[Guest article by Vishal Gondal, founder of Indiagames. Vishal pretty much nails down the Internet strategy (or rather, the lack of it) of Indian media companies (we also shared a similar view earlier Indian Media still doesn’t get Twitter].
India has witnessed a tremendous growth in its media and entertainment business. In the past decade, we have seen the growth of billion dollar home grown media conglomerates like Network 18, Zee, UTV, Reliance ADA, Yash Raj, NDTV, Bennet & Colmen, and Hindustan Times to name a few. At the same time the foreign players too have done extremely well either directly like Star TV or via investments and partnerships with local players. Today Disney, Viacom, Turner, Sony, you name it and they have a large presence in the Media and entertainment business. When it comes to Television, Newspapers, Magazine, Sports, Movies, Theaters, DTH and entertaining over 700 million people in India, these companies rock.
Indian Media Companies Suck @Internet
However, one area where none of these companies have been able to make a dent is the Internet and New Media space. Leaving a few exceptions in most cases, Internet and New Media ventures of these companies have been a complete disaster. And it’s not that these companies have been not spending enough money or time on the space. I think in aggregate, all the Indian media companies put together over the last 5 years would have invested between $300-$500 million in the space but the result is, we have an online advertising market dominated by Google (over 60% market share), the mobile operators are taking away majority of the moola when it comes to VAS revenue, ecommerce is dominated by players like Ebay, jobs is Naukri, matrimonial is Shaadi, gaming is Indiagames 
, VAS is Onmobile to name a few. There are tons of examples like Makemytrip, Cleartrip, Hungama, Sulekha, Justdial, Rajshri, Rediff , Smsgupshup, who have dominated their respective sectors even though they had to compete head-on with competition with large media companies who had companies in the same space, with high capital, technology and ‘quality people’.
I wonder if these big media companies will ever understand the real reason for this situation and continue to fund their internet ventures by replacing the CEO with an even more expensive CEO who will rubbish all the past strategies and invest another $20m in marketing and brand repositioning
Having interacted with a number of such companies here is my take:
Large Media Companies STRONGLY believe:
- That they have the ability to create ICONIC brands with the help of their media power and it’s the BRAND which is everything.
- By hiring somebody from Google, Microsoft, Rediff, Yahoo, Facebook, ebay, or Amazon, to head their business they can build a business equally successful as these companies.
- By poaching an entire sales and creative team of a startup competitor by offering them triple the salary, they can overnight wipe out competition.
- By investing millions of dollars on server farms, high end technology from Microsoft, Complex CMS and video solutions, Oracle, SAP they can have a super competitive edge over a startup competitor who is mostly using (cheap) open source software.
- By offering something FREE over what a startup competitor is charging for they can kill competition.
- By Exclusive content, movie stars, prizes, tickets and every possible incentive they can make customers switch to their brand.
- Using their Television, News and other media vehicles they can create enough PR to create viral effect.
- They have piles of cash and unlimited resources over a startup who is constantly scavenging for funds and resources. That startup will DIE someday on its own.
- The value of these startups is very high because of the stupid VC investors in the company. Actually, these startups are worth a lot less and one day they will buy it for peanuts or hire the founders as their employees.
- They can always sell Internet and Online inventories as a bundle with their Television and Print inventories.
- ESOPS in their media companies are worth a lot more than STOCK in some arbit startup with no revenues and cash.
While the reality for Startup Internet and New Media ventures is quiet the reverse:
- Most startups were able to build brands with very little marketing spend but more on innovation and word of mouth on the strength of their product.
- Founders and core teams of startups are driven by ‘PASSION’ and not just ‘MONEY’. Hiring a CEO with a $200k package and saying he is passionate is quiet a joke. Most founders take huge salary cuts over their last jobs.
- Being low on resources actually drives startup teams to deliver a lot more as they now have to go the same distance with lesser cash. In fact, having too much cash is not good for an early stage business
- Open source solutions perform better, faster and have proven to be more stable than the expensive ones… a startup with no cash understands this and is forced to find the most cost effective solutions.
