Is Facebook Paying Too Much for WhatsApp? 0-22

Is Facebook Paying Too Much for WhatsApp?

With $19 billion, Facebook could have purchased Sony or Gap or four aircraft carriers.  Instead, it bought WhatsApp, a tiny startup that so far had accumulated barely $60 million in funding, mostly from Sequoia.  This is nuts, you might say; although the world of mobile messaging is upon us, that is an awful lot of money.

But think about what exactly Facebook is buying:

Young users.  WhatsApp acquired about 450 million monthly active users in 5 years, 70% of whom are active each day, which is about three times as many as Facebook had after 5 years and almost 10 times more than Twitter or Skype had.  To be sure, these numbers translate into minuscule revenues and most of the users are probably on Facebook anyway.  On the other hand, they are just the people Facebook is most worried about losing.

A new business model. Unlike Facebook and most other Internet giants of that generation, WhatsApp employs a subscription-based revenue model, charging its users $0.99 a year after the first year of use. Further, in a decidedly different approach from Facebook, there is a commitment to no advertising and presumably no commercial exploitation of user data. The acquisition could help Facebook understand how to successfully execute on a business model that could replace its own.

Enhancements to the existing business model. The daily messaging volume of WhatsApp approaches the SMS volume of the entire global telecom industry, and while Facebook has become the medium for big announcements of life events, daily connections are better captured by metadata from messaging apps. Undoubtedly this data could much enhance Facebook’s ability to pick out people’s most important relationships from among their acquaintances, which would presumably lead to better-targeted advertising.

Internationalization. Facebook Messenger is big in the USA but not in other countries.  In key markets like India and South America WhatsApp is MUCH more popular than Facebook Messenger.  And this is where, we think, the majority of the immediate real value is: the global turn to mobile is quite evident and Facebook wants to be a part of it as soon as it can.

If you list all these reasons for the deal, and throw in some competitive pressure from the likes of Google, the $19 billion number might not look so silly after all. Time will tell.  But regardless of how this deal turns out, the one unambiguous loser, in our opinion, is the telecom industry, which currently enjoys about $100 billion year in revenues from SMS services globally.

Moral of the story: If you don’t create an alternative yourself, others will disrupt your business model for you.

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Are you ready to party? Because this kid sure is.02-22

• Are you ready to party? Because this kid sure is.
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  Oh yeah, she's double fisting it.
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  Three feet of bubblegum? Now it's a party.
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  Forget your mind-altering substances. This kid's got TICKETS.
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  You know it was a good night when you wake up surrounded by lollipops.
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  Step 1: Loosen bow tie. Step 2: Party.
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  When was the last time you rocked out his hard?
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  Or THIS hard?
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  ...OR THIS HARD?!
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  Popcorn bowls make excellent party helmets.
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  You know you can't have a party without food.
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  Leaves. Yum. Party.
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  SHE CAN TASTE COLORS.
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  Every party needs a leader. Even if that party's in the fridge.
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  She forgot the first rule of partying: never pass out in front of your friends.
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  This guy partied his way right into a dinosaur's mouth.
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  Party on, little one. Party on.

Why a 30-Year-Old Education Company Just Landed a $1 Billion Valuation 02-21

Why a 30-Year-Old Education Company Just Landed a $1 Billion Valuation 

Silicon Valley treasures its shiny, new startups. They're the ones who typically get all the adoration, the attention... and the cash.

Renaissance Learning is not one such company. And yet, on Wednesday, this Wisconsin Rapids-based education technology business, which was founded way back in 1985, announced a $40 million cash infusion from Google Capital. But wait, there's more. The investment values Renaissance Learning at a whopping $1 billion.

Patience, it seems, really is a virtue.

The Backstory

Renaissance was founded by Judith and Terrance Paul with a single product called Accelerated Reader, a reading assessment tool for students. Back then, however, "You had a student to computer ratio of 15 or 20 to 1," says Jack Lynch, Renaissance's current CEO, who joined the company after it was acquired by a private equity firm in 2011. Thirty years since the Accelerated Reader was invented, however, all that's changed. As Muhammed Chaudhry, CEO of the Silicon Valley Education Foundation, recently explained, schools across the country are rapidly transitioning to Common Core Standards, a more rigorous standard of instruction, and as they do, they're investing heavily in technology to help students meet those standards. For Renaissance, and indeed all education technology startups, it's a perfect storm of opportunity.

