Subba’s Serendipitous moments

October 21, 2010

Facebook overtakes Google in eyeballs. What next?

Filed under: Uncategorized — Subbaraman Iyer @ 8:06 pm

 

Ever since I made the rather controversial statement in Feb 2010 in a public forum in Singapore that Facebook will overtake Google from a traffic point of view before 2011, I have had some interesting conversation with a variety of people. I guess I misjudged. As of Sept 2010, Facebook had overtaken Google in terms of eyeballs.

Not surprisingly, it also has the largest page views and leads the 2nd contender by a huge measure. Will the people and eyeballs create a business model that can be potentially be bigger than Google which has current annual revenues of U.S.$27 billion? That’s the big question!

I have also said that while they may compete for advertising dollars, Facebook’s model lends itself to both advertising,   entertainment and commerce as it becomes the Internet.

Facebook has indeed the potential to dominate everything that we do on the Internet and I just list 2 main revenue opportunities here:

The advertising revenue model:

Facebook’s advertising revenues (its only revenue stream) was projected to end up at $1.5 billion in 2010 which is an incredible increase from $635 million. My reckoning is that it may even cross the $2 billion mark in 2010 itself.

The biggest advertisers have boosted spending by at least tenfold in the past year as Facebook crossed the 500 million users mark.  "Two years ago the big brands were experimenting with us, they started buying with us a year ago. Now, they’re going big." said Facebook’s COO Sheryl Sandberg in a recent interview.

If this be true, then Facebook has an accelerated growth trajectory ahead than what Google had during their initial years. As far as advertising is concerned, Facebook provides the demographic characteristics and interests, an increased social engagement through social graph and these are the buying criteria which marketers have traditionally been used to. So Facebook becomes the platform of choice foe marketers to reach a broad online audience. On the contrary Google’s target is based on the search intent and while Google is making search better by predictive technology, it could still lag behind the Facebook model.

My reckoning is that Facebook’s advertising revenue model may come more at the expense of TV advertising than the text advertising. Facebook can always create an equivalent of Google’s Adsense and AdWords model and draw some revenues from Google. I expect this may be a $10-12 billion business in 5 years.

The entertainment revenue stream:

With the success of Zynga and several other gaming companies like EA choosing Facebook as the platform, it is only a matter of time before every other gaming and virtual goods service embrace Facebook. Facebook earns a cool 30% out of all revenues the gaming revenues and revenues from virtual goods. Based on current run rate, this could be another $5-7 billion in 5 years.

There are several other revenue streams coming out of commerce. An alliance with Amazon, an acquisition of PayPal and this can become the harbinger for all revenue streams coming from commerce.

So, when will Facebook overtake Google in terms of revenues? Your guess is as good as mine! But wait, I am still mentally occupied with the question and will come to some conclusions early next year.

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September 3, 2010

Juggling Jugaad is a dirty joke on India

Filed under: Uncategorized — Subbaraman Iyer @ 4:36 pm

 

There is enough scope to create new management paradigms based on the Indian ethos. Sadly, the one that seems to be gaining popularity is “Jugaad”. From what was once a verb which was used, albeit apologetically, it is now getting gaining respect. It has even become the talk of celebrated journalists like  Anand Giridhardas and Swaminathan Aiyar. Both extol their values here and here.

Even McKinsey, which seems to have run out of management fads recently, is keen to give its own spin on Jugaad. Like many desi usages which has pushed its way into the English lexicon, this one will also get included. The institutionalization process will be complete.

I felt outraged when a respected academic in a business school suggested that we should teach Jugaad in business schools and even export it as a business model from India, fully aware of its sinister side.

The Hindi word “Jugaad” was originally meant to be innovative under severe resource constraints. It was to find a workable and a temporary solution for an unforeseen problem. The Jugaad approach defied conventional logic: it needed creativity, imagination, use of available cheap materials and more importantly the gumption to try something new. A permanent solution was never the objective or the expectation though it gives the impression that the problem has been “fixed”.

Over a period, it stood for grassroots innovation done on a shoestring budget. Low cost products like a $50 water filter, or a $800 ECG machine was touted as products coming from a Jugaad mindset though the quality, reliability and efficiency of such products remain questionable.

Suddenly the Jugaad phenomenon gained credibility and got the attention of intellectuals with the $2,500 Tata Nano,  and the $10 OLPC (One laptop per child) as examples. Tata Nano is yet to prove itself. All that came out of India’s OLPC  was just sound bites as can be seen from the links here. Yes, used tires can be recycled as shoe soles, but I have yet to see recycling done on any scale. So much for Jugaad that signifies frugal innovation!

