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News on-Paper to on-Screen: Finding Profit from Customers Who Pay

The mark of profitable news organization today is one who has found customers who actually pay, often redefining who the customer is in today’s crowded landscape of media information and analysis. Profitable organizations have either built two sides to their business: offering information to consumers and selling it to businesses – or achieved such enormous scale in their reach that they are too big to ignore in the traditional game of advertising reach.  Niche content, with few exceptions, will continue to move online and few – if any – have proved that model can yield significant profit as a stand-alone business.

Traditional Paying Customers
In previous eras, the access to information and news content was more limited than in modern day, such that organizations could achieve enough scale to earn profit from subscription revenue and the advertising income from those who desired to tap the same audience reach. In effect the theory was they had two sets or paying customers: the subscriber and the advertiser. Most would acknowledge this model is less sustainable in societies where Internet access and digital content consumption is widespread (although there are examples of emerging economies and ultra-urban cities with large commuter populations where it continues to prosper or even grow), as consumers increasingly do not pay and advertisers have other competing channels to consider.

A Successful Approach: B2B and B2C
Consider organizations in the modern day who have adopted a hybrid B2B and B2C approach: Bloomberg and The Economist, with Reuters as a third possible example but more complex in its structure to analyze. All three have built business models around providing traditional free or advertising-enhanced news content, but also built profitable businesses selling that information in more lucrative ways.

Bloomberg Has it Right
Bloomberg LLP is an integrated B2C and B2B business news powerhouse.  Ranking #45 on the “Forbes Largest Private Companies” in November 2012, the company is private, but it is hard to ignore the public growth and success of an organization which has spread from a core business of providing professional bloomberglogoreal-time financial news, market data, and analysis service offerings accessed through leased terminals and a corresponding subscription service, to expansion into a syndicated news service, magazine publishing (including Bloomberg BusinessWeek), and sharing of business information via Bloomberg television, radio, and the web.  They embody the dual-model approach of selling information to businesses who pay, and the reach to advertisers who also pay.

The Economist Does Too
The Economist Group is a collection of brands, led by its flagship print magazine brand, The Economist, but the company offers insight, analysis and services through multiple channels.  According to their 2012 Annual Report, their revenue dependency on print advertising was 46% ten years ago The_Economist_logoand today is 29%, primarily as a result of selling their business content and insight through other means.  Yes, they have approached digital content distribution in an aggressive way, being fast in adopting new reading platforms and keeping their content available only for paying subscribers, but the business growth is due to more than that: the Economist Intelligence Unit business is growing YoY, through corporate subscriptions and continued expansion into new content categories like that of Clearstate, a Singapore-based healthcare information source across Asia.  Their CQ Roll Call business is a valuable (paid) source of legislative information, tracking and analysis.

Another interesting point of similarity in both Bloomberg and the Economist Group is that they are aggressively developing themselves as global brands, providing wide global reach for English-language-based news and information.  In an economy where most investments and news events happen globally, having the reach and local presence to be notable and desired in local markets provides a scale which helps to differentiate and to ensure access to information which other will pay to access.

Online-first Content Sources Face the Same Challenge
Departing from the traditional example of an isolated, local daily newspaper unable to maintain profitability through the traditional models, let’s consider even modern web sites or content business like AOL and Yahoo (with its latest leadership vision) who aspire to aggregate or create unique content, targeting niche segments, and aollogoyet maintain the same business model, changing only the distribution model from paper to screen.  The value proposition behind niche or targeted content is for advertisers to better target, but niche targeting at scale has so far only proven profitable for paid search advertising, whereby the information or search results cost very little to generate, less so the case with unique news content. While they have a chance for success due to the scale achieved in aggregate, their strategies are still lacking a crucial component from a proven model of their more profitable peers – enough paying customers.

Some do Make it Work Today
News organizations who achieve significant scale in reaching the masses can be successful, but by definition there is room only for a few.  The New York Times Company and nytimeslogoWashington Post Company are probably the most successful examples of earning profit through the traditional combination of advertising and subscription sales. Both have not only developed massive brands to achieve notable scale, but both have also diversified their portfolios into other businesses and related properties (e.g. The Washington post owns Kaplan educational services; New York Times Company owns Group and other numerous web properties and a news archives and syndication business, although they still receives about two-thirds of their  core revenue from advertising and subscription).  It’s not impossible to earn a decent profit margin using a traditional approach, but clearly diversification to ensure alternative revenue streams from other paying customers help, and even these two are the super-stars in a dwindling industry.

Experiments Abound
Berkshire Hathaway is one such group taking a bet in this space.  In their 2012 Annual Letter, Mr. Buffett eloquently describes a similar state of decline for the on-paper news business, but wisely recognizes that while most get their news of interest from other, more instant news sources, few businesses have yet successfully replaced “local” news the way traditional newspapers once mastered.  In line with this view, the group has so far acquired 28 daily newspapers across the US, at a total cost of US $344M.  Perhaps the logic here is that niche (local in this case) at scale has potential to attract advertising dollars for reach in the same way as the large players mentioned above, but unlike current or future online competitors, these local papers will still need to deal with distribution and other costs that their online competitors do not, hence making them clear short-term profit wins for Berkshire if acquired on the cheap, but still questionable medium-term bets. Some might argue the value play here is in the brands more so than the business model.

