Weekend Reading

Every Saturday, I will highlight some of the good posts that I have come across over the week.

Here is the week’s selection:

Crucible Moments

I wrote a Tech Talk entitled “Crucible Experiences” a few years ago. A crucible experience is something which transforms us, and shakes and shapes our lives.

Many of the companies in the Emergic Ecosystem (my investments) are going through their own crucible moments. They face challenges of various kinds — revenue generation, business model validation, competition, need for additional capital. In fact, some face multiple of these challenges simultaneously. For some, there is a clock ticking away as cash runs out and there is a race to prevent closure. That is always the risk in being an entrepreneur (or investor) and doing things which are different and haven’t been done before. The probability of success is a magnitude lower than what most entrepreneurs believe. For these fledgling companies, this is a moment of truth — a crucible moment. It is a make-or-break period — and one which is easier to describe than to live through.

Take for example, Netcore. With two quarters of the year done, we face a situation that’s not unfamiliar territory: costs are as per projections, and revenues are lower than the ambitious targets we had set at the start of the year. Which means, cash burn is higher than anticipated. We have two choices: either we can reign in costs to account for the slower revenue growth, or keep on the accelerator and search out new revenue streams to bridge the gap. Of course, we need to do both! But which are the areas which get my attention more than others — that is the key question. We are in a blue ocean, in unchartered waters. We are pioneering many facets of mobile marketing. And I know that the multi-monetisation streams that we have planned out can be done. Which of these should we focus more than others is the thing I need to ponder on. The decisions we make now will make a big difference to our growth. In a way, this is our own crucible moment.

On TV

Last Saturday-Sunday, CNBC had a short segment on Netcore (and our MyToday mobile services) in their Enterprise Inc. program. They had done an extensive interview with me — about 45 minutes or so, with all sorts of questions. They had also shot around the office. The segment broadcast was barely five minutes, with my interview snippet-ed down to a minute or so. As I watched the segment, I thought what they could have done better, and sent an email the next day to the presenter who had interviewed. Here’s what I wrote:

I watched the show for the first time yesterday. A suggestion: you could give more in-depth coverage to cos. that are featured. Trying to cover 4 in 20 mins gives only superficial coverage. And for entrepreneurs watching, it doesn’t really give much insight (which I presume should be one of the objectives). You should probably cover no more than 2 cos. in each episode, and give greater coverage to each. This helps expain the business of the company and the roadmap going forward. Like in my case, you had a 40+ minute interview….there are no better learnings for entrepreneurs than to hear others talk, and that can be the USP of the program (rather than bringing in ‘external experts’). This way, people watching get an understanding of the space, the entrepreneur and the company — which should really be the focus for the program.

The same holds true for lots of what I watch on TV. I know that everyone feels that attention spam is dwindling and everyone if forever switching channels. But more than just filling up minutes, perhaps the focus needs to more on quality and making it a habit for those who watch it once for the knowledge the viewers get out of it.

Daily Blog Posts

It has been nearly 2 months now since I re-started the blog with a promise of daily posts, and I have maintained that discipline. I now don’t ponder long on posts — as ideas and thoughts come, I write them out and then space them out to be published one every morning. So, at any point of time, I always have a few posts buffered to be published in the coming days. It has been a good comeback to blogging — and it has also made me realise how much I missed it in the year when I didn’t blog. I probably made it hard for myself with the rigid previous format of one Tech Talk series every week and 30 links to other articles every week. Now, its all about either work or some personal impressions about the world around. In some ways, it is just like the Diary that I used to keep a couple decades ago during college and IIT days. Which is the way the blog should always be — the voice of a person.

I think more of us should blog — and not from the point of view of seeing who reads it, but more from just expressing personal opinions. We all see and talk about the world around; writing it on a computer for oneself and others to read is one step. This is what creates conversation between different people — outside of the circle one is directly in touch with (family, friends, workplace).

Perhaps, the most important commitment one has to make is to be transparent — write what one is. It is hard to create a different persona from oneself and then expect to blog regularly. And it has to just come naturally — let the ideas and words flow. Pick a style that one is comfortable with and stay with it. And that’s what I have tried to do.

C2 R2

In difficult times, what is needed is a combination of C2 and R2 (Cut Costs and Ramp-up Revenue). They may seem as conflicting objectives but that’s what the need of the hour is. Things are going to take longer than planned, so a rupee saved is like a rupee earned. It is not the easiest of things to do — once costs are happening, trying to contain or curtail them can be quite challenging. Someone is going to be unhappy. In easier times, one could have gotten away with a little extra spending but in uncertain times, more care needs to be taken to ensure that costs are controlled.

