Why have all become Farmers (Farmville) and Hit Men (Mafia Wars)?

January 30, 2010 in Uncategorized | Tags: , , , , , , , , | 3 comments

In the past few weeks, if you haven’t received requests in your in-box to help your friends on their farms on Farmville or help do a few con jobs in Mafia Wars, then you’ve probably moved residence from planet earth.

Consider this:  More people play Farmville than watch the Oprah Winfrey show. Players have generated more than 40 million farms (20 times more than the number of farms in the United States), own more than 500,000 tractors, and conduct more than 80 million harvests each day. So far, 1.75 crores in real cash has been raised for charity through the selling of an exclusive kind of sweet potato in the game. On the darker side, over 3 crore people are now part of ‘Mafia Wars’ – a game that makes you kill, rob and loot people. The more your friends help you in ‘supari’ jobs, the bigger you grow in status.

Read this to believe it -

Top 2 Social Media Sites in India

Unique Visitors from India in Nov 09

Hours spent on the site from India – Nov 09

Number of 30 sec TV spots that this time spent equals to

Orkut.com

 17.5 million

2.7 crore
hours

324 crore spots

Facebook.com

 11.2 million

1.7 crore hours

205 crore spots

Indians spent 4.4 CRORE MINUTES on just facebook.com  and orkut.com alone in November!

Social Games for the first time seem to be THE PERFECT source of Entertainment. No more waiting for TV programs, zapping ads and hoping that the movie on Star Movies is not the one you’ve seen the 4th time already. This is what entertainment was supposed to be!

The business of Social Games is also a BIG BUSINESS:

The economic model is no longer advertising, but actually selling ‘VIRTUAL GOODS’ (like tractors in Farmville and Poker Chips in Texas Hold Em Up) to consumers like you and me.

Zynga – the company behind Farmville, Mafia Wars etc is now clocking a MONTHLY revenue of 16 million US$ or 80 Crores in sales of these virtual goods.

So, what makes a Social Game really successful?

Something we* call VICTORY:

Recipe elements What each ingredient does
V = Viral Element Scope of  the app spreading virally.
I = International Appeal The International potential of adoption of the app.
C = Competitive element The level of competitiveness amongst the users of the app.
T = Task Orientation The repeated but fun task element in the app.
O= Originality How original an app is – in terms of concept and execution?
R =Regular Habit forming How Addictive is the app?
Y = Youth Appeal Is the app truly for young people?

*Games2win created an internal team of diverse folks from Art, Sales, Consumer Support, Product Management and Traffic to huddle together and create this benchmark and further rank the top 10 social gaming apps in the world using this metric.

The ‘recipe book’ for social games is a structured approach to help understand the various elements that make the world’s biggest games successful and use this guideline to make great games.

The VICTORY benchmark for the World’s top 10 gaming apps  (produced below) brings out the top 3 gaming apps clearly:

No 1 – Zynga’s Mafia Wars (yup it’s not Farmville)

No 2 – Zynga’s Farmville

No 3 – Zynga’s Café World

VICTORY RANKING OF THE WORLDS MOST POPULAR SOCIAL games:


Game Farmville Café World Happy Aquarium Fishville Mafia Wars Zynga Poker Pet Society
Company Zynga Zynga CrowdStar Zynga Zynga Zynga Playfish
Monthly Actives (Source – appdata.com) 73.8 30.6 28.2 24.6 24.2 22.6 21
FB App Rank (Source – appdata.com) 1 3 4 5 6 8 10
Viral Element 20 16 14 14 16 12 14
(marks – 20)
International Appeal (marks -10) 8 8 8 8 7 7 8
Competitive element (marks – 20) 14 14 12 10 20 14 12
Task Orientation (marks – 10) 7 7 7 7 9 6 8
Originality (marks – 10) 6 6 8 6 6 7 9
Regular Habit forming (marks – 20) 18 18 14 14 16 14 14
Youth  Appeal (marks – 10) 8 8 6 7 9 7 7
Total 81 77 69 66 83 67 72
( ON 100)
VICTORY RANKING 2 3 5 7 1 6 4
This is a proprietary ranking algorithm based on VICTORY that was used to rank the top 7 Global Social Games. The report above, tables and rankings are free to be used by anyone provided Games2win is credited as the source.

