Peter Drucker's "Five Deadly Business Sins"

I found an old classic when browsing the web this morning – “The Five Deadly Business Sins” by Peter Drucker (http://www.bmacewen.com/blog/pdf/WSJ.2005.11.29.DruckerFiveDeadlySins.pdf). These sins (in order of prevalance) are:

• Worship of high profit margins and premium pricing (e.g. Xerox's focus on feature-rich copiers and American car companies' focus on big cars provided opportunities for their Japanese competitiors to capture the rest of the market)

• Mispricing new products by charging what the market will bear (e.g. American firms' pricing of fax machines)

• Cost-driven pricing (rather than price-led costing)

• Slaughtering tomorrow's opportunity at the altar of yesterday (e.g. IBM forbade its PC division from approaching its Mainframe customers)

• Feeding problems and starving opportunities (i.e. assigning stars to fix problems)

Sins 1 and 4 are very similar to the issue Clayton Christensen addresses in his famous book “The Innovator's Dilemma”. 

Web Widgets on TVs

A common failing is to become enamoured with your present (e.g. our current city of residence, our current area of work) to the extent that we dismiss all other options as being inferior or less advanced. Such comparisons are often unfair as our views on these other options do not take into account all the changes that have happened since we last looked at them.

I have been working in the area of internet applications and services on mobile devices for the past few years and had not been tracking the impact of the internet on home entertainment, especially televisions. I read an article today on how the Yahoo Widget Engine has been integrated onto Samsung TVs (http://solution.allthingsd.com/20090324/yahoo-widgets-lend-brains-to-boob-tube/); Sony and LG Electronics are also planning to release similar products.

It will be interesting to observe how the evolution of web widgets on televisions (or in the cable industry) compares with the evolution of widgets on mobile devices (or in the mobile industry). Yahoo and Opera offer widget solutions for TVs and mobiles and if we were to extrapolate based on the the shape Yahoo solutions are in, widgets on mobiles (http://mobile.yahoo.com/gallery) seems to be further ahead as compared to solutions for TVs (http://connectedtv.yahoo.com/).

Apart from Yahoo and Opera, other players in the mobile industry are also active in enabling widgets; device manufacturers such as Nokia and Motorola have their own widget frameworks and mobile operators are attempting to standardize security mechanisms and APIs to enable widgets to access device services (the OMTP BONDI initiative). I tried googling for standardization efforts in the cable/television industry but was unable to find anything similar.

There is also the larger question on how the relationships between the different players in the mobile industry (i.e. application developers, operators, software platform providers, device manufacturers) compare with the relationships in the TV ecosystem (TV manufacturers, set-top box manufacturers, cable operators, channels, content providers). I hope to improve my understanding of this area in the coming weeks.

Monetization may be easier for Mobile Social Networks

Bill Gurley's has an interesting post on his blog - “How to Monetize Social Network: MySpace and Facebook Should Follow TenCent” (http://abovethecrowd.com/2009/03/09/how-to-monetize-a-social-network-myspace-and-facebook-should-follow-tencent/ ). He writes that social networks have a monetization problem because users are heavily immersed in the task of interacting with other users and so are less inclined to be interested in advertising; conversely nline advertising is more successful on sites where the user's intent to purchase is already formed (e.g. travel sites or on search result pages where the search query was triggered by an intent to purchase).

The post states that social sites can enhance monetization from other sources and gives the example of TenCent which generates revenues from digital items and casual games. Examples of digital items on TenCent include virtual clothes and accessories that users can buy to dress up their online avatars. Only 12% of TenCent's revenues come from advertising (as compared to over 90% for Facebook and MySpace). Gurley also explains why he thinks that people who dismiss the viability of such revenues as being an “Asian fad” are wrong.

Given the increasing popularity of social networking on mobiles and the fact that a number of mobile users are looking to personalize their handsets, I think that mobile operators can increase sales of digital items by enabling users to use the same content within the social networking application and to customize their handset. For e.g. users could purchase digital item packages that include personalization elements for their social networking avatars, wallpapers for their handset, downloadable ringtones and subscription to ring-back tone(s). As mobile users are already used to paying for digital items, it is likely that a social networking site oriented towards mobile users will be more successful in selling such items as compared to a site that is accessed primarily by desktop users. Common digital items would also mean closer integration between the handset and the social networking service (i.e. beyond the creation of specific applications such as the Facebook app for Blackberry, MySpace app for iPhone).

