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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
(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:
- 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.
- 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.
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
[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.
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.
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:
- Education: Online higher education, Online certification and Test prep (very nascent) are showing that consumers are willing to pay and consume online.
- Jobs: Linkedin’s Premium Membership, ABC’s Head Honchos and Naukri’s premium services are showing early signs of monetizing through consumers.
- Apps: Evernote, Apple iTunes/App store and Google Play are monetizing on an Indian user base – this could be a massive trend given the rate at which smartphones and mobile data users are growing.
- 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.
- Auto: Classifieds for used cars
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 Cleartrip, Zomato, Hike 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.
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!
Yesterday, we formally announced that Lightspeed and Sequoia invested in OneAssist, a company that creates and markets assistance and protection-oriented membership plans for consumers. OneAssist was incubated and founded in the Lightspeed offices during 2011 by Gagan Maini and Subrat Pani. We’ve known Gagan for almost five years and frequently traded views on business ideas and opportunities in the payments, loyalty and concierge space. Gagan and Subrat have known each other since the late-90s, when they worked together at the SBI-GE cards joint venture. They have each built new businesses from scratch inside larger companies – Gagan most recently started the Indian operations for CPP and Subrat built the credit cards business at Kotak – and we’re excited to back them in building a new company in this white space.
The thesis behind OneAssist is that consumers increasingly value peace of mind, convenience and assistance with respect to certain events that can disrupt or interrupt our everyday lives (such as the loss of a phone or wallet, health emergencies etc.). This is driven by: (i) increasing time scarcity – especially in double income households, (ii) a cultural preference for ‘assistance’ (witness services such as Naukri’s ‘assisted’ online job postings, where sales reps hand-hold employers through the job posting process, JustDial’s assisted directory service, IRCTC’s agent channel for booking online tickets etc), and (iii) an emerging orientation towards protecting oneself from unforeseen future events (health insurance didn’t meaningfully exist 10 years ago and is a 13,000 Cr industry now). And perhaps more anecdotally, a growing sense of taking responsibility for oneself and one’s family.
We believe there is a large opportunity to create a branded, consumer-oriented assistance and protection platform across multiple segments. The initial use cases OneAssist will support are the loss (or theft) of a wallet (including cards, driving license, PAN card etc) and the loss (or theft) of a mobile phone. In each case, the company takes on the chore of cancelling credit/debit cards (or remotely wiping and locking a phone), protecting against misuse of cards and/or data, providing emergency assistance (such as providing a replacement handset with data fully backed-up), and replacing essential identity documents such as a driving license or PAN card. Each product also offers certain group insurance benefits to protect against financial loss. Plans are priced at Rs 1,000 to 2000 per annum depending on the chosen package plan, which equates to just about Rupees 3-5 a day.
In addition to marketing directly to consumers, the company would also market their products through affinity partners (such as banks, telcos, retail, etc) and corporates who have large customer or employee bases and can offer such products as very relevant value added service or benefits for a fee.
This business model is notoriously difficult to execute against given the importance of delivering against the promise in ‘moments of truth’, the myriad of supply-chain partnerships and capabilities that must be developed and coordinated, the direct and partner-driven sales and marketing capabilities that must be built to achieve scale and the customer engagement strategies that must be deployed to ensure high customer satisfaction and loyalty. We believe that Gagan and Subrat are the best entrepreneurs to take on this challenge and wish them and their team the very best as they embark upon this adventure.