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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.

Setting a price for a product is sometimes one of the toughest decisions a company can make. Set it too high and people scream and run the other way.  Set it too low and you end up shooting yourself in the foot and leaving money on the table. One thing seems to be true, if you lower your price you pick up extra customers and hopefully enough to offset the new lower pricing strategy.  Someone needs to tell that to the Indian bureaucrats. Recently, I’ve noticed a couple instances where they have raised prices hoping to make more money…incredibly stupid.

The new public/private airports (i.e. Hyderabad) are facing a revenue shortfall with decreased airline traffic and to make up the difference they have increased the airport usage fee, aka User Development Fee (UDF).  In India, where people are VERY price sensitive this will just drive more people to look at alternative transport methods.

Another instance is the recently opened Bandra Worli Sealink (BWSL) in Bombay.  They currently charge Rs. 50 (USD one buck) one way and traffic has been about 50-60% of their revenue targets. So the infinite brain trust of the BWSL management are planning to increase the rates by 20%, this is just beyond words.  I’m sure traffic will fall even further.

If the management from the two companies mentioned above are reading this, please take a page from the Indian wireless carriers. Follow the 3 step method they use:

1. Drop prices, get more users
2. Drop prices, get more users
3. Drop prices, get more users

Do you see a pattern?  I thought paying Re. 1 (2 cents) a minute was cheap but apparently not, with the latest price war my call rates went down not up.

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:

Last week the inevitable happened, the dream run for Dubai came to a screeching halt. Dubai World a state owned investment vehicle for Dubai announced it needed some breathing room on it’s upcoming debt repayment. It currently has over USD 60 billion in debt, when you compare it to the sub-prime crisis this is nothing.  But, what is concerning is that 3 weeks ago the ruler of Dubai, Sheikh Al-Maktoum, said there was nothing to worry and everything was on track.

The personal investment vehicle of Sheikh Al-Maktoum is also rumored to be in trouble, now this should not be surprising. He’s been spending on all types of goodies, such as the 2nd largest yacht in the world. Dubai Holding owns a ton or properties from hotels, real estate and telecom.

The basic theme of Dubai was that it had very little oil and needed to diversify and create businesses that could generate revenue once the oil dried up. And the unwritten rule was that big brother Abu Dhabi would bail it out if anything happened.  The Abu Dhabi Investment Authority (ADIA) at one point was worth close to USD 900 billion, so it seemed it had cash if things went south. Well, things are going south and ADIA is not saying much, which is a bad thing.

All of this is not surprising to people that have been following Dubai from a distance.  It comes down to the fact that it’s a desert and Dubai Inc. was trying to portray the image of people living in million dollar pads, shopping like a king and making it a mini vegas minus the gambling. I visited Dubai about 10 years back for work and back then the common theme was “make a lot of money in Dubai and hopefully move to a place like the US.” I believe the same thing still holds true, their is no character to Dubai it’s all plastic or in this case sand.

So, who is next?  I read an article talking about Bombay being the next city to go belly up. Granted I live in Bombay and a bit biased, but I’m pretty sure there is a hugh difference between Dubai and Bombay.  Take housing for example, in Dubai you had lots of supply and very little demand as we are now seeing.  In Bombay, you have very little supply and lots of demand so much so that housing prices are up 15% in the past 6 months.  Yes, prices are up 15% in this pathetic market. Commercial real estate in Bombay may take a hit, but nothing like what we are seeing in places like Mid-town Manhattan or Dubai.

Or could it be China?  One thing I’ve always said about China, it’s a communist country and with that the press is 100% controlled and managed by the central government. We will NEVER know what is truly happening, even their projected GDP numbers are always suspicious.

In the end, I think Dubai did a great marketing pitch for the world but just never could live up to the hype.

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.

The smartphone OS battle is finally starting to take shape and I’ve decided to take a closer look at what the marketplace has to offer. Years ago the most critical thing that people would store on their phones were the actual phone numbers and most likely that got saved to a SIM card. Now, phones a have a wealth of info on them and utilizing some sort of smartphone OS is a must. There is no point in getting a cheap phone and then realizing you can’t sync your data, if the only option is to manually enter in the data…that is a major #FAIL.

From my perspective there are 6 players in the battle to be Number 1, I’ll go through each one:

6. Nokia/Symbian – Wow, these guys have really lost there way.  10 years ago Nokia was the phone to have in Asia/Europe but now they are quickly losing market share.  Even more pressing for them is that their Symbian software is withering, no real programmer is programming for the platform. And in today’s environment it’s all about the apps that run on a phone. Symbian reminds me of the IBM OS/2 days – Big company, no new customers and zero apps.

