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Copyright Lisa Clarke

There has been a lot of chatter on the Internets about unbundling of mobile apps. Tech media’s interest has been piqued by some larger brands jumping onto this bandwagon – examples include Microsoft, Twitter and Foursquare.

It’s not a new strategy. Featurephone apps companies used this for a long time.  Several smartphone app publishers have had an owned & operated network of apps right from the beginning – examples include Zynga, King, Supercell, Smule and Outfit7.  Incumbent media companies like CBS, News Corp, Viacom, Time Warner, Walt Disney and (in India) Times Internet have also had these networks for a while.  Established Internet companies like Facebook and Google have had networks, built organically and through acquisition.

I think unbundling is a strategy that has not yet been applied with vigor in the emerging markets on smartphones. I think there are potentially disproportionate advantages to be had by unbundling in countries like India, in the short- to medium-term. Why is this? Because low device memory limits (typically less than 16 Gb), low bandwidth limits (mostly 2G) and relatively high bandwidth prices result in dramatic drops in conversion rates, download success rates and retention rates as app size increases. Also, in my opinion, discovery on the app stores is easier when there is a single focused value prop (kind of the approach that Whatsapp has taken with a singular focus on messaging).

Conversion rates drop with package size.  Below is data from a global mobile analytics and advertising vendor. Data is global and is an average across all advertising products.

App Size Conversion rate
0-5MB 1.00%
5-50MB 0.80%
50MB+ 0.42%

 

Download success rate is nowhere near 100% (even on Android). The graph below is from China. I would imagine that the drop-off in India is steeper, given the greater prevalence of 2G and higher proportion of lower-end phones.

Picture3

 

Retention rates drop with larger file size. Large apps are 33% less likely to be retained after 1 month although iOS users are 12% more likely to retain an app than Android users, according to Flurry.

App sizes vary by app type and platform. Below is some data I gathered from the iOS and Play stores. Basic utilities are 1-10MBs. Communications and social media apps are 20-30MB. Most casual games are 40-50MB. Most mid-core games are 300-800MB.  From my not-so-scientific sample list below, Android apps are on average 37% smaller in package size than the iOS app from the same publisher.

chart

So, what is an ideal app size, especially in markets like India with challenged infrastructure?

The ideal size is 10-15MB globally. Idea size for an app for tier 2/3 countries (like India) is below 5MB.  500MB+ is a non-starter. At 50MB+ the conversion rates fall off dramatically.  On Android and iOS, conversion rates dip by 50% in tier 1 nations for non-game apps above 50MB.  In tier 2 and tier 3 nations, conversion rates dip by 50% for games above 15MB.

To lower the cost of loyal customer acquisition (a function of conversion rate, download success rate and retention rate), unbundling in emerging markets makes positioning more clear and therefore discovery is easier, in my opinion.  Unbundling also decreases the hits-driven nature of mobile apps businesses.  And finally, cross-promotion within an owned & operated network of apps also dramatically reduces the cost of introducing a new app into the app network.

There is a cost to this strategy though.  The engineering and products team now need to maintain multiple code-bases and roadmaps.  Initially building out the network may required multiple marketing pushes and already strained marketing budgets may not be enough to get apps into into the high ranks on the app stores.  Unpopular functionality, separated out into an app, will not get downloaded/used.

Some things to keep in mind if you are thinking about going down this route: You need to maintain a strong brand identity across all apps in the network to build company value and cross-promotion ability.  Also need a common ID system to build and leverage customer data across multiple apps. And a good cross-promotion engine is needed. Tapjoy and Flurry are leaders in this category but there are lots of other options.  To reduce app package size, you will need to rationalize your third-party SDKs, remove most heavy media files and reduce functionality dramatically.

COLOURBOX9732315

[Published on Yourstory.com]

India’s enterprise software industry has been slowly bubbling since the 1980s but has generally failed to deliver a large number of high impact, high value companies.  We do have some companies that everybody talks about – iFlex, Tally, Zoho – but these are far and few between. I believe that we are seeing a new scalable wave of enterprise software companies coming out of India and there is a potential to deliver several high impact companies over the next decade.  Here at Lightspeed Venture Partners, leveraging our global strength in enterprise technologies, we see opportunities to partner with companies that are cloud-native and have cracked a global market – examples of current active categories in India are CRM, analytics/big data, marketing automation and infrastructure.

India’s enterprise software industry has to be looked at separately from the outsourcing/BPO firms like Genpact, Cognizant, Tata Consulting Services and Infosys.  Starting in the 1980s and early 1990s, this services industry is now mature and at scale.

Separate from the outsourcing/BPO industry, India’s enterprise software industry (or “products” as it is called by many here in India) has evolved from the 1980s to now in what I think can be divided into four waves, coinciding somewhat with three trends: 1) enterprise software moving from desktop to client-server to cloud; 2) evolution of Indian industry post 1991 liberalization; and 3) increased experience of Indians at successful US product companies.

Picture1

WAVE 1

Tally-

 

 

 

The first wave of software products came along in the late 1980s/early 1990s – the focus was desktop products for business accounting.  Companies in this wave include Tally Solutions (still the undisputed leader in SME accounting software in India), Instaplan, Muneemji and Easy Accounting.

WAVE 2

Infosys-finacleramco

5I-flex_Solutions_logo.svg

G  _institute_Newgen Logo

 

 

 

 

This generation of software products emerged in the 1990s as projects within outsourcing firms or from internal services arms of larger corporates. Infosys launched Finacle. Ramco Systems launched its ERP. And Citibank launched CITIL which became i-Flex.  Other notable companies included 3i Infotech, Cranes Software, Kale Consultants, Newgen Software, Polaris Financial Technologies, Srishti Software and Subex.

I remember attending CEBIT in Hanover in 1989 when many of these Indian software and consulting companies were first introduced to Europe.

The late 1990s saw a wavelet of ASP (application service provider) startups in India, most of which got crushed after the dotcom bust.

