Sunday, November 30, 2008

The Grapes of Wrath

“The Grapes of Wrath” is the title of a book, by John Steinbeck, set during the great depression. It is the story of a poor family’s (the Joads) journey hit by the economic downturn, from Oklahoma to California, in search of a decent job, survival and dignity. I read the book, after listening to the Bruce Springsteen song “The Ghost of Tom Joad”, which has reference to the protagonist Tom Joad, from the book.

I choose this title for this blog, few days back, but after the Mumbai terror attack it addresses two issues. One is the current economic downturn, uncertainty, job-cuts and world looking down the barrel of a major recession. Here is one quote from the book:

“The Bank is something more than men, I tell you. It is the monster. Men made it, but they can’t control it.”

This is coming true in 2008, as well; the term added in this era is “complex derivatives”. Men made it, and they cannot control. Although some men like warren buffet, criticized it. The jobs are going, the companies are falling, the sales are down and the credit is tight. With some luck the internet advertising has survived In US, as it has proved to be more effective and ROI driven than any other medium. The Silicon Valley has survived the crash well, and still holding fort.

The second is the terrible Mumbai attack, which is the grape of the wrath, the anger, the hatred and the animosity built around the world. The human has dropped to a level, where the god given brain has stopped working. He is ready to kill anyone for someone’s revenge, and the killer didn’t know either “anyone” or “someone”. Here is one quote from the book:

“In the souls of the people, the grapes of wrath are filling and growing heavy, growing heavy for the vintage”

If you go to youtube there are stinging videos of wrath, against Hindus, against Muslims, against Jews, against India, against America and so on. Basically you can find a video against anyone, and the comments on those videos can easily explain the wrath, the hatred, people want to kill each other, not knowing who is on the other side. “Kill them”, “F..k them”, “Rape their women” are the common comments, please check, and I bet you already know this. We have lost it! The bright human has lost it!

Now with the top world economies going negative in GDP numbers, we at India were happy and hopeful that we will do at least 5 % economic growth, which will be among the best. Now that will be good enough to attract investment of leading investors across the world. Suddenly after Mumbai attacks I(and I bet many others) am thinking, about my safety in this country. In the aftermath, some articles have come out in the financial papers, about “Brand India” loosing its shine, and India’s corporate Image getting hurt. Although that is correct, but I think the top of the mind thought, with most of the Indians today is safety and security within the country, for which we await some strong actions from the government.

In any case, it looks like the economy is going to get hurt. Investments in a terrorism affected state will get tough, and tourism is going to suffer a great deal. Just like all media, the internet industry is also suffering with the falling advertisement spends. The aftermath of the attack will bring more issues to curtail the progress we were making. As the economic growth slows down further, we can look at PC penetration, and Internet penetration again growing at a slower level than anticipated. We were hoping for 100 million internet audience by the end of 2011, I think it is going to be delayed, until some major change happens.

The current issues of majority of Internet firms are negative operating leverage due to economic slowdown. And as per the sequoia presentation, the death spiral may get set in motion, in an effort to get the operating leverage positive by brute force of cutting costs. The investors are under immense pressure of raising credit, on the negative operating leverage. Now dotcom firms of Silicon Valley are also under similar pressure, but they were ready with the learning’s of the dotcom burst 8 years back. The firms are having lean manpower structures, automated models and thanks to cloud and grid computing, very reasonable server and infrastructure costs. Another great thing is the open source software resources, on which a lot of start-ups and even major sites are built, with minor coding and customized applications on top of them. The manpower planning is to have talented and senior people with very limited team strength, the visionaries and vertical/functional experts run the show, and donkey-work (manpower intensive, not dumb work) is outsourced to donkey-work experts.

This is not the case is India, and internet firms are still to learn from the crash. Majority of workforce is young and inexperienced, and are even new to their corporate career, let alone the Internet Industry. The other media like TV, radio and print has a training ground, and a process for education of new comers. But the Internet seems to be requiring zero training and practically anyone right out of college or from any other industry can take up major jobs. This is the key reason, why major brands do not spend, or pay very little for much higher value than any other medium, as the poorly trained manpower in Internet is not able to convince clients on the strengths of the medium. This is also adding to confusion and lack of foresight for taking on economic slowdown in reference to Internet businesses.

Here is another quote from the book to sum-up all situations:

“Man, unlike any other thing organic or inorganic in the universe, grows beyond his work, walks up the stairs of his concept, emerges ahead of his accomplishments”

Here is my take on the situation; we need the economic situation to improve across the world, with basics of hard work, savings and real income. We need hatred to come down and safety for everyone across the world. We need the Indian internet firms to surge ahead, and await the boom (like in US and China), with Internet population going beyond 100 million.

I salute the martyrs of Mumbai.

