60 years of political mess, 5 years of economic growth

Being in India on Independence Day after 10 full years (last time I was here at the same time was 1997), I was shocked to see the pride and enthusiasm in everyone around here. Initially, I thought this was all because of the 60 year mile-stone, but then 1997 marked the 50th year of independence, which, arguably is a bigger mile-stone than this one.

Then what possibly is the reason behind this rejuvenation across the board? This seeming patriotism feels just too good to be true. Something seems amiss...

And then it dawned on me, as soon as I opened the 60-page Times Of India, that this day felt eerily similar to a July 4th weekend in the US. Yes - its not patriotism, not nationalism and not a new-found pride. Its not the government and has nothing to do with our culture or history. It's the corporations. And its the media. The reason we are all excited is because (1) Today is "SALE" Day and (2) Because there are 24 different news channel, 4 different news papers, 16 different FM channels, 25 different super-markets and millions of bill board signs that flaunt the Tiranga and talk about Independence Day

How amazing is it, that just 5 years of sustained and solid economic growth makes people so excited. Reliance Mega Mart offered 60% off everything, Big Bazaar had 20-40% off and the news paper had almost 30 pages of ads (and 5 pages of news, of course!). With such amazing offers and a free holiday - celebrating Independence day has never been so exciting.

I believe now. Pride, culture, history, patriotism, national heroes - nothing matters more than commerce, profits, sales and discounts. Reliance, Adani, Infosys, Tata, Wipro and others - you are our true national heroes. We salute you.

Oh - By the way: The road just outside the Reliance Mega-mart is jammed for 2 kms and I see cars parked along the road all the way. Amazing shop, amazing merchandize. Disgusting infrastructure...

Are we social introverts?

Ever wonder why the most popular consumer gadgets in recent times are the cell-phone and the Ipod? One of them (the cellphone, i.e.) only works for social interactions. And the other one (Ipod) makes you completely unsocial. And the two together - complete us - mostly.

Is there really a need for anything else?

Apple's Safari for WIndows? Poor strategy

There are a few millions of us who believe that Steve Jobs can do no wrong. We think Apple connotes a quality, excellence and brilliance that no one else deserves. Much like Google can do no wrong and God can do no wrong (ok - this might be a bit too spiritual, but you get the point!), we think Apple can just not make anything half-ass. The Mac, the iPod and its billion variants there-of and the iPhone are all good examples of how much "trust" and "premium" we as consumers put on Apple

They why, pray why Steve, the hell did you release Safari for Windows? I do think it's a good thing and I'd love for Apple to provide me a way of not using IE - but such a lame-ass version? Is there one real reason in there that would make me change? Nope, sorry. Unsurprisingly, the bloggers responded scronfully (see here and here).

This might be a fuckin' screw-up. As consumers, we build trust in a brand that can never wrong me over a long period of time. By launching a lame-ass beta version of a browser, Apple is just telling me it is, afterall, mortal. It can do no better than Microsoft. All the credibility that it earned from me over time with its iPOD is slowly draining. Damn.. I feel robbed. Apple, Sony and Porsche are three brands I'd give my life for - now its just two of them.

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Disclosure: This posting was done on Safari. My first and last one on it for a long time though...

Web 2 point Oh - half done, almost!

Dan Farber describes the 6 levels of user participation in the social web media. The report of suggests that 48% of US adult online consumers create, collect, critique or read blogs or use a social networking site. The other 52%? They are still using hotmail, i guess...

Of India, Web and Online Travel

There is clearly a lot of enthusiasm in India regarding Travel. There are five big VC-funded companies, two large portals (India Times and Rediff), several international behemoths (Travelocity, Expedia, Mobissimo) coming in quickly, a rapidly rising LCC business model and gazellions of new hotel rooms being constructed. Its hard not to get excited about this industry, no?

