Sharing ideas with the world

Wednesday, August 31, 2011

Market Or The User?

10:26 PM Posted by Deepak Nayal , 4 comments
We all love those big, colorful and beautiful graphs showing market statistics. Top management cannot live without them, marketing guys swear by them, and consultants love them. Companies use these stats because these indicate their and competitors' performance over a period of time. However, these stats are almost useless when it comes to creating a new company or a product. The reason for that is market stats and graphs are macro level indicators, and if you want to create something that people want you have to come down to micro level - understand users, competitors and their products. This can make the I-only-look-at-the-big-picture people very uncomfortable. 

[All companies are essentially a product or a service when they start, so I am going to refer to both products and startups as products. You can make out of the context which one I am talking about (probably both)

A market might be growing at a CAGR of 50%, but no amount of market data is going to help you articulate the product (its features and their development priorities) you need to create. You will have to dive deeper, do some research, understand the users, their needs, desires, what are they using currently in order to fulfill the demand that your product will suffice, what is wrong with the existing products in the market, and how can that be improved. Not easy. Not easy at all. 

I have particular problem with two marketing tools/indicators when it comes to product creation: market share and growth. While these are good indicators to reflect the performance of a company and demand in the market, these are almost useless when it comes to creating products. Even if there is a huge amount of demand in the market, it will not guarantee the success of your product. It is not even going to help a little bit in creating the product. Why the obsession? Our fascination with these indicators is so deep that even if someone understands and believes that these parameters are not going to help him in creating a product, he will still ending up including these in his product presentation - because if he does not, he will be questioned on those for certain. It is a pity that many investors look for this data in presentations from entrepreneurs, and get uncomfortable if they do not see it. They forget that market is not going to buy the products, users are. 

I think the reason people are so use to using these market indicators is that these are very easily and abundantly available. You just need to pay a few hundred dollars (thousands in some cases) and you can get your hands on detailed market data sliced from every possible angle. This kind of data is easily generated and easily consumed. On the other hand, analysis of users behavior, needs and wants is much more difficult and subjective, and is harder to consume. 

The market versus user comparison also maps well to the bottom-up and top-down debate. When market data is your trigger and inspiration for a product, it is the top-down approach. When a problem that users are facing or a benefit that they can get is the trigger and inspiration of a product, it is the bottom-up approach. In my view, best products are made using bottom-up approach; copy cats go for top-down approach (though they might go for bottom-up for following iterations). iPad is probably the best example of this. Earlier, the tablet industry was moving sluggishly and no one was paying attention to it because the market was not growing fast enough. But then Apple found tablets interesting, because they saw the benefits that a good tablet can provide to users. Few years down the line, as we all know, Apple iPad has become a huge hit, and suddenly the tablet market has become one of the most dynamic technology products market, with almost every consumer electronics company jumping into it. An interesting point to note here is that none of the tablet makers is still able to match up to Apple. Though there are many reasons for this, I think one of the key reasons is that they (at least, some of them) are looking at the tablet market from a top down point of view. They started making tablets just because the market was growing exponentially, without studying the end users.

Do not get me wrong, I am not against market data. But again, it is more helpful for retrospective analysis, and that too of the high level and quantifiable type. If you want to make good products, keep your market data aside and go to the user. The things he says or does might not be as sexy and colorful as market share and growth charts, but they will be much more helpful.

Thursday, August 25, 2011

Location: Next Stage In The Evolution Of Social Networking

8:04 PM Posted by Deepak Nayal , No comments
Location Based Social Networking (LBSN) is about connecting people with other people, events, businesses and other organizations in their current location. It connects the virtual world with the real one. While [general] social networks connect you with the same set of people no matter where you go, LBSNs also allow users to expand/modify their network based on their current location. LBSN, still in its infancy, can have profound impact on consumers and businesses.

Although LBSNs can be used from Desktop PCs, they are best utilized from mobile phones. This is why the market for location based services/networks has exploded due to exponential growth in smartphones (particularly, iPhone and Android). There are various ways in which an application or a device can identify your current location. The most reliable, convenient and accurate is GPS (Global Positioning System); however, this technology drains the batteries of mobile devices a lot faster than other options. Network Triangulation is another option used by non-GPS enabled mobile devices. Users' current location can also be identified by using scanners installed in particular locations. Applications can also scan codes (such as bar and QR) to identify and broadcast the current location. At its most basic, users can even input their current location themselves.

Though bigger companies are also testing waters with location based services and networks, LBSN space is primarily dominated by new [and cool web 2.0] players. This infographic from JESS3 gives a great snapshot of this space. However, it does not give a true picture of the depth of services provided by players as it considers the number of members, which by default will be higher for the traditional mail and social networking sites, even if they do not provide better location-based services.
It is actually the smaller companies and startups that have done the most innovative work in this area - which is not surprising, considering that this is a new market. Some of the most interesting players in LBSN market are Foursquare, Gowalla, Brightkite, Loopt and SCVNGR. These companies are building platforms that users can use to connect with their network and other companies can use to connect with consumers. Foursquare, arguably, is the leader of this space and is considered by many as the equivalent of Facebook and Twitter in location-services space; according to its blog, Foursquare grew 3400% in 2010. A lot of LBSNs allow users to "check-in" to locations and earn points/badges in return, share their location with friends and identify other people checked in the same location. Some of them have also added gamification aspect to the location layer and enable users to explore places, earn badges, go on trails, etc. The location-based services landscape is not yet dominated by the social networking heavyweights - Facebook, Google and Twitter; however, once they do improve upon their location offerings, they can easily dominate this space leveraging their huge existing userbase.

