Thursday, December 27, 2007

Social Networking : Learnings & Opportunities

That's the title of a talk I gave at Web Innovation 2007 on December 19,'07 at Bangalore. Some key themes from the talk :

1. Don't think the story is over with (the likes of) Facebook and Orkut. Facebook will not end up ruling the social networking world, nor will any one site.There is potential yet in this technology.Many specialized networks with varying applications will emerge.

2. Each one of us can profitably be a member of 7 different specialized social networks.

3. The key value addition that online social networks bring to the Internet landscape is the creation of trust capital. While connecting people around the world is now easy because of the Internet, the problem that had hitherto not been solved was getting people - who are online but who haver not seen or met each other - to actually trust one another enough. Trust is the #1 issue in scaling up on the Net i.e. getting people who are online to actually use and embrace the Net.

Innovation by the likes of Friendster and Facebook have together shown the way. Friendster showed how to use connect and add people who were separated by more than one degree of separation. Facebook has shown how to well use sophisticated & personalized privacy controls to create virtual walled gardens. Social networks are now a tool to accumulate trust online.

Here is the ppt of my talk. Read on !

Here (and here) is some news coverage of the event and my talk.

And here is my blog post on the proceedings at Web Innovation 2007. There were several other interesting talks, here is the complete agenda / list of speakers

If you have difficulty accessing the ppt of my talk, let me know and I will zip you a copy.

And, Happy New Year to you all!

Sunday, December 23, 2007

Internet market surveys - more on social media & video

The online video & social media juggernauts keep moving on in the U.S. As I said in a previous post, these are the new online killer apps :

1. On Video :

Harris Interactive surveyed 2455 U.S. adults and found that over the last one year :

  • 65% had watched a video on You Tube - as compared to 42% in previous year.
  • Further, 42% said they visit You Tube frequently, as against 33% who said so in the previous year.
  • You Tube was also the most favoured video site , with the stated reason being that users found it to contain almost all videos.
  • However, as against 65% who used You Tube, as many as 43% had also watched videos on TV network website, 35% on news sites and 30% on search engines.

    And online viewers say they are more interested in full-length TV shows & movies and less in the amateur videos or video news that currently dominates video. Good omen here for the first movers .

    Her Royal Highness The Queen is now officially on You Tube. A watershed event of sorts. I still remember the interest the online coverage of Princess Diana's demise & funeral had aroused; it was a landmark in Net usage at that time (ten years ago), people the world over found it convenient to convey their condolences online.

2. On social media :
Pew Internet has come out with a report on teens & social media. Three salient findings :

  • There is an increase in content creation (64% of all teens between 12-17 as against 57% in 2004).
  • Girls continue to dominate most aspects such as blog creation and posting a photo or video online.
  • 28% of all teens are "super-communicators" and these are more likely to be older girls.

Not much buzz about video and social media in India yet. Yes, social networking much talked about but even this has yet to get the widespread usage. Orkut was only 5 million (and Facebook will be much less) when I last checked the site's stats.This in a market of 32 million active users a month.

There is indeed an opportunity to create an online video and an online social media market in India. More on this later.

Friday, December 21, 2007

Internet draws youth away from TV

That's the title of an article that appeared in The Hindustan Times dated Nov 17.They have quoted MediaScope, an annual media survey that is done in 11 West European countries for the European Interactive Advertising Association by market research agency Synovate.

Key trends from the survey :

1. Almost 6 out of 10 (169 million ) West Europeans now regularly access the Internet.
2. 8 out of 10 Internet users now use a broadband connection.
3. A user spends on an average about 12 hours a week online.
4. Among young people (16-24 year olds):
- For the first time, they are more likely to go online for most days of the week than turn on the television. 82% use Internet at least 5 days a week while only 77% use TV for the same period.
- Average use of Internet per week is 14.7 hours, or 10% than the average use of TV of 13.4 hours per week.
5. Internet consumption is fast increasing among all demographics, the +55 age group and women in particular.
6. 42% of all Internet users now use social networking, making it the third most important application after search (87%) and email (81%). Very interesting.
7. The number of people watching TV, film or video clips is only 30% of all users but has grown 150% since 2006. Another killer application here.
TV Advertising will move to video & rich media ads online big time, considering the 80% + broadband penetration.
8. Over a quarter (27%) of Internet users post on rating & review sites, a growth of 42% over previous year 2006. A similar number viz. 26% post on forums. Social media is big.
9. The most commonly visited sites (% of all Internet users who visit at least once a month) were:
News 65%, Local information (52%), Travel (51%) and Banking & Finance (50%).

