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!!