I’ve been called that a few times. So I just wanted to clarify to everyone what that means. Whilst it doesn’t sound like an endearing term normally, it is for people that work in startups.

It means you are willing to get down and dirty, to be creative and resourceful, and to make the most of what you have. Some people might call it “guerilla marketing”, and it encompasses that and more. When I spoke to Tom Howard of Adioso, he described his class at Y Combinator as the “cockroach class”.

The background is that this was at the height of the GFC (the lowest point) and only the cockroaches would survive. YC looked for the teams that had been together for a long time, the ones that had the motivation and instincts to fight for survival. Only the scrappiest would survive.

Entrepreneurs by their very nature are scrappy. You have limited resources and time, and you need to maximise output with that. The way to do that is to be creative, resourceful and scrappy. Do your logo on 99 designs, hire a developer on odesk, maximise the discounts you have, pay your expenses using your credit card so you get extra 60 days credit.

So if someone calls you scrappy, don’t take it the wrong way! Wear it as badge (could we get a foursquare badge for that?).

Yours in scrappiness,

Matt Ho

What is ProductCamp?

In the spirit of BarCamp (www.barcamp.org), ProductCamp Sydney is a collaborative, user-organised professional conference that focuses on Product Management and Marketing topics. At ProductCamp Sydney everyone participates in some manner: presenting, leading a discussion, showcasing a best practice, or sharing their experiences. Others help with logistics, securing sponsorships, organising sessions, setting up or cleaning up.  This is a self-organising collaborative event that is designed to be fun, rewarding and a unique experience.

ProductCamp Sydney is a great opportunity for participants to learn from, teach to, and network with professionals involved in the Product Management, Marketing, and Development processes from all industries around Australia.

We’ve listed the topics on Uservoice, so you can view the currently submitted topics and vote on them. Vote for my talk here.

Thanks,

Matt

I’m a big fan of Zara, having been introduced to them overseas. I saw them in Europe along with H&M stores. When I went to Malaysia and Thailand last year, my friends were also stocking up on Zara. So I did the same! The clothes looked good, decent quality and the prices were reasonable.

My favourite pair of shorts over the summer were Zara. I got them for $30-40 AUD. My favourite jacket over the winter was a Zara jacket which I bought for $150 AUD.

The opening of the Zara store in Sydney has resulted in customers lining up around the block and clearing out the stock. There is clearly pent up demand for Zara in Australia.

Zara – keeping it lean

The Zara business model reminds me a lot about lean startups. Look at this quote from Zara’s Chief of Communication from this article.

“Zara is known for interpreting runway fashion trends and having copycat looks available in-store within three weeks.

Items available include a leopard print cardigan for $59.95, sleeve cotton tops for $19.95 and jeans for $69.95.

Mr Echevarria attributed Zara’s success to focusing on customer feedback and being reactive to their comments. Store managers in Sydney will carry out a daily sales analysis and order new stock twice a week, which will arrive from Spain within 48 hours.”

Similarities with lean startups

So this is what Zara doing:

- Constantly talking to it customers and listening to their feedback.

- Monitoring daily analytics on what’s moving in the store AND knowing what is not selling.

- Analysing fashion trends for new looks and behaviours

- Ability to adjust their design and production rapidly

Which ultimately leads to new fashions in store. This is a rapid iteration process and results in an ability to pivot on a dime. Whilstly talking to customers all the time is good and getting feedback, it is of little use if there are no analytical evidence to back it up. It is also futile if you are unable to adjust your product in a timely manner despite customers wanting a different feature or changing consumer taste.

However, this system only works if the whole process is in sync. It is an end to end process of listening, watching, producing and distributing quickly.

There is definitely a few takeaways that lean startups can learn from this.

I’m out like last seasons fashion,

Matt Ho.

————————

Many organisations are banking on the paid subscription model – from music, news, movies etc..whether its the answer is another question.

Clay Shirky understands this better than most people. He explains the paid content model, comparing music subscription vs news subscription model here:

http://www.shirky.com/weblog/2009/03/why-itunes-is-not-a-workable-mod…

I have also been thinking about the music subscription model today. Apple has a whole ecosystem supporting the music experience. People will pay for this convenience and experience.

In terms of music, lets use Spotify as an example since they are most likely to extract value from the rest of the value chain. Is Spotify profitable?

