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Interview with Sridhar Vembu, CEO of Zoho

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Barcamp Delhi 6th Edition 28 Feb-1Mar

A chief event of life is the day in which we have encountered a mind that startled us.  Ralph Waldo Emerson

Yes, barcamp is back. Today I attended Barcamp6  held at MDI Gurgoan. This is my 3rd barcamp and I would like to thank organisers for this well done event. 

Reaching MDI was not a problem (as I tought it might would be) as DTC bus droped me just in  front gate of MDI. Arrangement was good except that we had very few chairs in hall 1. 100 something people turned up for the event. As always we had assorted audience including blogger, hackers, techies, geeks, educationist, lawyers, invetors, bankers and wannbe entrepreneur.

I attended  many sessions. First one was on scaling web application by Directi guys. It was very comprehensive and and useful. Second one was on Open source software development by Mir Azim who is a runing a 8 people startup called iKraft Software  from Srinagar. He shared his experience on how to pitch your open source software company to your client. Very useful session. I do attend other sessions but I had to skip part of them to attend other session runing in parallel. I listen to Depeek Shenoy’s views on recessions. He looked very pessimistic about current financial situation.

I got opporttunty to talk with Amit Gupta product manager at Makaan.com a real state classified portal. We talked on possiblities of innovation and delivering  complete real state management services to end users.

But what impressed me most was this gal Rashmi Gupta. She is 3rd year ECE engineering student She came from Patiala to attend this event and to get inputs for her startup flyingminds. Full of enthusiasm, passion and energy she shared her startup ideas with us and we had a very interactive session on how she may  go about executing her idea.  I was companied by Avinash (mind behind Routeguru) who shared his views on same. As I said earlier in my OCC meet post this is a huge change in attitude of indian youth who no longer looking for safe harbours and fat salary and is ready to take calculated risk and  exploring  his/her own ideas. I wish her good look for her venture.

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Social Networks : Business models and monetization

Social networks are plenty and in past few years  they have grown both horizontally from dynamic user groups to platforms and vertically from  social networks for gays and lesbians to  invitation only groups for social elites.

Social networks are  hugely succesful in India too. According to latest data from camScore indian social networks have grown 50 % in the year 2007-08. Moreover  majority of web users are now social networkers.

india-social-networks-stats

But despite this phenomenal  adaptation of SNs idea , social networks are  loosing  more money  then they make for their investors.

This post is my attempt to understand the whole social network monetisation problems and related  issues.

Social networks are used as marketing and branding  media  and make money through advertising  same way as TV, Radio, Newspaper  does. This way  advertisiding drives the form and functions of social networks. Social networks have to cater needs of two different parties, the actual  user, who want to use them as they wish to with minimum  interference  from anyone incling owners and advertiser who pay for runing the show and what users to behave in curtain way. This create a disconnect between interest of parties involved and there a contest going on between user and advertisers where social network trying to balance the  needs of both  parties.

Social network are new kind of media  in advertising industry and do not enjoy same level acceptence and trust among media buyers  as enjoyed by TV & newspapers. They are yet to prove their effectiveness and metrics used to evaluate thier effectiveness are evolving.

Other challenges involoved in monetizsing are related to very nature of social network. For exampl most of the network rely on user generated content where social network have very limited freedom to play with content. Most of the user activities are action oriented like writing on wall, poking friends, sending sms and hence  provided little space for text/display adversting model. Users are agnostic to any significant changes in social network structure and forms done to suit the  needs and requirements of advertisers. Attempts to sell/use user information to third party resulted  in backlashs and there is increasing awareness among users about privacy related issues. Many user privacy watchdogs  are seeking change in privacy policies of  social networks.

Below is more detailed  analysis of two major issues related to monetisation of  Social networks.

1. Low CPM  or Unsuitable metrics – CPM may not be the best indicator of social network analysis

Lookery, an ad network specializing in social media, offers display ads on MySpace, Facebook, and Bebo for only 13 cents per thousand times the ad is served (CPM); Yahoo’s average CPM is estimated at $13. Video ads on MySpace reportedly fetch just $25 per thousand showings; CBS charges $50 on affiliated sites, NBC as much as $75. (Source)

Next question will be  is why SN have low CPM . The reason is that most social network reply soley on advertising revenue.