Potential remains for the news content industry to evolve in many ways, and more creativity and experimentation is required to truly unlock the opportunity, but perhaps those investors and entrepreneurs contemplating the challenge can learn more from those who are thriving (and profiting) in today’s competitive world of news and information delivery.

Berkshire Hathaway 2012 Annual Shareholder Letter
Hoovers Profile of Bloomberg LLP
Reuters Annual Report
Economist Group 2012 Annual Report

Avoiding the Risk of Mediocrity: Learning from Others

No matter how great the team, individual, business or nation, one of the biggest impediments to greatness is mediocrity – becoming distracted or stuck in habit and a way of doing something such that you stop looking around to see if there might be a better way.  Whether a result of ignorance, inability or indifference, we must remain interested to learn and be challenged by the Ideas of others.
Building a modern national economy is the most clear example: a division is emerging between countries who are focused inwards and those who are focused on becoming a center for learning and exchange.  

Japan FlagA trip to Japan last week has reminded me of a story once told by a Chinese friend who visited Tokyo for the first time as a child and left saying he had a vision for how great Asia could become. This was the period following WWII when Japan was rapidly adopting American inventions and doing what the Japanese do best – gradually improve with relentless attention to quality and detail. 
Japan’s Risky Rise of Mediocrity
The Japanese learned how to take the best from others and make it even better, and eventually used capacity, scale and distribution to innovate on its own.  While the attention to quality remains today, sadly the focus on looking abroad for the best ideas (let alone talent) is less a part of the current Japanese doctrine.  This challenge is further aggravated by a labor system focused on long-term employment within the same firm, hence compounding the notion of becoming comfortable and looking inwards. With few stand-outs (Toyota’s recent positive market share report and other recent earnings reports boosted by a weak Yen among them), we are now seeing the decline of many great Japanese consumer brands – like those of Sony, Sharp, Mitsubishi, Nintendo and others. 
Nations Built on Learning from Others
While Japan’s long-term potential is anything but limited, it stands in contrast to so many other nations who are now using the power of globalization to also learn from the best. Nat799px-Singapore_Panorama_v2ions like Singapore and UAE have built economies on open immigration and the ability to attract outside thinking, and often the capital that flows with it.  Being "hub" nations means that even if all the best ideas don’t get created or used locally, they at least pass through and add value as they do.  Singapore has even recently embarked on a government initiative to further boost it’s population by 30%, driven mainly be welcoming foreign talent.
People and Business with Learning Cultures
Businesses and Individuals are no different, when one stops surrounding themselves with others who have differing experiences, backgrounds and (sometimes better) ideas, they assume the risk of mediocrity in exchange for the comfort of habit and self-assurance.  When I  ask new hires in my own workplace why they chose to join, it is very often the desire to work with other smart people from diverse backgrounds as their key factor in making the decision – and it is this logic that helps them and our organization reduce the risk of mediocrity.

Being a Local Organization with Best Global Ideas
Too often I meet local companies in a given market who think they are doing great by staying local: hiring only local talent and working only with local customers – and they might be doing well – but often less so than multi-national companies who have expanded into that same market (usually also hiring local talent who understand the local market) and bringing with them ideas, processes, business practices, training programs and active connections to their other subsidiaries. Success of multi-nationals entering a new market is a much more complex topic, but it’s benefit should also be clear in this context. Those local companies who are most successful are the ones who learn from multi-nationals in the same market, or invest in development of their own talent to ensure the curiosity to learn remains high. 
Learning from others can happen in-person or from the myriad of others ways we access thoughts, ideas and information in the modern world. Greatness can be achieved and mediocrity can be avoided, but like any road to recovery, it starts by admitting you have a problem and then having the willingness to lean on others who can help to show you another way. 
WSJ: Toyota Again World’s Largest Auto Maker 
Government White Paper: A Sustainable Population for a Dynamic Singapore
Singapore Image: Creative Commons

Is Brazil the World’s Hottest Job Market?

BrazilNearly every business leader you meet in Brazil today has a one hot topic in mind: talent.  In order to sustain Brazil’s rapid growth, and to keep pace with the business growth aspirations of most multinationals and local companies alike, Brazil is facing an intense war for professional people capacity.

Similar to the situation in other high-growth emerging markets, foreign companies looking to expand in Brazil are competing with rapidly-growing local companies for new hires. Those in greatest demand often fall into the same category of desired skills: English-speaking managers and those with skills in business development.

Growing Demand Requires New Tactics
Companies are increasingly adapting their hiring practices to the challenging local market situation.  Despite talk of Brazil’s economic rise for years, higher educational institutions were not fully prepared for the sudden economic boom and corresponding demands for talent in the market, and for-profit schools are attempting to fill the gap, but for now many multinational companies say they are having to educate their own employees and increase college graduate and internship hiring.