"At the intersection of these two forces is the teacher," says Lynch. "Where we come in is we deliver insight to teachers to help them unlock the learning potential of students."

For its current fleet of education products, Renaissance has effectively sequenced every skill a student should learn between kindergarten and 12th grade, and has developed tools that help teachers figure out what skills students have mastered and are now ready to learn. It's still up to the teacher, however, to help students advance to the next level. "Teachers are the lifeblood of education. We're not an avatar virtual tutor," Lynch says. "So we're not really looking to harness the power of technology. We're looking to use technology to unlock the power of a teacher."

According to Lynch, Google Capital first expressed interest in Renaissance last summer, noting the obvious opportunities for collaboration between Renaissance's assesment tools and the educational apps Google is developing through Google Play for Education. Already, Renaissance's tools are being used by 18 million students in 45 school systems in 57 countries. If Renaissance's assessments can link to Google Play's instructional materials, it's good news for both companies.

The Startup Opportunity

If you're an ed tech entrepreneur, it could be good news for you, too. As the K-12 market heats up, Lynch says Renaissance is on the lookout for startups it can collaborate with, and in some cases, even acquire. Last summer, Renaissance scooped up Subtext, an e-reading startup whose technology enables students to have a discussion about a book within the digital pages of that book.

"That's an example where spending a long time with startups uncovered the opportunity for an acquisition," Lynch says.

Renaissance is also looking to partner, he says, with startups that are innovating in big data analytics and instructional education technology. Recently, Renaissance opened an office in Fremont, California, in part because of this interest in startup activity.

"There's always gong to be groundbreaking great new ideas coming from entrepreneurs coming into the space," Lynch says. "We like to think we're good students of innovation."

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How to lead the student from the wrong answer to the correct one? 05-11

http://capacitybuildingdevelopment.blogspot.in/2014/05/how-to-lead-student-from-wrong-answer.html

Govt mulls setting up 'social bourse 02-21

Govt mulls setting up 'social bourse'

To provide platform for non-profit entities raise capital in transparent manner

The Union finance ministry has sought the views of the Securities and Exchange Board of India (Sebi) for the creation of ‘social stock exchanges’, people with direct knowledge of the matter said. These exchanges will provide a platform to help non-profit entities such as non-governmental organisations, trusts, cooperative societies and even political parities raise capital in a transparent manner.

Sources said the idea behind the exchange was aimed at providing a transparent, technology-based platform for investments in social welfare projects in India.

The UK, South Africa and Brazil have experimented with public trading platforms for social entities. On these platforms, capital is raised by dividing the cost of a project into smaller denominations that are made available for purchase. Investors can choose from a number of projects for investments and keep a tab on the status of the projects by following the disclosures and announcements made by the company.

STOCK EXCHANGE FOR A CAUSE

What is a social stock exchange? A platform for raising capital for social purposes Who can list on this exchange? Non-profit organisations like NGOs, trusts, cooperative societies and even political parities What's the investment rationale? Not to earn any economic return but to make a social impact Are there such exchanges in other countries? Brazil, South Africa and United Kingdom are said to have experimented with the concept When will it be launch in India? The ministry of finance is said to have floated a concept paper on ‘social stock exchange’. It has sought feedback from stakeholders such as Sebi

“It is a wonderful concept. There are many people who want to invest in a social cause, but are not sure about where to invest,” said J N Gupta, former executive director of Sebi and founder of proxy advisory and corporate governance firm SES. “If social enterprises become as transparent as listed companies, it will give them more credibility.”

According to people in the know, the ministry has sought Sebi’s suggestions on various aspects such as trading, disclosure requirements and monitoring.

Some experts said the initiative might involve a number of challenges such as selection of companies, pricing, and market-making. “Scrutinising social enterprises, to keep away the bad ones from listing, will be a difficult task. Such an exchange will have hardly any liquidity and might end up being just an electronic capital-raising platform,” said an official at a stock exchange, on condition of anonymity.