WAVE 3

eka-nexus-funding-147 zycus-logo

Manthan-Systems-Logo

talisma logo

 

 

 

 

 

The 2000s saw on-premise India-first companies such as Drishti-Soft, Eka Software, EmploywiseiCreate Software, iVizManthan Systems, Quick Heal TechnologiesTalisma (for which I did some initial product management work while at Aditi Technologies) and Zycus get started.  This was the era of 8-10% GDP growth in India which lasted till about 2010.  Many of these companies had a direct sales model. After India, they generally expanded into the global South (Africa, Middle East, SE Asia, Latin America) where they found similar customer requirements and little competition from Western software companies.  Bootstrapped in their earlier years, some of these companies grew over several years and have broken through to $25 million+ in annual revenue.  Key verticals have traditionally been BFSI (banking, financial services and insurance), telecom, retail/FMCG (fast-moving consumer goods aka CPG in the US) and outsourcing/BPO.

Having been around for over a decade, some of these companies generally face the challenge of migrating to the cloud, upgrading user experience to modern Web 2.0 levels, and expanding addressable markets beyond the global South to the US and Europe.  We have seen some of these companies get venture funded, typically at much later stages in their go-to-market relative to US-based software companies.  Several of these companies have received funding in the past couple of years, ostensibly to “go international” and “go cloud,” not an easy task, especially when done together.

WAVE 4

Starting in around 2010, a new wave of cloud-native companies were launched, perhaps following the slowdown in India’s economy and the growth/acceptance of SaaS as a delivery model and as a sales model in the US.  These companies have grown and now could power beyond the $10M/year revenue glass ceiling.  The reason for the scale potential being higher for this cloud-native wave is the cracking of efficient online sales channels to reach markets globally.

Why this decade? Because there is an increased willingness of companies around the world to search for and buy software products online.  There is now a large pool of founders who have worked at global enterprise product companies (e.g. Indian offshore development centers or in Silicon Valley itself with companies like SAP, Oracle, Google, Microsoft, Adobe) and have experience in product management, marketing and sales.  And finally, there has been a dramatic reduction in the capital required to bootstrap enterprise software companies.  Everybody uses AWS and software from other startups to get started. It’s quite meta.

Wave 4 companies have the opportunity to break through the barriers that previously relegated Indian enterprise software companies to selling to the global South. We have seen Atlassian (Australia), Zendesk (Denmark) and Outbrain (Israel) do this move to Western or global markets.  Zoho is an Indian company that is rumored to be at $100 million per year revenue scale – they have been part of many of the waves I have described.

This cloud-native wave, I believe, can be divided into two dimensions. One dimension is the platform/tools companies versus workflow automation (applications) companies. The other dimension is India-first companies versus the global-first companies.  We see opportunities in all four quadrants, each having its own challenges.  We are interested in looking at companies in all these segments, with a bias toward companies which have reached some scale ($1M ARR) and are going after large addressable markets with aggressive sales & marketing execution.

Applications Markets: Enterprise (retail, banking, telecom, BPO, ecommerce)
Examples: CapillaryPeel Works, Wooqer, Sapience
Categories: Employee productivity, verticalized
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Markets: SMB/mid-market
Examples: Framebench, Freshdesk, Kayako, MindTickle, Unmetric, Zoho
Categories: Mature SaaS segments eg CRM, SMM, horizontal
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Platforms/ Tools Markets: IT dept, developers, SMB, media
Examples: Exotel, Knowlarity, Germinait
Categories: Telecom infra, app dev tools
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Markets: IT dept, developers
Examples: Browserstack, FusionCharts, Little Eye, Mobstac, Webengage, Wingify
Categories: app dev tools, marketing automation, security
—————————————————
Model: License+AMC, direct sales, resellers Subscription, telesales, online sales (SEO/SEM,content mktg)
India-first Global-first

 [Please note this is not a comprehensive list of companies nor a view on which companies we admire or not]

Global-first companies coming out of India have started to crack or have cracked the online sales model, using SEO, SEM, content marketing and telesales.  They are typically going after mature segments where buyers are typing keywords into Google at a high rate. This online selling model results in an SMB and mid-market customer base.  In many cases, founders may have to move to the US to pursue direct enterprise sales.  It’s worth noting that scale markets are not necessarily all in the US – companies could get built with a general global diffusion of customers, perhaps with help from resellers.

I see India-first companies typically going after newer high-growth companies in India (e.g. ecommerce, retail) and startups.  Some go after Indian arms of multinationals (MNCs).  This is a reasonable early adopter market to cut a product’s teeth on, but has limited ability to scale.  Of the newer crop of India-first companies, very few go after large enterprises in India – there are exceptions like Peelworks and Wooqer.  The model here generally is SaaS as a delivery model but not SaaS as a sales model (ie direct sales, not self-service).  Many software companies are essentially verticalized.

We continue to see a few high-ticket, high touch direct sales enterprise software companies which are global-first, including companies like Cloudbyte, Druva, Indix, Sirion Labs and Vaultize. Many of these start out with teams in both Silicon Valley and India or transplant themselves to the Valley over time.  I think this will continue to happen but we will not see the explosion here that we are seeing in the number of companies utilizing low touch online sales models.  I see several high-impact companies coming out of these direct sales enterprise software startups as well.

I think this dichotomy between India-first and global-first companies is interesting and makes India a distinctly different type of investment geography, different from Israel (which has very small domestic market where tech companies move to the US very quickly), different from China (which mostly has domestic market focused startups and very little enterprise software) and different from the US (which is primarily domestic-focused in $500B enterprise tech industry in the early years of most startups). In terms of investor and founder interest, the pendulum may also swing back and forth between these two models as the Indian economy grows, sometimes at high speed, sometimes at a snails pace.

[With input from the team at iSPIRT and several of the companies mentioned above].

hotornot[Published in NextBigWhat on May 19, 2014]

This blog post illustrates how products have used comparison and choice based user interactions to successfully reinvent consumer experience on mobile. The underlying concept is titled ‘Hot’ or ‘Not’, derived from the original website created by James Hong. ‘Hot’ or ‘Not’ is now used by many products including an accidental creation from an entrepreneur we all know very well.

