Category Archives: Internet

Future of Search: A Search without Links

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Life cycle of technology products is declining with years. It is about 20 years that the first Search Engine was developed. Since 1998 Google made Search Engine part of our daily lives. Paul Graham recently wrote a essay called – ‘Frighteningly Ambitious Startup Ideas‘. He says one of the best ideas could be a new search engine.

Even today we are searching exactly the same way we did 14 years back. Search for ‘keyword’, Google provides us with hundreds or thousands of links, and leaves it up to us to spend time finding out what is most relevant for us in those links. Why can’t Google or any other search engine provide us exactly what we need without the pain going through multiple links every time. I have said this many times – Search is incredibly painful. Users have got so used to it, they just don’t realize this.

So the answer is – Yes. Search is evolving, Knowledge Graph by Google is one of the finest examples how search needs to evolve. When you search of ‘Paul Graham‘ now on Google, you see much more than just 100s of links about Paul Graham through Knowledge Graph.

I may be wrong, but it appears that Knowledge Graph by Google is flawed by business design. Knowledge Graph is showcased mostly for keywords that could not be monetized by Google. This is clearly the way ahead for search, and direction Google needs to move (or is moving already) or perhaps any other startup that is attempting a new search engine. Don Dodge explains how just 1% of search market shares is worth over $1 Billion.

Future of Search is not 100s of links on the search results page. Its one result – just exactly what you want.

Why Ecommerce acquisitions make no sense in early / nascent stage

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Few (Series B / Series C) funded ecommerce companies in India have started making/announcing acquisitions of smaller players. Recently when I posted about the 2012 Predictions & Trends, I made an comment that in an early ecommerce market, acquisitions of competition or startups really makes no sense. Trying to put few thoughts on that here.

A typical such small ecommerce startup that gets acquired by larger & known ecommerce player is structured as follows –

  • About 2-4 founding team members; 5 to 10 employees; up to 25 or so if the venture has received any institutional stage funding
  • Focused on one vertical – sports; electronics; kids; jewellery – Catalog of 1000 to 10000 product SKUs
  • Order Acquisition Channels – Direct Traffic, SEO, SEM, Social, Affiliates, Email Marketing, Display Advertising.
  • Team Structure: Founders, Product Development & Management Team, Online Marketing, Category Managers, Logistics & Operations Managers, Customer Support
  • Social Media presence – Fans on Facebook; Followers on Twitter
  • Business Partners – Vendors for Procurement, Logistics, Payment Gateway, Customer Support
  • Product, Platform & Technology
  • Warehouses & In-house logistics for Series A funded players
  • Gross Orders – between 50 to 100 per day; few Series A funded players may have from 200 to 500 per day.

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What happens when a considerably large & deeply funded ecommerce player (say LargeEcom.com) acquires a small startup (SmallEcom.com) with assets as mentioned above –

  • Category Focus:
    SmallEcom.com will be either a horizontal player or vertical focused player. If horizontal, then most of the products will be already present in acquiring company. If vertical then it might be a small ecommerce startup with about 500 to 5000 SKUs, the acquisition further does not make any sense. The acquiring LargeEcom.com could have directly poached category managers or could have developed that category in-house just by hiring few more category managers!
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  • Order Acquisition Channels:
    Any online ecommerce venture’s assets are how they are acquiring new customers. The biggest challenge is not acquiring SmallEcom.com, but making the most of these channels. Post acquisition, these channels are ‘unfortunately useless’ to the acquiring company – LargeEcom.com. Here is why –
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    • Direct Traffic >
      If website of SmallEcom.com needs to be shut, the direct traffic will be redirected to LargeEcom.com post acquisition, doing that quickly reduces the value to its existing users. If website is shut – value of all other channels die on its own, explained below.
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    • Natural Search or SEO >
      SmallEcom.com’s URLs in Google Index no matter how well optimized will lose rankings when the traffic is diverted to another domain. All time and money invested in search optimization over months / years is diminished immediately.
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    • Paid Advertising: SEM & Display >
      Search Campaigns are optimized over a period of time to reach lower the cost per clicks. Though the same can copied from SmallEcom.com in to account of LargeEcom.com’s adwords account, the same CPCs will not be maintained. Well, otherwise the acquiring company LargeEcom.com’s has its own online marketing team, it will be a max one week job to create new campaigns for the catalog of SmallEcom.com.
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    • Social >
      Post acquisition, SmallEcom.com’s Facebook Fans & Twitter followers cannot be moved to LargeEcom.com’s brand page or twitter handle. Again – value of the time and money spend behind this channel is reduced to zero on day 1 itself.
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    • Affiliates >
      There are few affiliate marketing companies in India, they work with all ecommerce companies. Most likely LargeEcom.com would have better negotiated rates (cost of acquisition) with the same affiliate partners thats SmallEcom.com has partnered with.
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    • Email >
      There might be few duplicate email addresses, but is this a reason for LargeEcom.com to acquire a ecom startup with a small number of email addresses knowing that email marketing has diminishing returns over a period of time.
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The conclusion is – to retain the value of the startup’s order acquisition channels, the venture needs to be up and running. The big question for large acquiring company – should be it done at a cost of duplicating every resource available – two marketing teams, two product teams, two tech teams, two customer support teams or two operations teams?

