Archive for March, 2011
Much is being talked about the rise of Groupon, LivingSocial and other such Daily Deal / Group Shopping outfits which have emerged on the scene within the last 1 to 2 years. Many stats claim that Groupon may be the fastest growing company in history. What is the big deal about Local Search and why is it so hot ? In this article, we examine this trend and the factors driving its explosive growth.
Groupon is changing the face of Commerce
Groupon, LivingSocial and many other like firms have figured out the secret sauce in Group Shopping experience. Group Shopping is not new or innovative in any fashion. Many outfits tried this in the prior dot com craze but it did not take off. Why now ? It’s the rise of Social Networks and Mobile Connectivity – something that we often refer to as “Mobile Social” or “Social Mobile”. Between the Facebooks and Twitters of the world and breakneck growth of Mobile phones, we are looking at Group Shopping proliferation like never before. The basic idea of Group Shopping is obviously that such sites promise to increase the foot traffic to local retailers and merchants by offering daily deals to scores of public. By spreading word about such deals using Mobile Apps, Social Networks and general Buzz Marketing, such sites have grown rapidly.
Groupon is said to have a $25 billion valuation already. Groupon is, of course, rumored to be working on an IPO at this valuation. Groupon had, earlier, rebuffed a $6 billion offer of acquistion from Google!
Late last year, LivingSocial accepted a $175 million investment from Amazon. Certainly, the big internet firms are watching this space with keen interest and would like to take part. Facebook, not to be left behind in this hot area, is about to launch its daily deals service in some cities across US.
The business model deployed by firms like Groupon and LivingSocial is to hire local sales staff in all major metropolitan areas and send coupons for local retailers to audience in the respective cities. With intuitive Mobile Apps on iPhone, Android and other platforms, sending such deals has become easier than ever. So we have the business model and we have the distribution via Mobile phones and emails – in sum total, we have the secret sauce of Group Shopping and modern commerce.
Group Shopping getting crowded
The problem with such Group shopping experience is that there is low barrier to entry. All it takes is a big field sales force in major cities, cool mobile apps and websites and word of mouth marketing. As a result one sees such models cropping up daily, almost at the rate of one new firm per day. Who will win this area eventually ? So far Groupon is winning it and so is LivingSocial. Others are either not that well known or are too new to make a dent. That is why Google tried to buy out Groupon rather than invest in its own model ( After the Groupon rebuff though, Google decided to launch its own daily deals business under the brand Google Offers ).
While others are new to the market or not that well known, eventually this field will be dominated by firms which can continue to grow rapidly and build out the sales capabilities in cities nationwide. Ultimately, this will be a business about economies of scale. Likely winners include Groupon, LivingSocial (with its Amazon backing), Facebook and Google. Most other firms will not be able to reach the economies of scale needed to succeed in this area.
Not all is hunky-dory in Group Shopping
Collective buying is touted as Win-Win for all. There is nothing farther from the truth. Many retail partners of Groupon and such sites have complained of squeezed profit margins, shift in customer buying patterns and constant bickering with Groupon sales teams who are trying to sell them on deals and driving down prices. Consumers have often found, much to their chagrin, that prices offered on Group Shopping sites, were higher than what they would get otherwise. Moreover, often times such sites highlight discounts that customers can get any way through other means.
The retailers are becoming savvy on Groupon and are requiring a lot of fine print and exclusions on Group deals, things which consumers usually miss why buying such deals and tend to suffer later. In some cases, consumers who bought these deals have found that there are exclusion days or spa appointments are sold out for a long time. This area is getting messy for sure, where all stakeholders – daily deal sites, retailers and consumers are playing the negotiation ball harder and harder.
Group Shopping craze comes to India
After seeing the breakneck growth of Groupon, firms in India and China were quick to copy the model. India has seen dozens of such sites crop up – prominent among these are SnapDeal, KhojGuru, SoSasta (acquired by Groupon), BuzzInTown etc. Groupon did not waste time in expanding internationally – in China, it launched GaoPeng.com in partnership with Alibaba founder Jack Ma. In India, Groupon scooped up local firm SoSasta.com. “Collective buying is in its infancy in India, Israel and South Africa and we see strong potential,” said Groupon’s president and COO Rob Solomon, “Groupon is shaping the way local merchants market themselves in every corner of the world.”