Remember Facemash? – Facebook’s predecessor that asked visitors to choose between pictures of students placed side by side and decide which one was ‘Hot’ or ‘Not’. Facemash may have been a product of Mark’s intoxication…a joke…an experiment if you will. But as I see it, it could very well be a great product concept that can wow the consumer and exponentially increase engagement, especially on smart-phone devices. To illustrate this thought, let’s look at a few examples.

Tinder

Tinder is a dating platform, which has used this concept and has been hugely successful. It lets you swipe ‘Liked’ or ‘Nope’ on images of women and men located close to you. So rather than answering a million questions on ‘Okcupid’ or ‘Match’ and relying on intelligent algorithms built by MIT/Stanford data scientists (who apparently understand dating), you just swipe on Tinder and get connected to people who have swiped ‘Liked’ for you as well. Simple, fun and it works!

What makes Tinder great and gives the application of ‘Hot’ or ‘Not’ credibility is the fact that it is absolutely frictionless. It connects people easily and instantly. Currently, Tinder gets 750 million swipes a day and makes more than 8 million matches. As compared to it, Okcupid, which is one of the most successful dating platforms, has 1 million daily users. Hence, far less matches when compared to Tinder.

Thumb.it

Thumb is an app that lets you get or give opinions in real time. From asking people about their travel destination choices, to product preferences all the way up to soliciting opinions on love lives, Thumb transcends a host of categories. It quickly became an addition and a community before it merged with Ypulse. Though Thumb was not as successful as Tinder, it does represent the kind of exponential engagement ‘Hot’ or ‘Not’ type products concepts can derive.

Thumb reminds me of a show called “kaun banega crorepati” – the Indian version of “Who wants to be a millionaire?”, where the contestant can use a life line called the “audience poll” if he/she is unsure of the answer. And there are plenty of such situations, which are frequent in nature, where we need advice and we would rely on wisdom of the crowds rather than make the decision ourselves. Hence, presumably Thumb’s success was because the ‘Hot’ or ‘Not’ type product concept was applied to a simple real life problem encountered by every man and woman almost on a daily basis!

We heart it

‘We heart it’ is an image based social network that has quickly grown to over 30 Million users serving 50 billion images per month.  Users ‘Heart’ images that they love and put these images in their collections that are shared with their friends and followers.

‘We heart it’ is incredibly simple, yet a very powerful way for people, especially teens to express themselves – their personalities, feelings, preferences, opinions through images. Images based networks have existed for long (remember Flickr?) but they never achieved the kind of scale ‘We heart it’ has done. Secret to their massive and instant success – a simple application of ‘Hot’ or ‘Not.

Fad or science?

It is easy to pass this as a quirky fad. However, the concept of ‘Hot’ or ‘Not’ has deep routed scientific reasoning. For those who are familiar with market research techniques, would know Conjoint analysis to be a bedrock of research studies. The simple form on conjoint analysis asked consumers to rate and review products just like a lot of platforms on the web today. This was disrupted when CBC or Choice based conjoint came along and proved to be a much better alternative. CBC asked consumers to choose between different product or service concepts and say whether it is ‘Hot’ or ‘Not’. It was argued by scholars that CBC works well because that’s how human psychology works. It is natural and intuitive to choose, it is unnatural and much more difficult to rate. Also, the variance or the error in the latter was higher. For the curious souls, you can read about CBC here  

‘Hot’ or ‘Not’ for Indian start-ups

Mobile is key to the growth of Indian start-ups. The mobile user is on the go, wants to be quick and fluid with his/her interactions with the device, does not like typing and is more visual. These aspects make it imperative for Indian start-ups to re-imagine their products for the mobile. Traditionally -

- Mobile products have been replications of web interfaces including the feature set and the sequencing of the user interactions

- The platform is not built around a single user input like a Pin, Thumb, Heart or Fancy. Instead, it is cluttered and asks users to do multiple things. For e.g. several buttons beneath an image asking the user to Comment, Like, Share and more.

This is where concepts like ‘Hot or ‘Not’ could help achieve a wow consumer experience and quick scale. – just like the examples illustrated in this post have done. Perhaps, soon we will see E-commerce sites moving to ‘choice’ from ‘browse’, Review/rating platforms giving up the age old 5 point rating system and new-age dating/marriage platforms innovating like Tinder.

If you think this article was ‘Hot’, feel free to write to me at maninder@lsvp.com and/or visit the Lightspeed blog to leave a comment…Or just ‘Digg’ it.

limeroadbookThis morning, LimeRoad announced $15M in new financing to further their mission of building a social discovery and buying platform in the lifestyle vertical.  This is a significant raise for a young company and provides additional validation of their differentiated approach to addressing the large and growing online buying opportunity in India. For those that aren’t familiar with the company, LimeRoad aggregates lifestyle products from a network of brands and stores and provides its community of users tools to create and curate lifestyle content as well as to easily discover and buy unique and delightful products.

