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About The Imminent Online Future Of Indian Media

NYT’s India Ink takes a swipe at that contentious topic of the future of media in India, seen through the eyes of an emerging online media scene in India. The post covers interesting aspects of the problem and is well worth a read, but it also misses a few key points.

For one, niche, experimental new media websites are hardly a new thing in India. In some ways, we have been ahead of even the western markets on that front. There used to be this fantastic (but way too costly to run) product called The Newspaper Today from the India Today Group and the first incarnation Tehelka was another of these experiments. Now, if you consider that, both were products from the 2000 – 2003 period, you will realize that our experiments in the space go that long back.

I was involved with both products for very short periods of time early in my career and I went on to work at digital operations of many other media companies after that. The idea that good content, somehow, will change the game was a popularly held misconception then and it remains the same even now and someone is bound to revisit that theme every couple of years, only to go home pretty singed by the whole experience.

Secondly, it is not the quality, but the cost that makes the proposition rather untenable in India. It costs way too much to create even less-than-average content here (points tackled in a bit more detail in an earlier post here), creating good quality content, on the lines of a daily, is even harder and costlier. The concept has been a first love of sorts for me, since content and journalism is where I started my career, and every now and then I wonder if I should try doing a venture there. By the time I am done with even the most basic financial models on it, the stark reality always holds me back.

Thirdly, the myth of the booming class of novueau-riche Indians who are dying for quality English content is something that is created by people like me who want to read more of this type of content and imagine ourselves as a growing tribe. Let me break it to everyone, we are not a growing tribe. We are a vocal, somewhat visible group given to group-think and internal amplification like any other group. Unfortunately, the group is so tiny that most niche online publications in India consider even half-a-million page views in a month as an excellent month.

Lastly, it is not impossible to have a growing, scaleable online content business in India. It will be in a non-English language, with content that probably won’t appeal to the upper class and it will need the backing of some really good investors who are patient enough to put money into a team and a business that will take 3-5 years to bootstrap properly.

P.S: Ironically, one of the people interviewed in the post, P V Sahad of VCCircle, was a colleague at The Newspaper Today. He’s one of the smarter guys in the business who realized early enough in the game that there is no money in doing content if you want to do a lot of it.

New Gmail Ad Unit

This morning, I noticed a new ad unit within Gmail. The usual practice for Google, and almost everyone else, is to make the click open a new window and show the target URL in that. In this case, the ad unit opens a first level of content within Gmail, just like an email, and then there is a further click-through that takes the user to the final page.

Gmail now has four ad units in the mail content page and Google has been fairly innovative with their formats. One of the units — the top one — starts as a band on top and when you scroll down it collapses to a smaller unit on the right panel, above the usual set of four link tower unit.

As it is always possible, Google could just be bucket testing this unit.

Facebook Graph Search: Nobody’s Killing Anyone Yet

The launch of Facebook’s Graph Search has led to the expected feeding frenzy from the media. The product was long-expected from the company, but what was delivered was different from what was expected. The hope was that the company would launch a product that would take Google head-on, but what was delivered was a query parser that uses a restricted dialect closer to natural language and considerably improved results display and filtration options.

The buildup to this event was seen in the stock price of the company in the past week with it rising to its highest in a while and going by the reaction to the product launch it has not been received well as the stock is down, but holding the $30 mark it had risen to. While the stock market is hardly a good indicator of the health of a company (ask Apple), it would seem that all is not well.

The fundamental problem with the Facebook v/s Google narrative is that till Facebook starts crawling the open web, they don’t represent a threat to Google as far as search goes. The same holds true in the opposite direction: till Google explicitly starts building a social network to pull people off Facebook they don’t represent a threat for Facebook. In short, Facebook Graph Search is not search as you know it, Google+ is not the social network that you use in Facebook.

Most of the divergence is the search approach for Facebook and Google boils down to two things:

1. Intent & Context: Most of the content posted on Facebook is posted with an active intent to be consumed within Facebook. This context is vastly different from content on the open web where the context is determined by Google using their secret sauce.

