Reliance to Acquire Saavn, Sehat Kahani Raises Money

Uber has agreed to sell its Southeast Asia operations to Grab for a 27.5% share in the latter. Dara Khosrowshahi, Uber CEO, will join Grab’s board. I don’t have anything to add to my original analysis.

Reliance to Acquire Saavn

I wrote in Spotify’s launch in India last week:

Spotify will join Gaana, Saavn, Hungama, Apple Music, Google Play Music and Amazon Music among others.

Two notable names in the missing subtext of “among others” were Airtel’s Wynk and Reliance’s Jio Music. By virtue of being over the top services on two of the biggest telecom operators in the country, Wynk and Jio Music has a significant market share. From The Ken (paywall):

But executives closely involved in several music streaming companies maintain that these numbers are often inflated and that as a thumb rule, the actual base typically is half of what is reported. App Annie data accessed by The Ken for January 2018 revealed that Airtel’s Wynk had 21 million active users, followed by Jio Music at 18 million. Gaana and Saavn, the data showed, had 17 million and 15 million active users, respectively.

While Gaana and Saavn lead in the total number of subscribers. Their active subscriber bases are lesser to those of Wynk and Jio Music. These numbers were particularly troublesome for Saavn—Gaana recently got backing from Tencent. From the same The Ken article:

A decade later, the situation couldn’t be any more different. Gaana is funded by Tencent, while Saavn, as per executives in India’s music streaming circles, is battling for survival and seeking fresh investment. Saavn, according to multiple people aware of the situation, is currently in the market for a fresh funding round of $50 million at a valuation of around $200 million. Saavn’s monthly revenue, sources say, is around $1 million, largely coming from its overseas subscription offering.

The report was spot on. This week from ET Tech:

Reliance Industries has signed a pact to buy out Saavn music app for $104 million in cash and rest in stock, to merge it with its own digital music service JioMusic, valuing the combined music platform at about $1 billion.

This feels like a sad end. Saavn was the torchbearer of India’s music streaming industry.

Sehat Kahani Raises Money

From Dawn:

Founded in 2017, the startup recently raised $500,000 in seed funding from multiple sources and plans to expand its operations in the coming months.

What Sehat Kahani is trying to do is to create an all female provider network that connects home based female doctors to patients in under-served areas where health is still a dream, through quality tech-enabled solutions.

I could not be more fond of what Sehat Kahani is trying to do here. From Craigslist, Telemedicine and Healthcare Startups last year:

While I am skeptical that Craigslist model will ever work, I think telemedicine can. The problem, however, is it’s an inferior product being offered to an over-served market. Private banks, hospitals, schools, no matter what you think of them. They are over-serving the urban population of Pakistan. So either you need a product that’s 10x better than what they are offering and charge a premium. Or you need to find customers that are being neglected by these incumbents i.e. people living in rural areas of Pakistan.

The latter 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.

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Patari’s Bull Case, Spotify to launch in India

Patari’s Bull Case

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.

Spotify to launch in India

India is a lot more interesting than I thought it to be. From ET Tech:

Music streaming giant Spotify is working on launching its service in India, co-founder and CEO Daniel Ek confirmed during the company’s investor day presentation.

“We are working on launching in some of the biggest markets in the world, including India, Russia, and Africa which has a very rich musical culture,” Ek said.

Spotify will join Gaana, Saavn, Hungama, Apple Music, Google Play Music and Amazon Music among others. Royalties model makes it easy for record labels to have the same song/album on multiple streaming services. More streaming services mean less differentiation for one individual player. Customer experience becomes less of an issue unless you go out of your way to mess things up. And less differentiation at customer touch point means very little chances of one player becoming an aggregator giving leverage back to record labels.

There is nothing ingenious about this though. It’s an old business model working surprisingly well in 2018. There is no guarantee, however, it will continue to do so. Especially when one name, more than anything else, is increasingly becoming synonymous to listening music in the country (hint: Patari in Pakistan).

Gaana Raises Money, Netflix Hindi Originals, Amazon Music in India

Gaana Raises Money

From TechCrunch:

Chinese internet giant Tencent is continuing to put its money in India and in music streaming services after it agreed to lead a $115 million investment in India’s Gaana.

Gaana is a music streaming service that was started by Times Media, the company behind the Times of India newspaper and tech incubator Times Internet among other things, seven years ago. Gaana didn’t reveal its user metrics, but CEO Prashan Agarwal said the company is “only 10 percent of the way towards building a business useful for 500 million Indians.