Sunday, October 26, 2008

The Greatest Trick

“The greatest trick the Devil ever pulled was convincing the world he didn't exist.”
The famous dialogue from the movie “The usual suspects” can be the headline for the financial collapse in the world. They are calling it the “Financial Tsunami”, “The Meltdown”, “Nuclear Winter” and so on. Yes ladies and Gentlemen the biggest financial crisis of the last 75 years has hit us. Now this blog entry will not be about explanation of sub-prime crisis, it will be about economy, lies, human behavior, financial modeling and a bit about the impact on the Internet space. It will be a bit long, but if go the whole way, I promise you the kicks…

The guy who predicted all this is “Paul Krugman”, the Nobel Prize winner for economics, the columnist of New York Times. Here is his now famous article from back then in 2005, titled “Greenspan and the Bubble”:

Here is the important excerpt, If you do not want to read the whole thing:

“If, in particular, the housing bubble bursts before the trade deficit shrinks - we're going to have an economic slowdown, and possibly a recession. In fact, a growing number of economists are using the "R" word for 2006.”

And some part of the problem was challenged by Texas congressman Ron Paul, wherein he criticized Ben Bernanke on money supply, trade deficit and oversupply of dollar across the world. But what was the feedback to their issues, they were criticized and some (Bill O’Reilly) called Paul Krugman stupid and unpatriotic. The Greenspan’s, Bernanke’s and the Paulson’s played along like ignorant parents, for kids like Lehman, Merrill Lynch and AIG to create mayhem.

Let us come back to India, Aren’t we sick and tired of listening to finance minister (FM) and RBI governor’s rhetoric that everything is fine in India. Now that is not the truth, and everyone knows that. The market has crashed from 22 K to 9 K and SEBI believes everything is fine, it is not. The rupee has touched its lowest, still our FM says, No problems, do not panic, we are in control.

The real estate and banking stocks have crashed, with real estate firms crashing 80% in six months, and these firms are still releasing full page advertisements in leading Indian dailies, Is that not misappropriation of funds raised from public? SEBI doesn’t care a damn, and you (the shareholders) are given an impression that it is nobody’s fault. Mr. Subbarao was all out to back ICICI; the RBI even released a press statement for their guarantee. Amazing, everything is great, all the banks are well funded, liquidity is good, not only good, according to RBI, ICICI is better placed by 4% in terms of liquidity over statutory requirements. Now ICICI is our number one bank, if they are so well placed for liquidity, so we do not need to free up liquidity anymore, but RBI is cutting 2.5 % CRR and freeing up thousands of crores, is that not contradictory? If that was not enough, repo rate was reduced by 1 % and another repo rate reduction, will come with 15 days to one month. Now why is all this happening if everything is fine?

There is a real estate firm offering 20% interest on a public fixed deposit, one will be surprised to know that a leading media firm, which reports business, is offer 13 % interest. The stock market has fallen, rupee has fallen, Inflation still in double digits, food grains prices are rising in an economy with 80 crore people making less than Rs. 20 per day and inter-banking lending was stopped by our beloved RBI, and still there is no problem.

This is the greatest trick. Lehman brothers were never in problem, all their press statements were bubbling with confidence till the last three weeks of their existence. Recently Greenspan admitted the error in vision, and the American politicians are blaming it on greedy Wall Street players. But there is bailout for all on taxpayer’s money.

Let us rewind, the India of six months back, everyone buying shares, MFs, ULIPs and biggest of all, real estate. “They asked me to take a loan for property, as even if I would not be able to pay the installment, the house will always be worth way more”, this is the statement of an American Home loan consumer, who had to foreclose. Does this remind you of anything? Yes all your friends and investment advisors were making the same statements. If you told them that the property is a bubble, and there is no change in civic amenities (electricity, water, roads, law and order), they would laugh at you. Every second person had become an investment consultant, throwing advice on shares, MFs and real estate, with zero background. All ULIP plans were sold like “guaranteed returns” plans, which they were not.

Three weeks back, one of our ministers was mocking US economic system, and boasting how we will have no impact of this, what now? Now Real estate firms do not have money to complete projects, is what they are saying. Complete??? That is a joke, go to Greater Noida and tens of other suburbs near major cities, where big townships are announced, and a single flat is sold over a crore. I just went there with someone; there is nothing there, absolutely nothing, no electricity poll, no road, nothing. The question should be if these projects will ever get started with the liquidity crunch and plummeting stock prices of real estate firms. These firms were raising debt at rate of 30% plus not so long back, where is the corporate governance on that in India, none what so ever.

But is the mainline media talking about it, Not much, they are running interview of the FM and RBI governor giving assurances!! At least in US, the mainline media is challenging the Fed and the regulatory system. Here, the King Khan claims ICICI is safe (as if he will bailout if there is a problem), and the word on the street is that RBI will bail us out in case of crisis. The FM, PM and RBI governor has promised the bailout, the question is should we not be doing something to avoid that situation? The mid-term credit policy kept everything status quo, they said it is not required, on the same day, when markets fell by 1200 points. This is the foresight of RBI.

More word on street, Real estate prices will never go down, especially from the people who have taken properties recently. Second assertion, even if prices will go down, rentals will go up. I checked in market both real estate prices and rentals are going down, in case of doubt please check for commercial rentals in the posh Con. Place area of Delhi.

There is a clear impact on internet space in India, the advertising propensity overall has gone down, and Internet is taking the maximum heat, followed by radio. The start-ups are going to have a tough time, check my piece on internet evolution on that:

Let us not think about the financial crisis for a moment. Let us question our intellect as to try and understand the truth. But instead most people are busy selling their personally benefiting confused thoughts.