Spotify has 10million users. News articles suggest they have approx 650,000 paying subscribers (~ 1 in 20 paying).

http://eu.techcrunch.com/2010/09/15/spotify-10-million/
http://gigaom.com/2010/11/22/spotify-2010-revenues/

MUSIC REVENUES

90% of users pay $10 Euros/month = $120 Euros yearly
10% of users pay $5 Euros/month = $60 Euros yearly

On a revenue basis, Spotify generated $74m Euros last year on music  subscriptions alone.

ADVERTISING + “VALUE CHAIN” REVENUES

Gigaom reckons that Spotify made $58m in advertising. I take this with a pound of salt cause I don’t see how this could be true. My estimates below are based on the low side.

I project the following revenue streams:

- Advertising (PPC): 10m users x 1% of users click on ads x $0.02 x
365 days = $730k/year

- Ticket sales: $5 commission x 10m users x 1% purchasing yearly =
$500k/year. Using the average Posse commission prices.

- Merchandise: $20 tshirt x 10% commission x 10m users x 1% purchasing
yearly = $200k/year

That’s roughly $76m in revenue.

COSTS

The only cost that’s public is music royalties at $30m. That leaves $46m on table.

I wouldn’t think the operating cost of a lean startup business would be any more than 40% of remaining revenues (assuming 20 staff, low overheads). Opex = $46m x40% = $18m.

Total profit is = 76m – 30m – 18m = $28m profit.

So in short, their music subscription model is profitable.

I’m sure they’ll have other revenue streams from deals with mobile companies. I think that’s where the real value is for Spotify – the mobile apps. People will subscribe to this. They probably need to get it to 10% – 20% of paying users (currently at 5%). Their push into the US is more likely to build a barrier to competition cause it will prevent other people from moving in.

I’m out like Myspace,

Matt Ho.

So what online activities am I doing?

I use file storage like dropbox as a digital locker to store and share large files. This syncs with your computer and your mobile devices. At work, we use Sharepoint to share files, collaborate on word and excel documents online and save them back into the system. Having the files online makes it easier to access and also ensures there is only one copy people will work from.

When I want to listen to music, I jump onto YouTube and type in my favourite artist and find songs that I like. I’ve been mixing it up lately between MySpace, Grooveshark, Hype Machine, and Soundcloud. To be honest, I don’t have that much music on my computer. I mostly stream it from the cloud because there is an infinite collection online, fast access and play lists.

I spend a lot of time online also watching videos. Again, I love my YouTubes! But there’s also Vimeo and a bunch of other sites you can stream from. I look at my friend’s photos not on their computers but via Flickr and Facebook. That’s where we store our photos and share them with others.

What is the cloud?

The cloud is defined as:

“The use of a Web services such as Flickr, Google Docs to perform the functions that were traditionally done with software installed on an individual computer.”

- Penn State Learning Hub Community Glossary

“Cloud computing is Internet-based computing, whereby shared resources, software and information are provided to computers and other devices on-demand, like electricity.”

- Wikipedia

There is a big push from the digital industry to go cloud. Consumers are already there. Enterprises have started to as well. Its only a matter of time before all of our online activities are in the cloud.

What are the benefits of being in the cloud?

1. Not having to install software on your machine. When was the last time you had to update Gmail? Our corporate email has regular maintenance and scheduled downtimes. Now, computers all about getting online, as fast as possible. Deploy in the cloud = deployed everywhere.

2. Access anywhere, anytime. Of course, this is dependent on being in the range of fast internet access, so this is a coverage and bandwidth issue.

3. Mobile & Cloud is a great combo. Allows for greater connectivity and syncing between your devices. Your mobile can’t store that much compared to a desktop computer or laptop. For example, my mobile currently has 8GB memory expandable to probably to 32GB so the cloud makes sense. Being able to stream music, access files in the cloud, play games on an online network with other gamers is perfect for mobile. Fred Wilson has a few ideas here on monetizing mobile audio.

There are many other benefits for Enterprises like scalability, reducing your IT hardware costs, and IT support costs. Turns your capex into opex. There are 3 types of cloud computing – SaaS, PaaS, IaaS, but this is for another blog post.

The Cloud Agenda

There’s a really good video I watched last week about Zoho’s new cloud accounting offerring. Its similar to SaaSu, Freshbooks, etc…

What I found interesting about it, was towards the end of this video at 26min 5seconds, they discuss mobile and the cloud and the advantages of the cloud. Other cool stuff they discuss is having your car connected online and the ChromeOS Notebook (which is purely online, no software installation required).