At the same time, there has to be an acceleration of revenue growth. One can only cut costs so much without hurting future potential and opportunities. The key is to think hard on how one can grow existing revenue streams and create new ones — without the limitations that exist. In early stage companies, I think the focus needs to be more on revenue growth. Cutting costs can only prolong a death, not eliminate it, if revenues don’t start growing. And in difficult times, businesses (customers) may also be open to looking at ideas which are different and gave them greater value for money.

In our mobility business, that is what we are now focused on — there are two primary revenue streams that we have (mobile ads and enterprise services). Even as we work on making sure theykeep increasing month-on-month, we are also thinking how some new revenue streams canhelp bridge the gap between what we are spending and what we are earning. This is what makes business so exciting and challenging! I’d love to see us add one more significant revenue stream in the coming months — I don’t know which one it will be, but there are a few potential candidates. The good thing about the mobile business is that it is all blue ocean — we are the pioneers, and have to lead the way. And that brings out the best in us — its not as much competition as innovation that will decide our success.

1988

I was watching “Rain Man” on Saturday evening on TV, and my mind wandered back to 1988. Its a year I probably remember more clearly than any other. That is the year I graduated from IIT and went to New York(Columbia University) for my Masters. It was the year I left home to become independent. The first semester at Columbia was full of challenges, and in between there I still remember some of the movies I watched. Two stand out: Rain Man and Dirty Rotten Scoundrels. (A third memorable movie of the time, Dead Poets Society, came in 1989 around the same time while I was studying at Columbia.) Even 20 years later, I can watch all of them again — many times over.

There are two years when I “grew up” — 1984 when I entered IIT, and 1988 when I went to the US. Both took me away from home into different worlds, creating many memories that are still etched in the mind. There was a carefreeness about life then,  with little worry about what was to come. It was almost like how Abhishek lives life today — in the present, here and now, enjoying every moment.

Pixar’s Cars

Sometime recently, Abhishek (my 3.5-year-old son) fell in love with McQueen and Mater. It started when we bought a reading book “Driving Buddies” from Crossword. We must have read that book 100 times by now! Till then, I had no clue about who they were. Now of course, I know. They are two of the characters from Pixar’s animation movie, Cars. McQueen is the rookie racing car who is competing with two others to win the Piston Cup. On Thursday (Gandhi Jayanti holiday), Abhishek and I watched the full 2-hour movie at home. He had plenty of questions throughout the movie as he tried to correlate the brief story we had read with what was happening in the movie. I too enjoyed watching it – and explaining it to Abhi. The quality of animation and the storyline is very good, and so is the message at end, where McQueen sacrifices a historic win to help a friend.

At home now, there are at least a couple other McQueen-Mater books and vehicles which Abhi drives around, and a McQueen T-shirt I bought for him when I was in the US recently. For now, this specific set of Cars are his favourites. Don’t even ask what else he likes to read nowadays. Snakes. 

Difficult Times Coming

The next year or two are likely  tough all around for businesses. It is amazing how the so-called “market conditions” have deteriorated in the past 9 months. It was in January of this year that we had celebrated another new high of the Sensex at over 21,000 and the talk was of 30,000. Now, we will be lucky if we do not touch 10,000. The real estate bubble in India is another one waiting to pop given the rapid rise that has happened over the past few years. The stocks of the companies in this sector have already popped.

From what I hear, there is talk of a “liquidity crunch.” Companies are having a hard time raising capital or getting loans. And as the financial contagion spreads, no one knows who’s next to fall.

These are also good times to build businesses. If one can come up with innovative solutions which can show RoI quickly or cut costs, there are greater chances of getting a quick adoption. Also, for start-ups and early-stage companies, conserving cash for the long-haul is going to be very critical. One has to marry boldness with prudence to come out ahead in the months to come.

Interview on Competition from Google in SMS Space

Rajiv Dingra from WATBlog emailed me some questions following the launch of Google’s SMS Channels (as part of Google Labs). I have reproduced my answers here.

Google has launched sms channels what are your initial thoughts? Do you feel threatened?

SMS is being percieved as the critical medium for mobile subscribers, something we had initiated two years ago. We pioneered permission-based services, and others are realising the power now. Mobile advertising will grow. The mobile subscriber base will be 500 million in two years; it is a big opportunity, more players are welcome. Where is the need to be threatened! In fact it is about growing the opportunity.

When one is first in a market, there is bound to be competition sooner or later. In fact, in the coming months, I expect many more companies to enter this space. In the Internet too, IndiaWorld was the first portal (which I had launched in March 1995), and in the subsequent years we had various players enter the market. Over the subsequent years, many dropped out. IndiaWorld thrived, consolidated its market leadership position, and won.