So I leave it to you, do you see a problem or not, do fundamentals like high money supply pushed by RBI is last 3 years without requisite growth in GDP, or growth in products and services is the right decision. Now so many questions, where were the questions when markets were rising?

To come clean after all this mayhem(which is just the tip of the iceberg), is surely the greatest trick!!!

Monday, September 8, 2008


Google, Google, Google, its everywhere, we love it, we use it, it is a case study, its all over. But few weeks back I read Top 10 Google Disappointments, and more than the piece I was shocked at some of the comments, people just hating Google with such venom. Someone even suggested to visit a site called

Now I am not disappointed with Google as a consumer and I love Google, Gmail, blogger, feedburner, Youtube and so on. I will specially mentioned Youtube here, I watch more Youtube than TV these days.

But one clear thing I have seen in using each of services of Google, right from their search engine to adsense to adwords to YouTube. It is the lack of accountability and an unannounced but still very pronounced threat “I am the Law!” This does not account to me hating Google, as things are not black and white in life, there are shades of grey. There are great things which Google has provided us, but there are issues coming along with that.

Using a Google service ensures little accountability, that is for sure, and all the Google sites and services, try their best to keep users away from any redressal system. The examples on YouTube are people abusing you in comments, illegal content, complaining for illegal content is next to impossible. The examples on adwords are highly misleading, like one I saw on 15th August in my gmail, “2 serial blasts, read news” from some news site, for a moment I thought some major mishap has happened, once I got in on the site, there was nothing. A common man wouldn’t know how to complaint, I got into adwords and complaint, and got a reply citing little responsibility for it:

“We monitor content in ads submitted through the AdWords program but are not typically in a position to arbitrate disputes regarding specific website content. As
stated in our Terms and Conditions, advertisers are responsible for the keywords and ad content that they choose to use.”

Someone should tell them, in a country like India, this will not work, abetting information on terror is the last we Indians want. I know it is not mistake of adwords, as the text ad must be created by the site owner. But giving people a license to advertise anything on the world’s biggest network is a big risk within itself. The lesser known evils are jobsites; advertising, “Jobs in Zee TV” as I open a mail from an old friend from ZEE TV is highly misleading and stupid.

Coming to search engine, the mother ship of Google, I see misleading results, but this time I will not blame Google, it is the SEO people. I think all these SEO people are making sure Google users will reduce usage of Google. When you search for “Home loan India” the number one site in organic links is,, a search for “House Delhi” gives and Now the search for “Buy House Delhi” will give first link same, and second link as My intention of searching “house Delhi” and “buy house Delhi” is the same, and I think I will be best serviced by, or, but I get none of it in the first page as an organic result.

The new chrome is great, wider area, better navigation and some small issues, like rumors that windows updates are going to make it look bad. Check out this businessweek story on similar issues:

Another thing, wearing the internet marketing hat, I think Google intentionally keeps their systems too complicated or too closed. It is left for the SEM and SEO people to take guesses and keep experimenting. The SEM scenario as more advertisers come on Google is going to be more expensive and less efficient. Already the PPC affiliate market has created enough confusion, misleading links, misleading Ads and a total mockery of Adwords editorial policy. But I think the lack of action is intentional from Google’s side, they want market competition and confusion, which will multiply their revenues. The affiliate PPC part is going to highly counter productive for Google as serious brands are going to reduce spends due to this confused marketplace.

But even after all this, “I love Google” and I hope they remove these kinks to create an even better internet place for all. I will say Google has given us much more than any tech firm, Microsoft is far behind, they just want to sell a new version, which requires a complete hardware change, I think they have some tie-up with the hardware firms. Quality services at no cost for the consumer, and showing them some Ads for it, don’t hurt me as a consumer. Everyone has got to make his money, I like the Google way, give things free to direct consumers, and charge others who like to reach out to “direct consumers”.

So here is my appeal to Google, as per the famous line from the movie Spiderman, "With great power comes great responsibility”. So I hope Google steps ahead and takes the great responsibility with the great power house they have become on the internet and in terms of influencing people across the world. I think Google owners have a great chance of making a positive difference to people’s lives. I will end with a Sergey Brin quote, and I hope he does as he says:

“Obviously everyone wants to be successful, but I want to be looked back on as being very innovative, very trusted and ethical and ultimately making a big difference in the world.”

Sunday, July 20, 2008

Social Networking: The future is beginning now!!

The C2C space is hot across the world, and so is the case in India. The India social media space is rocking with leading sites in the country being Orkut, Youtube, Wikipedia, Facebook and blogger. These sites feature in top 15 Indian sites as per alexa and have similar trends in comscore as per unique user per month data. Even worldwide scenario is the same, with these portals featuring in top 15 global sites in terms of traffic.

But is that all we need to know about the success of “User Generated Content”? What is the next step to it, what is the movement from web 2.0 to web 3.0 for these applications? Most important of all, what are the key success factors?