But growth in India is not a cakewalk and differs vastly from that seen in the West. India has less than 10% internet penetration (broadband penetration being around 1%) and less than 10% smartphone penetration – both of which are the primary drivers of success for firms like Groupon in the west. In India, commerce is dominated by the local retailers and merchants who control more than 90% of the shopping market share. Groupon / SoSasta are using India-specific models like variations of Cash-on-delivery (COD) where cash can be picked from homes for deals purchased. Moreover, the margins in India are much smaller than those in the West for Group Shopping firms. Also India already counts more than a dozen such outfits (or similar to a large extent), so competition is already intense for what is still a small market for Group Shopping.
Firms like SnapDeal have become popular in India touting vacation packages, spa experiences and high-end fashion products. Bottomline is that, in India, group shopping has still some ways to go before it becomes a substantial revenue opportunity. Firms which can last and build scale for a long time in India will ultimately be the ones which win. The usual winners from the west like Groupon, Facebook and Google will likely do well in India over time as these firms have the heft to ride out slow growth typical in markets like India.
Daily Deal innovations
Group Shopping is about to enter Phase 2. Groupon is fervently preparing for its most ambitious venture yet: the launch of a new mobile application that the company hopes will change when and how society chooses to eat, shop and play. Groupon is about to launch an app called Groupon Now which will have just two functions : “I’m hungry” and “I’m bored” – on clicking any of these, the user will be presented offers for nearby cuisines or entertainment experiences as the case may be. By simplifying the user experience in this intuitive way, Groupon aims to capture the Commerce market even further – this will likely solve the problem of perishable food in restaurants or empty seats at a show – wherein the merchant publishes last minute offers on Groupon Now. It is foreseeable that these two ideas will become standard buttons on some smartphones of the future (just like Facebook has become on some phones). It won’t be long until we find out if Groupon Now is the future of local commerce; the mobile app launches in April.
LivingSocial, on it’s part, has an option where if a user gets three friends to buy the deal, the original user gets the deal free – this is about reference shopping. The Collective Buying area will continue to see experimentation and new players for now, or at least until those lofty market valuation increases start to stabilize.
March 30th, 2011
(from our Atlanta desk)
It is commonly said that this is the “Year of the Tablet“. Certainly, with Apple iPad, Samsung Galaxy Tab, Motorola Xoom and dozens of other tablets and eReaders being introduced in the marketplace, everybody is talking about the “post-PC” era and the impact of tablets on consumers and businesses. Tablets are causing upheavals in the Publishing and Media industries with most major Newspapers and Magazines plotting a Tablet strategy for their periodicals. Netflix and other Streaming Entertainment providers are booming due to the surge in Tablet access subscriptions. Book Publishers are digitizing their books at an increasingly rapid pace expecting a shift away from Printed Books to Tablet or eReaders. 80% of Fortune 100 companies in the United States are trialing iPad for their Corporate employees. Laptops which were hyper-growth computers for the first decade of this century are making way for the Invasion of the Tablets.
Our analyst in Atlanta attended an intuitive session on Tablet computing at the Wireless Technology Forum, Atlanta on March 17th, 2011. Here are the notes from this session :
Mike Lupo, Sr Director – Digital Products, The Atlanta Journal-Constitution (AJC)
Karen Truitt, Director – Mobile Devices, Intel
Chuck Rainbow, Technical Manager – Tablets, Research in Motion
Jim Dudenhoefer, Manager – WebOS, HP Palm
Moderator : Dr. Phil Hendrix, Director, Institute of Mobile Markets Research (IMMR), Atlanta
A great cast of speakers from top contenders in the Tablet space (the 800-Pound Gorilla, ie Apple, was missing, so was Google). This session focused on the tablet form factor, the applications that will drive adoption and the business models needed to support this new networking paradigm.
(All data below refers to USA Tablet Market)
Dr Phil : Tablets have almost 5 to 7% penetration right now – it is currently one of the fastest growing Consumer Electronics products.
