Patari’s Inflection Point

Khalid Bajwa was involved in sexual harassment cases brought public by a couple of women via Twitter last week. I wrote how I felt personally about the issue on Thursday. A few of you replied back and suggested that his actions are best classified as flirting. And not necessarily harassing. And that WhatsApp screenshots, which can be cropped to make your case better, does not prove anything. While that’s definitely true. I don’t think what he was trying to do was flirting. Flirting does not make the other person uncomfortable even if he/she started it. Clearly, that wasn’t the case here. Women involved were uncomfortable. They were trying to avoid the discussion Bajwa was forcing them into.

I didn’t say anything about what this means for Patari. For one I was already done writing for the week. And I was late so didn’t want to delay any further. Plus, the news was fresh. I normally take some time to form my opinions. And perhaps most importantly I was angry. Not a good emotion to have when you are trying to write something. Patari is probably the best thing to come out of Pakistan’s tech ecosystem in recent years. They built a great product and there is a vibe to its existence that made me optimistic about its long-term future. And no matter what you think of Bajwa after these cases, whatever Patari is today, it’s a representation of him in many ways. That’s not to defend him. Rather point out how insincere and dreadful his actions were.

When you had created something so amazing, you owe a certain responsibility to it. A responsibility not to mess it up unintentionally. And Bajwa showed utter carelessness to the trust that people bestowed upon him by helping Patari become what it is today. That includes Patari’s user base, artists and most importantly people working inside the company. I wrote in Patari’s bull case why I am optimistic about company’s long-term future:

Last week’s update made me think about Patari’s long-term future. I was bullish on their success last year when I wrote Tabeer, Fanoos and Patari’s Opportunity. But after understanding the challenges they are up against I started to question my assumptions. If record labels are so well positioned than how they are going to make it? I think I will stick to my guns for now. I believe Patari can change the incentives game around. There are a few things, albeit abstract, that are in their favor especially on a 2-3 year time horizon:

1. They have solid traction and are connected to their community (artists + listeners) in a way that most startups from our country are not.

2. They don’t have serious competition in sight. I don’t know of any music streaming service that is challenging them in a meaningful way. Though there are no substantial early mover advantages in music streaming business. The window they have right now is nothing but gold to build a great customer experience and create some kind of lock-in.

3. If anything Internet is going to be more pervasive in coming years. And Patari is all record labels have to reach this new target audience. A scary proposition for any content producer. Despite the incentives being hugely in their favor right now, record labels are too dumb to understand this. And too lazy to build or help build an alternate.

What Patari has is nothing substantial as of now. At least not in financial terms. What it had was the trust. A belief that it’s doing something amazing. And in the process is helping revive the music industry of Pakistan. Nothing hurt that trust more than reports from last week. You lost your community’s sentiments. And in a way that’s all you had. With that said I don’t think all is lost. Kudos to the board and rest of the team for stepping in quickly. As you probably know Bajwa is out. And Ahmed Naqvi is now the interim CEO. They did the right thing. But a lot more needs to be done. Those twitter jokes will be weird for now. And it will be a hard time for the team to change and instill new spirit into the company’s culture.

But it might just be what the young startup needs right now.

Why Alibaba buying Daraz is good news?

A brief follow up from last week. Reliance JioMusic—Saavn deal is not what I understood. First, Saavn will keep its brand identity. It might be something along the lines of Jio-Saavn but the name will live on. And the founders will continue to lead it. Second, and perhaps more importantly, Saavn will not be an over top the service for Reliance only as I thought it would be. Rather it will be available to everyone just like before.

This paywalled article from The Ken has more details.

Why Alibaba buying Daraz is good news?

I don’t have any insights on whether this is actually going to happen or not. It does make a lot of sense though. Regardless, I think Alibaba’s potential entry is a fascinating news. I concluded in eCommerce Impediments:

I do believe that this is more than $1B industry. But ecommerce players will have to change their approach if we want to be there rather quickly. Or maybe Jack Ma can do something about it.