The answer is No in both the cases – that is why acquiring a ecommerce startup is senseless; and most of them happening in India now can be termed as Acqui-hires, hired for talent.

  • Founding Team:
    The founders are retained, most likely to quit post the expiry of retention period. Once entrepreneur is always a entrepreneur by heart.
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  • Team Structure:
    Post acquisition, most roles will be dual and overlapping in both organizations. Unfortunately many cannot be accommodated since the larger entity cannot have – say two Online Marketing Heads or two Operations Head. Only in the case when the acquiring company has open positions, high chances that the team members are accommodated, else asked to quit.
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  • Business Partners:
    Vendors for Procurement – will be added to LargeEcom.com if it was acquiring a vertical ecommerce player and was not present in the same category. Most likely, this will not be more than 100 new vendors; again which could have been easily acquired just by hiring 2-3 new category managers (so why acquire?). If horizontal player was acquired – there would a overlap in vendors too.
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  • Logistics & Payment Gateway:
    LargeEcom.com would already enjoy better pricing for both with its partners, needless to say they both work with similar service providers for logistics. Acquiring a startup will not increase footprint in terms of pin-codes served.
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  • Customer Support:
    In a small startup, customer support is usually handled by a very small team; often by founders. If acquisition is across city – a Delhi based startup is acquired by Bangalore based one, clearly means that the team is either axed or goes on job hunting mode as they would not be open to relocation. This also holds true for other teams as well.
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  • Product, Platform & Technology: 
    The smaller startup that gets acquired will probably be running a ready-to-integrate ecommerce platform. Surprisingly, even the larger acquiring company might be as well running on some ready to use ecommerce platform and struggling to hold it up. There is absolutely no question of seamless integration here, ask your engineering folks! Either ways, since the acquisition is not for technology, the product and platform improvements on the smaller startup’s ecommerce platform will be lost as well.
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  • Warehouse & In-house Logistics:
    Few funded startups today have started with own warehouse & in-house logistics. Post acquisition, the lease on such warehouses expire (for two reasons – acquiring ecom startup already has own warehouse in that location with excess space + managing two warehouses in same city at a distance from each other means doubling operational costs). In-house logistics employees are either temps or contract workforce or on rolls of another company.
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  • Gross Orders:
    The SmallEcom.com site that was just acquired was doing about 50 to 200 daily gross orders; The LargeEcom.com site who acquired it will usually claim to do between 10,000 to 25,000 daily transactions. On order to order basis – acquiring an loss making ecommerce startup that will does 0.5% to 1% transactions will add any value to large entity? No.
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So why are these acquisitions happening?

  • New Vertical?
    No. It is not right to acquire a company for say $1 Mn or even 1 Crore to add new category to your product portfolio. Hire two category managers and have the new vertical rolling in 3 months.
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  • Acqui-hires?
    No. They happen if it was a case of known proven talent who build a super kewl product / technology platform but did not hit a right idea or execute it well. Examples – Oink (by Milk), or Gowalla and so on.
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  • Revenues?
    No. A large loss making ecommerce entity acquiring another loss making small ecommerce startup – two negatives don’t add up to positives.
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  • Assets? No.
    Clearly no assets are doubled post the acquisition. Nothing on revenue, product, process or technology.

May be signs of desperation. May be lets try out something new. May be even VC / PE signaling – ‘Hey, we guys are growing inorganically, new category, new vertical and so on – we will require more investment capital in next rounds, care to participate?’. They may participate or may not – but is this a right strategy to present or package to existing investors where the net value of acquisition post 12 months (or even on day of acquisition) is zero.

However, some acquisitions do make sense – Homeshop18 acquiring Coinjoos or Flipkart acquiring Mime360. (Sorry – I don’t name bad acquisitions). Venturing into new vertical at times makes sense for acquisition – for verticals like huge catalog driven businesses – Books & Digital Music. It takes months together to build a team and build this massive catalog and then start business operations; acquisition makes more sense than building it grounds up; but not for any other category.
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So Amazon.com acquires? Why can’t we?
Amazon acquires cause it should acquire and own large ecommerce companies to maintain its undisputed lead. It is a listed company, needs to focus on growing is topline revenues and at the massive size that Amazon.com is – it has capacity to absorb losses and yet show some superb green numbers in balance sheet.