IMMR (Dr Phil’s organization) recently concluded a survey on the Tablet ecosystem. On the question of “Familiarity with Tablets”, here are the stats :
- On the question of “Familiarity with Tablets” :- 38% audience – somewhat familiar; 26% – very familiar; 35% – not familiar
- Smartphone familiarity is higher than feature phones in households.
- 4 in 10 people are interested in purchasing a tablet for someone in the household. Once the tablet comes into the household, it tends to get shared. Over time, some households may become multi-tablet households.
- Lower prices will unlock demand. $500 is the breaking point for most folks when they get discouraged from spending on tablets. iPad is at a higher price point but has still sold like hotcake – this is due to Early adopters, who are buying high end tablets today. But significant opportunity exists for cheaper tablets below the $500 threshold.
- Preferred Tablet OS :- Apple iOS – 58%, Windows OS – 36%, Android OS – 35%, BlackBerry – 13%, HP Palm – 9%. Interestingly, Windows OS beat out Android slightly.
Mike (AJC) : AJC Newspaper has just developed its iPad App and it is currently in Beta. AJC also has an iPhone/iOS App called AJC Digest which is available on App Store today.
Karen – Intel, which is a strong leader in the PC microprocessor industry so far, is looking to expand into tablet microprocessors, chips inside cars, etc.
Jim – HP had acquired Palm recently and HP plans to deploy the Palm WebOS in many of its tablet devices over the years.
Chuck - RIM is about to release its Tablet play titled “Playbook”. There is much excitement within RIM with this upcoming launch.
Dr Phil - Why now for tablets ?
Karen - Apple has created the game-changing device in iPad. Apple is a master of simple products that work well. They made the Mobile Device, App and App Delivery ecosystem simple enough to allow for a mass market adoption.
Chuck – Tablets are now because chip processing and battery power has reached a point where these devices are possible (our take on this : RIM won’t admit to Apple’s role in opening this market :). These devices are now feasible. We are reaching an inflection point where tablets can substitute for laptops, devices which are anyway more difficult to lug around. People are not getting acclimatized to these devices.
Jim- Consumers today demand anywhere access to content and data. Tablets are just another end point in this evolution. It’s about data access – moving it to the cloud and the desire to access it from anywhere. Phone screen is too small to allow an optimal experience for this. Jim also noted that they are not concerned about Apple’s dominance so far. Jim has a great point of view that, if at all, Apple has been a positive contributor in creating a huge new market for all device makers to play in. Jim said market is huge for many to thrive. This is a market where all boats can and will rise. (Good point)
Mike - In an average American home, people think of tablets as lean back experience whereas PC is work – so tablets make sense now for AJC. Newspaper is about relaxing and consuming the news. So it makes sense for AJC to work in tablet space.
Dr Phil – The 800-pound gorilla (Apple-who else) is not in this session. Where is the gap in Apple’s tablet strategy which others could potentially exploit ?
Karen- Apple has created the benchmark. Everybody else is trying to catch up to that. Android Honeycomb from Google is an attempt to catch up to the iPad benchmark. However the user experience of Android still has to mature for it to be a strong contender. AS to Apple’s weak points, Flash is certainly one – a blatant omission from the likes of Apple. (Karen admitted, however, that Apple does not consider lack of Flash in iOS devices as a weak point).
Chuck- Apple is weak on security. There is a security breach every 4 hours in Apple iOS environment. RIM / BlackBerry is known for security (note that BlackBerry is still dominant smartphone in the Corporate world). Mobile Device security is critical area – virus maker McAfee has smartphone security software today. Apple does even acknowledge the security issue in its iOS environment. Chuck said that until something goes wrong, people don’t take notice. Consumers will start getting concerned when they loose credit cards etc in Apple environment (CellStrat note : Note that Mobile Payments is about to become a big area and here security is of paramount importance).
Jim - Apple is consumer-focused firm. There is lot of opportunity in Enterprise and niche verticals (where the field is still open for all) in addition to the huge consumer opportunity.
Dr Phil : Avg selling price in 18 months?
Mike – 350 or 300 dollar will be great.
Dr Phil - Newspaper in Canada is giving away iPads if folks buy newspaper subscriptions. Will Atlanta Journal Constitution adopt this approach ?
Mike (with a chuckle) – No (resoundingly!)
