Hope your Kart doesn't Flip

About 18 months back I had written about the perils of misplaced goals at a start up.

Today , I see another cool outfit at a similar inflection point. Flipkart is great at doing what it claims to do, and customers(even my wife and close friends) love it. They are in the business of delivering books at your doorstep - free of cost. No shipping costs, you get discount coupons and prices are heavily discounted.They pride on having an excellent UX on their website and a simple checkout process and I can tell you that it is good. But then I got an opportunity to get close and I realized that they can screw themselves up if they are careless.

Ok, let me confess - their website is cool, the product is nice and when I got an opportunity to interview for a Product Manager, I took it up. I thought it was a great way to figure out what they are up to and how they handle product management. The person who interviewed me was apparently either the founder or some kind of Senior PM.

After the mandatory 'tell-me-about' yourself, he posed me the first PM question - "If you are the PM for www.google.com and in charge of their search algorithm, how would you measure the effectiveness of a change in the algorithm". I answered that I would measure the change in bounce rate(% of people leave without clicking a link) - an increase would be bad. And the average numbering of the link people click to leave the site to the page they were looking for - an increase in this number is bad.

Someone working @ Google can probably add more here but this is what I could come up with in about 30 secs. I don't think its that bad..but then there are ways to counter the answer if you want to prove you are smart.So the rebuttal was this - Is an increase in bounce rate always bad? I replied that in general it is true - even Google Analytics color coded an increase with red! To that the interviewer gave me the example at Flipkart - if you put prices of books on the search page, more people may leave the site. So can you conclude that putting prices was a bad idea. Gotcha, you got me there with an exception case.

Anyway, the rest of the interview proceeded on similar lines.When asked about improvement opportunities I told them that the number one thing for them to do is to use the website to improve customer acquisition effectiveness -i.e add hooks to social media and spread the word because at the rates they give books, they can't afford to do much marketing and their business model was built on focusing on the product and less on marketing.

Overall, it was not too great - I was of the opinion that their current website does precisely what it claims to do and not much should be changed just because they hired expensive software engineers but he wanted feature ideas. My final impression was that the company had assumed the identity of this uber-cool hi-tech start-up filled with techies wanting to create a great website. And I thought they were in the business of selling books.


Don't get me wrong.It is great to have some cool technology, but technology in case of Flipkart is just an enabler.Flipkart is in the business of selling books and their website is the best salesman they have got.Pamper him, reward him and enable him with tools to get more customers.But do you change your company's culture and goals to suit his whims and fancies? No. I think at this point, Flipkart has some good PR going on. Customers love it, they have a smooth working product.To grow from here they should focus on 3 important things

• Reduce costs to acquire customers - Incorporate social hooks on the website, have a referral program, get repeat customers, increase customer engagement on the site.How about having the author(for Indian books) launch books online at FlipKart.
  
• Improve operational effectiveness - I can't suggest much here - except that they need to start thinking of themselves as a logistics business(look at Amazon - not AWS).i.e reduce inventory costs, bargain better discounts from suppliers etc. How about using a group buying to ask for better discounts from publishers? (GroupOn meets FlipKart)
  
• Get into other businesses, but carefully - The interviewer told me that they wanted to be more than just a basic e-commerce site.I would be careful about this. They have a good thing going on and their #1 priority should be to not screw that up.

Flipkart is working on an established business model. They should look at not what Amazon is doing but what they did in 1999-2003. Getting into other business is a lucrative prospect but it is important to not mess up things which are working perfectly well.

SMS Business Models

Many people have played around with the idea of building a business around SMS and text message.Few are profitable. About 3 years back I did it too.It enabled users to create channels and exchange text messages over a channel.Soon users came and I was looking at the possibility of huge SMS bills without any sight of revenue. Eventually it didn’t work out to keep the service on and still sustain it  with no real business model.Many more such startups have come since and have been  more successful in getting a large user base and substantial funding but the basic question of finding a business model(that yields a positive return)  still remains unanswered.