Regardless of the model (CPM, CPC, CPA), advertisers value three key measures: reach, frequency, and targeting. Many social media sites certainly score high on reach and frequency, but how do they fare on targeting? Targeting is key, because it determines the CPM rates advertisers are willing to pay. And CPM rates vary very widely: from $16-20 for TripAdvisor to $0.10 for Facebook and MySpace. See, for example, this media plan. (Source)

There is another dimention to low CPM for social networks which is quite counterintutive.

The assumption is that if users are worth money, then more users are worth more money. Theoretically, an infinite number of users are worth an infinite amount of money. It’s simply not true.

There is a point of diminishing returns in Web advertising. Enormous traffic creates a glut of inventory, which inevitably drives the value of ads down. The most highly valued inventory on the Web is branded, high-quality media content. It’s valuable because the content projects value onto the advertiser. When Target advertises on MTV.com, the brand benefits from MTV’s youth-oriented content, giving the brand a youthful shine. In contrast, utility inventory lacks the compelling context that advertisers need to help build identity and image, and in many cases may include negative images. The result is that advertisers have no cause to align their brands with products like Social Networks. Unlimited inventory and negative brand association is a perfect storm for low CPMs.(Source)

Extra : Here is interesting explanations and maths that is involved in calcauting CPM

2. User behaviour

Both  social network & advertsier would like to use datamining techniews to target there advertsing to improve their CPM . But this leds to problems related to privacy fo user information . User behaviour give  different challenges to social network. On social networks, people are primarily concerned with communicating with their friends, not looking to buy items or services. Moreover when marketers try to shake things up, users don’t take kindly to major changes. There are issues related to trust and privacy of user infomation and this lack of trust is mutual.

the fundamental problem that social networks face when trying to monetize through an advertising-driven business model is the lack of trust.  To be more explicit, while brand advertisers have historically trusted people as consumers, they do not trust them in the new role of producer (e.g. uncontrollable content).  Likewise, people who are armed with the power of interactivity are also demonstrating that they are increasingly distrustful of brand advertisers (e.g. ad-skipping).(Source)

I come across few exellent presentations related  to subject. Here are two of them

In the next post I will look for solutions that are been tried to resolve problems mentions above  and will  do some analysis on  how successful are  they in generating revenue for companies. I would  also like to cover  indian  social networks are trying to resolve monetization conundrum

Extra:  Social Networking Is Not a Business* ( Technology review – registration required)

Update : There is change of priorities  in professional and career side and due lack  of time to research I am finishing this article here.

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OCC Delhi Meet Jan09

I never tried drugs but I doubt they if they could be as intoxicating as talking with  a bunch of passionate wannepreneurs ( wannabee entrepreneurs) and hackers on a lazy Saturday evening.

Ok, may be that was a   little hyperbolic analogy , but I think  it very well  sumup experience I had in  OCC  meet last Saturday, where I  joined  7 other wannepreneurs to talk on topics ranging from  busines model in startups to startup ecosystem in India.

First  thing that draw  my attention  was the  confidence and enthusiasm displayed  by first year undergraduate students  (Akhshay and Apoorv). I was  impressed with their strong understanding of web and passionate  interest in startups ( doing own stuff ,  own way) . There is a revolutionary change in the attitude  of young graduates. At my time the only objective of graduating candidate was to work as hard as possible to get straight A’ ( a honors degree to be precise) and then hunt for highest paying  ‘MNC’ job. At that time nobody even talk about doing startups. And here is these guys talking RoR and startups in the very first year of ther graduation. 

Another thing that I find rather unique and interesting  was  their agnostic attitude  toward ‘business’ part of startup. They were representing   first crop of true indian hacker who love coding amd creating  cool programs and who  are least bothered about  job or money. This  herald a sea change in Indian startup ecosystem in next couple of years.

We were join by an veteran entrepeur from Nepal , Ujwal Thapa, who is managing his web business in Nepal from past 7 years. He is looking for  partners  to expand is bussines in Delhi. Talking like a sage he kept  conversation grounded and shared some really inspiration stuff on entrepreneurs and entrepreneurship.

There were three  guys who left there secured job this month (yeah you wanted to know  if this is the right time to start a venture. Now you know, it is 🙂 ) to start their venture. Ajay and  two of his friends are all set to start  a new venture in real estate domain. Atul is looking forward to do a startup in education domain.

Quotable quotes:

“Entrepreneur are crazy people. We do not do stuff just for money. We do startups becoz it  is the only thing we understand and love doing. Nobody understand this  including our  family and friends.”                                                  

Ujwal Thapa

“Life is short and we live once so lets do things we love. ”   

 Ujwal Thapa

“In internet business we first build product and then build business around this. This is how facebook got created ”

Apoorv Khatreja

“Business main thoda baoot compromise to chalta hai.”       

