LinkedIn vs Facebook - Revenue model is the heart of your business plan

I am sure we all at some point wondered why is there so much buzz around Facebook's IPO and why is the company valued in billions! It was never clear if the 700 million Facebook users really clicked on the hundreds of sponsored links that appeared on right side of the page. In fact, most of our brains got easily trained to ignore those sponsored links. It was neither clear how the advertisers were measuring the benefits they received from these clicks. Are people really interested more in shopping the dress that appears on the link or are they interested to check the photos of their least favorite friend. Not exactly sure! Yet, Facebook went for its IPO in May 2012 with a lot of promises.

On the other hand, LinkedIn - the silent king of social network is extremely successful in turning the information it has into a cash machine. I recently read a Forbes article on how LinkedIn CEO Jeff Weiner soon realized advertisements on his website is not going to mint money for LinkedIn and he went back to the whiteboard to figure how best to monetize what he had. LinkedIn has a solid revenue model that has helped LinkedIn share leap 64% this year. LinkedIn has rightly focused on identifying that corporate talent scout is its target market because they not only want the individual profiles that LinkedIn has but more importantly, they will be willing to pay thousands of dollars for it.

Unlike Facebook which derives 85% of its revenue from advertisement, LinkedIn doesn't need the users to be on its website to make its money. On the lines of FB, silicon valley investors have been carried away with a lot of social and gaming companies such as Zynga, Groupon, etc. All these companies have been extremely good at creating a promising user community and creating the needed buzz to attract investors. However, these companies have taught lessons to the investors and budding entrepreneurs that how you make money is the heart of your business plan!

Where did Nokia go wrong?

Nokia as we know has been an incredible player and pioneer in the mobile industry for years. It is surprising to note that the company's R&D spend was 40 billion USD over the past 10 years compared to the innovators such as Apple and Google who spent less than 10billion USD over the same period. Nokia had the foresight of touchscreen, smart display, location-based services, mobile commerce and what not, several years before Apple rooted itself as the one and only God of smartphone services. However, why none of these wonderful Nokia products never reached the market? How did Apple take over the throne of mobile phone? How did Samsung who has been a laggard all these years take over the world market share of Nokia?

Firstly, Nokia failed to bring the market to product that they so greatly found in their R&D lab. The online resources (http://online.wsj.com/article/SB10001424052702304388004577531002591315494.html?mod=WSJ_Tech_LEFTTopNews) say it is the internal rivalry between businesses that caused this. However, being in product management, I can do an educated guess that Nokia probably had holes in its product management. For product companies, especially for a huge company such as Nokia, a corporate strategy and a vision is key in bringing the right products to the right market. I see this as the responsibility of the company's product in making the vision a reality, which Nokia seem to have clearly missed.

Secondly, Nokia has been a leader in the mass market especially in emerging countries. At the time when Apple introduced iPhone in the US, Nokia was a monarch in countries such as China, India and few pockets in Europe. Most of these markets wouldn't pay a fortune for smartphones. However, if Nokia had to make it big in smartphone, they should have considered targeting niche segments just like Apple did in 2007 when it introduced its first iPhone. Nokia's mistake was that it was trying to sell a 500 USD phone in the same way that it was selling 30USD phones. A well-known way of how successful companies handle this strategy well is creating a new brand name for luxury and expensive products example Lexus of Toyota, Acura of Honda, Infinity of Nissan etc. It is not surprising the company lost its focus on both the mass and the niche markets and lost its throne to Samsung.(I am planning on writing another blog on how great Samsung is).

Thirdly, Lumia could have been a better product. Though for years Nokia had been making great product, it lost its last and final chance of "making" it. There had been several glitches reported on Nokia right from basis SMS function to form factor, music, camera etc which as are bare minimal qualities for a smartphone these days. It is not exactly clear however if it is entirely Nokia's hardware or if Microsoft's Windows Phone has got to do with the poor performance of Lumia.

But I do feel bad for Nokia because it has been a pioneer and a constant innovator for so many year. Not sure if there is any ray of hope left for Nokia. Moral of the story here is - it is not sufficient to be just an innovator in one's own lab, but go-to-market strategy i.e bringing products to market is equaly or more important that just the innovation itself!

Smartphone Innovation lifecycle – Future Opportunities in Service Innovation

The smartphones are on its way to be just “phones” and to be commoditized. Though Google’s Android offers attractive alternatives for firms such as HTC, LG, MOT and Samsung, and they can concentrate on their manufacturing prowess and can compete with excellent designs, question raises for how long this could be sustainable. Now is a good time for OEMs (Original Equipment Manufacturers) and operators to start thinking about next stage of innovation in mobile devices industry. One way the industry could move is from product innovation to service innovation. We can see operators, OEMs and content providers joining hands on providing add-on services to the subscribers.