2. Universe: In Facebook, the universe of data is what is created and shared between the network of users.If it is not shared or liked by someone on the network, it will not exist in Facebook. In Google, the universe is every page that can be crawled out there.

For both companies battling the other one is not the most significant challenge they face. Google needs a framework in place that will, over time, reduce their dependence on open crawling (pull) and move in a direction where content publishers will intentionally (push) data into their index. This has the additional benefit of allowing them to fend off lawsuits regarding sourcing (crawling) and preferential display (using Google+ pages for local data).

For Facebook, user retention and overcoming Facebook fatigue is the big challenge. They can build many wonderful things on mobile and elsewhere, but it will all come to naught if a good chunk of its users start to find it is no longer fun to be on the service or be active on it anymore. The company has a long way to go to de-risk the core part of their business.

Coming back to the product specifics, it will be interesting to see user reactions once the feature is rolled out across its entire user base. Natural language querying has been an interesting niche for a while. It was considered as a panacea to all search aliments a while ago, but we discovered then that query parsing is only one half a brilliant search experience, the other — most critical — part is result quality and relevance.

On Facebook, quality is going to be awesome when the results are available, but I’ll wait and see how does availability work out for a large spectrum of queries. The trouble with socially networked data is that the results I see may not be the results you get to see. Having designed and run a private network for a while, I can tell you that this is a pretty significant challenge that few understand clearly.

Go Through This Checklist If You Want To Build A New Twitter

There is a lot of ire about what Twitter is doing to its developer ecosystem and its users these days. An often-mentioned suggestion that comes out of it is to build another Twitter, this time one that will set right all the wrongs. Even before we get around to the question whether any product developed thus will eventually wind up facing the same problems as Twitter, we have to first figure out what exactly is Twitter before we attempt to outdo it.

Most of the current ire with Twitter are the recent changes to the usage of the API and changes to how tweets and timelines can be displayed in third-party clients, but Twitter itself is a lot beyond just an API and a bunch of clients. To compete effectively with it does not mean that it will be good enough to create an awesome API which the developers will love. Twitter is a lot more than that.

Messaging Network: At its heart, Twitter is a massive messaging framework. It does nothing more than pick up a message, check with a set of rules who all gets to see it and dumps it with the bunch of people who are authorized to view that message. Clients can look up a user’s dump and render it. By the latest count, the platform handles 340 million tweets a day, which is replicated into numerous timelines (mentioned as dumps earlier). It is not trivial to engineer even just this part of Twitter.

API: Every client (including the official web frontend) displays data consumed from the API endpoints provided by Twitter. Almost all of the user-facing applications that are built atop Twitter leverage this API as web clients, standalone apps and mobile apps. Thankfully, Twitter seems to have so far stayed clear of having a restrictive license on the API specification itself. So replicating the API to allow existing clients to reuse their code should not be a problem. There is, though, no certainty that Twitter won’t change its mind regarding this, irrespective of the very problematic question whether APIs can be copyrighted or not.

Social Graph: Twitter, like any other large-sized network, is as much about the finesse of the product as it is about the number of people using it. For most users the restrictions of the API and the changes to it are inconsequential. For every developer adversely affected by the changes, there are probably a million users who could not care less about it. Without the users, no Twitter replacement will work, no matter how good/open/flexible it may be. If the reason why you are building a new Twitter is to address the griefs of the developers than the consumers it just will not work. Developers augment the network, but they are not the network by themselves.

Brand Partnerships: One of the reason why Twitter has done well is also the partnerships the company has built over time. The first iteration of this was seen in the ‘verified’ badge. We often underestimate the importance of that little badge in quickly it has been adopted, often by people who have struggled to even maintain a basic website. Historically, there is no parallel to the variety of users/brands who have come forward to claim their digital presence as it has happened on Twitter. Same is the case with non-verified official handles. We have never seen before a situation where television channels have voluntarily carried the branding of a communication platform that does not belong to them (by their usual standards, they would build a Twitter of their own and promote it. Example: NDTV Social which now augments than to aggregate). Twitter is gradually building and solidifying these partnerships to things that extend beyond the ‘verified’ badge with initiatives like cards. Over time, due to the authenticity (of the brand’s presence) and the reach (of Twitter) it will be really tough for a competitor to sell itself.