Gupta of SES said the move would help the social economy, but added there could be concerns such as pricing of securities, liquidity and settlement.

Globally, social projects have been listed on exchanges such as Brazil’s Socio-Environmental Investment Exchange and the South African Social Investment Exchange. However, these exchanges have ended up as mere online donation platforms.

About a decade ago, the government had floated a similar idea — that of creating a trading platform for listing of a large number of small and medium enterprises (SMEs) in India. It was felt an SME exchange would help small entrepreneurs raise capital to fuel growth and expansion, with less stringent regulatory norms.

In 2011, Sebi had cleared a framework for listing SMEs, with listing and disclosure requirements that were easier compared to main stock exchanges. In 2012, the BSE had started India’s first SME exchange. Subsequently, the National Stock Exchange also launched its SME platform. Currently, about 50 companies are listed on the SME platforms of these two exchanges.

Experts said setting up a social stock exchange might be difficult compared to an SME exchange, an extension of the main stock exchange.

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IMF punches holes in India's growth revival story 02-21

IMF punches holes in India's growth revival story

Says RBI may have to continue raising rates; prescribes floating sovereign bonds, going for NRI forex swaps again.

But the International Monetary Fund (IMF) doesn't seem to agree. It questions all these assertions in its staff report, prepared after discussions with Indian authorities and released on Thursday. It attributes much of India's economic slowdown to domestic factors, such as "heightened policy uncertainty". It projects a growth rate of 4.6 per cent this year (against the government's estimate of 4.9 per cent) and a CAD level of $61 billion, or 3.3 per cent of GDP.

However, in a teleconference call later in the evening, IMF's mission chief in India, Paul Cashin, clarified the CAD might come to 2.5 per cent of GDP.

IMF has said in its staff report, under Article IV consultations: "About two-thirds of the slowdown in India can be explained by domestic factors." Besides policy uncertainty, domestic causes of the slowdown include supply bottlenecks, delayed project approvals and implementation.

The report was released three days after the Interim Budget was tabled in Parliament, where Finance Minister P Chidambaram said: "I reject the argument of a policy paralysis."

Even on inflation, which has been persistently high for some time, IMF appears to be singing a different tune. It says India's growth slowdown is unusual among emerging markets both in terms of severity and because it coincides with elevated inflation.

It has said the rate of retail inflation is likely to remain near double digits well into next year. It expects the inflation rate to be 7.4 per cent by March 2014 - above the Reserve Bank of India's (RBI's) comfort zone - and falling only slowly to 6.3 per cent by March 2015.

It has also said that RBI might have to continue raising policy rates in the coming months. "The ingrained nature of inflation and inflation expectations mean that reducing inflation - even over a protracted horizon - might require significant increases in policy rates," the staff report said, though it admitted that any such move would weigh on economic growth. In his interim Budget speech, delivered on Monday, Chidambaram had said: "RBI must strike a balance between price stability and growth while formulating monetary policy."

The IMF report also carries authorities' viewpoints. It says Indian authorities agree that inflation is too high and that monetary policy will need to remain vigilant over the near term.

"At the same time, they (authorities) noted that supply-driven food inflation was a key driver of the headline number... With good monsoon this year, they believed food inflation should fall and that, in any case, monetary policy had a limited role in tackling food inflation."

The Indian authorities consider there is a significant risk of over-tightening, particularly in the light of the need to create jobs to absorb the country's growing labour force, the Fund says.

IMF has projected twin deficits higher than the authorities' projections. It pegs fiscal deficit at 5.3 per cent of GDP in 2013-14, against the government's hope of 4.6 per cent. As a proportion of GDP, the IMF staff expects India's CAD to be 3.3 per cent, against less than three per cent pegged by the finance minister in his Budget speech.

IMF does not take into account disinvestment receipts in its estimation of fiscal deficit, so the deficit will be magnifies to that extent.

Agreeing that the opening of sectors to foreign direct investment and portfolio flows in 2013 will help finance CAD, the multi-lateral agency warns that a further relaxation of external commercial borrowing rules should be undertaken only incrementally and cautiously, alongside a deeper domestic financial markets.

