All posts by koreel

ONE SIZE DOESN’T FIT ALL – THREE CONTENT IMPERATIVES

At the risk of sounding repetitive, I will try to air my views on how I feel the content business could change in 2017. I promise to keep it short.

Who’s the audience? This question has yet to be answered satisfactorily. Because even as there are many writings dissecting how digital is going to change the world of content, most of these either approach it from a monetisation point of view or assume an almost homogenous audience. But when you look at the data, that is anything but the case.

For example, there are three areas no one is really talking about:

1) Are we creating enough relevant content to make the young, post-millennial crowd care about important issues?

2) Are we really serving women content that is more than just television soaps and fashion tips?

3) How do we introduce meaningful content to millions of new rural internet users?

Each of these segments has distinct content requirements. Each of them needs to be reached and engaged with in different ways.

1) Getting the youth to care

Millennials, rather post-millennials, are hot property for most marketers. But they are a difficult and fickle demographic too. The need is to present substantive information to them in an engaging, contextual, approachable and unbiased manner.

Established mainstream media houses have rolled up their sleeves to ride this wave. So have the new digitally-native disruptors like ScoopWhoop, along with a bunch of social-media powered viral content players like The Logical Indian and The Political Indian.

However, most of the content being churned out is fairly shallow, relying primarily on entertainment or culturally popular tropes to attract traffic. The audience is not being viewed as serious information consumers, but rather, as a tool to achieve virality.

But data indicates a hunger for information: 80 percent of youth (18 to 24-year-olds) use the internet as their first source of information (as per the Google State of Mobile Internet Report, 2016). The report also states that the youth spends, on an average, at least half an hour every day browsing for information, and that 55 percent of them do research online before any buying decision.

What we need to realise is that these will be consumers of serious content tomorrow; part of the decision making process.

Organisations that can speak to and empower this section may find a whole new market for themselves to occupy and mine. How? Try using popular themes/memes, explainers, infographics, engaging multimedia versions and community involvement. How you distribute is also important – for instance, Snapchat and Instagram might be better ways to express short-form information than to expect people to come to a website.

2) Who is serving the ladies?

In my opinion, women have been underserved and taken for granted by most content outlets for far too long. The content provided has stayed limited to entertainment and fashion. Why is it that we can’t think of leveraging content in a way that brings millions of women into the fold of news, information, and problem solving, in a meaningful and empowering manner?

Women need a breadth of information from a trusted source with which they can engage. The daily range of information that women look for is wider than men. For example, typically, a man looks for general news, politics, sports and gadgets/tech, whereas a woman is not only interested in news and politics, but also in things like career, health, family, parenting, lifestyle and wellness.

However, the way they interact with information is different – it is not a second-by-second pinging on their phones, but fewer and more substantial pieces of content that attracts them. Similarly, because the sense of community is stronger, sourcing content through a network of contributors will lead to more interaction, engagement and trust.

The time is ripe for a digital product that can be informative and empower the growing woman digital user. After all, it is a significant market segment, which is growing phenomenally. According to data by Google Survey India, in association with Pew Research and ShesConnected, about 60 million women are online in India, of which over 24 million access the internet daily. Also, importantly, 75 percent are in the 15-34 age group. Moreover, the Google State of Mobile Internet Report states that both working (approx. growth rate 100%) non-working women are the fastest growing segment (approx. growth rate 250%) of internet users in India.

3) Is there anything for rural India?

Without a doubt, this is the next frontier of digital growth. The need for quality information is paramount, but most content producers are more than happy churning out low quality entertainment content or sensationalistic news that will get advertisers reach.

If we go by a BCG report, then the number of connected rural consumers is likely to increase from about 120 million in 2015 to almost 315 million in 2020, a jump of almost 30 percent every year. This means that almost half of all connected Indians will be rural users. Further, more than 60 percent of rural users have been online for less than two years, which means most rural users are still relatively immature digitally, and their usage patterns can be expected to evolve as they gain experience.

This is the opportunity. But, how can a primarily urban media deliver content in the correct tonality and maintain empathy?

By viewing rural India as a real place, not as the stereotype that mainstream media does. Rural content doesn’t only mean farming-related issues and folk art-related entertainment. People in rural India are just as curious about the rest of the world as they are about governance, infrastructure, career, healthcare and gender issues.

This could be well achieved through a network of citizen journalists from every block and panchayat. This could be interspersed by expert contributors on issues that involve topics like personal health and career. And to close the loop, providers of content can position themselves as tools for better governance and an information source for local authorities. (This model is being executed well by Gaon Connection in UP)

Further, for the purposes of rural India, a destination website might not be a wise strategy. Instead, a strong WhatsApp and social media strategy will be key. Creating an early beachhead through meaningful content should be of paramount importance to any content business.  And yes, monetisation will not be an elusive goal.

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FLIPKART NEEDS SOME PATIENT, PERMANENT CAPITAL

The markdowns are flowing thick and fast for Flipkart. There’s a lot of noise out there painting a picture of doom and gloom. But should valuations cause so much consternation? Isn’t there a larger story waiting to be told? In the last few days I trawled through old reports, news stories and information available in the public domain to make sense of the proceedings. I also had the good fortune of catching up with Haresh Chawla, Partner at India Value Fund Advisors, and a keen observer of and commentator on the Indian e-commerce sector.

The nuance that most media reports seem to have missed out is that it is not a simple question of whether Flipkart will get future funding or not. We need to dig deeper, because Flipkart will get funded – there aren’t too many Indian e-commerce players at that scale. The real issues are: (1) the kind of investor that Flipkart needs and (2) how soon that can happen.

But first things first: what is a markdown?

There can be both a markup and a markdown. It is only a way of denoting the fair value of an asset or liability on your balance sheet. In other words, because market conditions change all the time, your books should present the truest picture possible. But it’s subjective and is further complicated by incomplete information or over-optimistic/over-pessimistic expectations.

Should we be bothered?

If you are wondering why, simply look at the markdown exercises and the implied valuation after that.

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Do you note that essentially none of them are in real agreement as to what the valuation of Flipkart should be? There is a huge deviation.

Now here is where a lot of people are running around either screaming doomsday or smirking on Twitter. In fact, some unnamed experts have been quoted as saying that if the valuation isn’t marked up soon, then Flipkart may have to accept a significantly lower valuation than its “preferred” $15 billion.

