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Topics - wiredlife

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811
Web 2.0 / What is BankBazaar Business Model ?
« on: February 18, 2015, 11:35:37 AM »
The Bankbazaar platform has automated banks and insurance underwriting processes through its platform. It is a category leader in online loans and credit cards. It was getting 750,000 visits via organic search in January 2015, growing 2x per quarter. Organic (free) traffic has increased from 16% to 36% over the past few quarters.

It has done product integration with 70 partners already, and plans to take it to 100. It already has an international site for Malaysia and plans to launch five new sites for different markets by March 2015.

812
5G / Wi-Fi / Reliance NetConnect Mi-Fi Devices to Disrupt Broadband
« on: February 18, 2015, 10:55:39 AM »
Reliance Communications would introduce mi-fi devices soon; these would be able to connect to 10 devices simultaneously, with a four-hour battery backup. We look forward to how the company prices and bundles its mi-fi plans. This will use the underlying CDMA EVDO network for Data Communication.

On stagnant 3G investments, the RCom management said that the company has the largest metro footprint amongst Indian telcos and currently do not see much scope for expansion, especially given the relatively low market-readiness for 3G services. The management said that its plan is to currently milk existing 3G assets, with likely expansion in the future, as adoption increases.

Expectedly, the management did not give too many details on their auction strategy, however it re-assured that (1) RCOM is in a healthy financial situation and (2) it has sufficient fallback options in its seven renewal circles to maintain business continuity. We expect the current auctions to be tougher for RCOM than what the management commentary suggests.

813
900 MHz should see fierce bidding as it is a renewal auction and the minimum bid size is 5 MHz; implying only two operators can acquire it in each circle. In addition, 800 MHz and 2100 MHz are also being auctioned.

Idea has 92% of its 900 MHz spectrum coming up for auction, thus faces the highest risk. Given its balance sheet strength, we think that Airtel will bid aggressively to acquire more spectrum.

Data volumes have been growing 20-25% QoQ and hot spots in the country are witnessing congestions. Our case study on Asian operators suggests as data increases, so does capex to sales, which is over 25% in Asia currently

814
3G / HSPA / EVDO / Airtel Vs Idea on Investments & Profits
« on: February 12, 2015, 12:45:08 PM »
Bharti Airtel's invested capital (IC) in its India wireless (mobility) business is Rs1,071bn. Contrast this with Idea Cellulars IC at just Rs600bn (30% of this or Rs182bn is spectrum assets).

Idea?s IC is 53% of Bharti?s IC but its revenues at Rs80bn in 3QFY15 are ~61% of Airtel's 3QFY15 India wireless revenues. Idea?s relative underinvestment in spectrum/capex vis-a-vis Bharti may allow it more leeway to exhibit much greater flexibility on pricing but can this be an enduring state of affairs?

What might Idea do on voice pricing in the future as/when it scales up its capex (currently, 12% of revenues vs Airtel's 15-16% for India wireless)? Maybe, there could emerge greater pricing discipline on Idea?s part as and when it feels compelled to raise capex and also as voice/minutes growth slows down for Idea. We think that it is only a matter of time until Idea can hold out. We believe Idea must follow suit on capex else it risks a P&L miss in FY16 and beyond (more so in FY17 as we expect RJio will be fully competitive on the ground by then).

Both the Companies going forward will face number of structural issues.
ARPM vs MoU trade-off (so voice pricing increase cannot really be fully passed through)
cannibalization of voice by data, which we think will play out over 1-2 years;
the impact of the imminent entry of RJio impacting data pricing, profitability and elevating capex
the impact on the balance sheet due to upcoming spectrum prices in early 2015

815
SmartPhones & Apps / How OTT Apps Killed SMS ?
« on: February 09, 2015, 04:14:04 PM »
OTT services are web-based ways of communicating that bypass traditional voice/SMS services. These apps are popular & growing rapidly in India ? WhatsApp (70m users; 30m in Nov13), Hike (35m; 15m in Feb14), Viber (33m) & Line (30m). WhatsApp currently has ~70%  penetration amongst smartphone owners in India. Popularity of OTT messaging apps can also be highlighted from their ranking in India (on Google Play) based on downloads (WhatsApp ? 1, Facebook Messenger ? 3, Hike ? 20 & Viber ? 27).

SMS as % of rev (GSM) fell from 9% in Dec11 to 3% in Jun-13 but has remained there for the last 5 qtrs; drop rate in no. of SMS sent too has lowered. The subsiding trend comes when rate of OTT app downloads is high. This could be due to early adopters (heavy SMS users) having already migrated. While the overall trend will still be declining rev % from here, pace should be moderate (Airtel's SMS rev % fell 0.2% in last 2 qtrs v/s 1.1% in prev. 2).

Impact on local voice is unlikely to be meaningful in the near term 1) already low tariffs, 2) 3G coverage still inadequate (telcos focusing on top 4-5 cities/circle), & 3) rising 3G utilization (with low spectrum allotment) will start to hurt voice quality on an IP network. Roaming will get hit though some impact has already been felt (6% of rev; down 2.6% in the last 6qtrs).