One of the realizations from my experience was that even though we hardly think twice before sending an SMS with these applications, it is because the usage is so limited that we don’t mind the high cost.. yes indeed. I did say ‘high cost’ .Do some basic calculations and  on a per MB basis , SMS is one of the most expensive data transfer mechanisms. Even at 5 ps per SMS ( $0.001 at 50INR/USD), if you assume that 10 messages will fit 1KB of data, it costs Rs 500,000 per GB of data. 1G is about how much an average broadband user downloads in a month..and certainly the monthly internet bill is much lower than that .Now nobody would use SMS to send this kind of data but this is precisely what some of the SMS companies hope for. For example  the group messaging companies like Mytoday and SmsGupShup try to sell ‘corporate’ or premium accounts . The problem with this approach is that the per account usage will not be big enough to allow for significant revenue or scale.If it did become huge then they will soon realize it is too expensive to use SMS and resort to other means. So the only other option is to scale out..and it is not a trivial task for a consumer focused startup to woo enterprise customers in large numbers.

The other model is to  try to do as much as possible to woo users to send text messages to each other in the hope of packing ads into some of the messages. These companies spend quite a bit of money sending the messages(SMSGupShup sends around 10million messages a day)  and it takes some really aggressive sales tactics to make sure they just break even operationally.  Even if they are able to monetize 10% of their messages they need to charge 50ps per ad (assuming a cost of 5ps per message) which translates to Rs 500 per  thousand  impressions. Not a very easy CPM to achieve given that there is little intent (unlike search).No wonder even services like Twitter haven’t been able to do this successfully.

Another model is to allow businesses to send sms to their customers or employees.Of course there is no denying the utility of an SMS. For example a restaurant can intimate its patrons of a food festival or a merchant about its offers. Useful no doubt,but sending these messages is non complicated and can be very well done by the enterprise itself. I don’t see any scope for an intermediary to monetize this.

And then there are niche applications. I recently spotted one called smsmeon.com. It looks interesting.Something I always had in mind. This application allows enterprises to create keyword based SMS applications. So essentially you can define your keyword and some static actions for it so that when a user sends a message with that keyword , a response is sent via SMS. If dynamic actions can be configured for such a service, I do think this can be monetized because the application provides more than just message delivery and really removes the need for the customer to deal with SMS gateways etc. But again this may need aggressive marketing to enterprises which could make it unviable financially. Besides I am not sure why this site tries to be a consumer site and mimic some of the twitter and social networking themes . Making this product popular with customers has no  positive network effects for marketing to enterprises. Long back www.411sync.com had similar theme but the site now gives a 404 error :) Looks like they went out of business too.

 

And finally there is twitter which is positioning itself as a search tool rather than a messaging application.  Given the recent rumors around the Google acquisition , it may well be possible that twitter can add another dimension to Google search.Search has been the most profitable business on the internet,it is tough to write this off immediately.We’ll have to wait and see.

One thing is certain though. Thanks to all the startups , the cellular operators surely have benefited from the surge in SMS volumes.  And I think that is the only viable business model in SMS.

SlumDog's lost Millions

If only the guys who were behind the decision to release Slumdog Millionaire on 23rd Jan in India  released it 2 weeks earlier the movie would have made a few more millions for the producers.  Over-hype and a delayed release has cost the movie millions in piracy.The segment of people who would go and watch this movie are probably the ones who have downloaded it from torrents on their high speed connections or bought DVD quality  rips from the roadside and seen it.

It was a good strategy to allow the hype build and then do the release but they got the timing  wrong.. Anyway I hope the movie does well. It is a good movie and hope our Bollywood directors feel proud that their time tested themes like brotherhood , love and song-and-dance formulae are getting international recognition.

Porter anyone?

Anyone who has been to B-School will know how much 'strategic insight' is pulled off using the classic Porter's 5 forces framework. When in doubt invoke the 5 forces has been the mantra of many a b school graduate sitting in front of PowerPoint presentation and is clueless what to add in the next slide. Thankfully the man has now spoken and has written an update to the classic 30 year old theory. In an article in the HBR other than reaffirming the theory he also derides how the model is taught to students in b-schools.His key point is that analyzing using the framework is not equivalent to collecting a bullet point list of facts which is what most do.It is more of number crunching and financial statement analysis to get some concrete data..
The link is a good read . And here is a video below on an interview with Porter.