Market going forward is going to increase in demand for more and more data and the industry can address the upcoming limited data plans is by sponsoring data usage and offering free content on mobile devices. The source of revenue for the operators, OEMs and content providers can move from data usage, subscription towards advertising, lead generation etc. We can see in-app advertising model to gain traction going forward. As Android becomes the dominant operating system, Google has highest possibility of gaining even greater power to monetize mobile Internet traffic since it is already a leader in advertisement based revenue generation.
The mobile handsets are already indispensable to daily life and will continued to be used for a wide array of functions, including consumer purchases, banking, real-time video connectivity, advanced GPS tracking, entertainment and much more. Smartphone makers and app creators will continue to leverage the full range of sensors on modern handsets to further deliver revolutionary products and transform mundane mature features.

Smartphone Industry today

Paradigm shift in the Smartphone Industry
RIM was 5 years in to the smartphone industry when Apple introduced its 1st generation iPhone in 2007. Inspite of being a late entrant to the smartphone industry, Apple set a start for a new era for phones that are smart. Apple introduced new and better ways to interact with the mobile phones through the touch screen and customizable user interfaces. This introduced a groundbreaking user experience and the open platform model gave way to the rise of the third party application developers market. Being an early entrant in to the market benefited Apple with a total of over 2 billion application download by September 2009 by when the competitors such as Palm, Android and Blackberry had just started scrambling to get a piece of the pie. Apple hadn't just introduced a mobile gadget but an entire ecosystem in which Apple had been thriving.

Google came with a different strategy of providing an easy and inexpensive mobile platform(operating system) that enables the entire smartphone industry to adopt. Google has made its platform available through a number of device manufacturers and through a number of carriers. In contrast to Apple, Google's mobile ecosystem is much larger that will eventually enable Google to outshine Apple. In fact, Google's Android smartphone market share in the last quarter of 2010 was reported to be higher than that of Apple.
Microsoft had been long struggling to gain traction in the market, and in fact its market share in the smartphone platform has dropped by 2 % in 2010. The recent partnership announcement between Nokia and Microsoft might pose good opportunity for Microsoft to capture the Nokia's primary (non-US) market, but the analysts suspect that it might take 2 years for the Nokia-Microsoft integration to be completed. This is definitely a long time in the rapidly changing smartphone industry. But the partners might not also target on commoditizing the smartphones in the next two years and introducing low price smartphones in the emerging market in which Nokia is already a pioneer.

Apple's iPhone transformed how manufacturers build phones and its capabilities and thus the customer's expectations from mobile phones.
Touch screen is no more a luxury in a phone but it's a must feature to have that has become a de-facto standard. The handset manufacturers such as Samsung, LG and HTC are making significant efforts to out-beat Apple.
HTC had been making its way forward in capturing smartphone market share by consistently introducing smartphones with newer and better technologies. In 2008, HTC produced the first phone to use the Android system and with the Evo, HTC became the first phone maker in the U.S. to come out with a handset that could access the 4G network. Samsung with its new Galaxy portfolio of phones powered with Android, is expected to capture a decent share of the smartphone industry.
LG had been struggling to keep on pace with the smartphone race though the low-end market has served as cash cow for LG in the past. But recently in the mobile world congress, LG introduced its first 3D mobile device (Optimus 3D) on Android platform, the first one to bring 3D contents in user's hands. If this makes big, the smartphone market would have a new dimension of competition based on 3D technology.

Now what should Apple do? Stay tuned!

Mobile Operators in Money Transfer?!

According to a recent report by World Bank, the global remittance market is estimated to be value at $375 billion US in which over 75% is being sent to developing countries. Where as many of the developing countries has little or no access to financial services due to lack of infrastructure, poor literacy, lack of banks and ATMs etc. Many migrant workers are in need to send money frequently to their dependents for their daily household expenses and they find it difficult to send due to the reasons cited above in addition to high cost of international remittances charged by the well-established Money Remittance Organizations such as Western Union, Money Gram and other international banks and with the low speed that the money is transferred.
On the contrary to the poor financial services of 500,000 bank branches and 1.4 million ATMs worldwide, there are 3 billion mobile customers worldwide. The penetration has been the highest and the fastest in the developing nations such as India, Philippines, Brazil and Kenya inspite of being unbanked or the under-banked of all .
With its ubiquity and high penetration in nations around the world, mobile communications now
has the potential to vastly improve and transform access to remittance funds for people in
developing markets. Mobile technology can lower the cost of remittances as it removes the need
for physical points of presence and ensures a timely and secure method of transaction. This would give rise to a paradigm shift in how the international remittances have been traditionally made and it is a great opportunity for a Mobile Network Operators(MNOs) to enter the remittances market given its huge installed base of mobile subscribers.

