NextWala

Social/Mobile Platforms have Changed the Game in the US (but not India yet)

I was looking at some stats on growth of consumer social and mobile platforms between 2008 and now. Even though it's an obvious point, the contrast is quite stark and shows how much the world has changed in a short time.  It's almost hard to imagine a world where Facebook was a startup much smaller than it is today, LinkedIn and Twitter had very small user bases and iOS and Android each had less than 10M users. But this was the case in early 2008.

The numbers above are based on Crunchbase, SEC filings and news reports - I think they're directionally correct although there may be some numbers that are not exactly right.

While all these above-mentioned platforms or quasi-platforms (and others I have not mentioned) have impacted startups in the US and Europe, I think Facebook and Android are the real game-changers in India as opposed to LinkedIn, Twitter or iOS.

Why Facebook and Android in India?  Here's why: When I think of consumer platforms (a much abused term), I think of a few criteria:

1. a large, engaged and fast-growing audience (100M+ users)
2. a developer friendly culture and technology base
3. a monetization vehicle that is providing enough return to developers for their time

In my opinion, three platforms stand out today and meet this criteria - Facebook, iOS and Android - in many parts of the world.  However, they all fall down in India when it comes to #3 (monetization) and (for now) #1 (audience size).  I have no doubt these platforms will get to the right audience sizes in India in the next 12-24 months - Facebook claims ~50M users and Android has <10M in India. In the meantime, Google reigns supreme for reaching users. 

So, the upshot is that now is the time to start companies leveraging these platforms in India.

Learning from Slideshare's Founders

(Source: Marttj)

I have worked with the Slideshare team, as a user, investor and board member at different times, from 2008 till late last year.  After the Slideshare + LinkedIn announcement last week, I have been reflecting on how much has changed and how much (or little, depending on your perspective) I have learnt from this experience since starting out in the venture business several years ago, as well being a founder myself in the late 1990's.

Here's what I learnt from Rashmi, Jon and Amit about best practices of founders.  I appreciated their willingness to work with me and be patient. 

Passion & Focus

• Passion about your userbase is contagious. It impacts the employees and their retention, it impacts your core user base and their retention, it impacts customers and their retention.
• Focus, focus, focus on honing the product – UX, scalability, security, data, analytics and more – but keep trying new product angles quickly to iterate toward high engagement and clear value.
• Focus on crystallizing value to paying customers – make it easy for customers to understand value (packaging, positioning, messaging), connect value to price, and make it easy to pay as customers receive value. To do this, understand who your super-user segments are and why.

Growth and (or versus) Monetization

• Be frugal (if possible) but keep innovating, so you are around when lightning strikes in terms of user growth, revenue or outcomes.
• It’s tough to balance growth versus monetization versus profitability. There is definitely a trade-off. Get lots of input on this from people who have made these trade-offs successfully.
• Understand path from user acquisition to engagement to retention to monetization early on and track associated actionable metrics (a la Dave McClure’s AARRR). Especially for user-generated content, there’s no automatic connection between usage and revenue.

The Outside World

• Acquisitions and successful partnerships take time to develop.  They generally come from engaging over long periods of time. At the end of the day, it’s about people getting to know people.
• Keep tabs on competition, don’t obsess about them though – most companies die of self-inflicted wounds, not because of competition.
• Investors are people. Sometimes your investors and board members know what they are talking about, sometimes they don't, hopefully more of the former.

Becoming a Better Board Member

Through hits (and misses), I also learnt some lessons on how to become a better board member over time:

• Be respectful w.r.t. founders – they known their business better than you do.
• Be patient – there’s no such thing as an overnight success – don’t get too impatient but still hold management’s feet to the fire
• Be thoughtful and have a high bar when suggesting workstreams for the company – their time is precious, don’t waste it.
• Focus on strategic impact – as an investor, focusing on daily management decisions (i.e. micro-managing) will not have a positive impact on the company (and may have a negative impact). Focus on strategic changes, such as building the best management team, making the right bets on monetization, making the right introductions to partners/acquirers, holding people accountable for outcomes.
• Conduct board meetings for the right reasons. Board meetings should not primarily be about reporting only but also about trying to solve problems together and laying the groundwork for scale.  The real action happens outside of board meetings though.
• Align with founders on outcomes. Understand your goals and risk-profile as an investor early on relative to goals and risk-profile of the founders & management team.  Align.
• Angels and VCs are not at loggerheads. As long as companies continue to build value in a large enough market, angel investors and venture investors are aligned.  All the media hype about the two communities being at loggerheads with each other is overdone.