The contrast with India is of course stark, one source for India data is the annual I-Cube study by IMRB. Here is the executive summary of their 2006 report.

More on trends of Internet usage in India and other countries in subsequent posts.

Thursday, December 20, 2007

Indian Internet market : Hindu rate of growth Part I

I have just returned invigorated from the Bangalore summit Web Innovation 2007. Will soon update with notes of some sessions that I attended. Will also provide the presentation I made there on social networking.

Meanwhile, herein are my much delayed views on why India's Internet market has been growing slow and what can be done about the same.

The answer is in three parts :

I. Why is the Internet important
II. Why is the Internet user base not growing fast enough in India
III. What can be done to make the Internet base grow (this is the flip side of the question in II above)

This post is about item no. 1.

Why is the Internet important ?
(Don't laugh, there are several shades to this answer. The answer also has some bearing on questions II & III above).

1. Large numbers online (globally currently 1.25 billion are online via PCs alone).

2. Network effects : a potentially viral medium. You can make your idea or product travel through above large number of people faster than is possible through any other medium. Yes, you have to be smart about it.

3. Low cost of going online. And any one can be a publisher. Thus all in all a democratic medium. Gives every one of us access to information, various tools as well as a Voice.

4. Global Encyclopaedia, with well-regarded Big Brother (you know who, first two letters of name start with Go :-) manning the gates to this.

5. Easy Internet access across devices (beginning with mobile phones ) and in remote locations (probably via wireless technology) will boost usage,leading to a virtuous cycle of benefits.

6. Technologies getting popular currently e.g. VOIP, video, RIA etc. will provide many-fold benefits and growth in usage.
The best is yet to come e.g. Vincent Cerf believes that only 99% of the Internet applications have yet to be invented. A universal language translator, online, any one ?

7. New paradigms e.g. Web 2.0, 3.0, Semantic Web and the like makes the Internet grow through its own self-renewal.

8. Hypothesis : The more underpriveleged the Internet user, the greater benefit does the Internet possibly provide to him / her. This does needs an explanation :-)

When I worked at, we did much to understand Indian Internet users, including focus groups with consumers. And the sense I got then was that there is an even greater hunger among, say, young SEC B girls in small towns of U.P. to log on to the Internet than there is among upmarket metro users.

Education,jobs,travel,marriage, the Internet provides it all. The Internet is thus seen by underpriveleged as their passport to break out of immediate constraints of locality, gender and the like and partake of mainstream opportunities.

So the Internet is a tool to address social inequality concerns. And today income inequality in India is a more worrying issue than it is in any other large country. I was at a TIE Summit last week wherein C.K. Prahalad touched on this. He presented data on changes to India's Gini cooefficient ( a tool to measure disparity in incomes) over the years vias-a-vis comparable data for China and U.S. Income disparity is increasing faster here while at the same time our absolute i.e. average income levels are also much lower.

From the above, I would argue that in the long-term in India we have even "more" to gain from the use of the Internet than do China or the U.S.

9. Great impact possible in societal issues. The Net's impact will be even greater in non-business / non-profit concerns affecting us all. The new social media has a role here.More on this big statement in a subsequent post.

I was looking at a reason # 10 to create my own Ten Commandments, couldn't find one, and now will leave you, the esteemed reader of Marketer's Kaleidoscope to take a go :-)

Coming up : Parts II & III regarding "India's Internet market : Hindu rate of growth".

Wednesday, December 19, 2007

A truly open cellular phone network ?

An interesting Op-Ed piece by Tim O'Reilly in the New York Times, that I first picked up in the editorial page in Deccan Herald newspaper (here and here respectively).

