partner
- On a 100Mn user base: 800-1000 transactions per day to every partner. OMG!

Exercise extreme caution when you decide to monetize your social product. The timing is as important as how your monetization plan.

Also because Sean Parker said so -
From the movie – The Social Network. When Mark Zuckerberg, Sean Parker and Eduardo Saverin discussed on TheFacebook’s monetization in its early days -

Eduardo Saverin: Hey, you know what? Settle and argument for us. I say it’s time to start making money from TheFacebook, but Mark doesn’t want to advertise. Who’s right?
Sean Parker: Um…neither of you yet. TheFacebook is cool that’s what it’s got going for it.
Mark Zuckerberg: Yeah.
Eduardo Saverin: You don’t want to ruin it with ads because ads aren’t cool.
Mark Zuckerberg: Exactly.

–

Sean Parker: “You don’t even know what the thing is yet.”
Mark Zuckerberg: “I said that exactly.”
Sean Parker: “How big it can get, how far it can go. This is no time to take your chips down. A million dollars isn’t cool. You know what’s cool?”
Eduardo Saverin: “You?
“A billion dollars.”
That shut everybody up.

This holds true for every social product. You don’t know really know how a product shapes up it its journey that starts from minimum viable product.

Note: Sean Parker has said that the movie The Social Network is work of fiction.

Building Awesome Social Products

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Number of Social Products are launched these days; everyday we come across a new one. While I am also busy building my own Social Product – sharing few of our learnings with other Entrepreneurs & Product Managers working on Social Products.

Social Graphs are all around us today – some like Facebook, LinkedIn, Twitter have extremely high adoption rate and have provisioned development frameworks for existing and new products to leverage social graphs behind them. Each of these social graphs are distinctive by type of connections and mindset its users have developed towards them.

Google+ has been left outside of this discussion – cause in my personal opinion it is yet to find itself a distinct social graph. In current position – Google+ overlaps with lot of existing and established Social Graphs. More notes on Google+ can be reserved for a different blog post.

Building Awesome Social Products

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Existing Social Graphs (everyone knows this):

Facebook – Social Networking for friends, (close) colleagues and family. These are users with whom you have interacted in real life.
Twitter – Loose social connections, people you know or are acquaintances with. Typically people who are celebrities, known professionals, subject or domain expertise are followed by others.
LinkedIn – Professional and Business contacts.
Email Contacts – Gmail, Yahoo, Hotmail, AOL, etc – all people or contacts whom you have/had private conversations over emails.

There are other Social Graphs like – YouTube, WordPress, Flickr.., those who are limited by its mindset or domain; also limited ways to leverage those social graphs.

Every Social Platform has Social Mindsets & Product Norms:

Social Platforms – no matter how big in user base, its users over a period of time have developed strong mindsets, product usage norms and social norms. They are usually not said or stated, but followed subconsciously by its users.

Facebook -
Product Norm: Users can share status, comments, updates, photos, videos with “known friends”
Social Mindset: Informal, between friends, perceived closed group communication.
Social Norm: Example – Do not keep on updating status at same pace at which they tweet.
.
Twitter -
Product Norm: Follow like minded people, domain experts, known professionals, celebs, etc
Social Mindset: Open conversations & thoughts expected by followers.
Social Norm: Example – Retweet what you agree on, etc
.
LinkedIn -
Product Norm: Strictly Professional & Business oriented. Make connection with people you have worked with or intend to.
Social Mindset: Share professional or company updates; Industry news & views
Social Norm: Example – Do not post jokes or Facebook-like status updates.

Social Mindsets and Product Norms are difficult to break:

Users follow social mindsets and product norms subconsciously, they learn to follow it over months or years of product usage. Over a period of time, they become so strong that such platforms itself are not able to foster adoption for new products & features they introduce. Some examples are -

Facebook attempted to take on Foursquare with Facebook Places – but did not make much headway. Interestingly – there might be an 100% overlap of Foursquare users with Facebook.
Twitter struggled with getting usability for Lists feature. Users have added people to lists – but not following them for tweets. Twitter acquiring TweetDeck might be another sign of product usage norm.
LinkedIn struggled with its product LinkedIn Answers – while Quora scaled.
Google launched Google+ through GMail, but now struggles to keep continued engagement and adoption of Google+.