Congratulations to Rashmi, Jon & Amit at Slideshare for LinkedIn sale

I am incredibly happy to see Slideshare's founders - Rashmi, Jon and Amit - find such great validation for their vision of bringing together the world's professionals through their content. Congratulations also to Ross and the rest of the team in the US and India.

LinkedIn's acquisition of Slideshare is a great outcome and I'm sure both organizations will grow symbiotically together.  As an avid user of both, I look forward to many more technical and product achievements over the coming years.  

I remember meeting Amit in Delhi on one of my visits from the Bay Area in August 2006 as he was blogging at Webyantra.net about the web in India.  We kept in touch - he told me to keep a lookout for something they were about to launch.  And then Yee Lee reminded me of Slideshare when they were starting on their fundraise. We got to meet Rashmi and Jon at that time and appreciated not only the care that they had for the Slideshare community but also the power of the content to draw you in for long periods of time. Subsequently, David Siminoff and I led the Slideshare Series A financing at Venrock.  After the fundraise, we got to know many other people in and around Slideshare, including the inimitable Dave McClure, Ross Mayfield and many others at Slideshare in San Francisco and Delhi.  The rest, as they say, is history.

One other note: I am excited that this upcoming transaction will do a lot to boost the entrepreneurial eco-system in India. A good portion of the Slideshare team is based in Delhi - they have proven that teams in India can innovate on product at a world-class level.  In addition, given the relative newness of the venture eco-system here in India, it is great to have so many people find value in their stock options - hopefully this continues to prove to aspiring entrepreneurs and employees at startups in India that their equity can pay-off handsomely.

For old time's sake, here's the presentation that Slideshare put out publicly in May 2008 after the Series A funding. Brings back some good memories...

Meet Dave Meet SlideShare

View more presentations from Rashmi Sinha

Looking for: Utility App for User-generated Local Content Aggregation

[Source: deepatheawesome]

Having recently moved to a new area of New Delhi, I am familiarizing myself with everything around me and trying to get the general vibe of what's going on around my local area.  

User-generated content has been quite useful in this regard.  I'm somewhat surprised (although I shouldn't be) with the volume and frequency of locally-related updates on Twitter and the lack of services to curate these in a meaningful manner. I have made "Defence Colony" a saved search on Twitter and check into that once a day in the morning. It's been quite useful.  I see a fair amount of posts related to local photos, crime reports, road traffic, weather, sales/deals, job openings, vendor/restaurant reviews, events etc.  

While each of these categories has been targeted through stand-alone apps, many of which have uncapped upside in large corresponding markets i.e. local traffic/navigation only from Mapmyindia/Inrix/Waze or local services through TaskRabbit (a Lightspeed portfolio company) or local reviews through Zomato/Yelp, I haven't seen the aggregate woven together in a compelling manner.

So I'm looking, as an end-user, for any small utility that weaves this togther. IMO, if a hyperlocal mobile (or web) app can classify these real-time local posts into these separate categories, roll-up the last 24 hours of posts in each category and then let me browse them at will or perhaps even subscribe to specific content as mobile notifications, that could be a useful and engaging service (perhaps notifications with geofencing as per a post I did last year on 'Why geofencing & opt-in notifications could save Foursquare'). Local content would be drawn not only from Twitter but also from Facebook,  (perhaps) LinkedIn, Foursquare, Gupshup and other mobile local services with APIs, using aggregation services such as Gnip.  

Caveat: I haven't seen this sort of service yet but I've learnt to be skeptical about my own ideas as there are invariably several other people who've been thinking far more deeply about these problems and have already gone out and solved them. So please tell me where you've seen what I have described - I'm interested as an end-user.

Here's a sample screenshot for a local search on the phrase 'Defence Colony.' You can see posts around restaurants/deals and local photos:

There is a depth-of-content difference between what I see here in Delhi versus what I saw in San Francisco - however, it's not that different.  This local content is available in most of the big metros of the world today and increasingly in suburban and rural areas.

There is a disambiguation problem that needs to be solved. For example, Defence Colony is a neighborhood not only in New Delhi but also in Bangalore and Lahore, as you can see in the screenshot below.   Perhaps geo-stamped status updates can be used to disambiguate. There is also disambiguation that needs to be done between content categories (crime versus sales/deals versus job openings).

So what's available today? You can of course use Twitter search using the modifier 'nearby:'. There are several tweet curation services like Sulia that could provide local Twitter feeds on a whitelabel basis.  There are also local Twitter feeds like from some local newspapers (e.g. Xtra Toronto here) and Schmap's local feed network here.   I haven't seen anything compelling from Citysearch, AOL Patch, Topix etc either.