Some cataclysmic possibilities lie ahead in the cellular world.

Unlike Internet which is based on and which owes it's success to open standards (such as HTTP & HTML), the cellular world is one of carrier-centric closed networks.

Google threw a small stone in this tranquil pond a few weeks ago by announcing a few weeks ago the Open Handset Alliance.

Verizon (in the U.S.) is the first cellular carrier to announce that it will go "open" (towards year end). Which mean that it will allow any application and any device to connect with it. It will enable this by publishing technical standards which developers can then use to design products to interface with the Verizon Wireless network.

Tim O' Reilly (yeah the same guy behind the books and Silicon Valley conferences by the same name and the one who wrote the most quoted piece on Web 2.0) says it looks like Verizon is only opening up just a bit. To him really opening up is sharing up databases of calls made and the like.

In case the carriers don't move fast enough, Google & Co. could get there first. Then, history is witness as to what happen when networks open.

The other interesting move here is the one Nokia is making to go Internet with a vengeance (more on this later).

Wednesday, November 28, 2007

Web Innovation Seminar

There are quite a few events coming up that will be possibly of interest to the Internet folks:

1. TIE Entrepreneurial Summit on Dec 11-13 in Delhi.
This is actually the cross-chapter annual TIE jamboree, traditionally held in Mumbai, that is being held in Delhi this time. They expect 1500 delegates. Interestingly, it's being billed as "India's first climate friendly conference".No idea why.

2. Web Innovation 2007 , from 18-19 Dec at Bangalore subtitled "The Next gen technology : Web 2.0 and beyond", organized by TFCI and sponsored by Microsoft, among others.

3. India Digital Summit, from 10-11 Jan at Delhi. This is organized by industry body IAMAI. Agenda yet not known. And IAMAI is organizing a Seminar on Gaming in Mumbai today.

Am speaking at the Web Innovation meet. Will pontificate on social networking.

Sunday, October 14, 2007

Some McNuggets (Nuggets on McDonalds)

I am going to take up the Internet India market stagnation story (see my Oct 6 post) later. Meanwhile, having partaken of a beverage posting (Oct 2) earlier, now have an appetite for some food, so here goes.

Here is gyaan regarding McDonalds in India and in the U.S. home market. I have drawn on recent interviews in Economic Times & Pitch magazine given by the company's two master franchisees in India. With inputs also from their website and my own experience with the brand both in India and in the U.S.

I have grown to admire the company for the circumstances and manner in which it has recently revitalised itself in the U.S. market. Am also an admirer of the efficiency and consistency with which they run (the world's largest) franchise network.

And in India, they are one of few multinationals who got their strategy right first time and they have built a brand with an enviable following.

McDonalds (NYSE : MCD) is the world's largest single food outlet brand with 30,000 outlets in 100+ countries globally. The company was founded in 1955. McDonalds serve over 52 million customers daily. McDonalds is also the world's largest franchise chain, with over 70% of above outlets being franchisees. And in the brand rankings of leading consultancy Interbrand, McDonalds has been been in the top 10 global brands.

The company has been under attack in its home market in recent years thanks to the anti-obesity movement. The brand was witnessing stagnant sales.

However, what's creditworthy is that how well this large, mature organization has been able to pull itself out of the above hole it had got into. In 2003, during a time when I was working out of New York city, McDonalds had announced it's first ever quarterly earnings loss since it went public in 1965.

However,business has of late been booming, with a healthy increase in same-store sales over the same period of the previous year. There was 5.1% growth in the U.S. in same-store sales in Q3 '07 over the same period of the previous year.As against this, Pepsi's Yum Brands, the owners of Pizza Hut, KFC & Taco Bell, saw only a 1% growth during the same quarter. And the stock is outperforming analyst's expectations.

A revamped menu which includes chicken snack items and breakfast items has helped. Former Chief Marketing Officer Larry Light's "I'm Lovin' It" campaign has worked well. The campaign was produced - quite unusually - not in Madison Avenue - but by an office of DDB Worldwide, part of the Omnicom Group, in Unterhaching, Germany, near Munich. This ad outfit was selected after a global contest. The new theme had, as of Oct 2004, already helped contribute to 16 consecutive months of global sales gains after years of declines. In Larry King's words, it was a consequence of a realization at McDonald's that "we had to change our voice and let the customers speak for themselves."

