The limits of advertising led model

January 27, 2012

When you actually make something rather than simply being an intermediary, your potential for growth is determined by the limits of what you can build. An intermediary like Google or Facebook or Groupon are eventually going to fade away, being replaced by the next shiny new thing.

Apple may also fade away as may Microsoft but their impact on the world will be much more far reaching.


The 1% market size fallacy

November 17, 2009

The Cranky PM has an insightful take on the usual ‘conservative’ take on marketing sizing.

In the beginning of a new market’s life, sure, there are lots and lots of competitors.  Enough that many players might achieve 1% of the market.  That’s what markets look like when they are immature and stupid. But soon enough, the market’s childhood is over and you have an adolescent market on your hands.

And in an adolescent market, a 1% position is completely unsustainable.  Because as that market starts sprouting the accouterments of puberty — the appearance of chest hair, voluptuous hips, or the first contrarian articles in the press (a la “this technology is not quite the shizz that was promised”)  – the number of players shrinks big-time, as the small-time players — the ONE PERCENT players — all die or get acquired.  And voila!  You end up with about 5 players.  And you better believe they all have more than one percent of the market.

And then, our frisky little teenager of a market grows up more and becomes a fuddy-duddy adult, with only 2 or 3 players — the smallest of which will almost certainly have at least a 15% market share.  And that is likely that way it will stay until the market is wheeled off in a casket, or at least put into an assisted living facility.

Without a execution plan which does not get you 15-20% market share, you are better off not being in business. To really dominate you need 50%+ market share. One of the reason this fallacy comes up is that most entrepreneurs are unable to distinguish between population and addressable market. Except in the case of utility markets like electricity or telecoms, there is no way that the addressable market is close to the population or even a significant portion of population. Even if you are making a consumer play it is better to segment via number of households or income or some such parameter which tells you what is the addressable market you are looking at. Then go and dominate that market segment.

Annals of Obvious Research

October 26, 2009

Once again the academics have fearlessly gone forth and discovered the what anyone who has ever run a business will immediately tell you.

Analysing 85 years of data on Employee selection criteria, our intrepid researchers identified the  following three characteristics of successful employee criteria

1. GMA tests (“General mental ability”)

2. Work sample tests

3. Integrity tests: surveys design to assess honesty … I don’t like them but they do appear to work.

While the bottom three characteristics assuming graphology is some general rubbish

16. Years of education

17. Interests

18. Graphology (e.g., handwriting analysis)

19. Age

Anyone who has had to hire not in some corporate environment but in an actual business especially a start-up early stage could have told you that.

What the current Argentinian Football mess may teach countries

October 18, 2009

Simon Kuper has a provocative take on Argentina’s current football mess in FT.

The key is that there are two views of what a national football team is for. The first is the professional view: the team exists to win matches. To do that, it needs to follow best international practice. However, Argentina chose Maradona because it had embraced the second – nationalist – view: the team must be the nation made flesh. Silly as Argentina now looks, many countries periodically fall into the same trap.

This is true not just of football teams but frequently of countries where they believe that there is some unique way of doing business. Whether it’s the Asian way or the Indian way so even the Scandinavian way. Business, trade and culture could be segregated in past days because it took time for innovations and ideas to spread, but in today’s day and age there is only one way and that is the global way.

A Tale of Two Acquisitions

September 24, 2009

In the last week there have been in the new two acquisitions in the Tech space which are pretty close to home for me. The first was 170 million acquisition of Mint by Intuit. My initial thoughts of starting a Personal Finance SaaS company for Asia was inspired  by looking at Mint and reading this article in WSJ. We are now taking MyMoneyManage into a much broader direction, focusing on not just consumers but on a broader SME market which seems more lucrative for Asia.

The other acquisition was smaller one by IBM of Redpill Solutions but probably more significant to me because I worked at Redpill for one and a half years when the Analytics business was starting off. They were crazy days of literally running around trying to convince clients of the value of tapping into the data that they have sitting around.

Congrats to the Redpill team on pulling this off!

Both acquisitions are on the face of it similar, established companies taking over smaller innovative companies which are focused on providing a different level of service to their customers,  both are also about doing more with the data of their customers. How will these two acquisitions pan out is something only future will make clear. But I would like to believe that Redpill will have a greater impact on the future with their customer focus. Mint will get absorbed into Quicken and become just a pretty front-end service while Redpill has the opportunity to really change the world with the reach and openings that IBM can give them.

Will be following with interest on how these acquisitions play out.

Customer Acquisition in SaaS

September 12, 2009

Dhamesh Shah has a great bunch of insights on running a SaaS startup. One aspect that he does not really cover in great detail is how do we acquire new customers. It’s great if you are a Guy Kawasaki or have been funded by Y Combinator where you automatically get a reasonable launchpad and can expect some link-love from established presence in the community. But what about where you are launching something which is bootstrapped and you need to acquire customers. Here are some of the ways that you can acquire customers.

  • Make sure that you have your keywords set-up correctly, read Google Webmaster’s guide for SEO. It’s a great resource that gives good information and even if you are engaging an external SEO expert, it is well worth your time to understand how Search Engines view your site.
  • Build a presence on the web by writing and submitting press releases, blog posts related to your topic as well as participating in discussion forums or on blogs to raise the profile of your product.
  • One effective way that I have found regarding raising the profile of the product as well as getting initial customers is to create a survey and send it out to the demographic you are targeting. It’s a good low cost way of getting feedback. I have used Survey Monkey for this and it was very effective in the Customer Development Process.
  • If possible run a contest with some kind of free giveaway, popular things to give away are Electronic Goods, complementary services related to the software or even something simple like a T-shirt works if it is well designed and unique.
  • Use Google AdWords to drive traffic and acquire customers, an investment of as small as USD 5 per day can generate enough traffic for you to start getting a sense of how the product is being accepted and allow you to move to the next phase of tweaking the product.
  • Make sure there is a referral bonus for getting new customers, for your existing ones. Member-Get-Member or Viral marketing is one of the most powerful mechanisms of growing your customer base. Make sure you make it easy for existing customers to invite their peers. See Seth Godin’s talk on Viral Marketing.
  • Finally make sure that you provide a Free Trail Period

These are just some of the more cost-effective mechanisms of acquiring new customers and I hope you will benefit from utilising these and growing your business.

Are ad agencies like financial institutions?

August 31, 2009

Marketing is pretty similar to finance, it is a staff function which does not contribute directly to revenue or to product development or even to design. Marketeers main job is to tell a story about a product and make sure that the plot, characters and arc of story are coherent. How is this like Finance? Simply Finance has a similar function in terms of what it delivers to a business. A controlling function to ensure that price is right and other functions are run as efficiently as possible. They allocate capital between different functions of a business.

At a macro level Ad Agencies and Financial Institutions perform similar functions for businesses, and as has happened with all aspects of business in the last decade, the services being provided have become unmoored for any real value addition. This piece in the FT is ostensibly about rise of online media, but reality is that the go-go years have ended and advertising will not command the premiums that it once did.