Atul kumar Bucha

“Indian startup community is growing at very  fast rate  specially in banglore. If you have right idea and right team you can get angel and VC money”                                                         

  Ajay Yadav.

“You can start a business with passion and idea. Money may not come into mind as motivator. But when you have 100 people working for you and who depend on you and your startup ‘s survival, ‘business’ part of startup kicks in”                                               

Manish Malik

“Why you are so much into money and business. lets create stuff we like. Business will come later”

Akshay Gupta

 

Venue : CCD  (in front of sindhia house) ,Connaught place Delhi

Date & Time :  31 Jan  4.30 – 7.30 PM  

Agenda : Indian startup community, Web (business +models)

Participants

Manish Malik   Product Manager @Mobisoc   www.mobisoc.com

Ujawal Thapa  7+ year vetern runnning web business from Nepal. Looking for alliance  in Delhi to bring some of the web  business in India.

Ajay Yadav NSIT 2007, Trilogy, FlightRaja. Left job this month to start own web startup  in real estate business domain.

Akshay Gupta   First year CS student @ MSIT  and wannabe hacker.

Apoorv Khatreja First year IT student @DCE. Web developer and wannabe  hacker.

Atul Kumar Bucha  software Engineer @ Aricent Looking forward to start own venture in education domain.

Satpal Parmar  (yeah that me).

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Friendster story and lessons

Gary Rivlin at the New York Times  his written great piece on Friendster. This could be considered as  best overview yet of the terrific bungle of social networking company,which sparked the social networking revolution by allowing friends to hook up with others.

It is a great tale of how Jonathan Abrams started the site as a way to get a few dates, turned down a $30M buyout offer from Google (which would be worth around $1B in GOOG stock today), and opted to raise VC money from John Doerr of Kleiner Perkins and Bob Kagle of Benchmark — trying to create the next big thing.

Friendster had everything a “dream Start-up” seek.Great idea, first mover advantage, was backed by best VCs the  in market.All this  failed to make Friendster  a “success “. 

Friendster story tells us many thing  us we should do as well as few we should we should not do.It tell us about role  managment team play in success of a venture.It tell us  how important  its that we use and believe  in the product we create.Focus is crucial as we grow and CEO and managment arrogance can kill  grand product in no time.

Friendster make a great case study for all aspiring WEB 2.0 enterpreneurs as we all know failure store more lessons for  us then a success.

Here is a interesting discussion about Friendster  story on Techcrunch.

Source:New York Times.
 

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Marketing in Internet Era

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How to Build a Web 2.0 Technology Startup

I find this pithy artical on net. Its quite relevent and to the point.

The recent wave of Web 2.0 technology products is an indicator of today’s entrepreneurial vitality. Log onto Techcrunch, and you’ll likely see new several startups forming every day. Yet, there’s one continual theme you notice in every Web 2.0 startup: most technology startups haven’t opened their doors for the public.

Worse, grand opening announcements won’t come until several months later–if even that.
The problem with starting late? It delays those Web 2.0 startup companies from laying firm foundations for their companies. No, not their products, but the intangibles: professional connections, public inquiries, media relations, and whatnot. Most importantly, it stalls cultivating relationships with initial customers.

What should you do if you’re starting a Web 2.0 technology startup? If you’re planning on building an actual business, and not just selling out a product, here’s what we recommend:

Seek passion first. Profits, second.

Stop what you’re doing (or what you plan to do). Are you passionate about it? Do you live and breathe the idea, as if you were born to do it? It’s not just an opportunity, is it? The biggest crime we see entrepreneurs make involves jumping from opportunity to opportunity, thinking the next great idea exists in a specific industry. Then they fall prey to what we see as the entrepreneurial trap: they jump shark to the next “great” opportunity. Who can blame them? Sophomoric business books flaunt market opportunity.

Here’s two reasons why that’s total BS: First, what if a “greater” opportunity comes up afterward? You know it’ll happen. Will you jump shark? Probably.

Second: jumping from the next “great opportunity” will never augment your strengths. You’ll continually go to and fro, never finding a clear sense of direction, never building on top of the foundation you’ve pieced together. Instead, you’ll be like a bungling contractor — having good skills in various areas, but never seeking greatness.

Greatness lies not in finding and profiting from a great opportunity. Greatness lies in continually, repeatedly, and consistently enhancing your strenghts.