Here are some brief thoughts on why we originally invested in Limeroad and have continued to support the company in subsequent financings:

  1. A truly exceptional team that refuses to take short-cuts and instead focuses on finding scalable, long-term solutions to difficult problems.  Suchi and Prashant have been deeply involved in architecting and building consumer products of significant scale at companies like Skype, eBay and Facebook and bring similar aspirations to LimeRoad, along with an understanding of what it takes.  Every time there is a choice between an ‘easy fix’ or finding a less obvious, long-term solution to a core challenge, they choose the latter, even though that inevitably means stepping into the unknown and facing a higher probability of (short-term) failure.  It takes guts to choose the path less traveled, but we believe that this path maximizes the likelihood of substantial value creation.
  2. An early and intense focus on achieving product market fit. Here are some charts on user growth, supply growth, community activity (scrapbook creation) and marketing expense. We like it when growth and engagement charts are up and to the right while marketing is flat.  It tells us that something is working without significant external stimulation (or discounting). (Footnote 1)
    limeroad
  3. A belief that differentiation will be increasingly driven by front-end experience.  Fast shipping, real-time visibility into inventory and responsive customer service are now table-stakes, not a strategy to differentiate.  Pricing-led ‘differentiation’ (heavy discounting) is a questionable long-term strategy and can become a dangerous addiction for management teams who ignore quality of growth.  Instead, we believe that visual and social experiences that enable discovery and delight (especially relevant in the lifestyle category) will define the next wave of market-leading online companies.
  4. Visual and social experiences are perfect for mobile.  We all know what’s happening on mobile but the question is which types of businesses will benefit more than others.  We believe that products that are inherently social and visual will benefit disproportionately from smartphone growth.  LimeRoad sits squarely in this category.
  5. A large profit pool. At the end of the day, valuable companies must all have attractive economic characteristics and the margin pool in the online lifestyle category is perhaps the most attractive in Indian online commerce.

There is a lot more work to be done – and problems to be solved – but the LimeRoad team has already disproved many accepted notions in the world of Indian e-commerce – for example that it is not possible to grow without offering heavy discounts or that Indian users aren’t savvy enough to embrace deeper social activities like scrapbooking, curating collections or sharing.  We expect them to disprove many more and wish them all the best in the next phase of their journey.

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Footnote 1: In order to preserve confidentiality of company data, absolute scale is not provided in the graphs above. Base scale is sufficiently large that the above data is a representative indication of product-market fit, in our opinion.

I am looking forward to attending iSpirt’s Intech50 event next week in Bangalore. Fifty Indian enterprise technology companies will be there, meeting with fifty CIOs from the US and India.  Congrats to everybody at iSpirt, including Sharad Sharma and Avinash Raghava, for organizing what promises to be a productive spot-market.

We have put the names of the Intech50 companies into a list and categorized by tech category (applications, infrastructure, tools), vertical (e.g. none, financial services, retail) and geographic focus (India, India->Emerging Markets, India->Global, Global). See the Slideshare embed below to view or download the document.   Perhaps this is of help to you while navigating the Intech50 event.

These companies are two-thirds infrastructure, one-third applications. Analytics and security dominate the categories, followed by HR and CRM. A good 75% are horizontal solutions while the rest are verticalized. And more than half have a global go-to-market while about 40% are focused on India or adjacent markets.

The last decade, especially the past five years, has seen a lot of change for the better in the enterprise tech startup market in India. Startups have started building world-class product and user experiences. They have understood how to leverage online marketing to acquire customers outside India, versus relying on channel partners in other countries or sticking to just the India market. They have figured out how to initiate direct sales abroad, not relying on hiring expensive VPs of Sales as a first step but sending founders abroad to kickstart sales. They have started efficiently selling into the long-tail of companies rather than just focusing on large enterprises. And they have taken full advantage of platforms such as AWS, Force.com, etc. to run and distribute their products.

I think there is a clear progression forward from the types of enterprise software companies started 7-15 years ago which many times started with services projects; were usually vertically focused on banking, telecom or retail; and, despite branching out to SE Asia, Middle East and Africa, have generally tapped out growth at the sub-$10M annual revenue mark.  There were exceptions of course, including companies like I-flex, Subex and Ramco.

Lightspeed globally has put a majority of its capital to work in enterprise technology companies, represented here.  Many of our portfolio companies, including Qubole, Numerify and Bloomreach, have teams in India.  In India, we are looking for enterprise technology companies that can be category-defining and category-leading and can scale to $50-100M in revenue over time.  We are finding higher than average growth coming from applications companies focused on a global or US go-to-market – examples in India would be Freshdesk and Unmetric. We are also seeing such growth from globally-focused infrastructure and developer enabling technologies – examples in India would be Druva, WebEngage and HelpShift.

See you at Intech50! Come talk to us. You can reach me at dkhare at lsvp dot com.

 

 

 

 

 

India is seeing an explosion of smartphones’ installed base (chart below). This is leading to a burst in data consumption – Airtel’s mobile data consumption doubled in Q3, FY14 vs. Q3, FY13 and data revenue has become a quarter of the company’s total revenue. We are  starting to get onto the early part of the S-curve in terms of mobile-data growth.

Cumulative base of smartphones in India

Smartphones in India

(Source: Gartner, Industry)

Online transactions businesses like OTAs (MMT, Cleartrip, Yatra) are nearing 40% of their users on mobile and ecommerce companies (Flipkart, Snapdeal) are seeing 20-30% transactions from mobile. This trend will continue as smartphones will have deeper penetration than computers in India and for many people a smartphone will be their first and only connected device. Also being a personal device, a smartphone is more accessible than a computer even for users who have both.

This smartphone base will lead to creation of opportunities across sectors and an interesting one is in local businesses. Globally, Lightspeed has invested in companies like Sidecar (transportation), Grubhub (food), Styleseat (beauty stylist) which are betting on transferring demand generated online to local services fulfilled offline. We believe this trend will be led by mobile (smartphones) in India.

The current leader in connecting demand online to service providers offline in India is JustDial – mobile data traffic on JustDial is now more than 22% of total traffic, up from 12% in FY13 and 5% in FY12, and this will likely inflect more sharply with increasing smartphone penetration. Since JustDial is a horizontal and doesn’t provide a category specific experience it may be hard for JustDial to do more than generate leads for local businesses. JustDial is valued at around $1.8B and that points to an opportunity for vertical specific platforms that can provide a better value proposition to consumers and local businesses by leveraging smartphones.

The smartphone as a medium has the potential to provide a disruptive value proposition by taking an interested lead a few steps further and converting it into an informed and highly qualified potential customer (or even a transaction). Given access to rich content, fine location and direct calling at the moment of consumer need, a smartphone is uniquely positioned to provide a category specific experience that is not possible on a phone (non-smartphone) or a computer. We are already seeing this happen in verticals like transportation (Ola, Uber, TaxiForSure) and food (Zomato). More verticals where there is an unmet consumer need and an opportunity to leverage smartphone capabilities are healthcare, break-fix and education/vocation.

