Facebook recently displaced Orkut as the top social network in India. This is no mean feat. Social Networking is one of the few spaces where a first-mover advantage can mean a lot. The network efficiencies and advantages built up by the first mover are not only difficult to replicate, there is also rarely any reason for users to migrate from an existing network to another. This point was clearly lost on the hundreds of random social networks that mushroomed in India in the 2005-07 period. Social networking is usually a winner-takes-all market and for Facebook to come in, well after Orkut was well-established, and to wrest the advantage away from it is a huge deal. Orkut was the first real product that brought social networking to India and very soon, it meant for social networking what Google meant for search. “Orkutting” caught on as a term. One must note that this rarely happens in the internet industry. With such a large clutter of sites to choose from, a particular site rarely defines its category in a way that Orkut did in India. When a site starts defining a category, it is extremely difficult for another site to, not just overtake it in terms of usage but also start definiig the category. In fact, more people I know spend their time Facebooking that Orkutting these days. How did this happen? What worked for Facebook? How did it manage to pull something like this off? I’ve often asked people around me why they made the transition. And here’s what I gather from my conversations with other users: Bringing Privacy into the market: The Indian male stalker psyche definitely helped people move towards Facebook. The fact that everything about you was so public with no privacy settings whatsoever on Orkut was highly unnerving for a lot of users, especially girls who received random friend requests from unknown wierdos. Facebook’s privacy feature was the first real antidote to that and prompted many to move to Facebook. Sure Orkut did that too soon after but that was the start of Orkut getting into a “Copy-that-Facebook-feature” spiral which didn’t win them a lot of respect with the users. Everything under one roof: Facebook in its current form, had it not been so successful, could probably have been used as an example of clutter in user experience design workshops. Strangely, the fact that users could do everything from managing their pictures to playing games in one place really helped. Features were rolled out in a phased manner. For users who were already addicted to the site and comfortable with the interface, it probably wasn’t feature overload as much as it was some added utility. Social RSS: That’s how I would like to refer to the concept of Facebook feeds. While the Orkut design centers around the user and gives him a view of the network with himself at the centre, Facebook gives a more non-centric view of the network featuring feeds from all his friends at various points of time. I have a feeling this could just have clicked for the Indian psyche where everyone loves to know everything happening in everyone else’s life. I won’t have any data to support this but I will have a hard time believing that the average Facebooker in India doesn’t like this feature. Social Gaming: Social gaming is the most time-consuming activity on Facebook and many game developers continue to side with Facebook ignoring Orkut. While this may not have been the main drawer in bandwidth-starved India (or so we would believe), it definitely had a major impact in appealing to the next generation of net users, especially the ones who became active netizens towards the middle of this decade. Many believe that this was waiting to happen given a similar trend in Asia where Facebook displaced Friendster, the #1 social network in most SE Asian countries a couple of years back. The reasons for Facebook’s success in S.E. Asia were much more different though, riding largely on a very well-designed mobile app. S.E. Asia continues to thrive on mobile access to the internet and Facebook’s success here was less about the product and more about the added convenience of mobile access. Facebook is an interesting and rare example of a late entrant taking the market by storm, redefining the rules (Facebook Connect, Open Like) and eventually dominating the market. Google did it a decade ago in a space which no one was too interested to enter in. Facebook succeeded in doing it in a space that everyone was too keen about and some were already dominating. And like Google back then, Facebook with its virtual currency platform may just lead the way to ,monetizing it as well.
