Google Fi…. a case of self service and identity

The past couple of days have been quite interesting, with the launch of Google’s MVNO service. Although I still stick to my earlier stance, there are a few interesting nuggets which are worth examining. I will not go into examining the details of the service, you can find them all over the internet – such as here, but more look at a couple of avenues which are much less talked about – which I feel are very relevant.

The first is the idea of a carrier with complete self-service. Now self service is not rocket science – but when you look at legacy firms (and yes – i mean regular Telco’s) this does account for a LOT. In the current ecosystem of cost cutting – one of the largest areas you can reduce costs is in head-count. To give you an idea what this means for a US Telco – one only needs to read news around the consolidation of call centers from both T-Mobile and Verizon. We are not talking of 100 – 200 people here, we are literally talking about thousands of people! And people cost money – and training, and well can even indulge in illegal activities like selling your social security details! If you have a very well designed self service – you could do away with most (I daresay say even all) of them and voila – you have a lean service which meets a majority of your customer needs. In this case, although you end up buying wholesale minutes/ data from operators – you have none of the hassles of operating a network, and certainly none of the expensive overhead such as a call center. No wonder you can match price with the competition – and perhaps do so at an attractive margin! Not sure if Google already has this in place, but I believe it does have the computing and software wizardry to accomplish this.

The next is in the concept of a phone number as your identity. This has been sacrosanct to operator till now – and Google has smartly managed to wiggle its way in. Now it really doesn’t make a difference what device you use – all your calls will be routed via IP – so the number is no longer “tied” to your device. Maybe in the future – your number would be no longer relevant, maybe it would only be an IP address. What would be important is your identity. Simply speaking, perhaps you could go to any device and login with your credentials – and you see the home-screen as it configured for you.. irrespective of device.

However, here I find it difficult to understand Google’s approach. For a unique identity they chose to go with Google Hangouts…. and although I don’t know usage figures – I doubt if this is a very “popular” platform to begin with. Is this Google’s way of trying to push the adoption of Google Hangouts, especially since most of its efforts around social have proven to be a lot of smoke without fire? Will this approach limit its appeal to the few who are Hangout supporters, is this the first salvo in a wider range of offerings, or will this be a one trick pony to rocket Google on the social map … only time may tell.

But one thing is certain, such services will serve to force operators to keep optimizing – using techniques such as self service to reduce costs and offer even better solutions to their customers – at better price points. Maybe in a way it is not unlike Google Fiber – it serves to push the market in the right direction rather than be a game changer on its own. That in itself – would be worthy of applause.

The dynamic pricing game – where all is not 99c

Phil Libin the effervescent CEO at Evernote made headlines two days ago when he admitted that Evernote’s pricing strategy had been a bit arbitrary and a new pricing scheme for their premium offering would be launched come 2015. Although little was said about what the approach would be – I do hope it points to adopting a flexible pricing approach, and serve as a forerunner for pricing strategies to legions of firms down the road.

To put some context, many software providers (especially app companies) have adopted a one price fits all approach; i.e. if the price for the app is $5 per month in USA, the price is $5 per month in India. The argument has typically been one of these

1. Companies such as Apple do not practice price differentiation around the world, and yet they sell – so we should also be able to do the same
2. Adopting a one price fits all approach streamlines our go-to-markets and avoids gaming by users
3. It is unfair to users who would end up paying a premium for a product which can be sourced for a cheaper price elsewhere

From a first hand experience I believe that such attitudes have proven to be the one of the biggest stumbling blocks for firms to achieve global success. A good way to explain why is to pry apart these assertions.

• The Brand proposition argument – Although every firm would love (and some certainly do in a misguided manner) to believe that their firm has a premium niche such as Apple – harsh reality points in a different direction. There are only two brands who top $100 bn – and Apple is one of them; and no – unless you are Google, you are not the other! Even though your brand may be well known in your home of Silicon Valley, its awareness most likely diminishes with the same exponential loss as a mobile signal – its value in Moldova for example – may be close to zero. This simple truth is that there are only a handful of globally renowned brands (e.g. Apple, Samsung, BMW, Mercedes, Louis Vuitton etc) which can carry a large and constant premium around the world.
• The “avoid gaming” argument – this does have some merit, but needs to be considered in the grand scheme of things. Yes – this is indeed possible, but is typically limited to a small cross section of users who have foreign credit cards/ bank accounts etc. The vast majority are domestic users who are limited to their local accounts and app stores. The challenge here is to charge the same fee irrespective of the relative earning power in a country. While an Evernote could justify a $5 per month premium in USA (a place where the average mobile ARPU is close to $40), it is very hard to justify it in South East Asia (mobile ARPU close to $2) or even Eastern Europe (mobile ARPU close to $8). It then would simply limit the addressable market to a small fraction of its overall potential – and dangerously leave it open to other competitors to enter.

ARPU	$12.66	$2.46	$11.37	$9.20	$48.15	$23.88	$8.77
Region	MENA	APAC	Oceania	LatAm	USA	W.EU	E.EU

• The unfairness argument – also doesn’t hold true. The “Big Mac Index” stands testament to the fact that price discrimination is an important element of market positioning.

Even if you argue that you cannot buy a burger in one country to sell in another, the same holds for online software – take the example of Microsoft with its Office 365 software product, same product – different country – different price.

• That brings me back to the final point – $5 per month may sound like a good deal if you are a hard core user, but if you compare it with Microsoft Office 365 – which also retails at $5 per month, it is awfully hard to justify why one would pay the same for what is essentially a very good note taking tool.

Against this background, I do welcome the frank admission that this strategy is in need of an update, and also happy to hear that the premium path isn’t via silly advertisements. Phil brought up a good challenge with his 100 year start-up and delighted to know that he still is happy to pivot like one.  I do for sure hope that the other “one trick pony” start-ups learn from this and follow suit.