The Jack Ma reference was part sarcastic and part optimistic. There is only one way for startups to operate in any market eCommerce included and i.e. by targeting a small niche and owning it. That rarely happens though. The allure of ease with which you can start a business on the Internet deludes the fact how difficult it is to actually run one. So startups rush towards expanding their offerings. And end up taking a bite their mouths can’t swallow. And that’s precisely what’s happening with eCommerce players in Pakistan. I laid out the challenges in broader strokes in the aforelinked article.

Keep that in mind and the fact that we are already a huge market for Chinese products. It makes a lot of sense for Alibaba to venture into Pakistan. A population of about 200M is alluring, to say the least. There might be a political angle as well. The recent Pak-China Economic Corridor is certainly encouraging for Jack Ma’s team. And if one thing you can be sure of any Chinese company is that they play well with their government. That’s almost required by law. Xi Jinping will certainly be more welcoming to Pakistan than say India which he sees more of a rival than a friend.

I mentioned 200M people of Pakistan. I don’t assume all of them will be Alibaba’s customers. At least not immediately. But they might be. I will go on and say that Alibaba is the only player who can further expand the market. Current eCommerce players have spread themselves too thin in the most concentrated parts of the country. And now they have little or nothing left to expand into new cities. Yes, by virtue of being on the Internet they are everywhere, to begin with. But further you are from the main cities more bottlenecked their distribution is. And then there is all so big challenge of online payments.

Alibaba can solve both these problems in one stroke. I am particularly excited about AliPay. In other words, Alibaba can open up the market. And that’s precisely what eCommerce in Pakistan needs right now. From Tacking Uber.

Secondly, in Pakistan, distribution is still a thing. Actually, its the main thing. People are not experience buyers. While they might appreciate you they don’t necessarily buy you for that. Why? Because they are not used to it. Hence most businesses are competing on distribution and that’s exactly the reason why startups are having a tough time. To open up the market startup needs to be a force in itself first.

This is also a good news for the rest of the players as well. It will take the brass tacks off the equation. You will know, for once, who the biggest player in the market is. Once that’s gone we might get our focus right. And start paying attention to the only thing that truly matters if you are true to building an Internet business. And that’s customer experience.

WhatsApp Payments Controversy in India

I mentioned WhatsApp Business in passing while writing about Paytm in my first ever attempt to write about India’s tech ecosystem. My analysis was short-sighted in so far that my understanding of India’s payment landscape was limited. To put in another way I wasn’t aware of UPI. UPI stands for Unified Payment Interface. It’s a payment protocol specifically designed for India to make peer-peer money transfer as easy as sending an email. Almost all banks in India comply with it. Which means regardless of the bank you maintain an account with, you will have a unique UPI ID just like an email address. You can use this UPI ID only to send/receive money to/from whomever you want.

The benefits of such a level playing field for startups, looking to venture into payments, are enormous. From The Ken (paywall):

Startups would need to go through the software development kits (SDKs), made by banks, that acted as ‘wrappers’ on top of UPI’s core technology (APIs). Only banks would be allowed to directly access UPI’s APIs directly, so startups would need to find a bank willing to license it an SDK.

It was a payment system created specifically for India by the National Payments Corporation of India (which manages various payment standards in the country). It was imagined to be a payment system that works just like sending an email, complete with the person having a unique address. It is the closest thing to a one-size-fits-all payment solution as it can be used for peer-to-peer payments, peer-to-merchant payments, both online and offline. Its one limitation is that it can be used only through a smartphone.

The first company to adopt UPI was PhonePe. PhonePe is now owned by Flipkart. To make UPI more mainstream Indian government has its own implementation of the protocol called BHIM. Google came up with their own i.e. Google Tez last year. And then there is Paytm. WhatsApp’s entry is recent albeit most controversial one. The reasons are:

1. There is no username and password. If you can access your WhatsApp you can send and receive money. The reason behind this is WhatsApp, unlike other players, is not operating as a wallet. They are letting ICICI, their partner bank, take care of this.

2. Barcode implementation is missing which is a requirement for any UPI implementation.

3. You can’t send money to someone who is not using WhatsApp if you have an iPhone. You can do it on Android but the option is hidden deep in settings.

One person is particularly unhappy about this.

He is more unhappy then what’s apparent from his tweet. Listen to his interview with Bloomberg for a glimpse.