My guess is Amazon keeps all acquired ecommerce properties (Zappos, Woot, Diapers, Soap, Audible, etc, etc) live and independent post acquisition not alone for the culture of startups – but for reasons explained above. They need to maintain order acquisition channels for these acquired companies active and generate revenues.

While in India, a Series B / Series C funded ecommerce venture cannot run dual operations or two loss making entities.
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Concluding Notes:
I am not against acquisitions & exits, they are must for startup ecosystem. And they should be in plenty to keep the ecosystem building. But don’t agree with such acquisitions made by Series B / Series C funded ecommerce companies which end up adding no value to the company. They hurt in long run, when multiple investors get involved – burn their hands and then completely give up on the sector or market itself.

Otherwise I will stick to what I wrote earlier on predications for investments made in both horizontal & vertical ecommerce in India.

 

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.

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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.

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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.

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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.

  1. 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.
  2. 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.

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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.

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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

View more presentations from P J

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.

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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.

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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.

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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.

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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.

 

Google+ may be miles away from being a great Social Product!

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A Product Manager’s view – Why Google+ may be miles away from being a great Social Product!

There are various reports on super adoption of Google+, earlier about 10 Mn users and today it reaching 50 Mn users.  The key question is – How many users are engaged there? Also echoed by The Lean Startup author Eric Ries while Facebook has 750Mn active and engaged users.

I am trying to tell myself that first signs of product usage and assumptions change over time. It happened with me for Groupon where the business model was innovative, but not scalable; for Quora post initial adoption; for Twitter (where I was a early adopter) but found no one else there and stayed away for 2-3 years before becoming active again.

Same happened with Google+ my first reaction was Facebook killer, then next was Twitter killer – and over a period of time with my Product Manager’s hat – I feel that it may be miles away from being a great Social Attempt!

 

1. What is Google+? No one cared to answer!

A standard product management and product marketing practice is to tell consumers what the product is. The world knows about Facebook, despite its 750Mn+ active users – every time you visit Facebook homepage it tells you what it is.

  • Facebook – Facebook helps you connect and share with the people in your life.
  • Twitter – Follow your interests. Instant updates from your friends, industry experts, favorite celebrities, and what’s happening around the world.
  • Flickr – Share your life in photos.
  • YouTube – Join the largest worldwide video-sharing community!
  • Foursquare – Check in. Find your Friends. Unlock your City.
  • Quora – A continually improving collection of questions and answers.

While for Google+ – No one cared to answer what product use-case it solves or what should users are expected to do on it.

 

2. How does a user access Google+ ?

Users access Facebook on www.facebook.com; Twitter on www.twitter.com; and so on – is it www.google+.com?

And to prove this point – look at Google+ suggestions on Search –

Accessibility is a big question mark for Google+. The correct way to access Google+ is plus.google.com – which a technology early adopter shall ‘probably’ remember – but even he or she will end up accessing (most of the time) Google+ from within GMail on the notification bar at the top.

This point is also related with next set of arguments – User Psychology & Naming & Identification Psychology. I feel these factors are extremely important to consider while building any consumer product.

 

3. User Psychology for Consumer Products

For any Internet or mobile product – consumers are quick to label it with its strongest product use-case – which is typically the recall product value of the user. Simply stated for a normal user –

  • “I visit GMail to check my emails!”
  • “I visit Google to search the web.”
  • “I visit Facebook to view what my friends are up to.”

Now it is extremely difficult for any product to have a “and use-case” for a product –

  • “I visit GMail to check my emails and Social Networking.” – No!
  • “I visit Google to search the web and Social Networking.” – No!
  • “I visit Facebook to view what my friends are up to and also searching the world wide web.” – No!

“And use-case” works for features that support any product’s core value. Features that would be to better manage emails (for Gmail), to better display search rankings (for Google Search), to show more types of friend’s activities (for Facebook) and so on.

Google is aiming to take on Facebook with a Social Networking product. But launched it like a feature on Google Homepage (Search) & Gmail (Notification Header). In current avatar, Google+ is a feature – and will gain traction as much as a feature can. It will not gain identity as a social-networking stand-alone product.

