Ronnie05's Blog

Even Apps need a second life: Integrated Services

Posted in Applications and User Interfaces by Manas Ganguly on December 8, 2010

Even as Application stores are getting into prominence, Applications are rapidly getting commoditized and Applications will need to morph into Integrated services for serving the consumer digital space in future.

Application stores has also brought about the easy way in which applications are consumed (download and use with no knowledge of mobile functionality). While, 2bn apps downloads were recorded in 2009, various surveys put the apps downloads in near future at 6.5bn – 21bn. That by itself is a wide variation, and it only goes to prove that whichever way you see it applications will be a critical growth denominator for wireless and smartphone growth.

However, another trend that augments the App story is the development of integrated services for the “digital living”. Application stores are poised to evolve into a whole new modality, as services in the consumer communication space morph into integrated services. Integrated services are those that work on any delivery medium that the consumer may be using: cable, DSL, wireless, wireline or satellite rather than being tied by transaction to one delivery medium.
This age is coming and will require a different kind of application and a different kind of application store to service it. Integrated services applications offered through an application store will be downloadable from any device, and depending on the networks to which a consumer has access, will work comfortably over any network and the corresponding device. As a result, applications will need to be certified by not only the device vendor, but the carriers over whose networks these applications will be expected to work and application stores will need to interact with more than wireless devices.

As services become ever more integrated, application stores will increasingly be supported by conventional carriers and operators.

The bottom line is that applications have become as commoditized as downloadable music. Increasingly, consumers will worry less about exactly where the application runs and more about what the application does. They will expect that the application will be available wherever they are and regardless of the device they are using to access it.

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Google Nexus S underwhelms!

Posted in Mobile Devices and Company Updates by Manas Ganguly on December 7, 2010

An year back, Google announced its plans to work on a device with the intent to provide the “pure” pristine Android experience to users. That was Nexus One. The pure, pristine bit is mainly due to the fact that other manufacturers have a way of tinkering with Android to build in their own levels of differentiation into the product which is very understandable (Click here for more details). Inspite of the initial failure of Nexus One. Google’s intent clearly remains unchanged.

Google yesterday unveiled the Samsung manufactured Google S. Blogs, Articles, Reports and You Tube is full of articles reporting the Nexus S. The Nexus S is positioned as a pure Google smartphone. For everything else, the physical specs are close to Samsung Galaxy S, but this is the flagship Android 2.3 (Gingerbread). The Nexus S supports NFC signaling Google’s move into Contactless solutions (This would be the big Mobile Push into Payment solutions).

However, in my opinion, the Nexus S in terms of device is extremely underwhelming. This may be because of the multiple version releases of the Android coupled with the Android army effect. The changes and developments with every other Android becomes that much more “incremental” as against an iPhone which because of its 1 device per year approach has been able to bring forth “innovations” which are far more discontinuous and have the “Ah” effect.

Coming back to Google Nexus S, the look is fairly a cross between every other Samsung Android and the Nexus One. If there was one lesson that Gogle could have taken from the Milestone success, it was the side sliding keypads, which serve as a differentiator if not anything much beyond that. Gingerbread may be fast, very fast, but Google could possibly worked on the 1GHz Microprocessor and extended a bit on that. One would ideally have expected a Dual Core Tegra microprocessor, but Tegra’s release is still a month beyond. But I would still expect a 1.4GHz device. The other small addition that would have made a significant lot of difference to the Nexus S would have been a Radio and a TV out. 2 Cameras are passé and a 5MP Camera is hardly anything to write home about. One important miss in this device is the lack of 4G. With HTC EVO 4G establishing the benchmark, the minimum expectation with a Nexus S would have been a 4G! The looks are also very commonplace and plastic. Not impressed there. Sealing the list is a Internal 16GB memory capacity as against a T-Flash Card slot to allow the user to load his kind and requirements.

Bottomline: Not to make a Mistake, the Google Nexus S is a great device by itself with an impressive feature set coupled with the Gingerbread and NFC. But that aint enough! The way it looks, Samsung did a pretty smart job of cloning and crossing their existing products with the Google Nexus S. There isn’t anything beyond here.

