As most of you know Paypal is the online payment giant which is a subsidiary of Ebay. Paypal has around 100M active customers worldwide and like 1 in 3 online user in US has an account with them. And they are growing at a healthy 20% rate. Here are some thoughts on how PP can expands some of its services to become an online Bureau.

Whether you are an analyst, people manager or a corner office resident..providing a critical eye to the idea/data/project being presented can create value for everyone.

Practice your way to better critical think

Few tricks i have learned from the pros has helped me  improve my critical thinking/analytical skills a fair bit. Here are some key ones (in no particular order of significance):

• Start with Why?
  • Ask yourself why this makes sense?
  • Ask others to explain you why it makes sense?
• Can you explain the analysis/ idea/ data to laymen?
• Does it pass sniff test? Does back of the envelop leads to similar answer?
• “Invert the situation” Test
• “Put Zeros/ Infinity/100%” Test
• Can you list the assumptions( explicit/ hidden)
• Practice all of above when
  • Others present their ideas
  • News Analysis/Blogs/ TV commentary on economics, politics, technology, sports

I have not considered financial, technological, contractual, privacy constraints that Pandora may have

They might have tried out all and more and considered it to be not workable in their case

Background

Pandora is the online streaming service that lets its users customize what they want to listen and discover new music on their computers, and smartphones.It has more than 40 MM active listeners (total 100 MM) and has free service and a premium subscription service. It has been one of the hottest app on all mobile OSes and people love its product. Pandora had an IPO earlier this year making a lot more financial data available for public scrutiny.

Some Numbers about Pandora’s Business (from 3Q11 10K)

• 87% revenue from advertising
• 20 MM Mobile users
• 7 B Hours
• 20-25% reach in Top 10 Market segment in US for 18-34
• Signs up a user every second
• 2010 Radio + Internet Ad spend: 30 B ($10 B+ $20 B) (from :GroupM 2010 Actuals)
• For 3Q’11 they made $60 MM from 2 B listening hours
  • At $10 CPM (source 1,2) they sold 6 MM ad units
  • At 2 ad unit/Hr, it translates to 3 MM Hours
  • That means they sold less than 0.1% of available inventory (3MM/2000 MM)
  • Obviously above has lot of assumptions, but the potential for improvement is ENORMOUS!

How to monetize this inventory is Pandora’s biggest challenge/opportunity

I see 4 main areas to innovate -

1. Marketing Measurement/Solutions
2. Display
3. Audio
4. Interactive

Marketing Measurement/Solutions

Pandora’s long term growth and profitability depends on:

• It is able to measure and show the effectiveness of its medium for advertizers
• Provide analytic insights into identifying and reaching sub-segments and targeted population
• Create robust tools to monitor, manage and customize marketing campaigns
• Become a comprehensive, economical and turnkey marketing solutions provider to a diversity of clients
  • One stop shop
  • Enable rapid Test/Control experimentation
    • Ad format -creative, delivery, messaging
    • Segment Targeting
    • Pricing
  • Real time analytics driven marketing solutions

Display

Instead of pitting against the bottomless supply of display inventory from web publishers, it should try to market its unique medium for positive brand experience with this salient features:

• Permission based and non interruptive delivery
• Served while customer is immersed in self selected content -a positive brand association
• Data driven – numerous dimensions to target from (e.g.: location, device, lifestyle, gender,etc.)
• Cost-effective

Audio

To crack the audio ad market, it has to capitalize on its unique advantages:

• Location -to provide local and mobile (on the go) ads
• Targeting – data driven dimensions to target
• Test/Control experimentation non existent elsewhere

Interactive

It can provide unparalleled advantages in interactive space:

• Click per action based (it already does this – insurance, Vonage, dating,etc)
• Deals/Promotion/Event driven clicks
  • B&M Retailer – Weekly specials, Event driven (Halloween, Thanksgiving)
  • Services – Food, Health & Beauty, Auto
• Test/Control experimentation non existent elsewhere

Other alternate data strategies:

• Sponsored hour -e.g.: this hour of uninterrupted music brought to you by Visa
• Ask users what ads they find useful/like
• Create user Engagement score to identify the most to least loyal:
  • Number of listening hrs
  • Number and type of device
  • Number of skips, thumbs up
  • Number of station
  • Timing and duration
  • Ad click behavior
  • Location

Please let me know what you think!!

 Background

Every other day you hear bloggers and tech thinkers rant about the fragmentation problem in Google’s Android OS. Their main gist is this

Android’s biggest worry isn’t the iPhone, the Blackberry, or Windows Phone 7; it’s that it will fragment into multiple incompatible, brand-specific versions.

 So key concerns are that Android is being killed by-

1. Multiple OS/UI/Wrappers
2. Incompatible Apps
3. Branding

I agree with the problem and it does exist and it makes life inconvenient for lots of Android customers. But when was diversity and enemy of creativity. So in the next couple of paragraph, i will try to argue that fragmentation can be a real source of innovation and statisfaction for lot of customers.

