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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.

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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.

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.

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.

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.

india_rupee

I think there is a lot of potential and hope, especially now, for founders to start online (only) services businesses. Indian consumers seem to be opening up to paying for online B2C services, where purchase and most fulfillment is online. This trend is a natural outcome of India’s increasing online population (>125M now) and familiarity with online as a channel (20M bought online in last 12 months, 7M of which were non-travel). Barring a few exceptions noted below, this space has historically been challenging but I hope to see that changing in future.

Successful examples of existing online services in India include matrimony (Shaadi and Bharat Matrimony) and also aggregators across categories like travel (rail, air, bus), movies and mobile phone recharge. While the aggregator segment has been more successful because of direct linkage to offline services, it is relatively less interesting (and more capital intensive) because of low absolute margin per transaction and dependence on offline delivery for scaling versus a service which is purely digital in nature.

Subject to a large potential paying consumer base being available, pure online services are fundamentally very attractive to entrepreneurs and investors because of:

  • High capital efficiency (high gross margins).
  • Become disproportionately valuable (given B2C/branded nature).
  • Ability to grow quickly, since they are not constrained by offline buildout (not applicable everywhere).

Here are a few examples below in categories where we are anecdotaly seeing early growth in new online consumer services:

  • Financial Services: Previously, the web was used primarily for lead generation.  Now, certain types of insurance (Auto, Life, Travel) that are delivered end-to-end online are gaining traction.

It is still early days for these trends – but I hope that the growth continues. If you know of other online categories or businesses which are getting traction, I would love to learn about them – please add to the comments section below.

PS: While mobile operator value-added services (MVAS) is a great example of online services, in my opinion, these services have not really been B2C.  As a result, I am not including MVAS in the list above.  My list also does not include businesses which collect revenue from offline vendors (e.g. Zomato) or have large offline delivery responsibility (e.g. goods ecommerce).

[Also published on Nextwala]

The approach to mobile design and information architecture here in India has been haphazard at best and atrocious at worst. Perhaps this is caused by consumers just being happy getting economic value out of digital services, far outweighing their need for great design.  Perhaps the backend-oriented outsourcing culture has made developers less savvy about creating world-class UI/UX.  Perhaps the featurephone- and carrier-orientation of mobile services hasn’t required good design. Who knows.

I don’t see this as the future of design in India. There is an early but growing sense of good design and information architecture emanating from India-based mobile application developers.   Many of these are competing either on a global level or are targeting smartphone users who expect well designed apps, such as they see from Facebook, Whatsapp, Flipboard, Kindle, Spotify and Youtube.

I like to see a solid design orientation in consumer-facing companies that I look at.  This is an absolute imperative for Web and mobile.  At Lightspeed, we have some companies that are focusing on delivering great experiences, including Fashionara, LimeRoad and Dhingana.  Users are responding well to their designs.

As a benchmark, I think India-based CleartripZomatoHike and CloudMagic really deliver on superb design and value. Kudos to the developers at these companies.  I have included some screenshots below – hopefully the developers won’t mind me making use of their app images.

Addendum: Several readers have suggested other well-designed apps in India. I wanted to mention them here as well: BookMyShow, Ola Cabs, PayTM and RedBus.

Zomato

Photo 3  Photo 4

Cleartrip

Photo 1   Photo 2

Hike

Photo 5  Photo 9

Cloudmagic

Photo 8  Photo 6

(Source: kenteegardin)

We have been thinking through how to start and build large mobile B2C businesses, with an eye toward the megatrend of mobile that is slowly building here in India.   Megatrend-wise, the number of mobile internet users in India has grown rapidly (60-100M mobile web users depending on who you believe in) and that trend is likely to continue.

While this megatrend is creating an opportunity to build mobile-first B2C businesses, the lack of monetization methods is a big problem. Stumbling blocks include lack of depth in micro-payment platforms (outside of telcos) and a rather small mobile advertising market.

I believe that mobile-first startups need to keep gross burn low while iterating fast toward product-market fit –  there are two key metrics which I feel need to be optimized early-on and are lead indicators of the value that a business in this space can create:

  1. Customer acquisition cost (CAC) associated with a fast growing user base
  2. Engagement within the acquired user base

How to drive lower customer acquisition cost:

Low B2C CAC for a quickly scaling user base can mean one or more of the following:

  • You have hit a need gap that might have a large market.
  • Your product cuts through the clutter and provides an offering much better than competition / substitutes.
  • Strong virality or word of mouth referrals which come from a wow consumer experience and/or a well designed social product.

Typically, cost of acquisition needs to be compared against the revenue or lifetime value of a user, but given monetization will take longer in India, absolute low customer acquisition costs are important for the business to grow and sustain. Dhingana, a Lightspeed-backed music streaming service on web and mobile, for instance has spent a minimal amount on above-the-line marketing and has reached several million monthly active users.

What if your customer acquisition costs are not low?