Mobile: This one is simple. Twitter has partnerships with 175 carriers around the world. This provides them with various degrees of advantages including discounted rates for access over SMS compared to other numbers. In an environment where voice revenue is falling or stagnating around the world non-voice and data revenue is a main focus area for telcos across the world. Anyone looking to take on Twitter will have to take this into account. Another aspect to keep in mind on mobile is the money spent on support SMS messages – it is not cheap.

Funding: As an indirect fallout of the Facebook IPO debacle, the valuation bubble in pre-IPO companies are now taking a bit of a beating. When hypergrowth itself does not perk up a company’s potential valuation it will limit the  ability of companies to raise money and stay true to the core ideals.

Revenue: For ads to work on services like Twitter you need scale. For scale you need to have massive number of users using the service regularly. At $5 per month per user, you won’t get anywhere with user acquisition. How do you eventually scale this business?

Conclusion: If you can address at least some of the above points you could probably wind up successfully building a new Twitter. The odds are that nobody is going to be able to do that.


Review Of Prismatic

Wavii and Prismatic are two of the latest warriors in the perilous battlefield of automated social content discovery and recommendations and over the past few weeks I have grown quite fond of using Prismatic. The domain of automated content discovery has seen much money and effort invested into it with companies like Evri/Twine, SocialMedian, Summify either shutting down or being acquired into larger products to be integrated as smaller features or as talent acquisitions. So it is surprising to see even more resources being plonked into a domain that has repeatedly proven to be either plumbing with no real scope as a consumer-facing business.

One reason why this is happening is because nobody has successfully cracked this space, exposing the underlying technology in the form of a useful, simple service than as something which is inherently nerdy in nature. Recommendation engines that work on unstructured text requires a mixture of content crawling, classification and content clustering to make it work right. Each of those three aspects are hard to crack by themselves, requiring a lot more than just your average web development chops. Together, they are an unattainable holy trinity. There is a good reason why so many companies and smart people have failed at it. That is also one of the best reason to have a go at it again.

Then there is the aspect of the RSS readers — another domain that has seen many a brave product, person and purse eventually call it quits, with not a single big product from five-years-ago being alive in 2013. You can, justifiably, argue Google Reader is still alive in somewhat a whittled down form, but even in its heyday the product could not grow into the mainstream. RSS is inherently plumbing for the connected web. It is not meant to be consumed by humans. Yet, the entire workflow around using RSS was built around human intervention. There is a good reason why it never took off.

Why I like Prismatic a lot is because it excels at executing the holy trinity really well. The on-boarding is ridiculously simple – you hook up your Twitter account (in my case, since I am not on Facebook) and it figures out a list of things you like based on your profile. It presents you with a list of links to read right when you log in. There is no “hey, check in 10-hours later when we’d have crawled content for you” in their case. For a non-technical audience this is crucial. Even more crucial is the fact that you need to curate anything at all, it figures out what you like by tracking what you clicked/opened.

Comparatively, Wavii is a more nerdy experience. The on-boarding is nowhere close to being as polished as Prismatic and even after a while on the service it leaves me quite confused. Consumer-facing applications cannot afford to appear convoluted and complicated, especially in the iOS era. Wavii is much more an alpha/beta a product than Prismatic, but that is understandable as Prismatic is better capitalized and has been around for quite a while with some top-notch talent trying to solve the hard problems associated with getting their product right.

In my opinion Prismatic is the next step from Google Reader. Underneath the shiny bits Prismatic polls RSS feeds, crawls updated pages, classifies the information, generates content summaries, titles and images and presents the story to you as a simple news/content item. But, as a regular user, you are not exposed to any of those shenanigans. Instead, all you get is an endless stream of news/information with an exceptionally high degree of relevance with zero active input from you.