Focusing purely on social networking sites, there are more than one can count, hundreds of them getting created everyday. The Engines are mostly People Aggregator, ELGG, Drupal, PHPizabi and more recently, the revolutionary ODS (Openlink Data Spaces). Most of them are free, and do not require high skill in terms of coding, so an average coder can just pick-up any of these open source codes and crease a SNS in no time. If you are keen on it and do not know any coding, go to and create your own social network in 5 minutes flat for free! The bottom line, creating a social network is very easy and is no longer a luxury.

The most successful networks today are Myspace with over 240 million registered members and Facebook with over 80 million registered members. Myspace is an all round SNS with huge concurrent population, which is the key ingredient for success of any SNS. In addition of that it has all the applications like IM, mobile, News, TV, Music, blurbs, blogs and so on. Facebook claim to fame is the apps and interactivity, it is so good that in spite of having one third of the registered members, its activity is actually more as per alexa stats. Then there are host of other networks like orkut, freindster, Hi5, Habbo, Bebo and so on.

Coming back to India, the performance of Bigadda and Ibibo has been good, although not fantastic. They both have the rank near 150 in India.

What is next for India in this space? With only 40 odd million internet connections and growing at good rate, this space is still hot and worth gunning for. Now the following will be the key success factors in this business in India:

  1. Technology and Innovation: The Indian portals need to develop fast in terms of innovation in technology and service delivery on the internet. We know the country the best and I think we can deliver and innovate the best for ourselves. Taking cue from the next level of Internet, wherein multilayered and multimedia portals will be order of the day, we need to mix applications innovatively in the web 2.0 platforms. One can see to see as an example, wherein social networking app is layered on a video publishing engine. Bonus, you can make friends with Will Ferrell over there. This has to be intelligent and has to be able to service Indian mindset in a better manner.
  1. Concurrent Profiles: On any SNS most of the times, you are catching up with old friends and “your type of people”. You can also make news friends through current friends. In case you are looking for dating prospects on SNS, it is an absolutely different exercise. If you go register to an SNS and not find many people you know, or people your type, you loose interest fast. Therefore profiles in terms of numbers, and showcasing in terms of interests, location and common backgrounds (schools, colleges and so on) is critical. This has happened very well for orkut and facebook in India. To capture this, we need to represent and capture profiles as per interests and backgrounds more intelligently than orkut and facebook. Which we obviously should be able to do better, as we are here and understand the psychographics and demographics better than anyone else.
  1. Vertical SNS: The next rung of successful portals across the world are vertical SNS like,, avtars),,,, Twitter(micro-blogging), WAYN(travel, lifestyle) and so on. We in India have an amazing amount of vertical opportunities, right from castes, communities, languages, geographies so on. The communities on orkut do not do justice to the kind of potential India posses in terms of this space. So there is a clear need gap to plug and harvest in this space.
  1. Celebrity SNS: In a start struck country it is surprising to see zero action on SNS space by celebrities. has loads of celebrity profiles. Take for example Kylieconnect(Kylie), Dancejam(M.C. Hammer), and so on. We need to drive more celebrities on SNS and need to have more celebrity specific networking sites. This can be a big rage in India.
  1. Apps and widgets: The Apps and widgets are all over the place on the SNS engines. But this needs to have some discretion and a lot of innovation, in terms of indigenization. Again, to target Indian mindset, there is a huge scope here as well.

Rest I leave it to readers and leaders. Let’s gear up for a big social networking blast in India, and hopefully from an Indian portal!!!!!!!!!

Monday, June 2, 2008

Red to Black

The inflation (money chasing goods) is rising in India; we reached 8.1 % last week. As per “The Economist” considering the important commodities it should be over 10%. As such in India we use wholesale price index vs. the consumer price index in most of the developed nations. Considering we are picking inflation at wholesale levels, rather than consumer level, the inflation may be more than even 10%, which we all know, in our visits to the market. Even the finance minister last week finally conceded that it is not coming down in a hurry. Another issue is that all this is happening at pretty high interest rates, which are bound to move northwards as the situation persists.

Before moving forward I would recommend people to read about Ron Paul’s theory on Federal Reserve creating inflation in US essentially by increasing money supply:

Now one paragraph from this note from Ron Paul:

“Federal Reserve Chairman Ben Bernanke faces two basic ongoing choices: raise interest rates to prop up the dollar, but risk pushing the economy into a recession; or lower interest rates to stimulate the economy, but risk further declines in the dollar. This unfortunate dilemma is inherent with a fiat currency, however.”

By the way you can enjoy this gag video on Ben Bernanke from students of Columbia Business School's Dean Glenn Hubbard, who was not nominated for the big boss job of the Fed. very well done:

Back to topic, A similar situation lies with the Finance Minister and RBI chairman these days. Now the fuel prices and food grain prices in the world are also on the rise, soon fuel prices will also go in India. Other than international impacts, there are various theories on the same. One being Dollar chasing Rupee for significant time, and rupee getting printed in higher amounts to manage supply. The other being about money supply and money velocity, and I hit a point where my “economics” fuse blows……Just one more thing, we had a great economy growth, GDP going up by close to 9 %, so there is positive news as well.