It has prescribed that issuing a maiden international sovereign bond and seeking entry into global bond indices should also be explored. Similarly, its recipe includes again going for foreign exchange swaps for non-resident Indian deposits - after RBI undertook such a step in September 2013.

IMF also recommends taking oil marketing companies out of the spot market and offering them a short-term bilateral foreign exchange swap window at market prices.

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Facebook likes WhatsApp 02-21

Facebook likes WhatsApp

$19-bn deal for text messaging firm includes $12 bn in stock and $4 bn in cash

The frenzy to acquire fast-growing technology start-ups reached new heights on Thursday as Facebook announced its largest acquisition ever, saying it would pay at least $16 billion for WhatsApp, a text messaging application with 450 million users around the world who pay little or no money for it.

The hefty price signals the lengths to which Facebook's co-founder & chief executive, Mark Zuckerberg, will go to protect his company's turf as the dominant social network on the web, and is sure to fuel the debate on whether consumer internet companies are overvalued.

Facebook, based in Menlo Park, California, will pay $4 billion in cash and $12 billion worth of shares for WhatsApp. But the ultimate cost of the deal could rise to $19 billion, with WhatsApp employees and founders receiving an additional $3 billion in restricted stock units, which would vest over the next four years.

By any measure, Facebook is paying a steep price for a service that is widely used internationally but is less known in the US. WhatsApp does not sell advertising and has very little revenue. It charges users a flat fee of $1 a year to use the service, and the first year is free.

The purchase price dwarfs the $1 billion Facebook paid for photo-sharing service Instagram. At the time of that deal in 2012, critics assailed Facebook for overpaying, and this megadeal is sure to attract similar scrutiny. And, the price is also much higher than the $3 billion Facebook unsuccessfully offered to acquire Snapchat, another messaging service, late last year.

But Zuckerberg is clearly willing to spend big to acquire hot messaging technologies, which typically attract younger people more than Facebook does.

"Facebook is constantly working to not lose anybody," said Nate Elliott, an analyst with Forrester Research. "Sometimes that's them innovating on their own, sometimes mimicking competitors, and sometimes buying competitors."

The acquisition also reflects a new strategy at Facebook: The company intends to acquire or build a family of applications instead of simply buttressing its core social network.

Now a 10-year-old social network with 1.2 billion users globally, Facebook has become so ubiquitous in many countries that it risks losing some of the attention of users.

In buying WhatsApp, which is growing faster than its rival Twitter and other social services, Facebook gains access to customers who prefer communicating one-on-one or with very small groups rather than sharing information more widely.

Facebook also has struggled to gain traction in the message space in recent years, a big motivation for its failed offer for Snapchat. While Facebook Messenger, the company's chat platform, is popular with users, recent attempts to create its own direct messaging service have failed.

Facebook is justifying the price of this deal by citing WhatsApp's startling growth, which has been even faster than Facebook's own in its early years. On a conference call with analysts, David Ebersman, Facebook's chief financial officer, compared WhatsApp to companies with the potential to grow to one billion users.

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"INDCOSERVE" A prize winning case study from IIM Bangalore India

Case study on INDCOSERVE by Professor Seema Gupta and Professor B Mahadevan ranked #1 in ISB-IVEY Case Competition, 2011

The case study "INDCOSERVE: Stirring Up" by Professor Seema 

Gupta and Professor B Mahadevan was ranked #1 in the ISB-IVEY Case Competition, 2011.

The competition witnessed overwhelming response with over 220 faculty members representing more than 75 business schools registering for the competition.  Submissions came in from top Indian B Schools including  IIM-A, IIM-B, XLRI, S.P. Jain, MDI, IIT-B, NMIMS, Welingkars as well as many upcoming B-schools. Cases covered topics like Social entrepreneurship Microfinance, Leadership, Change Management, Governance etc., in addition to regular management topics of strategy, marketing, and organizational behavior etc. Competition was intense.

The case was judged by Ariff Kachra - Strategy Professor & Director of India Development, Richard Ivey School of Business and Sharon Armstrong, VP Business Development CMA, Ontario.