If I had money to invest, I would certainly invest a fair chunk with Prismatic. I am still not sold on the idea that niche products like these can stand on their own two legs and scale into the hyper growth phase. But I am pretty certain that should the team choose to sell in the future, the exit would be fairly large for everyone involved and deservedly so too.

Disclosure: I have no connections with either product directly (other than a two bug reports) or through my clients.

The Price Is Right: YouTube Versus Labels

The Guardian has an interesting story on how record labels are learning how to make money from YouTube.

Five years ago, this is what I had written in ‘Youtube: The future of music distribution?

Now, if Youtube were to give the record companies a fixed amount of money (they had set apart $500 million for copyright litigation-related costs in escrow), for legally playing out music/music videos and if that fixed amount of money is higher by even a cent, compared to what the industry might make legally a few years down the line, who can honestly complain about it?

Since I wrote that many moons ago, I have been quite convinced that the fight with YouTube for the record labels was less about copyright/licenses and more about the right price. Internet has not changed much the manner in which music is created; what it has ripped to bits is how discovery and distribution works for music. The stark truth for labels is that in trying to keep the old model going for as long as possible they have lost on being on top of the game as far as distributing music goes.

Another way to ask the question is: where is the Hulu for music for record labels?

With iTunes and YouTube they have given up a key point of leverage and that horse has long bolted. The situation is largely beyond repair with the limited imagination the industry has. So the only option left is to cut overheads, haggle over the price and ride the wave.

If the price is right they would not care less whether the clip or stream with the largest number of eyeballs is the official one or not, as long as they are getting paid for any stream (official or user-generated) or clip with their artist in it. In fact, it is more of a headache for YouTube as official channels can get them better revenue on the ads, compared to the clip being played on an unofficial channel.

To a great extent, this change is already visible on YouTube through two developments: YouTube’s fingerprinting service has of late improved dramatically. It now develops artist pages and playlists from official and unofficial channels. Secondly, they are aggressively pruning non-official versions of various clips, leaving only what the copyright holder wants to show available to the viewers.

For the users this has one major downside. In a manner of speaking, YouTube was the true successor to Napster in the width of content it used to host. You could find some really obscure clips on it earlier. As the cleanup continues, that feature will slowly fade away. On the other hand, products like Grooveshark, Spotify, Gaana and Saavan are making it increasingly easier to find and consume legal content, thus reducing one of the major cases for piracy – which is convenience.

For the labels, eventually, it is not that bad a deal. It is incredibly complicated to run a digital operation that manages both geo-restriction and monetization effectively. Given enough time, a new product is eventually bound to emerge that will do that better than a YouTube or an iTunes store. Till that happens, they can cut costs, make more money and let others do all the hard work.

Publishing, Distribution And Consumption In A Brave New World

One of my greatest disappointments with the past ten years in the digital sphere has been the absence of the creation of something that is immense. The eighties saw the growth and evolution of computing in the personal sphere, the nineties saw the evolution of the internet. But, over a decade into the new millenium, we have nothing to show more than refined versions of what has already been put into place. What I did not realize was that we may just be in the midst of experiencing something that is immense, but that something may not be a particular technology or a product. That something is only what a bunch of technologies or products enable us to do with information.

The past 15-years has been a frantic, often unpredictable, ride for the publishing business. What, even 20-years-ago, was the domain of the few has exploded into a creature so different that everyone who reads or write anything these days are still struggling to grasp the enormity and the meaning of the changes that are affecting it. The existing rules regarding who, why and what gets published is being shred to bits and new rules are being made up every day. All parts of the trade — writing, editing, distribution and consumption — are so drastically different from two-decades ago. This is disruption on a scale seldom experienced before.

