Thoughts on monetisation for content-led businesses, and key takeaways for the coming years

By Aditya Misra, Badri Pillapakkam & Siddharth Nautiyal
April 29, 2019, Updated on : Thu Apr 08 2021 08:40:30 GMT+0000
Thoughts on monetisation for content-led businesses, and key takeaways for the coming years
As the Next Half Billion readies itself to consume content online, here is a snapshot of what works for content-led businesses in the Indian context, and what can be expected in the coming years.
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Today, India has two Indian-language internet users for every user who prefers English. This difference is expected to grow starker as 90 percent of the Next Half Billion (NHB) users who come online over the next five years are expected to be Indian-language users. This pace will likely accelerate as data costs reduce further because of aggressive expansion by players like Jio and better access to Wi-Fi solutions, as provided by companies like i2e1.

The NHB user is clearly thirsting for local-language content: Indian-language searches on are growing 10x faster than English-language searches. However, there is still very limited local-language and contextual content available on the internet.

Over the last 24 months, several exciting companies have attempted to bridge the gap and increasingly leverage Indian language content to power massive user acquisition and engagement. This has triggered fundamental shifts in the Indian startup ecosystem. With India’s per-user digital monetisation potential still much lower than the developed markets and China, content has proven to be an extremely effective tool for digital businesses to re-engage their existing user base and lower their Customer Acquisition Costs (CAC), which is almost a must to provide line of sight to a healthy bottom-line in the long term.

As investors, we have been early and firm believers in the potential of content-led models to inform, engage and help the NHB smartphone users build trust with the digital medium and begin exploring more mature use cases such as ecommerce, healthcare, education, and travel, among others.

While transaction models are generally well understood (evolution of offline purchasing behaviours into online), very few examples exist of large incumbent digital content businesses, making it difficult to estimate the monetisation potential of upcoming startups. Please note that for this piece, we have kept OTT platforms out-of-scope. With the nature of content expected to increasingly move towards video from text and images (driven by higher CPMs), resulting in larger production and hosting expenditure, we think it would require companies to start thinking about monetisation models sooner rather than later.

Before we dive into each of them, provided below is a pictorial representation of Omidyar Network India’s investments bucketed under current/potential business models:

Categories of our content-led portfolio

Monetisation models for content-led businesses

●      Advertising

The most mature and widely understood revenue model for digital companies, with significant tailwinds in the Indian context.

India’s digital advertising market is pegged at approximately $2 billion and expected to grow at 30 percent+ per annum over the next few years.

Even though Facebook and Google have 70 percent market share, this is the first time that platforms with potential to grow to significant scale have emerged. These new platforms could pose a considerable challenge to the incumbents by becoming appealing partners for brands, with their NHB and vertical (like news) focus.

As the size of the digital advertising pie increases to $8 billion to $10 billion over the next 4-5 years, we envisage scope for the creation of several multi-hundred-million-dollar ad-driven revenue businesses. In the short term, companies like Dailyhunt in PGC/PUGC (Professionally Generated Content/ Professional-User Generated Content), and Sharechat in UGC (User Generated Content) seem best positioned to leverage their scale, brand partnerships and capabilities with personalisation to capture a significant chunk of the market from large incumbents. 

●      Content licensing

While several Indian UGC platforms have emerged, few have demonstrated network effect and engagement as high as Pratilipi. Pratilipi’s text-based content (books/stories/novels) created on the platform intrinsically has lasting value and long shelf life, driving continued high engagement. We are encouraged by what we see globally: stories are increasingly becoming global and, in our view, the race for content acquisition will only hot up over time, especially in the Indian context.

Companies like China Literature and Wattpad have demonstrated content/IP monetisation potential in China and North America while in India, Pratilipi is well poised to capture the market. As an example of potential, from adaptations of just 60 literary works (out of a total repository of eight million+), China Literature has produced and licensed films that have grossed upwards of $200 million+ in collections, TV series that have crossed one billion+ views and games that turn in over $20 million+ in revenues. There are a bunch of exciting audio UGC/PGC companies like Khabri, Dose FM, KukuFM, and Headfone that could unlock value through this model as well.

●      Network driven/social commerce

Within commerce, the last five years were all about rapid growth witnessed by ecommerce 1.0 models (pull based/search-led marketplaces/full stack models) – however, there are early indicators of demand saturation for this model at 50 million - 70 million users. We think the time is ripe for ecommerce 2.0 to emerge that will be Indian-language-first, highly social and push-based ie, offer a curated set of products versus endless aisle, lower AOV (Average Order Value) with high repeats, and centred around helping consumers extract value versus merely the convenience of current online commerce.

Our research on global models yielded a few categories that lend themselves naturally to strong community creation and subsequent social commerce. Healofy, with its vision to create India’s largest women-focused social network, have had the Content -> Community -> Commerce strategy from day one. They started their journey with relatable and credible content tailored towards women, and their best-in-class engagement and retention metrics reflect the strong community they have created.

With their evolution to a full-fledged network underway, we expect them to start experimenting with several interesting network-led commerce models in due course. Healofy’s ambition is to recreate the success of women-centric platforms like Pinterest in North America, and Little Red Book and Mogu in China. Back home in India, Zomato is one of the best Indian examples of a company leveraging content and community to drive monetisation, and we are certain there will be plenty to follow.

●      Full-stack commerce

In sectors like healthcare, education, and travel, where despite high intent, relatively ‘large’ transaction values lead to lower digital conversion funnels, content can be used to fuel a low-CAC engine. Online diagnostics and pharmacy player 1MG has effectively used local language content on medicines, tests, and surgeries to build one of the largest online healthcare businesses in the country.