What’s the point? We saw high inflation periods, from mid 90s to close to late 90s (1998). During these periods, the share markets were not bad, but post this period, we suffered an economic downturn. The early 2000’s saw the share markets operating at low levels, around 4000, which started picking up from year 2003-04, during this time, the interest rates were brought down considerably to increase the money supply. Is this a sign of another slowdown? High inflation, High interest rates, stock markets still staying stable.

Now coming to internet industry in India, where most players are in RED or a faded black. Other than the exception of infoedge(23 crore(06) profit on a topline of 85 crore(06), before IPO), essentially only, none of the players are on a confident wicket. With most players eying an IPO scenario and in case an economic downturn comes, with stock markets coming down, SEBI will never allow the “grey companies”(just in black) to float IPOs. Now some of the players, which have been there for a long time, are feeling the pressure of raising stakes and therefore some of these players are creating somewhat forced black situation, by reducing variable costs. But years and years of financial books of red, especially in a dull economic scenario (IPO scenario is already going dull in India), the SEBI support for an IPO will be little.

With majority of industry players backed by debt investment, and a potential of weak stock markets in offing, the industry players need to think differently. Now all this is not negative talk, as far as I think this is realistic talk. So what’s the point here? Nothing to worry, Internet will grow and most of sites will make money. The catch is the way VCs have to fund the right companies, the debt investments need to move in right companies, and need to sustain them in case stock markets are gullible. One good thing that will happen is that investment will cease for a lot of tom, dick and harry players who have mushroomed all over the place. So its my appeal to debt investors to keep backing the serious internet ventures in India, to make it last the day.

The other thing is planning for serious firms, who are in red or in faded black. It is important to gauge risk and work on some realistic estimates. Trying to overkill at this moment can be disastrous with poor financial books not worthy of IPO, and shaken VC confidence. The companies, in my humble opinion need to create a growing loyal base and get fundamental numbers showing for them, month on month. The fundamental numbers being the key comscore metrics, unique visitors, page views per unique visitors and time spent per unique visitors. These numbers are more important than the revenue black and red numbers. THIS IS WHAT BOTH VC’S AND INTERNET COMPANIES NEED TO BELIEVE!!! The Internet firms need to believe in these fundamental numbers, and VCs and Investors, need to look at firms with these numbers, as serious players and fuel these players only. This is important in the next year or two to come, as internet population reaches the threshold of 70-80 million connections, from whereon it is expected that a lot of businesses would hit a steep upward curve.

I wrote this while watching IPL final, great match, shane warne rules, I hope in the frenzy of match I didn’t make a mess of this entry…

Friday, April 25, 2008

Quality of Click

This post comes after some time, but then I didn’t have much to write about for some time. I was thinking on writing on US recession and its impact on internet VC market. But lately I read this piece from businessweek on the VCs being consistent on web spends which is very heartening.

Also Google did well in Q1 to raise sentiments of US stock markets, so it shows it is much better scenario for the online industry in the tough US market. Also a PWC report indicated better payouts for internet related investments. But the real inspiration for writing this post came from a quote from Scott Adams, from the Dilbert principle about marketing:

“Marketing people do not screw customers; they just hold them down so that the sales can screw them”

Being a marketing person for most of my career, I was really amused. Sometime back comscore reported that Google’s clicks went down by 3% in February, month on month and have not grown since last year. On this news, Google stocks went down by some 15 dollars (if I remember right, but it went down for sure). Now Google has been arguing for some time on raising quality of clicks, also part of my last post with Google being able to use double-click information and raise the standards of behavioral targeting. Google plans to make more money/click by increasing the quality of clicks for the advertisers. Now on similar lines, I had a chat with someone on internet not being perceived as a brand building medium.

Here is how I converge all this, stay with me folks, and fasten your seatbelts. Worldwide Internet industry and advertisers alike are taking the route of quality of clicks or action on the internet than the quantity of it. This is a bit different from the euphoria of performance marketing. The key is quality, which comes from relevancy, which comes from two things, one being contextual and second being a credible source. In simple terms customers would like to click something:

1. Which is right on my way as I am looking for it

2. Which sounds like a credible product/service to be

The quality of clicks means better results for advertisers as well as for the customers. But people who are euphoric about CTRs and number of clicks, and click buys only, or acquisition deals only can really make the mistake of loosing money in Internet marketing.

Now not everyone wants brand building on the internet, like a personal loans or a home loans campaign, which yours truly ran with considerable success on CPM, PPC and click buys across all Internet media. I was not running a brand building campaign, I was busy getting leads for personal loans. But then can you do the same for a fixed deposit plan or a savings account plan, Nah!! Why, simple, you will take loan form anyone, I mean anyone, as you are taking money, but if you have to put money in a safe place, will you give it to anyone, Nopes!! If bank pays 9% and I pay 10%, will you leave your money with me, Never!