Hope less BS is passed of in the name of Porter by MBA grads.

Farewell

I had expressed my doubts on the viability of their business model here
Now my misgivings about the food delivery business are not just doubts..The first victim folds operations today

Dear Customer,
We are writing to inform you that, regretfully, OrderMonger.com will cease all operations from October 1, 2008. This decision has been taken predominantly due to non-viability of the business while maintaining the high Service Standards we intended to provide. However, we will honour all of the existing orders which have already been placed in our system.
On behalf of OrderMonger, we would like to take this opportunity to thank you for your continued loyalty in choosing us as your preferred service provider for the past two years. Without your support, our success would not have been possible but under the current business climate, we have been left with no option but to close down. A lot of you have been calling us over the past few weeks to tell us about how much you value our services and offering to support us. We sincerely appreciate that support and feel good that we were able to make a small difference - so we are just as sorry that we are forced to close down. If you have any questions, concerns or comments about this decision, please send them to feedback@ordermonger.com.
Thank you once again for the loyal and continuous support you have shown us over the years we have been operating.
Yours sincerely,
The OrderMonger Team

Unfortunately utility of a service does not always translate into cash flows.. I wish the team good luck in their future endeavors.

#2 - These ads grow on you!

Video: New Family

#1

This will be interesting

Finally! In response to those pesky getamac ads Microsoft will soon respond. From the news at WSJ, Microsoft will be hiring Jerry Seinfeld for the campaign. The campaign - a closely guarded secret until now and with a $300 million budget, will have Seinfeld and Gates appearing in the ads..Despite what realdan(formerly fakesteve) says on his blog about hiring a 54 year old semi-retired comedian,I think it is a great idea.True Seinfeld fans will notice that Jerry's room had a computer - presumably a Mac. Apple also released a one time "Think different" ad with a small tribute to Seinfeld.Clearly if Seinfeld were to endorse a brand it seems like it should be Apple. How then did Microsoft decide to hire Jerry Seinfeld?What seems to be a blunder according to many may be a brilliant move. I can see ads like this similar to the PC guy - mac guy ads like this

Gates : How are you Jerry? I see you are working on your computer.Busy eh?
Seinfeld : Busy ?Me?Haven't worked since 1998 :-) Well I am not actually working, just editing a movie
Gates: (sigh) On a mac?Guess I must really get going
Seinfeld:No, actually I switched to Vista after I just ran out of options to get new hardware on the Mac and guess what I can now use the Windows Movie Maker on Vista to make movies.
Gates:That must have been tough, for someone using a Mac for .. 20 years?
Seinfeld: hmm, actually no, contrary to what others said - come over, let me show you..Even a 54 old guy like me can get it to work easily

.....


I can see how this can get really interesting if done right..Can't wait to see the ads

Is the begining of the end of Orkut in India?

Can someone explain the precipitous fall in the Alexa statistic for Orkut here? And compare that with rise in Facebook usage.Now I agree Alexa is far from perfect, but I still think it is interesting.
I think there may be a lesson here for all those sites that want to get around the cold-start or chicken-and-egg problem associated with platforms with high network effects.The graph is a worldwide usage graph but given that India has a significant (18% and second highest) share of Orkut users,this may be attributed in some ways to change in Indian users' behavior patterns as well.

A few months ago,I was reluctantly introduced to Facebook when a small but significant and growing percentage of my friends dumped Orkut for Facebook. I initially rejected the idea with a yawn - Indians are already hooked on to Orkut, Do need another social network? A lot of also-rans came and died ( yaari, WAYN, and few others which now reside in my spam mail folder) and I wondered if another 'me too' social network would ever work. I was wrong.

I increasingly find myself more on Facebook and less on Orkut and I think in a few months I may have to invoke the "forgot password" option on my Orkut account.