Death of many gatekeepers

Content is now created on so many platforms – blogs, tweets, personal websites, photo sharing sites; content is now distributed over so many channels – email, social networking sites, content aggregators; content is now consumed over so many channels – browsers, desktop applications, mobile applications, email. What used to be a strictly linear process (create -> distribute -> consume) is now something that is best described as being similar to Brownian motion. What used to be predictable in most cases is vastly unpredictable now. In this brave new world almost everyone is a participant and nobody is a real gatekeeper anymore.

In a pre-internet world there existed clear definitions regarding producers/writers, distributors and consumers of content. Content could be only a handful of things; books, articles in newspapers and magazines. Only a handful of people were either allowed or enabled to create this content and there were clear rules regarding membership into this select club. This content was consumed over clearly defined channels like books, news publications and magazines. If you could not access any of these channels, what you wrote had little value as nobody could consume it. Consumers of content had no other available option, but to be reliant on the established channels.

The scenario now is so very different. Almost anyone is now a creator of content. And by anyone I mean anyone. For a long time now, I have held that there is no social media. There are only creators, distributors and consumers of media/content. Comments, tweets, mashups, curated lists – all these are as much content as any form of reporting or long form writing. Of course, all comments, tweets and mashups are not the same quality as all reporting out there, but it is also true that all reporting is not really all that great. Yes, it is jarring to see slang, SMS-language and badly written text in things I read, but that does not make it any less useful or informative compared to established publications.

This has serious implications for the old guard. Gatekeepers, in any ecosystem, wield tremendous power. This power is accrued from predictability, reach and resources. Publications are valued because they publish to a predictable schedule, with a quality that is predictable, with topics that are predictable. Publications are valued based on the number of people they can reach. Publications are also valued based on their ability to cover topics; some cover a large number of topics at a shallow level; some cover fewer topics at a far deeper level. The new world of content and publishing has attacked each and every source of power of the gatekeepers.

Implications on the present

The first implication of this is on pricing. Ability-driven scarcity has been one of the key factors in enabling publications to charge what they used to charge. Since the information they publish is no longer scare, that rug has been firmly pulled out from underneath their feet. Almost every new old-school style publication that has attempted to charge a premium in recent years has tried to based it on opinion or exclusivity than attempting to do it over information. The businesses based on pushing information like in the old ages will survive as long as digital reach continues to exhibit the current constrained growth and the lack of understanding and translating key businesses metrics in digital remain. But it is an inescapable fact that such businesses are living on borrowed time.

In 2004, I remember telling my boss at that time that we need to pro-actively plan for a world where we can’t control the form factor or context in which information published by us will appear. In 2012, I consume most of the content I read and view now from my Twitter timeline, Hacker News and Google News. There are very few instances where I consume content from homepages of publications. I had previously tackled this topic in 2010 and the risk to brands and publications on this front continue to only grow with time. Brands and publications that ignore this threat will pay a big price in the coming years.

Crystal Ball

It would be the greatest lie if I were to tell you that I know exactly how this is going develop and what the future of publishing will look like. Currently, content anywhere is one of the bleakest businesses to be in at scale, while it is one of the easiest to bootstrap and hit Ramen profitability, should you choose to put your mind to it. Nearly non-existent entry barriers (domain registration & basic web hosting) and a preponderance of Ramen profitability creates an illusion of stellar prospects for the domain, but the actual outlook at scale is really dire. It is rare to find successful large-scale digital/non-digital publications that are in the black. The risks in being involved in the domain with any sort of significant investment on either side of the table is significantly high.

For existing publishers, the way forward is to measure everything and understand the numbers and your core audience very well. Monetization strategies will continue to be unpredictable for many years to come. That you are pulling good revenue is now not a guarantee of the same in anything other than the immediate term. Audience funnels and goals need to be set and tracked as a core operational metric. The industry still has an excessive reliance on gross numbers that does not differentiate in value between customer A and customer B. If you can’t make that differentiation, it is only natural that you can’t monetize better.