What is a car manufacturer doing on the net, has to be brand building of some sought, maybe in terms of recall of product features, new technology etc, but it seems lot of these are buying clicks. What is an Insurance company doing buying clicks by the dozen, without checking on target audience and the communication on the banners. Why are so many other people trying to do, that is buying clicks randomly, who are not selling personal loans, not classified portals, not online travel portals and so on….. I think it is lot of waste of marketing dollars and even more killing the credibility of Internet as a fantastic brand building medium. To some level agencies also have to take the blame for mapping all campaigns in the same light as of performance campaigns. This is killing the role of media planning, targeting and strategy on the online medium. We can many great success case studies, but still I would like people to visit the love guru promo on youtube, I think it is very well done:

All in all better planning, targeting and creativity can really lend amazing brand building benefits to advertisers. Internet is not equal to clicks and performance marketing. Even as the internet industry looks at increasing top lines, the idea will start from improving the quality of the click. I will end with another great quote from Scott Adams, all in light spirits, LoLz I just love Dilbert:

"We can't compete on price. We also can't compete on quality, features or service. That leaves fraud, for which I'd like you to call marketing."

Wednesday, March 19, 2008

The Mess - Ad Serving, Publishers, Ad networks, Affliates and the cookie

Two things, first as per the feedback I will try to keep this entry a bit short, it seems my rhetoric in previous entries have gone a bit longer. Second, as per the title, this entry will be a reflection on the mess, and as an entry will be non-conclusive.

An ad server is a computer server that stores advertisements and delivers them to website visitors – the Wiki definition. This delivery can be targeted in terms of behaviour, and also in terms of the context (contextual targeting). The server churns data on clicks and later conversions(with help of tracking pixel or a cookie on a “thankyou - closure/goal” page). Now this information is simply used in creative optimization, as in serving the ones which are more productive, and weed out the non-productive ones. This thing can reverse used to maximize publisher’s revenue out of a single advertising position serving various campaigns options.

Now other than just this Ad servers capture a huge amount of information, which is the base for the whole confusion on the Google double-click buyout. The confusion is the information Google will hold about the user and the control over a major chunk of the online inventory. We will get into its details, but the merger is complete, with European Union (antitrust regulators) cleared it on march 14th and the US regulators already closed on it in December. The other side is Microsoft and other firms shouting that "Double Click and Google together can have access to the majority of worldwide online behaviour, which can be severely misused”. Along with the closure of merger, surprisingly Google launched a free Ad-server for all called the Ad Manager(invitation only), which looks conflicting with double-click model of paid serving, but on getting the surfing data, it’s the final nail in the coffin for any other player.

So what does all this mean, what will Google do with all this data and information, everyone knows the answer to this “Behavioral Targeting”. So From 18th March onwards, Google becomes the number one firm in behavioral targeting, sealed and closed. With 70% of worldwide search and same percentage of worldwide serving, they know more than anyone else. Now this will make sure that dynamically this information increases effectiveness and efficiency of combined network. And with Ad Manager, they like to understand the smaller players. Now Microsoft has reacted by taking over an ad management firm rapt, in addition to their earlier acquisition aQuantive, a big ad network.

So it is all about controlling the Ad serving, Ad networks and Ad management tool companies. Just moving to networks for a while, for a successful Ad Network the efficiencies really need to come in terms of performance, clicks in most of cases. Now with the big impact of behavioral targeting, this can really change for small networks, who are not part of any big consortium like Google, Microsoft or yahoo. It may sound too big a statement at this time, but somehow dynamics indicate that. The good news for small networks is that they will be picked up well by some of the bigger players. Now coming to affiliates, who are the middlemen, as of now do not have a big influence on this scene. But on the information piece, they are chasing customer right till the end to benefit from original referral traffic.

Now coming to the customer, since the deal is in clear, the impact still needs to be seen. Just taking the fiasco around the Facebook’s beacon, which allowed partner sites to do behavioral targeting. This created a furor in US, due to privacy concerns, inspite of claims, the opt-out option didn’t work for users, and finally in December, 07, option was implemented. This came along with the apology from Mark Zuckerberg, the youngest self-made billionaire of the world. So the challenge for the consumer is huge, but normal consumer will not be able to chase it, still the privacy concern stays.

In India, we are not talking about it much, but this is really important, as performance of campaigns as we see it will change and so will be the cost of buying online media. It is going to impact everyone from Ad serving firms, publishers, Ad networks and internet users. As far a net junky like me, it gives me a rush, to see some new conspiracy theory to think about!! Adios…….for now!

Monday, February 25, 2008

CPM, CPC, CPL or CPA – Don’t Forget - Marketing is Marketing

If you are buying or selling online media, you know all these terms as CPM, CPC, CPL and CPA. Even if you do not, and you are in internet space, well one hopes you know them. But how they are used by a lot of people is really weird, some of them talk about it, as if it is a brand new marketing thing. Well it is and it is not! The fundamentals stay the same, but the beauty of online is the interactivity, that’s the closure, which makes it great. But calling the new “performance marketing” as new, and old being fundamental marketing as idiotic is not the best bet. Get to meet some people new to online space, young rookies and old hands(from other media), they make amazing claims.

Quick recap, CPM(M for mille, Latin for 1000) is cost of thousand impressions for a banner, CPC is cost per click, CPL, is cost per lead and CPA, cost per acquisition, which is essentially cost for sale. Now CPA and CPL is some times used as the same thing, but for simplicity, there is a lead and there is a sale, the cost for a lead and a sale is different. Now we all know online media is capable of interactivity, therefore an impression can become a click can become a lead can become a sale, all online mind you.