Entrepreneurs in this space need to keep the following elements in mind:

Consumer side:

  • Design the business to be mobile-first: Have a responsive mobile design or an app. The good news is that 90% of new smartphone sales in India are presently Android (unlikely to change anytime soon), so a majority of the market can be covered by focusing on Android.
  • Create a consumer experience specialized for the category: Take users as close as possible to the offline transaction.  For example, the difference between looking for a restaurant on Zomato vs JustDial is substantial. Another great experience is to see an Uber cab move towards oneself once one books it in their app.
  • Create consumer side entry barriers: Once the platform has early traction, elements like an active community, crowd sourced reviews/information can help retain leadership. Pagalguy and Team-bhp are two strong Indian communities and have grown despite popular belief that Indians do not like to contribute user-generated content online.

Merchant side:

  • Provide incremental revenue opportunity to merchants: Local businesses in India are most excited to embrace technology if it helps acquire new customers (they are much slower in adopting technology to boost productivity). Instrument RoI measurement early on and make it a core part of the merchant pitch. For example, Zomato had very early on embraced cloud telephony to track calls generated from their website or mobile apps to show impact to their merchants; this continues to be a core part of their merchant offering.
  • Have a mobile offering on the merchant side: It is very interesting to see how savvy even small merchants are about using apps like Whatsapp. Most merchants have (or will have) smartphones and are comfortable using them. Give them a mobile console to connect with your platform. For example, a lead management app for a real estate broker could be a great way to not only increase his productivity but also to get him to share his data with the platform.  Unlike merchant interfaces in the West which are computer-centric, merchant interfaces in India need to be mobile-centric. Nowfloats is doing this.
  • Entrench deeply inside merchants through technology: If businesses in the category are already using technology for their processes, then find a way to connect into their technology. This could be a massive differentiator on both consumer experience as well as the entry barrier. For example, one could plug into the CRM of a dentist, restaurant, play-school, builder, car-dealer etc. Bookmyshow is a great example of how plugging into the multiplexes helped create a great consumer and merchant experience.
  • Managing salesforce/productivity: If the monthly cost of non-founder sales team after initial training is 50% of the monthly revenue collected by them, it shows the inherent quality of the business. For example, Infoedge’s and JustDial’s people cost are ~35% and ~50% of their respective revenues (Source: respective public filings). For Infoedge and Justdial, people costs include corporate, technology and other staff so the ratio of salesforce cost to revenue is likely to be meaningfully lower. If this equation is working, then the next challenge is to recruit, train and retain at scale – most such businesses would need thousands of feet-on-street to reach scale (JustDial’s salesforce is around 4000 and Infoedge’s is more than 2000). There are interesting ways to juice salesforce productivity E.g. Justdial equips it’s salesforce with devices to enhance and track productivity and qualifies a sale over the phone before sending an feet-on-street agent.

A key challenge for businesses in this space is around the point above on balancing the cost of monetization vs. the revenue collected. While it is partially solvable through being a market leading brand for that category,  strong execution and using some of the concepts outlined above, but a big part of this balance is also anchored in the category itself. It is important to be in a category where the customers are more valuable (because of ticket sizes, category margins, frequency of purchase, etc), in order to achieve this balance.

We would love to hear your thoughts around other ways in which the growing smartphone base can disrupt (or not?) demand generation for local businesses.

newyear

With all the speculation about Bitcoin and an exciting 2013 behind us, I thought that a list of predictions for 2014 would be a good way to start this year. These predictions are based on growth patterns of similar networks, the traction in various ecosystem activities last year, and my conversations with various Bitcoin enthusiasts. So here are my Top 10 predictions for Bitcoin 2014.

1. More than $100M of venture capital will flow into Bitcoin start-ups.

This pool of capital will be distributed across local/global exchange start-ups (e.g. BTC China*), merchant-related services (e.g. Bitpay), wallet services (e.g. Coinbase) and a host of other innovative start-ups. A large chunk of the capital is likely to flow into startups which have emerged winners in their respective segment with majority market share. Building exchange liquidity and merchant network is tough. Hence, these businesses are likely to command high valuations as well. That being said, there would be plenty of money available for start-ups trying to solve a plethora of other challenges (e.g. private insurance, security), that exist with Bitcoin growth and adoption today.

2. Mining ‘will not’ be dead

A lot of press notes and individual viewpoints state that mining is dead, as we are already in the petahash domain and are restricted by Moore’s law from a technological stand point. I believed this until I heard Butterfly Labs and HighBitcoin talk about how enterprises can potential adopt mining. With transactions and transaction fees rising, it would be highly profitable for large enterprises to have data centers with mining equipment to process daily transactions. Medium enterprises, who cannot invest in capital expenditure, would resort to cloud-based mining. Finally, small enterprises would have to pay transaction fees, to the network. These fees would still be lower than those paid to Visa and Mastercard. In conclusion, we can potentially witness investment from large and medium enterprises in mining farms as early as the end of 2014.

3. There will be less than 5 alt-coins (out of the 50+ in existence) that will survive 2014

The open source nature of the Bitcoin protocol led to the advent of over 50+ alt-coins, most of which are blatant rip-offs with a tweak or two here and there. These can be divided into three categories

  1. Coins which are Ponzi schemes, where the sole purpose of the inventor is to drive the price of the alt-coin up and them dump
  2. Coins which can be mined easily and can have potentially more liquidity than Bitcoin
  3. Coins, which are based on a fundamental innovation and can result in specific adoption or security led use cases.

In my opinion, only the category 3 ones would survive. PPC coin, which has introduced a proof-of-stake system in addition to proof-of-work, is one such coin. It is on my list of survivors. It is also important to note that presently, other than Bitcoin, no other alt-coin has shown the potential for a growth in its acceptance network among merchants or companies. This is likely to remain true for 2014 as well.