A couple of videos detailing the product story of Nexus S (Not very convincing) and the Nexus S in its glory are featured here.

Gaming: To be or not to be (The Marketer’s Perspective)

Posted in Gaming by Manas Ganguly on December 5, 2010

Social Gaming has come a long way since Zynga and Facebook.In earlier posts, i had written about the Promise of Social Gaming and factors that determine its success: Content, Distribution and Platform.

More and more people are spending more and more of their online times playing social games with their friends. Users are willing to spend money on games that they find valuable. Marketers are exploring this avenue to build messages and engagement for their brands through the gaming media. The best advertising for gamers tends to be integrated into the game itself. The challenge here for social games developers is to figure out how to work better with brands to find contextual ways to work brands into social games.

The demographics depend quite a bit on the type of the game. Overall, social games cut across all age groups. Interestingly enough, a higher proportion of social gamers are women as against men (who have dominated gaming as a domain). Relative to other segments of games, there are proportionally more women involved in social games than one would expect.

Social gaming as a business for developers will need a lot of capabilities. Firstly, the businesses need to have the competencies with game design skills, so as to be able to integrate social interactions into the games. Secondly, there is a need for resources to support the game as it scales and grows in terms of usage on the net.

From the marketers and advertisers perspective, choice of a gaming platform depends on the objectives. Gaming is in a more strategic term, a service, which thus needs a long term perspective of the future of the gaming and benefits that it accrues for the brand. As is the case with any dynamic service, it’s important for developers to continue investing in creating new content for users to keep them interested. For instance Facebook as a platform gives the highest reach (They have over 200m people engaging with social games on a monthly basis), whereas a few niche gaming portals have a much higher level of gamer engagement and monetization. There is an opportunity for more specialized sites to succeed by strictly targeting folks who want to play games. The monetization rates in such cases on small platforms can be higher.

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Hey Google! Why Buy Groupon? (Part II)

Posted in Internet and Search by Manas Ganguly on December 4, 2010

In an earlier post, i had discussed, how a $6 billion tag for Groupon appears to be a stretch in Valuation by fair and logical means. However, this is Google we are speaking about. Is their something about Groupon and this deal that we are missing, which is what Google is paying do much for. This post is about Google’s perspectives on the deal.

While Google Adwords has been the cornerstone for building the internet business model, Adwords has not particularly been successful for local advertisers.Treating users and consumers with targeted ads based on their personal and social profiles has been successful on a large global scale, but Adwords has tasted only limited success with local advertisers. That has been the case with Google who had earlier made an unsuccessful attempt at acquiring Yelp. Yelp is a commerce portal which does the rating of local retailers in an area.

Thats just one point made. Google will try and leverage Groupon’s strengths in local advertising in the US and Canada geographies. This would thus be a pre-emptive move against competition expected from Amazon (Is rumoured to be acquiring Living Social) and Facebook (Rumoured to be launching its own Local Ads product).

But isn’t $6 billion an overkill for a 35 million user base (That Groupon has)? Site traffic at Groupon indicates the month traffic to be around 10-15% of the 35 million number.

Given below is a very simplified break even analysis for Google’s investment on Groupon basis number of years and incremental subscriptions. The derivative is the revenue generated per user. Presently Groupon generates $500 million for 35 million subscriptions which translates to $15 revenue per user.

Assuming Google has the ability to ramp up the user base of Groupon to 100 millions in a short period Google will have to generate 3X of present revenue for a short term realization of break even and 2X multiple of revenue for short term realization of break even. In the scenario, where the user base does not increase and is held constant at 35 million, Google will have to generate 8X in short term and 6X in long term for a break even. The median value is 3X-7X increment in revenue per user.

Will Google be able to pull off the ambit?

Considering that Google will have competition from Amazon and Facebook sooner in this space, it is going to be difficult for Google to monetize as much efficiently as its scale in search would allow it to do so.Google would obviously bring synergies with its other shopping based competencies to the table and would also be factoring a scale increase in user base of synergies.