Karen - Intel has created tablets for healthcare verticals. Businesses will want ruggedized versions of tablets (a delicate iPad device will not work in many industries) – these devices may get dropped and used in rough conditions in various industries.
Dr Phil – Amazon (Kindle) and Barnes & Nobile (Nook) eReaders will have more and more of tablet functions over time as the boundaries between eReaders and tablets will become indistinguishable. Printed Books may become redundant. Tablets will take over though it will take some time.
Ques : Will HTML5 replace Flash?
Dr Phil - Depends on how quickly content makers adapt.
Ques : Where is the money?
Karen – Apple is making money and also App developers. Carriers are making money also because of rapid growth in Data plans.
Jim- Dynamics of the industry is changing. It is still wide open to pin down the business model. Revenue Models are evolving still.
Chuck- When the PC came around, money was in hardware sales. Then, software became more important and apps like Microsoft Office made money. A similar ecosystem will evolve in Mobile Devices (implying mobile device hardware will make money followed by software over longer term).
Ques : What about accessories business ? The new Apple Smart Covers for iPad 2’s is all about margins (for Apple). Will USB attachments and such accessories be a lucrative area ?
Chuck - Ultimately Bluetooth will be dominant. Apple model of side-loading will be replaced by Cloud services. (Chuck said that in spite of this, Blackberry Playbook will have USB and HDMI port to cover all bases).
Ques : HP Palm strategy to win over developers given Apple’s popularity in Developer ecosystem (50,000 Apps already available customized to Apple iPad and HP Palm has hardly any, so far) ? After all Developers make or break Mobile platforms. Also, Apple deducts a large chuck (30%) from Developer App revenue as commission.
Jim - HP talked to a lot of developers and they are struggling on revenue generation with the Apple App Store or even the Android Store. Certainly there is room for developer innovation here in terms of Business model which helps them.
HP’s strategy will be to be as open as possible (Open Mobile environment) – ultimately this will help Developers. Eg Kindle Book Store will be available on HP Palm – this means that HP Palm Tablet will have 800,000 Kindle Books available from the get go. Also, HP will offer both models in its App ecosystem – the App store approach for mass market as well as Private distribution for corporations.
Chuck – Even though Apple iPad has 50,000 custom Apps, most are trivial (he referenced iFart apps on Apple Store:). Average Usage per app among the 50K apps (on iPad App Store) is less than one day. RIM / Blackberry has much higher average usage of its mobile apps. (our take : Good point but can one discount the mass Developer and Consumer Crowd running after Apple ?)
Ques : On Tablets replacing PCs ?
Karen - Tablet is a consumption device. It will do well but won’t replace PCs/laptops. PCs will always be ahead in graphics and processing power. So tablet will not replace PCs/laptops that fast (our take: they better not – else Intel’s primary business is in jeopardy
Overall a great session on Tablets. Kudos to the folks at Wireless Technology Forum (Bob, Steve, Maury, Scott, John, Ed and others) for organizing this event.
March 18th, 2011
Recently, Huffington Post – a Crowdsourced Media portal was acquired by AOL for $315 million dollars. Huffington Post started humbly long time back as a Blog and Media reporting channel and soon evolved into a Crowdsourcing model where many folks contribute to its curated content. The growth of Social Media is accelerating this trend in crowdsourcing. Now what is Crowdsourcing after all ?
According to Wikipedia : “Crowdsourcing is the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a “crowd”), through an open call“. Wikipedia – world’s largest Encylopedia – is, in turn, a top example of this trend. Jeff Howe, one of first authors to employ the term (his book on Crowdsourcing here), established that the concept of crowdsourcing depends essentially on the fact that because it is an open call to an undefined group of people, it gathers those who are most fit to perform tasks, solve complex problems and contribute with the most relevant and fresh ideas.
Crowdsourcing has become one of the most important trends to emerge from the breakneck growth in Social Networking in recent years. It is possible for small businesses and individual contributors to ignite a fire with lots of people and get them to contribute to a project or initiative similar to Wikipedia, Huffington Post or other such online portals. Amazon.com’s Mechanical Turk is another great example of Crowdsourcing – this is a prime example of how Micro-tasking comes alive using an online portal strategy and tens of thousands of workers willing to take up these micro-tasks.