LBSNs have gained a lot of interest lately, primarily because they leverage SoLoMo (social, local and mobile) - the current super mega trend enticing consumers, entrepreneurs and investors alike. The hype and interest is well deserved, and will surely increase in the near future, and that it because of the possibilities around LBSNs. You can not just connect with your friends and family but also other people near you, find out what is happening around you, and what all facilities are available near you. More interesting things can happen when you combine LBSN with other interesting trends such as group-buying/coupons and interest graphs. Shops can offer coupons to shoppers who have checked into malls. They can also provide group offers, which can only be unlocked when a minimum number of coupons are sold, prompting users to instantly set up a location-specific network and buy as a group. Other interesting applications of LBSNs can be unlocked when shops and businesses tap into interest graph of a particular user once he or she checks into a particular location. For example, when you check into a hotel, its service can tap into your interest graph and find out that you are interested in buildings with old architecture and like eating chinese food. Based on this information, the hotel can offer you tours to the nearby city buildings from medieval times and share the menu of its chinese restaurant. It can also automatically program the TV in your room so that architecture-related channels are lined up first. You can also be notified of other people checked into your hotel with similar interests. The possibilities are endless.

One of the best and most obvious uses of LBSNs is in the online dating industry. Once a guy checks into a bar, he can find out girls that have also checked-in there. If he finds out someone who matches his profile and interests, he can either approach her directly or send virtual gifts to that girl. The girl, on the other hand, can chose not to check into that location. Or after she has checked in, she can reject or block that guy, in case she is not interested in him. LBSNs can prove to be the best gift, since the internet, to the whole dating game. Applications such as Skout have already started to tap into this space.

LBSN, like other interesting trends - such as mobile, location and social networking, is useful for both consumers and businesses. The possibilities are extremely interesting and endless. However, we are still far away from enjoying the true benefits of LBSNs (and the larger, SoLoMo, trend). What we are seeing now is just the tip of the iceberg. With exponential growth in mobile [smart] phones, location-based services (including LBSNs) will surely become ubiquitous, and will become mandatory for businesses enabling them to be closer to their consumers.

Wednesday, August 17, 2011

Googlerola - Quick Analysis

8:43 PM Posted by Deepak Nayal 2 comments
I had thought that I will not use my laptop for the two weeks that I am vacationing, but it is really hard to do so. We have got so used to being connected with the rest of the world all the time that it feels strange to not check your emails, social networks and browse the internet every now and then. I feel like a drug junkie who needs to keep getting his dose regularly. 

Last night when I opened my laptop and started browsing, guess what was the highlight of the day - Google acquiring Motorola Mobility. The net was full of news, reviews and comments on this topic. As expected there are a lot of yay- and nay-sayers. What I observed was that most of the people where talking about the success and failure of this move based on high-level topics like market and strategy. If you have been following my posts, you would know that I do not have a high opinion of such people. Some of these people are also the ones who had debated earlier whether Apple should acquire Facebook, just because it had the cash to do so, without giving a lot of thought to the more subtle and more important points, such as whether combining these two companies with different culture, direction and business models makes sense. 

There seem to be two clear motives behind Google acquisition of Motorola Mobility (MM). First, the recent failure that Google faced in the patent wars is clearly a strong motivator. Google needs more patents to safeguard its Android platform. And second, Google is trying to pull an Apple here. Google hasn’t made any money from Android growth yet, apart from the revenue from mobile phone searches. This acquisition will allow Google to finally make some money from the Android growth story. 

While looking at combined Google-Motorola might make sense from strategic and market level, it is the post-merger integration that is always the biggest problem in M&As. This deal is just bonkers considering the finer aspects. 

  • To begin with, Google has only done small bolt-on acquisitions till date. Integrating small companies into big ones is an easy task, but integrating two big companies is a huge problem. Google will increase its headcount by more than 60% with the Motorola Mobility acquisition
  • Google has a very different organizational culture than MM. It has a hardcore software-driven engineering culture, which is very different than what you would witness is most companies (including technical ones). Integrating the culture and processes of these two companies is going to take years, and will be the biggest headache. 
  • This deal also puts Google against its own partners. Big players such as HTC and Samsung are major stakeholders in the Android market. With this deal in place, Google is going to have a strange relationship with HTC and Samsung where they are going to be both, competitors and partners. 
  • These two companies also have very different business models. While Google is a high margin fast growing software driven business, MM is a much slower growing lower-margin hardware driven business. 
I believe that this acquisition is going to be a failure. In fact, S&P thinks the same as well, which is why they have downgraded Google to a sell rating. My guess is that Google, failing to integrate the two companies, will eventually sell MM in a loss. Steve Jobs must have chuckled when he had read this news. Let us see how things turn out in future. 

Now that I have scratched my itch for sharing my thoughts on this acquisition, I am going to go back to enjoying the last few days of my vacation.

Thursday, August 04, 2011

Summer Vacation

11:33 PM Posted by Deepak Nayal No comments
I have been looking forward to this summer vacation for long time now - starting tomorrow two weeks of break from work and getting my head cleared up. Everyday of this past whole week has felt like a Friday! Last time I took such a break was in year 2009. Now that I look at it, I think one needs to go on such a break at least once a year.

For the next two weeks now it is going to be me, my family and my new Cannon DSLR driving through the beautiful terrains of England.