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Since the financial collapse, I hear more and more companies in India talking about targeting people at the Bottom of the Pyramid (BoP).  In a nutshell, it’s concept termed by Professor C.K. Prahalad that defines people living on less than USD 2.00 a day and when you aggregate their buying power it’s actually quite large.

There have been many case studies done on this idea and the big urban legend is that someone from P&G came to India because sales were dismal.  After a few days, the exec realized that selling products in single use sachet packets would be the way to big profits….SORT OF.  Funny thing I couldn’t find any case studies or documents about P&G, instead I found some info from a local player that had the idea of selling sachet packets (Scribd document).

This idea of targeting the BoP maybe a decade old idea, but then I realized there are people that have been targeting this demograph for decades – political people. And they have successfully sold people on a vision and hope for years and do it quite well. If anything a case study should be done on the political entities that have been targeting the BoP.  Granted, some of their tactics are probably not for corporate consumption but I do believe there might be a couple things that could be picked up from them and implemented.

There are days where I look at a company and just shake my head at how simple the business model is. For me that company is Times Private Treaties (TPT) which is such a brilliant concept it amazes me and something that cannot be easily replicated.  TPT is part of the massive Bennett, Coleman & Co. Ltd. (BCCL) group which publishes the flagship newspaper – Times of India.

BCCL is currently run by brothers Vineet and Sameer Jain* and according to Wikipedia has over 7,000 employees, 5 daily papers, over 30 magazines, 32 radio stations and 3 TV stations. In short, they have a massive footprint when it comes to consumer media services.

In 2005, Sameer Jain came upon a very simple but highly lucrative idea – barter ad space for equity stakes in new and existing companies. I’m not sure this would work in the US, but here in India it not only works but is highly successful. I’m only assuming it’s successful because their portfolio contains over 200 companies (see list below) and there must be something that attracts companies to TPT. I’ve known about TPT for several years but didn’t realize it’s size till I read that AEGON Religare a life insurance company is owned by TPT via a 30% equity stake.   TPT has also begun to advertise in the Times of India about the power of TPT and how it can help young companies reach a wide audience.

TPT can be viewed as a venture capital firm or private equity firm, but instead of handing over cash or providing management guidance they give you a marketing vehicle. And in India, that marketing vehicle is key.  You really have 3 avenues to pitch your product in India:

1. Actor – Bollywood pitch person or as they call them a brand ambassador
2. Sports – cricket player
3. TV/Newspaper/Magazines

With so few marketing avenues, the above 3 get very expensive for a new company and thus TPT enters the picture. So, next time you read the Times of India and wonder how a young company can spend a large amount on marketing dollars, more then likely it has TPT written all over it.

* Disclosure: I’m not related to Vineet or Sameer Jain, although I have requested to be adopted by them…still waiting for the adoption paperwork.

Below is a partial list of the TPT partnerships:

Forbes India has released their list of 100 richest Indians and the Top 10 played out as expected with the Ambani’s, Ruia’s and Mittal’s on the list.  More interesting were some notable people missing from the list such as Ratan Tata, Pallonji Mistry and Raghav Bahl – who are these people you ask?

Ratan Tata is the head of the Tata Group and for someone who has the authority to buy companies such as Corus Steel, Jaguar and Land Rover, I’m surprised he’s not on the list. Not to mention he is building a bungalow on Altamount Road – blocks away from Mukesh Ambani and Kumar Mangalam Birla.

Pallonji Mistry is the head of the Shapoorji Pallonji Group which owns over 18% of the Tata Group and therefore it’s single largest shareholder.

Raghav Bahl who runs Network18 a massive media conglomerate which includes many TV outlets and magazines such as Forbes India.

Part of the omission for the above 3 is that they may not be Indian citizens and hence excluded. Pallonji Mistry is an Irish citizen.

But, the big 800 pound gorilla in the room is the fact the list does not have a SINGLE politician from the Indian government on the list. Of course, we all know the money was gained illicitly but THAT would be the list everyone would talk about.

Getting back to the title of this post, Indrajit Gupta, Editor of Forbes India, summed it up best

Should we be celebrating the individual wealth of a 100 Indians in a country where more then 75% of the people earn less than Rs. 20 (50 cents) a day?