Because the Social Mindsets and Product Norms are difficult to break, products that leverage Social Graphs outside them become successful. (Facebook abandoned deals, but maybe it should acquire Foursquare as it is more valuable than Groupon, & LinkedIn should acquire Quora)

Some Perfect Examples of Social Products:

Zynga – Leveraged social graph of Facebook and introduced Social Games like CityVille, FarmVille and others as a Social Application.
Foursquare – Leveraged social graphs of Facebook & Twitter to introduce a location based check-in product on Mobile.
Quora – Leverage social graphs of Facebook & Twitter to introduce a Questions product as a destination website.

The 6 Basic Principles of Building Social Products:

Social Graphs are already Established.
Do not reinvent the wheel and try to build social graphs again from scratch on your product.
.
Social Graphs get built over a period of time.
a. Over years – Users have made friends on Facebook, added professional contacts on LinkedIn or followed people on Twitter
b. It will take loads of time, effort and patience if you try to build them again.
Google+ is attempting this – we can wait and watch if it succeeds.
.
Don’t build Social Products for sharing content & driving additional traffic.
a. Most social products are built with this intention – sharing content and hence driving more traffic
b. Existing social graphs are powerful and already allow sharing of content to drive viral traffic.
.
Build Social Products that add value to users.
There are many tasks and products that can be built outside existing Social Platforms which can add value to end users. While existing social graphs are established, users have a Usage Mindset about them, this is biggest incentive to build innovative social products.
.
Don’t arbitrage value through your product.
There is immense value in integrating directly with social platforms like Facebook & Twitter, do not try to arbitrage this value through your product. Users (if it is a B2C product) or Merchants / Publishers (if it is a B2B product) will at some point of time realize this and abandon your product to integrate/use directly.
.
Don’t build – but leverage Social Graphs!
Rome was not built in one day! And so are Social Graphs. Choose the one that fits most with your product use case and leverage it.

Building your Perfect Social Product:

Foursquare, Quora, Zynga did it, so can your product. Introducing established social graphs to new products. Key is understanding what you manage and what you don’t – Social Graphs are not owned by you, your product is – seamless integration with your product makes it scale up virally.

It helps you in -

Viral User Acquisition
Introducing your product to user’s existing social graphs
User activity on your product generates updates for Social Graphs, which acts like contextual marketing.

Identify what are the validation use-cases for your product, allow consumers to share the same with his Social Graphs. Few examples are – Foursquare checkins, Questioning & Answers on Quora, reaching a level completion milestone on Zynga while playing its games and others.
.

Solving the Chicken and Egg problem:

Social Products have more than one first users. Every initial user who registers to your product has his own social graph, he is the first user of his social graph.

The Chicken & Egg problem here is – what do you show to such first users who do not have any friends or activities to look at. Ask hard questions and look around for examples of successful social products.

First User Questions (FUQs) -

Facebook’s first user question – “Whom do I add as a Friend? Who will see my wall-post?”
Twitter’s first user question – “Who will read my tweet? Whom should I follow?”
Quora’s first user question – “Who will answer my question? How can I quickly get a answer for my question?”
Foursquare’s first user question – “Where should I check-in? Why should I check-in?
Zynga’s first user question – “Whom should I play CityVille with? How will my City grow?”

Try to figure out how these platform solved the first user question. There are multiple ways to do it, but idea is doing this right. The biggest challenge for any social product is solving the First User Questions – the approach and execution here makes or breaks your Social Product.

Validation Cycle of Social Products:

Defining Validation Cycle for your Social Product and reducing the time to validate it is the key goal for Product Managers. Validation cycles are reduced when you are at scale – thats a easy task cause at scale most of the things you do is just optimize based on data/feedbacks.

Take example of Quora – product validation cycle means getting answers from people with best knowledge about it. Since Quora has scale & adoption today – you will see few questions getting answered within minutes or hours of submission, while few take days to see first answer. But in its initial days – the validation cycle was not so short.

More crucial moments are in the first 10,000 users scenario. Have patience, learn from initial user feedback and pain-points; validation will be slow and takes time in initial days of adoption. Also to due slow adoption cycle in early days – the early adopters of any social product, don’t necessary get the best experience.

Example – My twitter profile (twitter.com/beingpractical) was created in Sept 2007; I had the First User Question syndrome. Same was the case with my profile on Facebook, LinkedIn or Orkut (Orkut showed me – “Bad, bad server. No donuts for you” 1000s of time).