Siemens AG has 10,000 employees in Brazil and expects to add an additional 800 in 2011, and is planning to hire about 90% of its current interns. Worldwide, Siemens today generatesSiemens about 30 percent of revenue in emerging markets, where 25 percent of its workforce is located, and has publicly stated their aggressive growth plans as a company will include outpacing industry growth in the emerging markets.

Audio-equipment maker Harman trains its Brazilian engineers at company research centers in California and Indiana for three to six months at a time, and then sends them back to Brazil.  Otis Elevator is adding over 100 new employees in Brazil, targeting mechanics before they finish school and placing them as interns for a sixth month training program, hiring an estimated 60% of those who complete the program.  Otis even recently made a decision on where to locate a new factory based on the hopefully likelihood of keeping existing workers who wouldn’t be inconvenienced by the move.

Retention is a Challenge Once Recruited

Given the similarity in hiring profiles of ideal candidates desired by multinational companies, it is no surprise that retaining those employees once trained is an increasing challenge.  A recent article in the WSJ highlighted this issue: “You train them for six or nine months your way and then all of a sudden, their market value doubles,” said Harman’s CEO, Dinish Paliwal.  For Liberty Mutual’s Brazilian arm, Liberty Seguros Brazil, their President claims competitors, both foreign and domestic, have tried to recruit 70 of his 1,500 employees, including underwriters, field sales managers and affinity specialists – with twenty ultimately making a move.

Brazil Created More Jobs In Last 12 Months Than the US
The job growth boom is seen across the broader economy, and is not limited just to professional roles.  Over the last 12 months, Brazil created 2.25 million jobs while the US created a little over 454,000, according to data from both governments released in June. The overall number is not an exact, scientific comparison because Brazil includes farm payroll while the US data does not. However, farm jobs in the US are less than they would be in Brazil due mostly to technical advances and mechanization. Brazil’s economy is clearly hiring more than equivalent sectors in the US: construction hires in Brazil in May were 28,922 compared to 5,529 in the US over the same period.  Professional and business services firms in Brazil added 71,246 jobs in May, compared to 44,000 US jobs in the same sector.

No End in Sight
As Brazil continues to grow, and benefits from economic accelerators (or “insurance policies” as I recently heard them called from a foreign business leader) of two Big Events with the World Cup in 2014 and the Olympics in 2016, the market for talent is likely to continue.  Beyond these accelerators, the economy itself has soared in recent years as its oil, gas and ethanol sectors thrived – and continue to demonstrate long-term potential.  In 2010, U.S. foreign direct investment in Brazil totaled $6.2 billion, up from $2.4 billion in 2003 – and in the period of January to April alone, US investment reached $3.1 billion, according to Brazil’s Central Bank.  A boom in domestic consumption, the result of an expanding middle class, has helped turn Brazil into an economy which grew 7.5 percent last year and is expected to register about 4 percent growth this year — slower, but still notable compared to most nations of similar economic size. Yet, some economists (and currency traders) consider the Brazilian real the world’s most overvalued currency against the dollar, interest rates remain high and many debate whether a credit bubble is forming as consumer continue to spend.  Violent crime, while falling in some areas, also remains a serious concern throughout the country and in cities like Rio and Sao Paulo.

Still, foreigners are arriving to work, with government authorizations jumping more than 30 percent in 2010 alone, according to the Labor Ministry.

A Job Seeker’s Dream
The most immediate wave of foreign talent likely to continue growing in Brazil is for professional-level talent, likely to be followed in equally growing (albeit harder to track) numbers for low income earners from nearby Latin and other countries in domestic, manufacturing, mining and support roles (as already visible by the wave of Filipinos working on ships and offshore oil platforms).

Indeed, a “gold-rush” mentality appears to be accelerating: the real estate company Cushman & Wakefield now say Rio is the costliest city in the Americas in which to rent prime office space; and even the Country Manger of executive recruiting firm Russell Reynolds remarked recently: “Our salaries here in Brazil are at least 50 percent more than salaries in the U.S. for strategic positions” – adding increased excitement to the craze when job-seekers begin to evaluate specific opportunities.

Americans are currently the largest group moving to Brazil, followed by those from the UK and Western Europe followed by contingents of Britons and other Europeans (according the NY Times) – some are on imagetemporary assignments, others are starting ventures big and small. David Neeleman, the American founder of JetBlue Airways, recently helped created Azul, a low-cost Brazilian airline. Corrado Varoli, an Italian who oversaw Goldman Sachs’ Latin American operations from New York, now runs his own São Paulo boutique investment bank. Goldman Sachs itself will increase it’s staff by 20% this year in Brazil, after purportedly raising its headcount from 200 to 300 last year.  New Brazilian dot-coms like, an online diaper retailer founded this year by two Americans fresh from business school, is one of the most notable in the online space.

