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E-Commerce – The Intent would need to change from Valuations to Sustainability

Posted in Internet and Search, Revenues and Monetization by Manas Ganguly on August 16, 2012

While Flipkart and Snapdeal have soared as Consumer Internet mega-brands – there is something systematically wrong about the e-Commerce market in India. It is working on Valuations rather than Sustainability and thats not the one for long term.

Flipkart, Snapdeal, Yebhi, Myntra, Infibeam, eBay, Homeshop18 – the list of e-commerce companies in India has come fast much too fast and too many. The category is still only in its infancy stages with enough and more action waiting to happen. The 1st round of e-commerce action in India is in prime action. Most of these e-commerce portals are in the funding phase. What is concerning is the fact that all these portals seem to be promising the 3 same things – range, price and service. Heavily discounted prices , management of extensive product categories and extensive customer service could lead to a cash burn. If consumers buy only for cheaper prices, free delivery, soft trials/ no-questions asked returns and Cash on Delivery … then the question is, will anyone ever make money? I don’t think anyone has a good answer to that.

The key to the e-commerce objective is logistics management both inward and outward. Logictics in e-commerce fulfillment is the tail that wags the dog. And then there is inventory management. For a great customer service experience, an end to end integration is most advisable which means building up of infrastructure and adding headcount/overheads. (On the contrary, an outsourced supply chain will spoil the service delivery experience for the e-commerce portals. All Infrastructure/overheads would mean quantum leap in annual sales for break even. Incremental sales is one thing, Incremental profits in a heavily discounted category in a crowded market place is a chimera. The intent is to become the Amazon of India. Amazon relied on the funds from its 1997 initial public offering (IPO) to tide through the aftermath of the dotcom crash that took out most of its rivals. Without competition, it could afford to lose money on building infrastructure. It would take $2.8 billion in losses over six years before it declared its first quarterly profit in January 2002.

Unfortunately, the e-commerce market in India is heavily crowded – this doesnot offer the (pseudo)arbitrage opportunities that Amazon had in its time. Thus, the whole proposition of consumer delight only ends up burning cash and capital. As all industries there is consolidation waiting to happen even while most of the portals are trying to aggressively build up the valuations. Self sustaining business is taking a back seat in the game of valuations and investors really need to identify the horses for the long run. Else, this is one crash that is waiting to happen.

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Apple & Samsung monopolize smartphone profits (Even as Apple pulverizes Samsung)

Posted in Industry updates by Manas Ganguly on August 8, 2012

Samsung shipped about 50 million smartphones last quarter — about double the number Apple sold and, according to IDC, the largest number of units ever shipped by a handset vendor in a single quarter. However, if Raymond James data is any indicator, Samsung’s 2:1 lead over Apple is a statistic in vain. Apple — thanks to the higher gross margins of the iPhone and iPad — far outshines its rivals in both revenue and operating profits.

Having generated only about 6 percent of the industry’s smartphones and tablets in the second quarter, Apple captured about 43 percent of the industry’s revenue and an astonishing 77 percent of the industry’s operating profits. Thats about 2.65 times that of Samsung’s. Interestingly enough, Apple and Samsung account for 96% of the global Mobile computings EBITs. Now you know why the rest of them are such a deep shade of Red! Apple’s statistic is of note especially in the light of the fact that Q2 in generally Apple’s weakest quarter and Samsung had the Galaxy SIII launch in Q2.

Ultimately, profits are the feedstock of innovation; and, innovation drives profit. Until Samsung starts generating more profits than Apple, we would not be overly concerned with who has the unit share lead. Remember, HP and Dell still sell a lot more PCs than Apple sells Macs, but does it matter. Probably not to Apple.

Tablets and the evolution of Mobile advertising

Posted in Industry updates by Manas Ganguly on August 8, 2012

The growing popularity of tablets is encouraging not just print publishing and television service providers to go mobile, but advertisers as well.Tablets, thanks to their larger screens and more engaging media experience, will account for 53% of mobile advertising dollars in 2014, compared to 47% for mobile handsets. That number is expected to grow to 60% by 2016.

A quarter of tablet owners clicked on ads while using apps, and 29% purchased extra content. Additionally, on average, tablet owners buy 1.7 paid apps  per month, while smartphone users buy 1.1.

A recent study by the Yankee group provides the directions towards tablets propelling and growing the future of Mobile advertisements and media.

•    Tablets are leading content owners, service providers and advertisers to go mobile. Tablet usage extends beyond games into print publishing and rich media. A fifth of tablet app downloads are for shopping and banking—an indication of the device’s potential for mobile commerce.

•    Over two-thirds of tablet owners are frequent video watchers. Pay TV services, producers and advertisers are rising to the challenge with optimized apps and dual-screen functionality. Video viewing is set to increase as mainstream adopters—who are even more video-oriented—buy into tablets.

•     Tablet ad revenues will surpass handsets by 2014. Mobile advertising works on tablets. In-app ads are especially effective and generate responses from a quarter of their target audience.

•     Over a third of tablet owners purchase multimedia from application stores. Apple’s App Store is a key strategic advantage and remains a killer incentive for developers to prioritize iOS. No surprise, then, that Google turned the spotlight on Google Play in the Nexus 7 tablet launch. The application store forms a decisive battleground for ecosystem rivals.

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Android – Balancing act between Smartphones and Tablets and platform fragmentation.