Let’s set the record straight. The figure $15 billion is obviously bigger than $5.5 billion, but to say that that is the “preferred” valuation would be wrong. It was what the market and investors expected based on the $10 billion of GMV projected by the company itself in June 2015. Mukesh Bansal, Head of Commerce, Flipkart, had told The Economic Times, “Flipkart will sell goods worth $10 billion during fiscal 2016, and nobody will be even half of that… There is not a shred of doubt based on all the market numbers we have today.” (You can read it here: https://goo.gl/FQKGy4 and here: https://goo.gl/a9UArZ)

According to Haresh, “It was expected and I have been saying it for some time. Flipkart announced that they would deliver a GMV of $10 billion and, clearly, on that expectation investors gave it a 1.5x multiple and valued it at $15 billion. But the company fell drastically short of its GMV target. The actual figure was only about $4 billion.”

In fact, it wasn’t only Flipkart that went wrong with its projection. Even the fund houses overestimated Flipkart’s GMV clout. To jog your memory – This Morgan Stanley report from early 2016 (Read that here: https://goo.gl/WWXLaa) said that in 2015 Flipkart, Snapdeal and Amazon together accounted for $13.8 billion in GMV or 83 percent of the market. That implied a market size of $16.6 billion. The report further said that Flipkart’s market share was 45 percent. That implied Flipkart’s GMV to be $7.5 billion – a gross overestimation, versus the $4 billion that Flipkart actually is said to have delivered.

Haresh pointed out one of his earlier peeves on the same issue, which he wrote about on Medium (Read it here: https://goo.gl/b1k7JW). At that time, he had noted, “Imagine when you extrapolate this error to the future. This has ended up muddying the waters, and misreporting the market share numbers.”

So, what happens next?

Let’s face it, valuations are a mix of many things – market environment, risk appetite, a fund manager’s own biases, the hot new trend, the fear of missing out, the multiples comparable companies are commanding, and of course, expected cash flows and margins. Of these, the last two are the most important and the most difficult to wrap your head around in an environment where you have to constantly burn money to stay in the game. So if an investor needs to justify why he/she is jumping onto the bandwagon he/she will constantly look at data that confirms his/her biases. Therefore, valuation is only a large headline figure; it’s not what decides your success.

Haresh concurred, “Currently, the world over, most of these companies are valued at 0.8-1.2x of GMV. Even with the markdown, Flipkart is still valued at the higher end of this range. But these valuation figures don’t reveal much. What matters is sustaining the business. The battle with Amazon will be fierce, but valuation has no relevance to Flipkart being among the top two in India.”

That’s the trick. Sustaining the business – according to data available in the public domain, while FY15-16 revenue grew 143 percent to about Rs 1,950 crore, expenses grew at an equally rapid clip of 128 percent from a much higher base. Expenses for FY15-16 were a little more than Rs 4,250 crore and losses more than doubled, to a shade over Rs 2,300 crore.

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An analyst at a VC fund that I spoke to, on condition of anonymity, pointed out that for every incremental Rs 100 of revenue, Flipkart spends Rs 200. He was also quick to point out that the losses seen in the public domain don’t add up to the “ostensibly” $2.5 billion (Rs 15,000 crore) that Flipkart is said to have lost or sunk into its business so far. Therefore, it would be safe to say that we don’t know what lies waiting in Flipkart’s balance sheet, which most people wouldn’t have seen.

But, enough said, ladies and gentlemen! This business is burning Rs 6.3 crore a day.

The management has been trying its best to cut its burn, focus on the right categories and rationalise headcount – though there have been many versions of exactly how many were let go during July 2016. (Read it here: https://goo.gl/XMXgJZ)

Haresh has a slightly different take. He feels Flipkart is doing a good job of it, given the tightrope it needs to walk. “Any drastic decisions to cut burn could result in a spiral down in marketshare making it even more vulnerable… The only option is to become lean and hold your fort at the same time – that would be the investors’ mandate and they seem to be doing a good job of it,” he said.

But, hey, existing investors have nothing to be worried about

It is unlikely that investors will lose money. The sum total of money that has been invested in Flipkart till date is about $3.4 billion. To that extent, as long as the valuation doesn’t drop below that level there is no reason to be concerned, because early investors would be protected by special rights like liquidity preference.

Haresh noted, “As far as the VCs go, they are unlikely to ‘lose’ money. Liquidation preferences protect them from any value destruction that may arise. But the wait for exits will be long. However, this protection may not be available to investors who may have entered secondary deals with founders or very early-stage investors at the higher valuations.”

Tying back to that magic $15-billion figure

So, here goes: The ‘$15 billion’ figure that people are talking about is not written in stone. It means that investors are taking a call that if Flipkart does exactly as well as they expect it to the maximum valuation they would give is $15 billion. It also means that they expect the future to be brighter than that $15-billion figure (because if someone were to invest at $15 billion valuation, they would expect much more than that in return, right?).

But, in the same breath, if the call on future valuation is not as bullish, there is nothing to stop a potential investor from adjusting it downward.

For example, if Flipkart’s GMV is $4 billion and one were to attribute a generous 1.5x multiple, then the valuation would be $6 billion. Sure, it would find buyers at that valuation, but it is unlikely that any of the previous investors would take any hit depending on the rights agreed upon during earlier funding rounds.

Therefore, it really is a question of what Flipkart needs right now

1) A control on costs – this is a given, so let’s park this for now.

2) The right kind of investor – strategic and very long term – someone whose investment horizon is a multiple of the 5-7-year typical VC horizon. That’s because Flipkart needs to take on the strategic money that Amazon has. Consider this: Amazon generated free cash flow (Amazon Annual Report: https://goo.gl/sYUIoz) of $7.3 billion for the year ended 2015 (that in itself is a multiple of Flipkart’s GMV). It can just dig in its heels in India, a market it can’t afford to lose.

Haresh said, “While they have taken steps to cut the burn, the biggest issue for Flipkart is who will buy? The company needs permanent capital on its balance sheet to take on Amazon, which has deep pockets and possibly infinite patience to win in India. When will this happen, on what terms and who it will be remains to be seen, because any investor with permanent capital, the likes of Walmart, Alibaba or JD.com, will not be interested in a minority shareholding – they will seek a path to control.”

But will Flipkart’s existing investors be willing to leave a clear path to control? They just might, because there’s definitely more to gain that way.

