June 12, 2007

You say GPS hardware, I say GPS software, let’s work the whole thing out…and vertically integrate!

Filed under: Technology,Web 2.0,Wireless — Administrator @ 4:43 pm

Over the past couple of weeks, we’ve been receiving wave after wave of business plans for Global Positioning System (GPS) related ventures – not entirely sure what is driving this sudden surge in cases but there you have it. Indeed, the odds-on favourite for the number one reoccurring business theme is:

“We’re China’s leading GPS software application vendor developing navigation and Web2.0 compliant applications and in search of US$2 to $5 million”.

Coupled with each offering is a competitive analysis whereby software ventures are championed and hardware ventures trashed. Not surprising – hey man, big upside over here, give us some cash – their motivation is obvious. Frankly, it ain’t that simple of an argument– the GPS industry is evolving rapidly, outside of China, and for once, we sense that China’s GPS industry will not adopt Chinese characteristic (the way Baidu and Tencent have) – um, go back, of course there will be some localization but this will happen to the extend that Chinese characters replace English, French, etc (and the minor bells and whistles) but by and large we don’t see much room for this to happen. In its place we see vertical integration theming its way nationwide.

A casual observation of China’s GPS universe reveals definitive gaps in the pro-software argument (“hey man, big upside over here, give us some cash!”) – the “hugest” being that fact that the H.M.S. GPS has already set sail – at least, for this cycle. Quite frankly, Chinese and foreign GSP ISVs, both large and small, too numerous to count, have built (circa 1997) substantial beachheads on China’s shores – the most successful Chinese ventures (just a handful) partnered, early on, with major technology companies and telco providers, such as IBM and China Unicom which helped them go to the head of the venture funding line whereby millions of dollars have been doled out by international and local vc funds, such as SAIF, Gobi and Oak Investment Partners (sadly, Ymer was not one of them).

With fresh funding and strategic partnerships these first movers have quickly moved up the value chain, offering sophisticated navigation engines and tools, nationwide map databases, and proprietary value-add networks (e.g. highway sensors and tags relaying traffic information). Given the fact that the demand side of the curve has only started inching up the scale, it reasons that a young enterprising start-up will find it extremely challenging to increase its footprint until such a time that demand outstrips supply. If you consider that there is only one dominate (virtual monopoly) mapping company in the US (Navteq) and one in Europe (Tele Atlas) it become clear the difficult new entrants face in light of China’s well funded incumbents (Lingtu, Careland).

Those in the pro-software camp fade GPS hardware investments largely because they claim the industry is over saturated, highly fragmented and competitive environment. However, I’m a bit uncomfortable drawing such definitive conclusions when the industry in its infancy (i.e. China accounted for about 3.5 – 4% of total global unit sales in 2006) and positioned to benefit from the convergence of mobile device market, rising in-car GPS penetration, and heightened recreational use.

On the contrary, highly fragmented and competitive industries tend to be fantastic opportunities for existing players with means to control their own destiny – the idea being to identify and then inject sufficient capital in a market leader, structure a well articulated and thought-out business strategy, look to roll-up (consolidate) smaller (synergistic) competitors, build strategic partnerships with other industry leaders (vertical integration), and then throttle up your execution machine (experienced management team).

However, how many GPS hardware players are out there suitable for venture funding – the equivalent of a handful, at the most.

Even so to suggest that an investment in a GPS ISV vendor trumps a similar investment in a GPS hardware vendor (largely because of the operating environment) may be off-center and is slightly ignorant of the dominant trend playing out in the industry.

Convergence – that’s the ticket. The GPS value chain is melting and evolving – the top 5 GPS vendors (accounting for 70% of global market share) now have capabilities in software development, chipset design (e.g. Garmin) and module/end-product production/design. And therefore, it becomes rather clear that as the industry matures in China, the leaders will be GPS vendors with vertical integration know-how and capabilities (either in upstream chipset design or software navigation engines) will lead their peers in terms of both technology innovation and product positioning.

To the point, some of the most innovative GPS software solutions are developed by leading vertically integrated GPS vendors, such as TomTom’s Map Share technology. This unique mapping technology allows users to easily and instantly improve existing maps as soon as they identify changes in the road network, for example a smart interface allows users to change street names, unblock or block-off streets, identify one way streets, etc. Furthermore, as TomTom’s mapping system is dynamic, all updates are shared with TomTom’s 10 million users (i.e. community).

This is exciting stuff – the next step in further developing this community is to overlay additional information, similar to what US based community site Outside.in does with localized information generated by users.

January 25, 2006

2006 not breakout year for e-payments in China says, 99Bill / SmartPay / Yide.com

Filed under: Technology — Administrator @ 11:52 am

Sage and his team from Pacific Epoch did a great job organizing last night’s talk on e-payment universe in China – unfortunately, the three panelists (99bill / Smartpay / Yide), while nice guys, were about as interesting my 5th grade Latin teacher.