It will be interesting to explore how social networking on mobiles has evolved in different markets. Bill Gurley's post mentions two popular services in Japan that are accessed more often from mobiles than from desktops: Mobage-Town from DeNA (http://www.dena.jp/en/services/mobileportal.html) and GREE (they only seem to have a Japanese site; a write-up on the service is available at http://www.tokyotronic.com/2008/01/review-japans-no-2-social-network-gree.html). The creation of such “mobile-friendly” solutions in Japan seems to be mirroring the different approach taken by NTT DoCoMo as compared to operators in US during the early days of the mobile web; while the former created I-Mode (a new set of web-based services designed for mobile users), the latter viewed the mobile web as providing the desktop Internet on the handset.

India - Online Advertising and Internet Trends

Back after a blogging break that turned out to be much longer than I had planned for..

The March 17^th edition of Mint has an article on online advertising in India and data on online consumer trends for Feb 2009; these contain some interesting numbers on the advertising industry and on internet usage in India.

• The total advertising spend in 2008 was Rs. 20,717 crores, with online advertising accounting for Rs. 363 crores. The projected growth rates for the various advertising meidia in 2009 are 25% for online, 15% for radio, 7% for TV, 0% for print, -20% for outdoor and -5% for cinema.

• India has an internet user base of 50 million with 35 million active users (as of December 2008). These include 12 million Cyber-cafe users, 10 million home-only users, 8 million office-only users, 3 million college/school users and 2 million home + office users.

• The top websites in India (based on the percentage of users accessing them) Google (75%), Yahoo (65%), Orkut (40%), Rediff (28%), YouTube, MSN and Blogspot (around 22% each)

• The top websites in India (based on page views) are Yahoo, Orkut, Google, Rediff, Facebook. I think this data needs to be looked at some more; Yahoo is represented by yahoo.com (2.76 billion page views) whereas Google entries include google.com (2.47b) and google.co.in (1.9b). Why doesn't Yahoo's India site (yahoo.co.in) show up in the list? Do the numbers for Google, Yahoo etc. include all their sites; for e.g. is gmail.com counted as part of google.com?

• The Indian Railways online booking site (irctc.co.in) surprisingly (?) ranks within in the top ten websites (with 180 million page views); it is accessed by 12% of India's internet users.

The data on internet usage has been obtained from ViziSense, an audience measurement service. Their website (http://www.vizisense.com) has a list of the top 100 domains and a paper explaining their methodology. Their data sources are a “well-diversified panel of 12000 active internet users” and “tracker tags” that are placed on the web pages of participating publishers. Vizisense then uses statistical techniques to scale this data to obtain estimates for the entire population.

Some interesting points in the article include:

• By adopting e-commerce, companies can “kill the time and distance from generation of interest by viewing the advertisement to actual purchase”

• Online ads are dominated by web portals, financial services, information technology firms and automobile firms. Consumer durables are likely to increase their online advertising as many consumers are likely to use the web to research and compare products.

• The popularity of cybercafes has meant that personalization features such as downloadable widgets have not taken off in India.

• Nokia projects 500 million mobile phone subscribers in India by 2011, with 50 million mobile internet users, 100 million music-enabled handsets and 200 million radio-enabled handsets.

Each of these points is worth exploring further in future posts (that I hope to write soon!). For e.g.

• The only time I have clicked on the ads shown with search results is when searching for information needed for a purchase decision. Is this the case for other users as well? If yes, are we likely to see an increase in the percentage of searches done for product research and also an increase in the percentage of cases where the user clicks on the search ads?

• What are the implications of having a internet user base that primarily uses public machines to access the web?

• Would a user listening to radio on his mobile handset be receptive to advertising delivered to the handset by the operator/manufacturer through other means? In other words, can the operator use the commercial breaks in the radio program to deliver ads he has selected (instead of having the user listen to the ads from the radio station)?