4. Bitcoin community will solve problems including that of ‘anonymity’

One of the key roadblocks for governments and financial institutions to start participating in Bitcoins is the anonymous nature of transactions. This has led regulators to believe that Bitcoin can potentially be used for money laundering, terrorist support etc. The good news that we have a very active Bitcoin community globally, which is constantly evolving the protocol. Hence, my prediction that in an effort to make Bitcoin more accepted, this community will come out with a solution to ‘anonymity’ that regulators can live with. One of the ways is it being done today is by forcing exchanges, wallet services and other Bitcoin companies to have KYC practices similar to those of financial institutions. As a side thought – Internet was and is still used for porn. That does not make it ‘not useful’!

5. US, China and other global forces will not be at the forefront of Bitcoin adoption

Fincen, PBOC and RBI’s reaction to Bitcoin in US, China and India points to one single conclusion – we are not going to let a ‘controlled’ and ‘vast’ financial system adopt a decentralized crypto-currency, which can be anonymous and used for illegal activities…as yet. Countries which have had a history of currency issues and have not had effective monetary policies are the ones who will be at the forefront of Bitcoin adoption. With China out of the mix currently, one can look at Argentina, Cyprus and others to lead. These may be smaller as a proportion of the global base. However they are likely to have much more local penetration and most importantly more government support or less government intervention – whichever way you want to look at it. That being said, successful internet and mobile companies in the US/Europe are the ones, who are most likely to offer digital goods in Bitcoins. Zynga just announced their experiment. I would not be surprised if Spotify, Netflix etc are next.

6. Indian ecosystem will be slow to evolve; limited to speculators and mining pools

The Indian Bitcoin start-up ecosystem today is limited to less than ten startups, including exchanges such as Unocoin, wallet services such as Zuckup, mining pools such as Coinmonk and some other ideas – compared to hundreds of them in each US and China. There is little evidence today to ascertain whether any of these startups are going to create a home market or serve an international market. In fact on the contrary, the Indian market is likely to be served by global Bitcoin companies. For instance, Itbit, a Singapore based exchange has already started targeting Indian consumers. Global services have demonstrated the capability to be credible especially when it comes to convenience and security by solving complex algorithmic problems. This also makes them more defensible in the long run (e.g. Coinbase’s splitting of private keys to prevent theft) and poses a big challenge for Indian Bitcoin start-ups. There is an active Bitcoin community in India (about 15-20 people), which is trying hard to create awareness among consumers and regulators. I sincerely hope to see at least one world-class Bitcoin startup come out of India.

7. The use of Bitcoin will evolve beyond ‘store of value’ or ‘transactions’

The underlying Bitcoin protocol makes itself applicable beyond the use cases of ‘store of value’ and ‘payments’. The Bitcoin foundation took a huge step in allowing meta data to be included in the blockchain. This will unlock a lot of innovation and maybe even prompt regulators to acknowledge the potential of Bitcoin, making it all the more difficult for them to shut it down or suppress it. As one can see from the current Bitcoin ecosystem map that there are almost no startups, which solely use the protocol without using the ‘coin’ or the ‘currency’ as a function. 2014 will be the first year to see some of these.

8. The ‘browser’ of Bitcoin will come this year

The Netscape browser made the Internet happen. ‘Something’ will make Bitcoin happen. It is still very difficult for the average ‘Joe’ to understand, acquire, store and use Bitcoins. Though Coinbase and several others are working on innovative security algorithms and making it easy to store Bitcoins digitally, it is still not enough to make Bitcoin mainstream. Hence, what a ‘browser’ did to the Internet, a product or technology innovation will do it to Bitcoin in 2014. This will make the transition to Bitcoins frictionless. Kryptokit and Eric Voorhees’ Coinapult are promising startups in this direction. Encouragingly, all the building blocks for that to happen – like mobile penetration, cryptography algos etc are already in place.

9. The price of Bitcoin is likely to range between $4000-5000 by the end of 2014

Well, though some people will argue otherwise, price is not the most important thing about Bitcoin. But given the interest and its volatility, it does deserve a place in this blog post. Speculators have predicted Bitcoin to go upto $100, 000; some say the maximum it can reach is $1300. Though, am sure that there is some underlying basis for these predictions; here is the one for mine. Bitcoin’s price is a function of supply and demand. While the supply is predictive, the demand is less so. However, the increase in the demand of Bitcoin can be compared to networks such as Facebook and Twitter, which have followed a ‘S’ curve of adoption. All such networks typically take 6-8 years to plateau out with year 4-5 being the steepest. Though Bitcoin was invested 4 years ago, I would say that 2013 was its 2nd real year. Given the nature of the ‘S’ curve, the price increase in 2014 is likely to be 3-4 times more than the one this year. Hence, the $4000-$5000 range, where the Bitcoin price is likely to settle down in 2014.

10. Last but not the least – Satoshi nakamoto will be Time’s Person of the Year 2014.

Please read about him here.

* Investments of Lightspeed Venture Partners

pwimage

The technology world has become a little bit flatter over the last ten years; the US monopoly on producing technology startups with impact outcomes has been broken.  We have all seen impact product companies coming out of Europe, Israel, and China over the past decade.

These startups are leveraging new platforms and customer behaviors that were non-existent ten years ago, including platforms such as app stores, SaaS app marketplaces, smartphones, tablets, content marketing channels, social media, and embedded payment options; and new user behaviors such as self-service on-boarding, bottoms-up technology adoption in SMBs/enterprises, use of open source technologies, and search as a primary way to find new applications/technologies.

We believe it is now the right time for Indian product startups to step up to the global plate, especially in mobile applications, developer tools/enabling technologies, and SaaS for SMBs.  There are already several examples of such companies, including Browserstack, Freshdesk, Helpshift, InMobi, Kayako, Nimbuzz, Simplify360, Webengage, Wingify and Zoho.

