Friday, June 19, 2009

A 'king"fishy tale

People were taking to the planes in hoards, I was told back in the summer of 2006 when I was in India on a short trip.  I did not get the chance to fly a domestic route in that trip, but got my chance when I had to fly to Mumbai in December 2007.  The (old) small hyderabad airport in the heart of the city was so crowded that it looked like a local bus stand called "Imliban". 

People who don't look anywhere like the frequent flyers in the US were sitting on the floor waiting for their flights to Bangalore, Vizag, Mumbai and other cities.  I was even amazed to learn that th flight to Rajahmundry was full.  Air Deccan.. my friend, had changed the rules of the game.  Through it low pricing and a loss-leader strategy it grabbed a nice market share of a fats growing market.  There were other similar firms - SpiceJet, Indigo which followed a similar low price strategy.  I deliberately use price, instead of cost because operating an airline at low cost is a myth, at least during the period when oil prices where at a peak. 

The incumbents were the state owned Indian Airlines and a couple of large private operators - Jet, Sahara and Kingfisher.  The entry and success of of low cost operators such as Deccan and SpiceJet set forth a wave of acquisitions and eventually Jet Airways ended up buying Sahara and Kingfisher snatched the real prize - Air Deccan.

What Mr. Mallya did not realize was that he wouls have been better off waiting it out and letting Air Deccan collapse due to its low-priceapproach. An implosion that was bound to happen, given the strategy Air Deccan had adopted.  He could have snatched Air Deccan for a much better price today.  However, hubris as they say may have played its role in the King's acquisition of Air Deccan.  He purchased Air Deccan on the premise that the market would continue to grow and that he would be able to somehow integrate Air Deccan's low-end positioning with his airlines' premium positioning and also end up gaining market share.  Surely, wrong timing.

The credit crisis, high oil prices, fall in demand and oversupply all semm to cause a problem of demonic proportions for many airline operators including Kingfisher.  I wouldn't be suprised, if the only choices woudl be Jet and Indian Airlines at the end of the day.  And, maybe one low-cost operator.

Mr. Mallya is still denying that his airline is in trouble but if the current downturn continues then there is no way Kingfisher can come out of this mess.  When Mr. Mallya launched his airlines, I presume he was trying to emulate Mr. Branson, or maybe not.  Whatever maybe his reasons for starting an airline, he sure quite a few reasons for not being able to manage it well.


Wednesday, June 17, 2009

Google’s money making machine

Have you ever wondered how Google makes money. Yes, we all know that they do by placing ads – strategically. However, I always found irrelevant funny ads that were totally out of place – Here's one that I found recently on CNN's website:




Well, the first ad for lowermybills.com does not look like an ad placement. But, I was not sure why that ad popped up there and why those two girls were dancing. Secondly, the ads by Google indicate how much more work is needed before customized ad placement becomes successful.

The original article was reporting protests in Iran and there is an ad for Iranian personals, chronic back pain relief and heart attack survival.

No space for mypsace

The social networking world is crowded. I had blogged about how MySpace a very weak generic positioning that may stop it from becoming a dominant player. If the recently announced layoffs are any indicator Myspace may have more bad things coming their way.

It seems to me that there are too many platforms and too much easy money chasing the wannabes. A classic run-up similar to the heydays of the Morgan Stanley financed B2B exchange for plastic bolts. There were other similar euphoric dramas of course, like the thirtieth online pet food store financed by VCs. I do not buy the argument that because some high-profile VC firm financed a start-up it has future, or because Fox took interest. Most successful ventures are under the radar - just as Google was during the internet boom. I predict that by the time the current economic downturn ends many of the SN wannabes will be gone. I still place my bets on Linkedin and then, Facebook. Linkedin because it gives social networking a clear purpose - maintain professional contacts and thereby possibly benefit from them. This notion seems simple but is elegant and has been studied quite a bit in sociolofgy by great scholars like Mark Granovetter and Ronald Burt. Facebook because it is the most well thought out generic platform for maintaining personal networks.