- Having VC’s investors who look at investments very objectively is a boon to startups. As they are able to spend a lot of time mentoring the startups and at the same time if the startup is going nowhere they are unemotional about this and can ‘pull the plug’ anytime. This is a big motivation/scare for a startup team, which once again drives them to perform. Over a media company startup where irrespective of the ‘division’ making or not making business plan the media company can never really pull the plug…since there is a lot more at stake, including stock market expectations, face etc.
- One of the worst things any startup can do is to hire some heavy hitter from a successful company like Google or Microsoft (unless he is willing to join at a huge discount to his salary with stock in the startup). The concept is simple when you are with Google, Facebook, Rediff and Microsoft you are not doing any selling at all. The product demand is created by the product itself, it is designed developed and managed by the masters in America and your role largely is to create fancy presentations, graphs, business plans, paperwork, strategy and keep the firang bosses happy. That is why these managers do very well at media companies since they can always create a great strategy document and why the last strategy they made did not work.
- Startups are fast in responding to situations, changing course, modifying business models, modifying product and respond to customer situations. The corporate structures of most media companies make any major change an exercise for which they would require a board approval.
- The hunger to win, the fire in the belly, aggressive, passion, dedication and terms you would normally associate with a startup how many times can you use these terms for a Media Company startup?
- Finally, for a startup team there is a lot more at stake. It’s not a job they are doing… which a media company CEO and team can change 4 jobs in one year and no one will blink an eyelid.
So, if these are the facts, why do we still see more and more media companies pumping money in their Internet ventures verses investing in startups or acquire startup companies?
A lot of this I think can be attributed to the early stage our new media industry is in and slow development of the startup ecosystem in India. The good news is that media companies are owned and run by some very intelligent entrepreneurs themselves. I believe that in the next 18-24 months, many of these companies will have no option but to get into an active startup investment/acquisition mode as their counterparts in the west had to do. There had been many examples in the west where establish media companies made the same mistakes in the early 2000 and now we are seeing ventures like Hulu and their participation in early stage startup funds where they don’t want 51% stake in the company but operate like a strategic VC fund and at the right time happy to acquire the company. Sony, Cisco, Google, Microsoft, News Corp, Disney, Electronic Arts, Facebook, Time Warner and many others have largely got into new media ventures by aligning with successful startups.
Will this happen in India?
PS:- I think I have opened a can of worms but have to make an important disclosure that before writing this post I had 20 shots of vodka and was watching some crappy saas bahu show on TV and lost a game of T20 Fever to some guy called ‘BIG Daddy’.
[Republished from Vishal’s blog]
Vodka has interesting effect, I agree. Nice post, Vishal.
Too much of Vodka can bring in life changing insights & debates
, good post Vishal.
i agree without the vodka, what you have said is absolutely true, but sadly this will continue to happen & they will live in their ideal and imaginary market. on a positive note these companies wont be apple or ‘indiagames’ of tmrw
some small startup sitting in a garage or own apartment slogging it out will be.
One of the reason may be they focus more on “branding” than solving any business problem.
/Rakesh/MeriCAR.com
What makes you believe that Internet is an important strategy for media cos?
They are investing where the money is.
I wouldn’t want to be left out from the next generation of humans. Your kids, n the ones on FB Orkut today will not lift a piece of paper and read new on it.
That’s the reason why it is important for them to wake up.
I keep telling this to Industry colleagues and even wanted to write about it. Thanks to my poor writing skills, I am reading !!!
Indian media companies just done have it in them. The big question is can the next FB or Twitter come from India , though some Indian internetpreneurs have done reasonably well the fact is that there is not a single internet property from India that has any global standing
This is the most sensible blog post about the Indian internet mess I have come across , kudos to Vishal
Getting big in the internet space is also a lot about time , patients and resilience e.g. Till 2006 FB , a lesser known SN light-years behind myspace in # of users then they just exploded , Craigs list – read the story , a dedication to serving the community is what made it , plentyoffish.com – a one man show with $ 6000 revenue / day.