Larry Light was also one of the first marketers to move away from exclusive use of mass media, as early as 2004.His strategy entailed employing many messages instead of one message to reach every one. He called his technique "Brand Journalism" and he said "it's the end of positioning as we know it".Some more nuggets on Light's tenure at McDonalds here.

McDonalds is a QSR or quick service restaurant with focus on Quality, (2000 food,safety & quality checks as it moves from farmhouse to restaurant), safety (72 quality protocols are conducted every day at each outlet), quick service and cleanliness . Under attack in the U.S. in recent years for it's - alleged - fattening menu, there has been a thrust on nutrition as also on CSR ( corporate social responsibility) initiatives.

The company spends over $1 billion p.a. on training. The employees are trained at the company's Hamburger University, for which they get credits towards a U.S. university degree.

In India :

They have 121 (here is an update from a feature in Hindu Business Line on Oct 16th) outlets in India, having invested Rs. 8 billion so far. They plan to invest an additional Rs. 3 billion over the next three years for back-end operations i.e. for improving productivity of food processing plants and suppliers,for expanding and testing new formats and for entering new markets.

The company operates through two 50-50 joint ventures between McDonalds Corp and two Indian businessmen. The first is Hardcastle Restaurants in Mumbai which is run by the husband-wife duo Amit & Smita Jatia and which is responsible for all outlets in the Western region. It commenced operations in April 1995.The other JV is Connaught Plaza Restaurats which is based in Delhi and which runs the North region. Here,Vikram Bakshi is the India partner.
The two companies between them employ about 5000 people, with between 60-80 hands per outlet.Every new employee is sent to the stores for four weeks training and goes through the entire rigmarole of duties such as serving people and cleaning the floors ad tables.

The company's plans include making French fries locally at a plant to be set up in Gujarat by one of its key supplier partners worldwide viz. McCain Foods.An outlet is coming up at Delhi airport, so also at old Delhi railway station. Towns like Meerut, Varanasi, Karnal,Kanpur & Gwalior will see expansion.

Sales (actual numbers are a guarded secret) to kids are down in India, consciously so. Thanks to the junk food and obesity concerns.Kids now account for only 18% of customers down from 33% when the company started ten years ago.This percentage is believed to be the the lowest among all countries where McDonalds operates.

In India the company is fastidious about showing it's respect for vegetarians as also locals (read Hindus & Muslims). All cheeses and sauces are prepared from veg ingredients. Only vegetable oil is used a cooking medium. No beef or pork are used or served at all. Veg products are prepared in separate utensils and also procured through a separate chain.

Some of the innovations for which Indian consumers know and probably love McDonalds :

  • Low cost products such as the McAloo Tikki & McChicken Grill (just Rs. 20). In fact, the company has consistently followed a value for money pricing.
  • McDelivery (call and you can get their items home delivered).
  • A range of innovative Indian menu items

By itself, each of the above three innovations are not unique. However, in each case, McDonalds was one of the first MNC brands to make such moves in the Indian market - as also succeed at them. Not many MNC brands have launched themselves with value-for-money pricing and created localized products and services right from day one. And McDonalds has been doing such localizations ever since they launched in India over 10 years ago.

A footnote : Localization has been around at McDonalds in other countries too. Euro RSCG CEO George Gallate is quoted in Times of India of Oct 20 as saying that McDonalds learnt the importance of localization the hard way. "When McDonalds tried its one-size-fits-all model, it didn't get a huge amount of traction in markets like France, China or the Middle East.What the people at McDonalds realised that was that they needed a global brand that was tailored to local markets. So they started selling noodles in China, used beetroots in Australia and put falafel burgers onto the menu in Middle East. They delivered the core of what they stood for - fast food - tailored to local markets".

Saturday, October 06, 2007

India's Internet user base : A Hindu rate of growth

It is of some interest to understand why India's Internet user base is not really growing and remains stuck at a low penetration level.