In hindsight, as I review my notes, I realize that their lethargic attitudes totally reflects their universal opinion of the China e-payment and e-commerce environments in 2006 – FLAT!

To be more exact, I think the boys on the panel harmonized that “…2006 was not going to be the breakout year for e-payments in China…” and the “…e-commerce would likely not gain traction until specific regulations are relaxed and customers learn to trust online retailers…”

My general China e-commerce thesis assumes the catalyst sparking e-commerce/e-payment’s break out (i.e. fantastic rampage) will be when vendors start accepting returns and replacing broken products. If you look at the US model, for example Best Buy (who operates stores in China), I whole hearted believe their value add to the customer goes beyond “pricing” — quite simply it is customer service (including knowledgeable staff and after-service support).

This model doesn’t exist in China (or Hong Kong, for that matter) but it should — manufacturers need to make retailers more accountable for the products they sell — this would not only improve overall customer experience, but also demonstrate a certain level of “buy-in” from the vendor with regards to building a long-term relationship with their customers – (i.e. TRUST)!

With that said, there were some interesting “bits, pieces and sound bites” that are worth noting. I’ll list them in a Q&A format:

Q1. How many users has your company signed up?

(a) 99bill: 4m
(b) Smartpay: 500k
(c) Yide.com: 600k — also, 65% of all Yide transactions are conducted through an e-payment provider, this is up from 40% in 2004

Q2. What % of China’s Internet users purchase goods/services online (e-commerce)?

(a) 99bill: Latest data reveals 15-20% of all Internet users

Q3: What are the major obstacles confronting e-payment moving forward?

(a) 99bill: (i) consumer trust, (ii) logistics, and (iii) weak user experience
(b) Smartpay: (i) government regs
(c) Yide.com: (i) size of transactions limited to RMB1,000/day, yet Yide’s average order is about RMB1,200 – to process this order, Yide is must split the transaction into two

Q4: After mature content and gaming, what is the most popular good/service purchased online?

Split between clothing and jewelry

January 19, 2006

China’s Consumer Electronic Market worth RMB800 billion by 2008

Filed under: Marketing,Technology — Administrator @ 1:08 pm

The three biggest electronics and home appliance retail chains in China are – GOME Home Appliance Group, Suning Appliance Chain Store (Group) Co. and China Paradise Electronics Retail Ltd.

GOME is the largest with 420 outlets in 100 cities and only 5% market share. Moving forward, the company looks to have at least 1,000 outlets by 2008 when they expect China’s electronic market to be worth RMB800 billion (about US$100 billion).

At first glance seems like the market is quite fragmented and filled with opportunity — consider this article from China Economic Net article titled, “Electric retailers not a best buy stock” about China’s impending electornic retail chain battle royale — it might change your mind.

January 18, 2006

New Dopod 818pro & peer-to-peer sharing of Internet access

Filed under: Technology — Administrator @ 4:52 pm

I bought the amazing Dopod 818pro two-weeks ago – by far one of the best PDA/mobile products I’ve seen on the market in some time. The 818’s usability, wireless capability, MS’s Mobile 5 and storage capacity are tremendous…

As a result, admittedly, I’m now addicted to the convenience of WiFi and (along with my colleague David) have made it our mission to identify all the WiFi Hot Spots in Shanghai. This must sound fanatical but for anyone who has recited this familiar phrase (made famous by US-based Verizon) while on their mobile, “can you hear me now”, you’ll understand the importance of fast, continuous connectivity.

Long and short, my WiFi impotence got me thinking about peer-to-peer network sharing – sort of the Holy Grail in the wireless universe – and whether there were any companies in China working on this. So, this morning, burning up the phones was I, reaching out to all the wireless guys I know in China to see if they had any information on companies working on peer-to-peer WiFi sharing applications.

My quest ended in disappointment – at least on the China end. Thanks to Google, I was directed to Jon Gordon’s public radio show, Future Tense, where I learned of two startups working on new peer-to-peer wireless technologies. Gordon writes:

Both Mushroom Networks of San Diego and WiBoost of Seattle plan to sell technology that will gather unused Internet capacity from neighbors. One possible roadblock is possible opposition from Internet service providers, which have fought the sharing of Internet connections in the past.

A couple thoughts: (1) I like how WiBoost mashed up Google maps into their homepage; (2) I’m not entirely clear on the how the applications work, but given China Mobile and Telecom’s virtual monopoly I wouldn’t imagine there would be that many roadblocks for this technology in China; and (3) I have some lingering questions about security/encryption

January 11, 2006

Consumer Electronic Show (CES): Seamless Connectivity

Filed under: Technology — Administrator @ 7:37 pm

It is funny how in the US/Europe everyone is talking about “Seamless Connectivity” while in China we are still working on “Connectivity” — are we really that far behind in China?