Now the simple diagram above asks us to come up with some basic metrics to ponder about:

CTR – Impression to click ratio

CTC – Click to conversion ratio ( conversion being desired action, lead or sale)

ITC – Impression to conversion ratio

eCPM – Effective Cost per Mille [for campaigns bought/sold on click(CPC) or conversion(CPA, CPL)], similar but not the same as ER, Effective Rate in television media sales.

Here is how a basic campaign would look like:

















Now everyone knows it. Just a refresher.

A little look at conventional media, TV maybe, over 6000 crores of media spends. Suggested for top of the mind recall, brand awareness and positioning, has all audio, visual appeal. No interactivity though! Bought on GRPs, the summation of TRPs, some deals of CPRPs(cost per rating point), channel shares for niche genres and so on. The key in the segment is generally the break TVR. No performance marketing here.

Lets see the marketing fundamentals:

  1. Advertising objectives – establish communication on brand or product or features or offer or usage and so on.
  2. Advertising in action – Communication(message) catching attention of consumer, goes through his threshold barrier of perception to make an impact in short term memory. Consumer can take it similar(something experienced before) or differentiated(brand new experience) learning.
  3. Consumer takes action

Back to beauty of online, the ACTION can be take on the spot of viewing the media. The action is the click. Now action is the important piece, but this important piece does not happen in any other media. So what are media spends doing on Television, print and radio, brand building.

Now there are two parties in media business, buyer and seller. In online space, almost all buyers are asking one question, how many clicks will I get, and what is your CTR, I have learnt till here! And that’s enough. Well who are sellers to say anything, once buyers have decided. Sellers just sell the clicks and the CTRs, and for some firms, up to CPLs and CPAs. You come to online, we are performance, rest is brand building. Online is no brand building. Now how do you get the clicks and conversions, creative optimization, ad serving technology, targeted campaigns – contextual targeting, behavioral targeting and so on. All the science of performance management. Everyone can geo-target, everyone has an ad-server, all servers are same and have same capabilities. Google will say double click is the best, MSN will vouch for Atlas and Yahoo is a fan of Right media.

But the question is are we studying and understanding ad-serving, targeting, creative optimization, and before all that creative planning and execution, to get the right message across. Creative planning and execution is the smallest job in the cycle, especially in the field of “performance marketing”, as why do you care about that when the thing you are buying is clicks or conversions. Don’t worry about the message, we will give you clicks!!

The online creative planning and creative optimization is last thing on the platter of performance marketing. Media Buying as a skill is not about buying clicks or leads. Look at the biggest performance marketing set-up in the world, Google Adwords, the quality score is a major component in that, which allows high score owners to have lower bids, high scores are achieved for consistent and high performing advertisers. Which is in-turn a case of better CTRs, which you achieve by putting the right message across to consumer, through even the textual ads. Now many people will say if I am buying clicks, why bother on CTR, I will only worry about click to conversion ratios, that determines the quality of my click. Nopes my friend! That’s not the way world’s number one “Performance Marketing” algorithm runs. The Adwords algorithms respects and rewards the fundamentals of marketing.

Here is a reverse take on the brand building piece. Recently I got a pitch from a firm, which claims to run TV ads on a 2 by 2 inch video screen, while I am checking my mail. Has it got better value than regular gif/jpeg banner? 100 % correct. Should it command a better CPM? No doubt about it! This will have a better CTR, sure why not! But this is the future, and it will kill the TV, and the spot price should be comparable to TV spots by any stretch of imagination, Hell No!! You will not believe it, we had a discussion on comparing this with the TV advertisements.

I think a bit of the problem is the lack of trained manpower in the industry. The opportunity for analytics to improve efficiency and effectiveness of media campaigns in Internet is far greater than any other medium. This needs to appreciated and pursued. The online media needs people who can guide brand managers to reach their desired marketing objectives through the online space.

Well Marketing is Marketing, on TV or online, the fundamentals stay the same. The execution and the metrics may change. In my opinion, Online is one of the best medium for brand building and simply the best for performance campaigns. But this should be understood from both fundamentals of marketing and analytics in the web domain. No offence to anyone guys!! Lets build some brands, lets get some leads and conversions, lets get it done!

Tuesday, January 29, 2008

Dear All,

Welcome to my Blog! (yes “another one” on online scene in India!)

The reason I have started this is, because I feel that I have something to share which is different (agree to disagree amicably) on some issues with some of my esteemed colleagues in Internet space. I am kind of motivated by all these Digital Conferences and meets on Internet space in India, which I have attended in last two years. I have heard a lot of people speak there, but I have read some better Blogs. And I also have an opinion which I felt was worth sharing.

In one of the recent conferences, in the first session, a presentation was made on Indian Internet space, and the challenges it is facing. The presentation showed the dream to be 600 million Internet users by end of 2012. Well, It is good to dream, and god willing it should happen. But we, in India, have not been able to reach out of 600 million of our people with some basic necessities, as yet, which has left us in UN Human development report at 128th position. No! I am not a pessimist! And its good to dream! But the Internet growth in India has been satisfactory, as per the latest Icube report, the Internet population of “Claimed Internet users” is 46 million over last year’s 33 million. That’s a healthy growth of 40%(year on year), which is a fantastic number. Now there are a lot of similar positive numbers in terms of ecommerce, traffic and overall industry revenues. Everything is growing by 30-40%, which is very good. But somehow some of us felt that we will grow much faster, and these are just the surrogate numbers of times of come. At least in all the presentations made to venture capital firms to raise money.