Both the telecom and Internet sectors were privatised at around the same time in the late 90's. But the Internet user base has witnessed a Hindu rate of growth of about 20% p.a. ever since the year 2002. It was only in the boom period 1999-2001 immediately after privatisation of the ISP sector in late 1998 that the user base grew impressively, at over 200% p.a.

On the other hand, telecom has grown by an order of magnitude i.e. 10X faster. The number of Internet subscribers as of end June '07 (the latest period for which data is available from the TRAI) is 9.22 million. The thumb rule is to take at a conservative basis 3 Internet users for each subscriber (ISP industry association ISPAI's old thumbrule). Thus, there are a total of about 29 million Internet users (defined as users who access the Net at least once a month) as against 200+ million cellular users.

Yes, one hears that there is now traction in access to the Net via mobile phones. Economic Times (Oct 6,'07) reports that 38 million Indians now access the Internet via their mobiles. And that this number grew from 31 million the previous quarter. And Indian Cellular Association Pankaj Mahindroo is quoted as saying that of the 7 million handsets sold every month, over 4 million are net-enabled.Some confusion here. Not clear whether 38 million mobile users are today Net-enabled i.e. GPRS subscribers etc. or just Net-ready handsets. And, even if they are Net-enabled, whether they actually log in.

Even assuming these are all Net-enabled / GPRS-enabled handsets, it is likely that these 38 million mobile Net users overlap with the very 29 million ones who use the Net via the PC.

Thus on a population of over 1100 million our Internet penetration rate is close to 3%. This is among the lowest Internet penetration rates among all countries.

The world average Internet penetration is in fact 19% (Internetstats puts the Indian penetration at 5.3% and user base at 60 million : one reason they are higher than the TRAI-derived number is that they count "ever used" numbers and not the "logged in last month" numbers).

The stats on minutes of usage per user as well as broadband penetration are not too impressive either.

The niggardly Internet usage & growth is a matter of concern to many, among them bureaucrats, Internet industry folk, VCs and all well-meaning folk. The moot question is : why has the Internet lagged in India?

There are to my knowledge no indepth studies on this, though theories there are a few. Having been involved in the industry over the last 8 years, I shall - in subsequent posts - comment on these theories and hazard a few answers myself.

Tuesday, October 02, 2007

Beverage companies

One of the most interesting things for a marketer is facts about a category of interest.Here are some nuggets on the beverages industry that I picked up last few days.

Pepsi has divided it's product portfolio into three groups (the classification is telling) :
Fun-for-you e.g. Pepsi beverage
Best-for-you e.g. Diet Pepsi
Good-for-you e.g. orange juice
Currently, fun-for-you accounts for 70% of the total business and over the next decade, the company seeks to reduce this to 50% and increase proportion of best-for-you and good-for-you.

For Coca-Cola, 30% of all beverages are consumed in emerging markets as against 70% of business from the developed markets and the former are enjoying unprecedented growth with large numbers joining the middle class. The company has 400 brands across carbonated soft drinks,juice,water,tea,sports drinks, sparkling water and energy drinks among others.The company had problems in the early 2000s due to an inward looking culture,lack of focus on customers and innovation and lack of alignment with bottlers. However, in the last 18 months the company has grown in both emerging and developed markets and the stock price has risen by 40%. The company's President & COO Muhtar Kent says it is because it has become better at commercialising it's innovations and succeeding with it's new product launches. Also, a "winning culture" defined by him as "belief in knowing what we are doing and where we are going".

And India is the only market where a local brand (Thums Up) has done as well as the flagship brand Coca Cola.

UK's Datamonitor Group's data shows that carbonated beverage sales have been nearly flat last 6 years (growth at 1% p.a.) while the overall beverage market has grown reasonably at 6% p.a. :
Carbonated drinks $1.31 bio (1999) $1.32 bio (2006)
All drinks $3.15 bio (1999) $3.34 bio (2006)

Tata Tea has some interesting plans.They overtook Hindustan Unilever two months ago to become the volume leaders in the tea market (HUL remains the value leader). The tea market in India is valued at Rs. 110 Billion with a tonnage of 950 million kg. Black tea volumes are stagnating causing tea companies to push the other varieties.