5. Palm WebOS – Not even former Apple exec Jon Rubinstein, current CEO of Palm, can save them.  The OS is stunning and slick, but they don’t have a chance with some of the bigger players down the list.  They should just open source it and work with the smaller cellphone makers.

4. Windows Mobile – Bloated.

3. BlackBerry – About a year ago, I was singing the “BlackBerry will die in 18 months” song, but I’ve changed my tune.  BlackBerry seems to have really put the pedal to the metal and appears to be doing well. I recently had the chance to configure a new BlackBerry for email and it took me 5 minutes, compare that to the first BlackBerry I bought 5 years ago where it took me 30 minutes and my current iPhone which takes about 7 minutes.  Kudos to the kids from Canada…welcome to North America.

2. Android – 2009 was supposed to be the year of the Android, that didn’t really pan out. The recently launched Motorola DROID phone is a customized version of Android and is said to be making waves. I expect a ton of new phones from Samsung, LG and HTC to flood the market and bring the prices down, which are currently hovering around USD 400-500 for a phone. The Android Marketplace has not taken off but that’s also driven by the fact that not many Android phones are in the hands of the consumer. 2010 seems to be the year for the Google Gang.

1. Apple iPhone – Beyond being an Apple fan there are some real business justifications for it being the king of the OS. First, they completely changed the game with the app store, this is not only a way to keep people on the iPhone platform but also another revenue stream for them – 30% to Apple and 70% for the developer.  Symbian, BlackBerry and Windows have been around for years and not one of them thought about offering a store but once Apple announced, they all announced their intentions.  Where Apple excels is that developers not only create programs for the iPhone but also the iPod touch (I believe over 80 million devices combined). Since both devices have the same screen size and resolution the user experience is the same and saves on development costs. Whereas, if you program for the Symbian/BlackBerry/Windows/Android every device is different – screen size, resolution, physical keyboard, etc…which leads to long development timeframes. The iPhone OS still has a way to go in terms of features but is quickly gaining and in the meantime grabbing hugh chucks of the market share.

Once again, with all these options the consumer is the real winner and should lead to lower prices and more features in the future.

Well, that didn’t take long for Bombay real estate developers to go from building “affordable housing” to overpriced properties.  Back in March 2009, at the height of the financial crisis every real estate developer was talking about changing their business model and going after value for money projects.  Now it seems many are scraping that residential business model and back to building massive properties, case in point – Indiabulls Real Estate (IBREAL). They recently kicked off their advertising campaign for Sky, Sky Suite and Sky Forest, all 3 properties are located in Lower Parel.  According to a sales rep I spoke to at IBREAL, Sky is sold out and their managed residences at Sky Suite are 20% sold. Sky just came onto the market about 6 weeks back, so that is either an incredible sales effort or excellent marketing to say “you can’t buy, go away.”

The latest building to go on sale is Sky Forest. The marketing info talks about 10,000 to 22,000 sq/ft for either a duplex or triplex.  I called and asked about pricing, it starts at Rs. 20,000 a sq/ft plus Rs. 50 per floor rise and Rs. 1000 sq/ft for a Worli view. So the math for a 30th floor 10,000 sq/ft pad is:

Base price = Rs. 20,000
Floor rise @ Rs. 50 x 30 = Rs. 1,500
Worli view = Rs. 1,000
Total 22,500 x 10,000 = Rs. 22.5 CR (approx USD 4.7 million)

The kicker is that the 10,000 sq/ft is really super built-up area, whereas the livable carpet area is more like 4,430 sq/ft. Why such a hugh difference? That’s because of the crazy Bombay real estate math that includes things like the lobby and other common areas of a building and quoted as “super built-up”, exceptionally stupid I must say.

So the price is really more like Rs. 45,000 sq/ft or around USD 1,000 which is quite spendy.

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.

When I first heard about Mint.com back in November 2007, I thought it was a great idea but wondered if people would be willing to part with their financial data via an online platform. The market has spoken, Mint was acquired in Sept. 2009 for USD 170 million by personal finance software market leader Intuit.

So what is Mint?  Mint takes your personal financial data and makes recommendations on your spending habits, investments, insurance, etc… Mint makes money via the service providers who want to sell products to the Mint audience. Simple and Sweet.

To get access to all that financial data they went to a single provider – Yodlee.com  and then enticed users by slapping an amazingly simple user interface on the data.

It’s a remarkable story and exit for CEO Aaron Patzer. He recently talked about the journey, the video is below and I would highly recommend viewing the whole thing.  I love his quote (about 5 minutes into the clip) about outsourcing the development to oDesk or India…”dead wrong.” The last 3 1/2 minutes are also really good.