It seems the fruits of hard labor are now more enjoyable online than in the real world!!


What Indian Brides, Start Up’s and VC have in common…

January 8, 2010 in Uncategorized | Tags: , , , , | 3 comments

One of the most memorable & valuable piece of advise I got was from my long standing VC friend Rajesh Jog – who was at that time partner at E-Ventures and now runs VJIVE Networks.

contests2win.com – my first start up was just closing its round with E-Ventures, and I remember sitting with Rajesh in a classic mahogany conference room with deep burgundy leather chairs discussing the business of c2w.

Rajesh knew I was a marwari (a business entrepreneur community in India that is quite classical and old fashioned) and that my wife and I had just had our second daughter.

He started a very interesting discussion with me:

Alok’ he said ‘ You have 2 girls now, and I am sure you,  like all good Marwari fathers, will already be planning long term for them – that would include making sure that they get married into the right families, etc ?’

While I didn’t immediately react, Rajesh had sure hit a soft spot. Our community is over protective, and old school in its way of thinking. The older family folks usually ‘match’ girls and boys – living  the legend that families marry each other, not just a couple.

His reference was an analogy to an amazing insight. He told me ‘ Alok, just like young girls can be groomed in the right and appropriate way to marry into business and famous families, you will have to groom your newly started business into becoming a beautiful and very attractive ‘bride’ so that all the most famous ‘men’ in the world – a la Yahoo, MSN, Google etc will be anxious to marry (acquire) you!

In a very simple way he had influenced me forever:

  • Exits of start ups firms especially funded by VCs need to be planned almost simultaneously along with actually creating the business. The entrepreneur must understand that his business will need to be sold or IPOed (in whichever way giving up a large stake for outsiders)
  • It’s essential to understand the DNA of the buyer who will find the eventual business attractive and hence build basis a certain TG (target group) in mind.

A caveat to this – in no way does this mean that originality of business concepts or first in the world ideas need to be shunned – its just that as the business evolves, understand which birds of similar feathers can you start hanging out with.

  • Getting into the radar of the prospective bridgegrooms is as important as being an attractive bride. Hey, you need to bump into each other casually in parties (conferences), in common friends functions (VC sponsored meets and retreats) and in friends’ weddings (common entrepreneur friends’ settings) to date ( start discussing business interests) and eventually marry!! (get acquired)

Hmm…. If you’re wondering what happened to what we Indians call ‘love marriage’ – meeting someone in the bus and falling in love or glancing at someone at the bar and making him your spouse….errrr…. I’d rather settle for pre arranged bride who can cook like my mom :-)

What babies and their socks can teach CEOs…

January 2, 2010 in Uncategorized | Tags: , , , , | 1 comment

In my past life (10 years ago) I used to make socks for my father in his hosiery factory. After 5 long and laborious years of trying to establish an export division, I got a lucky break with the European leading retail chain store of that time called ‘C&A’ (you may remember their bags that had a rainbow color stripes on them).

I had my first order of $ 10,000 worth of Baby Socks to ship to their stores in Germany and the UK.

Before starting production, I was invited to the C&A India office for an orientation on best practices and dos and don’ts for producing goods for them. Assembled in that conference room was a motley group of exporters all dealing with C&A for the first time.

A tall imposing German sporting a blond crew cut  entered the room and greeted us, and then asked us one question ‘ I assume some of you have babies or have been around them – what do you observe they do the most?’  As usual at first no one spoke and then there was muttering of ‘crying’ or ‘wetting their nappies’ etc , etc… The German gentleman looked puzzled and said ‘I doubt if Indian babies are different, but in Europe, the first thing a baby does is put things in its mouth. It takes typically seven minutes or less for a parent to discover the same and pull the item out. Hence, all the goods we buy for babies are tested for how safe are they for a baby when it remains in their mouth for seven minutes.’

I was explained how C&A had created artificial baby saliva and how our socks would be immersed in it for seven minutes to check for chemical emissions and other harmful reactive releases.

The next revelation was the German White Sofa test. We were explained that lots of households in Germany have very expensive white leather sofas and it was not uncommon for Germans to enter their homes drenched by the rain or snow or after playing a vigorous sport and immediately collapse on the sofa. In our case, Babies could wet their nappies followed by their socks while sitting on that sofa. Hence all clothes had to be white leather ‘color stain proof ‘ to prevent massive lawsuits against the retailer who sold them to the consumer.