Tata Tea has now launched a new campaign "Jaago Re" to position the Tata Tea brand as an umbrella brand to the four product brands of the company. The multimedia campaign is targetted at youth, uses a 45 second commercial and revolves around the theme of awakening youth vis-a-vis various social causes. A cup of Tata Tea "awakens" you, seems to be the subliminal message.

Starbucks which has it's stores in 40 countries already,has for the moment shelved plans to enter India. However, it has entered into a global arrangement with Pepsi to market its ready-to-drink products through Pepsi's distribution system. This could well result in Starbucks bottled drinks hitting the market here in India ahead of it's retail stores. Incidentally, all of Starbucks' 11,000 odd stores are owned, not franchised.

Hey, marketing guru Seth Godin has this number for the different number of customized beverages one can get made at Starbucks : 19,000,000.

Joseph Mitchelli, author of book The Starbucks Experience who was in Mumbai recently for the Asian Brand Congress has this to say on what a Starbucks (customized) beverage is : 'customization - with the handcrafted assistance of the barista or coffee preparer - is about satisfying each customer's unique expectations, and often involves special temperatures,soy milk, and various pumps of flavor. It is not uncommon to hear customized orders for drinks as complicated as "quad,two-pump vanilla, one and one-quarter pumps sugar-free hazelnut,ristretto latte, with one-quarter soy, one-half non-fat,one-quarter organic milk,extra hot,with three ice cubes and whip!' This is what Seth Godin refers to when he mentions 19 million variants.

Mitchelli further quotes Starbucks founder Howard Schultz on the Starbucks brand :
The success of Starbucks demonstrates ...that we have built an emotional connection with
our customers...We have a competitive advantage over classic brands in that everyday we touch and interact with our customers directly. Our product is not sitting on a supermarket shelf like a can of soda.
(This reminds me of websites which are interactive too in somewhat similar fashion!) Our people have done a wonderful job of knowing your drink,your name, {and} your kids' names.
Further, says Schultz:
We are not in the coffee business serving people, but in the people business serving coffee.
The equity of the Starbucks brand is the humanity and intimacy of what goes on in
the communities...The Starbucks environment has become as important as the brand itself.

U.K based Costa Coffee (their brand graphics have a close resemblance to Starbucks, no idea how they got their copy-cat trademark through!) has entered Mumbai through an arrangement with Ravi Jaipuria who is also the franchisee for Pepsi's Pizza Hut & KFC. They have an outlet in Juhu at a you can't miss it location, right where a Sony outlet used to be. Understand from HT Cafe columnist Vidhi Bhargava's column that they are in Agra, Amritsar & Lucknow already. The chain was started by Italian brothers Sergio & Bruno Costa in London in 1971.Vidhi rates it a cut above many cafe joints but says it's too early to say whether it will pose serious competition to CCD, Barista and Mocha.

This is me

Hey, this is me. Clicked by my photography-enthusiast daughter Anisha - on the occasion of our son Rahul's 15th birthday on 25th April '09 in our club next to our Mumbai home.The pic below was clicked by Anisha too, outside the doorway of our Mumbai apartment way back in '07.

Thursday, August 30, 2007

Needed : an Indian Marketing Association

India has associations, professional bodies and certifications for almost all major professions viz. chartered accountants,engineers,computer professionals, doctors, architects,lawyers, financial analysts and the like. Even managers have Bombay Management Association, Delhi Management Association and the like. Then there are bodies for professionals from HR,Finance,Audit,Systems and such like.

However,there is no professional body for marketers.There are bodies for advertising people, for media people, for market researchers and even for direct marketers but none for marketing people themselves.

In contrast, overseas there is the American Marketing Association and in U.K. there are the Chartered Institute of Marketers and the Marketing Society. These bodies carry out a gamut of functions.

Marketing needs to have its own body if marketers are to be seen as professionals. My feeling is today this discipline in India does not have the professional tag.