816
Defending its slower-than-Idea volume and revenue growth in India, Airtel management essentially indicated that the two companies are pursuing different strategies and the company is internally extremely satisfied with the performance of the India wireless business. We agree that Bharti?s performance on the India wireless side has been solid in the past few quarters in its own right; however, volume growth differential (on voice and especially data) versus Idea is too glaring to dismiss, in our view.

Airtel's management, like Idea?s, reiterated that it does not foresee a need for meaningful fresh 3G/4G cell sites for the next few years. This is in line with our view that 3G/4G cell site additions would be primarily in the form of loading.

The company, while avoiding any meaningful discussion on the upcoming auctions, did indicate that it expects the auctions to be rational. Definition of ?rationality? is the real unknown here and we maintain that the outcome of upcoming auctions is tricky to call.

817
4G / LTE / How Reliance Jio Launch will Lead to Another Price War ?
« on: February 09, 2015, 02:10:44 PM »
Reliance Jio'saspirations and game plan extends beyond the mobile to include content and video to the home; so to try and assess a business case centering on just mobility may be placing too narrow a lens on the analysis. The relevant question to ask is whether RJio, with its deep pockets and staying power, can alter the industry picture on pricing, margin, capex, data adoption, spectrum payouts, quality of experience/network profile in a manner adverse to incumbents while it competes.

For sure, Tata has poured in enormous capital/investments over the past decade with little to show for all of it (so, we are not making a case for RJio?s success) ? that said, didn?t Tata along with Reliance Communications (RCom) contribute to severe voice pricing erosion that hurt the India telco industry? Why can?t RJio do the same for data and spoil its currently attractive economics for incumbents?

818
4G / LTE / Why Reliance Jio Mega Launch Delayed ?
« on: February 09, 2015, 01:22:52 PM »
Reliance Jio Infocomm has delayed launch of its services from 1HCY15 to 2HCY15, which some investors may believe is due to technology/strategy issues. Not true. RJio is planning to launch services in 900 towns initially (as per its annual report). RJio envisages a pan-India presence in the course of time. Notably, a very low proportion of towers in India are linked through fiber in India and data transfer speeds/quality is constrained by microwave communication.

RJio needs to lay large amounts of fiber before launching services. To get municipality approvals in 900 cities/towns and laying fiber across the cities is a time-consuming exercise. Particularly, the time taken to get the approvals/permits to lay fiber can be unpredictable, which is likely the primary reason for delay in the launch of services. Premature entry resulting in sub-par data services could cause wide-spread negative word-of-mouth undermining RJio?s ability to attract subscribers. Hence, we do not think that the delays in RJio?s launch of services are due to any technical issues/glitches or sub-par experience.

819
We found Bharti Airtel's reasoning to not offer bundled services clubbing its wireline, wireless and DTH offerings a bit surprising. The Management indicated that the reason to not offer bundled services is the disparate IT systems of the three businesses. This surprised us, coming from the leading telecom company in India.

If the market is ready for bundled services, such system aspects cannot be a reason to not pursue it aggressively. There is a new large player on the horizon who intends to pursue bundled offerings aggressively, if the media reports are to be believed. The new player starts with fresh IT systems and we do believe that Bharti would not want to risk losing business on account of inferior IT systems. We may be stretching our argument here a bit but as we said earlier, Airtel's (honest, we appreciate) response surprised us.

820
Web 2.0 / Baidu's Mobile Search Queries Surpass Desktop
« on: February 08, 2015, 01:12:34 PM »
Baidu seems to maintain its dominant position in mobile search area with little immediate competition. On Baidu, mobile traffic in 3Q for the first time surpassed PC traffic, with the rev contribution hitting 36%. We expect this number to increase to 39% in 4Q, mainly driven by ever-growing mobile traffic and narrowing CPC discount to PC. Baidu is once again restructuring (last done mid-13) into: 1) Mobile Services (combining Mobile cloud & LBS), 2) Emerging Business (combining New Business, User Spend, Globalization), 3) Search (combining the Cloud and Mobile Search Union teams).

In order to ?connect people and service?, we expect to see deepening offline campaigns for O2O offerings such as Baidu Connect and Baidu Nuomi group-buy, which could pose pressure on further margin recovery in 2015. This new O2O offering, launched in 3Q, currently has covered ~ 500K offline merchants, who are mainly engaged in dining, travel, education, finance services etc

Baidu Investing in Lenovo SmartPhone
Baidu is investing over USD100m in Lenovo's Fancy Maker smartphone brand. With all of China's large internet platforms eyeing OS development, we view this small investment as betting conservatively on a very high-risk, low margin area.


821
SmartPhones & Apps / Why Flipkart Moved from Desktop to Mobile ?
« on: February 06, 2015, 10:49:01 PM »
For the majority of Internet users in India, mobile devices are their primary portal to the online experience. Only about 5 percent of
users in India own personal computers. According to Unitus Seed Fund, 34 percent of people in India access the Internet
exclusively through mobile phones
.