Music streaming while great for consumers is a tough business. I wrote in Tabeer, Fanoos and Patari’s opportunity:

Keep this in mind and now think about streaming services like Spotify, Apple Music, and Patari. They have little to no leverage in the whole system—despite all the hype. Because essentially they are just a funnel—a way to distribute music. But so is Google—a funnel. Yes, but Google has the unlimited number of suppliers. Almost everyone writing on the web is a supplier to Google’s funnel. Content creation on the web has been democratized in a way that music has not. When you have that much abundance in the production, the value shifts to the curation. And that’s what Google has been reaping the fruits of.

Almost every streaming service, from day one, is in direct conflict with one entity they are totally dependant on building a great product i.e. record labels. Unlike text, music creation, the sort of which that gains mass traction, is hard. While you can create it on your own. You can’t make it. Artists need record labels and that shifts the power balance to these labels rather than streaming services. Despite the fact that it’s streaming services who own the customer experience. I presented a bull case for Patari in the article to ultimately become the record label itself. But it will be easier said than done. The argument holds true for Gaana and Saavn except the complexity is tenfold. Due to the size of the industry record labels in India are much better positioned than they are in Pakistan.

Netflix Hindi Originals

That begs the question why music streaming services can’t be Netflix? Frankly, I didn’t know the answer till last week. But I was in luck. Ben Thompson answered it while writing about impending Spotify IPO in his newsletter (paywall). There are three key differences between Netflix and Spotify (read Patari, Gaana, Saavn etc):

1. Netflix started as DVD renting service. This allowed them to build their audience without getting into any conflict with film studios. They were operating at the bottom to get even noticed by the studios. The only company they competed against was Borders.

2. Movie industry operates on licensing model. While that makes streaming a movie more expensive, to begin with, it’s actually good for the long run. Licensing is a fixed cost while royalties on which music industry operates is a marginal one. This implies that Netflix could only venture into the streaming business when they have 1) sizeable audience to justify licensing fees and 2) enough cash to pay licensing fees upfront. Because of the licensing model movie titles go in and out of Netflix every month, but they always have enough to retain their customers. Not all but enough.

3. Because of the licensing, and not royalties per stream, model film studios can’t just pull out their content on the basis of Netflix making House of Cards. This means House of Cards improved the quality of the product without endangering the business model.

All this makes the making of “Love Per Square Foot” and other Hindi originals far more easy choice for Netflix than what Tabeer and Fanoos are for Patari. Or whatever Gaana is making on its own. Love Per Square Foot does not endanger the presence of Dangal on Netflix. And by the time the licensing deal with Dangal is over, Netflix might be coming up with their own Aamir Khan original. Besides you can only watch Dangal so much. Not true for a song you love though. Perhaps Steve Jobs was right all along. People don’t just want to listen to music. They want to own it.

Amazon Music in India

From ET Tech:

With this, Amazon Prime Music will compete with music streaming apps Saavn, Gaana and Apple Music in India. As part of the offering, Amazon Prime Music will offer ad-free streaming along with unlimited offline downloads at no additional cost to the existing Prime subscription for users in 10 languages.

India’s digital music industry is expected to reach Rs 3,100 crore in revenue by 2020, with 273 million online music listeners, according to a report by Deloitte last year. In terms of market share, Gaana reported crossing 60 million monthly users in January while Saavn recently reported 22 million users. Industry estimates peg the overall number of Prime customers to be around 10 million in India.

So why Amazon is interested in such a low leverage/margin industry? Amazon music makes sense because Amazon is not intending to make money out of it. For them, it’s mean to sell more Amazon Prime subscriptions. And as ET Tech noted above, its bundled as free to Prime subscribers in India. The same goes for Apple Music. Apple doesn’t have to make money out of Apple Music. You already pay for it when you buy a $1,000 iPhone or $350 HomePod. Yes, Apple Music costs $10/mo but that’s a dime a dozen.

WhatsApp Payments Followup, Uber to Sell Southeast Asia Unit to Grab

WhatsApps Payments Follow-Up

There was another angle to Paytm Vs WhatsApp debacle that I missed in my article last week. And that’s why NPCI allowed WhatsApp to launch, albeit limited beta, when certain UPI specifications were missing. Vijay Shekhar was quite adamant that he never got such a deal. That he had to comply with every little detail of UPI before launching for any user let alone 1M beta testers. He then went on to call Facebook manipulative and evil. And to put words in his mouth the modern day East India company. While a sprinkle of patriotism is nice the fact remains the Internet knows no boundaries. Unless you are of course China. And I am not sure India is willing to go that route. The country gained a lot from their Silicon Valley diaspora.