Synergies between Google and Group-on
One thing for sure is that Groupon would have helped Google expand in the $133 billion U.S. local-ad market and lessen its reliance on Internet-search advertising. Google wants to get into the local space and Groupon was one way.Locally focused e-commerce transaction data tied to one’s Google account could be used to improve personalization of other Google features as well as improve ad targeting.Google could also incorporate Groupon coupons into the location-based services of its Android mobile operating system

Even with all the factors considered, Google seems to be over stretching itself on the Groupon Bid. With monetization, purchase and payments building steam, is this Google under a Web 2.0 Bubble pressure or does Google know something that we dont? Google could for instance create its own local ads and commerce portal and blow it to sacle in an year at a much lesser tag. The desperation price of $6 billion only feeds the speculation, that Google may have been paranoid about the local ads opportunity and the fact that many of its worthy competitors are also looking at this space. If that be true then this is nothing but a Web 2.0 bubble that Google is feeding.

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Will History overwhelm the Wintel Platform?

Posted in Computing and Operating Systems by Manas Ganguly on December 3, 2010

For as long as I remember, Computers meant Windows and “Intel Inside” to me. This was called the “Wintel” platform because the Microsoft Windows operating system and Intel processors were virtually synonymous. In an era of rapidly increasing mobility, though, Intel and Microsoft are facing an uphill task. Their de facto dominance has been challenged and are now faced with potential irrelevance. Both Microsoft and Intel are fending off competitors in their core markets, while also struggling to establish a presence on smaller, mobile platforms.

History doesnot favour Wintel
To many, this is the history of computing revisited. Each wave of computing had its share of Goliaths (Large and Powerful incumbents) loosing out to Davids. There was mainframe first, which was dominated by IBM, then came the mini computer dominated by DEC in the second wave, then came the third wave with workstations dominated by Sun and Apollo, then the PC which is where Wintel had a free and undisputed run. Now it’s the mobile architecture that is going to be the main computing platform at least on the terminal side with the cloud backing it as the Data dump.

Android driving Windows Irrelevant
Android is also subtly shifting our understanding of the purpose of an operating system. Android is a means to an end for Google. The better Android is and the more it lets us do, the more of our data Google can potentially get access to. And data is Google’s raison d’être. By way of comparison, Windows is an end in itself–a dead end. Microsoft gains little benefit from Windows other than the income from software licenses, which is starting to sound like a very old-fashioned way of thinking in this age of mobile devices and data clouds. Windows Mobile 7.0 and its suit of services have been launched and have received some traction. However, challenging the Android would be mean WinMo 7.0 would have to play at a different level altogether.

ARM severely challenges Intel
What smartphones and tablets have in common is that they are almost universally built using ARM processor technology rather than Intel. ARM also powers the next big category of products: Tablets, EBooks and Internet TVs (Google). It is not that Intel is unaware of the benefits of the ARM architecture on mobility platforms. The tablet processor architecture unveiled by Intel codenamed Oak Trail–is a system on a chip (SoC) that promises to consume 50 percent less power while also enabling full HD video playback. This however is not expected to go into production until early 2011. In the mean time, ARM steam rolls establishing very key strategic partnerships that would take it to the next level.

Both Microsoft and Intel have been late to react to subtle shifts in the landscape which have suddenly cascaded into a all embracing powerful wave. Both these powerhouses are making and effort to re-orient and re-invent their businesses. However, the falls of greats in computing history is a telling story.

One thing is for sure, though–the fight for market share and market relevance will be good for business professionals and consumers because it creates competition which will force all parties to be innovative in their designs, and appealing in their pricing in order to set their smartphone or tablet apart from the crowd.