But wait, hold on a sec. Let's dig a bit deeper -

a) Research reports suggest that the Online Travel Market in India was at $300MM in 2005. Phocuswright projects it at $2B in 2009. Evalueserve is more conservative and estimates it at $1.2B in 2010. The former is a travel consulting and research firm and has a clear interest in being optimistic. Evalueserve probably is a bit pessimistic at least to the extent it supports its report on an overheating VC market. Well, let's say it will be $1.6B in 2009. Lets also assume a healthy 25% growth rate after that until 2015. That pegs the market at 6 BILLION DOLLARS. Dr. Evil, are you listening?

b) Currently, OLTAs are 14% of online travel. Lets assume they garner 30% of total in 2015, which is quite optimistic, I think. For context, OLTAs account for 40% market share in the US, but have a slower growth rate than supplier-directs. With a popular and flourishing LCC market in India who love supplier-direct sales, the 30% expectation is quite generous.

c) The current split between Air and Hotel is 90/10. Air is just more attractive and appealing to consumers. Its the first thing they think about when they think of travel. Traditionally, Hotels pay higher commission rates, and the level of commission rates are inversely proportional to how full the hotels are. Now, in India, there is severe capacity crunch. Hotels in the top-5 metros are running at close to 80% occupancy rates (HVS). With the minimal need of additional distribution channels, a highly competitive OLTA market and no strong brand or traffic generation record, I can't imagine a Hotelier paying an Indian OLTA anywhere near that level. Air is equally grim, if not worse. Load factors are equally high and LCCs just don't use OLTAs.

In their latest filing, Expedia reported ~15% gross margins. Travelocity and Priceline are close. This, for a company that probably has a huge leverage with its suppliers, commands a 40+% market share and drives a significant portion of its business through Hotels and Packages that are higher margin businesses. With no volume, brand and power at hand, I'd guess the Indian OLTAs would be happy to take 6% home.

d) Expedia with all its benefits of scale, reported ~17% in operating margin, with sales and marketing accounting for the bulk of its costs. Given recent trends in the US travel market, I suppose Expedia is only trying to maintain its market share through its advertising. The Indian OLTAs are trying to create a market, then grow their share and then protect it through advertising. Ouch - their spends will be much much higher. At the same time, travel is a high-touch business and the infrastructure in India sucks and shit just happens - so good luck cutting down on customer care costs. Well, lets just say these OLTAs are sharp and super efficient and will in fact manage 20% operating margins.

e) So, fast forward to 2015 - and we have all OLTAs fighting for a $6B * 25% * 6% * 20% = a whopping 18 MILLION dollars per year in profits. And that will be split between 10 different agencies? At a P/E multiple of 30 (remember we are in 2015 now, when growth rates will slow down), the entire market would be roughly worth half a billion dollars.

Ouch... it seems like the real winners in all this will be the LCCs. The OLTAs are driving awareness of booking travel online through their beefed up marketing and focussing on price-based messaging. If price is king and online bookings make sense, then LCCs rock. And why would would I buy an Air Deccan ticket on Makemytrip. I am trusting Air Deccan with my life to fly me from Point A to Point B. Sure, I can trust them with my credit card.

Ah well, here are my predictions for 2010 -
1) Of the current lot, Makemytrip will succeed thanks to its strong start and dominant market share. One of Cleartrip, Yatra or Travelguru will be a distant second (think Elong in China) - thanks to their VC backing. The other two (my guess - Travelguru and Yatra will die or get acquired for cheaaaaaaaaap.
2) Travelocity and/or Expedia will do very well, very very well. It will provide differentiated value to suppliers by marketing them to the high-net worth business and leisure segment traveling to India. Both will grow organically like they did in other Asian countries.
3) A meta-search player will emerge big (possibly Rediff?) - and will give each OLTA a run for their money. Airlines will love it for driving traffic to their sites
4) A specialty vacation package business (like pleasant holidays) will realize that dynamic packaging is bogus and will focus on good-old pre-packaged vacations to leisure travelers online. It will offer great prices, rich content and excellent customer service. It will also succeed.

Is herd mentality really bad?

