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InMobi’s Miip May Be More Important to India than Pichai

The emergence of an IP and technology-based leader from India will have a bigger long-term impact than a few Indians heading major global corporations

Isn’t it strange that we were obsessed with happenings at Google while the really momentous news of the coming of age of a serious desi challenger got lost in the noise?

Sundar Pichai and Google

News of Sundar Pichai’s ascension to the Google throne hogged media headlines for almost a week.

While I could understand the excitement instigated by the front page of Dainik Bhaskar in a young tier-2 and tier-3 city audience for whom a compensation of Rs 300+ crore would seem out of this world (however misleading that figure is since Pichai’s actual compensation in his new role is not known, and conversion from dollars to rupees doesn’t make sense anyway), the hoopla in the metro-based English language press was surely misplaced.

After all, what’s surprising? Indians including Ajay Banga (MasterCard), Victor Menezes (Citibank), Indra Nooyi (PepsiCo) and Anshu Jain (Deutsche Bank) have been CEOs of global corporations. And it’s now more than 20 years since Rajat Gupta became the CEO of the world’s bluest blue management consulting firm—McKinsey!

Indians are smart, ambitious and can communicate well. Once they have studied at a top US university and worked there for a while, they fit well into American corporate life, capable of discussing football and technology, and being politically correct. Most importantly, they can be quite conformist and refrain from rocking the boat. Clearly a good choice if you are a culturally diverse company like Google.

And, mind you, this may not really be the throne anyway as Larry Page and Sergey Brin are just one degree of separation away.

I have nothing against Pichai who appears to be a perfectly competent technical manager with the right credentials. But for me there were more interesting and promising events happening recently that didn’t get the attention they deserve.

What We Should Have Focused On…

For years now, we have bemoaned the absence of a Google-like company from India. Yes, we have had successful tech enterprises from India but these have been in the difficult-to-relate-to business-to-business (B2B) IT services space. The real big news of the last few weeks is that we now see some green shoots pointing to the emergence of an IP and technology-based leader from India.

On August 5, in a virtuoso performance that had a clear Steve Jobs touch to it, the CEO of InMobi, Naveen Tewari, introduced his company’s new advertising platform, Miip, to a gathering of who’s who in the technology world at Bangalore.

For the technological cognoscenti, InMobi is not a new company. It calls itself the “world’s largest independent mobile advertising platform”. Funded by Softbank, Kleiner Perkins Caufield and Byers and Sherpalo to the tune of $220 million, InMobi reportedly served 2.2 trillion advertisement requests in 2014. Its revenues are not in the public domain though some reports suggest that they could be as high as $500 million.

So, What Is Miip and Why Is It Significant?

Firstly, mobile advertising is huge and growing rapidly. With the shift of the internet to the mobile, most dramatically underlined by some Indian e-commerce giants’ decision to be “mobile-only”, the clear trend is for advertising on mobile.

Secondly, the whole promise of internet-based advertising (and now mobile-based advertising) is better targeting and customization. But this promise has to a large extent been belied. I am repeatedly amused by the fact that after I have purchased a ticket from, say, Indore to Delhi, I see online advertisements offering me low-priced Indore-Delhi tickets. These are completely wasted on me.

And, as InMobi keeps reminding us, many users see advertising as a distraction and an intrusion rather than something they find useful or enjoy.

Most extant internet or mobile-based advertising is intent-driven. You search for something you want to buy by entering it in a dialog box, and the search engine helps you by displaying related advertisements in addition to the search results. Once you have done such a search, related advertisements keep popping up even though the purchase may have been completed or you no longer have the requirement.

Such advertising makes limited use of analytics and doesn’t prompt you to check on other things you may be interested in. The range of products or services offered is also very narrow even though we know that there are hundreds if not thousands of companies that may be offering other products or services that may be of interest.

InMobi’s Miip is a mobile-based discovery platform that not only uses advanced analytics to overcome this problem, but also features a cute mascot that enters into a dialogue with the user to make suggestions and elicit user feedback. Along the way, the user can consult her friends before making a purchase choice using social media. All of this is done with high-quality visual content that exploits the superior graphics of today’s smartphone screens. Together, these enable an enjoyable and comprehensive shopping experience.

What’s significant in this case is that the company is already a strong player in the mobile advertising space, having entered at the right time about seven years ago. This gives it the muscle and the connections to capitalize on a big bet like Miip .

I particularly liked the launch of Miip in San Francisco, Bangalore and Beijing in quick succession, as these could very well represent loci of technological advancement and economic growth for the next decade. Unlike the earlier generation of Indian companies that shunned collaboration, it was good to see InMobi sharing space with important partners like Paytm and Walmart at the launch event itself.

I have only one regret about InMobi: I wish it wasn’t into push-based advertising that will promote even more consumerism.

India as a Product Nation

India’s success in services came from our ability to write high-quality software at low cost, without the need to make large irreversible upfront investments in technology or products. Companies like InMobi represent a new frontier where we are taking large bets and investing in platforms and new technologies.

This article is not only about InMobi, but about this new generation of companies that’s changing the way we do business. If sustained, this trend could help India become a Product Nation. In the long run, that would have much more impact than a few Indians heading major global corporations.

Reblogged from FoundingFuel

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Presenting the iSPIRT Governing Framework

It has been a great, great year here at iSPIRT, and though we have a long way yet to go, we are confident that we are well on our way to get to where we want to be.

After all, well begun is half done.