It’s Not Quite as Easy as it Sounds
While visiting a small store in LA a few weeks ago, the nice sales lady I met asked where I lived and when I told her Sao Paulo she immediately jumped to show my her computer screen which was full of “help wanted” postings and articles about how to complete immigration paperwork for a move to Brazil as an “entrepreneur.”  I smiled and politely told her it was indeed a hot job (and consumer) market and a great place to live, but that there was also still reason for pause.  Brazilian labor legislation favors hiring locals over foreigners, and the lengthy process of obtaining a work visa can surprise even the most accomplished of expats;  the process of starting a new business or forming a legal entity can be equally complex for even those already skilled in navigating Brazil’s bureaucratic systems and “developing” infrastructure; and then even if those hurdles are overcome, you still have the same challenge as every other manager in Brazil: attracting, developing and retaining talent.

Forbes Blog: Brazil Created More Jobs Than US in 2011
Yahoo News:
Goldman-Samba? Bank Ups Brazilian Presence
Brazil’s Boom Needs Talent
Bloomberg: Siemens Plans to Expand Market Share in Emerging Economies
NY Times: Foreigners Follow Money to Booming Brazil, Land of $35 Martini
Reuters: Brazil labor market still tight, stoking inflation

Building Credibility: Establishing Yourself in a New Job or in a New Market

2009 - August, Tokyo-071-106I was honored today to present to a large group of Microsoft’s recent college hires in the worldwide marketing organization on the topic of “establishing credibility.” As many of these new hires work in emerging market countries, it occurred to me that the humble advice I shared was not limited to them as individuals establishing themselves in a new job – it is perhaps equally relevant for companies working to establish themselves in a new country.

Why Credibility Matters
Trust and respect are essential elements in any relationship, and both qualities are earned – not given. When a new individual joins a team, the faster she earns the trust or respect of her colleagues, the faster that team will reach is potential; the same for a business entering or starting in a new country, the more effective that business – and its brand – are at building authentic relationships with customers and industry professionals, the more successful they will be at doing business locally.

1 – Build the Base with Facts
Build the base with facts, then you can earn the credibility to offer opinions. Recent college graduates, and indeed anyone starting a new job, both have a desire to impact and contribute from the start, but the challenge is often that they haven’t yet earned a sense of credibility from their peers or management.

While it is always important to have an opinion or a point of view, you don’t always need to lead with the opinion. There is often an opportunity to first share facts, for example: the product can do X, the market data says Y, a customer told me Z – all of those are undeniable certainties which can be offered in a meeting or discussion to hopefully enrich the topic at hand. Over time – whether it be during the course of the current meeting, or in future ones – by establishing yourself as a person who speaks facts, you essentially help others to assume any opinions or analysis you offer is equally grounded in facts, and thus is credible.

The same approach is true for businesses entering a new market – grounding product development or service offering assumptions in market facts and customer voices helps to attract investment and early employees; leading with facts helps to establish credibility that your business thesis is grounded in the realities and needs of the local market.

2 – Build a Plan; Execute Consistently
Taking the time to step back and build a plan before starting to execute can help elevate the outcome from good to great – and it can be a valuable step to ensure your effort joins the outcome in establishing credibility. Building a plan before you start working on a specific project helps to organize your own thoughts and ensure the strategy aligns with the tactics; sharing that plan enables you to set expectations with key stakeholders and solicit their feedback; communicating progress at regular internals demonstrate consistency; and ultimately delivering strong results all come together as the formula necessary to turn project management into credibility-building execution.

Having a plan is equally important for an individual in a professional (or personal) environment as it is for a business when planning entry or expansion into a new market.

3 – Build Relationships
Building relationships with other individuals and with the company or country where you work can help accelerate your commitment to build foundations necessary to establish credibility, and will help establish you for long-term success.

With individuals, these relationships at work are not only an essential part of enjoying the time you spend at work, they are an important element in being effective at work and in soliciting support and feedback from others around you.

It includes listening to what other have to say, responding to their thoughts or ideas in public or on email in an open, respectful and timely way, and truly seeking to connect in an authentic and genuine manner. This approach can also lead to positive endorsements from those individuals, perhaps even public opportunities to co-present or illustrate you are not alone in your initiative.

Building a relationship with a company or country is an important step in demonstrating your commitment to the broader good, and earning the credibility which follows. Having a relationship with a company means learning all you can about its culture, history and broader business context – and then putting it first when making decisions (ahead of yourself) in order to do what it what right for the broader organization.

I’ve found this situation is especially sensitive between inter-generational employees, whereby the stereotype would suggest a Gen Y employee might make a statement to a manger like “I want to take on this project, it is good for me” vs “I want to take on this project, even though I am busy, because it is the right thing for the company.” The subtle difference in both thought and positioning can go a long way in building credibility.

The same logic applies to a business: building relationships with your customers or industry professionals and with the local market where you seek to do business helps make your business a truly local one – and it helps build the local relevance and credibility ultimately necessary for long-term success.

Image: Aaron M. Painter

Building Broadband: Netflix is the Question, but Mobile is an Answer

brazilnetflix“Where’s my Netflix?” is the euphemism for broadband access around the world, implying that all countries are eager for both the access and services to take advantage; but universal access is the more important question, and increasingly mobile broadband capacity and mobile services seem to be a possible answer.  Netflix streaming movie service now occupies an average of over 30% of net traffic into US homes during peak evening hours, and while Americans and others in developed countries are watching films online, many emerging countries are still struggling with broadband access.

