Tuesday, November 21, 2006

Micro-money - μMoney

Alok Mittal wonders if businesses around the theme of providing a service to a million users at $100 a year (1m x $100) works in India. Or at least I assume he means in India. Of course, we don't speak the dollar language so I assume he means (1m x Rs. 5000) a year.

Specifically, Alok mentions:
1. Online DVD rentals
2. Online photo printing
3. Online tutoring (export oriented - ok more like 100k x $1000 here)

The theme behind such sites is - pay smaller amounts of money for a service rather than a product. You can rent, say, 2 DVDs for Rs. 200 a month, or pay Rs. 4.5 per photo to get it printed. Or get lessons off the net, with a real person delivering a course, at about Rs. 1000 per month.

I think such sites are the future for the software business in India, which is littered with software pirates. Piracy is so rampant that creating any "client side" software is a dead proposition from the start, unless you are able to build and sustain market share and then, hopefully, charge for it. I call this the Microsoft strategy, which has worked in India in the past, in the form of the Tally Solutions strategy.

But small entrepreneurs can usually not wait that long - after all, cashola is the king. Plus, if your solution can be pirated, it will be. The answer is to take the solution online: after all, no one can pirate your site and use it for free, and if they do you can fix it fairly easily.

I call this concept "MyuMoney" - a name for "Micro Money". Micro, in greek, is the letter "myu", so MyuMoney is written like this:


μMoney is the concept of charging small amounts of money for a valuable service. An amount so small for a value large enough that it flies under your customer's radars and therefore, she pays for it.

It's not something I invented. It's been there for decades, perhaps centuries. But it's new to the Indian software world. Why? Because we have been exposed to the US style of micro-money till now. In the US, μ meant $10 - $50 a month. To individuals and businesses this is so small it is under the radar. In fact for businesses, even $200 a month is an "below-the-radar" price to pay for a service.

Converted to rupees, this translates to Rs. 450 to Rs. 2250 a month. Not cheap by Indian standards. Cheap for businesses, perhaps, but not cheap enough. I can get an accountant to visit the office weekly, enter all my vouchers and invoices into an accounting software, reconcile bank statements and even prepare individual returns for Rs. 2,000 a month. I can get photos printed offline for Rs. 4.5 per photo. I can buy books at 15% discount offline (minimum).

So any service that's online must give me a deal that is just below my radar for a monthly service, or below the price paid for a similar offline service.

I should be able to pay monthly or per unit - anything that asks me to pay upfront for a year, or tells me they will send me 12 magazines and charge me annually, is off the radar. The yearly or multi-unit options are supplementary; I should be able to pay per unit if I choose to.

Further, online payment options are nice, but they must include Indian netbanking links (like ICICI or HDFC netbanking) and also have a "drop box" facility to drop cheques or make payments in cash (for sufficiently large sites). This is not easy but it's mandatory if you want a site to grow in India over the next three years.

So let me prepare the rules for μMoney:

1) It must cost between Rs. 200 to Rs. 500 a month for an online service. Ticket size should be less than Rs. 500.
2) I must be able to pay monthly.
3) I don't want to pay more online than I do offline.
4) I must provide online and offline payment methods for people who want to pay.

The unwritten deal is that I need to provide value for the money I charge; and the value should visibly be large enough for customers to know they're getting an absolute deal.

Who's available? Let's see:
- Shaadi.com, the online matrimonial service charges between Rs. 282 to Rs. 425 per month.
- Real estate sites like 99acres, (charges Rs. 500 for 2 month).
- Share Trading advisories like PowerYourTrade (Rs.500 per month)
- Personal finance sites like personalfn (Rs. 300 per year)
- Photo printing services like PicSquare (Rs.3 per photo)
- Mobile games and songs and ringtones (usually Rs. 50 a pop)

Who isn't?
- Most online job sites. They cost upwards of Rs.5000 per month for jobs.
- Many stock trading advisories or magazines that charge annual fees upwards of
- Most other sites that don't even bother to offer this option.

μMoney is all about flying under the radar. In the Indian context, it means approaching masses. Selling software at Rs. 500 a pop. Retailing at 99 cents a song - yes, that model will work in India, but not for songs. Think about TV serials. Cricket match highlights. On CDs, not just downloadable. Heck, I love that idea but it needs more money that I have and higher time to returns than I can get capital for.

But the concept remains exciting: Make small payments for a service that can give you much greater value. μMoney is the way forward for Indian startups; and a way for the Indian Software Industry to finally mean 'software' rather than the types of Infosys and TCS. It's time we finally came around. It's time for μMoney.

I have just registered myuMoney.com - I will build that site and list all the μMoney sites for India. And maybe,

Personally, I'm working on a site for India on the same front. It's based on the concept of "fool.com" - an online stock advisory that helps you become more knowledgeable about your investments. My idea is more than stock recommendations though - there are too many of those sites - and more of a complete investor tool. I've been writing about investing per se at http://theinvestorblog.blogspot.com, a basics and intermediate level site for the Indian investor.