Automobile Industry

Look around your family, friends, co workers…what diversity of Cars people drive. Different people choose a particular type, color, brand  of car mainly due to some of these reasons -

• Utility -comfort, racing,safety,luxury
• Looks
• Emotional appeal
• Price

Now one could argue that all cars at the end of the day help us travel from point A to point B. So why so much diversity/fragmentation is necessary/supported? Because we all have different tastes/likes/dislikes. So all that manufactures have figured out here is that how to tailor to various niches/sub groups profitably.

Why Android Fragmentation is good for customers?

So like Automobile industry, the mobile ecosystem gets more interesting as the likes of Samsung, Sony, Motorola, HTC..and countless others duke it out to grab marketshare and mind share. We are in early days of this evolution where everyone is trying to go after each customers. But very soon, they all will either find their niches or join forces or perish and we’ll have no more than 3-5 players remaining.

• This diversity will outpace the slow but certain refresh cycle of innovation at Apple
• The double your success rate by doubling your failure rate principle is being played out as over 100 Andriod phones came out versus ONLY 5 iPhone so far (Note 1)
• The cut throat competition will bring down cost faster in the Android Camp
• Like automobile there is move to niches (Droid vs Galaxy group)
• Like automobile there is and will be standardization to cut cost
• Choice and Price will help them penetrate into newer markets like Asia, Africa, Middle East
• ARM+ANDROID =ARMDROID might someday equal the might of Wintel from PC era
• Ultimately the fragmentation will lead to rapid failure rates but also faster learning cycles

What about Microsoft ?

Microsoft has deep pockets, experience of bearing years of loss (e.g.Xbox) and desperation to be the third leg of the stool in mobile ecosystem. I think they can provide a fresh perspective on things to people who don’t like the two As (Apple, Android).As far as the Car analogy there is definitely a scope for the Big Three slugging it out here!

Merchant kings : when companies ruled the world, 1600-1900 By Stephen R. Bown

This is a great book providing a unique historical perspective to lives and impact of various European trading companies and their subsequent monarchs in reshaping the world from the 1600 to 1900

The book talks about the motivation behind spice trade- huge demand of exotic eastern spices in post Crusade Europe and availability of daredevil adventurers to fulfill that demand

The book is divided into 6 parts that work through the history of -

1. Dutch East India Company -

• The Dutch were first to prove the business model by making trading half a world apart  profitable (with lots of blood, deceit and war)
• The first colonies were in Javanese island (current day Indonesia)
• The sophistication of Dutch monarch and stock exchange that enabled the working and management of such huge scale companies possible

2. Dutch West India Company -

• This is second company tasked with trading responsibilities in Africa, Caribbean and Americas
• Wikipedia has a great write up that summarizes this part  here

3. English East India Company -

• The start of ascend of British Raj -which at one point ruled (colonized) half the world’s populace
• The apparently innocuous beginnings of the trade to development of deceit, greed and looting of Indian subcontinent for centuries by the East India company
• Role of Robert Clive in establishment of the empire and the rulebook that led to other success are well described here
• Incidentally the Dutch, British and French all were interested in the Indian saltpeter  that was so important to fight their respective wars all across their colonies around the world.
• Later the Industrial revolution created a demand of Cotton -which were cultivated and shipped to England (similarity to their settlement in US/Canada..and the birth of Slave Trade)

4. Russian Alaskan Company

• The tales of Aleksandr Baranov and his exploits of the Russian Alaskan company

5. Empire of the Beaver – The Hudson Bay Company

6. British Diamonds company in South Africa

The author has a great knack of story telling and describing historical event and personalities with vivid details.

My rating 4/5

The information : a history, a theory, a flood  by James Gleick 

This is a phenomenal volume explaining the origins of information, its impact on human progress and whats lies in future for information in terms of genetics to internet

Author starts from the very basic form of information transfer-drums beats in Africa and takes us through the development and history of written word to encyclopedia to using machines to process information

I found this sentence amazing “written word is what led to what we call the process of Thinking”. Think about it! Written word enabled efficient transfer of knowledge through correct documentation, retrieval and asynchronous access across geography, time and section of population

According to the author writing is a technology while spoken language is not. Kinda makes sense -we had billions who are illiterate (in terms of writing a language) while everyone learns at least a language at 1-2 year..fascinating!

The book takes a deep dive into the development of machine based information processing “Throw the Powers of Thought into Wheel-Work”

• Introduction to the work of punch card based Difference Engine by Charles Babbage
• Other attempts of using steam to compute numbers
• Sir Alan Turing’s contribution -Analytical engine, Turing Test,etc

The book then introduces the guy who invented the term “Information Theory” -Claude Shannon

• Claude’s contribution to this country and world are just amazing and numerous
• Cryptography -during and after 2nd World War
• Information theory
• Digital computer and Digital circuit

The book then tackles varied topics related to Entropy, genetic information coding and other interesting topics

The author has an easy and cohesive way of writing stories -lucid and brilliant with lot of context.

My rating 5/5

So here is the first installment -a brief gist of each book. Hope you guys/gals love it as much as i did.