My Baby socks experience really taught me some very valuable lessons:

  • Prepare solutions that are based on real life observations rather than just theory. I started contests2win.com just because I was so frustrated at how difficult it was to cut and paste competitions in postcards to weird sounding post box numbers. That became a real business!
  • Ideas and offerings will have far more extensions and uses than ever imagined by you. Our business of competitions led to us making games for brands. That led us to China with mobile gaming. And we now make games for consumers without brands getting involved.
  • When I wanted to price my socks, I did the obvious – I went to the London C&A store to note the selling prices of all kinds of socks and then worked them backwards, deducting margins, etc so that it would be compelling to C&A and also profitable to us. I was shocked to realize that Baby Socks were priced exactly like Men and Women’s socks! It was so obvious – a mother or father who bought them equated their baby to be at least equal and in most cases more important than themselves – hence intuitively they accepted prices that applied to grown ups! Hence I learnt that value pricing was so subjective – not typically the ‘hours + labor’ formulae that so many Indian firms are used to…

I run a digital entertainment business now, but when I see babies & socks & CEOs, I chuckle and remember some important lessons learnt!

Alok’s driver plays obscene Hindi songs as his caller tune while Alok foots the bill

December 24, 2009 in Uncategorized | Tags: , , , , , , , | 6 comments

My long standing driver – Yadav aka ‘Maharaj’ is a rather decent bloke. He is demure, soft spoken and usually never has an opinion. All he loves to do is drive and polish the car. Yet, when I call him on his mobile for logistical coordination and other errands, the caller tune he forces me to hear makes me go insane. He has chosen the choicest of bawdy, vulgar and obscene bollywood songs available as his caller ring back tunes. If Hugh Hefner called Maharaj, he would probably never kiss a Playboy bunny again. Maharaj has taken mobile embarrassment to a nuclear level.

The least gratifying part of this story is that I pay his mobile bills and hence I am actually funding this spectacular entertainment strategy of his.

So what makes me do something so stupid?

Well, I have no option. This is the Indian Mobile Mafia at play that adds all kinds of value added services to their subscribers’ phones without their permission.

Maharaj has been subscribed to a monthly CRBT (caller Ring back tune) service without anyone asking him or me. If you try and call the ‘big’ telecom operator that powers his phone  and request to get that service switched off, the pain and the trauma of being passed around amongst villager sounding operators  and then pleading them to just get that damn service switched off is just too much of a pain. It’s better to hear those amazing songs.

Allow me to explain the real math behind the biggest organized crime racket in this country:

India has 50 crore mobile users and their ARPU (average revenue per user) each month is plummeting. Thanks to all out wars between so many operators, voice as a stand alone business will be a very competitive space to make money.  SMS at one time was a couple of bucks – now it’s been reduced to almost nothing.

So, if you are an operator and have massive investments to recoup, what do you do?

Enter ‘VAS’ – or value added services. Ringtones, Wallpapers, Games, blah blah. Sure they seem exciting, but it’s a relatively small % of people who are really interested. And after the newness wears off, you really don’t care. The bulk of India is oblivious to such services since they only want to speak and make calls.  Also, the remaining subscribers being added are coming from rural areas (all urban areas in India now have almost 100% mobile penetration) and these folks don’t want VAS at all.

So the next best thing is to thrust it on them!

In a mobile bill, very few consumers keep checking every small item and then calling up their operator to cancel, change schemes, etc.  Mr. Maraharj’s orchestra costs me Rs 30 a month – and I don’t have the time and effort to bother and get a ear pain calling up his service provider. It’s also amazing how many times his service provider calls him (while he is driving) to plead with him to say yes for song downloads and other useless services. Forget the embarrassing songs; these guys will cost us a car accident!

Multiply Rs 30 with 10 crore users (20% rotating guinea pigs) and you have 300 crores a month in a scam that is just too painful for consumers to switch off.

This is not just an India scam. While in China when we were operating Mobile2win (subsequently acquired by Walt Disney), we were always tempted to send mass sms messages to Chinese consumers to lure them into subscribing to Astrology and Love services. If the innocent consumer would message back, they would automatically be subscribed to 6 months of such services with very difficult ‘unwinding’ procedures. I remember a vendor showing us a machine that would be fitted with 24 sims just as a spamming device to lure subscribers.