  • Initial customer acquisition costs for new products are typically high. As you refine the product, channels and communication costs should improve.  So have a plan for driving down blended (over non-paid and paid channels) CAC.
  • Explore acquisition channels that are opening up now: A key driver of TripAdvisor’s success was its understanding of Google SEO much ahead of competition. Social and mobile channels are opening up now and some aspects aren’t yet saturated or very well understood. Take advantage of such channels. For example, Facebook recently launched its in-stream advertising and provides an opportunity because it isn’t very popular yet.
  • Think about alternate channels for customer acquisition (E.g. offline retailers for local oriented apps, banks for financial services, publishers for media content, etc.). However, ownership of the customer is always an issue with such channels.
  • Figure out monetization sooner, rather than purely growing the user base: Easier said than done, but you might want to identify market segments where there are customers that have a higher willingness-to-pay.

In essence, low customer acquisition cost is a key indicator of a large future user base.

How to drive higher engagement and retention:

After user base growth, engagement and retention are the key indicators of a business’ sustainability.

Poor retention is like a leaky bucket. There is no way you can create or hold value if your service is unable to retain customers. Retention (% of users that continue to use your service) after three months of activation is a widely accepted engagement metric. Flurry recently reported an average retention of 35% after three months of registration across a large base of apps. If you don’t know which side of this average your retention is, you are blind to one of the most important aspects of building a mobile business. A few points to keep in mind when using the above average as a benchmark:

  • The nature of your business impacts retention. Flurry’s own data shows the extremes, such as finance apps which average retention of 10%, while news/sports could be as high as 50% after three months. This does not mean you should change your business, but have the perspective when you are benchmarking your business.
  • If your user base includes a large mix of older platforms like Symbian (especially in India), then expect your average to be lower than the global average, which has a large mix of iOS that is likely to have better experience and thus retention.
  • Finally, this retention number is from developers who cared to install such a measurement tool. Many developers who didn’t would likely be at a lower retention for their applications.

More frequent use of your service makes it more valuable. Flurry reports average usage frequency of ~4 times per week within its sample. The use of game mechanics and notifications are approaches to building engagement. Foursquare is perhaps one of the leading examples in driving engagement through gamification. Tools such as Urban Airship, Badgeville, Bigdoor and Xtify could be useful to use here.

Start tracking engagement metrics as soon as you launch your service. Use tools such as MixPanel, Flurry, Apsalar, Kissmetrics to measure funnels and cohorts. Define core, casual and inactive users, and measure movement between these categories against weekly and monthly targets.

Delivering on these metrics will lead to monetization and sustainability over time:

Drive high engagement today to create valuable users for future: Eventually, a portion of users who you engage could pay for the service. If the service is providing enough value, people in India jump through quite a few hoops to find a way to pay. IRCTC (~20M monthly transactions) and online tax filing (15 M in 2010-11) are great examples of at scale online transactions.

Focus on building engaged user base for better ad-monetization: Overall, there is far more mobile ad inventory in India than there is demand from advertisers. Thus, a business that stands out in terms of user engagement and has an identity within its user base will attract ad budgets. For instance a strong sports-oriented platform could find youth-oriented brands as its takers. iPad has a strong identity and engagement within its user base and ads on iPad in India go at ~Rs 1000 CPM and there is always demand for more. On the contrary, if you are one more provider of mobile inventory, then you are likely to be used for performance campaigns with poor fill-rates and low CPMs.

Good performance is self-sustaining: Your performance on app stores as well as likelihood of getting featured on one improve if you have organic traction (low CAC) and have high engagement. Android for instance optimizes search results based on retention metrics of apps.

More monetization options are becoming available, albeit slowly:

Existing VAS business models are being challenged: While the above two metrics don’t apply as sharply to existing mobile VAS businesses that are monetizing through operator relationships, the wind  is certainly blowing in the direction that they would need to start thinking about these metrics as well (TRAI’s regulations and TDSAT’s recent ruling in TRAI’s favour).

Payments through telcos is a matter of time (could be long though): Given the circumstances, telcos are opening up to being a payment channel (and getting paid like one) where the mobile business is responsible for customer acquisition. Vodafone is already selectively allowing B2C businesses to keep 60-70% of the revenue that is being collected by Vodafone from users that were acquired directly by the B2C business. More on this in Dev’s post.

More payment options are opening up: There are more efforts underway at app-stores (Rupee payments at Google Play and iOS App Store, OVI/Blackberry integrating with Airtel/Vodafone billing gateways). There are also other ongoing efforts like mobile/online wallets and integration of telcos under a single payment solution which will all lead to a much more favorable payments ecosystem for mobile B2C businesses as they come into market.

Mobile advertising is getting organized: The mobile advertising ecosystem in India is firming up with multiple players from ad-networks (InMobi, Komli, Vserv) to media-buyers (Ad2C, Madhouse) setting up dedicated teams for the Indian market. Brands are already experimenting with mobile even though the budgets are small today. It is still a long way to go, but if smartphone penetration continues to grow, then mobile could very well be the largest targeted digital rich media platform available to a brand manager.

These are still early days and it is a long haul, but if you are building a mobile-first B2C business and focusing on the metrics above, there is a path to meaningful value creation.

Gagan Maini and Subrat Pani, founders of Lightspeed-backed OneAssist, as well as Lightspeed’s Bejul Somaia, were interviewed on CNBC’s Awaaz Entrepreneur program in September 2012.  Here’s the video!

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