What they are doing, whether they realise it or not is advocating the growth of cloud computing. Not just necessarily growing their piece of the pie, but the entire pie. Because its in everyone’s interest.

Consumers and enterprises benefit as more activity is in the cloud. You can see a lot of online companies now pushing the cloud agenda such as Zoho, Salesforce, Google and Atlassian. Even Microsoft has evolved their service offerring to incorporate cloud services.

As we become an increasingly connected society online, the cloud will only keep growing.

I’m out like software installation,

Matt Ho.

p.s. if you are interested in cloud computing, register for Cloud Camp on 25 Feb 2011.

Because of this, the web should not be considered as a bolt on to your business. Rather, there needs to be an alignment between business strategy and web strategy. Much will also depend on how important the web is to your business.

Consider questions like “how will my customers find my business online”. Why is this important? This can generate new customer leads. Look into investing in search, managing your presence in online social media channels, optimising your website for organic search, and creating a content plan.

Other questions to consider:

- What information is available on my website to customers?

- How can I get my clients or prospective customers to keep coming back to my website?

- Can customers find my phone number on my website? Do I have the appropriate resources to support the customer service number?

For some businesses that transact purely online, like DealsDirect or NetFlix, the web is at the heart of their business strategy. For many organisations, too often there is a disconnect between the business plan and the online strategy. The web should not be a mere afterthought but a strategy that is planned, managed and executed as part of your business plan. In most cases, it really comes down to ROI. Having the appropriate resources, time and money to invest into online.

Given that it is the start of the year, begin planning for this now. Align your web strategy with your business strategy. Put your website and online presence at the heart of what you do.

Taobao

Taobao is the largest ecommerce website in China. It sells everything! Its basically a Chinese version of Ebay. I actually came across it a few months ago, when this Chinese girl mentioned it to me as the place where she shops for books. Taobao is a subsidiary of Alibaba, which is a huge B2B website.

Let me give you some perspective about Taobao.

Though just six years old, Taobao (Chinese for “to search for treasure”) already has 120 million registered users and 300 million product listings. Its merchants produced nearly $15 billion in sales last year.

The company claims that sales through its Web site are already larger than any Chinese retailer. And, Internet analysts say, sales on its site this year will surpass Amazon.com’s expected sales of about $19 billion.

– New York Times

I came across a tweet from someone at an Alibaba presentation that Taobao is set to overtake Ebay AND Amazon in revenues next year. That’s insane! Consider how big Ebay is and how big Amazon is. Combine them. Then you’ve got Taobao.

Check this for more evidence:

The unique host of Taobao.com has topped 40 million, surpassing that of Amazon.com Inc. and eBay Inc., making the Chinese online marketplace the largest e-commerce Web site around the world in terms of traffic, disclosed Zhang Yong, its CFO.

By far, Taobao.com has had 190 million registered users, accounting for half of China’s total Internet users and 4.1% of the world’s total, according to Web information company Alexa.

– TradingMarkets.com

My understanding of the unique hosts stat is that it refers to unique visits. Having just finished Mr China, lets not get all hyped up considering how much of that information might be true. All I’m saying is ecommerce is big business in China and Taobao is #1 and its huge.

Busting up the search industry

Now in most Western countries, users have choice as to which search engines they can use. There’s Yahoo / Bing and Google. Realistically, most people use Google. However,  if you go to Google.cn, you are shown a picture of Google HK and when you click on the picture you are redirected to Google HK.

Google was supposed to renew their search license, but they haven’t done so. They also have not renewed their map and location license. It appears that Google is pulling out of China, and moving its search service to Hong Kong.

They had their recent blowup about abandoning China on ethical and principles, since gmail users were having their accounts hacked allegedly by the Chinese Government. They didn’t mention it specifically, but they hinted at it fairly heavily in this blog post called “A New Approach To China“.  Realistically, I don’t think Google would ever pull out of the biggest market in the world.

The big search engine player in China is baidu. There are local players in the China search market, but I’m not too familiar with them. What I did come across recently is that the Chinese Government is entering into the search market by backing another player.

The second, and more surprising deal was a link-up announced two Fridays ago between Xinhua and China Mobile to start yet another search engine. Xinhua, a news agency belonging to the central government which also acts as a propaganda organ and sometimes intelligence gathering body, and China’s largest cellular carrier seem like unusual partners for an Internet venture, and the exact terms of the transaction have yet to be announced.