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Hey Google! Why buy Groupon? (Part I)

Posted in Internet and Search, Value added services and applications by Manas Ganguly on December 3, 2010

Google has offered $6 billion to acquire Groupon, a 2 year old e-commerce portal. Opinions around this effort is vastly divided. The exorbitant $6 billion cost of acquisition would make this the second most expensive sale in history, only exceeded by sale of Cerent to Cisco in 1999 for $7billion in the thick of the Dot Com bubble. Google will be acquiring Groupon at almost double the price that it paid for DoubleClick. Groupon is expected to report $500 revenue for the year.Groupon was last evaluated at $1.35 billion 7 months back and the $6 billion price tag implies a 500% increase for Groupon valuation.

What is Groupon?
Groupon is a e-commerce portal which works on direct discount deals to consumers by local advertisers through eMail. It has about 35 million subscribers who receive email based ads and discount offers from local advertisers and uses the user base as a sales channel to generate bulk order deals. To that extent, the 35 million subscribers are also the distribution nodes for Groupon.

With $500 million revenues in 2 years, the distribution and discount model is fairly working for Groupon. However, given the fast and brilliant developments in the Web 2.0 domain, one is tempted to think if e-mail is really the best way to generate leads and revenue and the sustainability of the business.

Ironically, Groupon’s viral design (Subscribers getting bulk buying from their own social networks) is more closer to the Facebook P2P references and likes. To that extent, Groupon has a threat from Facebook which is also developing a product which will help merchants present discounts and offers to its 600 million users. If Facebook were to launch that service today, subscription could quickly ramp up to 35 million! Amazon is also looking to buy out Living Social. Living Social is a clone of Groupon in terms of e-commerce business models.

Thus Groupon’s only barrier to entry for other competition is only its first mover advantage which translates into critical mass. Facebook or Amazon could easily surmount this entry barrier with their huge subscription bases.

Thirdly, Groupon is waning in terms of influence and usage. Traffic has dropped by 33% in the last 4 months as reported by Quantcast. Refer to the chart below:

Given these facts, it certainly looks that Google is over-enthusiastic and overpaying for Groupon. Unless Google is seeing some other synergistic elements that we are blind about.

Part II: Google’s (possible) motives behind Groupon acquisition.

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ARM is favourably placed against Intel in Microprocessor space

Posted in Computing and Operating Systems, Mobile Computing by Manas Ganguly on December 2, 2010

In an earlier post, i had written about how the fight for Tablets and Embedded Devices (Google TV, eBooks) would redefine the microprocessor space and would possibly be the showdown between ARM and Intel. This post examines how the business model of ARM scores over that of Intel in creating new segments and future in mobility processing.

ARM-designed processors are still expected to remain the dominant technology in microprocessors for three contributing factors: ARM’s well-established network of silicon partners allowing downstream players to diversify their solution providers, energy-saving features which provide higher microprocessor computing speed and ability, and software support around the chip architecture enabling mobility devices like tablets and other embedded devices like Google TV and E-Book readers. The idea is pretty simple: ARM processors may be lower-performing cores, but they use less power; and in an era where one of the big defining characteristics is limiting power to the server room, multiple ARM cores might deliver more processing for a set amount of power.

The distinction between Intel and ARM is the business model. Intel, designs and manufacturers its processors end to end , where as ARM, designs the processors for other companies such as Texas Instruments, Marvell, and Samsung to license, refine, and build themselves. This in effect redefines the battle. Quoting Herman Hauser, co-founder at ARM, ‘it’s not Intel versus ARM, it is Intel versus every single semiconductor company in the world.’ That threat to Intel is not ARM per se, but from vertically integrated manufacturers like Apple — who do everything from product design right down to processor design. If a company like HP decided to follow suit, e.g. by buying Palm for its OS and licensing ARM, that might be a nightmare scenario for Intel.

Intel is clearly under pressure for the first time in its history and finds itself in the status of underdog when compared to the popularity and ubiquity of the ARM ships in the mobility and embedded devices space. Approximately 95% of the world’s mobile handsets and more than one-quarter of all electronic devices use an ARM chip. Intel’s recent purchase of the Infineon was an attempt to re-position the company away from microprocessors and towards producing baseband processors, the key component of the mobile phone. Whether they can morph themselves into a baseband company remains to be seen

It’s hard to argue with ARM’s corporate performance: this year the company has collected more revenue from its licensed designs than Intel has on its microprocessor sales, while still allowing its customers to make a profit of their own from the chips they manufacture. Increasing interest in the low-power chips from netbook, ultra-portable, and even server manufacturers shows that ARM’s long absence from the desktop and server markets could be drawing to a close.