Now the issue is usage of Internet, which has really picked up for horizontal segments and some more segments like classifieds, cricket scores, social networking etc. But the movement in online shopping and transactions is still slow. But “slow” is relative, the numbers are encouraging, but somehow the anticipation was more. And India looks like gearing up for the next big Internet market after US and China. But something is keeping that growth from happening. A lot of people today talk about how 200 million strong mobile market will take over Internet. You can excuse them for that, knowing how a mobile device and a computer is different with separate high points. India still has poor penetration of gaming devices like PlayStation, Xbox, Nintendo, which also will add to some competition, especially since the new ones (PlayStation 3) double up as blu-ray DVD players as well. Now in the same forum, I picked up the question that Internet growth is dependent on three factors, the computer cost, the operating system and the Internet connectivity options in that geographical area. Now all this is surely important, but later on I thought a bit differently.

India as a country is a “country of wave”, a wave of acceptability, aspiration and trends. Reliance is one Indian firm which has truly understood and leveraged this trait. Here in India, the issues look like poverty, unemployment and lack of infrastructure. But those are no deterrents in consumption patterns of “products/services accepted in India”. Now mobile phones could be one example, I think by any estimate India is the worlds leading country in terms consumption of “high end mobile handsets”. Now this may be surprising for people from America and Western Europe, but this is a fact.

Therefore all we need to do in India is make sure that the “value creation” is visible as a wave, a trend or as we call in the Internet world “a viral”. In case that “value creation” is established for Internet, you will see, the cost of computer, the connectivity, the operating system etc will not be a deterrent anymore. This is a fact, money is not a problem in India, liquidity in the market today can be a great example of what India is capable of. Acceptability and appreciation is the challenge. As Malcolm Gladwell puts it in “The Tipping Point” - “with the slightest push – in just the right place – the world around us can be tipped.”

Taking the Gladwell’s suggestions forward, we need an Epidemic for Internet, and the causative agents for creating the epidemic. Which are the important few, the stickiness factor and the context. Without getting into much details, the important few are connectors (People with a special gift for bringing the world together), mavens (ones who accumulates knowledge) and salesmen(one with the skills to persuade us when we are unconvinced of what we are hearing). Now we all, the people in Internet space, need to take respective responsibilities for the same to start the epidemic. The next step is to create a sticky message and spread it with/in the right context.

The message is simple, Internet will change your life, COMPLETELY!!! The context is simple, If you don’t have/know Internet, you will cease to exist in personal and professional life. But the key here is to be the connectors, mavens and salesmen for Internet in India. Spreading the right education and usage of the net, in the most influential manner and from the most influential people is the way to go.

The Harvard Advice

Well just patching in the Harvard Business Review gyan, the centennial issue is totally mind-blowing, so plugging it in. Ok two things here, first the big bug of Internet thought in India, Profitability Vs. Valuation. Now we have hardly any profitable firms in India, and its been a long time now, so that is a cause of concern. Some good models are really knocking doors of profitability, and actually can afford to move into operating profits any day. But still for most it is a game of valuations and our age old discounting cash flow models(using weighted average cost of capital) for the same. I meet some massive number of new entrepreneurs with claims of crores of valuation, without even the cash flow. This is not a criticism, just an observation. But the valuation model for a lot of players sounds very decent and logically they are getting some fine funding. Infoedge proves the point well, how their market cap can take on the best of Television channels or other conventional media firms.

Here’s the take of none other than Mr. Michael Porter himself in his article in the centennial issue of HBR:

“Advanced technology or innovations are not in themselves enough to make an industry structurally attractive(or unattractive). Mundane low-technology industries with price-insensitive buyers, high switching costs, or high entry barriers arising from scale economies are often far more profitable than sexy industries, such as software and Internet technologies, that attract competitors.”

Wow, he called us “sexy”, How cool is that? On a serious note, he feels we will kill each others profitability. He is bang on for the online travel sector in India, my god the number of players and amounts of cash backs, this is suicide mission called “capturing the market”. But good news in the online booking as a market is booming. Well I leave the rest to you guys, think about it, Mr. Porter is provoking some thoughts.

Another good thing he writes on Industry Analysis:

“The point of Industry Analysis is not to declare the industry attractive or unattractive, but to understand the underpinnings of competition and the root causes of profitability”

Hmmm..same thing, lets never loose track of competition and issues of profitability. For more enthusiastic fans of Mr. Porter, Here is a video link, his interview on his latest piece:

I will end the note on an interesting piece from the same issue(totally smitten by it). It is a case study in which a guy Alan, has 3-4 great career options, and he is confused. This is the advice he gets at the end:

“It sounds like the real question is not about the money but about where you think you can make the greatest impact on the world. Just do what you love and the impact will follow”

So guys lets do it for the industry!!!

Catch ya soon!!