In WhatsApp defense, the Payments feature is still in beta—only available to selected 1M users of its massive 270M base. And NPCI (governing body controlling UPI) has clarified that WhatsApp will have to meet full requirements for their eventual public launch. With that said I don’t think Vijay is pissed off for some arbitrary reasons. He understands what WhatsApp is trying to do here. With all the goodness that comes with an open platform like UPI, there also comes a less so ideal customer experience. First, you have to download an app i.e. Paytm, Tez, PhonePe etc. On top of that, you need username/password and enter verification pins etc for the individual transactions.

Now imagine an app that you already use the most in your daily life. There is no username/password to it. And you don’t have to enter obscure UPI IDs and confirmation codes while you are sending money. A caveat here is that WhatsApp only lets you use Payments feature if your mobile number is same with both the bank and WhatsApp. This and by maintaining a closed garden approach for now (payments only between WhatsApp users on iPhone), WhatsApp is showing how seamless sending money can be. To the surprise of no one people are raving about it on social media.

It will be interesting to see how they manage to maintain the same user experience for someone who wants to send money to a person not using WhatsApp. Or maybe they don’t have to. They need to be interoperable with other players to comply with the regulations. But there is no regulation for an equal user experience. What Paytm, PhonePe and other have been able to do is phenomenal. To use them, however, requires a certain level of tech savviness. The same is not true for WhatsApp. Your grandma can send and receive money if you help her set it up for once. And that might be instrumental in doubling down on an already powerful network effect of 270M people.

Vijay Shekhar is right in saying that Facebook is bending the rules. But they are not breaking them. And that’s an important difference.

What’s an investment for?

Simpaisa has raised money. Don’t be surprised if this is the first you heard about them. I did too. From TechJuice:

Many online businesses have struggled to generate real revenue growth due to the lack of a simple, one click payment system that allows recurring payments. SimPaisa enables digital businesses to monetize their products better by allowing their customers to make online payments using their existing SIM card balance. SimPaisa is the only payment system in Pakistan to offer this service.

Due to the lack of trust in online credit card payments, SimPaisa allows users to enjoy the benefits of premium services without the necessary risks involved. For merchants, SimPaisa allows for applications to be monetized, tapping into the 140 million plus SIM subscriber market.

Any payment system is a two-sided marketplace. You need payer and payee. I don’t know if such a marketplace exists where people are willing to pay via their career billing for Internet services. Let alone it needs a payment system that’s more trustworthy than Visa. Also, most apps on Apps/Play store have no direct to consumer business model. They operate on free + ads or the app is just a companion to their service. It’s not a local problem. It’s a global one. And for Pakistan, I assume things could only be worst. Even if such a market exists I could not think of a worst way to pay than carrier billing. I am already finding ways to lessen my spendings with those guys.

For most Internet businesses, a case can always be made for figuring things out as you go. Facebook didn’t have a business model for almost three years. To compensate for that, however, you need some other metric or usage statistics. Apart, payment systems, I don’t know there is anything fancy about them. It’s not a product that can pull a market from both ends in itself. You only need a payment gateway when you are absolutely sure that you need to pay for something. You don’t actively look or use one just for the heck of it.

Perhaps, most importantly the idea is practically flawed. It’s hard enough if you have to deal with one big corp at a time, for a strategic advantage, let alone three. The nature of Simpaisa implies that as you grow your dependency on telcos will grow as well. There is no way you will ever be in a position of power while dealing with them in the lifespan of your business. And you are running into something they all have intentions to do themselves e.g. Easypaisa, MobiCash etc. Marc Andreessen has more to say about this here (h/t Waqas).

So yes, I don’t know what this investment means. The best part, however, is their website. It has two pages. The most important of them i.e. sign up page is broken. And the landing page has an image photoshopped to perfection. An Android screenshot on top of an iPhone body.

The End Game

I am becoming increasingly wary of investment news. We are living in an age where the Internet is given. And yet most startup CEO’s talk about it like they invented it just a couple of months ago. Words like “online” and “digital” have become scapegoats to hide their actual value proposition or the absence of it. Being on the Internet does not mean anything. It’s what you do and how that’s valuable to your customer is what matters.

