India: state of the mobile app business

Cellstrat hosted Mobile App Conclave 2011 in Bangalore today.  The agenda was not published ahead of time so those of us that showed up were pleasantly surprised to see a quality lineup.  Excellent keynotes by Pratapa Bernard of Vodafone, Sridhar Ranganathan of InMobi and Sunny Rao of Nuance were punctuated by interesting panel discussions which brought together the leading lights of the Indian mobilility scene.  Some of my takeaways follow.

Platform wars

• Nokia+Symbian: India still has a large installed base of smart/feature phones consuming data.  Although the death-knell for Symbian may have been sounded, for the foreseeable future, mobile apps in India cannot ignore it.
• Apple: Although iPhones and iPads get a lot more ink and attention, the reality is that a negligible fraction of the userbase is on iOS.
• Blackberry, Java, Android: all these platforms are significant but Android is growing fastest

Browsers vs. Apps:

• Where Apps win:  Usability is the *sole* driver of adoption, not technology enhancements (e.g. screen size, USB ports, 3G network, etc.).   Apps are better suited to deliver optimal experiences.  Browser experiences continue to suffer from lack of usability just like the failed promise of WAP’s first run 10+ years ago.  Apps can support next generation user-interfaces including local language speech, pre-integration between multiple apps (e.g. linking Yelp reviews to Google Maps and FourSquare).
• Where Apps lose: Lack of stickiness plagues apps; most downloaded apps are seldom used after a few attempts.  Major publishers favor the control that a mobile site offers, especially when it comes to ad-supported revenue models.

The Ecosystem

• Appstores aren’t working for India focused apps: the Apple appstore is the only one that has figured out how to get developers paid but unfortunately very few Indian users exist on their platform.  Android/Nokia/Microsoft need to get their act together.
• Development skills are scarce:  those that are available are working on outsourced app development projects for the US market.   This makes them hard to hire for apps focused on India where app revenues are likely to be much lower.
• Mobile payments are caught up in a regulatory quagmire.

Despite all the challenges, a number of interesting companies are betting their future on the development of the app world, both locally in India and globally.  Some of my more memorable conversations today:

• Telibrahma:  Apps that use “augmented reality” to enhance the effectiveness of traditional advertising media
• TrackEveryCoin:  Personal finance management
• Infosys Flypp: a white-labeled AppStore platform
• July Systems: mobility middleware for media businesses and enterprises
• Guruji: a mobile ad network serving (over 1.5B impressions a month)
• InMobi: claims to be the largest independent mobile ad network (over 40B impressions a month)

India: supply meets demand but imperfectly

At the Microsoft ISV Days conference on Thursday, Manoj Menon of Frost & Sullivan provided an insightful analysis of current computing trends in India. One particular chart of his particularly caught my attention and I reproduce it below.   His point was that most products and services are developed in India for the “mass market” while the market is actually segmented into niches with disparate expectations.    Most products end up not meeting anybody’s expectations.

This is an interesting thesis which I have experienced but not been able to articulate as well.  Some examples will help to demonstrate this.

• Telecom:   India’s nearly 500M+ subscribers are primarily prepaid plan users who routinely churn between operators as prices spiral downwards (as do the operator’s earnings).   Infrastructure is vastly overburdened in urban areas and offers minimal coverage in rural areas: quality of service is abysmal with dropped calls and inadequate call capacity being the most widely experienced problems.
  • More than half their customers are focused purely on price and are happy to put up with the inconveniences.   For this segment the price cannot be low enough and will forever be unsatisfied.
  • The most profitable customers are those that run up high bills using data services and many minutes of usage.  Most of them will gladly pay even more to get better service than they do now but the operators are just not in a position to offer them better service.  Both niches remain unsatisfied.
• Satellite and cable television: A similar story has unfolded in the world of television viewership.  As India has leaped to over 120M households watching cable/DTH television, the number of channels has proliferated to over 400 (at least those tracked for viewership ratings which in turn attract advertising budgets).     The channels are crammed with advertising, more so than in the west.    Overlay ads on video are common so about half the screen delivers content;as are  6 second spots (yes) during live cricket matches,  three rows of tickers with text ads are all common.  ARPUs are about $2 to $3 but again there are two niche segments here:
  • One cares about price and little else.  They are happy to get 200 channels for $3 and that includes premium content from HBO (which is ad-supported in this country).  They continue to complain about the high price of content.
  • The other niche, is willing to pay $30+ a  month and get an experience comparable to the west, with less clutter.  However, the mass market offering is such that they have to put up with the same sub-optimal experience at a lower ARPU even if they are willing to pay more.

The story repeats itself over and over again but what is common to these situations is the large investments in shared infrastructure required to launch these products and services.   Although both sectors have demonstrated profits, I do not personally like these businesses since there are so many discontented customers.

In other industries,  brands have been able to target their niches better.

• Coffee houses:  It is possible to get a good cup of local coffee for Rs 5 (10 US cents) and get a decent cappuccino for Rs 100 (US$2.50).  But they meet divergent needs of two different sets of coffee seekers.  And yet there is not enough access to good, consistent coffee across a large network for the discerning drinker in either segment.  [ I am sure some of you are thinking of Cafe Coffee Day; their scale is commendable and they serve a good purpose but their coffee is consistently awful. ]
• Travel:  In a surging India, the airlines and road/rail networks have grown to service the needs of two separate sets of travelers; as have coach/business classes for further segmentation within each of these groups.  Carriers and classes of service have helped address many of these.

The message for entrepreneurs is to look for niches – one large enough to address profitably with minimal investment.  What you do not want to do is cater to the middle, which in some cases may be completely devoid of customers.  The message is not new – this is Marketing 101 – but in a large but  economically polarized society like India this gets all the more poignant.