Microsoft and Cloud Computing - Respose to Chrome OS?!!

The introduction of Chrome OS net book might be creating market speculation that Windows is starting to lose the operating system game. But I think Microsoft has a great opportunity to be a leader in the cloud based operating system as well. As per Google's claim, Chrome OS seems to be all about simplicity, running all that user wants through a single application - the Chrome browser. The point that Google could be missing here is the versatility that most of the users currently are used to. The users would be certainly restricted from performing certain functions or running certain applications on a Chrome OS. Additionally, Google might be too early into the game of web-based OS considering the fact that the penetration of internet has still a long way to go.
But still cloud based OS market is nothing to ignore because the future market potential for personal computers most probably lie there and the size of the net book pie might be growing tremendously and growing towards cloud based net book. Apparently Microsoft has been doing well with Windows 7 and with its add-on cloud based applications such as Skydrive. This is all done to retain the PC and laptop users running Windows, but in future it might get costly to retain the size of the PC/laptop pie. Thus growing the net book market will be a smarter strategy. Given Microsoft's strong position in the OS market in desktop PCs, along with several presences in cloud computing through Office online, Skydrive and Windows Azure for application developers on cloud computing, Microsoft has a considerable installed base to begin with. Rather than losing the current PC users who might migrate to Google Chrome OS in future, Microsoft should try to migrate these users to Microsoft cloud based OS. There is a great window of opportunity here to be in the market at the right time when the world is ready to fully embrace cloud-based computing and Window should make sure not to miss it and should make sure to have a strong foothold in the cloud-based net book market.
Since cloud based net books offer benefits of saving on software/plug-ins implementation costs and storage, customer who value these benefits will be ready to pay a premium for these net books than what they pay for an average net book available currently in the market. Microsoft currently has the highest market share in case of corporate users and these are the users who will be ready to pay a premium for a cloud based net book, so Microsoft should leverage this customer base.
Windows should works on a lean OS that does not overload and slowdown the net book. Microsoft can try to keep the look and feel of the Windows OS to enable a seamless transition for the current PC users but it should not forget that it is a completely new paradigm shift and should start working on the design from the scratch to match up the performance of Chrome OS. Apple might not remain silent for too long and with the iPad tablet's strong foothold it might be easier for Apple to enter the cloud-based market. But whatsoever, Microsoft has a strong installed base with the cloud offerings and can leverage the existing relationship with the net book manufacturers.
The next big piece is the pricing of the operating system. Google is offering Chrome operating system for free and it is apparent that it will be tough game for Microsoft if it charges the operating system. Though it is a game changer, Microsoft can partner with the net book manufacturers and share the profit margin on the net book based on sales numbers but bundle the operating system with the net book for free. Also, Microsoft can charge for additional application bundles or version upgrades or can offer the whole operating system on subscription basis. Fact here is that since Microsoft's core business is licensing, selling it for free is not going to be a sustainable model but users will be ready to pay for a product with premium quality. Thus Microsoft should keep the product quality in mind and should leverage the current market share and installed base and come with a killer operating system and introduce at the right time.
An additional important factor for Microsoft is the marketing communication and this needs your significant attention. Currently Microsoft offers great cloud based application on Skydrive with 25GB of free space and it enables users to create edit their documents online with OneNote application. But not even 10% of current PC users are aware of these features. So in addition to offering a best in class cloud-based net book product, Microsoft should make tangible changes in the way the company communicates if the company wants the customers to perceive Microsoft as a change maker!

What is it about Google Chrome OS?

Google Chrome OS introduces a shift in paradigm - a new way for an individual to manage his personal files and data on his own personal computer. To effectively market Chrome OS, Google should begin with performing a thorough assessment of who are the people who would benefit from a cloud based operating systems in terms of types of web-based applications , on-the-go usage of files, online gaming etc. Google should consider the fact that the users might be skeptical about availability of internet where ever they go and how a Chrome OS based net-book would behave in case they hit no-internet environment. Also, whether the files and other data created on Chrome OS will be compatible (read/edit) in other PC or MAC platforms. Moreover since this is a shift in paradigm, the complexity of how the whole web-based OS would work and how secured their information is, might make the users even more skeptical. It will also be beneficial to assess the risk associated with the control level of customization that you let the net-book manufacturers to make and partnership with the mobile data plan providers. Additionally, the regulations for securing individual user and corporate data should be assessed and addressed.
These days in customers' perspective, everything that is small in size should be touch based monitors and they are comfortable carrying all their personal data in this small touch based devices. Thus Google should enter the market with one significant claim that will be compelling for a user to buy the keyboard based light weight notebook that will store all the files and user's data securely on the cloud. The significant claim is that Chrome OS is a web-based operating system that alleviates hassles of maintaining hi-end application installations on your computer and carrying these heave computers around.