What makes it worse is that Jugaad masks a more insidious thinking that is corrupting the core fabric of Indian ethos. Jugaad deploys any means – legal or illegal – more of the latter to get a job done. Accountants use Jugaad for creative accounting, Ramalinga Raju uses Jugaad to siphon money from Satyam (“Truth”) and the list goes on.

Even school kids are encouraged to do benign Jugaad by asking them to revise 10 year question series (instead of reading their study materials) to pass exams. Here is the ultimate Jugaad: judges caught cheating in their LLM exams. This temporary success has institutionalized shortcuts, short-term thinking, shoddiness, a grey market, patchwork all leading to mediocrity and corruption.

Sadly, a generation has grown up without understanding the meaning of excellence and what it takes to pursue it, having been fed on the Jugaad pill since childhood. And India depends on this generation to become a superpower!

Jugaad derives its immense energy from its elder brother – a “Chalta Hai” attitude. What at one point of time was meant to signify meek acceptance and a tolerance of an aberration has now become the de-facto response to everything – corruption, poor governance, miscarriage of justice, unfair social systems, criminalization of politics, even acts of terror and mindless violence – and you can keep counting.

While Chalta hai has assumed a tone of abject resignation and even cynicism, Jugaad has become more sinister and monstrous. Jugaad’s execution models revolve around manipulation, deceit, corruption, criminal intent all going into sub-standard workarounds and cover-ups for selfish short term interests.

The Commonwealth Games scheduled in Delhi is a classic example of the entire Jugaad lifecycle at work. Far from showcasing India to the world, first the Sports Minister (M.S. Gill) and now the Chief Minister of Delhi (Sheila Dixit) are exhorting the country to pray for the success of the Games. This can be “Incredible India” but by no stretch is “India Shining”.

I for one would like it to fail as this is the only way that the collective Indian consciousness  can wake up from its deep slumber. The fact that Rs28,000 crores have been spent instead of the original Rs655 crores in what amounts to be a criminal drain of public funds is another matter. Azim Premji raises this pertinent issue and several other valid points here.

If the benign avatar of frugal innovation has failed to deliver, Jugaad’s sinister variation is to India’s detriment. It has completely corroded traditional Indian values. Sadly, the vast majority are happily celebrating it in the drunken stupor of a temporary surge in economic growth, completely oblivious to the fact that no organization or country can buy its way to superior status with a Jugaad strategy. The fact that some are acquiescing – and worse giving it a glossy coat of respectability – is tragic, to say the least.

It just takes a few good men to say the truth. Will India find these good men before it is too late?

September 1, 2010

Reframing fear of failure for success

Filed under: Uncategorized — Subbaraman Iyer @ 11:46 am

 

Most people get paralyzed by fear. It seems to be an automated response, partly burdened by the expectations of success or the stakes involved. This doesn’t have to be necessarily the case.

A simple mental calibration of our perspective should be adequate to leverage this negative emotion to be successful. Adam Khoo explains the mental calibration effectively in his blog post here. Key elements involved in the mental calibration include:

Many people define failure as NOT achieving their goals. Successful people see failure differently. They think they only fail when they give up. As long as they don’t quit and keep learning and moving forward, they have not failed yet!

Successful people also believe that the greatest failure in life is the failure to participate in life. Not even ‘trying’ is the greatest failure of all.

There is nothing wrong with having fear. Fear is an emotional response given to us by our creator for a specific purpose. When you learn to use it, fear heightens your senses, increases your focus and drives you to become even better prepared.

Speaking for myself, the fear of failure in fact energizes me. Though I am  well prepared for most events, there’s always the gnawing fear that something can go wrong and I can fail. For instance, I dread the ten steps that I need to take to go up  the podium to deliver a talk. But as soon as I am close to the stage and get ready to start, I can actually feel a positive energy revitalizing me. Some say it is the adrenalin effect. I can’t confirm that. Most times, I deliver a talk that surpasses expectations and I feel a sense of fulfillment.

In the rare case, when I never felt the dread, I missed giving a great performance.

I have also been told that psyching oneself up and having positive thinking is a great antidote for the fear of failure. I do not think so. An induced positive thinking is synthetic. It only accentuates the obsessive attachment to the desired result and increases the intensity of failure. It doesn’t neutralize the fear of failure; merely suppresses it. Delusional optimism is as harmful as having the pathological fear of failure. I wrote about the negative aspects of positive thinking here.

The thing that works effectively and is healthy: Feel the fear and do it anyway. Do it after you have adequately prepared for it.