I think the initial reason for the migration was due to the Facebook apps.There was a lot more to do than just see photos and updates from friends,and I think its an important reason why people come back to the site. Orkut was and is a lot more static and by early 2008 Indian users of Orkut had got past the initial novelty factor and were beginning to get bored of logging in again to see the same page with just a re arranged grid of friends.Thats when I Facebook provided something that was missed - a more dynamic page with more updates from friends.Facebook apps-although many apps are not very useful - are a clever way to increase the number of friend updates and help maintain a more dynamic page.Users will login more often to see what changed. And that is again a self feeding cycle with network effects - the less often users login the less number of updates friends will see and even fewer people will login. Network effects in reverse direction!

I think the graph explains very well what happened. Facebook is gaining a foothold in India and Google better do something about maintaining Orkut's popularity in India. The OpenSocial Apps and friend updates strategy doesn't seem to have worked too well. The UI needs a big face lift and probably a better way to show updates must be worked out. Still, if things stay the way they are , I think it is beginning of the decline of Orkut in India.

Whats up with Sulekha.com??

If you want a lesson on how to screw up a perfectly useful service go to www.sulekha.com . If you have been there a few months back then you are in for a rude shock now. Sulekha is the first name that comes , (rather came ) to my mind when I want to look for a business or listing in any metro in India. They were good,fast and had a really useful feature of sending a listing by SMS. All that was on the landing page of sulekha.com. Now its a mess..They have morphed themselves into a portal which delivers news and the classic classified page requires about 3 links to go to and all I can see is ads. Still can't find a doctor nearby. And whats with the NRI focus?

I am not sure if they now make more money but surely the party won't last long enough because users will dump it for something else.

Does someone know of any other equivalent service?

What can I say?

Domain squatting is now a business ? and that too a web2.0 start up.They seem to post on start up jobs and other web 2.0 portals and design their site like a web 2.0 company.If that O Reilly chap had trademarked on "web 2.0" term when he came up with it first he would have made more money than any web 2.0 company ever made

This time hope they get it right

Anyone who has been through the dot com boom and bust cycle of the early 2000s or was old enough at that time knows that grocery delivery and pet accessories were among the top categories of companies that went bust.Yet a relatively new player has bravely forayed into this space. I have used Ordermonger quite a few times.Their service is good. They immediately call back to confirm your order and it is at your doorstep in within 1 hour. They have since expanded to groceries,flowers,cakes and into other cities after Hyderabad. No doubt they are useful, most web 2.0 start-ups are,but do they make any money? I was curious since online groceries and food delivery business has been beaten to death - many dot.com era companies did something of this kind and struggled to see any profits.Yet ordermonger.com seeks to turn a profit in a historically unprofitable sector.


I tried doing some basic calculations. In Hyderabad they have tie ups with around 40 restaurants and 6 sweet vendors serving around 50 localities. For groceries and flowers however they seem to have a tie up with 1 vendor and serve a lot many localities (around 300).So I thought a reasonable way to guess the orders is to assume a fixed number of orders per restaurant per day for food and sweets and an estimate on the number of orders per locality per day for flowers and groceries for example the revenue per day for restaurants is number of restaurants * number of orders per restaurant * order size * margin% .Similarly for flowers it is number of localities serviced * order size * margin % .One can then get total revenues per day across all categories and all cities.

In other cities they have much lesser presence.Bangalore they seem to have tie ups with around 5-10 restaurants (from what I see on their site) and flower delivery is available in all cities they operate in

I assume margins of 10% for food delivery and 5% for others. I dont have much of an idea though but this seems reasonable. Groceries are not a very high margin business for sure and the assumption of 5% doesn't seem way off limits. The basic calculations are here


Doing some sensitivity analysis yields revenues in the range of INR 4,000,000 - 6,500,000 per annum.The company is started by ex software professionals so the revenues are hardly enough to employ 3 software engineers. Add to this cost of maintaining a fleet of delivery staff which has to be replicated in every city,no scaling advantages here. It is going to be interesting to see how they manage to grow and yet be profitable. The biggest mistake such companies sometimes make is that they think they are a software company (one look at the website confirms that there is at least one employee trying to impress everyone with his or her web development skills) but in reality they are a logistics and operations company.(Dell, anyone?) Having that perspective will help decide the right strategy early on for the fledgling start up.