Similarly, MyUpchar is building a trusted full-stack health platform in Tier II and III towns and cities by acquiring users through indigenous healthcare content, including popular local home remedies. As an illustration of the reach of this model, one in 10 residents of Lucknow district, which has a population of six million, logs on to MyUpchar every month. Edtech player Vedantu has effectively leveraged content to cross 10 million MAUs (Monthly Active Users) across platforms and demonstrated significant conversions for their online live-learning packages.

RailYatri used information on trains and buses to execute on its mission to become the ‘dominant OTA (Online Travel Agency) for Bharat’, while DoubtNut expanded its user base multi-fold after building a comprehensive math Q&A repository and are on course to launch various transaction models in online tutoring.

●      Subscription

While subscription adoption rates for OTT platforms are encouraging, we think subscription as a dominant monetisation model for content businesses might require a longer gestation time frame.

This is primarily driven by low Creative Commons licence penetration and easy availability of pirated content in India. As UPI and in-app payments (in mobile gaming, etc.) become more ubiquitous and higher quality NHB-focused content becomes prevalent, we expect this behaviour to change.

Our investment in The Ken was to target the digital natives (first wave of smartphone users), propagate a top-down push, establish sustainability of a subscription-driven model and pioneer high quality investigative business journalism.

●      Freemium/micro-payments

Like subscription, we expect this to contribute to a sizeable chunk of revenues over a longer time frame once digital transactions become commonplace for the NHB. Besides Pratilipi, we think exciting Q&A focused companies like Vokal, Bolo, bottom-up publishing players like Lokal, Lokal Play, as well as micro-blogging and discussion platforms like YourQuote and Manch could all be able to leverage this model for monetisation.

●      Brand marketing/engagement

Lastly, with vertical focused, content-led companies owning the acquisition, engagement and lifecycle of the user, large traditional enterprises will look to partner to tap into their knowhow of the customer base through monetisation of native content. This could vary from FMCG companies for the likes of Healofy to pharmaceutical players for the likes of MyUpchar and 1MG.

In due course, we expect ‘data insights led monetisation’ to become a possible revenue stream as well.

With tighter norms around privacy of user data, companies will need to move towards encrypted data, run data analyses through homomorphic encryption, and provide cluster-level insights for partner brands to understand and target the audience better. With users exercising greater control over their data, interesting customer-led monetisation models could also emerge.

Thinking points

Globally, UGC-led platforms like Facebook, YouTube, Instagram, among others, powered by technology to expertly curate and recommend in a personalised manner, have scaled and monetised rapidly. However, given the nascent stage of the industry in India and relatively lower quality of available local-language UGC content, especially videos, it might be imperative for companies to think about a mix of, professionally curated user generated content (PUGC), occupationally generated content (OGC), and UGC models in the near term.

Additionally, thinking about tools to elevate or expedite content creation could turn out to be massive moats in the long term. Quality of content has the potential to be as much as of a differentiator in the long term as depth, which is typically the strongest advantage in favor of UGC-led models.

India is usually categorised as a country with significant trust deficit where success of businesses, especially online platforms, often boils down to the pace at which they can establish credibility with their user base. While great impetus is placed on studying user consumption (‘demand’) patterns, startups could benefit from a similar focus on identifying and onboarding strategic key opinion leaders (KOLs)/influencers early in their journey to not just augment the quality of their content (‘supply’) but also to expedite creation of trust with their platform.

In cases where these influencers and KOLs are not easily accessible, affordable or obvious, startups will benefit from early identification, extensive hand-holding followed by targeted promotion to facilitate the creation of these platform-specific micro-celebrities.

Additionally, with governments around the world actively debating increased accountability from large social media platforms, effective employment of influencers and KOLs at the onset could help clearly define ‘brand purpose’ and indirectly facilitate regulation of the content being disseminated.

Lastly, Indian companies can benefit by being bolder about product innovation. While offering local-language content is a sound strategy and a great starting point, we think there is huge potential for structural changes on existing products to better serve their target audience. Chinese companies have produced countless such case studies in the last few years– from TikTok’s differentiated ‘product feed’ containing an endless stream of short videos (viz. the grid view for the user to choose a content piece of interest) to BiliBili’s ‘bullet screens’ with user comments sweeping across the screen to enrich interaction with the video content on the platform. Indian startups will need to leverage key user insights to produce several game-changing innovations to further their competitive advantage.

Predictions and takeaways

As has transpired in other spaces in India, we expect ‘early winners’ to be well-positioned to attract downstream capital and consolidate their first-mover advantage while investor buoyancy towards early-stage (seed/series A) content-led businesses will return to normalcy in the short term.

As the founder of a content-led business, below are a few things to consider early in your journey:

●      Capital needed to reach significant scale such that you can start to monetise

●      Revenue model that best suits your company

●      Cost of content per daily average user (DAU) and the average revenue per user (ARPU) per DAU you can realistically expect

●      Amount users will be willing to pay for the content you are offering

●      The commercial skills available within your team

●      Brands most suited for your audience and setting up a direct sales team to target them

●      Required product and content changes to convert audience into a transacting user base

Looking ahead

Even though this is the lens we have applied to evaluate content-led businesses thus far, we are confident (and hopeful!) there will be many more India-specific innovative additions to this list. Board meetings of Indian content-led businesses over the last couple of years have understandably been dominated by conversations around growth, engagement, and retention. While those will continue to be important, the next 18-24 months should see those discussions evolve to talk a lot more about revenue models. We cannot wait!


(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.) 

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