In his post titled "Herd mentality and Indian startups", Pranav cites some interesting examples of how almost every successful internet model (mostly in US) is quickly flooded with their indianized me-toos. While I do think Pranav is being harsh on budding entrepreneurs (you can argue that his blog itself on indian startups and entrepreneurship shows herd mentality given the many that appeared before him - try webyantra, ileher, business india 2.0); he does raise an interesting point.

Why is this happening? Lets dig a bit deeper.

First off, I don't think herd mentality is bad - I think its terrific. There is no bigger motivation than trying to replicate a proven business and success elsewhere, and its this drive that takes people through all the hard work and no money phase of a startup. And its not any different from how other things in life work - doesn't almost everyone want to be a sofware engineer right now? isn't every Bollywood movie a love story? do we really need a 100 different types of car models to choose from? But if its a formula that has worked for someone else, then why not?

Secondly, the idea in itself has no meaning. Its all about execution. If ideas is all that's needed, all VCs would be billionaires and all B-schools would be selling ideas, not degrees.

Third, and most importantly, almost all web 2.0 startups are a product of software engineers. They build great technology, decent interfaces and then just hope for traffic. What happened to marketing? Ask them and they will you - "Aah, that's not a problem at all. We'll get blogging coverage, buy google keywords and its all going to be viral". Good luck to these guys! Think about marketing first. People don't need 8 photo sharing sites and 6 DVD sites. But they do need one. How do you get to them first? How can you make them remember you forever? It's all about marketing, baby! Product is a distant second.

Finally, its all about economics. The field will become even in the long-run. If a business is easy, cheap and profitable - then it will get competitors. Ultimately, all markets get reduced to a few handful quality companies. Its just a matter of time.
Figure out how you can make your business difficult and profitable. Thats what gives you unfair advantage. Don't look at how google got to where it is - look at where they are and how difficult or impossible it will be to displace them. Its f***'ing scary...

Ask this. The internet population in India is 38ish million.
a) Are all of them taken? The answer is probably yes for social networking and matrimonial sites, but definitely not for DVD rentals
b) Is there a reason they have to be loyal to their current brand? Again, given how much time they have invested in their site, this is a yes - for social networking sites. For photo sharing sites and travel - probably 'no'
c) Is the cost to switch them over to me too much? matrimonial sites - may be ( I say may be because what if you mareketed your product to 17-year olds? They will be ready in 5 years and they will only come to you). DVD rentals - should be easy! Travel - even easier.

Like it or not, I think there is still room for a few more sites in a few of these categories।

What is it that drives you?

What is it that makes us violate the speed limits? adrenalin? the 65mph odomoter reading that calibers upto 120? is the cars in the lane next? the person next to us? or just the heck of it? whatever it is - it is freakin' fun, isn't it! I love cars that drive fast. I love employees that work fast. I love waiters that serve fast. speed is f***'in fun!

Just peep into your body odometer... if it has been reading below 70 for a while - something's wrong. CHANGE your life - find something else. If nothing works... go test-drive a porsche... or go carting. or watch a good movie. it'll help rediscover your inner fire. Go ignite!

Just do it!

Do you wake up early in the weekdays than weekends? If you answered yes, you must hate your job! No excuses, just say yes! There is nothing wrong with hating your job. If it pays you well, there must be something wrong about it. Aren't all things good the ones where we have to spend? Be it food, fashion, females?

I always try and register the first word i say as soon as I wake up. If I am saying too much of "Oh Shit" - its time to quit. If I am not eager to wake up for my job - it must suck... I wonder what makes a job fun... Is it work? Is it people? Is it the culture? Its definitely not money. I say - its fun only if it makes you feel special - whether its the client, the boss, the work or the pay-check.

When was the last time you had trouble getting out of bed? Don't remember? Stay put!

But where is the money?

I have always admired Indians. They are amazingly entrepreneurial, sharp and opportunistic. They learn and speak English because it sells better. They dance to rock and salsa. They code Java as if it was Darjeeling tea. Ever heard of second mover advantage? India is all about it

But ever heard of stupid copycats? Yes, we are still talking about India. It pains me to see Indian entrepreneurs madly rushing into reproducing consumer internet models. I feel bad for the so-called Web 2.0 clones, because I just don't see a reason for them to exist. The consumer base is small (20MM - 40 MM, depending on who you ask), but most shopping is offline. There just isn't any ecommerce economy yet. Google works because the "tail" is long. India has no tail. The online advertising pie is too small and there are way too many people going for it. Screw advertising... it blows anyway. Lets make a product people want, and make them pay for it.