The average mutual fund investor in India must be celebrating since the Securities and Exchange Board of India (SEBI, it’s like the SEC) is doing everything in its power to bring down the costs of mutual funds.  The speed in which SEBI is mandating these changes is fast and furious…nice to see for a change.  On the flip side, many of the asset management companies (AMC’s) and banks that offered mutual funds are taking a hard look at their business model.

During the past 4 years what drove the mutual fund industry was the “entry load” that was paid to distributors.   The fee was as high as 2.25% paid by the consumer and then sometimes the AMC would throw in some additional coin to generate more sales.  The biggest distributors were banks and independent financial advisors (IFA).

The writing is on the wall, most of these AMC’s will have to steamline their operations and look at technology to enable their sales growth. I see two options:

1. Go directly to an AMC’s website and get their products, such as Fidelity.co.in

2. A low cost mutual fund online aggregator, which makes money directly from the AMC or supported via advertising

Both have potential but India has a small number of internet users, the reason the mutual fund industry grew was because of the IFA’s in the Tier 2/3 cities and villages.

To be honest 2.25% upfront was a complete joke and really lined the pockets of everybody but the consumer.  And when the markets were going up, many financial advisors were telling customers to switch to Product X because it was better.  In reality, the advisor wanted to get the 2.25% entry load on Product X – not much of a financial advisor.

The real winner in all of this could be brokerage firms. SEBI recently issued guidelines which allow mutual fund products to be bought and sold through brokers. The real losers will be the independent financial advisors who in a span of 9 months have gone from gravy train to derailed train.

NOTE: The above image is the SEBI logo, which could possibly be the worst logo ever designed.

Yesterday, Twitter announced they had struck a deal with the largest mobile phone provider in India – Airtel. It will allow users to send a status update to Twitter for only Re. 1 and receive tweets by SMS for free. It’s apparently only a 4 week exclusive deal after which I’m assuming all mobile carriers will offer the service.

I tried the service for about 5 minutes and soon realized how much it sucks…for me. I really don’t want to get over 100 SMS tweets via my phone.  I was thinking WTF, what was Twitter and Airtel thinking when they struck this partnership, but then it dawned on me that this is India.  And when something is free, Indian’s will figure out a way to use it or monetize it.

The first use of this service would be around stock picks. Since people sign-up for a stock picking service to receive updates this would be an ideal use and free for the person receiving the pick. This is one instance and I’m sure we’ll see many more in the coming months.

The official Twitter @ Airtel site. Doesn’t have much info, which is par for the course for most product launches involving an Indian company.

Its been a busy week in Indian telecommunications and my frustration with the government grows. After the Indian general elections in May, the press had a love fest with the new government saying everything would change and the economy would be back on track.  And one of the first things to get fast tracked would be the 3G auction. News trickled in this week that the much awaited 3G auction for high speed mobile data services would be delayed yet again.

For me the 3G auction should be one of the easiest policies to implement and to show the Congress Government has indeed arrived and changing the way business is done.  There are no slums to move nor environmental impact surveys to conduct.  The government is acting like most stock markets investors, they want to see those previous all-time highs and then auction off the spectrum. In the meantime, companies are losing revenue and the government is losing out on taxes. It all comes down to money, who gets what and how much – hence the title of the post.

All is not lost for the consumer, this week the government said they wanted to look at implementing per second billing for all carriers as opposed to the current per minute billing.  This all came about when Tata DOCOMO launched their service with per second billing. I have a feeling it will happen because Reliance Mobile launched their “Simply Reliance” plan which offers 50 paise (USD 1 penny) per minute for local, long distance and SMS’s.  Since Reliance is pretty well connected to the government, they probably have better insight to what policies will get implemented and threw down the pricing gauntlet.  The “Simply Reliance” plans reminds me of the AT&T Digital One Rate launched in 1998, that really was the game changer for the US mobile market by eliminating “roaming” charges.

While most businesses and industries around the world are struggling to get back to their glory days of 2007, one industry that continues to sky rocket is the wireless industry…at least in India.  As of July 31, 2009 there are over 441 million wireless connections.  I don’t think anyone could have predicted the hugh uptake in wireless, just 4 years ago there were only 70 million connections. Of course, the average revenue per subscriber (ARPU) is a paltry USD 4 a month, but it’s a numbers game – the more numbers the better. I could go on and on about the statics of the Indian wireless market but luckily the Telecom Regulatory Authority of India (TRAI) conveniently provides a mind crushing PDF every quarter that slices and dices the data.