Access Itself as a Universal Human RightUNlogo
The United Nations has officially declared in June that internet access itself is a universal human right, yet it is a right many are still without.  The International Telecommunications Union, ITU, says that by the end of 2010, developing world Internet users accounted for 58% of the global total (1.2 billion), compared to 900 million in the developed world. Yet when compared to population, it means only one fifth of the developing world is online, compared to almost 75 percent in developed countries.

Broadband Availability is Subjective & Services Matter
There is a difference between technical availability and pervasive (i.e. affordable and widespread) availability of traditional fixed-line broadband.  Indeed, in my home town of Sao Paulo, people often point out that 10Mbps speed is available for purchase, at a relatively high price, but even if that type of availability was pervasive (which it certainly is not) such speed is of limited value since services (like Netflix) provide limited to non-existent availability outside US markets, and there are few local offerings to take advantage of fast broadband.  And, indeed, in countries like Brazil, access itself is still a core issue (despite previously-announced efforts under a “National Broadband Plan” to make 1Mbps affordable and more accessible).

clip_image001Too often the rationale for lack of broadband infrastructure investments is that there are not services which exist to take advantage of the capacity.  Even in the European Union, Neelie Kroes, EU Digital Agenda Commissioner, commented recently: “Netflix is the largest single source of internet traffic in North America. But we have no pan-European equivalent.”

Changing the Dialogue: Mobile Broadband is the Economic & Social Leap Forward
While it might not lead to the ability to stream movies into selected homes around the world, digital access is the key growth driver for much more than entertainment, and mobile broadband is increasingly the greatest opportunity for many countries without traditional infrastructure. A recent study by Bell Labs and the World Economic Forum’s Global Agenda Council (GAC), argued the “right combination of actions and investment can accelerate the economic impact of broad access to mobility by as much as 36 percent, measured in GDP.” Focused on the mobile landscape in countries like Bangladesh, Kenya and Venezuela, the report concluded there is a correlation between mobile penetration and the prosperity of emerging economies.

Earlier research by the World Bank calculated that every 10 percent increase in mobile penetration leads to 1 percent increase in GDP in low-medium income economies. There is a “strong link between increased telecommunications penetration and faster economic and social development,” and mobile communications in particular opens up “groundbreaking opportunities to transform industries and improve living conditions in developing countries,” the organizations noted in their report.image

Mobile operator Vodafone claims that many emerging economies are investing unnecessarily in fixed line broadband networks, when they should be focusing instead on extending the reach and capability of mobile networks.  In its 2011 Social Impact of Mobiles (SIM) report, Vodafone warns that the current level of investment in fiber optic networks in emerging markets is unsustainable, mainly due to the cost of deployment in rural areas.

Mobile Penetration is Not the Same as Mobile Broadband Penetration
Much of the world has a mobile phone, or is quickly getting one. Statistics from the ITU reveal that over one hundred countries in the world have passed 100 percent in mobile penetration, Eastern Europe is said to be counting about 126.6 percent mobile penetration at the end of 2010; Western Europe also is said to be trailing with 118 percent penetration; Asia Pacific region itself is at about 68.6 percent as of the last quarter of 2010; ITU LogoNorth and Southern Americas are also said to be fast approaching saturation; yet Africa is one of the few continents with vast untapped potential with mobile mobile cellular penetration closing at 41.4% in 2010.

Mobile broadband is growing, and nearly equal to fixed broadband reach today. The ITU says that there were as many fixed broadband subscriptions in the developing world in 2010 (253 million) as there were in the developed world in 2008 (251 million) – although around half of the developing market capacity is in China alone.  At the same time, there are now more mobile broadband subscriptions in the developing world in 2010 (309 million), than there were in the entire world in 2007 (307 million).

Barriers Exist Even for Mobile Broadband
Infrastructure and applications must be developed in tandem – just like the traditional broadband model. Infrastructure is key to accelerating the provision of universal and ubiquitous mobile access, and adoption of mobile services is hampered by a lack of applications, or a lack of apps which appealed to niche segments of underserved populations, thereby proving compelling or useful enough to appeal broadly across the urban and rural populations. One effective example is Mamakiba, a mobile app which aims to help Bangladeshi expectant mothers with irregular incomes, save and prepare the costs of prenatal care and childbirth. Affordability is also the obvious, and critical, element to enable widespread adoption across income levels.

Government Can Help Create Both Access & Services
Government in many countries have proven effective at creating the pervasive availability of fixed line broadband, and linked it with a plan for services and industry growth. Estonia is a fascinating case in the implementation of a comprehensive government strategy to do exactly this: grow broadband penetration, while simultaneously encouraging the growth of various e-commerce, e-government, e-education, e-health and other services to take advantage of the broadband capacity. High broadband usage in Estonia has helped to ensure a high potential online audience, which is in turn stimulating the development of broadband services from various sectors of the economy. Countries like Malaysia are also following similar approaches, building holistic plans with ICT at the center.

