No music download service in India yet !

We all “consume” books, newspapers & magazines, music, movies and DVDs. Life would be unimaginable without these. 

These media have for some time now been moving online. These are indeed eminently ‘digitizable’ and will therefore, in the years to come get impacted significantly by the Net.  

Let’s look at music.  

Music is now more online than any of the above media under discussion. One can indeed download most music online. That at least is the perception.

However. In India, music is not quite available online, not legally that is.

Consider:

I listen to FM Radio (local Mumbai stations) as well as Worldspace Radio (satellite) very often. Very often, there’s a tune that I like and wish to listen to again. My current wishlist, comprising Hindi movie songs, English songs and others, numbers 50 odd titles. These songs span across 30 odd albums : I certainly don’t want to buy CDs. Doing so will burn a not inconsiderable hole in my pocket. Not to mention the possible difficulty in getting all these albums from any one store at any one time. 

In short, I need to download these 50 songs. Onto my iPod. Ideally, legally. Where can I do this? There are no music download / subscription services in India.

Consider: 

Ø      The iTunes Store for India, opened up only recently, has mainly music apps. It does not have individual Hindi or other Indian music titles available. The available apps are compatible only with an iPhone or an iPod Touch, my Nano will not do.

Ø      There are no other music subscription services in India either - unlike in the States (where in addition to iTunes there are Napster, Amazon, Rhapsody, Zune,  eMusic, Walmart and others, each boasting millions of music titles and rich features and with the per song download options at or near 99c per song and some with monthly subscription services).  

Ø      Specifically, none of the Indian music labels have their music available for  download online. Saregama, which boasts of an archive of 25,000 titles, has an antiquated “create your own CD” type of service.

Ø      One has to look for a “less than legal” option. And here, Limewire, the # 1 P2P download service, now seems to save songs only in the protected WMA file format. This format prevents the songs them from being copied onto iTunes.

Ø      About 5 years ago, I was involved in launching a music subscription service for Rediff.com viz. Rediff Radio. The service was aimed at the overseas Indian (NRI market). Things didn’t work out. In particular, the stiff terms and conditions imposed by the Indian music industry – associations PPL & IPRS - made the viability of the service a non-starter and Rediff.com was unable recover it’s costs.

Interestingly, the iTunes store for India too seems to offer only streaming music (radio) services for a bundled subscription price (sold as different apps).

The music industry in India has had a myopic approach, looking to earn royalties and prevent piracy but doing little to create an online download service. As seen above, only an a la carte download or subscription service can meet consumer needs.

The focus however has been on protecting the turf. Nor have the dealings of these bodies covered them with any glory, a less than savory reputation exists. Else one would have had an online music service by now.
 
Maybe, in the future, biggies like a Nokia, Airtel, Vodaphone or even Apple or Reliance’s Big may well be able to strike a deal with the music industry, their business models.

Till then one has to perforce use sites like search engine Guruji.com . This site has launched a music search service that claims to “link to” 400,000 Indian songs. Seems to be borrowing a leaf out of China search engine leader Baidu, where a similar music search service is the killer app.

Each music search leads to several (need it be said) less than legal mp3 sites. Guess it’s only a matter of time before the music industry guys move against them.

It would have been much better if they had backed or promoted one or more legal download sites in the first place.   

The Internet juggernaut rolls on - V

Nowithstanding one belief that a vast majority of Internet applications are yet to be "invented," the fact of the matter is Internet has been mainstream for over a decade old. We thus run the danger that new developments here won't make news. For example, usage of the Net for politics (cf. my last post on Obama), is a done thing now, we have reams being written about this even in the Indian media and I am afraid that it will all soon draw a yawn from the readers.

In recent days, however, I have been surprised by two news stories on the Net. 

1. The first was a story last week in the daily Mint that Malappuram in North Kerala State  is now the first district in India where at least one person in each household is Net savvy. Many households have at least one family member in the Gulf, with whom emails and chat is used to keep in touch. Note that India's Internet penetration as a whole is barely 5% (~ 50 mio users in a 1000 mio+ population).

