Broadcast TV – Sword of Damocles pt. III.

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OTA broadcast given a second chance.

  • While Netflix and Amazon continue to make inroads into the cable TV subscribing population, the old dinosaur of over-the-air (OTA) broadcast seems to be winning a second lease of life.
  • Over the last 4 years I have been very negative on the outlook for broadcast (OTA and cable) as I have viewed the convenience and lower cost of on-demand viewing as a much better proposition for users (see here and here).
  • However, while this prediction has been largely accurate, what I failed to take into account was the fact the OTA is free (ad supported) which I think is largely what lies behind its renaissance.
  • A standard Cable TV subscription in 2016 cost on average $103.10 per month (Leichtman research group) for which a large number of channels come as a prepaid package.
  • However, in reality, most users watch only a few of those channels meaning that it if they could subscribe to those channels individually, they would be in a position to save a lot of money.
  • This is now becoming a reality as some of the most prized content now belongs to the streaming companies as well as other content creators making their content available as a subscription through the Internet.
  • The most obvious response has been the well documented and accelerating cord cutting by US households unless the cable TV industry takes immediate and drastic action.
  • The other effect appears to have been a substantial recovery in the number of households making use of OTA rather than cable.
  • According to a Nielsen study commissioned by Ion Media, OTA only households has grown by 41% over the last five years to 15.8m households although this may have slowed significantly since 2015.
  • Furthermore, this is not limited to older generations as the median age of households using OTA and not cable is lower at 34.5 years than the total households using TV at 39.6 years.
  • Although the total number of households switching back to OTA-only may have slowed, there has been real growth in households that also have a fast broadband connection (nScreenMedia).
  • This leads me to believe that users (young and old) are increasingly switching off cable and replacing it with a combination of premium streaming services and OTA TV.
  • This allows the user to have access to a wide range of channels, almost all the content he was watching on cable at a much lower price.
  • Consequently, while commentators are cautious on the outlook for TV advertising revenues in 2018 and beyond, I think that they could easily witness a recovery having been stalled for some time.
  • While this gives OTA a reprieve, I still think it needs to act to prevent itself from becoming obsolete in the long-term.
  • The obvious move is to make the entire selection of channels available on a single, free, ad-supported streaming service.
  • That way the valuable spectrum can be re-farmed for a more economically productive use and OTA can ensure that it has a place in the future of the media industry.
  • If it is really sharp, OTA will also seek ways to make its offering available in emerging markets which are highly price sensitive and willing to consume advertising in lieu of paying a subscription.
  • I still think cable TV is going the way of the Dodo but OTA looks like it has been given some time to reinvent itself.

OnePlus – Learning curve

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OnePlus’ slip serves as a warning.

  • BBK Electronics is fortunate that OnePlus is one of its marginal brands as a gaffe of this size at Oppo or Vivo could have done real damage.
  • OnePlus is a subsidiary of Oppo which in turn is owned by BBK Electronics (like Vivo) and has its own favour of Android (GMS compliant) called OxygenOS.
  • Unfortunately, OnePlus decided to include code in OxygenOS that captured and uploaded: IMEI, serial number, MAC addresses, IMSI and WiFi network data in addition to which apps were being opened and what the user was doing in those apps.
  • This data was being uploaded and analysed by OnePlus without either the knowledge or consent of its users.
  • OnePlus claims that the data was only being used to improve the user experience but that has not earned the company a free pass.
  • However, once the company had been rumbled it was reasonably quick to react explaining how users can turn off usage data collection but for the other data it stopped short of saying that it would cease collecting it.
  • I suspect the real problem here lies in the cultural difference between China and developed markets.
  • RFM research (see here) has concluded that in China, privacy is much less of an issue where almost all services collect and use data without the user’s permission.
  • Critically, the users do not seem to mind.
  • However, in developed markets, a flagrant disregard for the users’ privacy can sink a product or service.
  • I suspect that the code used in China was simply translated into English and launched into developed markets without a second thought.
  • This is not the first time that this has happened nor, I suspect, will it be the last as smaller Chinese brands try and leave the home market.
  • Fortunately, it appears that this lapse has not also occurred at Oppo which ships a third of its volume overseas (10m units Q2 17) which would be at risk of losing a substantial part of its business as a result.
  • OnePlus is too small for anyone to really notice or care but it serves as a warning to other companies.
  • Being aware of the differences between China and the rest of the world may make the difference between success and failure.

VR / AR – State of the nation.

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VR & AR still miles from being properly ready.