Part of Paytm’s success even has a lot to do with outside investments from Softbank and Alibaba. To Indian government’s credit, they refused to allow WhatsApp operate as a full fledge payment company. From ET Tech:

Last year, the messaging app, the largest in India, tried to partner with a private bank in the country to develop a digital wallet app to facilitate payments on its platform. That was when it ran into a reluctant Reserve Bank of India. The regulator was not ready to allow a foreign entity to enter India’s digital payments space, according to multiple stakeholders ET spoke with to piece together the story behind WhatsApp payments.

The fact that they are not operating as a wallet protects them from any legalities. This does not, however, explain why NPCI allowed them to launch without following full UPI specs. More importantly to create a walled garden of payments (iPhone only) when previously no one was allowed to do so. One reason could be the 270M user base. By courtesy of being the most dominant chat app in the country, WhatsApp has the ability to introduce UPI to a lot more people than any previous entrant had. Everyone else had to build their audiences from scratch. This is a typical example of demand controlling the supply. Only, in this case, it’s a regulator who controls the supply. Perhaps more importantly, a regulator willing to go lengths to make India a cashless society. You can’t say they had the wrong intentions.

With that said Vijay Shekhar’s outburst is good for the long haul. Though it might not have stopped WhatsApp from rolling out the beta version the way they wanted to. It will put significant pressures on them and NPCI moving forward.

Uber to Sell Southeast Asia Unit to Grab

From CNBC:

Uber is preparing to sell its Southeast Asia business to Singapore’s Grab in exchange for a sizable stake in the company, according to two sources with knowledge of the matter.

No deal has been reached yet, and the timing of any such deal is uncertain.

This is an interesting development but not a surprising one. Uber is at a point where they need to prove their worth. Not just as a company well run but also with numbers to push for an impending IPO. The company is no longer the default choice especially in countries outside the US. It’s Didi in China, Yandex in Russia, Careem in Pakistan and Middle-east, Grab in Southeast Asia and Ola in India. Even in US Lyft has gained significant market share away from them in 2017. So a deal to the tunes of Didi and Yandex makes perfect sense. I won’t be surprised if a similar deal comes up for Careem and Ola in near future.

Below remarks from Dara (Uber CEO) while talking to Goldman Sachs Technology and Internet Conference the week before suggest this is clearly part of the strategy. And not another bump on the road. From the same CNBC piece:

I think the team ran through an inventory of where we competed, and if we compete on let’s say even on a dollar-for-dollar basis against the local player, paying the same amount to drivers, collecting the same amount from riders, in general where we are now is, if both players are kind of spending equally we tend to win share. We’ve got a better brand, we’ve got better technology, better network, etc. Whatever it is, we tend to win share. There’s certain markets, China and Russia, where that wasn’t true. And if your only competitive advantage, or the only reason you can be in a market is because you can spend money, that’s not exactly a reasonable proposition.

Inspiring confidence on eCommerce, Dawn interviews Khalid Bajwa

Money is a powerful incentive. And the fact that it’s not attached to this newsletter is what making it suffer. I need to work hard on that.

Onto the update.

Inspiring confidence on eCommerce

From Pro Pakistani:

What e-commerce can provide is so much more than just a sale through a website – it can be the chance to educate those about the power of the internet, to aim to be a major contributor to the economy at large, and to truly change a person’s life.

It was through that pleasant experience that Sehat decided to hold a football match in the region, this time through their own arrangements, taking place in Late July 2017. A football match was held between the Imran Khan Foundation and the Langlands School and College at the Chitral Polo Ground in the center of the city.

I agree eCommerce is definitely more than just a sale on the website. But I don’t understand how a sporting activity can help in educating that. A football match is a great idea to increase your mindshare in a growing market. But for people in Chitral eCommerce simply does not exist let alone growing. What people of Chitral, or any other rural areas of Pakistan, need is confidence that online shopping is just as good if not better than a visit to a local market. And the only way you do that is to actually make them go through the process. And when they are in it make sure it’s smooth. Even better, let it exceed their expectations. Frankly, that’s not what’s happening.

To be fair this is not just a criticism on Sehat. At least they did something with good intentions. Most online stores seem careless about how their customers feel once a transaction is over. I bought something on Black Friday from one of those self-proclaimed best and biggest online stores. And it was a horrible experience. Since I wasn’t taking my foot off their tales their CEO called. He explained what has happened in a true gentleman way. But when I probed him why his email communication lacks the same level of empathy he has shown on the phone. His reply shocked me. Apparently, he gets 500 emails per day so does not have time for empathy. I forgot to ask if this, too many emails, is why their customer service is so bad.

Maybe I should just be happy that I finally got my order after like two months. But what irks me is that I have seen this guy mentoring young startups. And he definitely would have lectured them on how important the customer is.