The catalyst was the government's Akshaya Project launched in Aug '02 to make the populace e-literate. There are 289 Akshaya kiosks too and electricity, phone and other bill payments are being done online. The users include a fair number of purdah-clad women, this being a Muslim-dominated district.

2. The other is a story in Newsweek on a couple - Rhonda, 39, who lives in California and Paul,43, who lives in Wales - who have "met" and fallen in love on Second Life. No, this by itself is not what's unusual, there are other people who have found romance on Second Life : 43,000 is the number of such couples who have so far got "married." And there are by itself interesting aspects to Rhonda and Paul's story. 

What's unusual is the conclusion : that online is actually making possible genuine relationships. The conventional wisdom was that online relationships are risky and that love cannot flourish unless two people have met first in the flesh. Fake profiles and protection of kids and teenagers from perverts, for example, were in the news.

Unlike in the real world where a mutual attraction is likely at first sight, in online it usually grows only over time. The distance apparently makes candor possible, couples share much more information about themselves than they would in real life. This may lead to an emotional bonding !

Worldwide, 1.6 billion of 2 billion Internet users in 2011 are expected to have used some virtual world or the other.Separately, there are 800 dating sites in the U.S. and 10% of Internet users currently look for love online. The Internet is also having an incredible ability in allowing people to self-sort i.e find and engage like-minded others, it's said. And given that people have very different personalities and tastes, this can indeed be useful.     

 

Obama and the Internet

Am back after a nearly four month hiatus. An unpardonably long break for a blogger, no denying that. And the first new post is on the growing influence of the Net on public opinion, on politics in particular.

That President Obama used the Net for his campaign and is a Blackberry-lover is  well-known.  Actually, history could well record that there are at least three separate initiatives that Obama took early on that happened to stimulate the growth and usage of the Internet. These are :

1. His campaign made the Internet the “killer app” towards getting elected

Firstly, by raising significant money for the campaign:

Barack Obama was the first presidential candidate to forego using public funds. A public financing system for U.S. Presidential candidates was set up after the Watergate scandal, which is financed by tax payers who voluntarily allow $3 of their taxes given to the Presidential Election Campaign Fund. Thus, McCain who used federal funds could spend only up to $84 million in months of Sep and Oct while Obama who chose to go privately funded raised $150 mio in Sep alone. This enabled him to buy half hour prime-time spots on several TV channels in the week prior to the election.

An estimated 3.1 million people may have contributed to Obama’s campaign via the Internet, with many contributing amounts under $200, (amounts that can be anonymous ) and comprise in all about half of the $650 mio that Obama has raised since last year. Grass-roots financing also has the advantage that candidates are not then beholden to corporate sponsors. Unlike other candidates, he did not have to spend time calling up rich donors but could use the time to campaign.

Secondly, by articulating his campaign policies and ideas:

Obama not only raised money, he used the Net to articulate his policies and ideas. He announced Biden’s selection as his VP mate through mail & sms (text messages).

Thirdly, by enabling mobilize supporters:

Though the Net was used for the first time in a groundbreaking way for a political campaign in 2004 (by Democratic party candidate Howard Dean with a site built in Drupal and with the use of Meetup) and also used in 2008 by several candidates including Hillary & McCain (he used Google Adwords to raise money !), these were primarily for fund-raising. Obama’s campaign was the first to  exploit the full power of interactive web tools to organize  supporters / volunteers, in this he built on some pioneering work by Dean. 

Obama used social networking websites such as My Space (his primary profile  here had 850,000 friends as in end-November ’08: there were 60 other official profiles too). "Friends" of Obama on Facebook (over 500,000) got automatic news feeds from the campaign sent to their profiles, which were then seen by other friends. The campaign mass-texted (sms-ed) news updates ("CNN just projected Obama wins Wisconsin") and reminders of where to vote in upcoming primaries. He is my second degree friend on Linked-In !

His campaign used data mining tools to identify and tap potential supporters. A firm called Catalist (whose CTO is former Amazon.com executive Vijay Ravindran) did this. Chris Hughes, ex co-founder of Facebook helped build the online community My.barackobama.com.