Should Governments Bet on Fixed or Mobile Broadband Infrastructure?
Any government who sees the Internet only as a “luxury” in the twenty-first century has failed to see the enormous potential of ICT as key lever of economic and social growth, as well as national competiveness; the governments who most recognize it are the ones building comprehensive plans to ensure both universal access and local services / local businesses to take advantage of the infrastructure – mobile is best for some, fixed line is best for others, and perhaps for many it is a combination of the both.

FastCompany: “Netflix Owns The Evening Web”
Research and Markets:
“Estonia – Digital Economy and Broadband Market – Overview, Statistics and Forecasts”
IT Decisions:
“Brazil internet plans dwarfed by South Korea”
Penn Olson: “
Malaysia Announces Digital Masterplan For The Next Decade
ZDNet Asia:
Study: Mobile access lifts emerging markets
LA Times: United Nations report: Internet access is a human right
eWeek Europe: Vodafone Warns Against Excessive Fibre Investment
iAfrica: “Where’s our Netflix?”
Photo by Alicia Nijdam licensed under Creative Commons

The Patient, Adventurous (and increasingly wealthy) Brazilian Tourist

We’ve just finished a four-day long weekend in Brazil, and most people I know locally are either on trip to the US, returning from one, or planning for one. Flights everywhere for the holiday weekend were anecdotally either sold out or extraordinarily expensive. No matter where in the world I travel these days, I seem to meet Brazilians – whether it is in line at a Starbucks in New York, or on a safari in east Africa. A friend in Miami recently shared a story of being in an hot new restaurant when a group of Brazilians arrived, ordering the most expensive bottles of wine and bringing a healthy amount of laughter and fun to the entire restaurant. It’s clear that as markets like Brazil continue to experience rapid economic growth, Brazilians tourists will increasingly be seen in the US and around the world.

Truth in Numbers: Brazilian Tourists are Big Spenders
According to Brazil’s Central Bank, Brazilian tourists spend an average of USD $43.3 million a day in countries around the world, outside of Brazil; spending USD $1.4 billion this April alone, up 83% from the same period last year. In 2010, 1.2 million Brazilians visited the United States, injecting USD $5.9 billion into the US economy.

Travel to the US is Not as Easy as it Could be – but Brazilians are Going Anyway
Ironically, despite the positive economic benefits of increased tourism to the US, it is far from easy for most Brazilians to have the opportunity. As Brazil is not one of the 36 countries currently on the US Visa Waiver List, all Brazilian citizens must apply for – and receive – a visa before entering the US. This wait time to process these visa applications can be as high as 141 days, according to the US Travel Association, despite claims by the US State Department that the average international wait time is 30 days. Purportedly, the consular staff in São Paulo is currently processing an average of 2,300 visas every day, more than any other US consulate in the world – and they are hoping to double their production levels by next year just to keep pace with demand.

Brazil now represents the fastest-growing non-immigrant visa demand in the world, up 234% over the past five years, eclipsing even China’s 124% increase in US visa issuances, according to the US State Department.

Many Reasons to Go Abroad…
There are many reasons to explain this influx in US tourism, specifically, and many more reasons to help explain why it will likely continue: Brazil’s GDP continues to grow, the Brazilian Real currency continues to gain strength on the dollar, and taxes/tariffs continue to make imported goods sold locally significantly more expensive than the same item if it was purchased outside of Brazil or substituted for a local alternative. All of this, of course, is in the context of established travel routes, cultural connections, expanding infrastructure for upcoming Big Events, the growth of English as a second or third language, and increasing foreign investments (both ways) enabling more business trips to be combined or followed-up with personal vacations. Job growth also continues to grow steadily in Brazil, enabling more opportunities for Brazilians to travel and explore.

Opportunities in Travel & Tourism
As this trend is likely to continue, there is significant opportunity to attract Brazilian tourists and provide services all along the tourism value chain. Time Magazine recently mentioned that even exclusive ski resorts in Vermont are trying to hire Portuguese-speaking ski instructors to meet the growing demand: "Brazil is our fastest growing international market — up 20% from last season," says Chris Belanger of Stowe Mountain Resort.

Time Magazine: Let Them In: How Brazilians Could Help the U.S. Economy
Photo: Passengers check the information at monitors in the departure terminal of the Tom Jobim International airport in Rio de Janeiro on April 19, 2010.  Vanderlei Almeida / AFP / Getty Images

Women are Building Today’s Growth Markets

The Chinese proverb that “women hold up half the sky” has often been considered more aspiration than fact, in developed and developing countries alike, with persistent gender gaps in education, health, work, wages and political participation. However, with increasing focus on the growth in emerging market economies, one intriguing fact remains less discussed than most: woman are increasingly the driving human force behind the start-ups and business growth culture.

50% of Brazil’s Entrepreneurs are Womenimage
Dell, in partnership with Ernst & Young, recently hosted a Women’s Entrepreneur Networking Event in Rio de Janeiro to recognize the significant female influence in business and technology. In conjunction with that event, they shared data concluding that more than 50% of Brazil’s entrepreneurs are women, and 15% of the population has their own business. As a nation, Brazil is now led by its first woman President, Dilma Rousseff, and has made its way onto the world stage in the last decade, currently as the world’s 7th largest economy.  By appointing women this month to two key ministries, Rousseff has also nearly met her goal of having 30 percent of women in her cabinet, and is putting women in predominant roles at the Planalto Palace, the seat of government.