  • Facebook has launched a wireless VR headset that appears to be very similar to Oculus Gear which addresses a gap in its portfolio but does nothing to alleviate the issues that keep VR a niche segment.
  • At the same time Apple has admitted that real AR is years away, explaining its (and almost everyone else’s) focus on offering AR using the camera and screen of a smartphone.

Virtual Reality

  • Facebook has launched the Oculus Go which is a self-contained VR unit that sports better resolution (2560×1440) than the original Rift and a “fast-switch” LCD display which I assume aims to increase the refresh rate to improve image quality.
  • Facebook did not announce which processor is being used but I am almost certain (see below) that it is a smartphone processor with some commentators speculating that it is the Snapdragon 821.
  • The price is right at $199 and the fact that the Go has binary compatibility with the Gear implies that this device probably has the guts of a smartphone.
  • This makes sense as the Android supply chain has huge volumes which would have been very useful in designing the device to have a reasonable specification and yet meet the price point of $199.
  • It also means that there is already a range of apps and services available which removes the problem of there being no content available for the device at launch.
  • While the Oculus Go plugs an important gap in its portfolio, it does not do much to solve the real issues that plague VR which remain:
    • Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost.
    • To be fair, the Oculus Go does address this issue but it does so at the expense of raw performance.
    • Clunky: VR and AR units are still large, clunky and uncomfortable to wear.
    • In many cases they also make the user feel foolish when wearing one.
    • Comfort and security: VR cuts the user off from almost all sensory inputs from his immediate environment, severely limiting the situations in which the user would feel comfortable using one.
    • Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.
    • Cable: Many units require an HDMI cable which prevents the user from moving and also increases the risk of a fall should the user trip over the cable.
    • Again, the Go addresses this issue but does so at the expense of performance.
  • To bring VR to the mainstream, I think that these issues need to be solved with no compromises being made with regard to the user experience.
  • Of this there is still little sign leaving me very cautious on the outlook for the immediate term.

Augmented Reality

  • The requirements I see for AR to really come of age remain far more challenging and include:
    • First: a head unit that is no more intrusive to wear than a regular pair of spectacles (also applies to VR).
    • Second: a full field view of the virtual world as it is superimposed upon the real world.
    • This is proving to be so difficult that all the solutions available today are letterboxed (limited field of view) with no real time-line as for when this problem will be solved.
    • I have doubts that Magic Leap will be able to solve it an time soon.
    • Third: there will need to a vibrant ecosystem of developers to ensure that the experience offered is both broad and deep.
    • Developers will also be needed to ensure that the experience is easy to use and fun and to push the boundaries of what the device can be used for.
  • AR is even further away from meeting these ideals in my opinion but it is finding an initial lease of life in the enterprise.
  • This is because when users are paid to have the experience, tolerance of clunky head units and a bad user experience is much higher.
  • When this is combined with a good improvement in productivity there is enough benefit to see some traction.
  • However in consumer, the challenges remain enormous which is why the consumer ecosystems are pushing AR on smartphones as a stop gap.
  • I think that the experience offered there is pretty weak meaning that investments here are really about being prepared for when the above issues can be fixed rather than driving uptake of a new use case for smartphones.

Take Home Message

  • The net result is that I see nothing on the horizon that is going to change the current situation in either VR or AR.
  • Hence, I think that they will remain ancillary to the propositions offered by the big ecosystems and incapable of influencing a user’s purchase decision on where to live his digital life.
  • The result will be relatively low volumes and disappointment compared to the hype that regularly surrounds product demonstrations.
  • I continue to believe that investors in this space need to have a very long-time horizon.

Yandex – Homeless.

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Alice needs a hardware home.

