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Lies, damned lies … and percentage growth

One of the many banes of a technology journalist’s life is a tech company gushing about its percentage growth – while refusing to divulge actual numbers.

This is almost always cause for alarm. Invariably, it means the base figure is so low, it would be an embarrassment to the company to reveal its true performance. But anyone can claim 678 percent customer or user growth if they only had 2 customers to start, and anyone can truthfully declare 200 percent revenue growth if revenue started at a few hundred or even thousand dollars.

Let’s be straight about this: it is an insult to present journalists with these kinds of numbers. That many of these claims make it into the media is not a reflection of credibility, but of poor journalism and inability of journalists to think through the claims they report.

This is only marginally more offensive than the use of old data to back up current arguments. Especially in the mobile arena, and especially in Africa, growth is so fast, that old data is all but irrelevant – and yet many companies still base both business decisions and claims on a long gone status quo.

A rule of mobile Internet resrarch has even been coined in South Africa to warn against this form of sloppy data use: Gray’s Rule, named for veteran Internet marketer Scott Gray:

“Research around mobile typically has a relevant life of around three months. Decrease the relevance by about a third for every six months on top of that.”

The rule has been bandied about among South African tech journalists frustrated with the relevance given to old data by large corporations. It’s been modified somewhat by refinements and corrolaries, to allow for the difficulty in accessing fruit-tree-fresh data.

For example, there has been consensus that, if such data is accompanied by solid forecasts based on proven methodologies, it may be used to extrapolate data by a further 12–18 months. However, this does not apply to data more than 18 months old.

The underlying assumption is that the research is based on sampling that is broad enough to be generally representative of a population in question.

In April, during a Virtual Indaba to thrash out further rules around acceptance of statistical claims, Brainstorm editor Samantha Perry pointed to a third broad category of data abuse: the use of undated statistics in press releases or marketing material, in an attempt to avoid having to vouch for their veracity. The refusal to accept such data was accepted as Perry’s Corrolary to Gray’s Rule.

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Online Retail growth in SA: The Tweenote presentation

Tweenote presentation (10 Tweets on a topic in 10 minutes) of MasterCard Online Shopping Survey with South African industry context (using hashtag #MCSurvey):

1. #MCSurvey MasterCard Online Shopping Survey part of global study. Local industry context from World Wide Worx research.

2. #MCSurvey sampled 500 SA consumers, 18-64, banked, online at least once a week. Representative of highly active users.

3. #MCSurvey found 58% of active Internet users shopping online in 2011. World Wide Worx puts that at 1,65-million people.

4. #MCSurvey found high growth in % of online shoppers: up from 44% in 2009, 53% in 2010; and % of growing base each year.

5. #MCSurvey showed concern over security falling rapidly: 2009: 59% worried; 2010: 47%; 2011: 38%. Function of experience.

6. #MCSurvey finds key factors in growth are price/value, convenience and secure sites. Backed by World Wide Worx research.

7. #MCSurvey shows product and site reviews increase confidence. Social media (Facebook, Twitter) will be vital in process.

8. #MCSurvey finds virtual products, eg coupons, air tickets, gaming and apps, most likely to be bought online vs offline.

9. #MCSurvey finds grocery shopping in decline, down from 27% to 9%. Mirrors World Wide Worx finding segment stagnating.

10. #MCSurvey finds Kalahari, Amazon and Bidorbuy the biggest online retail drawcards for SA. Groupon biggest contendor.

Thank you for following the #MCSurvey tweenote. Full details of the findings are up on @GadgetZA at http://bit.ly/HHp70c

 

 

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Why Facebook bought Instagram

Why did Facebook pay a  billion dollars for Instagram? The answer is simple: Facebook wants to own photo-sharing.

Here you have an early-stage photo-sharing player that is on a rapidly climbing trajectory, but can still be had cheaply. The question is not why Facebook bought it, but rather, why WOULDN’T Facebook buy it? Fear and greed often go hand in hand, but in this case the simpler answer is that it consolidates Facebook’s position in this arena.

Facebook is already acknowledged as the biggest repository of photos on the Internet, and probably in all of history. The coming of Instagram has represented a seismic shift not only in the way people regard their photos, but also in what makes an application cool. At the heart of early enthusiasm was the fact that it was another way iPhone users could pretend their device was cooler than any other, but that was never going to last. What it did do was build a critical mass of early adopters who would create a buzz about the product.
The cross-over to Android was inevitable, and the objections of the iPhone community were more comical than a real issue for its adoption. But the cross-over did indicate that Instagram would maintain an upward trajectory that would eventually challenge the dominance of Facebook in this space, in a way that Flickr and Picasa never could.
Facebook will probably allow Instagram to continue as both a stand-alone app and as an integrated tool within Facebook. The ability to apply Instagram effects to your entire repository of photos on Facebook will be very compelling to some, as terrifying as it may seem to the purist.
The backlash is symbolic of a deep-seated psychology of superiority among certain categories of technology users. In particular, the iPhone users who mourned its cross-over to Android don’t realise that, given it’s massive user base, there was nothing exclusive about Instagram to start with. Wanting to hold onto it as a single platform application is not only absurd, it is also childish and arrogant. If it worked for you as an iPhone user, it will still work for you once Facebook owns it. If you refuse to use it because it’s on Android and Facebook, it means you weren’t using it for its utility, but for the status it gave you. It is an idiotic approach to technology use, and there can be little sympathy.

Is it indicative of a bubble?

The Instagram purchase is more a factor of its stratospheric growth at a time when Facebook is prpeparing for a listing, than of a bubble as such. It is a case of Facebook defending its position as the world’s leading photo-sharing environment, and of making an obvious acquisition of the fastest growing player in this arena, rather than of Instagram in its own right suddenly having this high value. Time is tight for Facebook, prior to its IPO, and they obviously made an offer that couldn’t be refused, taking advantage of the current high value of Facebook shares.

Well then, is Groupon a bubble?

Groupon’s biggest mistake may well have been not accepting a similar offer-that-couldn’t-be-refused from Google and believing its own hype about how much it was worth. Although it has a market cap of above $8bn, versus that $6bn offer, it is unlikely they will be able to extract that value from the business. The market has already punished Groupon, and its share price is down to a low of near $13  from a high of $31 (Nasdaq data, 11 April 2012). That looks like fairly sane market response to a business that had previously been over-hyped. If we were in the midst of a bubble for group buying sites, that share price would be closer to its highs.

Of course, both the acquisition of Instagram by Facebook and Posterous by Twitter, not to mention Zynga buying the creators of Draw Something, will spark renewed fervour to come up with the next big app or platform that can be sold to one of the big guys. Every developer is looking for a big payday, and this just fuels the dreams, although in most cases not the reality.

 

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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