Category Archives: Corporate

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.

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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

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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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.

Fundamentals Of A Good Business Plan

In my line of work, clients, business partners and prospects often ask me what a good business plan looks like. I don’t have a straight answer to that because each business, each category and each industry has its own idiosyncrasies and it’s hard for me to generalize. I’m sure that I could offer a standardized answer if I put my mind to it, but I like to feel my way into engagements rather than check off items on an objective list of things-to-be-done.

My work is a delightful mix of business development, strategy consulting, category creation, market expansion, brand management, forging partnerships, financial analysis, and portfolio management. All of it becomes even more exciting given that I am not constrained by any sectors. Hence, my belief in co-creating businesses by fusing my lateral experiences with the vision & mission of the entrepreneur.

Very often the most basic issue with business plans is that owners fall in love with their product and/or ideas so much that they fail to justify the existence of the business from the prism of an investor. And that’s very crucial. There’s nothing wrong in really believing in your business, but one should always strive to answer a few critical questions:

What unmet needs are being addressed? Why now? And, what is really different?

There are many I’ve met who believe that their product/service is the best or first of its kind or not replicable. But what is the main customer pain point that you are addressing and is the time ripe for it? Many businesses die an early death simply because they are ahead of their times, or because an ecosystem to support the business or expand the market has not matured adequately. For instance, online grocery shopping may not have worked in India five years ago, but today with technology, logistics, payment mechanisms in place it seems to be a viable method.

However, the toughest part, and the one that requires maximum attention, is to identify the one or two strongest customer propositions. This is what defines your business in the market place; this is what your entire business strategy will be based on; this is what each and every employee in the organization will align towards.

Do you understand the chosen industry and competitors well?

Are you trying to be an entrepreneur because it’s sexy to be one, or are you entering this having done the necessary research? Passion is important, but that alone doesn’t pay the bills. It goes without saying that unless you do understand the forces at play, the outcome will at best be mediocre. Will you be able to both open up a new market/category and sustain market share? Or will you be the guy who opens the market, educates the audience, only to see others with deep pockets rush in and edge you out?

What are the key factors that will keep the business in business?

You obviously know where the revenues will come from and may have even formed very scientific assumptions to predict future revenues & costs, but you might have to consider every tangible and intangible aspect that will keep you going. You need to be adaptable to evolving needs; in fact you should be able to proactively cause people to change their needs & habits. That’s a very important skill. For example, if you are a healthcare company, are you going to choose only the unwell as your target client, or do you want to inculcate a habit of regular check-ups among the larger population and thereby create a much larger catchment area for yourself. Similarly, you should be aware of how government policies can affect you, what wind is blowing politically and how that could shape the policy environment. Is your universe of target audience expanding or shrinking; and what adjacencies to explore?

Do you understand your potential investor?

The potential investor is probably reviewing several plans simultaneously. She/he may not have the time to do detailed research on the businesses at this early a stage. So try to present her/him with as many relevant information nuggets as possible, with due reference. If you are presenting a certain market size & dynamics and you got the numbers from Report XYZ; please do mention – after all you don’t want anyone to think that those numbers were pulled out of thin air. Tell the investor why you are the right person to back, who are the others that take decisions in your company and what are their backgrounds. Support your financial projections with rational assumptions and go into as much detail as possible.

And don’t forget the most important aspect that any potential investor looks at – a successful exit. Every investor will want to engage with a player who has a definite plan to provide an exit – whether through buybacks, IPO, trade sale. So it comes to 3 things: Ability to Scale, Ability to Execute and Ability to Exit.

The list can go on, but the fact is that a well-researched business plan, that showcases the entrepreneur’s passion and gumption, always wins. The trick is to tell a compelling story, grounded in rationality, which excites everyone!

What Job Does Your Content Do?

We as humans like to optimize the utilization of our time. That could mean catching up on news on your mobile phone while commuting or watching a game on your tablet or buying a book of short stories because you feel you don’t have much time or even taking a nap on your way back from work. It is these “jobs to be done” that cause folks to look for a solution, and when they find one, they buy it or hire its services.

This is relevant for content businesses. How is the consumption pattern of viewers/readers changing with evolving technology? Let’s take the example of television– for a large portion of Indian population this is still the first port of call, but that’s fast changing as smartphones make deeper inroads and feature phones get smarter, or even as the number of available channels swells. In a household where the TV is being shared by at least 4 other members of the family, mastering the nuances of programming is of paramount importance for a television station.

For example, news in India is consumed more by adult male audiences and it therefore might make sense for news channels to target such a viewer at a time when he has higher chances access to the TV. Because let’s face it, prime time news at 9 pm often loses out to the entertainment demands of the rest of the family. Maybe news prime time should be shifted either before or after the entertainment one.

Breakfast programming, which is a well-established genre overseas, is only picking up in India. And to my mind, this could be a good way to address a “job to be done” by helping arm people, stepping out for their workday, with all the information they could need – their choice of information could differ, but that’s why we have so many different channels.

So is the need to address the new age viewer through different delivery platforms and re-purpose the content for that. In simpler words, can a news nugget that’s 2-3 minutes long be delivered via mobile apps and social media links, every few hours?  That addresses the “job to be done” as well as ability to complete that job with as little hassle and commitment as possible. If a channel can reach out to more people more often and help them fulfill their need for a quick doze of information, I bet the effort would be worth it.

Interestingly, the entertainment industry addresses this very seamlessly, where they make short capsules of soap episodes.

So instead of channels fighting fierce battles to gain rating points, there could be a way to garner market share through co-option & co-creation. In short, look at what is the job that your content needs to do in order to enrich the viewer’s life. Because contrary to what market research tries to justify, humans are complex creatures who don’t necessarily watch a particular television channel just because they happen to be a certain age, working in a certain industry and belonging to a certain socio-economic class.

It may not be a “winner take all” scenario, but the increase in the pie size would compensate for that. For more on “jobs to be done”, go here.