  • Yandex has jumped on the digital assistant bandwagon but with its history, it should be able to produce by far the best product for the Russian speaking market.
  • However, it will be unable to serve the majority of use cases without hardware to carry it into the home or the vehicle.
  • Yandex is the pre-eminent internet company is Russia with 65% market share in search and just seen off a challenge from Uber (see here) to also become the dominant provider of ride hailing.
  • Most importantly of all, Yandex has been crunching data for over 20 years, which according to RFM research (see here), is a major contributor to its RFM rating as No. 3 in AI behind Google and Baidu.
  • Consequently, a digital assistant is an obvious product to launch and is one that has a much better chance of succeeding in Russia than any of the others even if they are taught to speak Russian.
  • The assistant is called Alice and is the result of putting together a series of AI projects that the company has been working on for some time.
  • These include voice search, weather, news, maps and so on.
  • Two of the key features include:
    • First, speech recognition. Yandex claims that the assistant demonstrates near-human levels of accuracy when it comes to understanding speech.
    • This is no great feat in English anymore but in Russian, this is likely to put Yandex meaningfully in front.
    • Second, context. Alice has some short-term memory in that it remembers what the previous question was and is able to answer a follow-on question in the context of the first.
    • This is quite a difficult AI problem to solve and the only other player that I have seen do a decent job of this is Hound from SoundHound.
    • I not seen this ability in Google Assistant, Amazon Echo, Microsoft Cortana or Apple Siri.
  • Alice is available in the Yandex Search app on iOS and Android as well as in beta on Windows PC but this is not where it is most needed.
  • Usage of voice assistants predominantly occurs when the user’s hands are occupied such as in the car or in the kitchen.
  • Consequently, to address this use case Alice needs to be resident in a home speaker of some description and, potentially, in a vehicle infotainment unit.
  • Yandex has stated that there will be further products forthcoming and I am pretty certain that a speaker (probably in conjunction with a known audio brand) will be shortly forthcoming.
  • Given Yandex’s heritage in AI and its dominance in search, it looks unlikely that Amazon or Google will be able put up much of a challenge leaving the Russian speaking markets open for Yandex.
  • It will have more difficulty if it wants to expand overseas but Russian is a big enough market for Yandex to fare pretty well just by staying at home.

Apple – Expectations gap.

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iPhone X unlikely to produce the needed super cycle.

  • Expectations for the iPhone X are at fever pitch and I think that a super cycle is now required to prevent a sell-off in the shares.
  • iPhone X is the first substantial revision to the design of the iPhone since the launch of the iPhone 6 and in many ways the circumstances are very similar.
  • In 2014, the biggest complaint with regard to the iPhone was the size of the screen which was considered to be tiny compared to devices being produced by Samsung and the other Android handset makers.
  • When Apple fixed this shortcoming with the iPhone 6/6+, there was a lot of pent up demand as users who could only have a large screen with Android were able to have the best of both worlds.
  • This demand led to shipments growing (calendar quarters): Q4 14 46%YoY, Q1 15 40% YoY, Q2 15 35% YoY, Q3 15 22% YoY and Q4 15 0% YoY.
  • This was followed by shipments declines in Q1-Q3 16 as the pent-up demand was exhausted and replacement rates normalised.
  • I do not think that the iPhone X will stimulate a big enough uptick in replacement rates to meet the expectation that Apple will ship more than 255m+ units in its next fiscal year.
  • This is due to:
    • First, Utility: While the new screen is nice to look at and enables a big screen on a smaller device, it does not offer an increase in utility over the iPhone 7 similar to that of the iPhone 6 compared to the iPhone 5.
    • Consequently, I think it will not create the same degree of desirability and therefore not trigger a similar degree of early replacements compared to the iPhone 6/6+ .
    • Second, Price: The device is meaningfully more expensive starting at $999 which may put some buyers off.
    • Third, Law of large numbers. The bigger Apple becomes, the more difficult it is to post the kind of growth that the valuation of the shares now demands.
  • I think that the iPhone X will stimulate a replacement cycle but one that is smaller in magnitude compared to the iPhone 6.
  • With my optimistic hat on, I can just about get comfortable with the following unit shipment growth (calendar quarters): Q4 17 15% YoY, Q1 18 8% YoY, Q2 18 22% YoY, Q3 18 10% YoY.
  • This gives me 245m units shipped during the next fiscal year which is below current expectations.
  • The net result is that I think expectations for fiscal 2018 need to come back somewhat which is likely to trigger a sell -off in the shares bringing the valuation down somewhat.
  • Hence, I think that the time is right to take some money of the table and put it somewhere else.
  • Tencent, Baidu and Microsoft have less immediate downside in my opinion.

Microsoft – Blue Squares of Death.

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Google is the big winner from Windows Phone’s demise.

