Media disruption in India -- what does it take to succeed?


We covered key trends driving adoption of digital content in Part 1 (read here). In this concluding part, we drill into the India digital content startup landscape and outline key challenges and opportunities that new-age digital media companies need to navigate.

Globally, over $3B has been ploughed into digital media startups since 2015 (CB Insights data). In India, 200+ digital media startups have attracted about $180M in venture funding since 2013 and there has been a significant acceleration in activity over the past two years with over 80 more startups setting up shop.

There are two points to keep in mind when looking at this data. First, digital media companies are fairly cash efficient and do not need hundreds of millions of dollars upfront to gain significant traction. Second, until 18-24 months ago, many of the drivers we have discussed – smartphone penetration, 3G/4G access at affordable rates, and brand budgets/spend had not yet gained momentum. The inflection point is much closer now and this is reflected in investor interest and funding.


We find it instructive to look at the space across two fundamental dimensions – distribution and content ownership. The X-axis represents content ownership, ranging from a pure aggregation of third party content to content creators who focus on unique content in formats tailored for their target audience. The Y-axis represents the distribution choices for this content, ranging from third-party platforms to direct distribution.

To be successful, a startup or newco needs to be very clear on its strategic choices leading to a spot on the quadrant. For illustrative purposes, we have slotted a few companies based on our view of where they fit. Please note that this is not an exhaustive list and is purely representative – the companies chosen are random and we have not optimised for specific spots within a quadrant (don’t want hate mail from anyone!). But if you feel we are off the mark here, we would love to hear from you and learn what we missed.

Original content creators with third party distribution

The companies in the top right box have chosen to create and own content while leveraging third party distribution platforms. The advantages are immediate access to hundreds of millions of users and a focus on the core competency of producing highly engaging and sticky content. There are several successful third party models globally, including Buzz Feed, Refinery 29, and Vice Media with multi-billion dollar valuations.

Success in this quadrant can be via horizontal platforms – large scale, ability to continuously produce relevant content, and demonstrated reach to a mass youth audience. Alternatively, it could be via dominance of a specific category that appeals to brands and agencies.

In India, representative companies include Scoop Whoop (horizontal news and entertainment) and AIB (youth video) as well as vertical focused startups such as Popxo (women) and YourStory (startups and small business).

Content, especially video, is a key focus area for social platforms. In India, Facebook and YouTube currently dominate, with messaging platforms such as Whatsapp and Hike likely to make a successful push as well. Reliance on a third party that can influence demand is a concern.

However, most social platforms are not in the content production business and need engaging content that appeals to their users. So, it's likely to remain a symbiotic relationship. Eventually, startups in this quadrant are likely to leverage audience loyalty to build some direct distribution and also diversify their third party distribution across multiple platforms.

Content aggregators with third party distribution

The companies in the top left quadrant have chosen to aggregate content and distribute via third parties. With the democratisation of content production and low unit costs, there has been an explosion of “celebrity” content creators on platforms such as YouTube. Many of these creators have millions of followers and work with MCNs (Multi-Channel Networks). The MCNs provide support for content creation, analytics, and distribution via third party providers. Culture Machine, OML, and Qyuki are examples of MCN or creator platforms with success in India.

Content creators and aggregators with direct distribution

Firms in the bottom half are focused on distributing content (original or sourced) via their own platforms. The challenges here are in attracting users to a new platform and away from third-party social giants such as a Facebook and YouTube. User acquisition and retention in India is an expensive effort especially with the 18-25 youth demographic.

On the flip side, the firms that cross this chasm are likely to have a lot more visibility and data on their audience that translates into better monetisation programs. There is a competitive advantage in building scalable and proprietary distribution platforms that work well in the context of India constraints such as slower download speeds. Companies like DailyHunt (broad-based vernacular news), Magzter (global digital magazine destination), Saavan and Gaana (music streaming), and Hotstar and YuppTV (video content) fall in this category.

It is interesting to note that large players are trying to straddle both distribution and content creation. Netflix, for example, started out aggregating and distributing movie content. They have since moved into original content production and now have several award-winning shows under their belt.

In India, Hotstar and TVF started out with their own content but now distribute third-party content as well. Given the need to acquire, retain, and monetise a large user base, we see most large players adopt a hybrid strategy of producing original content and distributing third party productions as well.

Adjacent areas

Not all areas fit neatly into the grid. One such emerging trend is user generated content (UGC). It’s early days still but the success of Medium and other UGC platforms is indicative of the potential in this area. In India, these platforms will likely need to be multi-lingual and broad-based in terms of content to get traction at scale. Startups pursuing analytical tools and solutions have a legitimate opportunity since tech platforms are needed for traditional and new-age content players to demonstrate value. Some examples are Shopalyst (content commerce for brands), Vidooly (digital video analytics), and Zapr media (TV analytics and cross-platform advertising).

