We have discussed some of these ideas on venturewoods before, but I thought I would get more specific thoughts. We are seeing more and more businesses around the theme to offer a $100 a year service to a million users. Few ideas that have got discussed here include:
1. Online DVD rentals
2. Online photo printing
3. Online tutoring (export oriented – ok more like 100k x $1000 here)
What are the views around feasibility and scale on some of these? Will these land up being more like 100k x $ 30 plans in the online context? Given that 5-10 startups are starting out at the same time, will the market fragmentation be too high?
Any other ideas that might fall in this conceptual framework?
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Been thinking about this concept for a while now, trying to see where it fits in the Indian context.
What about Web site hosting, a sector with minor players accounting for the majority of the market? Surely web site owners would be willing to shell out Rs 5,000 a year (or more). But a million customers…I think 100 K would be more realistic.
This is a most interesting discussion. I agree with Ashish’s comments that USD 100 might be too high a price point for the Indian market. If I take i million users (10 lacs) paying Rs. 2000 rupees per year – that is a Rs. 200 crore business. If we assume that this is a interesting size to achieve post VC very many interesting opportunities arise from services. For instance, building an idea proposed by Rajan on maintenance, what about post warranty maintenance of all gadgets outsourced to a single vendor across all brands?
I think that while online tutoring has good scope from a export perspective, at these price levels it becomes interesting for Indian students. What about communication courses targetted to Indian techies?
Health & Fitness. Think of ediets.com and throw in Indianizations. Tie-Ups for health checks. Discounts at gym memberships. Grocery vouchers for health foods.
Like Alok I would volunteer to work with anyone who wants to build a plan around these ideas (or others). And I do not believe that fragmentation is an issue. In some of these ideas you really want several companies to start off so that the market is created/expanded. And then of course winner takes all. Remember search in the early Internet age?
On the SMB front, you may be able to charge them a lot more than $100 per annum, but two challenges – there are lot less SMBs than individual customers and reaching these customers is *very challenging*. So a 1M SMB base would imply a very deep penetration and if you eliminate the 5-person SOHO, almost a 100% penetration.
The second key challenge in selling anything to SMBs is the channel piece – there are lot of value-add services that SMBs can use, but the key stage where I’ve seen business plans (I am handling Cisco’s venture investments in India and encounter numerous plans in that space) fail is the channel strategy. However, happy to hear any ideas that anyone may have (and to dispel a common misconception – we don’t invest only in networking-related stuff – we invest in anything that is connected with Internet, and that means online businesses as well. Plaxo, for example, is a Cisco investment).
Are there existing subscription businesses (not just that are online) that are $100 x 1M subscriber model? Very few if you really count.
Even if you look at ISPs, it is only the broadband subscribers that number around 2M and pay around $10 per month. (Does anyone have ARPU numbers for dialup subscribers?) If you take top 30 cities, cellphone subcribers would probably be paying $10 (2x the national ARPU).
Cable has traditionally been a $60 / year business and that is largely maintained by the new channel pricing regulations.
I think $50 is the right benchmark in India – moving to the $100 mark will cause a lot of customers to drop off, many times more than in other markets.
($10 a month is equivalent to $100 per year)
Alok: Online photo printing has been growing in western markets, India is a different story for now. However, the big opportunity that many large printing companies are eyeing is in online printing of marketing collateral. This subject had come up earlier too in one of the posts at Venturewoods. http://www.venturewoods.org/index.php/2005/12/10/online-digital-photograph-printing
The attempt is to move businesses away from offset printing (high quality, cheaper only at large volumes) to digital printing (high quality, small quantities at competitive prices).
In an environment like India, where SMBs driving growth, it is the quality of collateral that acts a bridge on the size divide and services like this can offer value.