ABSTRACT

INDCOSERVE: Stirring Up

Seema Gupta and B Mahadevan

Indian Institute of Management Bangalore

In January 2011 A.S. Jafry, Special Officer and Managing Director, INDCOSERVE, a tea producing and marketing cooperative, was reflecting on the marketing strategy of the company. Jafry's main concern pertained to putting more money in the hands of the small growers. He can do this only by increasing the profitability. The moot question is do we increase profitability by improving the quality of tea or by strengthening existing marketing channel or by exploring new channels?  

Agricultural commodities often are characterized by seasonality and shelf-life of the produce. Further, in countries such as India there are significant public policy dimensions (governmental regulation on pricing and markets etc.) that critically influence production, distribution and marketing of several agricultural commodities. Unlike their counterpart in manufacturing, agricultural commodity supply chains typically are not well organized in such countries. Therefore, prevalence of cooperatives as an organization structure for managing several supply chain activities is also a common feature. This case has contextually been set under these conditions and it deals primarily with the issue of marketing of tea. In addition to issues pertaining to marketing of agricultural commodities, tea poses unique challenges arising out of numerous varieties/grades. Due to several of these aspects understanding the factors that influence profitability of a firm engaged in procurement, production, marketing and brand creation of tea makes an interesting study for a student of management.

The case offers a multidimensional perspective to the problem of improving the profitability and points to various alternatives in the hands of the management to address the same. The case can be used in the core marketing course, perhaps, as a capstone case towards the end to highlight the interrelationships among different elements of marketing. The case can also be used in other courses to introduce challenges of managing cooperatives, use of auction as the procurement mechanism and also to illustrate the use of Internet as a primary marketing channel.

B. Mahadevan is a professor of operations management at the Indian Institute of Management Bangalore, where he has been teaching since 1992. He was also the Dean (Administration) of the institute. Professor Mahadevan has more than 18 years of wide-ranging experience in teaching, research, consulting and academic administration at IIM Bangalore and other reputed institutions such as IIT Delhi and XLRI, Jamshedpur. He was earlier Chief Editor of the IIMB Management Review, the premier Indian journal for management educators, consultants and practitioners. Professor Mahadevan was earlier the EADS-SMI Chair Professor for Sourcing and Supply Management at IIM Bangalore. He was a visiting scholar at the Amos Tuck School of Business Administration, Dartmouth College, New Hampshire, in 1999-2000.  He was also a retainer consultant to Deloitte Consulting LLP, USA, in 2001-2002. Professor Mahadevan is on the board of trustees of some NGOs providing valuable community and social service.

Professor Mahadevan is a member of the editorial board of the Production and Operations Management Journal and the International Journal of Business Excellence. He served in the editorial board of Six Sigma and Competitive Advantage. Besides being on the advisory boards of several business schools and management journals in India, Professor Mahadevan has published several of his research findings in leading international journals such as the California Management Review, the European Journal of Operational Research, the Production and Operations Management Journal, the International Journal of Production Research, the International Journal of Technology Management and the Asian Journal of Operations Management. He is a lifetime member of the Society of Operations Management and a member of the Production and Operations Management Society.

Seema Gupta is Assistant Professor of Marketing at the Indian Institute of Management Bangalore.  She has earlier worked with RPG Enterprises in Sales and Marketing function.

Professor Gupta's current research interests are Marketing strategy, Corporate Reputation and Marketing Communications. She has published papers in international journals such as Corporate Reputation Review and Public Relations Review. Her recent research includes identifying new dimensions for communicating change in corporate identity; building an experience brand; and building image through advertising. Some of her recent cases are on The Park Hotels, Coke-Pepsi and Bosch.

Professor Gupta is the academic affiliate of Reputation Institute (RI) a premier international research and consulting organization, for India. She is an invited speaker in forums of Marketing, Corporate Reputation, Corporate Communications and Public Relations.

She has conducted several training programmes on Marketing and Marketing Communications for executives. She has done consulting assignments for public as well as private sector organizations in the field of Marketing Strategy and Corporate Reputation.

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