Maybe the question should be, “do we really want seamless connectivity?” Do you really want your watch talking to your computer talking to your radio talking to your TV? Where is the value-add in this — I don’t see it and I don’t want it!

Robin Williams riffed about a conversation you might have with your TV once all your devices can work together:

“I want to watch a movie.”

“Porn again?”


“I’ve been talking to your computer, and I know what you like.”

“Shut up!”

If you are interested in a full review of CES click to Kevin Maney’s USA Today article.

December 15, 2005

Google might be moving to purchase mobile browser Opera

Filed under: Technology — Administrator @ 5:59 pm

Om Malik from Business2.0 blogged that Google is looking at buying mobile brower Opera.

This makes a lot of sense as Google has been positioning itself to make strategic move into the mobile search space for quite some time.

Shanghai base mobile browser Tonehub is making moves to be the browser of choice for local handset manufacturers; this might make their life a lot more difficult, especially because Opera is now free thanks in large part to its September partnership with Google.

November 8, 2005

The future of TV in China…look to the what is shaping up in the USA or not?

Filed under: Technology,Tencent — Administrator @ 4:47 pm

Recent announcements by major broadcast and cable networks, digital recording devices, and Internet portals in the US are blurring the lines between TV and Internet…what ramifications will this have on the future of TV advertising and content? What are the implications for China?

Below is a summary of some of these events:

(November 7, 2005) David Lieberman from USA TODAY reports that, “Tailored, ad-free TV gains ground

CBS and NBC delivered another hammer blow to the traditional TV economic model on Monday by agreeing to let some Comcast and DirecTV customers pay 99 cents to watch certain hit shows on demand and ad-free

(November 6, 2005) Michael Singer from CNET reported, “Yahoo, TiVo to connect services

Users of Yahoo’s TV page will be able to click on a record-to-TiVo button directly from a television program listing to remotely schedule recordings.

There seems to be a couple things going on here: (1) Networks are waking up to the fact that advertising dollars are eroding and must search for alternative pools, and thus video-on-demand as well as digitalizing content for the web seems to be two solutions; (2) Internet portals are looking to go the other way, for example TiVo is one of the few devices that provides consumers with the ability to both record broadcast and Internet videos and deliver this to the TV.

In a sense, we are truly seeing the convergence of channels, rather than mediums…I guess the question is who benefits the most from this convergence? It seems to me it might be the online players as they are leading the charge in real-time/rich media/contextual advertisement, for example, Yahoo reported a YoY 46% gain in 3Q05 advertising revenues…

…the networks by moving towards video-on-demand (or even a rental model) seem to be acknowledging the inadequacies of traditional TV advertising model…

Back to China and how events in the US might impact the environment out here…

Based on our analysis, TV accounted for 40% of total advertising spend in 2003, we expect this to decline to 32% at end of 2005. This decline largely comes on the back of an increase in interactive/web based advertising spend, which we are forecasting to grow on a 2005 to 2009 CAGR of 25% to US$1.5 billion.

If you trust that these numbers at least illustrate the macro trend, then what should we be looking to invest in to ensure we’ll hit the next wave — that is if we aren’t already in the next wave?

And finally, does this make IPTV irrelevant and portals, such as Tencent’s QQ increasingly more relevant?

mmm…I think it does…

October 9, 2005

Intel’s Gordon Moore schools entrepreneurs…

Filed under: Start-up First Aid,Technology — Administrator @ 6:06 pm

…This weekend the Financial Times ran an article entitled, “A wealth of influence: they have a combined worth of more than US$320bn…” Essentially, it was a list of the 25 most influential business people in the world.

…A couple things I noticed: (1) everyone was smiling because their personal wealth was x billions of US$ and (2) Gordon Moore, Chairman Intel, had the best quote…

…Moore said, “Failures are not something to be avoided. You want to have them happen as quickly as you can so you can make progress rapidly…” Well, I think that is one of the smartest things I’ve ever read…

…Keeping with this “failure” theme I thought this was a good time to introduce Don Dodge; he doesn’t know I’m writing about him (strange how that can happen, huh?) but Don is part of Microsoft’s Emerging Business Team out of Boston. I read his blog regularly and I think he has a lot of very interesting things to say…

…What makes Don relevant to us is that he was part of the team that rolled out Napster and has been kind enough to write down four simple lessons he learned from his experience at Napster. I think each lesson can be applied to a host of Chinese start-ups…

(1) Never get too far ahead of the market. Creating new markets, new business models, and value propositions is very difficult and takes lots of time and money. Pioneers are usually unsuccessful, the fast followers make most of the money.