July 6, 2010

Heard of Kin? Microsoft’s phone launch and quick withdrawal

Filed under: Business,Competition,Uncategorized — Subbaraman Iyer @ 9:48 am
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Has anyone heard about Kin? Microsoft launched 2 mobile phones Kin One and Kin Two in an uncharacteristic low key manner and before even the word got out, it quickly withdrew the product barely 6 weeks after launch.

In the 6 weeks that the product existed, it sold 500 phones. Has anyone seen Microsoft do this with any of their products? Never !

The Kin failure is yet again one additional piece of evidence that Microsoft just doesn’t get it when it comes to consumer products other than the XBox. At least with Vista and Zune, Microsoft made some marketing efforts, but Kin got a quick burial.The courier PC which has been in development didn’t even make it to the store stupefied by iPad’s success.

Kin has an interesting past: In 2008, Microsoft had acquired a startup Danger  who has built a mobile phone software business. Around the same time, Google also acquired another mobile phone startup called Android. Incidentally both Danger and Android was founded by the same founder – Andy Rubin. While Microsoft floundered, Google’s Android sells more than 130,000 units per day.

This should lead Microsoft to make do some deep soul searching.

It is time that Microsoft wakes up to a new era. It continues to comfortably extract rent from the Windows/office franchise. I think the successes of the past is proving to be the brimstone around its neck. It also seems to have lost the war for talent and developers.

May 3, 2010

The cloud adoption – at an inflexion point

Filed under: Uncategorized — Subbaraman Iyer @ 10:39 am

 

The cloud got a fillip with Netflix making a public announcement that it will move all of its web applications to Amazon.com. This came as a surprise, given that Netflix and Amazon could be potential competitors as they stream movies to people’s homes.

Given its critical dependence on internet infrastructure, it takes courage, foresight and risk for Netflix to abandon plans to build one’s data center and run that off the cloud operated  that too by a potential competitor. It implies that moving to the cloud is cost effective if one doesn’t have a data center already and do not want to manage the data center. So, the case of moving to the public cloud is strong in such cases

While Rackspace, GoGrid and other vendors are emerging as competitors, Amazon Web services is far ahead of the game. Since 2007, Amazon’s S3, the Simple Storage Service, and EC2, the Elastic Compute Cloud, Amazon has offered the  general-purpose cloud computing platform with a business model that made it attractive to developers large and small.

Recently Google showcased their Cloud offering in their much publicized Atmosphere event. Google reported that there are about 30 -50K signups per day for the Google applications which essentially reside on the cloud. In some analyst reports, I have seen this as counted as part of SaaS revenue stream and in some cases this gets categorized as Cloud revenues. All said, Google never sold the cloud, but the apps. It so happens that the apps are in the cloud.

Microsoft seems to be taking a leaf from the Salesforce.com’s playbook by building new applications on its Azure platform. Salesforce.com is the only enterprise apps player to move beyond software offered in a SaaS model and create a complete platform – Force.com which has over 100,000 applications.Though it is early days, Microsoft also seeks to do to the cloud what it did to desktop software for over 2 decades – by making applications run on Azure alone and harnessing the entire Microsoft developer community to build applications for the Azure platform. Surprisingly Microsoft’s first application on the Azure platform is an online collaboration suite and advertising tools for political campaign management.

So, the public cloud is beginning to gain some traction. It could very well be that it is the applications that is offered which could determine the future of the infrastructure (cloud) platform, for all players other than Amazon which has restricted itself to just offering development tools in addition to computing and storage.

As one can see, Google’s enterprise apps is  a case in point and Microsoft’s strategy reinforces the point.

If applications on the cloud becomes the raison d’etre for cloud adoption, the differentiation amongst cloud providers could very well be the data subsystems that they employ since it is not easy to deliver data at the speeds required by the applications. Storage and computation thus become starting points, not end offerings.

If the public cloud is now gaining traction, the private cloud lags behind despite all the vendor hype. The private cloud for most part is just repackaging  data center consolidation, server virtualization, IP  storage technologies to offer a more scalable infrastructure.

The private cloud still needs lots of CAPEX and infrastructure still remains a fixed cost, unlike the public cloud. It is still by and large inelastic. Moreover the private cloud will still be run by enterprises. Will large companies which have made significant investments in their own infrastructure move to a vendor cloud? VMWare after earning its spurs in the virtualization market is now trying to make it easy for applications to migrate between cloud providers, and creating an easy interface between private and public clouds. VMWare’s acquisition of Zimbra and Springsource is indicative of its intent to build a developer’s platform much like Azure or Force platform.

