Thursday, November 17, 2011

Why users' desires and needs are the most underserved?

We know Malaysians are crazy about food (the further we traveled, the better the food taste), and there are plenty of restaurants popping up and closing down every month, yet there are very little successful websites which help consumers to look for good food and restaurants. There are probably 2 dozens of food websites (non-blog) in Malaysia versus a few hundreds food bloggers, and Malaysians actually get makan advice from food bloggers rather than using a food website like Yelp (for Malaysia).

We know fairly sure most Malaysian eat out and there are plenty of thriving restaurants, but why the supporting web services to help match foodies with their desired restaurants is not quite there yet? In fact, most food websites are started as a hobby project; and some done by small companies, and the big players are certainly not in sight.

Is Malaysian web sphere not vibrant enough? I don’t think so. We have Groupon and dozens of its clone such as MyDEAL and Dealmates. For online property, we have iProperty, ThinkProperty and PropertyGuru. For job hunting, we have JobStreet, JobsDB and Monster. For e-commerce, we have Lelong/SuperBuy, Postme, AirAsia Megastore and Jipaban (in fact, most individual setup a blogshop).

Why are certain segments more vibrant and filled with bigger players? I have a theory: short cycle to profitability. Most of these segments require low development time and cost, perhaps high marketing spending, and the ability to monetize and be profitable within 6 months (or gone out of business). Almost everyone can setup a Groupon shop, though you need to have sizeable capital for marketing and hiring sales people, and there are multiple proven local models and success stories where the top 10 local Groupon clones are hitting the revenue of RM 200,000 to RM 5 million per MONTH! It’s like a gold mine, and everyone is getting the shovels. Success story like iProperty and JobStreet shows there are millions of ringgit to be made from the local market, thus people are willing to invest in and try to wrestle some market share from the big established players. How about e-commerce? We never really heard about most of the websites besides Lelong. My theory is E-Commerce = Sales = Money, thus people inherently thinks there are always money in this segment (just like a brick and mortar shop which sell things). E-bay could be an inspiration for some.

So, does that mean there is no money in helping people to discover great food, but tons of money in selling restaurant coupon? Let’s just say selling restaurant coupon is easier and faster. There are basically 2 type of consumer Internet business: Type A) one that focus on the users and help them to get what they need. Type B) focus on the merchants and make it super easy for users to buy the merchant service. TripAdvisor and Yelp is Type A (focus on users); while services like KAYAK, Expedia,, and Agoda is Type B (focus on merchant). Bigger companies would like to venture into Type B kind of business, because it’s nearer to the money (there is profit in every booking).

What is Type A (user-focused)’s business model, like TripAdvisor? TripAdvisor is more costly to develop (platform, content, community), which might take 1-3 years to gain traction with minimum profitability; once they became the market leader and everyone goes to TripAdvisor’s website to plan for travel and seek recommendations, then it became a valuable platform. All Type B business like Expedia would want to be featured on TripAdvisor website, because there is where their customers are. TripAdvisor make its profit from referrals bookings made on Type B’s platform, without the need to handle customer service and all the work. Click and KaChing!

What is the different between TripAdvisor and Yelp's business model? TripAdvisor is slightly luckier as they could make profit from travel booking business like Expedia, and they don’t have to do the hard work of engaging every hotel and travel agencies in the world. Is there a booking service for restaurants? Perhaps there are some, but nothing as elaborate and vibrant as Expedia. My guess is Yelp! still have to do a lot of ground work, engaging restaurant owners and merchant to do some kind of advertisement or promotions on the website. Each travel deal could average RM 500, but each restaurant deal is only RM 50. For restaurants, there are more work and less money.

So, why would we want to do Type A (user-focus) business if most of the money is in Type B (merchant-focus)? I guess I am a believer that if I do something which actually helps others to solve their problems, it means I am creating value and good things will happen. A lot of people are trying to look for great places to makan (including me) every day, and I am serving that need. Though that might not sound very business-minded, but I do believe in its value (though I got criticized a lot by business-minded person who thinks I am delusional for treating this as a business). Basically I believe we solve a problem, serve a need and acquire users who like our services.

Mr. Stoppelman (Yelp) said that the site deliberately tilts its rules to support the reviewers. “We put the community first, the consumer second and businesses third,” he said. - Source: NYTimes

Besides personal and philosophical reasons, there is a long term strategic reasons as well. It might take you 3 months to start a Groupon site and start making money, and it’ll take any guy 3 months to be your competitors and reduce your profitability. The barrier of entry is very low, and it’s a very hot gold mine; and money can buy success easily through marketing in this case. How many people are willing to invest hundreds of thousands and be patient for 1-3 years to gain traction; and have the opportunity to monetize in the end? There are hardly any competitors left at the end, and new comers will take years to play catch-up, and we gain the priceless reward in becoming the market leader. Most importantly, we have gotten the content and the users; content attract the users, and users attract the merchants (and profitability).

Jeff Bezos said, “It’s all about the long term.  If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.” - Source: Forbes

In Malaysia’s context, the idea of pouring hundreds of thousands and taking 3 years to make real profits might be unbearable of most investors. The idea of food hunting using websites (or mobile applications) is quite alien to users above the age of 35 (they like to read reviews on newspaper, and ask for advice from friends). Thus, most investors would think I am a young ciku who know nuts about business. Then again, I still have a lot to learn.

In the meantime, we will make Malaysia Most Wanted the ultimate gateway to all Malaysian food and restaurants; provide satisfactions to all the foodies out there.

1 comment:

kc said...

Angie’s List just went IPO and Yelp is filing for IPO today. But Malaysia has none of those user review type of portal for food and services that gone really big and popular.

Get the name of your site out maybe you can fill that space.