Investing with this theme, we are excited to partner with Chandan and Vaibhav at Phone Warrior to take mobile communications to the next level.  What Wikipedia did to encylopedias and Waze did to radio road traffic reports and paper maps, namely disrupting existing businesses with community, real-time and mobile, Phone Warrior is doing to plain old phone calls and messaging.  Phone Warrior’s user growth, retention and engagement in countries around the world over the past six months gives us confidence that they are well on their way to finding product-market fit.

Phone Warrior (incubated at 91Springboard) is building a globally-relevant cloud-based platform to crowd-source mobile phone numbers and turbo-charge the value of this data through big data techniques, graph search and machine learning.  Through this platform, Phone Warrior powers an essential set of services that has grown rapidly over the past year and could get onto every mobile device in the world across all forms of communication including phone calls, text messaging and over-the-top IP-based messaging.  Their product is currently visible on mobile devices through services such as caller-ID, spam blocking and call-blocking.

There is much more to come that leverages this core platform.  We look forward to exciting times ahead with the Phone Warrior team.

Post Authors: @dkhare and @anshoo

appstore

[Also published on Medianama]

It has been only five years since the launch of the iPhone App Store in July 2008.  Feels like fifty dog years.  In reality this is not a long time, compared to nearly twenty years since the launches of Yahoo (February 1994), Amazon (July 1995) and the IPO of Netscape (August 1995).  Over these twenty years, not only have startups innovated on product/design and business models and but also on demand generation/user acquisition strategies.  Yet only five years after the launch of the App Store, the pace of innovation in mobile app user acquisition seems to have hit a brick wall… in the search for increasingly efficient methods of marketing, we seemed to have hit the efficient frontier.

In India, efficient user acquisition is a key problem area for developers targeting Indian users as well as global users.  Fortunately, marketing has gone online, along with placement, onboarding, monetization and payments. And mobile marketing can be done at world-class levels right in India.

So, what is this efficient frontier? What are the best practices for mobile user acquisition?

To provide some concrete pointers,  I organized several founders-only sessions on enterprise/SMB SaaS user acquisition as well as mobile user acquisition in Bangalore, Delhi and Mumbai. This month, I also organized and moderated a session on mobile user acquisition with TIE in Delhi.  Our eminent panelists included Harinder Takhar (CEO of PayTM), Pathik Shah (Head of Growth, Hike), Jamshed Rajan (Chief Product Officer, Nimbuzz) and Chandan Gupta (founder/CEO of PhoneWarrior).

So here’s a summary of what we discussed – please note the tone of the conversation was more around hacks and learnings from practitioners as opposed to some over-arching strategic viewpoint on mobile user acquisition.  Many of these tips fall into the non-scalable bucket but some are more scalable. I will leave it up to you to decide which is which.  Also, it was assumed that developers were tracking efficiency of marketing campaigns and funnels through some form of app instrumentation, whether through commercial solutions like Mixpanel, Apsalar, Flurry, Google Analytics etc or home-grown analytics.

CONVENTIONAL PRE-MOBILE TECHNIQUES

These include traditional PR/media outreach, analyst relations, direct selling and tradeshows/conferences.  These techniques are fairly inefficient and out-of-date for mobile apps as most target users/consumers are not reached through these means.

Blogs/websites: Chasing Techcrunch and other tech blogs does not have nearly the same effect it had a few years ago – previously, a post on Techcrunch could drive 50-100k visitors/downloads – now, this number is down to 100-500 downloads.

Vernacular newspapers: Targeting vernacular media outlets across India, as opposed to the English and Hindi dailies could provide some advantage. Regional language papers are hungry for technology news and can be quite effective in reaching regional audiences.

Localization: On a related note, for some apps, it makes sense to provide app store listings in several different languages, sometimes backed up by the product being localized as well but not necessarily.

TV: In India, it could be useful to get onto NDTV Cell Guru and other such shows.  These media outlets also have Facebook, web, mobile and video assets to drive awareness.

Print: Some panelists had tried this. It does not have any meaningful impact on mobile app downloads.

Offline: Some panelists had tried stationing people on campus to get some initial adoption. It does not work and the message gets diluted/warped when temporary employees are hired to do this.

MOBILE 1.0 TECHNIQUES

These include OEM/mobile operator distribution, mobile advertising and search engine optimization (SEO).

A basic deterrent is app size – especially in Tier 2 towns and beyond, people are wary of downloading apps greater than 10MB in size.  Really need to minimize app size.

Factory loading: Average OEM/carrier deals take 5-6 months at least and have to be positioned as helping the OEM/operator differentiate. Most OEMs are now looking at apps/services as revenue streams so this should be baked into the business case for them, perhaps as a rev-share.  Some panelists mentioned Rs 5-10 per install as what Indian OEMs are asking for.

If the app is already factory-loaded onto the product, this doesn’t drive activation either – factory-loading has to be on the homescreen and accompanied by an above-the-line marketing campaign (e.g. advertising or logo on device box) preferably paid for and driven by the operator/OEM.

Some of the smaller/newer OS/OEMs providers are being more aggressive in courting developers. These include Tizen, Intel, Amazon, and Blackberry.  If you build your app for these, you will maybe get an advantage and may get paid to build out on their platform. The flip-side, however, is that these platforms have small audiences and will most probably not drive a meaningful amount of downloads/usage.  Panelists mentioned Parag Gupta at Amazon, Annie Mathew at Blackberry and Priyam Bose at Microsoft/Windows.

Mobile advertising: General consensus is that users acquired through paid advertising tend to be less loyal than users acquired organically.  One exception may be advertising to users of competitor apps on Facebook and the use of promoted posts on FB. Panelists mentioned Google/Admob, Inmobi, Flurry, Tapjoy, Yieldmo, HasOffers etc.

Mobile advertising gets an initial burst of downloads to move up into the top rankings on the app stores and then some drip marketing is required to keep rankings high.  Some people expressed an opinion that any burst marketing should be done on one day rather than over several days and perhaps should be done on a Friday so the boost in rankings persists over the weekend.  The key is to get into the top 10.