But then, there is also the question of structure, not unlike the problem entrepreneurs face they have to scale their business – when the organization becomes big and responsibilities fragment and become more focussed, what if the core values get diluted?

This is why principles are important, and since we started with an ideal we wanted to reach, we have distilled it into three governing principles , which are –

  1. Radical transparency
    This is crucial to continued operation of our ‘peer production’ (volunteer) model.
  2. Polycentric governance aka Panchayat system
    Which means that SPIRT is bigger than any one individual.
  3. Open-Access Public Goods
    We work for many and not for any one company, no matter how important it might be.

The Governing Council (GC) is responsible for upholding these governing principles and ensuring integrity across the board. The GC is about empowerment, not control. It helps clarify the causes and initiatives that we pursue. It is responsible to the SPI at large and not to donors. Our inspiration comes from the world of Wikipedia and Linux.  It’s a world where people are organized but there is no traditional organization; disputes are resolved and order prevails but there is no single person in control.

In the GC, we have a clear conception of the long-term outcomes that we seek. Today SPI is not even an identified industry. We seek to change this. As we argued in the 2012 iSPIRT Annual Letter, India’s future depends on a vibrant software product industry.

To accelerate the growth of SPI we seek a healthier power-law distribution of big and small firms. Our focus on market catalysts like M&A Connect, Global CIO Connect (InTech50) and Software Adoption Initiative are geared to help companies scale faster. In keeping with the global practice, we measure ecosystem’s success in terms of market capitalization, not revenues. We hope to overtake Israel in number and value of M&A deals in the coming years.

The Governing Council is going to champion three causes in this regard –

  1. Solve market coordination failures (e.g. through M&A Connect Program),
  2. Influencing policy,
  3. Synthesizing and evangelizing playbook for faster success.

We recognize that these aren’t everyday tasks. And iSPIRT is just getting started. With our almost audacious mission of transforming India at large through use of software products, we know this is a marathon, not a sprint.

This governing framework that we are sharing with you has evolved from numerous discussions and conversations with our Founder Circle members, Fellows, Mavens and Saarthis over the last many months.  By placing this in the public domain, we once again commit ourselves to building a durable Think Tank that’ll turn India into a Product Nation.

Bharat Goenka (Tally Solutions), Jay Pullur (Pramati Technologies), Naveen Tewari (InMobi), Sharad Sharma (BrandSigma), Vishnu Dusad (Nucleus Software), Governing Council, iSPIRT Foundation

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It’s time to open the gates wider

There is a growing nervousness among foreign investors putting their money in India. The Global Entrepreneurship and Development Index 2012 revealed that India, Asia’s third-largest economy, ranked 74th out of 79 countries, making it an unviable country to start a business. There is a growing nervousness among foreign investors putting their money in India.

Fewer than 150 start-ups are promoted by venture capital or angel investors annually in India compared to over 60,000 angel investments in the US. In 2011, Indian angels, constrained by regulations that make both investing and exits cumbersome, invested only about Rs.100 crore in around 50 deals compared with Rs.2,000 crore angels invested in Canada.

These figures don’t surprise Indian product software start-ups. India has produced few of the world’s leading software products, has 3,400 software product start-ups, and adds 400 every year. But it needs the right environment and incentives to build a world-leading industry.

For several decades, the Indian ownership laws and the investment and business environment have not allowed a conducive setting for the brightest of minds, many of whom have migrated to California. The new Indian entrepreneurs spend significant time on product development to build patentable products with a global market. However, as soon as the product gains traction, venture investors and professionals advise entrepreneurs to move the holding structure, if not the entire business, outside India. The main reasons are as follows:

Financing:

In today’s world talent and ideas are mobile. Singapore, Hong Kong, Chile and the UK are offering attractive financing (debt and equity) to Indian companies to relocate their business. They are also offering tax benefits. This is starting to result in real migration of promising companies out of India.

Maze of rules:

In India, we have foreign direct investment, VCI (venture capital investment), foreign institutional investors, Reserve Bank of India, fair valuations and draconian consequences for inadvertent slip-ups, while in most major economies there are no restrictions.

Taxation:

Capital gains (20%) as well as dividends (dividend distribution tax of 12.5%) even for foreign investors. In most major economies, foreign investors are not taxed on their capital gains and dividend income on their investments and owned businesses. India’s tax policy does not help a product business to attract the right kind of investors and acquirers, and is a hurdle for those interested in foreign acquisition in a stock deal as Indian paper is not an attractive currency. In the UK, for example, investors can write off any investment losses against income, and this significantly reduces their cost of failures.

Open economy:

India does not treat foreign investors on par with local investors, unlike the US, the UK, Europe, Singapore and Hong Kong, which have no restriction on ownership and company structures, and for the most part, regulatory filings (except some strategic and security related issues).

India needs to build an attractive regime to retain the software products business and its intellectual property, which is highly mobile. Incentives and special regimes for businesses that create IP and file for patents will give the industry a big boost. Among the solutions are the liberalized ownership rules with exemptions from regulatory filings and specific regimes (FDI/VCI/FII, etc.), specific exemptions from capital gains and dividend taxes for investors and tax exemption on foreign income of Indian software product companies. Why not go even further and build a fully liberalized virtual special economic zone for ownership and operation of software product companies, with India signing an iron-clad double-taxation avoidance agreement the virtual SEZ.

India needs to proactively grab opportunities, or risk driving the whole industry abroad. We have the potential to create multi-billion dollar global product companies every year, and the benefits could run into trillions of dollars over a decade or two.

This article first appeared in the LiveMint