Given Crowdsourcing’s importance in today’s world, CellStrat, in partnership with AgileCO, is pleased to launch HireTheMob – a CrowdSourcing and Recruiting portal for Mobile Developers, Researchers, Marketers, Testers, Consultants etc.
This portal will allow Businesses as well as Individuals to post jobs as well as micro-tasks and invite folks from various categories to accept and complete those tasks. Some interesting applications of using this portal :
- Device Testing
- Application Testing and Review
- Mobile App Testing
- Get Reviews
- Website Testing
- Market Research
- Hire Designers and Reviewers
- Recruit IT Consultants and Managers
Comments, feedback, questions ? Write to us at email@example.com.
We hope that you will like this service and will enjoy using it. HireTheMob service is in Trial period for 3 months (until June 30) and all firms who register in this period can use this service for free.
March 7th, 2011
Mobile Apps and Web have taken the world by storm. Certainly, Apple deserves credit for orchestrating the Mobile Web experience when it created the iPhone and its App Store. In the process, Apple unleashed the creative energy of hundreds of thousands of Mobile developers worldwide. As of last count, Apple App Store counts 350,000 Apps in the store. With the launch of the iPad tablet, Apple popularized the Tablet computer category and now lot of developers are developing Apps for the Tablet version. Tablet has started what most refer to as the post-PC era. Certainly firms like Microsoft, HP and Intel are in lot of trouble as many consumers and businesses are going the Tablet way instead of upgrading or buying regular PCs and laptops. Now Apple is trying to bring the App experience with its launch of the MAC App Store.
Mobile Web is the latest and greatest Media channel today. It is a most apt media channel for a variety of reasons which we will explain a little later in this post.
Are the various Media firms and Brand Marketers prepared to adjust to this titanic shift of Mobile-based Media ? Do Mobile Apps and Web even belong in a firm’s Integrated Media portfolio ? We will attempt to answer these questions below.
Today media consists of various channels :
How does Mobile Web fit in this scheme ? The schematic below elaborates the various Digital and Mobile Advertising formats :
Digital Media Channels
Consider this (taking Indian context here) :
- There are 770 million Mobile Subscriptions today (out of a total population of 1.2 billion people) – granted only 550 million are Active Mobile Subscribers : still almost 45% of Indian population are active Mobile Subscribers
- India has less than 10% internet penetration
- Mobile is the first and only communications tool for most Rural and Semi-Urban Audience in India
- Mobile is personal, has context, is location-aware and is always ON
- Admittedly 90% of Indian mobile market is comprised of feature phones, leading to SMS as the dominant marketing channel in India. But the fastest growth rate is now seen in Smartphone uptake – with acceleration in sales of cheaper smartphones from the likes of MicroMax, Lava etc in addition to established Brands like Nokia, Samsung etc. Mobile Web is now proliferating throughout the Indian consumer class much more rapidly than the feature phone growth.
- The 3G launches this year will only accelerate the move to Broadband Mobile Services (think Mobile Web with much superior user experience and faster speeds)
- The post-PC era may have started with Tablets taking over the role of laptops and computers. Many leading businesses and business execs are using tablets for business travel instead of their laptops now.
- Print Media and Book Publishers are rapidly shifting en masse to Mobile Apps and Mobile eReaders as the delivery channel.
- People are increasingly consuming media, content and advertising on Mobile phones and tablets.
Given the above advantages – Mobile can be a top Media and Marketing Channel for any Agency or Marketer today in India, much better than the Internet at least.
Now how many Brands and Media Agencies in India have actually integrated Mobile in their portfolio ? Our research indicates that most Media Agencies and Brands in India are yet to include Mobile as a captive Media channel (more on this in our upcoming Research Report : “Mobile Apps Innovation Report for India“. Contact us for details). Though many firms have tried the SMS and VAS marketing route in India, the future now lies in capturing the Mobile Web and Mobile App Media market which is developing rapidly in India.
Our upcoming conference on Mobile Apps (April 29th) – the “Mobile Apps Conclave – Bangalore” will address the entire gamut of topics on Mobile Web and Mobile Apps. Do not forget to register – there are some early registration promotions going on right now.
March 7th, 2011