The campaign took advantage of YouTube for free advertising. Some argue that those videos were more effective than television ads because viewers chose to watch them or received them from a friend instead of having their television shows interrupted. Quote: “The campaign’s official stuff they created for YouTube was watched for 14.5 million hours, to buy 14.5 million hours on broadcast TV is $47 million.”

Separately, during the 2008 campaign, there has also been a sea change in fact-checking, with citizens using the Internet to find past speeches of politicians and determine if they have been consistent and then using the Net itself to alert their fellow citizens.

Obama had a massive preference among young voters, first in the primaries vis-à-vis Hilary and then over McCain: the Net was an important force here. 

2. He has been looking at ways to use the Net to govern

In a bid to make the government more transparent, he is attempting to organize his campaign supporters into a political force that he can tap into in tough times. Just like Net was not used for campaigning, it has not been used to govern before.

This has been true both during his transition period when he started a site www.change.gov  and now as President with the official site www.whitehouse.gov. This again represents a first in terms of use of the Net.

Roosevelt pioneered fireside radio chats, JFK and later presidents used TV. Obama is posting his weekly addresses - as President-elect and now as President - on videos, not just putting it out on TV. The first address he made as President-elect was put out on You Tube at 6 AM, ahead of the radio broadcast. Again, during the transition, members (an estimated 11 million) in Obama’s email list were sent a mailer asking what ideas they had for the incoming Administration.

Post his taking over last week, he has asked his CTO to make within 120 days the Administration more Internet friendly, says this report on CNET.

3. Catalyzing use of the Internet, going forward

The expected $825 economic stimulus package for the U.S. economy will put money into public-works (i.e. infrastructure) programs such as construction, repair of schools, expand broadband access and put energy-efficient technologies in buildings. He has also supported the idea of a neutral Internet.

In announcing his public works program, the president-elect said it's unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online," Obama said.

For this initiative, the House of Representatives Committee has on date already approved $6 billion while the Senate has recommended $9 billion . The money will essentially go to strengthen the rural broadband infrastructure.

In a related but separate story ,it’s been opined that Obama’s rise has now made the company Google into a powerful force too..

Update : Here is an masterly report that shows the Obama campaign actually raised the bulk (over $500 million of the $600 million odd) through the Internet, sent 1 billion mails across 7000 targetted messages to 13 million recipients, registered 1 million for it's text messages, developed 7 million friends across 15 social networking sites, had design and analytics teams, not unlike an actual Internet start-up would have done.  And here is an earlier report of Aug '08 (again from The Washington Times).  

The Internet and global contests & polls

In an increasingly global world,the Internet is turning into a great medium to drive participation from the world over in polls, contests and the like. Over the last 72 hours,here is what three marquee names have announced :   

1. The Economist is running an unique online poll. People the world over - including from the U.S. - can "vote" online for Barack Obama or John McCain. Each of the 195 countries in the World has - in a system inspired by the U.S. presidential system - been set electoral votes in a global electoral college.

Of the total 9875 global electoral votes, India alone has 1588. As of the time of writing this post, the world vote is overwhelmingly pro-Obama, with him registering 12,956 votes as against 2,970 of McCain. In terms of electoral votes, it's a one-sided race, with Obama having 8,012 votes as against just 12 of McCain.

2. Google is, on it's 10th anniversary,running a global contest online called Project 10 to the 100th.Ideas are invited on how the world could be made a better place. The best ideas will be funded and championed by Google.

3. NASA is sending a satellite Glory into space in June 2009 which will also carry names of ordinary people. Anyone can enter their names on NASA's "Send Your Name Into Space " website and derive the thrill of having one's name circle in space for very many years.

I would imagine that other brands will also one day launch other such online polls / contests / fun things to do. These activities are, at the very minimum, really effective ways for the respective brands to build /acquire goodwill.  

      

The Internet juggernaut rolls on - IV

1. The power of the Internet, good or evil, never ceases to amaze. Some news from the previous fortnight - and earlier :

• The Taliban is using Skype to dodge the British intelligence service MI6 in Afghanistan. 
  