I understand that TRAI in India (The Telecom Regulator) is really taking the operators to task and getting them to clean up their act.

Till their bullets hit Mr. Maharaj’s operator, I will merrily listen to his songs… and who knows…even hum them when I am drunk?

Why do women carry such large handbags?

December 8, 2009 in Uncategorized | Tags: , , , , , | 8 comments

I have given up trying to figure out what my wife is upto with her obsession of  massive handbags. Big new ones appear each week at home. In the morning, a new one is selected for the day. Its takes a while for complete ‘content transfer’. In the car, the phone in the handbag rings, and since the bag is almost the size of a cave, it takes forever to find the irritating ringing thingy in the tunnel – by which time the caller gives up and hangs up. Each new store we visit, she first heads to ‘womens bags’

Why are women fascinated by big handbags? And why do they buy new ones ever so often?

  • It’s primitive DNA gene:

I think women were the hoarders or safe keepers in the caves and that’s why clutching bushel like parcels is hard wired in their brains. The bag replicates that experience – it makes them feel that they are in possession of something very material and hence the comfort of the big wobbly cushiony thing near them.

  • It is a baby-cradling fetish:

The bag is a surrogate baby. Cradling and holding it delivers the same effect. Stuffed with things women never use, the weight and proportion is almost that of a baby. It’s a good way to feel.

  • Its that industrious feeling:

In India, women in rural areas carry  large water vessels on their heads. Or on their waist. It makes them industrious. Some toil with sickles in the paddy fields. Are handbags the avant garde tools of industriousness of the modern woman ?

  • It feels like protection

These large handbags are perfect for swinging and protection.  Think of carrying a soft manageable boulder hanging out with you. A swig or two can do the job. It’s a nice feel safe thing.

  • None of the above – women are just richer than men.

The economics of the handbag business are mind boggling. Women buy them like clothes and its just plain simple economics – They have a better cash flow than us men.

I’ve given up reasoning and hope to get some answers.  And watch out – the next handbag is going to become the trolley bag.  I’m gonna get my car an overhead bin!

Why Steve Jobs and Apple should make the ‘iCar’.

December 4, 2009 in Uncategorized | Tags: , , , , , , , , , , , | 3 comments

OK, so Steve Jobs has done it all. He is at the top of his game, and has very little left to prove. At least in the pc, software, consumer electronics and digital music domain.

Perfect timing for President Obama to hand over (US government owned) General Motors and Chrysler to Mr. Jobs and get Apple to build the ultimate American car.

7 simple reasons why this could be the biggest thing ever for the USA car economy:

1.     Mr. Jobs and Apple are the Gods of Materials.

Just look at the way Apple has conquered the material science space. The iPhone, the iPod variants, and of course the Mac machines – all masterpieces of blending metal, plastics, electronics into goods that consumers queue up to buy.  Have any of Apple products ever failed on you? Aren’t cars almost made up of the same things, and needs someone who understands how to make magic of them all?

2.     Apple gets the consumer right all the time.

We always want to buy what Apple makes. It’s because Apple understands what consumers want and aspire for. The US car industry has been cursed by too many car companies stamping out cars that consumers don’t want. Someone in that industry needs to understand consumers first.

3.     Mr. Jobs knows to how beat the Japanese at their own game.

The iPod buried the Walkman.  While the Walkman created music on the go, Apple recreated the magic in the digital renaissance. The same way, there has to be a way to rethink the magic of Japanese cars and make the American car great again.

4.     Apple knows a thing or two about consumer loyalty.

Once an Apple customer, always an Apple customer.  iTunes makes sure that almost all iPod owners stay connected to Apple always. The App store online does the same for the iPhone and iTouch owners. When was the last time you remembered Sony after buying your Bravia TV?

Haven’t you experienced that feel good rush when you walk into a brick and mortar Apple store? Car companies need to rethink their relationship with their customers pretty much the way Apple has done with consumers, and recreate that incredible sense of magic when car buyers walk into their car showrooms.