The New York Times described the deal as follows: “In an apparent bid to extend its control over the Internet and cash in on the rapid growth of mobile devices, China plans to create a government-controlled search engine.”

– via techrcrunch

Its very intriguing. Would you ever see the Australian government busting into the search market like that, creating a state sponsored search engine? I don’t think so. They were trying to introduce an internet filter but this is a relevant and related discussion but for another day.

This move is to introduce competition into the search market, to ensure one player does not become too dominant and to be able to control where people can search and what information can be given to them. The Chinese government wants to be able to do that =)

Having a dominant search engine (even Google) is not a good thing either. Search, like any industry needs competition but from the free market. Why do you think Google come out with Instant Search? So they can blow Yahoo/Bing out of the water with yet another innovation they hadn’t thought of. Search needs to be competitive but also people should have the freedom to find any information they want. Its akin to freedom of speech. How can I form a reasoned, independent and well thought out opinion without the availability of information?

CCTV iPhone app

Speaking of State sponsored propaganda media, CCTV has an iPhone video app blows the water out of any iPhone video app. The quality and speed at which it streams video (Chinese news) is amazing. Hat tip to @vincentzhou for showing me the app.

So why did they do this?

According to Computerworld:

China’s film and TV regulator late Tuesday praised the growth of an iPhone application from state broadcaster CCTV as the country looks for new ways to project its political views abroad….

China is investing heavily to expand the overseas reach of its state-owned news outlets, which often air official Chinese political views strongly at odds with mainstream Western views. The Dalai Lama, for instance, is frequently attacked as a dangerous separatist in Chinese state news reports, while the exiled Tibetan figure is seen more as a saintly religious activist in the West. The first section of CCTV’s major evening news broadcast is always dry footage of top leaders meeting with officials from other countries or with smiling farmers in rural Chinese areas.

Of course, lets throw the State budget at creating an iPhone app to further push their views. I mean, even I am considering watching CCTV to improve my Mandarin. Its one of the few dedicated Mandarin chanels on my Chinese tv at home.

The Wash Up

There are many opportunities in China, particuarly given the size of the market. There are more internet and mobile users in China than anywhere in the rest of the world. Taobao is currently bigger than Amazon, and could be bigger than Amazon AND Ebay. But as you can see in the search sector, its not easy doing business in China especially with the Chinese government moving in to create competition. And yes, they’ll do that with killer iPhone apps too.

I’m out like Google in China,

Matt Ho

1. How a small group can start a trend, create a tipping point and influence greater adoption. Where can we find these early adopters, how can we tell what is cool? Malcolm Gladwell has written a short essay more than 10 years ago on the art of the Coolhunt. If you have  read Tipping Point, you’ll recognise the reference to the rise of Hush Puppies. Love the stories about basketball sneakers and AI!

2. What would it be like to work for Google? Don Dodge discusses what it has been like working for the search giant for the last 6 months, and how it compares to another giant which everyone wanted to work at in the 80′s – Microsoft.

3. Speaking of Googlers, check out the 22michaels blog on careers and risk taking. Ex-Googlers Michael talks about the greatest career risk – not following your passion and dreams. Follow their rollercoaster ride!

4. I’ve been reading this Fred Wilson’s  blog for the last few months, and its quite insightful. He became quite well known as an investor in twitter, foursquare and tumblr. Here he discusses why he doesn’t like share buybacks – an subtle signal that a company is not innovating and has nothing better to do with the money.

5.  The pay for news content model is getting hammered left, right and centre. Clay Shirky, respected academic blogs about why the iTunes model won’t work for news. I’ll give you the short version: each news article is a unique item which consumers only read once. Unlike music or movies where consumers will play or view them multiple times, and there is a longtail back catalogue. Of course, Steve Jobs will tell you otherwise.

6. QANTAS plane boarding passes redesigned. Blogger Jordan Sim discusses how we can improve the user experience of boarding passes based on how users read information (left to right) and ordering the information in a logical order. Size is also an interesting point.

7. Keeping with the travel theme, want to travel to India? I’ve been living vicariously through my friend Pace J Miller who went to Hyderabad, India. I thought the traffic in Vietnam and Shanghai was bad. Here it goes to another level! India, I will go see you one day.

8. Lastly, there is no better place for hip hop music than Kevin Nottingham. Here, you can get a free download of the Just Wright movie mixtape Vol 3. Check this blog for free mixtapes, albums and singles on the regular!!