(2) Understand who your customer is, what problem you solve, and how much they are willing to pay for it. Sounds simple enough but you would be surprised how many start-ups get excited about their technology innovations and forget about the basic business proposition.

(3) Never start a business focused on solving a big company’s problem. They don’t know they have a problem…and they are probably right. That is how they got to be so big in the first place. The record labels didn’t know they had a digital distribution problem and were not interested in our solution to it.

(4) Test your assumptions before spending lots of money. Interview your potential customers. Understand what their top 10 problems are. Don’t try to convince them that you have a solution to a problem they don’t know they have. Take a survey of 100 potential customers. Ask them to list their top 10 problems, without prompting from you. If you don’t see your problem area listed…move on to another problem.

October 7, 2005

What does the Greatful Dead and Baidu have in common? Can you believe it is file sharing…

Filed under: Technology — Administrator @ 10:20 pm

…for those who are interested in seeing what happened at Web 2.0 conference this past week, click here to view the “underground video” directed and produced by Alexander Muse, entrepreneur and part-time venture capitalist with M | Ventures. It is actually quite funny…

…also, if you are interested in reading about some of the interesting conversations that went on at the conference click to its blog, such as (thanks by Niall Kennedy) what former Greatful Dead (one of my all time favorite bands) drummer, Mickey Heart, has to say about file sharing…er…I wonder what Baidu would say about this?

Mickey Hart on file sharing

Mickey Hart, former drummer for the Grateful Dead, is on stage at Web 2.0 right now and making a whole lot of sense. Jeff Mallet from SNOCAP, a digital licensing and copyright management company is also part of the discussion panel to represent the paid model. Some choice quotes from Mickey:

“[The fans] didn’t steal it, we gave it away”

“If we ever make a good album, they’ll buy that.”

“I’ve probably been recorded more than anyone else.”

“We played in the park and we always played better when we played free. I think it’s a good thing to share and give people something. Whets their appetite too…if they go to the trouble to bring a machine and tape it, they should have it.”

October 3, 2005

Broadband internet coming to mud hut near you…

Filed under: Marketing,Technology — Administrator @ 6:13 pm

This morning, as I was getting ready for work, I was watching CNBC when a commercial for Thailand based (and owned by the Thai Prime Minister) Shin Satellite’s IPSTAR interrupted a spicy report about how China and India are dooking it out over global oil rights….

My understanding of IPSTAR is that it will offer digital high-speed internet access using Internet Protocol (IP) to all of Asia – in short, broadband internet. It so happens that China is IPSTAR’s biggest market in the Asia-Pacific Region and has more than 25% of its capacity over China.

Back to the commercial…

…the first frame shows a little Chinese girl making dinner for her family, a bunch of farmers…the second frame shows the girl surprising her farming family with a pizza…the third frame shows the farmers trying to eat the pizza with chopsticks…and then some kind of voice over…

…in the fourth frame the camera pans back on the girl who is now standing back in her kitchen, rolling pizza dough with a big smile on her face…in the final frame the camera pans even further back and reveals that adjacent to the side of this kid’s hut is an IPSAT satellite dish…

After a good five minute laugh-athon I asked myself a couple questions: (1) Is IPSAT onto something here or are they “pissing against the wind” (at least in China)? and (2) Is the China market ready for this or is it too early?

I searched for a quick and dirty answer and came up with an experience that happened to me 12-years earlier. At the time (1993) I was studying Chinese at Nankai University, Tianjin, PRC and some classmates and I went on holiday to Inner Mongolia. We wanted to locate the famed Genghis Khan Mausoleum but instead we found a tiny village of mud huts and small horses. We spent the night huddled together (not for warmth but because the rug they gave us only covered 20% of the dirt floor) in a Mongolian style tent. Just as the last drop of formaldehyde infused beer was consumed we heard screeching, clapping and music. So a couple of us got up and meandered over to the hut bellowing this noise. We opened the flap, looked inside, and to our surprise we saw a massive boom box that would have put a smile on late great Jam Master Jay’s face…

Turning back to IPSTAR and wondering whether or not it will be successful in China (where only 40 million households make more than US$12,000 per annum)… I am left with the image of that “Boom Box” banging away in the Mongolian night 12-years ago…and my gut feel is that if these guys from Inner Mongolia were in the ad they would have figured out by now how to eat pizza with there hands but since the majority of peasant farmers are not from Inner Mongolia…I wouldn’t be long IPSAT…

In fact, I bet IPSAT’s China business will experience the same fate as satellite phones and Global Crossing did 4-years ago…last guy out the door don’t forget to shut off the lights. Reality check: How are these guys going to figure out how to hook up the cable box when they are sill using chopsticks to eat pizza…hell, I’m still trying to figure out how to adjust the clock on my VCR…

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