Should it be an Application on Facebook or Destination site:

“Why is this not a application on Facebook?” is also a question you will hear from Investors. While there are different answers for this question when it comes from Investors, but for a product decision make your judgment based on -

Your product idea or concept or product use case should deliver real value. The value should not equate to addition of features on Facebook.
There are Social Graphs outside of Facebook that you want to explore.
Facebook would want people to interact with people; not with applications.
Product or Business use case qualifies to be a destination site outside of Facebook – like a Quora or Foursquare.

Remember again – Social Mindsets & Product Norms on Facebook are difficult to break. If your product requires to explore Social Graph and is outside the Social Norms of Facebook – it can be a destination!

The Key Questions to answer before getting started:

Have good answers to all of these questions before starting with build your Social Product -

The task your product is planning to solve – do people do it in real world socially?
Social Products are reflections of user behavior in real world – People play games together, People want to hear answers from persons with best knowledge about it, and so on. If people don’t do such tasks in real world – they will not do it on a Social Product as well.
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Is it a feature on Facebook or Twitter or any Social Platform?
Feature products don’t last. Identify if your product can be a feature on Facebook or Twitter.
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If B2C product – Is there a value to do this task outside of Facebook?
Check and check again – Is your product idea meant to be a application or destination.
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If B2B product – Is sharing and driving traffic to merchants / publishers the key aim?
There is no harm if it is one of the propositions, but this should not be the key aim of your B2B product. Many social commerce products on top of Facebook project sharing & driving traffic as their core benefit. Marketers are smart, at some point of time they will self-integrate this on their Facebook pages.
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Always keep these things in Mind -

People drive Social Platforms & Products. Not features!
Features are how you want users to drive your product. But it is always people who drive it – make your features people-centric; not people feature-centric.
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Engagement should be People to People
People don’t login to Facebook everyday cause it is Facebook, it is cause there friends are there. Same will hold true for your Social Product.
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Don’t arbitrage on User Value
Consumers & Businesses will eventually figure this out. So don’t do this in first place.
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Don’t be Evil
People love their Friends & Social Circle / Connections more than they love your product.
Don’t mess with them. Don’t spam. Don’t be evil.

Happy Building your Social Product. Don’t forget to send me invites on pj(at)beingpractical.com.

The Biggest Innovations never solved any problem!

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Being an entrepreneur is exciting. And one question you hear often is – “What is the consumer problem that you are trying to solve?”

We try to reserve our weekend lunches for some awesome conversations over products, companies and where the world is heading in connected world. Last Saturday, Anupam Mittal (Founder & CEO of People Group, Entrepreneur behind Shaadi.com), my co-founder and myself discussed this over lunch – “Did Google or Facebook solved any consumer problem?”

Our interaction inspired me to write this post -

Solving a problem and creating a market are two different ways to look at any company or any product idea. Products or Companies that solve a problem are the Million dollar companies, while products or individuals who look at the industry from a radically different approach – are the most disruptive, innovative and create Billion dollar opportunities as they grow.

My conclusions were -
- The biggest innovations never solved any consumer problem
- The founders or entrepreneurs had a different approach to the industry
- In almost all cases, the entrepreneurs did not belong to the industry, had little or no experience in that industry.

Further thoughts are embedded in this SlideShare presentation -

Biggest Innovations Never Solved Any Problem

View more presentations from P J

Have a different approach. Think different!

Lets Blame It on Rio (and not the Ecosystem!)

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Having read so much on blogs, forums, one on one interactions with entrepreneurs, VCs – I conclude that “Blame It on Ecosystem” is the favorite game for people in Indian startup space (both included – entrepreneurs & the investors). And the blame game continues – Entrepreneur complaining that this VC just “does not get it” when their pitch does not make it; Investors complaining that they are “yet to find a Bn dollar company” from India.

There is a lot of rant already over this topic without much reasoning. Unlike my other posts on this blog – I will not try to express any personal opinion about a business domain here; but just highlight why the Indian Startup scene is about 10 years behind Silicon Valley.

Indian VCs don’t take risks -
Entrepreneurs have higher appetite for risk than investors. Every investment in any investor portfolio is a risk. There is a calculated risk that every VC takes, be it Indian or US investor. Indian VCs don’t take risk is a incorrect statement, the right way to put this is – risk appetite of Indian VCs is more inclined towards proven business models of west. After all a entrepreneur takes a risk with belief in his idea, VC with his money in entrepreneur’s belief to execute.