Posted in Computing and Operating Systems, Industry updates by Manas Ganguly on August 6, 2012

Platform fragmentation has been a pain point for Android and there is much less balancing the Android experience elements in terms of uniformity across its devices. The latest numbers from Android developers outline this pain area, as Android still struggles with 75% of its base in the Android 2.2 and Android 2.3 platform levels.

The other pain area that Android would like to put in order is the split of the screen sizes it works upon. 85% Android devices presently work on the 2″-4″ screen size – essentially the smart phones. Android is by and large less dese on the larger screen sizes.
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Source: Android developers data collected during a 7-day period ending on August 1, 2012

So you have it there – a fragmented platform and the inability to create a dent in the tablet space – even the 7″ space. That would be a bother for Android. (There is a base effect for the smartphone numbers, but Android’s ianbility to balance its smartphone and tablet numbers is the crux of this problem)

Facebook Tail Spin – The hard take!

Posted in Social context, media and advertising by Manas Ganguly on August 4, 2012

Facebook’s shares continue to tumble under the weight of its own expectations. Facebook’s mid May 2012 IPO was pegged at $100bn and with growth stalling, the m-cap is a downward spiral. I had written about the extremely stretched multiples which make Facebook’s share price unsustainable.

Source: finance.yahoo.com

Facebook’s share price is down 47% in 3 months after the IPO. In its earnings call for the quarter, Facebook Inc reported a drastic slowdown in revenue growth and offered no financial forecasts to ease worries over the prospects for boosting advertising in its first earnings report as a public company, sending its shares to a record low.

While Facebook has pointed to early signs of success in new advertising services, but the lack of a detailed financial outlook went over poorly with investors hoping for evidence that the company could soon reverse the continuing slowdown in its business. Facebook posted a net loss of $157 million, or 8 cents a share, in the second  quarter after taking hefty stock compensation charges related to its IPO. That compared to net income of $240 million, or 11 cents, in the year-ago quarter.

Facebook has raced through eight years of break-neck growth that was to have culminated with its May initial public offering. Instead, its share price has headed south as investors questioned its valuation of more than 100 times earnings and its longer-term ability to sustain growth as users migrate to mobile devices.

Monthly active users grew to 955 million at the end of the second quarter, up from 901 million at the end of March. But mobile monthly active users surged 67 percent year-on-year to 543 million users, adding further pressure on Facebook’s business, which only recently began to offer limited forms of mobile advertising.

While advertising “impressions” lagged user growth during the second quarter but that new social ads, which appear directly in Facebook users’ “newsfeeds”, were driving up ad rates. The average price of a Facebook ad increased 9 percent during the quarter, driven primarily by the United States where rates jumped 20 percent with the company’s newly released social ads.

In effect, facebook’s slow down is a study of failing under the high growth expectation set by the blistering pace of growth registered earlier. However what seems to pinch the investors is a stretched valuation of $100billion when the new advertising avenues have not fully driving the revenue growth engines

The Android Dilemma

Posted in New Technologies, Value added services and applications by Manas Ganguly on August 3, 2012

Tight control (Fight Fragmentation) v/s Open Source Innovation – That is a dilemma that Android has on itself.

A connected world of device systems running on seamlessly on a single platform. Embedded systems in the back end are evolving the definition of connected devices. Definition of device connectivity is migrating from Netbook, Smartphone, Tablet, Car, TV to complex enterprise/industrial systems and critical utility infrastructure which are stitched together by a complex network of  NFC, RFID, QR Code Readers, Motion/activity sensors and more (the list is quite large here).  In the later case, Linux has dominated the market for good cause: it’s lightweight, networked, reliable, standards-based, and cheap — a perfect combination that has stymied competitors.

What Linux does well, Android does better

Android pushes these benefits several notches further, adding a graphical user interface and modern mobile networking support, which are huge assets for embedded devices that might be mobile and require increased redundancy or frequent interaction with users who find menus and icons far less intimidating than command prompts or low-grade web interfaces.

One of Android’s greatest assets, and one of its critical weaknesses from a tablets perspective, is that Google essentially provides a blank slate upon which others can build compelling, integrated applications. Google’s desire to deliver a platform might be perfect for embedded devices, but it’s become a hindrance for enterprise tablets.

A solution for embedded devices is unfortunately Platform fragmentation on the other hand

Even while there are  concerns about Android hardware fragmentation, the rapid release cycle has muddied the waters on the software front, especially as it pertains to tablets. Add in Android’s ability to be enhanced and modified by manufacturers, which a great strength on the embedded device front, and you have different hardware providers doing everything from superficial “skinning” of Android on their particular device to providing a unique and different OS shell.

Google shouldn’t take an Apple-like approach to locking down hardware, software, and application distribution, but Android does need to be more tightly controlled by Google in order to achieve tablet success. A significant asset that Google has over Apple is that there are Android tablets available in every conceivable size, shape, and price point. Hardware manufacturers understandably don’t want to be forced into commodity status, but at this juncture, an average user could pick up three random Android tablets and find an inconsistent interface and experience among them. This is not a recipe for a successful enterprise device.

Its an interesting toss up and a marketers dilemma at Google – Maintain course and run out of favour for devices today. Or change course today and loose out on the what appears to be a great future in connected devices

The Information Revolution

Posted in Technology impact on economy and population by Manas Ganguly on August 2, 2012

Years from now, we will read about the Information Revolution as much as we read about the Industrial revolution these days. We live in the era where data and Information are rapidly transcending borders and limitations and changing lives like never before. The stats here prove the point that as a civilization, we are at a inflection point with data and information.

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