In a way Tiger bringing back Kalyan Krishnamurthy in a key role at Flipkart is evidence that the investors had a crisis of confidence in the team and hence are seeking to put the house in order. This allows them an opportunity to seek strategic sale with transfer of control. Remember, no VC, Tiger included, will be in it forever – they all have to provide their investors with an exit. (Also read: Saving Private Flipkart https://goo.gl/AIzsm6)

In the end, this series of markdowns has and will continue to cause a few flutters in the market, and may also affect the fundraising plans of smaller players. But the big boys may get by because there are enough strategic global investors interested in doing deals; and if they can get in after a series of markdowns, why not?

There’s huge merit in the space Flipkart occupies. We have barely scratched the surface of e-commerce in India. Flipkart is definitely India’s biggest calling card in the sector; it has inspired thousands of entrepreneurs and brought to the forefront a new way of doing business. But, Flipkart, on its part, will have to find ways to make its way deep inside customers’ wallets by constantly cross-selling and up-selling, while at the same time tightening its own belt.

Rethinking Content Distribution

This article first appeared on YourStory.com

Almost five years ago, in a conversation with the CEO of a disruptive division of India’s largest media house, I had opined that Facebook would be the primary media vehicle, irrespective of how we interact with it. What I had not accounted for was how “primary” it would become.

While content distribution and discovery through the social network is now commonplace, I feel that the next growth platform will be instant messenger (IM) apps like WhatsApp, Messenger, WeChat, Viber, etc. As we’ll see later in this piece, all of them are giving the established social platforms a run for their money. Well, not exactly. Facebook owns two of them and hence, gets away with straddling the best of both worlds.

Coming back to the topic, IM should be the place for any content producer to start distributing heavily. But even as small businesses have embraced WhatsApp and Messenger, why aren’t the content guys shifting to messaging platforms as quickly?

There are some green shoots — a few niche information/storytelling content startups who are running very active messenger strategies — in areas of youth entertainment, citizen journalism, and rural reporting. There are those who have started using Messenger through chatbots to deliver content. They are all reaping the benefits of audience engagement, brand recall, and actually being where the consumer needs them — in their hands!

A few things to bear in mind

One, content has to be really sharable for it to have a huge multiplicative impact — it can’t be vanilla news or information. It has to be something that people are proud of sharing, something that will show them as being ahead of their peers or something that will establish them as the cool people to hang with.

Two, getting people to sign up to the group itself requires some effort — there’s more lethargy in signing up to the WhatsApp group of a brand versus one that has your college friends in it. But if number one promises value, creating communities, either large multi-dimensional or various smaller special interest ones, should not be difficult.

To execute this successfully, content heads and editors need to rethink the format in which they present content. Simple long text stories interspersed with some images are no longer standard. Content has to be created in byte sizes — a paragraph here, an infographic there, a short video thrown in, a sound clip attached — all of which come together to tell the whole story and yet are easily pushed and shared on messaging platforms.

1Three, is lack of measurability beyond the initial group — you don’t know how many of your subscribers are sharing the content further with their friends and how many of those friends share it and so on. The same goes for conversions — you can gauge whether it’s a smartphone that the content request is coming from, but you can’t tell whether it came via WhatsApp.

But, I believe if number one promises value, number two will be easier and when those two roll together, you might be happy with only a rough estimate of number three (at least until some mechanism is put in place).

However, the big boys feel uncomfortable when they can’t measure something well. That is why we don’t see the needle moving on the use of IMs. Maybe they will sit up and take notice as more and more new startups create greater engagement and much more value through communities and two-way content creation on messaging groups.

The audience is already in place

Desktops are passé; smartphones are commonplace; virtual reality, while promising, is still taking baby steps. Of the others— glasses didn’t exactly offer a smooth experience, and watches are not deemed to be very practical.

According to a BI Intelligence report citing a Salesforce.com study, smartphone activities like accessing mails, text messaging, social networking, and getting news alerts account for 80 percent of all activities on an average.

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It would be interesting to note that even though social networking is huge, and a lot of content discovery is happening across Facebook, YouTube, Instagram, and Twitter, among others, the user base for messaging is also huge. WhatsApp alone crossed more than a billion monthly active users in February 2016, while Messenger did that at the end of June. There are others, too, that are no pushovers; developed by China’s Tencent, WeChat has crossed 800 million approximately and Rakuten’s Israeli acquisition, Viber, is snapping at its heels with another 780-odd million (all data from Statista.com). Snapchat, though smaller, deserves as honourable mention with its 150 million daily active users surpassing that of Twitter (source: Bloomberg.com).

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As you can see, Facebook controls a large swathe of media real estate — it owns WhatsApp, Messenger, and Instagram. Add to that the fact that almost all of the use case is in a smartphone environment (FB had 1.57 billion MAUs on mobile, as per the company’s quarterly filings), and you have a potent winning platform. Because it is ubiquitous, very well spread across the world, and boasts high usage patterns, it makes for the ideal distribution platform.

Also, it seems that the generation of users that most people are interested in, can’t seem to live without their smartphones and messaging apps.

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Where does India fit in?

Inexpensive smartphones and much better broadband infrastructure have enabled a culture of being forever online. I do not define being online as overtly accessing a website or logging on to a social media platform. I define it as being constantly connected through the muted pings of IM apps and email.

This is adding millions of low-end android users who require apps that are small and run light. Guess which the two most popular ones are? Facebook and WhatsApp.

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In fact, by 2017, India is expected to have more than 350 million smartphones. Consumers have shown increased preference towards short-form content, with the average length of video viewed in India being less than 20 minutes (Source: EY). The short-form and snackable content will drive growth through storytelling that is optimised from a story point of view, and not by length.

In fact, this is how India is consuming content:

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In conclusion

It is quite logical to expect that the ubiquity of smartphone and IM distribution will enable a lot of individual content consumption. This will lead to a lot of new opportunities for content creators who will need to think through the utility of their content from a platform, device, and time-of-use perspective. Communities, whether segregated by demographics or special interests, would also yield much better monetisation opportunities, but more on this later.

Disclaimer: “At the time of writing, Google’s messaging app Allo hadn’t been launched and was therefore not considered in this analysis.”

Investing in Media? Junk Traditional Models

The business of media, especially news media, is a curious one. You wield a lot of power, but often the economics of running the business is tricky. It is a business that delivers above-normal returns to the top 2-3 players, and practically nothing to the rest.