5.     Want a new Business Model? Ask Mr. Jobs.

The new business lines of Apple have all remodeled conventional revenue models. iTunes makes money in an otherwise dying music industry. The Mac is almost price insensitive to competition in a piranha like infested PC business.

The US car industry needs some serious rethinking about how to invent its now failed business model. Maybe car companies need to earn profits over a long term relationship with customers rather than a one time sale?  Almost the Gillette and HP model and not this buy me and forget me model?

I would think that Apple would be an ideal Company to entrust in helping create this new equation.

6.     Outsourcing, global competition etc etc – Apple understand this and how.

Apple has mastered outsourcing of its products.  It makes its goods all over the world. It’s an ideal company to figure out where to make the iCar once it has designed it. Efficiency, cost consciousness, etc etc – all come naturally to Apple. Apple will make sure that if a car needs to be made, it will be made in the most cost effective way on this planet.

7.     Branding, Marketing and all that jazz – ask Steve how much he spends on Advertising?

Almost Shunya (zero). The marketing approach of Apple is no longer case study material – it’s the way the new world is supposed to be. Show & Tell people what you have made, and they will do the rest. They will blog, call their friends, boast about their new toy and get consumers lined up to your store.

All that wasted advertising and marketing in the global auto economy needs serious examination.

What it now takes now is to get Steve Jobs excited into creating something far bigger and everlasting than his previous products.

President Obama needs to make that phone call, motivate Steve and do the world a big favor.

Guess who fooled the Ad Agencies?

November 26, 2009 in Uncategorized | Tags: , , , , | 7 comments

Whenever I see the success of Vodafone’s Zoozoos being celebrated or the iconic advertising that almost created brands from scratch (like Onida), I am bewildered about the context of the celebration. It’s almost feverishly praising the ‘idea’ and its execution while ignoring the wealth creation in the hands of the owners. It’s shocking how the agency then sells and transfers all this for a mere few lacs to brand owners. It’s an IP slavery model.

Advertising agencies are almost equal partners in some business creations and yet benefit the least. For the older and rock solid brands, they are the true ‘custodians’. I remember meeting an agency head to seek help on some confusing signals about a particular brand of toothpaste from a Unilever brand manager. He chuckled and said ‘These guys are new kids. They will grow and learn. The brand is about………’ and he gave me almost a Wikipedia like 1 hour plus analysis of the brand and what it stood for.

A case:

Imagine that you are the owner of a Rs. 1000 crore industrial air conditioning enterprise. The business is stagnating. Lots of small players are eating into your market share. You have to move from being a service business to becoming a product company that makes air conditioners for consumers – a business that is booming. All the assets to do this are in place. The business cash flow can support this logical expansion. It’s a giant leap but has to be made for you to survive and thrive.

Lots of questions remain unanswered – How will you create a new brand for ACs in the consumer space? What’s the product strategy? What’s your positioning and differentiation?? What is your consumer communication? Which media vehicles work best?  You have sold ACs to purchase guys in factories and malls – how will you sell them directly to discerning consumers?

Sure you could hire some professionals from existing consumer AC companies but that’s a path riddled with hits and misses.

Now, imagine that Advertising Agency ‘Olive & Mason’ that has helped sell ACs  for 50 years finds out about your plans & approaches you to help.  They have worked with over 10 leading AC brands in the past, made them market leaders, they have all the insights, research, market penetration data and the knowledge of what the market wants. Most importantly, they know what the market doesn’t want. Also they are not conflicted to work with you at this stage.

Their proposal is simple – they will charge you only their real costs in terms of research, media and creative costs that they will incur on your behalf.

Their upside is 2 % equity of your company’s extra valuation should this new business of yours succeed. So their entire profit is success based. The nitty-gritty of ‘success’ is of course negotiated hard between you and them and is a sure win-win for you and them.

If I were that owner, I would do that deal.

Your CFO however is much wiser and this is what he does:

Your company casually floats a general inquiry that you will be spending 200 crores in building a consumer AC brand. Of this almost 20 crores  (10%) will be spent only in consumer media (TV, Print etc) to launch the brand. In a few hours the 30 best agencies of India clamor to get into your reception door. Over the months, they pitch so sincerely and hard that you feel like hiring all of them. Finally, the best amongst the best is selected. The lucky agency crafts your product, strategy, creative and media plan. They wisely spend your 20 crores.

