Would You Pay $1 per month to use Quora?

This is a popular question on Quora, the Q&A website founded in June 2009 that has gone viral among the nerd dizzles. It’s a Wikipedia of sorts, only with information arranged in an a Question and Answer format.

The company has received $61m in funding till date, but there’s no evidence of any money being made by the Quora business model as yet. I’ll reserve that discussion for a later post. The company’s latest series B round assigned a $400m valuation on it.

Quora Funding

But would I pay a dollar every month to use Quora?

Here’s why it’s apparent that charging $12 p.a (which works out to ₹732 annually in India) isn’t a wise choice.

Indians currently, and for quite some time now, have formed the largest geographical chunk of Quora users. More reading on that: Quora: Has there been an influx of Indian users on Quora? and Indian overload: Much ado about the Quora conundrum

Information from Alexa Internet on user stats that I got as of 08/08/13:

In India the $ is pegged at ₹61 currently. Its GDP PPP Converstion Factor is at 21

The World Bank defines GDP PPP Conversion Factor as the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market, as the US$ would buy in the United States.

Meaning, what you buy in the US with $1, you buy in India with ₹21, in terms of purchasing power. Charging $1 every month would actually translate to charging Indians ₹61 instead. That’s 3x what an American needs to pay for the same stuff!

According to the CIA World Factbook, 2012(E) GDP PPP figures of the US and India are $50,700 and $3,900respectively, which means that the average American has 13x purchasing capacity as compared to the average Indian in their respective local markets.

So I’m suggesting that it’s over 39x unlikely that an Indian would pay $1 per American unlikely to pay $1.

Note that this is just back-of-the-envelope math on why $1 doesn’t seem like a good idea. The founders of Quora wouldn’t want such a thing knowing that Indians are a geographical majority here. I’m sure they’ll have better ideas. Of course, my assumption that such a move would be silly, is based on the premise that Quora would prefer a growing quality user base over revenue.

I can also see why Graeme Shimmin‘s answer to this question on Quora makes tremendous sense.

One might argue that you can’t equate The Indian Quora user’s GDP per capita to that of the nation’s GDP per capita — simply because Internet’s reach in India isn’t to the average Indian. Be that as it may, the Indian middle class’s spending amounts to anything between $8 and $40 per day [Page on Cgdev]. A simple average of $24 per day would mean PPP spending of $8,760, implying that the American has 5.8x purchasing capacity as compared to the middle-class Indian in their respective local markets. The truth is, that it could be anything between 5.8x and 13x.

So it’s still 17x to 40x unlikely that an Indian would pay $1 per American unlikely to pay $1. This is after all, just a rough look at the big picture

Altimeter Group – Leveraging on Disruption

[This post is the first in a series focusing on private companies I like to follow on Deals and Valuations]

altimeter-logo

Located in San Mateo (CA), and as a research firm focused on disruptive technology, Altimeter builds market strategy, provides product direction and offers guidance in go-to-market positioning, lead generation, licensing and pricing strategy.

The company does research reports, webinars, speeches and offers advisory to businesses to explore specific implications of disruptions within their organizations. They are undoubtedly bringing to the table a niche bundle of services, and since their founding in 2008 by Charlene Li (former VP at Forrester Research – another technology focused research and consulting firm), they’ve grown quite rapidly.

This isn’t your typical Silicon Valley company with a gang of nerds writing code. Each of their analysts have years of experience in deployment on the buyer side and as analysts in other firms. Have a look at their team here — I’ve always been a fan of Brian Solis and Jeremiah Owyang

Here’s a sample of the research that these guys dish out (these folks believe in open research, are transparent in their research process and release their reports under Creative Commons):

Some quick facts:

  • they have 23 employees – mostly industry analysts, researchers and operational staff
  • The Hangar – is what they call their HQ!
  • 12 of the 30 Dow Jones (DJIA) companies have been their clients; you can have a peek at a partial list of their customers here

Check out more of Altimer’s Open Research here.

Earnings Surprises

ThomsonOne is probably the most used source by analysts for earnings surprises. Or Thomson Reuters I/B/E/S. Or Zacks (I’ve never used it myself, though, so I would like to know whether it’s good).

For the uninitiated, let’s first throw light on what what these ‘surprises’ are.

Basically, brokerages come out with estimates on Companies’ quarterly / annual earnings – and when we average a set of these forecasts, we come to a figure that we call ‘consensus’. Now, when Companies posts their earnings, their numbers are either in line with consensus, or miss consensus (lower than expectations) or beat consensus (above the predicted figures).

An interesting piece of information I stumbled upon at Musings on Markets was spectacular – that just prior to Companies making earnings announcements, price movements tend to gain momentum in the direction of what should be the most obvious post-result movement.

Source: http://aswathdamodaran.blogspot.in/2012/07/earnings-surprises-price-reaction-and.html

Insider trading is a fact of life. Charts and numbers shout out loud.

Decoding Form D

Companies need to raise money. In doing so, Regulation D (RegD) needs to be complied with

…and hence the Form D. That’s it put simply.

How Investopedia explains it:

“Form D is also known as the Notice of Sale of Securities and is a requirement under Regulation D, Section 4(6) and/or the Uniform Limited Offering Exemption of the Securities Exchange Act of 1933.

This act, often referred to as the “truth in securities” law, requires that these registration forms, providing essential facts, are filed to disclose important information upon registration of a company’s securities. This helps the SEC achieve the objectives of this act – requiring investors to receive significant information regarding securities offered and prohibiting fraud in the sale of the offered securities.”

For a private company to sell securities — and in effect, meet its capital funding needs, it is required to disclose such information to the SEC, through a Form D document.

What does the document contain?

Information on the amount of money raised, its type (debt / equity), the industry category, names of executives and directors in the company (which gives an idea of parties that might be currently invested), and also the names of brokers/banks involved in the transaction, in which case, commission paid to them is also mentioned.

How can Form Ds prove useful to you and me?

Well, that would depend on whether you’re interested at all in tracking investments into startups and growth companies. If Form Ds are tracked real-time, you can come across valuable information before it comes out in the form of press releases. FormDs.com is one such useful website to track these documents real-time with n sorting options. Or you could stay hooked to Market Brief

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The best way to go about searching for Form Ds for companies, would be to look for the company you’re interested in here, and filter for Form D documents among filings.

Check out this sample Form D by Tesla Motors here

Related posts you’d surely find (more) interesting:

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