Why are tech firms buying out smaller start-ups?

Consolidation in the technology space. It’s happening. Much has been said, heard and analysed when it comes to the recent Whatsapp acquisition by Facebook. Valuations were being tossed around and here’s an interesting graphic on whether it was worth $19 billion to start with. That being said, i’m looking at bigger forces at play in the technology space. As textbook economics will tell you, consolidation is a phase that kicks in mature markets when the big players begin to swallow the smaller and more active ones up.

Acquisitions have been happening for quite sometime now. But some of the interesting one’s in recent times have been Google buying Motorola and then selling it off to Lenovo. Microsoft buying out Nokia and they did give in to market pressures by releasing an Android phone just yesterday at the Mobile World Congress’14. Microsoft also bought Skype nearly a year back and killed its own messenger. Software firms have been increasingly snapping up hardware companies. It’s clearly about building capabilities to have more integrated software and hardware. Apple has been doing this for decades with a very closely knit user interface that has been winning customers over for years. Pretty much like them, the other companies are also trying to tightly integrate services to have the customers locked in for longer period of time. Look at Google, that is trying to foray in to nearly every possible nook of our life as it builds its inventory for the internet of things. You’re using maps, gmail, search and docs for starters. As any marketeer will tell you, its always cheaper to retain customers than to go out and acquire new ones.

Here’s a drill-down of what i think about the entire consolidation bit:

1. Customer stickiness: Companies want customers to buy a product and integrate it so tightly that they are unable to breakout.

2. Eat the competition: As start-ups have more breathing room and flexibility for innovation, let them build great products as the big cats will swallow them up to eventually kill the competition if any.

3. M&A industry: Who else is laughing all the way to the bank? Consulting firms. In fact software acquisitions made up nearly half of the deal value in this space as per PwC.

4. Increasing usage: Big tech players are always looking for means to increase usage and as Metcalf’s law says, the value of any network lies in the number of connected users on it. Hence you see why software services have been aggressively merging or finding new ways of driving usage for their platforms.

5. Start-ups don’t always need an IPO: It’s increasingly difficult for a small company to go public and put itself under the scanner. Investors and analysts will slice and dice not only excel spreadsheets but also any single move that key people make. By cashing out and selling themselves to a larger firm, they can avoid all the pain. All of this when they might have not even achieved the vision they started out with.

6. Hide failures better: The chances of a start-up making it big are rather slim. In fact, the odds seem to be against them. Once they have generated enough buzz and got a fancy valuation. The small fish can then afford to dissolve in the system and chances are if they were going to fail, little would anyone get to know about it.

With all of this in place, we can only hope for better products and services. While some of these partnerships may have benefited the firms, what remains to be seen is how innovative they can really get. For now, the entire space has become a playground for many small firms to pitch their products and see how quickly they can go to market or gain more funding. At the end, the customer stands to benefit the most from this!

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*Image source: Flickr (labelled for reuse)

Insight: The New Face of Marketing

I was excited to be a part of the thought leadership event organised by the ITSMA with InformationWeek as the media partner. Knowing that this one was positioned to give out insights on where marketing is headed had me more curious about what was the discussion going to be like. There was a good mix of representatives from several IT firms and its always great to be in a room full of marketeers!

The event started off with a session by Dave Munn, who elaborated on the top priorities for marketeers. Interesting stats shared indicated that only 9% of CEOs actually use marketing data. But, on the whole the perception of marketing has improved for this year as nearly 78% of the audience they survey voted in favor, 20% had the same view and only 2% had a lowered perception. Now, that is the challenge i see whenever i’m talking to any other function. Marketing always needs to emphasize on the value they are driving for other business units/functions. Some of the top priorities for marketeers this year are:

1. Building thought leadership & dissemination of the content created for this

2. Managing brand reputation

3. Aligning sales & marketing

In terms of the budget being allocated for marketing, content creation took the top spot. For digital marketing the priority of allocating monies was: Website, Search, Online Advertising, Online Communities & Social Media. Digital marketing was also one of the key marketing areas that saw an increase in budget allocation. Most of this was taken out of the cuts in sponsorship,  direct mailers, advertising or public shows. A remarkable point was that nearly 25% of the overall marketing budget goes out to external agencies as fees/payments. Dave also listed the 5 mandates for marketing this year:

1. Measure & communicate metrics: Its important for marketing to contribute to business outcomes & provide predictive insight.