In the Bear of a Heart: Life, Energy, and the Unity of Nature by John Whitfield

The book starts with the introduction to great biologist D’arcy Thomson who through his seminal work “On Growth and Form”  revolutionized the concept of evaluating biology through the lens of Mathematics

The author sums up the 150 years of research, progress in sizing life/biology in terms of mathematics from the use of power laws to explain metabolism (Kleiber’s Law) to Fractals (by Brown, West, Enquist,etc) to understand not only animals but whole ecosystem like forests.

The book is full of amazing nuggets about workings of human body and principle of Allometry applied to animal biology and evolution

The introduction to work of Brown, West and Enquist using Fractals to solve disparate problems from metabolic rate to climate change is just fascinating

The author has a refreshing and concise way of presenting  a tedious/boring topic  in seemingly straightfoward stories.

My Rating is 4/5

Part II is Here

Part III is Here

Its been 8-9 months since i signed up for Target’s Red Card program. It heralds a new era in loyalty cards by using the Decoupled Debit possible thanks to the CARD ACT passed last year. It provide 5% discount on everything you purchase from Target and gives you the option of deducting it from your checking account directly.

I was excited about the potential usefulness of the Red Card usage data for Target as well as me. (being a data nerd i am..!). Unbeknownst to the happenings in Minneapolis head quarters…here are some of my thoughts on interesting things that can be achieved with that data.

Benefits for Customers

• Create a Mint.com expense report/spend analysis -it is an optional weekly/monthly/yearly report breaking down the categories, dollars spent, savings accrued due to 5%..etc
• Compare my spend with average spend
• Trend growth in spend -month over month (e.g.: Frozen food spend vs Fresh Groceries..or Clothes)
• Suggest a Subscribe -n-Save offer ( a La Amazon.com!) by picking up recurring items i buy every month..etc
• Suggest possible savings if 10-100% switch to Target brands on the spend

Benefits for Target

• Trends of customer usage/ foot traffic/ marketing promotion impact
• Trends in categories..SKUs..Layout..culled from the loyalty card data
• M-o-M, Y-o-Y sales, margin performance of loyalty card customers by geography
• Create a 0 to 100 loyalty/engagement score from the usage data
• Compare trends of spend/ foot traffic/ promotion impact for various groups with different loyalty score
• Trends of loyalty/ engagement score groups by city/state/country and it’s correlation to sales/ profitability
• Pitch free shipping etc for online shoppers with good loyalty
• Select a willing sample of loyalist to co-create new product ideas/ merchandizing and store layout
• For the item/ monthly spend if all possible item/items were Target brands
• Compelling up sell/cross-sell opportunity to the most loyal/ engage group
• Test promotion/marketing effectiveness with the most loyal to least loyal
• Pitch free shipping etc for online shoppers with good loyalty

Innovation in general and technology innovation in particular follow the brutal path of Schumpeterian “Creative Destruction” . Be it the venerable land line or internet auction pioneer Ebay..ultimately every new innovation takes the ultimate road to obsolescence based on either sheer economics and/or changing societal norms.

So let me indulge here in some foolhardy prediction about one such innovation (my fair chance of success is 50%!) -The daily deal phenomenon -Groupon.

Rise from unlikely background

Located in Chicago, far away from the tech bubble of silicon valley, gave them the clarity to enable exchange of commerce by connecting Offline (small businesses) through Online tools -email, social networking and word of mouth to their customers.

And boy the offline-online connection they stumbled on is so invaluable that in 2010 Google made a $6 B offer to buy Groupon.

Classic features of innovation -serendipity and naiveté were at work here as well. Their non-profit beginnings and unlikely location made them thrive away from their competition and common belief.

Business success, technology and society

As with so many innovations, technology enables something – commerce, communication, transparency, discovery (e.g.: commerce in Groupon’s case); but it is people and society at large that make them a success(e.g.: Cell phone) or failure (e.g.: Fax).

With Groupon, several key pre-requistes both in terms of technology and societal landscape were ready to meld.

Social Networking:
With the exponential rise of social networks like Facebook/Twitter…it became affordable (time and resource wise) to connect, share and broadcast to a broad social group of your friends/family/acquaintance your day-to-day life happenings.

Groupon leveraged this free and exploding medium to its maximum for effective word of mouth marketing and hence business success.

Societal landscape:
The recessionary times of high unemployment and economic uncertainty (2007-2011) heralded the new virtue of Thrift.

Groupon enabled thrift and made it fashionable in fact to hunt and share deals with your immediate social circle.

Reasons for downfall

Convenience innovation
Whoever makes it more convenient for consumers and small business to carry out the exchange, will emerge as winner

• Deals tailored to individual or niches
• Pull vs Push ( e.g.: subscription based deals)
• Remove frictions -time, geography and information

Competition

Innovation attracts competition big and small – smart and dumb (e.g: Facebook beat the first mover Myspace)

Societal changes/fatigue

• As the economy improves, the sudden fashioning of Thrift might subside and hence deal hunting
• Use of social networking might ultimately evolve around conversations and communications (basic human need) rather than commerce