For investors, at least in India, publishing is a no-go territory for any fund that probably has a size in excess of $100 million. There is no scale in the business at this point which will allow for returns that justify the investment. Even established players have been demonstrating flat or slow growth in revenue (no point talking profitability) over the past three-years. Even that growth is impacted by increasing operating costs that have not slowed down in the same years. Valuation, based on potential, can be easily ignored here. Exits are rare and at a level that makes no sense for anyone other than the founders and some form of relief for early stage investors. There are way too many shackles that make any attempted disruption too costly.

For the consumers, publishing is a lovely place to be at right now. Both quality and quantity has grown in content that is available for consumption. The growth is quantity has also led to the emergence of aggregators and curators. They used to play an important role in the early web as consequence of nearly non-existent means of searching the web with its limited content at that time (problems of discovery and scarcity of content), now they play an important role because of the excess of content that is available for consumption. Things will only get better for them. These are the true winners in this game.

Quick Look At Official Indian Banking Apps On Android

The main list of banks to track has been sourced from the BANK-NIFTY and it throws up an interesting set of results

Axis Bank Ltd.
No official Android app, supported in NGpay. There is a Java mobile app for it.
Update (13th, August, 2012. Thanks, Rajashri Ray in the comments): There is an official Android app now: https://play.google.com/store/apps/details?id=com.csam.axis.activity
Install base: 100,000 – 500,000

Bank of Baroda
Official App: https://market.android.com/details?id=com.fss.bob
Install base: 1,000 – 5,000

Bank of India
No official Android app. There is a Java mobile app for it.

Canara Bank
No official Android app. There is a Java mobile app for it.

HDFC Bank Ltd.
No official Android app, supported in NGpay. There is a Java mobile app for it.

Update (13th, August, 2012. Thanks, Pankaj Batra in the comments): There is an official Android app now:
Install Base: 100,000 – 500,000

ICICI Bank Ltd.
Official App: https://market.android.com/details?id=com.csam.icici.bank.imobile
Install Base: 100,000 – 500,000

IDBI Bank Ltd.
No official Android app. There is a Java mobile app for it.

IndusInd Bank Ltd. 
Official App: https://market.android.com/details?id=com.fss.indus
Install Base: 100 – 500

Kotak Mahindra Bank Ltd.
No official Android app. There is a Java mobile app for it.

Punjab National Bank
No official Android app. There is a Java mobile app for it.

State Bank of India
Official App: https://market.android.com/details?id=com.sgs.sbi.mbanking
Install Base: 50,000 – 100,000

Union Bank of India (FSS)
Official App: https://market.android.com/details?id=com.fss.ubi
Install Base: NA

Other Notables:

Citibank India:
Official App: https://market.android.com/details?id=com.citiuat
Install Base: 10,000 – 50,000

Stanchart India
Official App: https://market.android.com/details?id=air.app.scb.breeze.android.main.in.prod
Install Base: 1000-5000


  • Interestingly, only five of the twelve banks from the list have official applications on the Android platform.
  • Pretty much every bank on that list has a J2ME app for mobile banking, which makes a lot of sense in a country like ours.
  • Even the banks with Android apps don’t feature it prominently on their websites.
  • Only exception to (3) is ICICI Bank, who are a bit overenthusiastic in promoting iMobile.
  • HDFC Bank is a notable absentee in the list, even though they are supported through NGpay.
  • The apps mostly have the same feature set. Understandable, as the backend service providers tend to be the same few across banks, which makes feature-based differentiation a hard one to pull off.
  • Citibank India and Stanchart India have a reasonable install base.
  • nGpay supports both Axis Bank and HDFC, which should be the cheapest route for banks to integrate with an Android or mobile app.
  • FSS powers the services of Bank of Baroda and Union Bank of India. Looks like they are using a white-label application.
  • SBI’s install numbers are a pleasant surprise. Shows a level of awareness in the market I had, honestly, not expected.
  • Quite revealing that both SBI and the FSS-based apps have a minimum requirement of Android 1.5 and up, while most of the others are 2.x.
  • These numbers can be quite misleading. It is nearly impossible to track the install base of the J2ME apps. So, usage could be a different matter altogether.
  • Install base leader board
    1. ICICI Bank
    2. SBI
    3. NGpay
    4. Citibank India
    5. Bank of Baroda
    6. Stanchart India
    7. Indusind Bank

BWA at Rs 10 per GB is an invitation to ruin RIL

Medianama recently posted their analysis on the reported plans by Reliance Industries to roll out their BWA-based product at a bundled cost of Rs 10 per GB with their Rs 3500 tablet.