Michael Jordan wouldn’t be the most envious athlete if he had jumped over to Boxing in the 70s, Roller Derby in the 80s, Indy Racing in the 90s, and Poker in the 2000s. You shouldn’t jump at the next great opportunity as well.

Instead do this: Where does your passion lie? After living a good number of decades on this planet, a passion of some sort is already ingrained in you. Cultivate it.
Once you seek your passion, you’ll find new and greater opportunities popping up. Paradox indeed. Harvard’s Amar Bhide contends about successful startups: “once they are in the flow of business, opportunities often turn up that they would not have seen had they waited for the big idea.”

If you’re not passionate about what you do, you’re in the wrong line of business.
First, find your passion. Then, start building.

Start early. Get something out.

Once you find your passion, do something that relates to it that can give you good and steady cash flow.
Forget business plans. Forget finding the “perfect” idea. Instead, see cashflow as the king of your new Web 2.0 company. It’s your startup’s blood, and only source for survival. Most startups forget this. They believe they’ll wait until their final product comes to fruition, and then reap rewards.

The brutal facts? It’s far less than 5% likely that the product will achieve what the founder envisioned. Most startup businesses that succeeded, as a Harvard study indicates, didn’t leave all their eggs in one basket. Instead, they experimented with smaller projects. Once those succeeded, they exploited the momentum by building higher-cost products. The important cashflow, of course, kept them afloat.

Harvard’s Amar Bhide: “Get operational quickly. Bootstrappers don’t mind starting with a copycat idea targeted to a small market. Often that approach works well. Imitation saves the costs of market research, and the start-up entering a small market is unlikely to face competition from large, established companies.”

Forget being perfect.

You will fail. That’s okay. As you’re starting your Web 2.0 Startup, know this: Perfection kills progression. Failures fuel creativity; that is, of course, you don’t give up. Learn to fail. Failing is good. It drives you to understand where possibilities and opportunities exist.
For every major success you see, the media forgot to report the one thousand failures from the same person. While other Web 2.0 entrepreneurs are fearing failures and quitting because of it, you’re not. You see failures as a natural part of building a startup. You see failures as something others don’t: a driver to that next successful product.

Experiment!

If you forget perfection, you’ll open your doors to experimentation — the secret sauce for the most innovative companies. In the business world, you’ll learn that you can’t plan for anything. A million-dollar idea (in your mind, anyway) could very well bomb.

Media reports hailed the Segway as the next great thing. It was supposed to transform roads. It didn’t. It sucked, and venture capitalists no doubt regret their blunders. On the flipside, an invention appearing out of the blue might — just — net you a million dollars. Think eBay, Yahoo, Google, etc. etc.. The point? Ideas aren’t formed from thoughtful analysis. It’s formed from experimenting, and trying different things.

Learn to use the law of probability to help you.
Say one product has a 10% success rate. Then, getting one success out of two experimental products is 32% (i.e. 10% * 10%). Five experiments? 63%. The more you experiment, the greater your chance for success.

Forget product features. Seek purposeful innovation.

Having fun experimenting with all the new Web 2.0 features? Stop! Forget tagging, curvy corners, AJAX and all the other BS just for the sake having them. Just because others are doing it. Just because they say it’s essential for Web 2.0. Just because.
Technology products are built for humans. If you want to build the next great Web 2.0 product, ignore what people are doing on TechCrunch. Instead, spend your time understanding the human brain. Know people’s motivations. Understand their desires.
Abraham Maslow. That’s a start.Once you understand humans, you’ll understand precisely what Web 2.0 features you’ll need for your intended product.You will not see the next great technology company as the most innovative user of Ruby on Rails. Instead, the next great Web 2.0 Technology Startup will understand and cultivate human desires.

Cultivate early customers.

A Web 2.0 Technology Startup without a blog is a startup without a compass. Like Magellan, you’ll need a direction to steer your company. A blog helps you cultivate your first customer relationships, gives you important feedback on product wants/not-wants, and quickens the product development process.
Sure, you can get by without a blog. But, understand that every company needs its early adopters. We’ve found blogs to be the best way of doing that.

Have fun.

Yeah, all too-good-to-be-true success stories tell you to have fun. And, we’re not arguing with that sentiment. We feel entrepreneurs have the most exciting and adventurous career paths. It should also be the most enjoyable.

Please, have fun!

One final thought: In one hundred years, you won’t take your Web 2.0 startup money with you. Start leaving an imprint, a legacy that continually affects and consistently improves the lives of your surrounding communities.
And, world.
Word to your mother.

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