Some of my thoughts includes tax accounting for investors, providing a look-see into "real" growth, comparing investment options, cash-flow analysis and a slew of other things that work for intermediaries.

I will expand on this in the future, and give you an insight into this "startup" which initially focusses on information, but in the end, aims to be the first stop for the Indian investor.

If anyone's interested - drop me a line at deepakshenoy at gmail.

Another idea I have, which I will not take up because I'm involved with the above, is an online "testing" tool focussed on companies testing candidates. I will write more about this, later, if I have some time.


Pooran said...

Good article :)

Himanshu Nautiyal said...

Firstly, as I understand it, micropayments are payments of the order of a few cents, whether it be in the US or India.

Secondly, nothing really flies below the radar IF there is an explicit payment step. Even the smallest of amounts cause users to pause and think, if there is a click involved to pay. The only case where micropayments work is when the user does not have to go thru an explicit payment step e.g. SMS or clicking on Google Ads. That seems to be the only way micropayments works. To test this hypothesis, I would ask you if you have ever bought any premium content at any website - there are several I love, but I haven't... not because the amounts are high, but because they make me think... and once I think, I decide to postpone the purchase.

Himanshu Nautiyal said...

While I think micropayments won't work, subscription-based-software (which is what Alok is actually describing) WILL work. Most of those providers charge a large aggregated amount, not individual micropayments, or even individual $1-size amounts.

On micropayments ... http://en.wikipedia.org/wiki/Micropayment

Deepak Shenoy said...

Himanshu, Micropayments are that, yes. But MicroMoney is different - the idea here is that your charges aren't big enough to attract attention. In fact, they are SMALL enough to attract attention.

This is like buying peanuts when you're going for a walk - the cost is low enough that you don't ask for the price BEFORE you consume them, you just ask "How much" and fish the cash out. Of course, for some people it will still be expensive, but for your target market, it's not.

Google or SMS style micropayments are just temporarily invisible; eventually everything will become visible because the charges appear somewhere else. Ad based portals, unless they're google, are not viable businesses anyhow , and everything else, including SMSes will stagnate or become dominated markets (and SMS is already a goner).

The affiliate business is an interesting MicroPayment complement to MicroMoney. Meaning, if I have a site that charges Rs. 100 a month, I get affiliates to promote my site to get Rs. 10 a month.

To answer your other question: I have bought premium content earlier - as paper magazines (when the web content was free), as web content where I felt there was value (share advisories etc.) in web based services (like membership on online portals) and even for membership on community sites like elance and so on.

The point is: Provide a valuable service, and charge so little for it that there's no question in the customers mind that this is a darn good deal. Like a stock advisory that charges Rs. 100 per month, but only if their advice generates profits (and the last bit can be reported through community or an independent advisory or even making archives free to browse)

- Deepak

Deepak Shenoy said...

And actually I think the term described is probably confusing. So I'm going to remove the word "Micro Payments" from the article and call it "MicroMoney" instead.

Himanshu Nautiyal said...

To answer your other question: I have bought premium content earlier - as paper magazines (when the web content was free), as web content where I felt there was value (share advisories etc.) in web based services (like membership on online portals) and even for membership on community sites like elance and so on.

Hmm... I don't dispute that a large number of users buy paper magazines and elance-like services.

But your having bought premium web content does surprise me - I gave it a very low probability in my mind because the friction is too high on the web.

Re: Micro-money, the change of terminology does clarify things and remove the confusion. Thanks.

Deepak Shenoy said...

Premium web content wise: I have bought at www.poweryourtrade.com (but then let it go because I lost money using their advice). I've paid the elances and shaadi.coms (yessiree) and now I don't have a problem paying if it'll help me with more information.

Sites like basecamp etc. are very interesting sites, and so is the area I'm looking at: Personal finance. If you can make money or save it, and a LOT more money than you pay to get the service, chances are it'll hit you as a "deal".

Or so I hope.

Anonymous said...

Hi Deepak,

I have couple of ideas on this micromoney concept.I need your advice and inputs on these.
Hoping to get some precious time of yours.:)


Deepak Shenoy said...

Anshul, not a problem. Let me know at (deepakshenoy) at (gmail).

Akash said...
This comment has been removed by the author.
Akash said...

Hi Deepak,

I completely agree with your concept of MyuMoney and Alok's whole idea about multiplying money by increasing the customer base.
Also I think that by uMoney, one is not charging the customer small amount unnessesarily. Customer is being given a service, (like in case of real estate sites...its the subscription) and is being charged for it..but the charge is bare minimun, and the customer or the user feels that he is paying the correct amount for the service. For the seller, because of the low charges, (and meaningful service) a huge customer base is possible.