The "Face" behind Facebook

IT is a way of life today. It’s imperative for the successful functioning of any organization. In fact, leave alone companies, individuals cannot do without browsing the Internet. Thanks to the fast paced IT the world over, we can connect with our family and family located at any part of the Globe.

Social networking sites are the cheapest and most convenient mode of communication. Facebook is one such site that has had a stupendous growth rate. Started in the year 2004 by a sophomore at the Harvard Business School, Mark Zuckerburg is the face behind Facebook. With 66 mn users, Facebook is the most sought after social networking sites, beating the likes of Myspace.com and Orkut.

I guess what’s impressive is the rate at which Facebook has grown. The number of active users of Facebook has grown from 7mn to 66mn (that’s a whopping 843 per cent) in a period of just 2 years. Companies like Microsoft and Digital sky technology have been astute enough to have bought stakes of 1.6 and 1.96 per cent respectively.

As per recent articles, the net worth of Facebook stands at $10 bn (that is larger than the total IT/ITeS sector in India). While most analysts believe that the figures are exaggerated and over valued and there, all I can say is that recession seems to be miles away from Mr. Mark Zuckerburg. The man definitely seems to be rolling in money.

WPI Mirage

I’m not taken aback when my mum cribs about the rising prices of commodities, while on the other hand the present Ministry takes great price in keeping the inflation figures low, at a time when India needs it most. As per the week ended April 25^th, the WPI stood at a meager 1.27 per cent, the lowest in three decades.  Sadly, this figure is not representative of the true expenditure of the common man in India.

While most developed and even developing countries like USA, UK, Japan, France and China use the CPI (Consumer Price Index), India continues to use the WPI (Wholesale Price Index) for calculation of inflation.

The WPI comprises a basket of 435 commodities and 100 of these commodities are not consumed by at least the Urban India. Being a wholesale index, the price change fails to take into consideration the retail margins. The basket of commodities comprising the WPI was formed by the Government back in 1993-94, while the developed countries update the same every 4-5 years to ensure that the figures are a true barometer. Conversely, the CPI sees to be a well defined and systematic series, which represents only 1 but different class of people in society and thus acting as a good indicator. The series can be broadly classified into:

·         Urban consumers

·         Urban wage earners and clerical workers

The calculation of the CPI is not just a lot more laborious than the WPI, but also demands an organized and systematic source of information. It’s commendable to see that the economic assistants at the BLS (Bureau of Labor Statistics) work rigorously to get updates from various retail stores, rental units and Doctor’s offices to get updates on a whopping 80,000 items a month).  

Inflation is one of the most important indicators to any economy. Its importance cannot be restricted to keeping the households abreast about the changes in the value of goods and services, but is imperative for business and investment decisions as well. It’s important that the Government works towards ensuring that the figures published by them are a lot more reliable. 

IPL: Money Spinner

Right time, right place with the right product has been the success mantra for several marketing gurus. This thought was strongly reinforced in my mind as I watched Mr. Lalit Modi (Chairman of IPL) talk about the success story of the IPL-2.  The man does deserve credit for introducing the game concept in India (although the same format has been followed in other countries for years and was originally introduced by someone in England). Well, what came as a shocker to me was a statement made by him during an interview: I'm not making money from IPL: Modi.

His statement definitely does not tally with the humongous figures (Rs. 400 cr) that the IPL has generated as advertisement revenue alone. With the stupendous success story at IPL-1, the organizers would not have had much trouble raising money. Companies are paying a 35 per cent premium over the amount quoted last year for each advertisement, and Set Max (the host broadcaster), has been quick in filling 80 per cent of the 12,000 advertisement spots.  All of this would results in more money in the kitties of each of the teams and the BCCI.

In fact, the WSG (World Sport Group-An International Sports marketing company) that had bought the media rights of the IPL at a whopping $1.75bn last year plans to invest Rs. 8,200 cr with the BCCI over the next 9 years. The amount would be shared in a 80:20 ratio between the Team owners and the BCCI. The huge stakes involved in the IPL can be justified, with the returns the team owners get, from not just advertisement revenues, but also various other title sponsors and the revenues collected from the ticket and merchandise sales.

I guess now the presence of the various celebrities (especially Mr. Modi) is pretty evident!!!

 

 

 

 

 

Roadblocks in the Logistics sector!!!

I was totally ignorant about the Logistics sector till one of the Big 4, asked me to prepare a report for them on the same. 

The Global Logistics sector is a whopping $5tn and India holds a miniscule 2 per cent share in the same. Despite being of immense importance to both businesses and individuals, the sector has been unable to attain the industry status. While the present Global economic crisis would result in a slowdown in the trade movement, there is significant potential for the sector. As per analysts, the sector would continue to grow at 16 per cent (CAGR) over the next few years.

Sadly, even after 62 years of Independence, India lacks tremendously on basic infrastructure. Infrastructure is the bedrock for the sector, however, has been unable to meet international standards thus posing a business challenges for several MNCs. As per a survey conducted by the World Bank, India ranks low on its LPI (Logistics Performance Index) due to poor infrastructure in comparison to other developing and developed nations.

Surprisingly most articles, reports and discussions on the Logistics sector mention about the percentage spend of the Logistics sector to the GDP (13 per cent in India), vis-a-vis other developed countries like USA (9 per cent) as extremely high. I guess, what these discussions seem to miss out on, is the same comparison in actual figures. While India's GDP stands at ~$1.1tn, USA is ~$13tn. So the high percentages don't justify India's spend on the Logistics sector. In fact, the converse should hold true since India is still a developing nation and USA has embarked on a robust infrastructure for years now. 

Too bad, that the estimated expenditure for infrastructural projects as mentioned in the 11th plan commission does not alleviate the worries for the various operators of this sector who are juggling with various other impediments such as low investments, less PE deals, drop in the GDP and a contraction in the IIP and export growth rates.