In light of the strong disparity between PC and mobile usage in India, some companies have crafted their business models to capitalize on the mobile revolution.

Flipkart, India?s largest e-commerce marketplace, caters to the huge numbers of people in India?s towns and cities who rely on mobile devices for commerce. Consumers can use the Flipkart app to search, share, compare prices, and shop from thousands of third-party vendors in more than 70 categories.

More than 10 million people in India have installed the Flipkart app. Mobile traffic growth for the app is twice that of PC-driven traffic
growth, and over 50 percent of the company?s traffic comes through the mobile app and the mobile website. Flipkart anticipates that mobile commerce through the app will constitute more than 75 to 80 percent of all user traffic in India by 2016.

822
Technology / China 2015 Digital Ad Trends
« on: February 05, 2015, 04:24:44 PM »
iClick CEO Sammy Hsieh sat with HK-based investors last week, offering them a preview of 2015 Digital Ad Trends. Sammy's Tech Team is working to link up to the ever-growing number of APIs Tencent Ad Exchange.  Mr. Hsieh expects Tencent to see faster Ad Revenue Growth.

While there have been gradual improvements in the back end, we believe advertisers await more marked improvements in Qihoo click-through and conversion rates.Amore important development would be the introduction of an even more powerful mobile search solution which would improve Qihoo's market position significantly, although we see few leading indicators to suggest its imminent delivery.

A smaller amount will come from Weibo spend along with current brand ad spend and budgets previously devoted to China's largest e-commerce platforms. Buy Baidu and Tencent. Most Moments and broader GDT spend will come from offline budgets.


823
Web 2.0 / What is Customer Acquisition Cost for Online Retailers?
« on: February 03, 2015, 04:45:22 PM »
The revenue model of most of the entities that operate e-tailing portals are commissions and gross profits ? if they also follow the hybrid model. But the costs of e-tailing are intriguing and they cause of a lot of heartburn to offline retailers as well as brands.

Contrary to perception that online retail entails lower costs as there are no costs associated with operating stores, these businesses have high costs in the form of discounts / coupons, free delivery for products (where cost of the product is sometimes lower than delivery costs), and customer returns. In e-tailing parlance, some of these costs are known as customer acquisition costs.

The largest cost for e-tailers in a nascent ecommerce market such as India is customer acquisition costs - this is because it includes discounts offered. These discounts are offered over and above the discounts offered by brands or sellers of the product and are usually offered to customers in the form of coupons. They are known as cart discounts because they can be availed once the customer adds the product to his or her cart. The discounts sometimes tantamount to losses at the gross level (transaction level) in the hybrid model; in a marketplace model, they sometimes exceed the commissions that the e-tailer earns. E-tailers bear these losses for customer acquisition.

E-tailers bear these losses for customer acquisition. However, these discounts are not limited to a one-time purchase and are often open for all ? they don?t distinguish between old and new customers. This implies that they are given not only for customer acquisition but also for customer retention.

Search Engine Marketing Cost
But customer acquisition costs don?t end here. The other significant costs are Search Engine Marketing (SEM) costs. These are costs that ecommerce players incur to direct traffic to their portals on leading search engines such as Google. One of the most interesting cases of SEM costs is when flipkart.com ran its big billion day sale on 6th October 2014. When one searched for big billion day on Google the search actually led to amazon. in instead of Flipkart!! ? it seems like Amazon paid Google to direct the search to their website.

824
Technology / How is Amazon Shopping Making Money in India ?
« on: February 03, 2015, 04:27:15 PM »
Amazon India is not only a retailer but a technology company putting its technology to the bets use. Amazon receives a fee for listing items by Sellers plus commission on sales depending on the category. Amazon calls it referral fee. The fee is charged when an order is placed and the amount is disbursed a few days after shipping.

The following Chart Shows the Fees charged by Amazon.in

825
Web 2.0 / What Are Indians BUYING Online ?
« on: February 03, 2015, 03:39:58 PM »
Crunching Data from Online Retailers, Data suggests that Electronics and CDIT (consumer durables information technology) products dominate the current online buying space by Indians. In terms of value, electronics is the largest category ? it has a 47% share of the online retail market.

Within electronics, mobile phones, laptops, tablets, and cameras are big purchases. A large logistics company that partners with ecommerce players for deliveries said that electronics (and particularly mobiles) form a very large share of their deliveries. Flipkart sold over half a million mobiles in just one day on its Big Billion Day sale on 6th October. Flipkart and Snapdeal list over 3,000 stock-keeping units (SKUs) and 5,000 SKUs of mobiles respectively on their portals. The average ticket size in electronics is estimated to be Rs 5,000.

Apparels, footwear, and accessories are the next largest categories bought online, with a 31% share. While this category has a lower share (in value terms) than electronics, it clocks the highest volume amongst all categories. The average ticket size in this segment is around Rs 2,000. The rest of the online pie is fragmented between books, home furnishing, baby products and others.


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