2. Become data & technology frontrunners: Invest in skills, build omnichannel marketing, foster the potential of data & analytics and lastly increase awareness with the c-suite.

3. Improve relevance & personalisation for the customer: Track for insights, provide customised marketing and make use of personas. This involves rendering different treatment when you talk to CMOs/CFOs/CIOs.

4. Enable thought leadership selling: Use sales teams to provide insight about client needs, enagagements and discuss challenges with marketing. Marketing also needs to manage & train SME’s to increase the awareness of our offering.

5. Build adaptive culture in marketing: Marketing needs to be proactive & collaborate within the functions. Companies should build a reward based culture to value business contribution from marketing.

The later session by Ramkumar Ramamoorthy was also rich in terms of the takeaways from his experience with the sterling work he has done at Cognizant. The impact of investor and analyst relation teams cannot be discounted. The last session was a panel discussion with key members such as Jyoti Singh (Genpact), Lavanya Jayram (Zensar Technologies), Kulwinder Singh (Synechron) & Sujit Janardanan (Amazon Web Services). Key takeaways from this discussion was about how marketing ROI is being measured (metrics differ everywhere), value being added through marketing (engagement matters on social & business matters in place of leads), investments matter in place of cost as that can be used to justify customer retention value over time.

Overall, i think it was an excellent session as it refreshed some of my own learning to reinforce the same. On the other hand, we picked up some good examples that were good to know and i also bumped in to some people i worked with earlier! All in all the new face of marketing looks good to be worked with in the future 🙂

Why tagging is important for Instagram?

So you’re out for a jog and can’t help but notice totally distracted photo junkies like me on the lookout for a #photooftheday scene waiting to be snapped. Yes, we #instagrammers as most people would like to hashtag their pictures to are just waiting for that dew drop to fall, kitten to purr and flower to bloom. Add to that coffee shots, stills of my shoes and just about anything thrown is in the most absurd of formats. Cover it up with a filter (my fav is Lo-Fi and at times Amaro) and you’re good to go!

Now, Instagram just recently introduced its photo tagging feature. So earlier, i could tag my friends in the description. However, if you’re likely to receive a lot of comments then heaven help the friend in sifting through!

Coming to why this is important:

1. Users: Users can now directly tag friends in pictures that will make it easier when a group of people are tagged as the photo will then appear in their photos too. (Bound to make a lot of lives simpler)

2. Business/Brands: Brands can stand to gain here as users can simply tag them in photos of themselves. In a way they would also need to be cautious and keep a hawk’s eye out for any deteriorating content being floated around.

3. Crowd sourcing: As many would know, user generated content is the way to go. In this way for a business perspective, this move by Instagram could prove to be fruitful.

4. No Advertising: Facebook acquired Instagram, so changes on simmilar lines were foreseen. However the good part is that since Instagram is free of any form of advertising, users & brands alike will have to be really quirky and innovative with content to engage.

So, there you have it. Tagging will make it easier and increase the overall shares and activity on Instagram. Now, i got to go and grab a mocha mugshot!

Why should you ‘Check-In’ on Foursquare?

Chances are, that you’ve heard of Foursquare: the location based social networking platform. Almost every social media junkie you’ve met is right now, at this very moment checking in to his/her favorite spot. I like the fact that on social, you’ve got platforms that are specific to the purpose. While i may not want to share my coordinates with everyone in my Facebook friends list, Foursquare let’s me share it with a select few.

However, there is much more to Foursquare than just being another platform to engage bleary eyed students, tech – enthusiasts or common people. Recently it raised funds through debt financing to further propel its growth plans. While all of this may show that there is value to be garnered, I have some points to ponder:

1. ROI : Yes, its the ‘word’ for anyone in social media. Foursquare in its 4 years of existence has received $110 Million in financing. Out of these venture capitalists have powered up to $70 Million. But, if you look back at the total revenue for last year, Foursquare made just $2 Million!