Latin American Startups
This spirit is not limited to Brazil: NextWeb recently did a fantastic summary of 10 Latin American start-ups currently led by women entrepreneurs, featuring impressive leaders from across the continent building businesses in a variety of industries – it’s worth a detailed read.

10,000 Women are Only the Beginning
image10,000 Women is a five-year citizenship program, with supporting investments, by Goldman Sachs (which began in March 2008) to provide 10,000 underserved women around the world with a business and management education. The strategy was to partner with a broad network of more than 70 academic and non-profit partners to develop locally relevant coursework; investing in women is considered one of the most effective ways to reduce inequality and facilitate inclusive economic growth, and investing in education for women has a significant multiplier effect, leading to more productive workers, healthier and better-educated families, and ultimately to more prosperous communities. Within their first 18 months, the program was already active in more than 20 countries, including: Afghanistan, Brazil, China, Egypt, India, Rwanda & Turkey – as well as developed countries like the US and Japan.

Turkey Shows Education & Community Building Can Work
In countries like Turkey, this initiative has itself helped to foster female entrepreneurship.  Founded by one of Turkey’s most successful entrepreneurs, an academic program at Ozyegin University is now extending its message about the value of enterprise to women – one at a time.  In the first year, they accepted 27 women who were aspiring entrepreneurs, six of whom went on start their own business.  In the second year, they focused more on accepting women into the program who had already established businesses and would benefit from the business education to help take their business to the next level.  In their most recent year, 73 graduates were accepted over three cohorts, and in just the first cohort the women had 72% growth in revenues and 72% growth in employee numbers – hiring 87 new people.  Ozyegin’s program suggests this is proof that supporting women will be a solution for Turkey’s challenges, like unemployment.

It Takes an Industry
Technology remains a prime industry opportunity for female business leaders, given the rapid worldwide industry growth and comparatively low start-up costs, and strong support from large industry leaders.  Companies like Microsoft, for example, continue to place a great focus on attracting female talent, and helping to develop strong local communities of female leaders. As the result of a recent internal Microsoft contest to promote the next generation of innovators, one employee from Tunisia shared this video of the work she is leading to help transforms students’ ideas into real business solutions, through the Microsoft Innovation Centre in Tunisia.  Facebook’s COO, Sheryl Sandberg, is also a vocal advocate in this space, and recently delivered a fantastic TED Talk on “Why we have too few women leaders,” offering practical advice to men and women alike to ensure they stay focused on having an impact in life and the world.

Knowledge@Wharton: Tackling Unemployment in Turkey: Ozyegin University Nurtures Women Entrepreneurs

Facebook’s Emerging Market Boom: Now 5 of its Top 10 Markets

FacebookWhile there is ongoing media debate around if Facebook’s active user base is shrinking in select developed markets, there is one clear fact in the data: Facebook continues to experience rapid growth in the emerging markets.

Worldwide, Facebook gained 11.8 million new users last month – more than offsetting any potential losses – taking its global user base to 687 million people. In Turkey and India, Facebook has more than 25 million users each – and Indonesia, with 37.9 million users, makes it second only to the US. A recent report by the Dubai School of Government estimates that 50% of the UAE population is now using Facebook – with countries like Bahrain (36%) and Qatar (30%) also seeing significant penetration.

Facebook in Brazil
Brazil is leading the way in this recent growth wave, more than 10% in May, bringing Brazil’s user base to 19 million. Only a few months ago, both Brazil and India remained two of the largest opportunity countries yet to experience rapid adoption of Facebook, due mainly to the popularity of Google’s Orkut social networking service, but Facebook recently began to take active share from Orkut in India, and Brazil is now following close behind in adoption.

China remains the single largest opportunity, and one of the hardest for Facebook to penetrate, due to a variety of factors which deserve more focused analysis.

Local Product Functionality Continues to Expand
Facebook’s payment system will be available in an additional 13 countries across Latin America and Asia in July, enabling the "Facebook Credits" virtual currency system inside all games on the social network to make payouts directly into developer bank accounts. In a similar way to Apple’s iTunes, Facebook keeps 30 percent of the revenues and shares 70 percent with developers. Additional countries with payment support include: Japan, Korea, Philippines, Indonesia, Malaysia, Vietnam, Singapore, Brazil, Argentina, Chile and Mexico – with support for a total of 15 currencies.

Implications to Profitability & Product Development
The implications of emerging market online user growth are significant to a business model and web site originally created for developed markets. Online services must continue to monetize these user bases through the expansion of advertising and paid offerings at a rate ideally equal to the user growth, as the costs for an online service to deal with web traffic and things like photo hosting all continue to increase operating costs. Furthermore, as access in these markets increasingly comes from mobile devices – many of which might be basic feature or early-generation smartphones, the user experience and product development implications require increased consideration in order to provide for the demands of the same users who might be accessing from full PCs or more advanced smartphones.