Also note the big failures of other “And use-cases” –

  • “I visit Facebook to view what my friends are up to and also Buy Local Deals.” – Deals was abandoned by Facebook
  • “I visit Facebook to view what my friends are up to and also to check-in in places” – Places as stand-alone attempt within Facebook failed, but as feature is gaining traction.
  • “I visit Gmail to check mails and Buzz up articles.” – Google Buzz… remember?

“And use-cases” work for B2B products, but have never worked for any consumer web product.

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4. Naming & Identification Psychology

Social Graphs & Social Networks are all about giving identity to users. Currently, Google+ itself needs an identity. Users think and will continue to think of Search when they think of Google, and it is virtually impossible for them to perceive Google as a Social Network.

How consumers relate with social activities – “Are you on FB?” “Can you tweet this?” “Let me share it on FB” and so on. The terminology “Google” or “Googled” is built over last 13 years – will be impossible to change from search to a social context.

For sake of Product identity or for its different product use-case, Google+ should have been outside of Google identity with its own identity (probably a www.plus.com if it was available). But the lure of exploring existing user-base is too difficult to give away – and if that logic was to succeed Yahoo! would have still been the largest internet company in this world. They tried to do everything under Yahoo! brand name (Yahoo! Search, Yahoo! Shopping, Yahoo! Finance, Yahoo! Hotjobs, Yahoo! This & Yahoo! That), but for consumers Yahoo! was and always remained a content play.

Even Google’s largely successful consumer products outside Search – Gmail & YouTube were successful because consumers saw it as an independent product identity outside the core of Google’s Search. While Google Video, Google Buzz, Google Answers – all failed. I am strong advocate of one-product = one-identity for consumer web businesses.

 

5. Social Graphs are occupied; No place for Google+ to fit in

I mentioned in my previous post Building Awesome Social Products – successful social products are reflection of people’s offline behavior in the real world. Similarly – successful social graphs are also reflection of people’s social relationships in real world. Social Products reflect activities, Social Graphs reflect relationships.

A typical user’s social relationships involve –

  • Close Relationships – Friends, Family, Friendly Colleagues (present and past) – more importantly people you know personally.
  • Professional Relationships – Colleagues, Business Relationships, Partners
  • Loose Relationships – People you know, but they probably don’t know you. Celebrities, known professionals, domain experts

Facebook covers Close Relationships, LinkedIn covers Professional Relationships, Twitter covers Loose Relationships. So if Google+ is trying to create a new Social Graph, it will be a struggle (big struggle) – simply cause there is no use-case for a new social graph. Social graphs are distinct; by nature, by user behavior and are established over a period of time.

Features don’t make a product success by itself and expect it to later evolve in to a Social Graph; Instead having a use-case for social graph is essential and the features should evolve.

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6. It is important to know whom to kill – Facebook, Blogs, Twitter, or what -?

Google+ though it presently looks like a Facebook killer – it is not. None of my friends are using it the way they use Facebook, instead I see more updates from technology adopters in Silicon Valley – and the posts look like extended tweets (beyond the 140 characters). I follow these technology adopters on Twitter, and hence my own assumption that probably it is a Twitter-killer.

Google+ still does not have a clear proposition – and is trying to overlap between all three Social Graphs (Close Relationships, Professional Relationships & Loose Relationships) without taking a clear positioning against one of them.

I am personally not happy with the killer-suffix (no products killers have ever killed anyone – they are still trying to kill iPhone & iPad). But its also important to know who your competition or what your benchmark really is. Or you might just try running behind all, but never able to catch up with any one of them.

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7. Developer APIs will not enable Social Graphs; Instead Gmail invite contacts are more powerful.

There has been lot of noise about speculated Google+ APIs for developers to build applications and its release dates or so on. Developer APIs will provide access to features – posting an Google+ update, ability to do +1 through applications, and so on – but this sounds (unfortunately once again) like Twitter APIs or FB app APIs that allow you to post status updates and share pictures and so on. Most importantly, Google+ will not be able to build a Facebook Connect equivalent.

Today Social Graphs when referred are mostly Facebook explored through Facebook Connect (unless you write some algorithms on top of them to bring context to your product). F-Connect allows applications & developers to enable Social Graphs (of friends); which clearly explains why 1000s of applications prefer to have Sign-up with Facebook buttons.

Google+ has multiple circles (friends, acquaintances, doctors, techies – and you can delete and rename any other circle); relationships in these circle are mutually not dependent on each other – and hence cannot be explored even if Google+ comes out with a API to access them. Let me explain this below –

a. A user Larry might add another user Zuck in friends circle; Zuck may add Larry in My Gang circle. Hence social relationship between them is not mutual (as friends).
b. Further Larry might name his friends circle as Buddies; Zuck names his friends circles as Pals; Hence the social graph definition itself is flawed.