• Tigers are being sold illegally over the web, said a news report. Very surprisingly, the site still seems up and running, despite activists having lodged complaints with the authorities.
  
• And then there was news of HRH Queen Elizabeth II’s scheduled visit to Google’s London office on October 16^th.  This follows the successful debut of the official Royal Channel on You Tube (currently with 22,000 visitors and 1.5 million+ page views). Reportedly, Her Majesty also uses email to be in touch with her grandchildren Princes William & Harry.
  

2. India’s Parliamentary standing committee on Personnel is considering sweeping changes in the UPSC (Union Public Service Commission) exams for entering the civil service. Among other things, they are considering that the phase I or preliminary exams be held online, followed by the immediate release (online) of the candidate’s results (as is the case with the GRE & GMAT), thus saving time in the overall selection process. Civil service is one of the country’s three or four largest entrance exams (the others being engineering, MBA and medicine) with approximately 200,000 aspirants appearing each year. The MBA Common Admission Test (CAT) exams, with an anticipated 400,000 aspirants in 2008, are to also go online, though only next year i.e. in 2009. 

3. The Times of India, Mumbai reported on July 8th, '08 that an online mutual fund platform has been launched by Tech Process Solutions (the people best known for running the bill payment site billjunction.com) that enables mutual funds to be traded online. Tech Process said it had so far brought together six mutual fund houses (including Reliance & ICICI Prudential), four large MF distributors and 9 banks. Currently, investors can use the platform only via the above distributors, who have to give them a login.

This is an important initiative. Unlike stocks,which today are traded online by individual investors, mutual funds in India can at best be bought and sold at the fund house's website itself. Tech Process seems to be setting up an exchange for trading mutual funds, which should help Plans include allowing adding more players to the platform and enabling investors login directly.However, one was unable locate any site in use.

Meanwhile, industry association AMFI is itself exploring setting up of such an electronic platform for which it has invited and received 15 Expressions of Interest from potential vendors. It is believed such an exchange will take two years to implement. Several countries viz. Canada, the U.S. and Australia alredy have such a platform. And there are other moves in place to standardize - acros fund houses - the mutual fund application forms and offer documents. All this would benefit existing 46 million mutual fund owners as well as help grow the market.  

 

The Internet juggernaut rolls on - II

Here are some more Internet websites/ applications - that I have experienced or that have been reported in the media :

1. Medical diagnostics (path reports) online : Was at a diagnostic lab in Mumbai today morning for some routine tests. Was pleasantly surpised when I received an invoice listing the lab's website, along with a unique user name and password and a time at which I could login and access the report. This will certainly save me a return trip to the lab. 

Come to think of it, a path lab report doesn't warrant any face-to-face discussion at the lab itself, so it's a good candidate for going online. One can think of several value-adds here :
- creation of a My Account for each patient, where the patient logs in and can see his/ her medical history
- loyalty scheme for patients where they can see accumulated points and discounts (useful in a commodity service like diagnostics)
- user ID & passwords for all the doctors in the neighbourhood, along with an email & / or SMS alert to the doctor informing that the test report is now online
- an application whereby doctor can upload his/her comments vis-a-vis the path lab report

Daresay some labs / sites worldwide have already moved forward on these ideas, would be interesting to get names.

2. Indian website on pancreatic cancer : Continuing with sites on medicine, leading cancer hospital Tata Memorial Hospital of Mumbai has launched the first Indian website on this cancertype. Pancreatic cancer is as yet less common in India but - with ubanization - it's incidence is rising. This site, run by the cancer specialists themselves, gives information and resources for patients as per the Indian context and will help create better understanding here of this little known disease.

3. Site for dental specialists : Smileworld is a site created by two Mumbai-based dentists which seeks to serve as an educational platform for dental students and newbie dentists.

4. Jama Masjid redevelopment plan : The Jama Masjid mosque, built by Emperor Shah Jahan in 1656 A.D., is Delhi's premier mosque. The Delhi city muncipal authorities have posted their plans to redevelop the mosque area online. Governments are increasingly turning to the web to interface with their constituents and this is just one example.