Also, almost every startup you pick, it’s probable that a version of it has already dried and died in the past. That’s not necessarily a bad thing. What’s concerning is that the new entrants do not seem to be learning anything from it. They don’t have any new insights about the market that their previous fellows lacked because they were the first ones. Which begs the question of what makes them get into the game, to begin with. I suspect it has nothing to do with their product or the market opportunity. But rather it has everything to do with entrepreneurship being the new cool.

Of course, there are exceptions and I know few of them. But most startup founders are just happy to be part of Plan9 or NIC. Or best yet to get a term sheet. Getting to Plan9/NIC or securing an investment is not an end game in itself. It’s just a mean to get somewhere. No amount of mentoring or money is going to help if you don’t know what that somewhere is. And a plan to reach there. More often than not the latter two are found missing.

The Four “Horsemen” of India’s Tech Ecosystem

My first article on Pakistan’s tech ecosystem was a holistic look at seven startups incubated in Plan9’s first batch. It was a smart idea from a friend that gave me, and presumably my audience, a helicopter view of the entire ecosystem. And proved instrumental in setting the context for what I wrote next. I am hoping to do the same with this article, only this time we are talking about India. Also, while I believe these four startups are the most important ones right now, there are more. And I don’t think they spur on their own. Like everything else, these startups are built on shoulders of others. I like to think India’s early foray into IT outsourcing from the late 80s and resulting culture has a big role to play.

Flipkart, Snapdeal, and Paytm Mall

I am clubbing them together because they are competing in same eCommerce space. Flipkart is the poster child of India’s tech ecosystem. Founded by two brothers in 2007, it’s the highest valued startup in the country. And the idea is clearly inspired by Amazon. Actually, the founders worked there before coming back to find their own. They are the largest player in the category with every third Internet user in India being a user of either their website or app. Earlier this year eBay invested in Flipkart and as part of the deal, Flipkart now owns eBay India too (though the later operates separately).

Snapdeal was originally a deal service. It got you the most exciting deals in the town but eventually turned into online shopping. It’s smaller of the two homegrown players in eCommerce. Flipkart tried to buy them a few months back but founders turned it down. While Paytm is also homegrown, it’s eCommerce wing i.e. Paytm Mall is not. Alibaba holds the controlling shares and is more of an Alibaba thing than Paytm. The fourth player is well, you guess, Amazon.

Together, as of now, Flipkart, Snapdeal, and Amazon own 75% of the market share. But it’s Snapdeal that seems in hot waters moving forward. From Tech in Asia:

Amazon’s commitment of US$5 billion to the relatively open Indian market, after finding the going tough in China, transformed the market dynamics. Flipkart and Snapdeal, which were in a race to grab market share with discounts, suddenly had the rug pulled from under their feet.

Amazon could offer better prices as well as selection and back it up with world-class services like Amazon Prime Video. The biggest loser was Snapdeal, which saw its market share dwindle. Flipkart managed to stay the course and inspired sufficient confidence for Tencent, eBay, and Microsoft to infuse it with fresh funds.

This leaves three big players in the market – Paytm ecommerce backed by the cash-rich Alibaba, the rejuvenated Flipkart, which could achieve a bigger market share through the acquisition of a marked-down Snapdeal, and Amazon.

Personally, I believe the news is troublesome for Flipkart too. Recent rejuvenation aside it’s dangerous to play in the same field as Amazon and Alibaba. Both can go on and on without making a dime. The longer it goes more trouble it spells for Flipkart.

Ola

Ola completed seven years of operations yesterday and they posted this on Twitter.

Yup, that’s how much services they are offering right now. Also, their lead on Uber is much bigger than I thought it to be. From Tech in Asia:

The advantage Ola has gained here is significant as the share of auto-rickshaws in rides booked online rose to 10 percent in the third quarter of this year, compared to a mere 3 percent in the same period last year. The number of auto-rickshaw rides booked via ride-hailing apps went up from 5.5 million in Q3 2016 to 18.5 million in Q3 2017, according to RedSeer Consulting.