It was agreed between you and them that they will earn about 1 crores in the bargain (5% margin on the 20 crores as a blended commission on creative and media) but they secretly make 1.5 crores (ouch).  A few weeks later a media auditor calls your CFO and whispers about the 50 lacs extra surreptitiously earned and all hell breaks loose. You can now legally and morally strangle the agency anytime you wish.

At your end, the AC business has gotten off to a great start. The 200 crores investment is poised to create a 200-300 crore business in the next 3 years and your stock has risen to reward you with a market cap of an extra 500 crores (1.5x of revenue). Life couldn’t have been better.

The guy who fooled the ad agency is you.

If the agency had taken equity as compensation, their 2% would have been worth 6 crores and appreciating. They would have been your partners in many more milestones to cross. Today, they are a vulnerable vendor that has taught you everything and yet earned a negative reputation for themselves. This is classic win – lose.

The trade-off – fees vs. value creation.

Consider this:

Revenues of Indian cos that advertise* Ad spend (3.4% of revenues)** Gross agencies earnings
(assumed at 5% of ad spends) #		 The topline that ad agencies helped improve of their clients @ The improvement in market cap of these companies (1.5 x revenue) If ad agencies earned out 2% equity of the upside
3,00,000 cr 11,000 cr 550 cr 30,000 cr 45,000 cr 900 cr

* Zenith Optimedia report

** LiveMint report

# Assumed blend between creative and 1-3% media commissions

@ Assumed that 10% of the topline increase was thanks to improved marketing and communication of ads.

The new business model – Ad agencies becomes the Brand VC

The new business model would mean that Ad agencies get capitalized to run operations at their own costs (salaries and overhead expenses) and use the teams to then create and manage brands in exchange for equity. Its equity for knowledge just like VC operate using the equity for cash model. This creates a deeply valuable business model that not only can be externally funded but also create a deep synergy across the value chain – rather than being at conflict today (it’s well known that ad agencies need their clients to spend to survive – sometimes it’s not in the best interest of their clients to spend but that gets compromised). In a world that’s contracting spends and improving returns, we need partners in arms – not enemies in bed.

The risks in this model as Punitha Arumugam – CEO of Madison Media explained to me are manifold: The business of clients (and hence their stock) declining due to reasons other than good marketing; the inability of the agency to really control or influence a client like a financial VC; having the deep cash pockets required to sustain long term cash burns in the hope of accumulating equity etc.

Well, this is the brave new digital world and that calls for brave hearts. If google, twitter and facebook are the new media powers, it’s knowledge over brute media power that will win. More the reason to trade IP – not sell it to the highest bidder. As a starter, the big 5 agencies could incubate a VC agency model to service new start-ups and less risky business models as an experiment.

Mr. Martin Sorrell – are you game to become VC yet?

The Mumbai Sea Link is in trouble..

November 22, 2009 in Uncategorized | Tags: , , , | 3 comments

A week back, when I asked my driver Mr. Yadav Maharaj to drive me at 6 am to the  Mumbai Airport from home, he matter of fact said ‘Babu (Sir) – we will take the usual old route via Mahim… there is very less traffic that time’.

I was shell shocked. That’s when it hit me – I think of the Sea Link like a Googleesque tech nirvana – the more you travel on it, the bigger you start to dream and the faster you drive on it, the more you feel like stepping up on your own speed of growth.

Yeah, it just happens to be a bridge over water that also made life so much simpler. Mr. Yadav however thinks of it like an ‘avoidable’ cost that should be entertained only in dire straits!

The Seal Link is in trouble. On my way back from home that night, I noticed that at least 9.5 cars out of 10 were turning towards the old Mahim Road rather than taking the sea link. I am sure 9.5 of them were not residents of that route that had no alternative choice.  Most of them had Yadav mindset owners inside– saving 1.5$ and sacrificing 45 minutes of their lives in their bargain. ( If you take the Sea Link, it saves you at least 45 minutes in travel time, beyond the frustration of driving on bumper to bumper traffic etc)

Can you believe the math – burn in hell for 45 minutes, but save 1.5$ ?

There has to be a way to break this mindset and introduce the  Sea Link as the new way TO THINK for Indians. Screw who travels where and how. Once our people understand how to appreciate thinking BIG, they will use it in their own lives and demand the same from the companies they work for,  and their government !

