Monday, December 04, 2006

Fishy market analysis

I sometimes find such statements on blog comments:

India: Total subscription base of 9.5 crores…[GSM+CDMA]
If an application is targetted around this, and generates a bare minimum revenue of Rs 1 per month per user/subscriber….it has the potential to generate 9.5 crores INR per month....

This is a classic fallacy but used so often that most VCs will, on listening to this, splutter and choke and burst various unrelated blood vessels.

These figures talk about a "universe". Not a target market. (Peter Rip explains this very well.) The total number of mobile phone subscribers in this country is 9.5 crores. You can probably reach much much much lesser of them. For instance, you will not be able to reach or tap the fishermen who use the phones in the high seas to figure out which fishmarket to sell their catch.

You will not be able to tap the innumerable phones given to car drivers because the car owners understand that parking is tough, and visibility is less useful than radio frequency in such situations.

You won't get a hoot from people like me who are suspicious of anything which involves my paying money over SMSes or mobile phones. You won't get much interest from people who are sick of mobile spam.

I believe you will not be able to tap most of the 9.5 crore people anyway, even if you paid people 2 rupees each to send you an SMS.

Even if you tried stunts like having people pay automatically when they switch mobile zones, you will find people changing service providers or removing the service. You can't make people pay even 1 paisa when they don't specifically say they want to. Not in India.

Your real target market depends on what market you want - students, housewifes, drivers, people with bluetooth phones etc. And then it depends on what you do to get to that target market. Er...not clear? Here's the underlying concept.

--- Mobile business plan---

I will sell fish through mobile phones. There are 9.5 crore mobile phones. Of which 2 crore eat fish. Now fish is a perishable and requires freshness, so all people have to do is send me an SMS or give me a missed call and I will send it to them. Each family eats fish around once a week, and probably 500g of it at a time. That's 2 Kg of fish per month. I have a margin of Rs. 5 per kg of fish, so I can get a net revenue of:

2 crore people = 1 crore households, eat 2 kg of fish per month and I profit at rs. 5 a kg, so I make Rs. 10 crore per month.

I will spend five crores on marketing and people and all that and I net a cool 5 crore a month.
--- End of plan ---

Sounds fairly stupid to me.

Firstly, all the above assumptions are wrong in some way or the other. Secondly, I can't get one crore people sending me SMSs or whatever. I can probably reach 100,000 people in one city for a certain price point. Of that, less than 1% will buy my service. I can perhaps sell a thousand KG of fish a month, if I really try.

Reality is harder than you think. It's all very nice to start thinking of universes. What really matters is what you can reach.

India has 4 million home PCs. That means nothing to you. What you really should care about is: How many can I reach, with the 100,000 rupees I have for marketing?

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