Mobile Rev-Share Changes Might Spark a Fire

(Source: Andrew Bolin)

I attended the Founders Forum event in Mumbai, organized by Rajesh Sawhney, Brent Hoberman and Jonathan Goodwin, as well as the Nokia Growth Partners Mobile Internet event.  

Jonathan Bill of Vodafone spoke at both these events about upcoming changes in Vodafone's offdeck rev-share regime in India.  This change, along with a potential broadband data plan price war and growth in smartphone users could result in a real transition in mobile data usage over the remainder of this year, charting a way out of the slump that I discussed in my last post .

Vodafone will start to offer more favorable rev-share deals to those direct-to-consumer mobile apps/services companies that will not rely on Vodafone for promotion and customer acquistion. In other words, developers will keep 70% of the revenue from their applications (at a scale of Rs 1 cr+ in billings; 60% below that), as opposed to the 25-30% currently prevalent here.  70% is more in line with what Apple and Google offer to developers for iOS and Android apps respectively as well as what operators are offering in the US, Europe, China and Japan.  

The bet here is that the smaller operators like Aircel and Tata DoCoMo follow relatively quickly and then the larger ones like Airtel and Reliance may be compelled to follow suit - in aggregate, these greater offdeck rev-shares will drive more innovation and more revenue for developers.  Nokia, among others, is citing a 3-5x jump in conversation rates when operator billing is enabled for paid apps and in-app purchases.

I don't think mobile operators are risking much in the short- to medium-term by tring this since this change in rev-share would only apply to offdeck billing and not to the majority of revenue that these operators get through whitelabeled services, data plans and p2p SMS that they already offer.  In the long-term, though, whitelabel services will suffer from competition from D2C apps/services - also, ARPU from data plans will come down in price wars although overall data plan revenue should go up with significantly higher numbers of data subscriptions.

I don't expect these changes to break open the eco-system overnight.  70% rev-share to developers was offered in the US for several years prior to the iPhone being introduced in 2007, yet the eco-system there did not break-out.  Why?  Because there is lots of other friction in the eco-system as well, including multi-step transaction flows for consumers, 4-6 month payout periods for developers, reconciliation issues, no standard app discovery methodology (although app stores are starting to be offered by most operators today), no offdeck billing aggregator in India, fragmented platforms, lack of customer trust, and limited success/availability of multiple business models like paid apps, in-app billing, in-app advertising etc.  

However, assuming this change from Vodafone comes through in the next couple of months, here's some of what could ensue:

• In anticipation of other operators following through with the same model, I expect to see the formation of many new teams with strong consumer acquisition, engagement and retention DNA.  Hopefully, with funds freed up for product and marketing, there should be a greater focus on building brand and acquiring customers directly on what will be the leading platforms in India in the next few years: mobile Web and Android (in my opinion, not SMS, USSD, J2ME or iOS).  I am bullish about the prospects of some of these D2C categories, especially related to entertainment.  

• Mobile ad networks (e.g. Google, InMobi, Appia, Getjar) will benefit from some increased performance-based ad spend from developers.  As we have seen in other countries, mobile content providers (music, ringtones, apps) with direct revenue models have been the earliest adopters of mobile advertising because they have been able to tie marketing spend directly to revenue.

• Existing whitelabel MVAS vendors will launch consumer brands or start pushing their nascent consumer brands more aggressively.  In other geographies where the D2C eco-system opened up, whitelabel vendors have struggled tremendously with building consumer brands and have mostly failed.  Impediments include trying to maintain relationships with their mobile operator customers while competing with them in their D2C business and not having the consumer DNA in the team for user acquisition and retention.

• Other mobile operators might slowly start offering similar rev-shares although I think they will wait to see the results of Vodafone's new initiative before risking their arguably miniscule offdeck billing revenue streams.  

• We may see a carrier payments aggregator emerge once enough operators have changed their offdeck rev-share percentages.  InMobi (with Smartpay) and Opera are already moving this way in India as announced at MWC.  Boku, Zong, Paypal may come this way over time.  There should be a space for a standalone Indian carrier payments aggregator, along the lines of what Qpass did in the US a decade ago. 

So, I see a much more vibrant and larger MVAS eco-system emerging over the next few years.  Now is a right time to start direct-to-consumer companies in mobile - we are seeing a ton of founders with exciting new ideas.  Bring it on!