I think:

  • The Sea Link should be free on random and unannounced days – this will surely get more drivers to try their luck – and get addicted in return.
  • Happy hours on the Sea Link?
  • Loyalty points like an airline program?
  • If you are 4 in a car – you go free. So even lesser traffic on the road
  • Give me a few advertiser inserts at the toll gate and let me ride almost for free?

As I believe, the Sea Link was never about making money. It was about solving  an age old horrible problem using technology, imagination and ambition! Isn’t that the only way to create value?

The more people use it, the more it will inspire them.

We need 10000 ‘Sea Links’ in India – In Politics, in Municipalities, in Hospitals, in Schools and most importantly in the Government itself…Sleepy Mantralaya – you capiche?

Why Piracy is Good

November 4, 2009 in Uncategorized | Tags: , , , , , , , , | 4 comments

Every time I listen to my Ipod I remember Napster.

The record industry treated Napster like the Taliban of Piracy – they sued, fought and closed it down.

But wasn’t Napster actually ‘iTunes’ way before iTunes really came on the scene?

What would have happened if the Music Labels – the Virgins, EMIs, etc., had gotten together and invested in Napster or just bought it outright and made it their industry ‘digital music’ distribution channel? A Sony ‘walkpod’ a la iPod would have complemented the business: The music guys cranking out music, and the hardware guys making the stuff to play it on.

The moral here is that piracy needs to be understood before it is fought. Ask me about it: I run a casual games company that produces 15 games a month and has a library of over 350 games. So far, I know of 8900 websites that have stolen or as they politely say ’scraped’ our games.

Honestly, after the initial shock, I am quite glad about the situation. It proves that what we create is valuable – since only valuable things get robbed. And we have creatively leveraged piracy to help us succeed. More on that below.

Recently, I asked a 13-year-old teenager if she would ever walk into a CD store, lift a CD from the shelf and take it home without paying for it. She clearly said that she would not. Yet the same girl was zapping MP3s and singles to her friends across the web… when I explained to her that she was actually ‘stealing’ – she just didn’t get it.

Piracy is the new consumer ’speak’ and ‘do’, and it’s here to stay. Like it or not, piracy or not, music and all forms of entertainment is going to be zapped all over the world without any restrictions.  It’s the job of the industry to capitalize on it rather than squander it away.

This is what is good about Piracy and the Pirates behind it and where value possibly lies:

  • Piracy creates economies of scale-

Distribution by agencies and companies is history. Consumers distribute content amongst themselves – leading to almost tsunami like waves of consumption and distribution. So, in effect, the cost of digital entertainment is actually reduced, thanks to the non-hired help.

Creators can price their wares very aggressively given this new economic dynamic.

  • Piracy creates democracy-

It’s no longer a chance meeting with a music czar  or a gaze by a producer at a bar that creates stars today. Digital distribution is the ‘lowest common denominator’ that anyone with creativity gets noticed and famous. Pirates are the best advertising agents out there. And they come for free.

The stars in the making need to partner with this global tide rather than fight it.

  • Piracy creates innovation-

The big gaming-console companies did not succeed in markets like China due to rampant  piracy. Their game CDs were copied and sold in the black market. They felt cheated and held back. That created a massive vacuum in the market that was filled by the online game companies that created games that were meant only for the browser that required subscriptions and virtual goods purchases. This was the stepping-stone to games like Farmville and Mafia Wars.

How to win

It’s painful to be robbed of what’s yours. Yet if one thinks beyond the hurt, there may be a bigger opportunity out there.

  • Upcoming artists now make more money from concerts and live appearances than selling CDs. Pirate marketing is the new currency of value. They tell fans about new bands without spends on ads. Pirates can be the new career launchers.
  • Shouldn’t the big music companies still create a competitor to the iPod and iTunes?
  • Make everyone in the eco-system win. Our secret sauce to leverage piracy was something called ‘inviziads’ – we placed invisible ads in our games that went with our games when the pirates took them. These ads automatically become visible on pirate websites. The interesting concept is that the content remains pristine. The consumer wins (gets content without paying), the pirates win (become popular thanks to evergreen content) and we win (thanks to the ads in the content).