Despite all these developments many CIOs are wary of putting their entire software and business operations on a vendor’s data center. Looking beyond the hype, CIOs are likely to test the waters as privacy and compliance considerations weigh heavily on the CIO’s mind, not to speak about interoperability and performance issues. There is also a switching cost involved and if one runs an efficient virtualized infrastructure, there is no compelling reason to move to a vendor cloud. So, next time you hear private cloud, it is just that vendors are selling the same thing with a new approach. A case of selling old wine with a new label. We still have a long way to go.

April 19, 2010

Prof C K Prahalad – the paradigm creator passes away

Filed under: Uncategorized — Subbaraman Iyer @ 8:58 am

 

Globally recognized as one of the greatest  gurus who regularly created several management paradigms Prof C K Prahalad (known as CK) passed away on Friday.

Other than reading most of his articles, books and spending about 1.5 hours with him in a cafe at Borders Singapore on a rainy day, I can’t claim to know him closely. But his books and the time that I spent him had a profound impact on me.
My meeting with him was purely chance. We both were browsing the books at the book store when I saw him reach out to a book. I instantly recognized him. I asked him : "Excuse me, are you Prof C K Prahalad"? In a soft tone, he replied "Yes, I am unfortunately". We talked for about 10 minutes, before I summoned the courage to ask him to have a coffee with me. Given that it was raining and that he had no other engagement, he graciously accepted.

Time flew by. Before we realized, it was 1.5 hours. The finest 1.5 hours that I had spent. Few people would have been so fortunate to have learnt the philosophical underpinnings of Competing for the future and The Core competencies of the firm than me. He patiently explained the choices global firms have in developing the strategic architecture. However before every answer he gave, he always asked a couple of questions perhaps to assess my sincerity and understanding. Every answer that he gave opened my mind further.

His writings on Competing the future came at a time Reengineering was the reigning buzzword and hence for many it was a radical new thought. Subsequently he became a regular paradigm creator and continued till he wrote “The Fortune at the bottom of the pyramid" that drove businesses not to ignore the poor but consider them as value seeking consumers. Every idea that came from him was a blockbuster of sorts.  His intelligent play on the word "foresight" as "future insight" and not just "insight" was breathtaking.

It took me several years to imbibe what he taught. Each time I saw an interesting and bold business strategy, I could see how one of his blockbuster ideas were applied.

I have it from a friend (who is now a CEO of a major Indian firm) that whenever he conducted workshops for Indian CEOs, he exhorted them to think global, even when circumstances were daunting. When a CEO questioned him about resources and why it was difficult to think global in the 1990s, he gently rebuked him and asked him " Is there a constraint even in thinking global?" If today many of the Indian firms have gone global, at least some credit has to go to him for having changed their mindset.

His parting comment to me as he left that evening became one of my core values. He said " Pursuing excellence in whatever one does is an enriching way to lead life. People often exaggerate the cost of pursuing excellence and often undermine the impact. If one has to compete in the future, pursuing excellence is a core necessity".

Thank you, Professor! This student of yours has been trying hard to do that since you said and I have to say it is enriching. And on this day with all reverence, I deeply acknowledge the impact that you made on me.

April 14, 2010

The mobile is the future

Filed under: Uncategorized — Subbaraman Iyer @ 7:11 pm

 

The mobile is indeed the future. Korea, Japan and to some extent even China has made impressive strides with mobile applications. India lags behind considerably despite having close to 300 million subscribers. The Facebook on the mobile was the catalyst; though few acknowledge its contribution.

Eric Schmidt reinforces the view in this interview.

I particularly like Eric’s statement that large IT apps are inflexible, late and complex. That is an understatement.

The other thing is that more apps are moving to the Web and while it has gained momentum in the consumer space, the Enterprise is still to embrace the Apps on the Web paradigm. It will take time. I also agree that barring the critical and classified part of the government apps, more government apps can be Web based and hence a lot of scope for open source apps, something that I spoke about in Reengineering Government apps last year.

January 30, 2010

The Nexus One and iPhone – A clash of paradigms

Filed under: Uncategorized — Subbaraman Iyer @ 10:50 am

The media has been agog with news comparing the iPhone and Nexus One. Even before the battle broke out, I alluded to the possibility of they becoming rivals. Some have referred the ongoing battle as the title fight of the decade. It is easy to compare phone features, ease of use, cost of ownership, price, the “cool” factor and maybe even the choice of applications available on each platform and arrive at some tentative conclusions. Such analysis serve as a product comparison guide at best.

I see this as a fundamental clash of business models and a collision of paradigms. It is too early to predict winners.

Let’s begin at the beginning: 

Apple changed the business model in a dramatic way when it launched the iPhone. It wanted to control the user interface– something that the service providers were very reluctant to part with. More importantly, it insisted on a share of mobile subscription revenues which was unprecedented. It worked with only one operator in the US (AT&T) and chose specific  service providers in the rest of the world.