Hope the newbies take a few lessons from there.Good luck to them

Viva La Vida - Coldplay's new web site

Has anyone noticed the new design on Colplay's website after the launch of Viva La Vida...The site simply rocks.. Nice design and it doesnt play coldplay music automatically when you load the page which is good for opening in office:)

The pages have the latest album covers and other wallpapers as backgrounds. All UI controls -scroll bar, links,buttons are hand drawn.Very neat!!!

The future belongs to us

"Derivatives are the financial weapons of mass destruction" - Warren Buffett

I cannot think of anything else to say on readin this about speculators playing havoc with oil futures and other exotic instruments to cause oil and other commodities prices to rise. See this excerpt from the article.

Last August, the price of oil was $70 (€45) a barrel, in early March it surpassed the $100 (€64) mark, and then the new record high on June 6. What's next?
Ernst Tanner is asking himself the same question, but he is thinking about cocoa, not oil. Tanner is the CEO of Swiss fine chocolate maker Lindt & Sprüngli. He has had to look on as the price of cocoa beans jumped by 40 percent since early 2007, despite abundant supply. "It hardly has anything to do with supply and demand anymore," says Tanner.

Come to think of it,futures and forwards were created to protect producers from the vagaries of price movements and be able to sell their produce at a fixd price thus insulating them from risk.
A far cry from how it is used today by Wall street and hedge funds to speculate prices.

Regardless of whether prices go up or down, speculation results in preposterous exaggerations, with real consequences for the economy.Once again, it is the excesses of modern financial markets that are sending the world economy into convulsions. Indeed, German President Horst Köhler may have been right when he recently said, in an interview with the German magazine Stern, that the financial markets have developed into a "monster" that needs to be tamed.

Is this a new form of imperialism? Cash rich pension funds and other pools of money in the developing countries are finding their ways into commodity futures driving up prices.Inflation affects the poor much more than the rich.

Globalization, a success story for many until now, has stalled. After initially helping hundreds of millions of people escape from poverty, it is now showing its ugly side. As profits grow on one side of the world, hunger is on the rise once again on the other.

It's a completely different story on the computer screens of Wall Street analysts, where commodities are the biggest growth industry of the 21st century. Vast sums of money are being invested in the markets for food commodities and energy

Help!

One of my friends is suffering from a rare form of leukemia.Treatment costs are heavy and he seeks help.
Go to http://helpmishra.blogspot.com/ .
Any ideas on how this can be promoted to seek more donations are welcome(No, don't suggest I spam on orkut!)

Update

Update on the previous post. http://tv.burrp.com/ is quite useful, I no longer have to look for the newspaper to see whats on the tube..May be http://movies.burrp.com or http://events.burrp.com/ will be coming next on this site.Atleast I would love to have the events microsite and an RSS feed for it.

Do you want to discuss this topic?

Anyone who reads blogs and has even the slightest technology orientation will discover in a short while how many web 2.0 companies are starting up each day. Therefore there are websites that track new web2.0 start ups.I think off late even that number is growing out of bounds.I already have 10 of them in my feed reader.

Most of the new start ups have something to do with social networking - new way of intruding into friends' lives,share videos with them, create social profiles,chat with them on IM from your socially powered blog, share music with friends of similar interests, inform them about mind numbing boring activities you did via text messages.. and the list goes on.. How about a site which takes your email and just disconnects you from all your friends on various networks an anti social app where you can make foes and not friends!! Does it sound boring?If yes it is because I am bored of seeing how my friends throw paris hilton at each other or super poke themselves or pimp their pictures..give me a break.Where are the real companies, which help me get things done faster.The last one I know came more than 10 years ago. Yeah OK this here and this one have made life more fun but am hoping for more.

Meanwhile I have added one more 'useful' social web2.0 gadget to this blog. Its called disqus, you can now freak out on my blog's comment section with full blown discussions based on my rants.

Finally..

After months of adding small and barely noticeable features,Orkut the social networking site from Google has finally added  third party Apps,like Facebook. Apps are based on the Open Social platform.I tried iLike - I  couldn't get to add favourite songs or artists and yes if you are in office, be careful before starting the game.For me, it started a loud rock song much to others' surprise. May be I will try later.