Ola’s wider play is reflected in its presence in over 100 Indian cities, compared to Uber serving only the biggest 30. That’s a strategic differentiation because Uber is focusing on doubling down and winning in the major cities, which contribute the bulk of the revenue. Ola, on the other hand, could have an early mover advantage by going into areas which are yet to gain momentum.

While part of this has to do with Uber being more vulnerable recently but that will be not giving the credit where it’s due. Ola is definitely playing a different game than Uber. They understand the market well and are responding to it quickly. Plus they know what their advantage over Uber is i.e. being local, early and later’s vulnerable state. And they are doubling down on it.

Questions for Tech in Asia

We overestimate the effects of technology in the short run and underestimate them in the long run. Writing on the Internet does feel like a thing from the past because we now understand so much about it. Yet it’s effects on journalism in general and newspapers, in particular, have just started to creep in. We have only started to grasp what a future media company will look like. Two such companies who managed to capture the value in a sustainable way are Vox Media and BuzzFeed. I initially thought of putting Tech in Asia into the bracket but then I had some questions.

The name Tech in Asia struck a chord with me back in 2011. It felt like the thing that’s needed. A lot had already started to happen in Asia and there was no reliable way to keep yourself updated. In 2017 though, the name and the brand seem a bit lost. I stopped visiting their website mainly because they wind up from Pakistan earlier this year. But a slightly less profound and subtle reason was also the perception that they are stretching themselves too thin. I spent last week testing my perception.

I can’t say I was disappointed. There were a couple of stories that were really well done. The team is still growing. They are covering the region more extensively, excusing Pakistan. Their Job boards seem filled with opportunities. And I would like to think that events are a good revenue stream. But perhaps most striking was this paragraph from Willis’s announcement of their latest funding round:

Some of you may not know, but behind our media, events, and jobs products is a data warehouse with a treasure trove of data for us to understand and serve users better. We have some ways to go before being near the world’s best (e.g Toutiao), but that is the standard we are aspiring to.

The infographic below the paragraph summaries what he is trying to get at very well (do check that first).

I get the ambition i.e. being Toutiao for Asia. But I have always been skeptical in the assumption that what has worked in China will work in any other country. Mostly because China is such a different market. Toutiao, like WeChat, is riding on censorship. And it’s great. They saw an opportunity and seized it. But such an opportunity simply does not exist outside of China. People have their social and Techmeme requirements being fulfilled by Facebook, Twitter and well, Techmeme. What you need is a reason for people to visit your website every day.

So has Tech in Asia lost that reason? No, not as of now. I think they have a perception of being the single biggest tech publication from Asia. And that’s valuable. The danger, however, is that as each country in Asia becomes a bigger tech hub, this perception will be a problem in itself. China, India, and Japan are already there. And the rest is growing. In 3-5 years (at most) if I am really interested in Pakistan’s tech ecosystem and reaching its audience, I am better off with a publication who has a more local audience.

While that’s not happening right now because there aren’t many local pubs in each country to challenge Tech in Asia. But there will be in the future. But isn’t starting a new media company the hardest thing on Internet today? Yes, it is. But people are finding interesting ways to do that. Media companies with niche audiences are on the rise—supported by subscriptions and native ads. The problem is sustaining wider and wider journalistic operations. They are slowly becoming the equivalent of a printing press. Massive costs with very little gains. Unfortunately, that’s exactly where Tech in Asia is right now.

Finja SimSim, MVP, ​and the Third Wave

There has been a constant theme in my updates past few weeks. It started with why healthcare startups are solving the wrong problem for the wrong market. From the article:

The later makes a lot of sense for these startups to consider. First, it solves the last mile problem of healthcare. Hospitals have no reach to the rural demographic. And presumably, they are not interested as well. Which makes these areas an ideal market for a startup to tackle. Second, by serving these under-served customers you can slowly build a product that catches up to what’s being offered by big-name hospitals.

The only thing that matters

This is a classic case of disruption theory laid out by Clay Christensen in his landmark book “The Innovator’s Dilemma”. On a similar note, I suggested Pro Pakistani do the same with ProBlogs. Pick writers nobody knows as yet and slowly work upwards. And none exemplified it more than Veon. There is clearly a need to be captured if you are serious enough about building a platform. The problem, however, is the wrong product and even more importantly the wrong market.