Since this is a topic that has been of some interest to me, I thought it was worth taking a deeper bite into the pricing and other factors of this offering.

As far as per-GB pricing goes, even the cheapest cost, even for fixed lines, is not to be found under Rs 30 per GB. Data on wireless (2G or 3G) is considerably more expensive, other than the sole exception of Airtel’s Rs 99 for 2GB plan on 2G. RIL could tap into RCom’s FLAG and also leverage RCom’s their ‘preferred’ status with YouTube to mitigate a bit of their costs, but that will hardly be enough to start making a dent on the pretty penny already spent in acquiring spectrum through the Infotel acquisition.

The comparison with fixed line broadband or Wimax is not entirely fair when in it comes to BWA. They have different cost structures. Traditionally, fixed line broadband is used by an entire household and is shared over multiple devices. A tablet, on the other hand, will mostly be used by one person. For this to work out, RIL has to sell aggressively to the demographic that currently contributes to Rs 200 ARPU on voice. You can see how the pricing makes sense if you compare it to a mobile phone.

The only problem is that online services in India don’t yet have the utility status that mobile phones enjoy, thus requiring an entire layer of content and services to be added for the users. It won’t work if you just give people cheap bandwidth and a cheap device. It is not that we have not had reasonably priced broadband in India for a while (BSNL’s DSL services now reach a lot of remote places in the country), we just have not had enough India-specific products and services for people to use in those places so far.

Anyway, let us work some more numbers to see how much money RIL can make out of the current plans.

To establish a base (reasonably flawed) benchmark, we will take Airtel’s assertion that their 3GB plan is one of the most popular ones and assume that a user on the new service will use 3 GB per month. For the sake of convenience, we will spread the cost of the tablet over the course of a year. This will mean that for the first year the user will bring in revenues of Rs 291 per month and the cost of data used on the service.

This gives us an ARPU of Rs. 321 for the first year.

Total first year revenue per user = Rs. 3852

Second year revenue  per user = Rs. 360

Total revenue for 2-years  per user = Rs. 4212

Even on a subscriber base of 100000 users in the first year, this will only bring in revenues under Rs 50 crore in the first two years. Considering that the spectrum alone cost Infotel well over Rs 12,000 crores, the outlook is horrible for the company. At a million users, the company has a shot at a marginally more realistic runway (if you can call two decades that), but I am not sure if those users are there for the taking and we are not yet taking into account the Rs 18,000 crore – Rs 20,000 crore that the company plans to invest in setting up the services.

As a thought exercise, let us bump up baseline usage a bit to 30GB per month. This will bring up the data costs in a month to Rs. 300. Add the device cost of Rs. 219 per month to it and you get an ARPU of Rs. 519 for the first year.

Total first year revenue per user = Rs. 6228.

Second year revenue per user = Rs. 3600

Total revenue for 2-years per user = Rs. 9828

This bumps up total revenue estimates for two years to around Rs 98 crores. On a one million user base it will recover the spectrum costs in a bit over ten-years.

The main takeaway from these numbers is that RIL really needs to get users to use a lot of data or/and get a lot of users from the word go. What stands in their way is that in reaching out to the people who are not already online, they will be dealing with the ceiling of the Rs 200 ARPU on voice segment. They won’t easily move up at all on this curve. Another data point that will be a cause for concern is the ARPU on wire line broadband. These have always been around Rs 600 – Rs 700 level, from information that is not easily available. That more or less keeps the ceiling a bit too low for RIL to succeed with this offering.

There is, though, an alternative way to go about this, which is to not  directly charge for the device. Instead, you get a Rs 350 flat rate per month, on a 2-year commitment from the user. It will come bundled with 3GB of usage per month. You can buy more GBs like talktime for phones.