Only Validated Business Ideas get VC invested -
OTAs, Daily Coupon Sites, eCommerce, Finance Lead Generation & similar., these are proven business models with metrics that are well defined.
- X visits result on Y transactions at average value of Z
- X spends result in Y leads and Z conversions from it

This is a low risk appetite investment, where it is not a rocket science to determine how to scale up the business and predict profitability & revenue projections. Knowing these metrics and a good team – the VC is more comfortable & confident with such investments in India.

Compare the same for an Facebook, Foursquare, Quora, Twitter, Dropbox or Evernote. If such businesses are pitched at early stage to VCs here, most of them would have no clue on what metrics to use for basis of their investment. All such platforms raised a angel round or small VC round before the metrics were clear.

Lack of 2nd/3rd Generation Entrepreneurs -
Now why did I mention initially in this post that India is ten years behind Silicon Valley? – because Silicon Valley today has entrepreneurs & investors who have done 2X/3X exits. Living up a 2X or 3X full company life cycle till exit gives an incomparable experience, the next company they build is ‘better product & platform’ than the earlier and so on.

In India, with notables of Naukri, MakeMyTrip and few others we have started seeing first generation exits now, both Sanjeev Bikhchandani & Deep Kalra are doing the right things with spotting new investments for the next mile. To have more entrepreneurs going 1X, 2X or 3X exits, is anywhere between a 5-10 year game plan.

Pre-Revenue Investments -
There is a big misconception that in Silicon Valley companies get funded in pre-revenue stage. Yes, they do – but not all; not the ones without strong user engagement, not the ones without a solid team behind the product or platform. And for B2B products, not the ones who have initial set of customers who swear by the product!

This might not be false for India as well. If Sanjeev or Deep Kalra want to start their next entrepreneurial journey – who will not invest?

Pre-Revenue Startups like Facebook, Foursquare and many others did not raise large investments or achieve high valuations in their first round. These companies themselves raised either an angel investment or a very low value Series A investment to start, validate their product, get users/customers and then went for a big round of investment/valuation.

There are no Early Adopters -
Unless an entrepreneur agrees that his product is bad or not a market-fit or has not tried enough, in my opinion this is the biggest excuse. How can one justify the same in a country of 1 Billion people. In a country which easily figures among the top 10 countries by users for any successful web product in valley – from Orkut, Facebook, LinkedIn, Twitter, Foursquare, Quora and many others!

For B2C products – you have not tried enough!
For B2B or Enterprise SaaS products – did you guys not hear of Wingify or Fusion Charts or InMobi. This is digitally connected world – no one has bounded a company by geographical limits. These are proven models of product driven startups from India.

Disconnect with Valley -
The kind of companies that are funded in India today are the ones that were funded in US about ten years back. I have no disrespect for the Indian companies – infact they are building the base for the next wave of Internet boom – exactly the same that happened with US.

With a whole lot of first generation entrepreneurs in India – we expect at least the VCs to bring an perspective on whats happening in US & other parts of the world, not the obvious answers that everyone knows. The learning from valley does not come or has not reached to many investors in India.

My point of disconnect with valley here is that many in investment community today are still unaware of Quora, Spotify, Dropbox, Evernote, Airbnb, Rovio, and so many others. In one of my meetings I had to tell a investment analyst about 500startups, Angellist and in another one that Ashton Kutcher is also a technology investor! And in one more, someone explained if a American company like Lenovo can be big in China, others too can (? – OK)! And that people in investor circles are still unaware of Yuri Milner & DST.

No Product Focus -
There is a buzz within investor circles that the next Google, Facebook, Amazon of the world will come from India. With comfortable investment decisions in validated business models like eCommerce – post my above experiences I sincerely doubt if Indian investors will be able to spot such opportunities when it knocks your doors?

The current series of investments about eCommerce in India are a hunt to find the next Amazon. But, Amazon itself has ceased being an eCommerce company long time back, it is a product/ a platform and much more beyond all that – view Amazon’s Hidden Empire .

In US, investors invest in products & platforms; in India – they invest in companies. Huge Difference! When did you last hear of an eCommerce (leaving aside daily deals and private shopping, though a format of eCommerce itself) or Online Travel company getting funded in Silicon Valley?. If you are building a B2B or B2C product/platform company in India, all investors will be to help you with money & connections, but only handful of investors in India will be help you with product or platform – choose wisely!