Much like China, rural areas of Pakistan are going through a phase where they are bypassing laptops and jumping directly to smartphones for their computing and communication needs. There are a lot of interesting ways you can capture their imagination because the market is infancy. You could have even started with messaging with a little intrigue and chances are you might have found the MVP of your product. Having a good product is important but even more important is a ready market. From Marc Andreessen’s masterpiece on the subject:

Personally, I’ll take the third position — I’ll assert that market is the most important factor in a startup’s success or failure.

Why?

In a great market — a market with lots of real potential customers — the market pulls product out of the startup. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along. The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.

In short, customers are knocking down your door to get the product; the main goal is to actually answer the phone and respond to all the emails from people who want to buy.

The Third Wave

We are entering into the third wave of Internet companies. An era where tech companies will be challenging and working with industries outside of tech, argues Steve Case. He actually wrote a book on the subject, the gist of which is captured nicely by this image on the first page:

New Note

From the book:

The Third Wave is the era when the Internet stops belonging to Internet companies. It is the era in which products will require the Internet, even if the Internet doesn’t define them. It is the era when the term “Internet-enabled” will start to sound as ludicrous as the term “electricity-enabled,” as if either were notable differentiators.

What makes Uber and Airbnb unique is not their apps, it’s actually what happens at the backend when you interact with their apps. The map isn’t the hard part because a second wave internet company named Google has already solved it. It’s making sure that a driver with a car actually shows up when you press the button. Finding people willing to rent their spaces isn’t the hard part. Craigslist was doing that already. It’s making sure that a tenant gets a good experience. There is a famous Airbnb story where Brian and Joe found that their app wasn’t the bottleneck for their declining numbers. It was the tenant’s perception that rooms available are not good enough. They had to rush in and deal with individual cases personally.

Hence it’s wrong to follow Craigslist if you want to disrupt healthcare. It’s probably wiser to study AOL.

What’s wrong with Finja SimSim

That’s exactly the problem with Finja SimSim as well. They are trying to solve a third wave problem i.e. Fintech via a solution that’s mimicking the second wave. Part of the product experience in the third wave is what happens at the backend when you interact with an app or website. While you can say that you have made banking simple. What you have essentially done is forced the complexity on the user. Opening a SimSim account does not do anything for me. I have to pull things up myself e.g. transferring funds to make it work. From the book again:

If this new generation of entrepreneurs is to succeed, the playbook from the Second Wave won’t do. The playbook they need, instead, is the one that worked during the First Wave, when the Internet was still young and skepticism was still high; when the barriers to entry were enormous, and when partnerships were a necessity to reaching your customers; when the regulatory system was coming to grips with a new reality and struggling to figure out the appropriate path forward.

Apart from that, the product is not as simple as advertised. Sign up process is definitely not less than a minute. You have to type out almost everything that’s on your CNIC. Take a selfie and then scan the CNIC again. For a guy like me who is destroyed by Apple-esque experiences, that’s a lot of friction. But again, back to Marc Andreessen’s point. You can get away with an inferior product if you are in the right market. And that’s where I believe they are making the same mistake as MyZindagi and Veon.

What made WeChat so invaluable wasn’t the idea or the product. It was the market. They didn’t target the tech-savvy upper middle class of China. That market was already being served by WhatsApp and Facebook albeit via VPNs. WeChat targeted the lower end of the market and gave them something they didn’t have i.e. free messaging. And not just that they started to build integrations that no Facebook could build. They started to bring local merchants on board i.e. mom and pop stores on the streets of rural China.

The person who goes to Centaurus or Emporium Mall for shopping does not care if your product is free. They already have a lot of money, a bank account with an app that gets authenticated via Touch ID (thank you SCB) and possibly a couple of credit cards. I am not sure how you can break up this powerful game of incentives with a product that’s new and inferior. Imagine, however, a person who doesn’t have any of that. No or little fiat money, no bank account, no credit card and in whom no bank is interested. But he most probably has a smartphone. Or at least eye one. That’s your target market. The good news is that they are at least 50% (rough estimate) of your country’s population.