The Real Money in Virtual Goods

Posted in Gaming by Manas Ganguly on December 1, 2010

Here’s some trend spotting on Virtual Goods and an assessment of the market for Virtual Goods
1.According to market-research firm In-Stat, revenue from sale of virtual goods is expected to touch $7.3billion in 2010. This figure exceeds estimates from many leading research and investment banking firms, and is in large part tied to the overwhelming success and growth of social games.
2.Juniper research puts the revenue figure from virtual goods to surpass $11 billion by 2015. By 2012, it predicts virtual good sales to surpass the traditional pay-per-download model for game monetization.
3.Another research by Flurry show in-game item sales rising by 80%
4.Zynga’s makes money on Virtual Goods and Ad revenues. Zynga currently has 360+ million monthly active users, and the company was valued at $5 billion in April of this year. Other companies, like Gaia, sell as much as $1 million a month in virtual items.
5.Inside network, another analytics estimates that the market for Virtual goods in US will jump to $2.1 billion in 2011 from $1.6 billion in 2010 and $1.1 billion in 2009.
6.Research reports from Live Gamer and DFC intelligence reveals that 60% of all gamers have purchased virtual goods. Among gamers surveyed 88% had purchased digital content before.This leads credence to the theory that most gamers are now comfortable with the idea of purchasing virtual goods

At this market level, virtual goods have evolved into a major revenue stream from the media and entertainment industry. As consumers spend more of their leisure time online, Virtual Goods are reaping the benefit and becoming a key aspect of lifestyle spending. Accordingly to Nielsen, U.S. consumers already spend a higher share of wallet on game content –of which VGs are a key part – than on print media, premium TV packages, movie rentals, and music.

A key factor in the growth of VGs is the explosive phenomenon of social games—games that are integrated into social networks such as Facebook. Nearly half of Facebook’s over 600 million users play social games. This mass-market success creates an excellent opportunity for publishers and marketers to create a free and diverse market—much to the benefit of both distributors and end-users.

Within this environment, marketers must master a new task: using virtual goods as the carrier for powerful, viral brand messages. Branded virtual goods can work as well as the best word-of-mouth marketing, but they also give the player the control to engage with, reject, or ignore the message. Here, we find a vehicle for extending reach into new markets and for crafting brand messages that are woven into the fabric of user’s social activities. Compared to context specificity of branding/marketing messages in social games, Virtual Goods have the advantage of being context specific already and hence marketers no longer need to look at context. They would need to focus on just the message and how it links up to the medium, the virtual product it is embedded in.

With VGs today, the market for branded goods represents a small, yet growing force and conservative forecasts put the BVGs (branded virtual goods) at $150 million in 2013, with annual revenues of $318 million by 2015. This growth in VGs and BVGs reflects significant strength in the business models of social games. Likewise, it promotes increased control by players-as-consumers.

A few real-life examples of brand orientation being integrated into social gaming:
• FarmVille is teaming up with both McDonalds (offering in-game VGs) and 7-Eleven (branding realbananas in stores)
• “Chocolatier: Sweet Society” is a Facebook game by PlayFirst with a premise of becoming an artisanal chocolatier in San Francisco. For the holiday season, PlayFirst is partnering with Charles Chocolates (a San Francisco-based chocolate company) to offer physical production of chocolates from the game.
• “Retail Therapy” is Facebook game created by the publishers of PopSugar, a popular blog featuring celebrity gossip and entertainment news. The game allows players to create a fashion boutique that sells branded virtual goods from top tier fashion brands such as French Connection and Diane von Furstenberg.
• Mertado’s Embedded Shops appear in social games and allow players to make a purchase of clothing and related items on Mertado.
• Zynga has offered branded virtual goods on behalf of Haitian hurricane victims.

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