The reason is that success is dependent on the quality/quantity of content and the TG reached – each feeding off the other to form a positive feedback loop – something that lesser players will not be able to replicate. But, on both ends, you need to pump in a lot of money and keep at it.

Unlike a content aggregation and curation business, which may be more of a play on content marketing and tech, core content creation is extremely human-skill-intensive.  Therefore, typical success parameters like revenue, efficiency ratios, margins, active users, returns, exit opportunities, etc. will all come to naught if one doesn’t add Editorial Talent & Patience to the mixture – These two require investment and conviction.

A content-heavy media business is not amenable to the regular cookie cutter method of investing/business modelling. There are three essential components – content creation (input), content discovery & engagement (output).

Creation

Let’s face it quality news/informative content is inherently not exponentially scalable, regardless of the technology that you might deploy. This is because one requires human skills that can identify trends, smell out stories, contextualize them and produce compelling content (text, videos, pictures, infographics, etc.). This means you need to seriously invest in good talent and then give them time. Every time you wish to ramp up quantity of content, you need invest in more talent, and so on and so forth.

Yes, there’s user generated content & citizen journalism, but if you are a serious player you would mandate serious fact-checking and editing. That implies equally dedicated editorial process/teams. Curation is an option but there’s no long term benefit, as you would want to own the content and the associated value chain.

Discovery/Distribution

The next leg, discovery of content, is perhaps where one could apply a traditional business prism of marketing and audience building. Discovery is dominated by platforms like Facebook, WhatsApp, YouTube, Twitter, Snapchat, etc. and stories are being discovered by contextual shares.

Therefore, you need to be (1) creative; (2) iterative; (3) able to crunch data; (4) repurpose content; and (5) most importantly, prepared to spend money. Given constant algorithmic tweaks by discovery platforms like Facebook, pumping up organic reach is not easy and paid reach is getting expensive. Hence, one needs adequate funding and a healthy disregard for instant gratification.

Moreover, you need to focus on where the trend is, where your TG hangs out, how the content fits in that spectrum, and what is it that will drive discovery into engagement. Once again, it boils down to investing in talent that can straddle content creation and community building, and empowering that talent to do so every day.

Engagement

Home pages are no longer the entry point, which means that you need to figure out more meaningful UI/UX across your entire product. It also means being able to create an affinity with your content in the time it takes to scroll from one time to the other on the feed of any of the discovery platforms.

Need I mention it again that it boils down to the right talent? Content businesses need leaders & teams that can integrate tech and content in a way that they are able to tell a story and distribute it across several channels for maximum impact. And the talent that can do that is scarce.

Ultimately, it all boils down to a founder’s/investor’s commitment to the cause and her stamina to run the course every day of her life. The shelf life of news/informative content is low and one cannot afford to take their eyes off the meter even for a day.

The question is how does one sustain such a business? Constant fund raising is not the solution. It calls for looking for revenue sources outside of regular advertising & branded content. Can we put the bad genie of free content back in the bottle? Can our wish for patient capital be fulfilled?

Pay For Content Or Watch Ads

AdvertorialAdvertorials – not everyone likes them. No. Not even if you call it branded content. But then are these “evil” and “misleading”? I don’t think so. As long as the intent is clearly mentioned in the header (the image alongside prominently shows that this is an “advertorial”) and the publication does not pass it off as journalism.

Yes it is an eye sore and maybe it treads on the thin line between editorial sanctity and commercialism, and one could argue that since the publication mentioned has a separate supplement for advertorials, why not place it there?

The reason is the tussle between revenue yield (that’s much, much higher on page 1), cost of publication and brand visibility.

But why do brands and publications do it? One is that mainstream newspapers are still growing in India and therefore the reach is unparalleled. Second, just like internet and radio you can target campaigns either for national dissemination or limit them to a geography Vs. television where there is a lot of leakage. Third, advertorials – the well-executed & well-written ones – work better than mere ads. This is because they are more informative and co-opt the readers mind rather than push a message. Fourth, if the space can be monetized, why not? After all, somebody’s got to pay the bills.

Let’s also take a look at some other factors. India is a very price sensitive market. Even now, most people would rather not pay for content (it’s been an uphill battle for TV & internet). So, if newspapers X or Y were to suddenly charge a realistic Rs 15 for the daily paper (leave alone the Sunday glossies), the elasticity would ensure that demand plummets overnight. In that scenario, the paper that prices lower would capture significant market share.

Hence, every publication is deeply discounted on subscription, and looks at selling ads all over to subsidise that cost. The same goes for TV news. When you are being armed with information that can help you execute trades worth millions, why should your TV news channel fees be a paltry Rs 11 or 12 per month? (check this TRAI pay channel a-la-carte rates)

So why shouldn’t a publication or channel not seek to monetize their inventory innovatively? After all, they are all for profit businesses – their business being to bring you information.

heatmapIn the online world, this transforms itself into what is called native ads, which nest in your regular feed, but are marked distinctively as being “advertorials” or “sponsored”. This is because however fantastic your banner ads or flash animations, reader studies have shown that eyeballs rarely register those ads. Look at the heat-map alongside showing banner blindness.

But why do fewer people raise a stink over these native ads? Maybe it is because they are more contextualised and individualised to a person’s taste and hence, one doesn’t deem it to be too much of interference. Also, creating multiple access parameters is easier online. Those who pay are not shown ads, those who don’t pay have to bear the ads.

But the bottomline is those who will not pay a fee for content will have to pay the content creators’ bills by watching ads.

Media Industry and Digital Business Models: HBR

It has been a great 20 years for U.S. media innovators, with hundreds of billions of dollars created by companies that are helping democratize content production and distribution while developing new ways to connect advertisers and customers. Google and its disruptive advertising model leads the pack with a $370 billion market capitalization, but consider also companies like Facebook ($225 billion), LinkedIn ($25 billion), Twitter ($24 billion), TripAdvisor ($11 billion), and Yelp ($3 billion).

Of course, for most traditional publishing incumbents, “great” is not the word that springs to mind.

This article has appeared on Harvard Business Review. Read more HERE

Not Too Stale, Is It?

About nine months ago, July 2014, within the span of a week, both Amazon India and Flipkart got in billion-dollar-plus commitments.

