Tuesday, 21 August 2012

SoLoMo: Creating value at the three-way intersection

Guest article I wrote recently for NASSCOM. Also available here

Blurb: Social, Mobile, Local – these three areas are the honeycombs around which there is a buzz of activity in the start-up space. Nishant Verman of Canaan Partners looks at how SoMoLo start-ups can create value for their companies and get investors to stop and take notice.

SoLoMo: Creating value at the three-way intersection

Today there are 50 million Facebook users in India. Of the total 900 million mobile subscriber base, 27+ million Indians use a smartphone, and this segment is growing rapidly. These are staggering numbers and present new opportunities to build a hyper-connected, personalized and highly interactive user experience – something that was not possible even a year ago.

In the past access to a large user base and ability to acquire those users cost-effectively have been key challenges for startups. The 50 million people on Facebook are a tremendous opportunity to target a highly engaged, affluent and connected group of users. These users are more likely to experiment with new services and even transact online. However, today their usage is limited to posting status updates and playing farming games. Western markets have many other social and professional networks – alumni societies, professional organizations, review sites, and even Twitter. In India many of these have yet to be created – and Facebook’s critical mass makes it a good choice for this.

Mobile is a long running story, starting with rapid penetration of voice calling services in the ‘90s. To drive adoption, calling rates were slashed, devices became cheaper and 900 million subscribers later the entire industry started losing money. Now the rules of the game have changed – today’s phones are powerful devices with rich media capabilities, the data pipe has become fat and more reliable, and distribution is getting decentralized from the operator to app stores. Payments continue to be a bottleneck, but this issue is getting resolved through operators who provide billing services and as well as through uptake of electronic payments.

The focus on ‘local’ started with retailer information getting captured in yellow pages. Later this database moved online to make searching more convenient. Today local holds the greatest promise as it integrates both social and mobile to create a dramatically new user experience. Consider the common scenario of a user sampling a new Chinese restaurant in the neighborhood. Previously one would rely on mailers in the newspaper, or searching online for restaurants in the area. Now a user’s phone can show the top 3 Chinese restaurants that are highly rated by their social network within a 5 km radius of his or her location. Or show merchants who are offering a 15% off coupon to potential customers in the vicinity.  Clearly there is a tremendous opportunity to innovate here!

So if you’re a SoLoMo startup, how do you create value for your users? And what might make you stand out in the mind of potential investors?

1.       No space for me-too: Though this space is nascent in India, there is no doubt that many plays in the mobile and especially social space will be global. So the “Facebook of India” will be Facebook! There is limited space to create a new network and expect users to sign up just because it’s “made in India”. Rather figure out what India-specific application might users be looking for – from social wedding photo sharing to social commerce.

2.       Think about monetization, worry about engagement: We are in the first innings of SoLoMo, therefore having the long-term vision and near-term focus will be critical to survival. For example, since payment mechanisms on mobile are still getting sorted out, don’t let them be a roadblock to scaling up. Rather have a long-term plan around how you might eventually monetize and why would users pay you. In the near-term prioritize engagement – is usage increasing across different cohorts of users? If built right you should eventually be able pick a business model to convert this engagement into revenues – through advertising, ecommerce, subscription etc. 

3.       Go deep with metrics: Mobile lends itself to micro tracking of metrics – everything from number of downloads to minutes of usage and most used features. With social connect, factors like virality coefficient and cycle time become critical to driving exponential user growth. Tracking metrics will enable you to understand user preferences and shape your product accordingly, as well show early traction to potential investors.

4.       Experience is everything:  User experience has never been as critical as it becomes on a 3 inch screen with a tiny keyboard. Each key stroke and swipe needs to be thought through to make the user experience smoother. Remember that one of every four apps is used only once after download – therefore tightly controlling the user experience will make sure that you don’t push your users away. 

Today we are at a cusp of the next major revolution in consumer computing – brought about by the fusion of social, mobile and local. Historically such transitions have occurred at an accelerating phase – few decades for PC penetration, rise of the Internet in few years and more recently adoption of smartphones in few quarters. In the case of SoLoMo it is clear that time for rapid adoption will be measured in years and months, not decades or quarters. The time to start innovating is today, to prepare for the tremendous opportunity ahead of us. Full speed ahead!

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