  • Microsoft has admitted that Windows 10 on mobile is no longer a focus finally putting to bed any hope (however tiny) that Android handset makers had to escape from Google’s clutches.
  • Their only hope now is that the EU forces Google to make its app store (Google Play) available without having to also install the rest of Google’s ecosystem and set it by default.
  • Microsoft has already wound down the activities that it acquired from Nokia which, combined with barely a mention at developer events like BUILD, has made this fact obvious to everyone but this is the first time that Microsoft has openly admitted this fact.
  • There will continue to be fixes and security patches for a while but no more than that.
  • Microsoft has blamed the lack of availability of apps and services from third parties as the main reason for the platform’s failure, but I have long believed that there was more to it than that.
  • The issue with developers is simply that they won’t develop for a platform with very few users as there is no way to make money.
  • Without third party apps and services, it is difficult to get users to adopt a new platform resulting in a typical chicken and egg problem.
  • Consequently, to kick start a platform, the platform owner needs to prime the pump in order to generate interest that will quickly feed off of itself.
  • Microsoft has tried very hard to incentivise app developers by paying them money and even writing the apps for them but this was not enough.
  • I have long believed (see here) that to succeed Microsoft needed to encourage both developers and users and it was in the encouraging of users where Microsoft really failed.
  • I have long referred to this as the Blue Squares of Death problem.
  • iOS has always been able to sell itself and Android was also a simple sell as it looked just like iOS except that it was cheaper.
  • By contrast, Windows Phone was very different and as a result, Microsoft needed to explain to users why it was great and how they could live their digital lives with Microsoft.
  • Furthermore, devices in the stores needed to be populated with data such that users would be able to clearly see how the Microsoft ecosystem would make their digital lives easy and fun.
  • Without this data, the demonstration devices were simply screens with blue squares on them preventing anyone not in the know to understand the proposition.
  • This needed to be done in conjunction with the efforts to get developers on board in order to give the ecosystem a fighting chance.
  • Microsoft’s mobile ecosystem has always scored reasonably well against the 8 Laws of Robotics and users who did use it generally reported a positive experience.
  • Hence, I believe that it was the failure to educate the users that was the primary reason for the ecosystem’s failure.
  • Marketing has never been Microsoft’s strong point and as a result it simply told users that the ecosystem existed and never explained to them why they should buy it.
  • The net result was that the ecosystem never got enough momentum in order to keep the developers interested resulting in the long decline that we have witnessed.
  • The real loser here is not Microsoft, which is going from strength to strength in the enterprise, but the Android handset makers.
  • If Windows had become a thriving alternative to Android and iOS then they would have had far more leverage over Google which could have resulted in much better economic terms as well as greater freedom.
  • Unfortunately, with its failure, they are completely stuck giving Google a free reign to continue draining the Android industry of its profits.
  • The one exception is Samsung whose profitability I have long believed comes from its huge volume advantage rather than any differentiation it is able to create on Android smartphones.
  • Despite Microsoft’s failure in mobile, its strategy in the enterprise is going from strength to strength leaving me still comfortable with owning the shares.

 

Amazon & Microsoft – One-way street

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Amazon gets the best of it for now.

  • Amazon looks to be the main beneficiary of the co-operation between Amazon and Microsoft which will see Alexa offer access to Cortana and vice-a-versa.
  • Amazon and Microsoft are working on a co-operation where Windows 10 users will be able to get Cortana to open Alexa and perform its range of functions.
  • Users of Amazon Echo products will also be able to ask Alexa to open Cortana and ask it to perform its various actions.
  • The idea is that users get another easy conduit from which to access Alexa while Cortana is provided with a badly needed escape from the PC where it has been stuck since the collapse of Windows Phone.
  • Cortana was originally designed to operate on a mobile device and consequently was taught how to work in a range of domains that are used on mobile.
  • The problem is that most of these domains are irrelevant on a PC and as a result, Cortana is fairly useless where it is predominantly present today.
  • This is exacerbated by the fact that Cortana has not really been taught how to work with the Office applications making the user experience for its main use case on a PC pretty poor.
  • For example, asking Cortana to read my email results in a Bing search for “read my email” and it is quicker and easier to open documents in Office with a mouse than to ask Cortana to do it.
  • I think that Microsoft’s artificial intelligence is actually better than Amazon’s as a result of the data it has been crunching via Bing but very little of this has found its way into Cortana.
  • Consequently, Amazon has come up with a better product that is far more useful in the environment where it is present (speakers in kitchens and living rooms).
  • Hence, I don’t see much of a use case for Alexa users to begin asking Cortana to do things but having access to Alexa via a PC could prove to be quite useful.
  • This is particularly the case as Alexa is very good at shopping and controlling the smart home potentially making device control remotely from the office much easier.
  • As a result, I think that Amazon is the main beneficiary of this collaboration in the first instance.
  • However, if Microsoft’s AI continues to be better than Alexa’s then there is scope for a much deeper collaboration where Microsoft’s AI could be used to power some of Amazon’s services.
  • The only problem here is that this could result in cross over between Microsoft and Amazon Web Services who are fierce competitors in the cloud.
  • Hence, a deepening of this collaboration looks unlikely at the moment but may become a reality if Amazon’s AI continues to languish.
  • Although Amazon appears to have gotten the better of this deal, I still cannot stomach the valuation leaving me with a strong preference for Microsoft’s shares.