Disclosure: Experience – I reached out to two venture capitalists at some point of time for role as investment analyst with experience in diverse products & platforms – was rejected outright for lack of ‘relevant experience’. No sour grapes, but I could have saved some millions for them

I am of a strong opinion that there is a huge need of in-house product & platform management advisory in many Indian venture capitalists. All ecosystem changes are driven by improvement & innovations in products & platforms, not by revenues. Lastly, it is only the consumer products that will scale up and be a billion dollar company!

Everyone wants to invest Early Stage / Series A
Everyone wants to invest at early stage, but no one wants to take risk. So investments will happen early – but validated business models only. Some good examples for early stage investments in India are redBus, InMobi – while some good early stage misses are Infibeam (which has grown significantly larger without any outside investment).

Angels and Seed stage funds are well positioned to spot early opportunities than institutional investors.

Premature Incubation Model
Going for a incubation model – make sure you choose the right one among the ones you are joining. Reason to say this – incubation models in US have mentors who have great experience in building products & platforms at scale. Y Combinator – has Paul Buchheit (creator of Gmail & Google Adsense), 500startups has Dave McClure (PayPal, FBfund, Simply Hired and more) and mentors from hottest companies and startups in valley; and so many others.

I have simple belief – Internet & Mobile startups are as good or as bad as the products you build. If you are choosing a incubation model – make sure it compliments your actual requirements. Last reason an entrepreneur should choose a incubation mode is money!

The Know-It-All Attitude
This goes to Entrepreneurs – if you have, please shed away this attitude and get in a mode to learn, to take advice and asking right questions. Relationship status between an Entrepreneur and Investor is complicated – you can’t live with them or you can’t live without them, so you might as well accept them the way they are.

While closing your meetings / pitch with prospective investors – take feedback on the product, business model and the pitch. They will advice you based on their best strengths and experience, but only if you ask! In my personal experience – I managed to get some key improvements & suggestions on the product I am building.

Please learn to say No
Entrepreneurs learn to say no to investors who do not see and agree with the vision you hold for the product.
Investors learn to say no, and fast. Entrepreneur’s time is equally important as yours! If the product does not match your investment interest – communicate it as fast as possible. Saying no immediately may not so bad; but keep a hope alive may be frustrating for the entrepreneur.

PS: Please respond faster to emails! I exchanged few notes with some of ‘the investors’ in Silicon Valley – always found a reply within 12 hours in all cases, some of them in less than 30 minutes.

Quality of Press Releases & Coverage
The state of ecosystem is also reflected by the type of news coverage & press releases one reads on Indian Blogs. People movements – in most cases of those names who we have never heard of before, New sales office in Middle East, Forward looking statements on revenues & projections, Surveys that say the obvious in press releases, Claims & unacceptable figures, and so much more! Damn – we would like to know more about your products & platforms, everything else is just crap!

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Concluding Remarks -

Startup ecosystem is built with entrepreneurs, their companies, their early customers and then the investors. You control 75% of the ecosystem already, investors will follow. In the same context I remember one of Sameer Guglani’s tweet – “Founders r creators / accelerators, angels, VCs r service providers. our business runs because founders start companies & not other way arnd.”

The point I am trying to convey here is that if you think or perceive that ecosystem is not evolved in Indian start up scenario, stop complaining and don’t be an entrepreneur. There is no point in waiting for a right time to build your startup, the time to start is now. Get started!

Ecosystem or no Ecosystem – it did not stop a redBus, Naukri, MakeMyTrip, Flipkart, InMobi or SlideShare* to be what they are from India. Why should it stop you!

The term ecosystem means lot of other components as well. Feel free to add more to the comments based on your experiences.

What problems are the Mobile Payment Services trying to solve?

1 Reply

When I heard of Twitter founder Jack Dorsey’s announcement of mobile payment startup – Square, I loved the simplicity of the service. Few months Jack Dorsey tweeted that Square is processing transactions worth $1Mn per day – that is a cool revenue run rate of $10Mn per year for a two year startup (Square charges 2.75% charge per transaction when paid through credit card)

With very little knowledge of how offline transactions work in US, but it is definitely a card driven economy. Coming to Indian scenario – unsure if any Mobile Payment Services company in India will declare the value of transactions it processes per day. For a country like India, although the opportunity for mobile commerce looks huge – unable to relate if existing mobile payment services are trying to solve any consumer problem.

Back in 2006, when penetration of mobile phones in India was growing at an exponential pace – with falling talk times, it was predicted that India will be one of the largest telecom markets in the world. Well, that has surely come true. In internet world – there was another wave of prediction. Analysts & Enthusiasts found another buzz world – mCommerce which was supposed to be a multi-billion dollar industry by 2010.