5. Political party BJP's website attempts to be Web 2.0, with forums, YouTube videos, active blogs and a (currently) non-functioning Wiki. The Congress party's website is most drab though. In a country that's the world's largest democracy and that has one of the youngest  voter populations, one only hopes that going forward political websites will evolve to better connect with the populace cf. Barack Obama. 

Nothing particularly exciting about the above sites, if anything their execution leaves much to be desired, what's interesting is that there are a lot more novel online applications by the day.. the Internet juggernaut rolls on.  

     

The Internet juggernaut rolls on - III

After a 75 day (or so) hiatus, am back again (no blogger likes to be off-blog for so long, and I have the same standard excuse for being away : "Was busy").

Here are two interesting Net applications recently reported in the press:

1. BMC (Brihanmumbai Municipal Council), the municipal council of Mumbai, the world's second most populated city, is testing a website which will have on it the approved plans of all buildings in the city - as well as permissions given by the civic authorities to the builders for these constructions. Currently, citizens have to go from pillar to post to get hold of these plans & information.

Thus, hapless apartment buyers today after moving into their homes often discover that several floors in their building are unauthorized. Or, they discover that the building does not have an "Occupation Certificate" and thus pay the penal rate (double) for electricity and water charges. My building in Lokhandwala area in Mumbai too hasn't got a copy of the approved plans, for example, though the building was built nearly seven years ago.

No details available yet about the site or the url.

2. Patients in the U.S. are seeking a second opinion online through sites such as the Cleveland Clinic, John Hopkins Remote Medical Second Opinion service and Partners Online Specialty Consultations (POSC). Each of these three report getting a thousand patients a year, with POSC saying they have had a cumulative 10,000 patients since starting out in 2006. These services offer consultations from specialists based on the medical records that they fax, mail or post via the Net. The cost of the service payable upfront through credit card is $500 to $1500, depending on the radiology or pathology interpretations required. So far these services were not covered by insurance but on April 24, Cigna announced it's intention to cover this service.

Thus for example if a patient has a tumour and finds travel to a distant specialty hospital for a second opinion tiring or cost-prohibitive, the online second opinion service comes in very useful.

Such a service should do well in India, considering that we have one of the lowest doctor to patient ratio (a reported 6 doctors for every 100,000 population) in the world. There should also be scope in doing outsourcing services of this type for overseas patients.

The Internet & (ahem) "escort" services

A month ago, the not so honourable Elliot Spitzer resigned as Governor of New York State. A high profile politician, he had in an earlier stint as the State's Attorney General, adopted a crusading, morally upright stance (against Wall Street and other adversaries) that had earned him the title of "Mr. Clean". He resigned as he was found out to have on several occasions used the Emperors Club, an international call girl ring.


The Emperors Club (website now shut down, see screenshots and reports here , here and here) was essentially an online prostitution ring that had interests in America, England and France. The women were graded with between one and seven diamonds on the website, which determined their fee.The most valued clients were offered "membership" of the "Icon Club" where fees started at $5,500 (£2,750) an hour. The company boasted that it targeted "those accustomed to excellence". This club was subsequently shut by the FBI.

That's not quite our story here, though.

As we shall see below, it would have been quite difficult to run this business as profitably if it were not online. The Web is reportedly a key channel for high class prostitution. For an Internet lover (no pun intended) like me, it is instructive to learn why. Here then are two alternate approaches to identifying why the Net is a great fit for this business.

Perspective A

In the first approach, we identify the "customer value" the Internet provides in this business :

1. The Internet provides anonymity, a key requirement for all those involved in this business. This is somewhat similar to the requirement of those doing music and movies file sharing.

2.Websites allow sex workers to avoid the high risk, police-attracting behaviour of walking the streets.

3.Websites allow the girls to attract (reach) a large number of clients all at the same time. They can even enlist themselves on multiple sites.

4. Data-rich profiles i.e. profiles with photos, videos and the like of above workers - are possible online. A website is also an easy way to list the wide "variety of services" available in this business.