So, a launch of a product by itself in no way guarantees its success – even for us, there are many things that have not worked in the past two years. What is needed to win long-term is a combination of multiple things: vision, understanding consumer needs deeply, strong focus, constant innovation, money and an ability to invest for the long-term, and an organisation completely aligned to the mission (which in our case is to “be the Genie that makes the Mobile Phone into a Magic Lamp” for people), and of course, some luck!

There are nearly 4 million MyToday subscribers with 11+ million subscriptions today for whom the service has become a habit with its excellent content and timely delivery. This is supported by a technology platform that can prioritise and customise each of the 12 million SMSes that we send out daily. And this is just the start. Competition helps bring out the best in all who are there in the marketplace hastening the pace of innovation, adoption and revenue growth. This is therefore good for everyone who has an intention of being a long-term player in the market.

Why would Mytoday continue to do well? Given stiff competition from someone like google?

There is a critical difference in the two services. One is a user-generated and ad hoc content, while we believe in offering editorial content with specific deliverables which help in creating habit in consumption as our recent Nielsen study (covering 5,000 users) had shown. The study says 76% of our subscribers read every message, 84% say they receive the information first from MyToday before any other medium and 98% say they will continue with the service and recommend it to others.

Google already has a huge database of advertisers who would surely be introduced to sms channels once it matures how do you think that would affect mytoday?

It will certainly help grow the advertising pie and then it is upto the individual service to offer best value back to the advertiser. I also think that every medium is different — and the mobile is not going to the same as the Internet. Monetisation streams on the mobile will need to be thought of very differently from the Internet.

Unlike the Internet where the cost of each page view is negligible, there is a significant cost for sending out each SMS. While advertising is going to be one of the most important revenue streams, it alone is definitely not going to be enough to create revenue breakthroughs. This is where one needs to think of the concepts of “VAS Operator” and “Mobile Computing Operator“.

Google has in the west acquired products after their own version’s didn’t work (think google video youtube story) Are you open to acquisition if its Google at a later date?

This is highly speculative and we are right now focussed only on building the service further. We have no such intentions.

How many smses do you send per day and what would be cost of sending those smses?

We send more than 12 million sms per day and because of our innovative initiatives we have been able to tremendously reduce costs.

Lets say you are growing at the same rate for the next 2 years what would be the cost of supporting that growth?

We would have broken even much sooner than the next two years and the service will be returning value back to us.

What is your strategy on the advertiser acquisition front? How do plan to build scale?

The only way to acquire advertisers is to offer innovative solutions based on the native features and strengths of the medium, and return back a good value for their spend. We are building a large sales force in multiple cities across the country as well as working with partners to target specific verticals.

Low Valuations of Sify and Rediff – Why?

It is a reflection of the slow growth of the Indian Internet that the two companies which had listed on Nasdaq nearly 8-9 years ago today trade at very low valuations. Excluding the cash they have on their books, Sify and Rediff are trading at about $50-60 million valuation each. Both companies have a significant customer base (Sify in enterprises, and Rediff on the consumer side), and yet investor are putting a very low value on both of them. Part of the story can be the general market fall, but there has to be more.

I think that both companies have not exploited their early market leadership to create dominant and defensible positions in the Indian market. Sify faces competition in the enterprise market from the telcos (wireline and wireless) who have immense scale of operations. Rediff has not been able to position itself as the gateway to the Indian Internet, and is facing a rapidly growing Google that is capturing ad revenues with its performance-based model.

The Indian Internet story is not over by any means. There are others like Naukri who have now become the domiant players in terms of market cap. Given the market downturn and the cash crunch that companies are likely to face, I think we can expect to see some consolidation in this space so we get larger companies with $100 million in revenue. All the incumbents have plenty of cash to make some bold moves in this sector. And make the right investments in services to make the Internet a utility in our daily lives.

Hovering

Had published this by mistake before I had finished writing it. Apologies. It is done now.

This is a word that has become something I think of every time I take a flight back to Mumbai. Circling over Mumbai for 30-60 minutes has become commonplace thanks to the air traffic congestion — made worse by the crisscrossing runways that were designed, and the inability of the airport managers to add a new runway quickly owing to the land being used by voters. So, it was a pleasant surprise when my 8:30 pm flight from Chennai hovered for only 15 minutes and actually landed on time at 10:15 pm. It must have been a year since I had the pleasure of an on-time arrival in Mumbai. Even the Air France flight from Paris that I had taken a couple weeks ago had to hover for 50 minutes. The longest hovering that I have done over Mumbai was about 80 minutes (from 10:30 pm to 11:50 pm).

I am not sure hovering is the only solution. I can understand there are limitations in the air traffic movements that can be handled. So, why not ask the airlines to take the delay on the ground prior to take-off rather than waste expensive fuel doing it in the air? Of course, the right solution of building additional runways is not something I think we have even begun work on in Mumbai.