On a more local level, the latest wireless carrier to enter the fierce Bombay market is Tata DOCOMO. It’s a joint venture between the largest industrial group in India – The Tata Group and Japan’s NTT DOCOMO. This will be Tata’s second wireless network in Bombay, they have an existing CDMA network while the new venture is based on GSM.

The question arises does Bombay need yet another mobile carrier? Apparently, the Tata’s feel their is space for one more carrier. With the latest entrant we now have 9 carriers: Aircel, Airtel, BPL, Idea, MTNL, Reliance, Tata (CDMA), Tata (GSM) and Vodafone. The Virgin Mobile brand in Bombay is just reselling the Tata (CDMA) service, almost like an Mobile Virtual Network Operator (MVNO).

So what’s the current selling point for Tata DOCOMO – per second billing and a 3G ready network.  That’s not enough of an offer to swing me over as a customer, but if number portability comes into play that’s another story.  You could see many people switch over just for the per second billing feature, remember the average bill in India is USD 4 per month…so seconds count. Of course, Airtel and Vodafone could just turn that feature on as well.

The Indian online travel agent (OTA) space became a bit smaller this week, with Travelocity buying out Travelguru. Although the terms were not disclosed the media is reporting the acquisition was valued around USD 9-10 million.  The insiders know the true number but typically when a successful exit is announced all the players want to highlight the fact by saying “we returned 5x, 50x or whatever to our investors…blah, blah, blah.” I didn’t see or hear such a statement and honestly that’s not the point of this post. Instead it’s about the current economic viability of the OTA’s and the Airlines. OTA’s are much more then just airline ticketing but I believe they are a large financial component for most OTA’s.

Let’s first start with the product – air travel.  It’s no secret the airline industry went through a massive airplane buying and airport construction binge since 2005.  With the economic environment we are all feeling the after effects, carriers are delaying deliveries of new planes, newly constructed airports are jacking up their user development fee (UDF) and the aviation turbine fuel (ATF) surcharge is killing everyone’s balance sheet.  The UDF is a catch-22, with the decline in traffic, airports want to charge more to makeup for the short fall but this pushes away consumers. With the drop in tax collection, the government needs money as well and hence the ATF is a way to recover some of that tax money. This puts the airline in a painful spot, Air India is begging for a government bailout of USD 2-3 billion to help alleviate the situation.  Secretly, the private carriers would love a bailout as well, but I doubt Praful Patel, Minister of Aviation, can save face with the public if he bails out Kingfisher or Jet Airways.

One of the ways the airlines have dealt with this situation is to cut the commissions paid to travel agents. This recently led to many travel agents refusing to book flights for certain carriers since it wasn’t worth their effort. The OTA’s that have high fixed costs and shallow pockets are going to face the music very soon.  Most OTA’s started during this binge when the number of passengers traveling in India looked like a hockey stick (J curve) and hence all the VC money thrown at them. Some of the OTA’s have looked at bus and train travel which have very small margins but potentially a hugh number of travelers.  But, most of those travelers are not connected to the internet. How many OTA’s will exist in their current avatar 18 months from now? It’s anyones guess.

Random Fact: TravelGuru was started in 2006 by Ashwin Damera and Ganesh Rengaswamy, they both attended Harvard Business School (HBS). Travelguru was selected in 2005 as the Harvard Business Plan Contest winner.

Here we are in the thick of the supposed Monsoon season and it’s frikkin’ bone dry all over India.  Usually, most urban Indian residents complain of the Monsoon since it leads to floods and is a general nuisance.  This year the complaining is due to a lack of water which is leading to water cuts and don’t get me started on the havoc it has on farmers – the largest industry in India by revenue and people employed.

Several days ago the news channels were mentioning that the Prime Minister was going to meet with the Chief Minister’s from the affected drought states. What is that meeting going to accomplish? Are they going to schedule a meeting with Mother Nature and fix the problem. Everybody knows that the Monsoons come every year and yet every year India suffers from either too much or too little rain. There seems to be no long term strategy in dealing with this perennial problem.  There are a host of initiatives that could potentially lessen the burden such as rain water harvesting but India always seems to be focused on the short term strategies.