Strategically, they would both have the same agenda… In the interest of scale and repeat clientele, both would have to spread their wings beyond discretionary purchases and into the most habit-forming & repeat purchase zone of shoppers a.k.a. groceries (see my write-up on how online-groceries are changing consumer behavior HERE )

Both Amazon and Flipkart would also have to follow suit, and it seemed that Flipkart would perhaps be the more aggressive one given its need to ringfence itself against a much bigger giant.

Hence, looking at that situation and trying to extrapolate how it would pan out, I had made a key suggestion on July 30th, 2014, to sell / partially sell one of our portfolio companies to Flipkart. The portfolio company was at the time vying for leadership in Mumbai’s online groceries space (now it has expanded much more).

It could have been a strategic opportunity, where the acquirer would have been an established e-commerce player buying into an online grocery start-up that had refined its act. It would have given Flipkart immediate entry into the grocery market.

But then, one can never time these things to perfection. It’s a trade-off between waiting & nurturing an investment in hope of higher value or taking an exit route when it comes. Maybe it’s still not too late. Consolidation is key in an industry where large scale sourcing, large scale operations & large scope of customer choice are big competitive advantages. Who knows?

Only New; Not New & Improved

This is a short post – largely motivated by some questions that we are asking ourselves. How do we survive in an established market which already has so many service competitors? Is our strategy wrong or are we just not trying hard enough. Maybe we should figure out what clients want and then carve out a niche for ourselves, or maybe we should only go after a particular type of client? Or maybe we can invest a bit of time and effort to create long-lasting insights that open our clients’ eyes to the possibilities of tomorrow? Yes. That last one sounds like a plan. At least we won’t be creating a host of “me-too” offerings.

It’s important that we refrain from telling our customers what they need. In fact, we should open their eyes to things that they might need in the future. Do they know what could potentially disrupt their comfortable lives? Can we become their partner in future-proofing? At the very least, we would be doing a favour to both ourselves and our clients by creating new categories, instead of fighting for market share.

Market research is good. It spouts a lot of data, is exciting for the quants, but it comes with a bias. Customer feedback will mostly be about things that customers know about and hence, all their preferences & non-preferences will be constrained by their knowledge of needs. If one were to ask the average media consumer of the ’70s and ’80s, not many would have asked for the internet or a smartphone. Or maybe 150 years ago people would have voted for faster horse-carriages instead of a car.

Similarly brand communications also need to undergo a more forward looking change. Instead of increasing their messaging frequencies, brands should work to create a higher purpose of existence. Technology is on our side. There is great fragmentation of media. Brands can really get close to customers and create tailored conversations. Brands can afford to wean themselves from preachy/informing advertising and give the stakeholders something to talk about, engage them, co-opt them, titillate them and be their friend.

India’s Tier 2: Incentivize Hidden Liquidity

I’m back from a yet another trip of one of India’s holiest cities – Allahabad – a city with deep historical and mythological underpinnings, yet fast trying to embrace modern India’s newest fads. It’s a city I grew up in and therefore I have had the chance to observe social and economic opportunities first hand. On this trip it seemed that everyone in the place was buzzing with the promised conversion to a “smart city”.

However, what could easily derail any “smart city” dream is the lack of basic necessities, infrastructure, education, growth mindset and talent drain. Sure there is enough economic growth as anecdotal evidence from local business that are proxies of consumer spending & confidence like entertainment, food, consumer goods, etc. suggest. But the growth is ad-hoc and haphazard. There has been growth in transactions and economic activity, but not HDI. I don’t think a “smart city” can be made without effecting change in fundamental mindset, infrastructure and employment dynamics .

But here’s an idea. Why can’t such mid-sized cities build an eco-system which nourishes a variety of new businesses spanning areas like social, infrastructure, education, medical, consumer, entertainment, information & media, transport, etc? Why not put the huge amounts of idle cash/hidden cash to good use by incentivizing the hoarders of such money?

The problem is that this liquidity is either invested in real estate through legal and illegal means or it is spent on consumer purchases & entertainment outside the city (typically in big cities or abroad). But hardly any of it is ploughed back to be reinvested for the good of the city.

It is my belief that such liquidity can fund a lot of new start-ups in a variety of areas – there are plenty of higher educational institutions churning out bright students. But lack of exposure to new ideas, the absence of a viable guiding platform and the fear of such cash coming under the taxman’s scanner are holding back many bright ideas. Therefore for the youth, the only way to progress is to move out of the city after graduating.

So when one can have tax amnesty schemes like voluntary disclosure of incomes, why can’t we have another such amnesty scheme which mandates the pooling of money into an fund that bankrolls new business ideas that will make a difference to the city, generate employment, discover new talent, change mindset, and truly prepare the Allahabad to usher in the “smart city” tag.

What’s Your Story? Branding For Start-ups

At the heart of all brand-building and marketing lies storytelling. But haven’t we all learned that product is the most critical of all Ps? Yes, that remains true. However, a super product with a poor storyline is as unlikely to cut much ice as is a super storyline with a poor product. Innovation in both is important. Especially when starting out and you don’t have huge marketing budgets, and are spending most of your time fund-raising, it’s important that you develop the story very carefully.

Here are some of my thoughts. Please feel free to add to these and/or suggest modifications, or some new viewpoint.

Develop A Story, Own The Conversation

Harry’s is a shaving brand that’s shaking up a market, which has rarely seen a leader past Gillette. That’s not a mean achievement, given that this industry requires constant product innovation, expensive R&D, high volume advertising.

For Harry’s it has been a case of good storytelling. They focused on giving really awesome looking products, with a strong core of message – creative, affordable & equally efficient. This is especially true when the goal is to sell and experience, whether that’s shaving or selling groceries. And when, the story is strong it reflects in every aspect of your value chain – factory shop floor to customer’s shelf.

The customer should feel compelled to talk about it. Therefore, it might be instructive to create engagement that creates conversations. These engagements can be as simple – for example: in the context of shaving, style competitions or creating a National Shaving Day after ‘Movember’. (Harry’s does the latter, but also goes the slightly expensive route of having its own salons, creating a magazine, etc)

Innovate, Innovate, Innovate

As we said in the beginning, the story should reflect in every aspect. The same should most importantly flow into the product or the service that your customer will be interacting with and taking home or coming back for more.

So if your story is creating a hub where musicians around the word can collaborate, then your entire product team’s innovation should be focused on the technology that will create the low latency, making available the easiest modes of recording, creating a pipeline that will compress and decompress data in sync with available bandwidth, etc.