Generating Collective Crap

Yes - I am taking a dig at O' Rielly's definition of Web 2.0. I think its wrong, mis-guided and wishful. Don't get me wrong, Web 2.0 is good and real - but collective intelligence it is not. What's actually good is all the cool and light interfaces, the emphasis on sharing and connecting with users, blogging and lower barriers to entry through open-source resources, be it software, human or web services. All of these elements have a real tangible benefit to the user or the business, and they are here to stay.



But its wrong to glorify collective intelligence, a.k.a. "user-generated content", as the primary offering of Web 2.0. Yes, there are millions of believers in this, which is not surprising if you are watching the number of social networking sites, group sharing sites, blogging and what not. If we have the same 24 hours every day and have at least much work to do as we did before, where do we get the extra time from to spend on myspace, linkedin, gusto and what not. And what's in it from me. The oens that actually spend time on it are the ones with the wrong intentions - they are not in there for content or sharing, they are their for money. When you have so many different sites coming up, where the only barrier to make it to techcrunch is an extra feature or two, you have a largely fragmented user base. You have a collection of random words and no group intelligence. To make wisdom off a crowd, you need a real crowd. Otherwise, you will only generate crap.

Make no mistake, i do think the collective intelligence is real and big if approached correctly. But I think people are foolishly optimistic about the "collection size" and "intelligence quality" they will collect. We should not be harnessing intelligence, we should be understanding it. And we are not looking for intelligence, we are just looking for needs. Lets call it "Understanding collective needs" and you have a winning model. Yes, Amazon's recommendations is a prime example, Google's page rank and Netflix's recommendations is another. Findory is an excellent service - so much better than the more popular, but completely useless, Digg. The only winning models I have seen so far along the lines of O' Reilly's definition are wikipedia and tripadvisor. May be youtube and Yahoo Answers to some extent, although i am still very skeptical of their sustainability. The former two are here to stay, but don't expect any of the copycats to succeed. Take your dime and go shopping on Black Friday. The returns will be higher.

Happy Thanksgiving!

Chaos

Barry Scwartz in this book "The Paradox of Choice" complains how vendors create a multitude of options for consumers in their clueless quest of helping them, but what ends up happening is customers are confused, frustrated and feel downright rejected. To experience this first hand, try buying a laptop at Dell, or a ticket from Orbitz. They make me fell stupid and dumb...

But I wonder what makes humans want options, unless ofcourse they get it - at which point they hate themselves. We like going to malls better than the clothing store down the street, we prefer AMC 32 over good old cinema, the Walmart over the mom and pop grocery store... Its analysis - paralysis, we are gradually becoming more indecisive and losing our identity. Its confusion... its chaos. Life sucks!

Debut

If you are reading this blog, you are one of the distinguished (read: only) few who either mysteriously managed to stumble on this one or are more than nice to have accepted my invitation to read the Debut. Either way - thanks for stopping by!

With blog count as of July hitting 70 MM, another 70 million is due in the next 6 months, so here's my bit at trying to keep up the pace.

Now, to the more concrete stuff -

Why?
Well, like a few other billion people, i also think that the one thing i cannot live life without is the "broadband". Yes, i don't think cellphone cuts it; Tivo is not remotely in the picture, and myspace - i just don't understand. Personally, it is broadband that has managed to disrupt my life by creating a unsurmountable Attention Deficiency Disorder in me. Scores of blogs, news and scores have managed to victimize my brain and my focus beyond all repair.
This blog is my attempt at trying to focus on something

What?
Don't know yet. I might write a post once a week. And it'd be on technology, strategy, life, criticism, whatever - depending on how much its raining outside. San Francisco has crappy unpredictable weather, so good luck predicting this space.

Stay posted!