I grew up in Southern Indiana in a sea of corn fields and I bet more innovation comes from that small region then all of India. I fail to understand how a country who prospered with it’s “Green Revolution” in the 1960’s seems so far behind in terms of technology. I’m sure there are pockets in India that are using the latest in technology and benefitting, but what about the rest. Punjab is the first place that comes to mind, they say there are more Mercedes Benzes in this part of India then anywhere else to give you an idea of the wealth creation from farming. But, beyond that I think most farmers are suffering.  If you stop by my dad’s hometown in Madhya Pradesh you would be hard pressed to find many tractors farming the land, instead most of it is manual labor.

The government has helped the farming industry with many things such as no taxes, free water and free electricity but I think some of those are band-aid’s on the real problem – lack of innovation.  The government always seems willing to throw USD 5-10 billion at forgiving farmers debts but when it comes to spending the same about on new farming technology it gets politicized. If farmers were committing suicide in droves over the past 2 years, I’m sure this year we are going to hit record numbers. And the government’s response – forgiveness of debt, a couple thousand dollars and a guaranteed government job for the oldest son.

When Twitter was created over three years ago no one seemed to care, but in the past 6 months it’s gone from obscurity within the tech community to mainstream overload. I’ve struggled over the past month to write this post, because I’m not sure if Twitter is the next big thing or just a temporary distraction. With each passing day I find myself leaning towards the next big thing as I see and hear more people jumping on the Twitter bandwagon.

What makes Twitter different from the rest? Two big factors that are helping Twitter at the moment:

• GDP is contracting worldwide and hence there is less “stuff” happening.  This gives people more time to try new things and hence Twitter and Facebook are enjoying a “hockey stick” growth pattern. Thus, many users entering random thoughts into “the matrix” as I call it.
• The Twitter API is simple to use. The guys at Twitter have made a platform that can pull data and allow people to aggregate, repackage and reuse the content.

From a business model perspective, Twitter seems to have all 3 segments rolled into one platform.  Quick refresher course in dot.com lingo, C=consumer, B=business.  Sorry to take you back but it was the easiest way to break it down:

• B2B – Currently, there is no fee for using Twitter’s API but at some point they could charge based on how much data you want to pull and how quickly.  If you are StockTwits you would want millisecond access to the data, others might need hourly access.
• B2C – Many companies are using Twitter for customer support, press releases or to disseminate other information.
• C2C – Allows people to have an open conversation and allow people to jump in if the topic is interesting. This is where search.twitter.com comes in handy to find content.

So, how do you benefit from Twitter? That’s the beauty you can use it any which way you want and not feel confined. I know some people that tweet every waking hour and others that tweet once a week. I mainly use Twitter to share links to business articles which others might find useful.

How are people in India using Twitter?  It’s not as widespread as it should be considering over 400 million mobile users and over 8 million being added monthly. Since the founder of Twitter, @jack, designed the architecture around an SMS type usage, I’m hoping within a year the uptake will be much more as people become aware of the service.  Anyways, the people that are using Twitter in India are doing some great things for different markets.

B2B
?? – If you know of anything that is targeted for the Indian market, tweet or e-mail me

B2C
@DeskAway –  SaaS project collaboration tool. They are using it to for support, product announcements, etc…

C2C
@missmalani – According to her Twitter profile she is a Radio DJ, Party Animal and Mumbai’s Gossip Girl. In essence, she is a one person marketing machine
@gulpanag – Actress based in Bombay, tweeting about random thoughts
@deepakshenoy –  Based in Delhi. All things related to the Indian equity markets
@kaushikgala – Based in Pune. Tweets about Indian equity markets and the venture capital field
@sm63 – Based in Bombay. social networking and most recently was Twittering the IPL finals match
@pjain – Based in Delhi. technology, finance, apple, etc…

Some others that are using Twitter only for input and not following others, which is such a waste:

@Rahul Gandhi – He is following nobody, but has over 1,900 people following him. Fail.
@ShashiTharoor – Following 3 people and over 3,300 followers. Fail.

I’m surprised that no big tech exec is tweeting from Bangalore or a big Bollywood star. The CTO of Cisco, Padmasree Warrior tweets and of course everyone knows Ashton Kuther does as well.

If you want to follow me on Twitter, I’m @mrjain.