Create your own space for growth. Do good, good will happen to you – take the case of Warby Parker which distributes free glasses to those in need, apart from selling quality, designer eyewear at affordable prices. It gets them huge brand equity, because there is a very unique story to tell – one that surpasses all costs of distributing those free glasses. It creates customer conversations, it creates brand innovation and it definitely creates revenue.

Create a product/service that is truly needed; not just one that will try to chase share in an already existent market.

Don’t Feel Shy of Highlighting Your Expertise

So you feel you have stumbled upon something new that the market needs? Good for you. But why is yours the only team that can do it? Maybe you might have some kickass coders, some brilliant marketers, a rainmaker from heaven, the best guy handling finances and the best VCs backing you.

So once again, please do tell your story. Don’t feel shy of telling the world how great you are. It’s a mistake that a lot of people make – they equate marketing of their individual expertise as boasting. It’s not.

Share Insights, Help People Decide

We are all here to buy and sell services/products and we all want to make informed decisions. Whether you are in the field of mobile technology or food, share your knowledge. Tell people what’s happening around the world, what are the latest improvements in technology, what are the latest trends in menu designs, why X is better than Y, or why customers should opt for Z.

Be the thought leader. Let your potential customers feel comfortable in the knowledge that you know your stuff. Let them feel sure that they are going to be investing in the right product/service.

This is not just about maintaining blogs, tweeting, or having an active Facebook page. Try to be out there at conferences, or if no one invites you, create mini audience-connect sessions of your own at the nearby café.

Ultimately, it’s about positioning your expertise in as helpful a way as possible.

Creative Execution – Flexible & Shareable

Creatively, you do need to go the entire path. The level of creative execution depends from sector to sector and story to story. Be careful about the visual identity and brand language that permeates all stages.

Communicate a single end-to-end experience. It’s very important to establish the mood in your creative execution that fits exactly the story you are trying to tell. Not any more, not any less.

Also, while crafting the creative strategy – think about the future and be careful while creating the story and positioning. You might want to add certain verticals to your business at a later date. In that case, the brand name that you choose, the logo that is designed and the communication that is drafted must leave enough leeway for the audience to connect with even your extended business line at a later date.

Needless to say, plan upfront with your agency, but keep the freedom to do something different. An elaborate storyboard might lock you into something, even if the final product is not in the right direction. That doesn’t mean you micro-manage the creative agency – some rough sketches before shoots work best but after that let their brilliance take over.

Creative content generated must be inspirational, aspirational and easily shareable. The last one is very important these days. Even your website must evoke the same emotions as your story and rest of the creative.

Lastly, of course, plan your campaign release well – media, timing, regions, etc.

What Should Uber’s Response Be?

I really don’t envy Uber’s management these days – especially the CEO and General Counsel. As in all brands, there’s a positioning game that you play for a short while by portraying yourself as a brash, fast growing, and arrogant, young company that really only cares about growth. But as a long-term, sustainable strategy it may not have enough legs – unless supported by plenty of checks and balances of, among other things, egos.

These headlines and the map (sourced from Bloomberg) will be giving the entire management some food for thought and hopefully, they will come up with a long-term measured response:

  • Uber Under Attack Around The Globe: Wall Street Journal
  • Uber Needs To Say More Than I’m Sorry: Marketplace.org
  • Uber In The Middle of A Social Media Whirlwind: Exchange4Media.com
  • Things Are Going Downhill Fast For Uber: TheDailyBeast.com
  • Uber Drivers Hit With Penalties: The West Australian
  • City of Portland Sues Uber: Forbes
  • Uber Under Pressure As More Bans & Lawsuits Loom: BBC
  • Uber’s Plot To Spy On Reporter Is Latest Controversy: USA Today
  • Chicago Police Investigating Allegations That Uber Driver Assaulted Female Customer: Chicago Tribune
  • Uber Driver In India, Accused Of Rape, Faces Other Charges: New York Times

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We are dealing with a company which has been valued at almost $40 billion recently. The least that the organization can do is own up to its shortcomings, raise its hands and apologize. But it should not just stop there. It should then start to clean up its act, change its business practices and very importantly, learn that each country is a different beast. In order to thrive, and not simply survive, it needs to take into account the dynamics of the host country.

It cannot be an action as farcical as British Petroleum changing its brand and logo BP.

Uber needs to invest some of that hot PE money into good crisis managers (not PR guys), especially given the pace at which it has grown. In countries like India, where there is a dearth of reliable data for its citizens, Uber must make that extra effort and invest in background checks & fix GPS trackers in cars. I’m sure it won’t cost the company even a fraction of the $1.2 billion it recently raised.

It might even be HUGE brand victory if they were to rethink their current Terms & Conditions which absolve them of any wrongdoing by the so-called “third party provider”. A protection, even a limited one, could act as a good service differentiator.

Now it’s up to the management to either get some good PR people to spin another story or to roll up their sleeves and go back to the market more humble, but equally confident & ambitious.

E-Groceries: Changing Consumer Behaviour

I recently read an article, which said, “Online grocery stores require large investments, deeper technology and complex supply chain. Hence it does not pose a wide start-up opportunity.” Since, I have had the opportunity of working very closely with some companies in this space, it set me thinking. To start with I don’t agree that this business does not pose a wide start-up opportunity. Same as in any emerging business, there are various models at work, which will get fine-tuned as time goes. But at the heart of it is achieving a change in consumer behaviour which will contribute to scale.

Yes, you need to have a strong technology backbone in order to process ordering, picking, packing & delivering, but that is not insurmountable. In many ways, technology has today become commoditized – in the sense that there are plenty of solutions that you can buy and tweak as per your requirements, or if you know a good techie or two, you can get it done on your own. And, if you are far-sighted enough you would have spent upfront on a technology that is scalable and hence requires minimal repeat spends as you grow.

At the heart of any business working or growing profitably is scale. Online grocery is no exception. But executing scale, while holding inventory, can be a stress on capital expenses. Imagine having to keep on adding warehouses at each location. The asset light model employs inventory management that procures stuff only when they have been ordered. In other words: Just-In-Time. Stock a tiny fraction of the fastest moving SKUs and pick from large wholesalers only what your current lot of orders requires. The same goes for perishables. You can instantly cut out not just warehouse cost, but also cost of large scale industrial-level air conditioning.