The next battle starts when the e-book readers like the Kindle begin to get high penetration. Original books, new and old, will begin getting zapped across friends and families. Authors, publishers and booksellers will be on the receiving end of the tsunami – they will not be paid in this round. Let’s see how many of them try and fight the flood and drown vs. those who swim with the tide and survive and win with innovation.

VCs should learn Bonsai…

October 16, 2009 in Uncategorized | Tags: , , , | 3 comments

I love VCs. They are the reason I exist. 7 rounds and 2 exits later, VCs and I co-exist like the sky and the clouds.

Having said so, I deeply reflect on my experiences with VCs in companies that I own, mentor and closely follow &  wish that they learn a bit of bonsai.

Why?

Because I firmly believe that:

Small is the new Big, and Small is how big Value gets created.

So, what’s the point?

In most VC funded companies, there is a sudden expectation from VCs to explode value creation just after the funding.  To me, that is quite unrealistic.

Like a Bonsai plant that takes time, you cannot ever ‘force’ value to  suddenly grow in a company. Growth comes over a longer period of massive pavement pounding, relationship building, slow but sure adoption and acceptance of a product or service and so on and so forth.

In the ‘Outliers’, Malcolm Gladwell actually empirically proves that it takes 10,000 hours to become great – that’s at least 5-7 years of non stop work.

So what happens when newly funded start-ups are held at gun point to grown in value?

Here are 7 deadly mistakes that typically ‘kill’ the business :

1. Good money is thrown into advertising -

Great brands take time to become valuable. No amount of ads can make you valuable. This leads to massive drainage of funds and when the ads stop, the brand becomes invisible again. Ask the 2000 dot com club for more details.

2. Hiring the President of America to run your company -

If you manage to get Obama to run your company, he will probably run it into the ground. These ‘names’ are useless. They come from Fortune 100 companies with 100s of people to take orders. Ask these pow-wow CEOs how many times they have sat outside a client’s office for 2 hours before a meeting to beg for a deal. That’s what happens in start ups and this is not what these guys are used to.

These big shots are great when the company is on a massive scaling up etc.., but not when its starting up.

3. Signing of irrelevant agreements and contracts -

In the bid to show ‘traction’, management is compelled to sign all kinds of MOUs, Letter of ‘Intents’, blah blah… These toilet paper documents rarely get consummated and just waste crucial top team time.

4. Rapid Changes in Business Plans -

It takes a long time for a business to become a business! Funded companies sometimes think of business models like fast food – just ready to buy, try and die!  I have seen so many companies fail because they changed what they set out to do and then adopted ‘what’s hot’. Well, by the time they got around to doing that, their original business became hot again!

5. Bad Board Room Karma-

Board room management is such a killer. VCs sometimes begin to take offensive positions and their cross fire assassinates the CEO. In mobile2win China, we had Chinese and German investors and an Indian CEO. They all hated each other!  All of them spoke their native language in a common board meeting! One VC told me that he wished the company was dead because he hated the CEO! I politely reminded him that his money was at stake but he just shrugged his shoulders.We finally exited the investors, fired the CEO, and got really lucky with Disney buying us after the resurrection!

6. Bad business deals and decisions-

In the hurry to show revenue and cash flow, sometimes deals get signed at negative values that haunt the company forever. Such stinking agreements become precedents in the markets and strangle the company.  Clients never agree to improve payouts and it becomes a vicious cycle.

Management needs time and space to think through a business and how to model revenues and cash flows. It can’t be done in a hurry.

7. Let 100 companies fail as long as we get 1 right-

This is the deadliest problem. VCs sometimes play a simple mathematical game of hoping that 1 out of a 100 investments they make, gives them a 300-500 times return, hence getting back 5 times on their overall money.

Where does that leave the 99 entrepreneurs who didn’t sign up to be part of an experiment?

Its like throwing  100 folks in a middle of the ocean and asking them to swim to the shore. 99 will not be able to – they will drown.

If you did that to the 100 in a swimming pool, all would make it to the wall. Do it 50 times and then take them to the ocean. The results will be different.

I think VCs need to understand that each business and every entrepreneur is unique  and approach their investments with lots of time and patience. Their returns will be far more spectacular than what they enjoy today.

Bonsai is a great starting point!