Google – Brain boxes

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Clever devices are useless without volume.

  • Behind the carefully orchestrated event was a series of strategies aimed at driving penetration of devices which to date have been very disappointing.
  • Google made up for slightly below par hardware by maximising its leadership in AI to provide best in class functionality as well as some unique features that no one else is likely to be able to copy for some considerable time.
  • However, the key to badly needed volumes will be execution as Google completely bungled the open goal left by Samsung after its Note 7 disaster.

Pixel 2 / 2 XL

  • Google has updated the Pixel phones and has moved to OLED displays.
  • In contrast to iPhone X, Google has opted to make use of the always on display feature that allows key information to be displayed when the screen is off with almost no impact on battery life.
  • Why Apple declined to make use of this excellent feature on the iPhone X is a complete mystery.
  • What really sets the Pixel 2 apart are the new features such as Google Lens which offers the best image recognition and the fact that Google uses AI to do with one camera while everyone else needs 2.
  • However, Google openly admitted that volumes of Pixel have been disappointing and its offer of a free Google Home Mini is clearly aimed at driving badly needed volumes of this device.
  • Pricing remains punchy at $649 for the Pixel and $849 for the XL making the comparison to better looking Samsung s8 and iPhone 8 inevitable.
  • I suspect price is going to be an issue for users considering this device.

Google Home.

  • Two new products were introduced:
    • First: Google Home Mini ($49) which takes direct aim at the best-selling Amazon device (Echo Dot) in another clear attempt to drive badly needed volume.
    • Second: Google Home Max ($399) which goes up against Sonos and Apple HomePod.
  • The broadening of the portfolio should help Google increase its penetration of the home but the smart home piece is still badly lacking.
  • Google claims that 1,000 devices from 100 manufacturers now work with Google Home but it failed to demonstrate any and instead concentrated on products from Nest.
  • Google also launched routines which is exactly the same as the Amazon Echo function of the same name and something that all smart home controllers need in my opinion.
  • The integration of Google Home with other Google devices and the functionality being added is far ahead of anything else available but the smart home bugbear continues to rankle.
  • This means that anyone serious about smart home is likely to choose Amazon simply because they know that anything made for the smart home will work while the same cannot be said for Google.
  • This needs to be fixed and will remain the reason for Google’s potential defeat at the hands of Amazon because elsewhere it is by far the best product available.

Google Accessories.

  • Two companion products were launched which deepen the cross-device functionality as well as highlight Google’s core AI strengths.
    • First: Pixel Buds ($159). These take aim at Apple’s popular AirPods (also $159) and while the design looks inferior, the functionality is excellent.
    • This includes an exciting implementation of Google Translate that works with the Pixel phone to enable usable voice translation in 40 languages.
    • It also allows easy access to the best in class Google Assistant in a similar way to AirPods.
    • The difference here being that Google Assistant is a substantially better service than Siri.
    • Second: Google Clips ($249). This looks like a regular GoPro or Yi camera but the differentiator lies in its functionality.
    • The idea with clips is to position the device during an event or gathering and leave it to gather the best photos and video clips.
    • Again, this is Google using its leadership in AI to differentiate and if this feature works well, I suspect that it will be a very good reason for users to buy this product.
    • The number one use case for GoPro and Yi cameras is family despite their sporting image and it is this use case that Google is taking aim at.
    • If it works well and gains traction, this spells more trouble for GoPro which has struggled with software and ecosystem from Day 1.

Take Home Message.

  • Google has substantially deepened its cross-device capability with the new launches as these devices should all work extremely well together.
  • I think that Google comfortably leads the industry in this capacity.
  • Furthermore, much of the functionality that Google has demonstrated should make its way onto the Android devices from other manufacturers driving which should really help penetration.
  • How well they work on the hardware of others is a concern as manufacturers tinker with Android that always seems to result in inconsistent and subpar performance of apps and services.
  • Consequently, in terms of driving deeper and richer services for its ecosystem users, this was a successful event but the real question remains what volumes will Google’s own hardware achieve?
  • These services will obviously work better on Google controlled hardware where the endemic fragmentation and lack of software updates are not an issue.
  • Execution and marketing are the two things I am looking for from Google as to date, these have been woefully lacking.