Supply chain is also something that is slightly more complicated in the case of an asset light model, compared to an inventory-based or offline model. But, there are ways to make it work right and it all boils down to scale. So even though you might not want to take the capital costs of the delivery infrastructure on your own books, you can sweat each inbound & outbound vehicle that much more as your scale grows. In fact, a mobile hub and spoke model is something that is being experimented with. You don’t really need to have tie-ups with offline store to be efficient. Yes, some big players are entering the market with that model, but they will have to work very hard to maintain consistent service levels across the entire network of offline stores.

While one would have to agree that most of the online grocery businesses have been city specific, these are only early days. I have no doubt that templates being set in one city are highly replicable in the next. Also, apart from the traditional arguments of overcoming inconvenience, a few of the biggest advantages of online grocery retailing are (1) Unlimited shelf space, leading to thousands of SKUs being available at no large real estate cost; (2) Ability to dynamically upsell and/or generate offers based on user profiles & past purchases; and (3) Ability to offer deliveries at any time of the day, as per the consumers’ preference (with so many double income households, late-night deliveries are now very prevalent). Yes, you have to be patient with any business in the beginning. This is a business which is disrupting consumer behaviour. In its current avatar, a lot of regular purchasers will obviously be the more savvy lot. But we’ve seen from other ecommerce models, that it didn’t take long for others to catch on.

Changing consumer behaviour was never easy, but it has always yielded good returns. Therefore, upfront costs on marketing & brand building are perhaps going to be much higher in the case of these organizations. But behaviour once changed, is tough to go back on. And when you combine that with a repeat-purchase habit like grocery shopping, it would only yield ever increasing volumes. Owning the consumer also leads to many other related revenue streams.

It’s still early days for the space. As in every emerging sector, not everyone might crack the model. But those who do would not only have made a lot of money for their investors, they would have created a completely new market. And that, to me, makes a suitable case for a start-up opportunity.

The Joy Of World Cup

Once every four years we get to witness the best sportsman that humankind has to offer, battling it out in an arena for the highest honors. No, I’m not talking about the Olympics. I’m talking about the FIFA World Cup. Yes, I’m a little biased towards football.

Anyway, the 2014 edition has seen several interesting things. For one, there was not a single draw in the first 11 games. Some of the smaller teams are playing with a lot of heart (just look at Costa Rica’s campaign opener against Uruguay). Two established names are already out of the tournament – Spain & England (However, why England’s ouster is no surprise, is something we’ll discuss in a bit). Portugal has been demolished by Germany. Chile have been playing like mountain lions rather than timid Andean llamas.

Let’s take the example of England in this edition. Their ouster has not come as much of a surprise to me. It’s a team that has consistently underperformed on the big stage for many years. They reached the last four, 24 years ago. Many mistake the vibrancy of the Premier League as being indicative of the state of English football. But the fact is that many of their good players are old. Lampard, Terry and Gerrard are possibly playing their last major international tournament. Rooney is not young anymore (at least by footballing standards). The young guns Welbeck, Sturridge and Sterling are inexperienced. Cahill and Jagielka cannot provide the fullback support that Ferdinand and Terry could. The vibrancy of the Premier League comes from the brilliant mix of foreign players (including those from other parts of the UK). Over the last many years, many stars have emerged – Henri, Ronaldo, Suarez, RVP, Giggs, Drogba, Oscar, Torres, Bale, Hazard, etc. And, by saying this I don’t mean that the Premier League should change in any form, because it provides a very solid platform for talent discovery and subjects each player (domestic and foreign) to a high level of performance.

But there are many games to follow. Brazil, Netherlands, Germany and Italy are still in it. It promises to be a very interesting 3 weeks ahead.

Is Dhoom 3 Indeed A 500 Crore Film?

Just stumbled upon a news article, as per a statement from Yash Raj Films: “Dhoom 3 continues to create history at both the Indian and Overseas Box Office. It is now officially the first Indian film to cross Rs 500 Crores Worldwide, making it the biggest motion picture event of all time!” You can read it here.

I do not refute that claim. But the numbers hide more than just a stellar movie. I would argue that it’s the inflation effect that has boosted the topline numbers for D3. You can read about higher ticket prices here.

Even if one were to assume conservatively that about 1 crore people watch an average blockbuster, priced at an average of Rs 100 per ticket, then that movie would gross about Rs 100 crore at the box office.

However, if we were to assume that movies which create a huge hype and hoopla before their launch, by burning a lot of marketing dollars, manage to raise footfalls by 1.5 times and average ticket price by 2x, then we are home. Of course, this is a simplistic calculation and one can argue pretzels around it, but the following table will illustrate this effect:

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As with any other project, it would be interesting to see the numbers at the operating level.

Facebook & LinkedIn Must Future-Proof Their Audience Demographics

Facebook must address poor traction in the 18-24 age group, else usage rates may drop sharply in a few years. Even if usage rates remain similar, it is simply leaving too much on the table for other audience aggregators to prey on (ie: share of advertising pie).

While optically LinkedIn seems to be suffering from the same issue, the argument is solid that it targets mid-career folks. However, even there LinkedIn could stand to “future-proof” itself by perhaps building upon college networks, thereby extending versatility.

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Social May Be Sexy, But Advertising Is Not Dead Yet

In my day-job, I identify and engage with organizations which are creating new conceptual businesses or redefining the market segment that they operate in. The end goal of this is to create a new leader / ‘superbrand’ in every category by virtue of investments in advertising.

However, therein lies the conundrum – is advertising alone enough to build a superbrand?

But first, let us be clear what a ‘superbrand’ is. Is it simply the brand that sells the most or advertises the most, has maximum recall? Or is it the one that sells the most without much advertising effort? Perhaps it’s the one that identifies an entire product or service category or maybe it’s merely the one that has been there, in your face, for the last dozens of years… Whatever it is – it could one or all or a mix of the parameters mentioned here – one thing is for sure; a superbrand is one that evokes a strong passion. It is a product or service that people flock to purely to see it, feel it, revel in its company, enrich their lives with it, and most of all spend a moment of their lives living it.

We are talking of winner take all markets. And these may not typically be built on the basis of advertising alone. The reason being advertising or any other above-the-line activity is practically a one-way street. You really don’t create the network externalities that are required for either mass adoption or mass reverence. The problem with depending solely on advertising is that after a point it creates dissonance. Unless a clever creative breaks the clutter, advertising alone can rarely cultivate large scale & long-term loyalty.