5. The sites have themselves evolved - with Web 2.0 like features - wherein customers rate and review the girls. These features include discussion boards, online chats,etc. Apparently, customers often base their decision of which escort to choose, on these reviews. You can search by name, URL, phone number, etc.

6. The most successful sites actually have an aggregation model, which is to say they are a directory of other ISPs (Internet Sex Providers for the uninitiated). The Erotic Review's site traffic is up to 357,000 unique visitors for Mar '08, up 49.6% from the same period a year ago.

6. A study has shown that the mean billing rate of escort services on the Net is $250-300 per hour, much higher than the rate commanded by girls who work the streets. The higher-priced girls found online are likely to constitute less of a hygiene risk. In effect, the Net is lowering the average HIV and STD infection risk-rate.

Perspective B

Here's another perspective on why the Internet is a great channel for services of the matchmaking kind, whether these be jobs, dating, matrimony, real estate, auto or the service under question viz. escort services :

I'm going to draw from the following article that appeared in HBR in Sep - Oct 1997. Philip B. Evans & Thomas Wurster wrote a paper for the Harvard Business Review titled Strategy and the New Economics of Information. The paper also features in the HBR book Creating Value in the Network Economy edited by Dan Tapscott. Some pertinent extracts :

• Every business is an information business, said the authors (something which most managers would consider a truism today). Further, the electronic carrying (as opposed to the physical carrying) of information, enables it to be unbundled from the product.
  
• What's revolutionary about this is that electronic information simultaneously allows high reach and high richness. Reach means the number of people exchanging the information. Richness of information is a composite of three factors viz. bandwidth, customization and interactivity.

In the case of physically carried information,this is not possible. Thus, in the physical world, it is possible to easily deliver stock quotes (which are narrow bandwidth) to a large number of people but it's not possible to deliver movies (high bandwidth) equally easily. Likewise, TV ads can be easily delivered to a large number of people but it was far more difficult to deliver customized sales pitch for individuals (direct mail). And dialogue was easy between a few individuals but not among a large number, for which all communication had to be monologue (low interactivity).

Electronic information, most importantly the Internet, has changed the above. It is today possible to simultaneously have (i) high reach (ii) bandwidth, (iii) customization and (iv) interactivity.

And matchmaking services - such as escort services - have these following attributes :

• These are consumed by a large consumer market, in fact have universal application, so require a good reach.
• Product offerings are very individual (no two options exactly alike) in nature, so a rich description is useful. Video, photo and other descriptive (text) profiles as well as ratings,review & dicsussion boards enable such a rich description (hence the need for high bandwidth).
• Product preferences vary widely, so multiple service offerings are useful (high customization).
• Happen - whether it be love, home, a car or a job - to be usually about "high stake" decisions (so multiple interactions are required before trust can ensue and a deal be reached).

This is what a good matchmaking service requires and this is what the Internet delivers well. This is why such services - jobs, dating, matrimony (in India) and yes, the Internet Sex Providers - have to a great degree migrated online.

The Internet, diamonds & the "fine things in life"

It's almost been a month since my last post. However, I went to Mumbai's Bar Camp 3 yesterday and am charged up sufficiently to add this one post today. In the next couple of posts, I'm going to be writing about how the Internet is making more easy some of the "finer" things in life, and I begin with diamonds. Hopefully, this should interest most of us, so here goes :

It is traditionlly believed that the Internet is not for transactions of high value, touch-and-feel items like,say, jewellery.

Blue Nile
However, Blue Nile (NASD : NILE), a Seattle-based online retailer has helped challenge this belief. Last year,it beat marquee name Tiffany's to become the largest retailer in the U.S. by revenue of diamond rings and wedding bands - across online and offline jewellery stores taken together. It's revenues were $319 million. Over 70% of this was from diamond rings and about 20% was from diamond earrings.

In an industry comprising many players, the company has a market share of 4% in the engagement ring market. It's begun shipping to 25 overseas markets as well.