Android – Further deterioration.

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Apple is 577x better at software upgrades.

  • Both Android 8.0 Oreo and iOS11 have been available for a few weeks and has highlighted, once again, how bad the situation in Android.
  • I continue to believe this has a fundamental impact on the Android user experience, loyalty and monetisation.
  • Data from android.developer.com shows that Android Oreo is present on 0.2% of Google Android devices while iOS11 is present on 38.5% of all iOS devices.
  • Android Oreo has been available for 44 days (August 21st 2017) while iOS has been available for just one third of that time (15 days, September 19th 2017).
  • This means that the iOS user base is, on average, being upgraded 577x more quickly than Google’s user base of Android devices.
  • To compound the problem, it looks as if the rate at which the user base is transitioning to newer versions of Android is slowing down.
  • 12 months ago, Android 7.0 Nougat had 0.1% share of the user base and currently it has just 17.8%.
  • At this rate it will take 5 years and 7 months for Oreo to completely penetrate Google’s own Android user base.
  • This is substantially worse than the 4 years that I have observed in previous years.
  • This means that when Google makes an innovation in functionality that requires a modification to be made to the underlying Android OS, it will take the best part of 6 years for this innovation to make it into the hands of all of its Android users.
  • By contrast this process is essentially complete on iOS devices within about 3 months.
  • Effectively Google is spending money on R&D that stands to benefit its competitors more than it benefits itself.
  • If Apple takes a fancy to something launched at Google i/o, it can include the innovation in its latest version and have it deployed to essentially all of its users long before Google Android makes double figures.
  • This combined with the endemic fragmentation, substantially hampers the user experience on Android making it inferior to iOS.
  • I think there is substantial financial upside for Google if it can fix this problem which is why I continue to believe that Google Android will eventually become fully proprietary.
  • This is the only way by which Google can fix these problems and it comes as no surprise that both Android Auto and Android Wear are fully proprietary.
  • While the status quo persists, Apple profitability on iPhone is unlikely to be challenged although I am much more cautious around revenue growth.
  • I continue to be indifferent to both Apple and Alphabet, preferring instead, Tencent, Baidu and Microsoft.

 

Ola vs. Uber – Turntable

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Ola has one chance to turn the tables on Uber.

  • Ola has secured $2bn in funding from Softbank and Tencent which it must immediately put to good work if it is to wrest the advantage from Uber in India.
  • I think that this is an excellent time for Ola to receive a large cash injection as it is almost neck and neck with Uber in India and has the advantage of focus while Uber fights endless fires elsewhere.
  • This advantage will not last for ever and if Ola can push its share back to 60% it will stand a chance of doing to Uber what Didi in China and Yandex in Russia have done before it.
  • Car hailing is one of the best examples of a networked economy and, just like classifieds, it is extremely difficult to make money until one of two criteria are met:
    • First: one must have at least 60% market share or
    • Second: one must have double the market share of the next largest player.
  • Data in terms of market share has been somewhat unreliable but it looks as if Ola has been able to cede only a small amount of market share in the last 12 months.
  • Research by KalaGato Pte shows that Ola’s share in July was around 44% with Uber on 50% with everyone else fighting for the scraps.
  • In October, Ola’s market share was around 50% (see here) and it looked to me like Ola would only survive with state intervention.
  • During March 2017 Ola’s rides per customer stood at 2.95 while Uber were 4.38 with 40.9% of Uber customers paying less than Rs100 per ride while only 31.4% of Ola’s customers paying less than Rs100.
  • While not definitive, this data indicates that Uber has been gaining share through aggressive pricing and the good user experience offered by the app.
  • However, I think that Uber’s troubles have had a massive ripple effect right the way through the organisation resulting in the eye coming off the ball.
  • It is this that has given Lyft a new lease of life in USA and now offers the same chance to Ola.
  • This turmoil has only intensified with Transport for London denying Uber a licence to operate necessitating even more diversion of attention away from India.
  • This $2bn investment and Uber’s focus elsewhere gives Ola a chance to halt its recent losses and turn them around.
  • What it has to do appears to be quite clear:
    • First: cut prices and
    • Second: improve the usability of its app and service.
  • If Ola can get back to 60% share then it will have reached the hallowed status at which it will be able to generate cash and Uber will not.
  • It is at that point it will be in a position (as long as it holds onto 60%+) to eject Uber from India (probably through acquisition) but not before.
  • Now it all comes down to Ola management’s ability to execute and upon this, everything depends.