But yes, when you are setting out to creating a brand (with the ultimate goal of getting to be a superbrand) advertising is definitely an effective tool to encourage trials, inform people, and many of the other attendant benefits that we have all learnt in school.

However, one aspect holds true – access to deep pockets to fund high frequency & high impact advertising does create competitive barriers. It also causes competition to step up on the ad pedal themselves. But if you are the entrant with the deep pockets, you need to first sort keep your supply side geared up for bursts of new trials, you need to prime your communication to keep evolving as and when newer entrants take to the battlefield and you need build a strong dream for your stakeholders to buy in – both consumers and investors.

So yes, while many branding gurus will debate till the cows come home about the virtues of advertising vis-à-vis going social, I would say just one thing – one does not come at the cost of the other. If you are already higher up in the “branding curve”, I would say, by all means try other cost effective and viral methods of staying relevant because the marginal utility of above-the-line advertising would be very low. However, if you are an ambitious organization still in the commodity or quasi-brand level, you should perhaps start with advertising and habituate people into communicating with you on a daily basis.

What’s your view?

Tying In HR With Business Development

Human Resources is still finding its strategic bearings – especially in Indian media businesses. And till it does so, all companies will continue to suffer from mismatched skillsets with work profiles and hence, higher attrition rates.

Even as the rest of corporate India is moving ahead on this count, the HR department at most media houses remains more of a support/administrative outpost. It is because of this status that it doesn’t attract leaders who are practicing cutting edge personnel management.

In fact, HR’s role in business development is as critical as the business team’s. Talent management/sourcing along with other traditional functions like remuneration et al are important, but maybe some part of an HR team’s KRA should be tied in to the actionable outcome (ie: has the overall business grown or not).

Moreover, I feel that the HR-round of interview, which is deployed by most organizations as the first checkpoint, ends up being a formality and is sub-optimal use of resources. It may be effective in screening out junior level roles, but not when you are selecting candidates for mid-senior managerial posts. The reason is that the concerned HR person ends up mostly checking off a list of criteria without any macro/strategic outlook. So a candidate with huge strategic potential may get marginalized just because he/she doesn’t fit the boxes of “preferred experience”.

Of course, there are some other areas where there have been significant improvements in the recent past – employee training & re-skilling, addressing grievances & career counselling, among others.

Content Monetization

Monetizing content is more of an art rather than a science. That’s because content appeals to the cognitive senses of a person rather than logical and analytical. I’m sure there is an equally competent counter-view to this. One might say that entertainment content appeals to softer senses and factual content to the harder senses. But my submission is that content – whether fiction of non-fiction – is consumed from the prism of being exposed to new ideas, thoughts, being entertained and being able to absorb a fresh perspective that will enable the person to transact his/her life with peers.

So getting back to the monetization bit – Engagement and making a difference to people’s lives get you quality viewers and the same also encourages sticky content. So even though a channel may log huge GRPs week-in week-out and have a hoard of advertisers knocking on its doors, would it be better to have sharper segmentation and programming that’s amenable to engagement (ATL/BTL/Online/Offline) in order to have a more efficient spend-GRP ratio. Advertisers go back happy having reached audiences in a more meaningful way, audiences go back more enriched having been reached by content & ads in less superficial ways.

The questions to ask while creating such a marketing/positioning strategy are – What can bring about a change in consumption pattern – not only from the point of viewing/interacting with the channel, but also in the viewer’s own life choices. What can expand the advertiser pie beyond the traditional ones? Is it a wise idea to have to the same content across a spectrum of audiences on-air, online and offline?

Each content re-purposing can act as a marketing statement and each content re-purposing can help an advertiser reach a new set of audience. The sum of the parts of really engaged audiences will be larger and the probability of them buying your advertisers’ products will also be higher.

For instance, are your viewers switching channels during ad-breaks? Are they recording the programming and skipping the ads? Are they ignoring the banner ads? Yes? Can you take away the choice from them? Yes! How about digital product placements as per the nature of content re-purposing? So if your soap has a protagonist sipping a glass of water in its original version, a digital edit for on-air purpose can have him sipping a glass of Coke, a re-purposed clip on your Facebook feed can have him drinking Sprite or Red Bull… The choice is limitless and the technology is available.

This is very different from traditional product placements in that editors can drop whatever they like, wherever they like, into programmes or films during post-production.

Digital placement firm MirriAd is cashing in on this trend. To quote Mark Popkiewicz in a recent BBC article (full details here): “These are not just logos, they can be video, signage and products, even cars… When brands are integrated they are placed in such a way so it is clear to the audience that they were always there and are part of the scene. For example beverages are placed as open cans or bottles with glasses containing the beverage alongside – that way they look like they are being consumed… The technology is capable of placing or replacing moving objects and even replacing products being handled by actors like mobile phones… Early trials show almost double the engagements of traditional campaigns… This is because when a consumer watches a show they are not defensive against advertising as they might be with advertising online or commercials on TV – they are in receive mode and are not blocking.”

This is just one of the strategies that one can use. Similarly, there are umpteen things that can be done to increase engagement offline, serve up content at places where your target audience socialize, constantly contextualize content as per changing trends, etc. What are your views? Eager to hear them!

How To Build Businesses Out Of Thin Air?

Can a business be built on bare-bones capital requirement, yet is profitable, scalable and captures emerging trends?

Many companies have been able to do so – at least in the initial stages (think any of the dotcoms that have today become huge valuation games). But once they grow out of the initial stages, the costs start catching up. Conversely, there are equal examples of companies that have incurred high initial costs (even for many years) but have now evolved high margin business units that practically run large annuity businesses with almost all if being free cash flow (think of the Disneys, Virgins and luxury brands).

One such business philosophy that comes to mind is brand licensing. First, you need to have a strong trend to capitalize on; one which will change consumption patterns. Next, you should have the ability to incur an initial period of high costs related to brand creation, brand establishment, product making, distribution, etc. However, once the brand saliency has been established in the market, the capital costs can be cut drastically and the brand could be extended both horizontally and vertically.

This way, the risk of manufacturing, selling and marketing rests with the licensee, and the licensor can earn steady cash flow. But one needs to ensure that the brand is being extended into correct categories & price points, that the licensee’s ethos matches that of the licensor and that the investment in marketing & branding continues unabated.

There are many attendant intricacies, but I shall leave those for another day. For now, I need to go to the drawing board and see if I can rustle up a viable plan.