First year ARPU at 3GB data per month = 350 PM

Total first year revenue per user =  Rs 4200

Total second year revenue per user =  Rs 4200

Total revenue for 2-years per user = 8400

This should get them a much healthier Rs 84 crore in revenue with a better certainty that the users will continue with you.

If you bump up the data usage, the picture gets a lot more healthier.

First year ARPU at 30 GB data per month  = 350 + (27*10) = Rs. 620 PM

Total first year revenue per user =  Rs. 7440

Total second year revenue per user =  Rs. 7440

Total revenue for 2-years per user =Rs. 14,880

In theory, this is the sweetest deal RIL can hope for. Around Rs 150 crore in two years is not a bad number to have in revenue, but it also requires users to consume data at a rate which is comparable to a more than moderate wire line data user at the moment. I also think that Rs. 500 is a major point of resistance for the average household to spend on anything beyond bare necessities on monthly basis.

There are a lot of factors that can change the equation for RIL, but knowing what we know now, it is very unlikely that the offering is a sustainable one in the long term for the company.

The Great Promotional Mailer Overdrive

Contrary to what seems to be popular sentiment on the internet, I actually like advertising as long as it is not overly intrusive, has some form of relevance to things/services I am interested in and is not spammy. As a result I don’t at times unsubscribe from promotional mailers sent to me by various companies and in certain cases I do actually check out most of the offers. Of the many that I subject myself to, I like the efforts of both ICICI Bank and Ebay. So I figured it will be a good idea to track one of these companies for a month to check for volume for and quality. Below is the list of mailers ICICI Bank has sent me through November:

Nov 30: Refer iMobile to 5 friends and get Rs. 500
Nov 30: Just activate iMobile and get a Free Voucher worth Rs. 500
Nov 28: Get 5x reward points for online recharge of Mobile, DTH and Data Card
Nov 27: Get 5x reward points for online recharge of Mobile, DTH and Data Card
Nov 25: Special Privilege: Rate of Interest now reduced on your ICICI Bank Credit Card
Nov 23: Refer iMobile to 5 friends and get Rs. 500
Nov 20: Get a Gift Voucher worth Rs. 500 just for activating iMobile
Nov 20: ICICI Bank presents Home Loans at fixed rate of interest for the first 2 years
Nov 18: Discovering Malaysia is now 5X more rewarding
Nov 16: Prepaid Mobile Recharge at your fingertips!
Nov 16: Count on us to cover your medical expenses, with the Family Protect Premier Insurance!
Nov 16: Money Manager
Nov 14: Rs 100 off on tickets
Nov 14: Presenting Culinary Treat - Minimum 15% savings on dining
Nov 12: Personal loans
Nov 9: Cashback travel vouchers
Nov 8: Redeem payback points
Nov 6: Activate imobile
Nov 2: Get Rs 500 Cashback Travel Voucher by spending on your ICICI Bank Debit Card
Nov 2: Get 3 exciting gifts absolutely FREE just for activating Internet Banking!
  • 20 mailers in a month are a few too many for my liking.
  • They don’t seem to do much of a finely tuned campaign. I am already using imobile, same is the case with internet banking.
  • Quite a few repeats.
  • The tracking is sub-par
  • Copy quality is average
The feedback for ICICI must have been good as this flooding has now been taken up also by their sister company ICICI Direct, but the latter’s campaigns have hardly any tracking enabled on them, keeping them at a much earlier stage of evolution.
Ebay India:
  • 23 mailers in all of November, 2011
  • A lot of effort is put into the creatives, they are really well done. Copy quality is also good.
  • They are pushing deals/offers really hard. Not surprising, since they seem to be flavour of the current boom (or bust).
  • The tracking is meticulous on the campaigns. Opens and clicks are tracked, I am assuming so would be transactions conversions.
  • Other than offers/deals, most of the mailers are content initiatives. They categorize existing items on the site.