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e-filing of taxes has seen significant growth over the past few years (136% YoY for salaried professionals) making it one of those apparently lucrative internet spaces with a clear revenue model and steady growth year-on-year riding offline regulatory changes. However, the numbers don’t reveal the challenges that still remain in the Indian e-filing space which need to be addressed for players to really win in this space. 1. Seasonality of revenues: The first thing that strikes one about the e-filing business is the seasonality of the business model, the fact that tax filing will invariably experience a spurt during a particular time of the year. If e-filing is just one of the many businesses that a company is into, then this shouldn’t hurt too much but if this is the only business that a startup does, then it clearly needs to look out for a sustainable model to make money during the rest of the year. 2. Cost rationalization for computing hardware: While seasonality of revenues is an important factor, there is another challenge very particular to the tax business. All e-filing sites see a sudden spurt of usage towards the end of the filing season. The last few days of the filing season see astronomical growth day-on-day in the number of filings and the last day invariably witnesses the most number of taxes filed. The huge spurt in traffic and activity towards the end of the filing season requires a lot of computing and processing hardware. However, this hardware is hardly used during the rest of the year when traffic is either stable or low. When one invest in all the hardware, what does one do with it during the rest of the year? 3. Is this a consumer business? The answer must seem obvious. Of course it’s a consumer business. Consumers use the product and consumers pay for it. The reality though is that this is a business where the bulk of the customers currently are coming through on account of enterprise deals. Tax filing services strike deals with employers and pass incentives to the respective employees to use their services. For most startups, less than 5% of their customer base files taxes directly through them. The rest of the base is acquired by the employer channel. The problem with the employer channel is that it is very difficult to scale it and there is no way it will ever see the organic growth that a direct-to-consumer business will. This might be a great channel to get your first couple of hundred thousand users but how does one make it a sustainable growth story beyond that? 4. Trust: In a country like India, trust continues to be an important factor and people are more comfortable taking the extra pains to file taxes offline where they can actually meet a tax consultant. An online brand needs to build trust to really penetrate the market and that trust can never be built by a series of campaigns in the tax filing season. A presence needs to be created in the consumers’ mind all year round and, if possible; the company needs to establish itself as a champion of consumer financial needs by offering other financial services rather than just a tax-filing service. This is not to say that players will not make good money in the meantime. For a 5-10 member team running a tax website, a million dollars of revenue is good money. However, to make a business that can really scale organically, capture the fancy of investors and create an impact in a crowded market of players, one needs to address these challenges successfully. Nokia Beta Labs recently announced the launch of Nokia Listings. The application’s purpose is to connect buyers and sellers, as well as employers and job seekers, via mobile phones – thus acting as a digital local marketplace.
It features three major categories of listings: 1. Buy & Sell 2. Jobs 3. Local Services Nokia mentions that 60% of the hiring and consumer-to-consumer transactions, like apartment rentals, in emerging markets (like India) currently occur via word-of-mouth or through middlemen who charge a hefty commission for their services. Nokia aims to bring a digital marketplace of sorts to users of basic mobile phones (Series 40) without the need of GPRS connections. While this is great on paper, I am really unsure that the Indian digital consumer is evolved enough to start using digital marketplaces actively. Here are a few reasons: 1. C2C marketplaces in India: Attempts at forming C2C marketplaces haven’t been very successful in India. Baazi might have been a success to some extent but the trick to forming a successful C2C marketplace is to simultaneously get a good base of buyers and sellers. Running deal sites is far simpler where you can artificially (non-organically) source deals from businesses and then get an interested audience for the same. Hence, it remains to be seen whether this attempt works. 2. Mobile Local Search in India: Zook, Google, Yahoo and others have unsuccessfully tried to create a mobile local search service. In a country like India where data is rarely standardized (and hence, not easily searchable), starting a local search service over SMS is all the more difficult where you have to return the correct answer within the top 3 results. Starting such a service where the publishing is also over SMS could increase complications as implementing search can be tough if the database itself isn’t content-rich 3. Inherent challenges with solving certain problems: a. Job search on mobile: In a job market as evolved as India, it is difficult to fathom aa job classifieds service doing well on an SMS-based phone. A full-fledged app experience may still help but over SMS, anything beyond pushed alerts may not really be of value. Also, I don’t see job search as being as critically needed over a mobile device as is local search since you may need to know about the nearest restaurant on the move but you can still wait to get on to the web to figure out your next job jump. I do believe mobile becomes more relevant in a case like that of Babajobs where you are catering to the job needs of a segment that doesn’t have access to the web. b. Real Estate marketplace: Nokia believes that a C2C marketplace may do away with having to deal with brokers in finding apartments for rental etc. In a country like India, I don’t see that happening too soon. People still don’t use digital marketplaces while advertising for real estate. In fact, most advertisements on existing classified sites like Makaan and Indiaproperty are by brokers. Hence, while marketplaces solve for aggregation of an otherwise scattered listings space, they do not yet solve for disintermediation. This is not the first time that a digital marketplace has been launched on the mobile phone. CellBazaar in Bangladesh was among the first such services to launch an SMS-based marketplace in partnership with Grameen Mobile. However, the company learnt soon enough that the service wasn’t easy to use on SMS. Over time, they moved to a web-based service and the SMS marketplace ended up becoming a means to get a new customer onto the marketplace who would then typically migrate to the web version for future usage. It remains to be seen whether a mobile-only marketplace will kick off well. It will be interesting to see how Nokia Listings gets traction and whether it tries anything different to break the above constraints. | AuthorA curious cat, online at odd hours, trying to figure out why some companies don't suck and how to be one of them! ArchivesOctober 2010 CategoriesAll |
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