One needs 100k-200k installs per day to get into the top of the charts in India. Can’t get there through paid advertising.  Advertising is not cheap.  Especially given the messaging wars between Line, WeChat, Whatsapp, Hike and others, mobile inventory seems to be sold out in India.

If you measure real CPI (i.e. CPI taking into account successful download rates, activiation rates and 3 or 6 month churn), actual cost of customer acquisition (CAC) ends up 4-10x as high as CPI quoted by ad networks. In India, iPhone CPIs are under Rs 120 ($2) and Android Rs 30 ($0.50) at low scale.

There are mediation layers from Flurry, Hasoffers, Mopub and others available so that developers don’t have to integrate multiple ad network SDKs into their apps.  All these SDK providers have their own ad networks but also connect with other ad networks. Meanwhile, publishers use SSPs to route between ad networks. It’s a complete spaghetti-like mess.

Incentivized downloads: Tapjoy/Flurry used to provide this but have moved away from this. Panelists urged developers to not even think about trying incentivized downloads as CPIs are high as are uninstall rates, given that users are downloading without any intent to use.

Search engine optimization: Most developers mentioned that web SEO did not work for them.  Content on the web does not bring traffic from the web to the app stores.  Some people mentioned content marketing e.g. blog posts and posting presentations on Slideshare as a way to drive some traffic.

Mobile web: Make sure you have a http://get.yourwebsiteURL.com mobile-optimized website up and running.  Apple and Android have special HTML widgets to include here that you insert once you know the OS of the device (through the header). These widgets redirect to the relevant app in the relevant app store.

Social media is not very effective for user growth. It is somewhat effective for engaging existing users as well as a support channel.  Adding social network sharing within apps does generate some virality, especially if sharing is encouraged at points within the app where users get a delightful experience.  Apps with social as their core may benefit from Facebook, including automated actions posting to Facebook (e.g. ‘read’ or ‘play’).

Virality:  Startups should track their k-factor/viral-factor and viral cycle time.  Even a k-factor of 0.2 really helps if it can be sustained over several months/years.  A viral factor anywhere close to or greater than 1 is phenomenal but can only be sustained for a short period of time.

MOBILE 2.0 TECHNIQUES

App store optimization (ASO): The panel talked about platform stores (like Google Play, iOS App Store, Blackberry App World and Amazon), indie stores (like Getjar, Opera, UCWeb and Appia) and operator portals/stores. Most indie stores have a paid/sponsorship model but CPIs are the same as ad networks.

Platform app stores require carefully crafted keywords (repeated in title and description), creative content (which is mostly only read by loyal users), quality screenshots/logos and a good demo video for Google Play (linked through Youtube). Do not to go overboard here e.g. do not stuff keywords in the title/description – you will look desperate.  Best tools for ASO include Google Trends, Searchman SEO, AppCodes.  Reverse engineer the search algorithms on the app stores by typing in keyworks to see output of apps appearance.

Getting featured is obviously great but is driven purely through relationships (for Apple and Amazon) and algorithmically (for Google Play) with the curation teams for each platform, sometimes on a geography-by-geography basis.  Always make sure to comply with the design guidelines provided by each platform – this makes it more likely you will get picked up for featuring. Use AppFigures and Appannie to track your performance and reviews.

App updates also drive additional downloads and push up ranking for a short period of time.  Since there are no well-proven A/B testing methods for mobile apps, it makes sense to try several variations with each app update.

Cross-promotion: Companies like Outfit7, Zynga and Google have very effectively used their large network of apps to cross-promote new app launches. Outfit7 has been able to get to one billion+ downloads and has cross-promoted new launches to tens of millions of downloads in a few weeks.

Barter: Many developers don’t think about this, perhaps because it only applies when their apps get to some scale (several million MAUs). The trick is to find mobile app properties that (1) have tens of millions of MAUs; (2) have users in demographics/regions that you are targeting; and (3) have a large proportion of unsold or remnant inventory i.e. low sell-through rates.  Bilaterally trading this remnant inventory can then be quite an efficient, not to mention cashless, way of driving downloads.

Referral schemes: Virality can be driven through incentives that provide an individual relevant app-specific user benefits in inviting people successfully. Examples include Hike (free SMSs for each successful invite), Dropbox (additional storage for each successful invite), Evernote (one month of free premium service with each successful invite) and Paypal ($5-10 for each successful invite).  These schemes do not work for single-user utilities if you hand out real money.  Users will try to hack around this system.

Beyond a certain point, only word-of-mouth/virality works, can’t use paid. This does not apply necessarily in the case of apps where the lifetime value (LTV) of an average user has been quantified, as can be done with many user-paid models like games, ecommerce and subscription services.

UNCONVENTIONAL TECHNIQUES

Use social influencers: If you can identify and target social influencers, it sometimes works to make them proponents of your app.

Gamification: Leaderboard-based incentivization does not impact new user acquisition.  Make sure that gamification works even if the user does not have any friends using the same app.

Push SMS marketing: CPIs end up being within 25% of where the ad networks are, so not much different in price.  Historically, SMSs went out to non-data, non-smartphone users as well so were not effective.  This can contribute to cheapening the brand. Also, TRAI has specifically banned sending spam SMSs to users on the DND list.

Restricted invite lists: This is what Mailbox did, as have many others.  A permanent beta is a less extreme example of this. This make sense for apps like email which need to be scaled up slowly given their complexity.  However, restricted invite lists only make some sense when there is a lot of PR and noise generated some other way to drive artificial scarcity.

Review sites: At small scale, this helps. Some developers pepper comments throughout review sites such as Appolicious, AppTurbo and AppBrain to drive some downloads.  This also build links into the developer’s website to drive Google search rankings.

Here’s a video of Dev Khare of Lightspeed Ventures in conversation with Manik Gupta of Google Maps on the topic of building global businesses on top of maps.

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