2. Valuation: It’s paramount to check for decent valuations and projections/forecasts for the firm you wish to invest in. According to estimates, Foursquare was valued at $600 Million. This just baffles me.

3. Growth Life-cycle: Typically any platform such as this goes through the following stages:

  • Introduction: Pitch/Launch at a influential event. The way Twitter did back in ’07, Foursquare was launched in SXSW ’09
  • Steep Growth: Backed by early adopters and influential base, there is an exponential growth that is seen
  • Monetization: Logically, the next step where you begin to reap monetary benefits out of the base you have acquired
  • Quick Exit: If there is any hint/indication of the platform not growing further, the plug is pulled out quick enough for a painless exit.

From these stages, we can see that Foursquare has crossed step 2 in a sluggish way. They are still trying to crack monetization. The main playing field they have is 50 Million data points, through which they can get marketers to put ads and target users based on their location. I guess by using this as an API they should be able to reap some benefits. Currently the total user base is estimated at 30 Million (actual active users are unknown)

4. Funding Options: Now the reason why they had to go for Debt Financing? From my basic finance course back at the B-School, entities typically tend to go for equity/VC funding. The risk of paying back is much less, plus the valuations on sheet look good. Debt is the route taken up when all other modes fade. So, does this indicate at a lower valuation or estimates being revised downwards?

5. Gamification Vs Review App: The gamification part comprises of earning points everytime you check – in. If you’re a mayor, flash around your coin and earn goodies at your favorite restaurant. Else you’re engaged by earning badges. However, Foursquare wants you to leave tips which serve a tiny reviews for the place you’re at. Be it a tourist spot, restaurant, bus stop or the daily commute train station, you can simply leave your tip to guide others around. I don’t think Foursquare should take up this route as there are several other popular apps that serve the purpose. Its important to differentiate their offering here.

So my personal take? I think Foursquare is here to stay if they crack the monetization bit. It’s also crucial that they don’t take that objective to the hilt like Facebook. While its lovingly designed in NY and SF, it will take a lot more to get the love from users all across the world!

Facebook’s Home Window?

So the much hyped “Facebook Home” event took place yesterday. This was a finality of sorts to the rumored Facebook Phone that had created quite a buzz off late. While, there was nothing on the hardware front, Facebook has come up with a software that should be able to further refine the user experience.

It was quite intriguing to have made the assumption that there would be a new phone. That’s cause Facebook is software centric and it wouldn’t make much business sense to compete on hardware with a much evolved and highly competitive market scenario. Hence, they made the correct logical choice of sticking to software. What exactly does this mean for us?

Since the update is to be rolled out on a select few Android OS phones, the experience is going to be reserved for a limited number of handsets. On the OS front, Facebook has everything to gain. The home screen will be more people centric, building around what is most relevant to the user. In the midst of the brouhaha, smaller apps are bound to get pushed in to a corner. While this could prove to be good for people who need a limited number of options, the more app crazy user such as me would find it cumbersome to keep going in to layers to use apps.

To an extent, this is pretty similar to the tile interface that windows phone have. This is a big debate, as to whether Facebook just stole Microsofts idea. Afterall they do have a huge base of nearly 700 million users that serve as a potential playground to roll this out to.

I wonder if this would actually be path breaking or is this another cog in the Facebook machine to justify that there are shreds of innovation that are in progress. After all, its backed by investors who would want to see some tangible development. While its still unclear as to how advertising would sit within the entire interface, there would surely be means to drive revenue. Going by the way the Windows OS was bluntly ignored, it would be interesting to see how Facebook Home pans out in terms of adoption levels.