This is a huge flaw – Through APIs the developer’s applications cannot reach mutually accepted graph of both connections (mutual friends) or an validated status of their relationships (close friends, professional or loose). Hence at this stage it would be more preferred to use the Gmail Invite Contacts module – for simple reason that it is more powerful and treats all contacts at a same level (a social graph of email contacts / connections).

 

8. Not the best attempt at Social Networking

Google already knows so much about its users – whom do you chat (on GTalk), whom do you mail (on Gmail) or who are my most contacted people in real world (on Android). Google could have actually used a lot of this data, recommended people with circles (I still hate sorting people in circle all the time, but pre-cooked circles by associations would still have been so much better).

With Google holding so much data and wanting to go ahead with a strong social product; it is expecting users to do it again from scratch. Makes one feel that Google+ is a half-baked attempt.

Facebook users usually have about 150 to even 5000 friends. Usually added over years, and all added at a same level – ‘Friends’. However cool the task of adding people to circle is in execution – to add those many people again to circles is a pain. While most people that users see on Google+ are those who are discovered through the people you follow. Every time to add someone to a circle is little more effort than just adding as a friend (on Facebook) or just following the user (on Twitter).

Circle looks like Twitter lists – People get added on them once, later everyone forgets which user is put in what circle. And while the News feed (or stream) stays common for all – the Circles might as well be forgotten just like Twitter Lists.

The next point makes it more clear – why it is not the best attempt at Social Networking.

 

9. Real Capabilities of Social Graphs (or Networks) are absent –

Get this right – Friends (or Connections!) are the minimum one expects out of a Social Network. What stands out are the capabilities to engage those connections. Remember Orkut? – it had all connections; but Facebook just made the engagement so much better.

  • Ability to discover Friends or Connections in context –
    Google+ has done a simple job or fetching contact list from GMail and enabled it with the painful process (yes!) of adding to circles. But by enabling discovery of friends or connections who are active on Google+ – the suggestion engine for friends could have been so much better.
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    Example –
    1. I end of following lot of product enthusiasts & early adopters. There are mutual connections that could be added to my circles – which currently not recommended.
    2. My Gmail contacts list have endless email addresses of people I really don’t want to follow in circles or on any social network. So a smart recommendation based on whom I chat with, mutual friends, top contacts on Android and others need to be made discoverable.
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  • Stream or Newsfeed –
    The most important discovery tool on any Social Platform is Newsfeed. In its current stage – the Stream on Google+ is very Twitterish – a timeline of all people you follow.
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    Facebook raised the standard with algorithms that help you discover feeds that is most relevant to every user, ranking every story contextually around a user. Newsfeed makes or breaks any Social Product and single most important activity & engagement enabler for any Social Product or Social Graph.
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  • Communication or Chat –
    The most cut-copy-paste feature of Google+ is chat – where user can chat with contacts he otherwise can also on Gmail or Gtalk. Quite honestly, this is the most ridiculous feature, with no context to people any user has put in his circles.
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    In context of chat (or video chat) – expecting users to do Hangouts with webcam is a big No. Hangouts are not conversation starters, but should be featured alongside as planned video conversations.
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  • Ability to drive Traffic –
    Remember Google Buzz? There was nothing wrong in the idea – attempting a Digg or Facebook Share or Tweet Share. Once a user Buzz’ed an article – it was critical to reach his Social Graph and drive viral traffic to that article. This story failed cause of poor dissemination of activity in user Social Graph. Google should learn lessons from Google Buzz chapter.
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    Social Networks like Facebook & Twitter are popular with publishers or businesses due to their ability to drive traffic to their own websites. While few publishers have added the +1 button to their webpages – still drives only an insignificant proportion of traffic to them; and lot of unclarity on how the dynamics of +1 button works for publishers and its benefits to them eventually.+1, Like, Share, Tweet this – are big distribution mechanisms for a Social Network. Should be given its required TLC.

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As mentioned earlier – the product use-case should be driven by features; and not the other way round. Google can always come back and say – we are working on this. But hey, if a product is coming from a product & technology resource-heavy company like Google – even user expectations also very high.

Even these are early days for Google+, web is dynamic and consumer interests change quickly and Google can still do lots of changes quickly and innovate, possibly even work on the above arguments if they agree with it.

This post is written over last several days with some last minute additions on stats before hitting the publish button. Meanwhile Facebook has launched a series of new features, which looks like they are (over)reacting to Google+. Facebook, you are miles ahead, don’t make mistakes, please.

 

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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!

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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.

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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!

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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.

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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.

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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?

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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.”