I’m out like crossing the road in India,

Matthew Ho.

These websites got my attention because of similar product buying sites like woot.com and its Aussie equivalent catchoftheday.com.au. Lately Groupon, a social buying site recieved a lot of press and VC funding with its $1 Billion valuation.

I quite like these websites and the idea behind them. As they offer discounts and better deals than if you bought these products or services directly from the supplier. I have used the Entertainment book for a few years now, and really enjoy the savings that you can get. Ironically, you do need to spend money in order to save money! In addition, it introduces you to new services, entertainment and dining venues which you would have never thought of. It gives you ideas of things to try.

I’ve bought goods from catchoftheday before. Occasionally, I receive emails from friends and facebook updates from my social network about JumpOnIt and Scoopon. Both these sites seem relatively new and tend to have a female skew (well at least within my social network!).

Group buying sites for services

The premise of these newer group buying sites that are emerging is that they focus on services and need a critical mass of buyers. Living social is another example.

Initially these kind of websites focused on products – a supplier or manufacturer may have a surplus of stock which they needed to offload. Hence, they could list on catchoftheday or some other website offering daily deals. It was great for the tri-parties involved. The supplier (seller) could quickly get rid of stock and convert it into cash. The website (deal maker) instantly got a lot of traffic from people visiting the site looking for a  deal and a cut of the sales. Lastly, the consumer (buyer) won by buying a product at less than market value (commonly known as a bargain).  These websites have proved popular for quite some time, though I’ve only come across them recently in the last year or so.

I love the idea of focusing solely on one product and offering a superior price for it. As these sites have been built up over time with a loyal following and because the products already existed and needed to be offloaded, there didn’t need to be a threshold level that was required to be reached to sell the product.

This brings me now to the service group buying sites. The way that these sites work is that they require a minimum number of people to buy the service before the deal is “on”. e.g. for today’s deal you might need 20 people to buy the massage service before you can obtain the discount. So it encourages people to tweet, facebook, email and generally share it. I think its perfect for today’s social status obsessed environment. People want to share news about a bargain, and encourage their friends to buy it to help them.

I look at some of these daily deals, and I can see that they can easily smash the required number. For example, yesterday Spreets featured a deal @ Doctor Pongs that for $10 you could get $40 worth of food. A saving of 75%. When I checked it with 11 hours to go, there was already 230 people that had bought the service and it only needed a threshold of something like 30!

Behold The Threshold

A key question is whether these service based sites require a threshold number to be reached. Many businesses have multiple coupons and promotions which they use to bring customers through the door. The idea is that these are lead generators. They might take a hit the first time the consumer uses the coupon, however these discounts are more like advertising. What they are hoping for is:

a) an increase in volume in a short period of time (weeks or months during the promotional period)

b) reaching new customers to consider buying their product/service (marketers like to call this “consideration”)

c) however, it really boils down to repeat transactions and selling them more stuff (upsell, cross-sell, monthly or yearly subscriptions, add-ons, etc…)

By having the threshold, it is easier to sell to the business involved i.e. that you need 30 people before the deal is on. This also makes it worth their while to be involved. The more people that buy the product, the more viable and better priced that discount can be and the better the business can absorb that initial hit. What it creates is an economies of scale. It also allows the business to have a crude prediction of demand for that discount.

The other subtle yet important factor is that if you know that you are going to save money in a transaction, aren’t you compelled to spend slightly more? I know I am the type of person that thinks since I’m saving 25%, I might as well spend $40 more!

However, for these websites to be successful, the thresholds needs to be relatively low. Because most consumers like me, will wait til the threshold is almost within reach. In this Scoopon example below, it is tipped @ 20 people. It is within the range where I would consider buying. It is also worth noting that you do not get charged unless the threshold is reached.

Some other Australian examples

The main reason I started writing this post is what I noticed about these sites. So that was Scoopon above and Jump On It above.

Take a look at OurDeal.com.au

Here is Spreets.com.au, a newer site built by Pollenizer and Booking Angel.

Yes thats right, they all look the same!

I showed a friend of mine, who said exactly the same thing. Its like they’ve all been built on the same CMS (content management system), or by the same design team (doubt it on both counts).

However, more likely, they’ve managed to figure out what is the most optimal way to sell these services and some of them may have just borrowed some elements from each other.

I’m out like buying services on my own,

Matt Ho.

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