With cool features, it became the phone that everyone wanted. The App Store with close to 100,000  applications and over 2 billion downloads completed the iPhone  partner eco-system propelling it to unprecedented success.

Till date it sold over 55 million phones with high profit margins.

In all fairness, Google didn’t begin to build the Android platform to counter Apple or for that matter any mobile handset player. It started off to protect its core business – advertising and not to make money off either the hardware or the software. To this end, it did the exact opposite of what Apple did – it offered to split the advertising revenues with the carriers. It put the entire code on open source so that as many handset manufacturers can use it. And more importantly, it even ceded control of the user interface.

I would even go further and say that because of Apple’s insistence on strict adherence and its growing clout pushed  both the cellular operators and the handset manufacturers into Google’s arms. Google’s flexibility and “open approach” just made the embrace more warm.

Let’s analyze how this battle will play out:

Will the iPhone users (the 55 million users) switch to Nexus One? Unlikely. Well, that’s not Google’s target market for sure. Google is more likely to target the remaining 3 billion users. Google may well become the choice of the masses with Apple comfortably perched at the top end with its cool design and premium price points.

Apple will continuously leverage on its strength and popularity of its killer apps like iTunes. Yet it may have to re-jig its other native applications like iPhoto or the iMovie for the iPhone environment.

The Nexus One and the Android platform is built on simplicity and completeness of cloud integration and cloud based data applications. The synching applications are all great, happens in real time and the cloud applications will just get better by the day with speech recognition getting ubiquitous for one. Apple’s cloud applications are still in its infancy.

Google will have no choice but to keep its popular apps on the iPhone. Google would not want a Microsoft product on the iPhone and open up another battlefront.

Google would have no choice but to build a partner ecosystem to build applications and services for music, books etc. and hence a Google AppStore is inevitable.

Conclusion:

The reason that I call this a collision of paradigms and a battle of the business models is because of the underlying premise of the future:

Is the device primary with the web as the “add-on” – the Apple’s thesis and its reasons for its unprecedented success?

Or

Is the web and the cloud providing robust and rich data services, social network awareness the primary factor with the device as the “add-on”?

That indeed is the title fight of the decade. Not the iPhone or the Nexus One. At best they serve as proxies for their respective constituencies.

May 12, 2008

Eric Schmidt unveils an exciting future.

Eric Schmidt in a very short speech at the recent IBM Partners leadership conference shows to all of us what the future could be in a very interesting compelling way.

Some of the facts:

  1. Currently the Internet has 1.3 billion users, with 200 million getting added each year.

  2. In Japan, 3 of the most popular books were delivered first on the mobile readers and subsequently done on print.

  3. There were just 400 servers in 1983, and now there are more than 500 million servers worldwide.

  4. There are 70 million blogs, with over 120,000 blogs being created every day

  5. 7 million photos are uploaded to Picasa (Google’s photo sharing site) each day

  6. 10 hours of video uploaded on YouTube each minute.

  7. 500 million Wifi chip sets will be sold next year.

His most provocative statement of the future: By 2019, there could be a device that could sit on the belt or kept in the wallet that could have 85 years of video on it. You will be dead before you can see all of it. One of the ultimate frustrations in life.

But what he said about Convergence was interesting. Convergence is not everything (services) going into one device. It is entering (all the services) into one server or services in the cloud and hence even if the devices are different, the content in all that will remain the same.

His quote on Breakthroughs was equally profound: Great breakthroughs are closer to what happens in a flood pane. It is not one idea. A dozen tributaries converge and the rising waters lift the genius high enough so that he or she can see the conceptual obstruction of the age.

His entire address and the subsequent panel discussion can be viewed here. Each time I hear Eric speak, I come back with more knowledge and insight. An earlier interview of Eric is also available on my blog here.

As you see this, maybe you should also see some of the other great CEO interviews and discussions. A few are listed here

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May 1, 2008

Google’s strategy of harnessing innovation –“crowdsourcing”

Google’s rise to success is predominantly based on the talent it has assembled in house and the way it has managed to use its talent. Yet, what Google did in harnessing the innovation talent outside its own employee base is unique.

Google just closed the Android Developer Challenge, which will provide $10 million in awards — no strings attached — for great mobile applications built on the Android platform. Instead of just spending $10 million in house or working with a few select developers, it has managed to find access to the best available talent on the planet with its Developer challenge program.

Increasingly, companies are using more external resources even in cutting edge high impact product development work. Dell was perhaps the first to start with their IdeaStorm project and now Google follows suit.

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