NZ Herald: Facebook’s billion-user drive could hit China’s web wall
WSJ: Facebook Credits Goes Global With Additional Support in 13 Countries
Dubai Chronicle: 50% of UAE Population on Facebook
Inside Facebook: Facebook Sees Big Traffic Drops in US and Canada as It Nears 700 Million Users Worldwide

International Hotels Bet on Emerging Markets for Growth

The growth of emerging markets means more visitors – both to and from – and that means an opportunity for the travel and tourism industry.

All top 5 US-based Hotel CEOs expect to see their future growth come from China and other emerging markets, including: Hilton, Starwood, Four Seasons, Intercontinental & Loews. During a panel on Monday at the New York University International Hospitality Industry Investment Conference, the CEOs of these respective companies all agreed that emerging markets represent the largest potential.

Building New Hotels Where the Opportunity Is
More than 180,000 rooms are being built in Asia, or nearly three times as many as are under development in North America, said Mark Lommano, CEO of Smith Travel Research this week. Marriott said Monday that approximately 34 of the 50 new hotels and resorts it plans to open over the next four years will be based outside of US and Europe (they have about 500 properties today). Of the 34, about 25 will be in APAC (including China, Thailand and India), 9 in the Middle East or Africa (including Rwanda, Saudi Arabia and the United Arab Emirates). Separately, Starwood announced that it would open 90 new hotels in China alone, by approximately the end of 2011 – or the opening of one hotel every two weeks.

Booking Visitors, To and From: Priceline Sees Emerging Growing Market OpportunitiesPriceline
Priceline, the US-based online travel company which pioneered the “name your price” approach is travel bookings is following this trend, planning increased expansion into Thailand, Singapore, Malaysia and Brazil; and possibly China. Today they operate with a Thailand-based site,, and also a British based one,, both of which saw a combined 71% increase in international gross bookings – to USD 3.5 billion – vs just 15% growth in US booking to USD 1.3 billion. These numbers reflect two sides of a trend: online booking growth in certain markets is growing, as well as the desirability of certain travel destinations – and Priceline is able to take advantage of both, as they did by recently adjusting their featured travel destinations to Asia, and promoting it their own site in the UK.

Limits Exist
Despite the aggressive growth aspirations, and the obvious interest from travelers as their curiosity outpaces the sense of caution they might have once previously had, limits likely exist in individual markets as the infrastructure to support this growth in tourism must grow at a pace equal to the demand. “It’s time we understood that the challenge of building world-class infrastructure to match the world-class destinations extends way beyond any single stakeholder,” said Jonathan Tisch, CEO of Loews Hotels at the event on Monday. As an example, in anecdotal evidence, it remains extremely difficult to reserve hotel rooms across Brazil today – and especially in Sao Paulo – as today’s infrastructure simply does not match the demand of being a “world-class destination.”

Personal Prediction: People & Planning Matter Most
Two key factors will determine how and which companies capture the growth opportunities in the emerging market hotel space: people and planning. Will management teams leading these large international hotels develop the “global fluency” necessary to be successful, and will they be able to hire and train the right local talent to maintain the high standards their brands demand? Secondly, will local governments develop the right policies and build sufficient infrastructure to encourage hotel development at the right pace? Without proper planning on behalf of government and business, a potential risk appears that some markets will end up with oversupply, while others have more demand than they can handle – or equally bad – limit their growth potential by not having either.


As Starwood’s CEO, Frits van Paasschen, this week set off on a 1-month trip to China with his entire Senior Leadership Team (and is blogging about it), there is reason to believe that at least some companies understand what matters most.

GlobeSt: Hotel CEOs Check In, Like the View
PR-Inside: Hospitality Opportunities In The Emerging Markets
Investors: Priceline Stepping Up In Emerging Markets
Hotel News Now: NYU: Data shows recovery takes hold in all metrics
AP: Marriott plans 50 new hotels, with focus on China
Travel Daily News: Starwood Hotels relocates global headquarters to China
Huffington Post: Frits van Paasschen, Shanghai or Bust
Starwood’s First Hotel in China, 1985, Sheraton Great Wall Beijing

Emerging Market Hedge Funds Reach a Record High in Asset Levels

imageThe evidence is clear: Investors continue to bet on emerging market growth.

Assets managed by hedge funds focused on emerging market investments rose to more than $121 billion in the first quarter of 2011, surpassing the previous record of $117 billion set in 2007, according to a report released by industry tracker Hedge Fund Research last Friday. "Emerging Asia," and Russia lead regional asset increases; followed by Latin America – all which helped offset Middle East weaknesses in Q1.

Separately, Citigroup says Emerging Market Equity Funds, which typically see more volatility than hedge funds, attracted about $820 million in the week ended June 1, snapping two consecutive weeks of outflows.

Hedge Fund Research: HFR Emerging Markets Hedge Fund Industry Report: Q1 2011
Hedge Fund Research: Capital in Emerging Markets Hedge Funds Reaches Record Level
Bloomberg: Emerging Equity Funds Post First Weekly Inflows in Three, Citigroup Says