In general it is a good development. Orkut is the most popular social networking site in India and for almost a year Indian users of social networking have been deprived of the state of the art in social networking- i.e a Facebook like experience. At some point of time one gets pretty much bored of seeing his/her friends' faces on the profile or their pictures from a vacation.Sometimes you just want to throw a strawberry cake or poke then or smash a bottle of beer on their heads and then tickle them.

And for all those desperate single guys who think Orkut is a dating site just because women put up their profiles,there might be light at the end of the tunnel in the form of a dating app.The much (ab)used scrapbook  pickup line "Wanna be friends?" may see decline in usage. Although given the opinion women have of strange guys on Orkut I am not sure how successful it will be.

The way they have promoted the apps interesting. No friend invites for apps so far.Just a link to announce the Apps with the hope that it will catch the attention of Orkut fans. Overall the apps have a long way to go before they match the  Facebook application platform but a good start  and it was about time.Over the last few months more and more Indians have been experimenting with Facebook, and if left unchecked, there could have been an en mass defection from Orkut. Hopefully the apps will make life in Orkut more interesting and worth sticking around.

The young and the senseless

 

Whatever appreciation I had for the lead actor in TZP greatly diminished when I heard he had refused the best child actor award. He may be a great actor but nevertheless a child actor. It is tough to imagine if it is this 10 year old who really has an ego of a 30 year old or it is his parents making him do such things.Still,for the benefit of doubt I  ignored his tantrums,be it his parents speaking through his mouth or may be it is his childish immaturity. But not for long. Yet again the kid has surpassed himself. Whatever he lacks in age, he makes it up with  his larger than life actions. According to recent reports the  boy who has no doubt been flooded with offers,wants nothing to do with directors or actors who he hasn't heard of in his lifetime of 12 years. So he will not hear anything until the movie has Shah Rukh  or Hrithik or Akshay and of course not to forget a sum of about 1 crore as compensation!!

Now, I am all for talent and recognizing it early, but at this age kids must not try to grow faster and bigger than what their age allows. It is harmful and I wouldn't be surprised if attitude causes the actor in question to burn out too quickly after a few 'big budget' films. With due respects to the neo liberal ideas of child upbringing and pedagogy sometimes the good old smack on the buttocks is what is needed to put astray kids back on line.

He is not the first kid to have tasted success in films. There have been others before him and insisting on big budget films and big money is not what made them fine actors later in their careers.Success has gotten into his head unfortunately  and its known to mess people up in strange ways.

Incentives

 

Marc Andreessen has a good post  on  incentives. Based on Poor Charlie's Almanac, it goes to explain how RSU's and stock options can make a difference to incentives. If an employee gets an option to buy a stock of the company at INR 100 there  is absolutely  no pay off as long as the stock is valued at 100. The employees have a pay off only if the value of the company increases - i.e the options motivate employees to add value to the company. Whereas stock grants, don't motivate employees the same way as options. They employees sure gain more if the stock rises to 200 but are going to make money anyway even if it stays at 100. That surely does not motivate employees well enough to increase firm value.  RSU's in my opinion are just bonuses for past performance. Neither should the employees nor employers perceive it as an incentive future performance.  In the short run employees who receive grants may work harder out of sheer momentum from the pat they received on their backs but that will not last long. Eventually employees just do enough to preserve value.And when that happens for long enough,  especially in an industry like technology, it ultimately hurts the company. When everyone works towards preserving value , its certain that soon this culture will diminish value.

Marc has a blurb on how Microsoft decided to give RSU's as against options which eventually led to the stock being flat since 2000.

Surely, options are better suited at startups where each employee has a clear idea of how his or her actions will impact company value. For larger companies however it is difficult to justify doling out options to lower rung employees. Most of the rank and file employees cannot impact firm value solely on their actions. Stock grants are a better way to compensate employees.However executives and senior management who oversee a business unit should be compensated only in stocks. I hope that is the case with Microsoft, if not then definitely Marc is right.  One should never underestimate the power of incentives and neither should one overestimate the power of bonuses. Bonuses are not incentives.