2 Billion Disruptive Minutes on Skype!

Skype today announced that people around the world spend nearly 2 Billion minutes a day on it. The scale of the time spent here is baffling. To back this up, they have put up an interesting infographic that also specifies how equivalent time could have been spent.
Time spent? Well in the form of 33 million hours of laughter (you’ve got to be high on sugar), 1.3 million days of collaboration (yes, people do talk business) and 3,805 years of sharing smiles. I think that was a neat break down of how anyone across the globe could have spent 2 billion minutes on practically anything. 
What’s remarkable here is that Skype is present across all platforms for different phones, laptops and desktop. Ensuring that one can be connected to anyone across the globe having a Skype account, this was considered to be disruptive. Disruptive technologies by definition as per Paap & Katz – 2004 is where a technology innovation can have a significant impact on products that are based in a technology market. This technology breakthrough came through the integration of VOIP and P2P technologies. While the supplier market those days was dominated by Cable, Voice Carriers and VOIP, no one had brought together 2 different tech aspects the way Skype did.
In recent times, there have been several other apps that have come up to fulfill the same purpose. Some of the popular ones are Viber and the iPhone only Facetime. However, not everyone will have an iPhone in case of Facetime and people may not want to switch over from Skype. Additionally the recent integration of MSN Messenger has also integrated the huge base of users that would have been instrumental in driving usage statistics.
All in all, this is an impressive feat and going by the good quality and at a bare to bones rate (if you don’t have an account / fixed phone calling), I’m sure this numbers will surge upwards. It would be interesting to see how Skype would continue to provide an experience most of us live by in keeping in touch with loved ones!

What makes Videos go Viral?

You have heard it, they have and seemingly everyone has. Oppa Gangnam style! Its surprising how this video that basically ridicules the idea of living a Gangnam way of life and parodies nearly every popular dance move can go viral so soon.
It’s difficult to get the killer moves and the catchy tune out of ones head. So what is it at ground zero? Is it the beats, lyrics, moves or the video? I would side with the last one. It’s the video that is addictive, that gets a grip and you don’t tire of the lameness being showcased. Be it the colorful dresses, dance moves in a spa, dumping ground or a parking lot. Now to understand what could have been the reason behind this video gaining a million views, I turn for wisdom to Kevin Alloca – Trends Manager at Youtube.
Not long ago, Kevin spoke at a TEDYouth conference elucidating why videos go viral. In a totally simplistic, example driven session Kevin demystified the phenomenon. Although Gangnam style wasn’t out then, most of his parameters fall right in place for this video. To put it simply there are three major reasons for any video to garner a large number of views (I will put the Gangnam Style video through each of them):
  1. Tastemakers: These are people who share or tweet about a video if they find it interesting, funny or anything out of the ordinary. Now this could also be done by normal people like you and me. But the tastemakers are influencers. They are people who have achieved celebrity status or it’s just that their opinion matters to most people. Once any one of the influential lot share, mention or tweet about a video, link or image, their followers are most likely to check it out and well, re-tweet or share the same. In the Gangnam Style video, the Tastemaker was T-Pain who first tweeted about the video on July 29th. So you see, one big influencer there.
  2. Community Sharing: As traditional marketing goes, we have thought/opinion leaders who are looked up to by fans and followers alike. Hence once the influencer has put his/her thoughts on the wire, other people are bound to notice. When the idea becomes popular within the community which could include more influencers, you’re bound to see an exponential rise in views. For Gangnam, post T-Pains tweet popular blog Gawker put up a post and subsequently personalities from pop culture tweeted about it too. These weren’t strung out kids in a low key indie college rock band. Instead they were celebs such as Katy Perry, Tom Cruise, Robbie Williams and the likes.
  3. Unexpectedness: This I believe is one of the strongest parameters to a video going viral. PSY apart from being an underground hip-hop artist on the K-Pop circuit, has taken on the great social divide in Korea. Gangnam actually means “South of the River”. While Korea has been late to join the affluent mass with infrastructure that towers and tech that has finally come of age, the gap between the rich and poor has only widened. So Gangnam being the business district there which boasts of luxuries, is where every yuppie in Korea wants to be at. This is exactly what PSY is running this cultural parody about. The song is totally about wannabes or wanted-to-be’s as some refer to them as. People who really have no clue about the upper crest way of life but are desperate to pull off stints of that magnitude and have no qualms in being posers. The sarcastic yet funny approach that taken was something unexpected.

Add to these the fact that there have been flash mobs in games to Times Square (for Good Morning America) to a Jail as well. While PSY rides on the path to glory with appearances in SNL, Today Show and every major broadcaster across the globe writing or anchoring about it to Eric Schmidt doing the Gangnam at Google office in Korea, you sure as well now know what’s got it all going.

There you see, it all falls in place. Three simple steps to ensure that your video goes viral. Or are they that simple at all?