What does it take to build a successful digital content business in India?

 In our view, there are three areas that digital content startups in India need to focus on:

  • New formats and ROI measurement
  • Selling to brands and agencies
  • Monetisation – show me the money

New formats and ROI measurement

As digital ad spend in India moves towards 25 percent of the total over the next five years, there will be a growing need for digital content players to improve ad formats. Currently, 90 percent of ad spend in India goes toward brand marketing. Top spenders in CPG, automobile, retail, telecom, and financial services spend most of their advertisement dollars on brand campaigns. Digital today is primarily viewed as a performance marketing medium.

Traditional TV ads are also expensive to produce. The opportunity for digital content startups lies in creating high-quality native video designed for online consumption at a fraction of the cost of a TV ad. This has been proven by companies like Buzz Feed and Vice Media and increasingly, in India, by startups such as Scoop Whoop.

The biggest challenge for digital content providers of any kind is to prove ROI. Digital vendors ranging from Google, Facebook to small startups do a great job of providing audience interaction metrics – likes, shares, clicks, etc. However, for a brand marketer, this is only a piece of the puzzle. Digital content providers have to go beyond to establish a correlation between the ad, the audience, and impact on the brand in terms of recall and intent.

Over the decades, the TV ecosystem has developed ways to show brand recall and impact through industry neutral metrics (TV ratings) and post ad survey measurements. Even digital giants like Facebook and Google are just beginning to find ways to close this loop to the satisfaction of large marketers. Smaller startups also have to go beyond simple engagement metrics to providing more in-depth analytics and visibility into ad ROI.

Video will play a big role in attracting brand marketing dollars to digital. Pre-roll ads (before the video plays) and mid-roll ads (during the video run) already exist on YouTube and should soon appear on most social networks. For brands, this is an easier format to embrace as it’s a lot closer to TV. However, their initial foray into this space by simply duplicating a TV ad online as a pre-roll or mid-roll ad has not been as effective. Native video ads – where ads are created specifically for the medium, audience, and a particular device - have shown better results and are expected to become the format of choice.

Selling to brands and agencies

Who is the customer? The end consumer or brands/agencies? For a resource challenged young startup, a lot of time and energy is devoted to building a great technology platform, unique, and sticky content, and a fantastic consumer experience. Where they often trip up is in assembling the right sales organisation. Unless it’s an ad-free consumer subscription model, this is a B2B sales challenge.

Startups are fighting dozens of traditional (print, TV, radio) and digital providers, as well as the Google and Facebook sales machines, for a share of an annual brand budget. Strong sales teams can make a significant difference in their ability to position, compete, and grab a disproportionate share of these budgets. Learning to work with agencies is also an area of development. Most digital content startups seem satisfied with selling piecemeal campaigns with the hope of broadening engagement over time.

For agencies and brands in India, digital is still an evangelical sale. The onus is on the new-age vendor to sketch out a roadmap of change. They need to be educating agencies, and even brands, on the possibilities with their platform and back this up with unique audience categories, insightful analytics, ROI, and brand impact measurement.

Monetisaton - show me the money

Monetisation success for a digital media startup is a function of owning a large target audience, technology driven targeting and measurement, and efficient content production. Few startups in India have achieved best in class levels in all three. We see strong content teams needing to significantly shore up their technology to enable better analytics, targeting, and measurement. Conversely, we also see strong digital technology platforms with limited ability to produce content capable of generating largescale audience stickiness and loyalty. All three elements need to be in place to drive meaningful monetisation.

India has some of the lowest digital ad rates in the world. eCPM for banner and video ads are a fraction of what you see in the West. For example, YouTube eCPM in India is around $3 for a given type of video versus $9 -12 in the US. In the native ad space, the difference is even more stark. Buzzfeed reportedly charges $30-40K+ per article for native ad content. In India, this is currently around $3-4K for large publishers.

Pricing should improve significantly in India but is unlikely to approach US levels. As a result, very high volumes will be required to offset lower rates. As discussed in Part 1, while these volumes are likely, startups have to build the technology and efficiencies to harness a high volume and low price point environment.

Currently, there are two broad avenues to monetisation. Free content that is ad supported and subscription-based content available without ads. Native text and native video ads seem to have reasonable pricing power. Many audio and video content providers in India are finding hybrid approaches where a portion of the content is free (ad supported) and the consumer can upgrade to a subscription service to access more exclusive content. Startups have to build scale either across categories (entertainment, news, sports), regional content and vernacular, or horizontal distribution platforms.

Parting thoughts

The next five years should bring a massive change to the Indian media industry. Change favours tech-centric new media, but incumbents are likely to make aggressive moves to broaden their portfolios and connect with an entire generation of youth in their audience. We expect to see significant M&A activity across categories and a few breakout startups forge ahead in the quest to build a new generation of media companies.


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