How they started
It's been a somewhat unusual success story. Co-founder (& former-CEO) Mark Vadon was a 28 year-old consultant with Bain when, in 1998, he dropped by at Tiffany's in New York City to shop for his engagement ring. Here,however,he got disenchanted by the less-than-friendly attitude of the staff , even though he was willing to spend over $12,000. He then went online looking for a Consumer Reports-type site i.e. a site where they would teach a prospective buyer on how to buy. He stumbled upon a site called Internet Diamonds which - though basic - had the tutorial he was looking for. On this site he also found and bought a ring which he believed was nearly identical to the one he had spotted earlier at Tiffany's but, at $5800, was less than half as expensive.

A few weeks later Mark happened to be in Seattle on business and here he dropped by at the Internet Diamonds retail store. The site owner informed him that the store sold a diamond or two every other day , at the same (average) price of $6000. Mark did a quick calculation, found that here was a business doing $250,000 in revenue , despite it's vanilla website and zero marketing. It was thus probably worth much more. That evening, he made an offer of $5 million for the online store, an offer that was accepted by the then owner.

Mark didn't actually have the money to buy. Since it was at the peak of the dotcom boom, however, Mark was able to quickly raise the money. In fact, over the next 12 months, a total of $50 million was raised, apparently without much difficulty.

The site was renamed Blue Nile. In 2000 itself, the first full year under Mark's management, revenues grew to $44 million. However, as was true of many other online businesses during the period, Blue Nile too spent heavily on advertising ($40 million on TV) and lost big money ($30 million that year). Next year, however, the company cut advertising spend to zero,decided to build the brand through word of mouth alone, and survived.

Success factors
Blue Nile believes that what has really worked for it is customer focus i.e. obsessive listening to customers , looking at customer data and getting very many details right. Of course, educating it's website visitors on "how to choose the right engagement ring" is core to this. The site tells you how much to spend (two month's salary) and shows the ten typical diamond cuts, from "round" to "cushion".The size of the diamonds, usually quoted by the industry in carats, are converted into milllimetres, so that all customers understand.There is a slider scale that enables customers choose trade-offs for a given budget e.g. get an ideal cut and a brighter stone, but at a lower carat size.

And Blue Nile's site looks good, period.

Majority of the visitors to the site are believed to be women who then email their men their preferences. The men are the ones who make most - 85% - of all the purchases (rather an unusual gender split for a jewellery purchase). Going to a retail store and being hustled by salespeople about a product they don't know much about can be intimidating for men, so the anonymity of an online retailer turns out to be a blessing.

(It's a guy thing, trust me, I've been planning buy a diamond for the better half from a neighbouring store in Mumbai, but keep postponing a visit :-)

On Blue Nile an average a customer takes 3 weeks to make up his mind and spends $6,200.High value diamonds are couriered under special security (armed guard & vans) to customers.

Blue Nile displays items it does not own. It sources these from diamond wholesalers only when an order has been placed on it, in effect carrying negative inventory. Further, overhead costs account for just 13% of it's total cost as compared to 30 to 40% for the (offline) jewellery stores. It is also now the largest retailer overall so enjoys economies of purchase.

Thus, today the company can sell at 20% above purchase cost as opposed to 49% above cost for the jewellery stores.

Orders are fulfilled in three days, faster than at most retail stores. And customers are offered a 30-day return policy.

Lessons from the Blue Nile story :
1. There is a value in the information and the convenience of buying online, no matter what the item. Just that it's upto the online company to tweak the customer value proposition and the site tools to make the site succeed.
2. Trust has always been an important component of online transactions. However, in this cateory viz. jewellery it's an overrated concept. Because it can be built over time. Each transaction, if well-fulfilled and honoured as per customer expectations, is an opportunity to build word of mouth. And word of mouth is the most important type of marketing here.
3. This is not a category where the auctions sites (read EBay) can be very successful. It's difficult to have a reputation management system in a category as sensitive as this.
4. On the Internet, it pays to be on the side of the customer.
5. Blue Nile seems to have chosen to sell premium range stones, since the the modal price in brick-and-mortar stores is just $3200. Even at Amazon, the modal price seems below $1000.

There is always money to be made in any category at the premium end, I believe. And a good U.I. (user interface), site looks & value-added site features are critical to the success of premium online products.