Dawn interviews Khalid Bajwa

The interview is more about Khalid Bajwa than Patari. But it’s good. Often the personality of a founder predicates the culture of the company. And that’s certainly true here. This last bit is really fascinating though.

In his opinion, music has become almost exclusive to the corporate domain, where musicians are told what to play by MBAs who know nothing about it. We must give creative freedom to musicians, even if we sometimes disagree with what they come up with. We have to trust their judgment because they know the craft. Sometimes they will create something that is not commercial, but that is the only way we can make magic happen.

That’s probably what has happened to every form of fine arts in Pakistan.

Book List

I read a shit load of books last year. Well, actually they aren’t many but a lot compared to what I was reading in years before. Here is the complete list.

Paytm (India) adds messaging

I have been planning to write about India’s tech ecosystem for some time. The delta of knowledge it required overwhelmed me more often than not. Not only the ecosystem is far bigger than ours. Also, unlike Silicon Valley, I don’t know much about it. So even if on weekends when I managed to squeeze some time, I quickly gave up because I couldn’t figure where to begin. The answer, however, came from an unexpected place.

This is not the first time I heard praise for an Indian startup though. But I have a personal history with Paytm. Seeing what it has become gave me chills. Plus, it made a lot of sense as a follow up to my article on SimSim.

Back in 2013, I pitched Paytm for Pakistan to Plan9. Obviously, I didn’t make it. And I didn’t pursue it myself too. The idea of an app for mobile top-ups was intriguing back then—if nothing else. And it was the result of my own personal frustrations rather than a Paytm inspiration. I actually didn’t know Paytm existed until a few days later.

My family and I used a combination of 2-3 different telecom operators and a couple of them were not on-board with SCB’s online banking. Also, it was a value-added service back then. Telecom operators used to brag about it i.e. you can do mobile top-ups using this bank and that. So not only there was no bank offering top-ups for all operators, they were not planning to do either because they were seeking partnerships (read easy money) in a typical incumbent fashion.

I was more than sure I wasn’t the only facing this problem. So having a mobile app that can solve this all made a lot of sense. Not so surprisingly I wasn’t alone. Vijay Shekhar was three years ahead of me. Paytm, for the most part, was still a top-up service in 2013. It was tiny compared to the behemoth it has become now. On that end, I cringe what a lost opportunity Easypaisa has been. I vouched for it to be a separate company more than once. Here was a product way ahead of the competition and one that had the MVP built in. And yet they kept it tied to their own service for God knows what.

Today like Sriram said, Paytm is everywhere. From cucumber to Gold, you can buy anything and everything without carrying cash or leaving your couch. It also got little help from the government last year when it started demonetizing 500 and 1000 banknotes. And while banks and telecom operators in India have caught up but not before Paytm captured a large portion of the market. And now it’s on a head-on competition with them by offering services previously reserved to banks.

Paytm Inbox is just like their banking service, a fend off strategy to keep WhatsApp Business at bay. I won’t be surprised if WhatsApp gets a tough time here. Albeit all the Facebook money, they still have to work upwards. Paytm, on the other hand, will be pushing from the top.

Cheetay raises money

What’s a good sign you have reached your product market fit? Your customers will be talking more about you than yourself. I rarely see Cheetay in the news but I do read people talking about them. Some good, some bad. But they do. And these people are not your typical tech guys like me who feel obliged to comment on everything happening in the ecosystem. They are the actual customers who take Cheetay for its face value and that’s a delivery service.

The irony is they are in a competitive market. On that end, I found remarks from Ahmed Khan on their latest funding round quite assuring. From TechJuice:

… amongst the clutter it is imperative to be recognised not only for providing quality and timely delivery services but also to fulfil the promises you make to your customers by delivering their orders through efficient riders (delivery staff) who are meticulously trained to facilitate and satisfy the customer.

The fact that they have stayed small and focused on food in Lahore is smart too.

Logistics is an unsexy business. Most people won’t talk about the timely delivery passionately. But they are sure to let you know in a profound way if something goes wrong. But it’s also a lucrative one if done right. One of the impediments to eCommerce in Pakistan is the last mile problem. The fact that you don’t have a physical store can backfire because your window to perfect the experience is small. From the article:

Checking products in a well-decorated store is different from checking them on your couch with possible kids screaming at your back and the looming uncomfortable decision of giving your money away.

There is a solution to this, however. And that’s significantly improving the user experience at last mile. But this might require getting into the logistics yourself and making sure your customer is happy and satisfied before you leave the door.

What if there is a company that specializes in nailing down the last mile? A company that understands the Internet. A company which has grown up much like yours. And a company that’s more of a trusted partner than a vendor to be managed.