The recent Vodafone acquisition of Hutch Essar for $11 Billion has been garnering a tremendous amount of press globally. In India, the media has been heralding the size of the price tag as the price of a ticket to the Indian consumer market. In the West, the academic and management consultant skeptics suggest that the Eastern bubble is growing to unmanageable proportions with an impending correction as these valuations give way to margin compression and delayed infrastructure modernization, etc. The M&A bankers are test driving Lamborghinis with gold-plated shifter knobs.

With the emphasis on customer franchise size and lifetime valuation of customers, we are kind of seeing a bubble ala the Internet days, inasmuch as the distorted lifetime value numbers in the current context. Google is the only model that emerged with the lifetime economics even close to its original estimates, because its search became the start point of virtually every web session. However, given mobility’s inevitable centrality to emerging market Internet strategies (see NetCore CEO Rajesh Jain’s comments last October), should we be discounting the future Google + Verizon’s of the emerging global economy?

The question that does come up is how do these companies avoid commoditization and business model decay as it should happen even faster in markets with lower margins than the US and EU. One cans see the need to welcome true customer service providers such as banks and health services to the network in a strategically significant manner. Co-developed, innovative solutions that bring traditional services to a secure, mobile, customer centric platform can feed both heads of the beast, allowing further capitalization of the networks, allowing them to fulfill the dream valuations they have today.

Recently, I was chatting with a bank marketing manager about direct mail marketing and the ever-decreasing response rates and the increasing battle for that scrap of attention in apartment building lobbies and on the porches of the suburbs every morning. She was talking about tweaking a program to get up from 15 to 20 basis points of response. I imagined the 100 other marketing managers doing the same thing for this months mailing. The consumer finance industry sends 8 billion pieces of direct mail in the US with a response rate heading to 25 basis points.
Quick math shows that a fully loaded piece of normal direct mail (color and first class postage) will go to about 40 to 50 cents plus the list cost. That’s a $500 CPM people.
What banks should do: Be the first to kill off direct mail and go all electronic. You ask your customers to do it, so practice what you preach and it should pay off in the same way.