An Indian online jeweller, any one ?
It's instructive to know that there are virtully no established online jewellery retailers in India. Brands with established names e.g. Tribhuvandas Bhimji Zhaveri either have a vanilla website or none at all.

And there is sufficient detail to be attended to should one want to go the Blue Nile way. Which makes it unlikely that existing ecommerce sites or portals can do justice to the jewellery category. A quick glance at these sites confirms that their jewellery sections have enough lose ends to result in a low conversion of site visitors to their jewellery sections.

So the opportunity exists for someone who has contacts with the Indian jewellery industry, is willing to educate prospective customer online and is, of course, "innatively honest" (customers will always research similar stones and prices at the brick and mortar stores, so be honest with what product information you give online).

The market is very large. The costs of running a site are,well, affordable. And tools like Ajax, Flash & video which are now entering mainstream, if used wisely, can create a compelling online experience for the prospective customer.

The Internet's positive impact

Here are five more ways the Internet is going to positively impact our lifestyles.

1. A Website for senior citizens is planned by insurance regulator IRDA for senior citizens that will enable them to easily lodge their grievances with their health insurance providers. The background to this development : health insurance companies seem to be taking the short way out when it comes to meeting seniors' insurance needs.

Not only have they of late doubled the insurance premia but - reportedly - often do not accept new proposals or accept proposals for a low sum insured. Over and above, these insurance providers pussyfoot when it comes to clearing insurance claims.On the ground that many claims are for diseases with a "pre-existing" condition.

I should know. My late dad didn't get his claim passed on the ground that the claim he lodged was for a "pre-existing" heart condition : hence not admisible. So he put some of his hard-earned, public sector career savings to engage a lawyer. And fought - against a very Big Insurance company - for over 10 long years. And their attitude all along was : fight us if you can.

2. Domain names in Devanagari (the Hindi language script) will be available by year end. Currently, even Hindi domain names like Nai Duniya are spelt in English. An important psychological move forward in taking the Internet into local languages, I would say.

So far we have had language fonts for the HTML content, language keyboards as also limited availability of OS in local languages. The slow availability of Indian language OS is a mystery. Especially since it is local language OS that helped IT & Internet penetration grow in China, Korea and Japan.

3. The government proposes to set up a National Knowledge Network costing Rs. 1oo crore (Rs. 1 billion) that will connect major education & research institutes at 100 Mbps to enable them to share knowledge. This will also include portals on education, health, water, natural resources as well as online lectures on various issues. Public sector telecom behemoth BSNL is being roped in to set this up.

Expect an announcement in tommorrow's Union Budget.

4. Mumbai city has been looking at various upgrades to it's infrastructure, notably its transport system. The city is currently examining Seoul's Bus Rapid Transit System (BRIS).

Seoul has 10 million population vis-a-vis 14 million of Mumbai. It has 627 sq.km area while Mumbai has 468 sq. km. And it has 2.8 million vehicles as against 0.7 million of Mumbai.

In the late 90s, when Seoul had about 2.3 million vehicles it was able to decongest the city by, among other things, introducing dedicated bus lanes with buses leaving every 2 minutes. Currently, Seoul has 10,000 buses (Mumbai currently has 3,400) operated by 170 private bus operators.

5 million of its 10 million population use this bus network.And only 25% of the population take cars to work, down from 40% who used cars in the late 90s.

The important thing for a Neophile (that's my own term, by the way) like me is that the bus schedules for these 10,000 are available on the Net.

That's something that should be done here in Mumbai as well - leaving aside the bigger need for a dedicated bus corridor et al.

5. While on urban transport woes, the local car pooling site http://www.carpoolin.com/ has been getting some positive press. There are other sites too.

One issue preventing popularity of these sites is safety i.e. security concerns in travelling with strangers. For which one answer is the creation a social networking car pool site. This can work either standalone or be a widget that works with existing social networking sites.

For more on this idea, see my previous post on "Social Networking : Learnings & Opportunities".

Wishing all readers of Marketers Kaleidoscope a Happy Leap Year Day and a favourable Union Budget !