With time, the definition of Mobile Commerce is itself a cliche’d.

Is it mobile commerce when a consumer books a airline ticket online, gets a confirmation and PNR number on to his mobile number . Displays the PNR ar airport counter and gets ticket?
Is it mobile banking when consumer receives confirmation of debit/credit transaction on his mobile
Or is it when the discovery, intent & transaction for a product/service starts and ends on mobile phone?

The definition is now debatable – but with mobile communication included, online transactions and services have scored a big mile.

The proposition of Mobile Payment Systems is (or was) very simple:

Offline Merchants – Allow consumers to walk-in to any shop with his mobile phone, buy stuff and make payments
Online Merchants – Tie-Up with multiple online eCommerce/Travel portals – allow them to purchase products through their payment service
Own Marketplaces – Create own marketplace on mobile that combine eCommerce, travel, utility services etc and enable payments for such transactions through their own system

Honestly, this would have sounded amazing to everyone back then. Undoubtedly very huge potential – Offline retail transactions are worth billions of dollars everyday, Online Merchants wanting to reach out to very high percentage of consumers who have not come online due to lack of internet connectivity and mobile device seemed very logical, & of course with own marketplace strategy they too wanted to own a sizable chunk of users/revenue and be a destination for commerce.

The mobile boom did happen. It is very difficult to find someone these days without a mobile phone. But then why is it so rare that we don’t get to find people using mobile payment services as it was predicted earlier.

Trying to analyze why did this zillion dollar plan on paper did not translate to even millions of dollars in reality. Here are few thoughts, there may be many other reasons as well that contributed to this -

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Limited size of Market -
With 95% mobile subscription in country on prepaid, and average ARPU of less than 200 INR (& steadily declining with time) – mobile payments or transactions is definitely the last thing on such user’s mind. Addressable market for this service is considerably very small and will be a subset of eCommerce market.

Active Credit Cards in India are declining -
According to recent numbers published in this TOI report – number of active credit users in India has tumbled down from 20.7 Million (in March 2008) to 10.8 Million (in November 2010).

eCommerce Services discovered Cash on Delivery -
India is a cash driven economy and most eCommerce services have realized this by today. COD accounts for anywhere between 30% to 60% of transaction for players who have enabled it. IVR payment mechanism also has widespread acceptance for ordering directly through call center.

Banks play their own Game -
In fact they already have started playing their own game. Banks are launching their own mobile banking applications and promoting it aggressively. That leaves mobile payment services out of their own play-field.

The 3G Magic may not happen -
The 3G magic shall happen to other services, but in my opinion nothing dramatic will happen for mobile payment services companies. There is simply no connection between acceptance of 3G by consumers and why ‘new consumers’ will subscribe to credit cards or link up their bank accounts to a mobile payment service company. They will fight for existing consumers between competition and the banks.

Radical shift to app-economy -
Smart Mobiles & Tablets devices are making a huge difference to the way consumers are accessing services on handheld or portable computing devices. With advent of app-stores and in-app payment systems – the mobile ecosystem has grown more radically than any of these players would have thought about.

Money was always Mobile -
If the pain point that mobile payment systems were (or are) trying to solve was allowing consumers to do transactions wherever & whenever they want – then this consumer pain never existed. Money in whatever format – cash or card was always mobile.

I see and hear of Mobile Payment systems usage in India only in the context on prepaid recharges & utility bill payments. But that was not what they aimed for, correct?

To sum up the article -

Money was always mobile; the consumer pain point mobile service providers were trying to solve never existed!
These businesses were way ahead of time; and in most scenarios got investments before validation.
mCommerce model evolved differently and in a way that kept such players outside the ecosystem.
mCommerce will evolve along with eCommerce; will go hand in hand – but definitely not before.

In my opinion this vertical is classic case of ‘ahead of time’, ‘investment without validation’, and ‘dynamic changing ecosystem’. Lesson for entrepreneurs and investment managers – make sure your companies are a part of “validated ecosystem” and solves a “valid consumer pain.”

being practical

syntax error.,, unpractical world

Category Archives: gyan

Predictions 2012: Technology Trends; Investments & Biggest Exits in Indian Internet / Tech Space

Junglee and how it impacts Indian Ecommerce

The Biggest Innovations never solved any problem!

Lets Blame It on Rio (and not the Ecosystem!)

What problems are the Mobile Payment Services trying to solve?