A point that Vishal has missed out is the failure of a lot of VC funded internet ventures partially killed due to being overfunded , entrepreneurs who get used to the limelight and luxury get their drive and eventually venture killed
Good post Vishal.
@Ashwin I think one of the reason India does not have the next Twitter and FB is because a lot of Indian media sites are copy cats of websites in the US e.g. makemytrip, cleartrip, naukri. This could be because (I may be wrong) a lot of VC funding comes from the west and they would be more comfortable investing in something that has worked there.
Let me know what you think.
@Vishal “Open source solutions perform better, faster and have proven to be more stable than the expensive ones”
I don’t agree completely but yes I do agree that a startup with no cash will find the most cost effective solutions it may not be the best one but will get the job done and reduce time to market.
Zabba , in my early days of understanding the Indian internet scene I did some Primary Research. The finding – the Indian internet user is a very choosy and finicky customer , wants only the best and will not settle for a b-grade product or even anything thats # 2 that explains the success fo Linkedin , FB , youtube amongst Indians despite replicas by the media big wigs [:) with a lotta fake profiles and overrated stats]
Why we donr have FB or Twitter from India & what can be done
- more SFI programs like http://www.techstars.com , http://www.seedcamp.com we hardly have any
- though we have most of the big VC’s here dont have top VC talent who can identify and nurture the next Twitter, hate to say this but we need some Gooras managing things in the VC space the ones who have built internet biz and are now VC’s
The http://www.pagalguy.com dude did a great job in the user generated content space , could have been a story from India which made it big Internationally with the right diversification backed by institutional support but they choose to invest in some dumb Orkut wannabees & other SN’s
sorry thats http://www.mouthshut.com not http://www.pagalguy.com I was referring to the Founder , Faisal has done an amazing user generated content gig and this could have been global
@Ashwin
There is always a slight disadvantage for replicas.
My understanding is the Indian user is not very brand loyal either. People won’t buy a ticket from makemytrip if they find something slightly cheaper at cleartrip or akbartravels or any other. So big brands may not be very significant.
So I believe most top VC talents are people who have gone through the grill and have had failure and/or success understanding the art of starting up. The number of startups in India compared to the US is like comparing an ant to an elephant hence its going to take time to get Indian VC talent good enough to nurture the next twitter.
I don’t think Goras is the answer. They may not have experience working in India. Startups in India would like to concentrate on solving problems of Indian businesses and/or consumers (My assumption may be wrong) and once that is done they would like to go international but because its the web maybe everything is international.
hinting towards UTV new media? are you! … “I wonder if these big media companies will ever understand the real reason for this situation and continue to fund their internet ventures by replacing the CEO with an even more expensive CEO who will rubbish all the past strategies and invest another $20m in marketing and brand repositioning”
nice post. cannot agree more.
very well said.
Nice post…But I would still point out few observations from my side…
The important of all is investments by media companies are over-rated cos look at NDTV.com they have various sections like jobs,cars,classified all white-labeled so some smart move to check the market traction before putting much money.
Why Media Companies are turning into internet?
1. They know their internet ventures could easily get pumped up valuation even in loss making times by just leveraging their brand name and credibility in media circle.
2.Internet is another medium for them which they have to follow else they would be called a ‘Bigger failure’.
Why they are (not) failing/Suck in my view-point?
1.Internet cycle is same as media cycle where they had to make huge capex & losses in the beginning and are now enjoying the fruits of their labor.
2.India still has very less internet penetration compared to even china,brazil.So its useless to compare their success parameters with western counterparts when the market is just getting ready.
3.In the end,They are content owners and if I am looking at a scenario(due to recent Google-rupert murdoch spat) where ‘Content is King’ they might be able to churn decent money out of it.Cos google searches are worthless to users if they can’t find good editorial content.
I would conclude by saying these media companies suck less than some internet conglomerates like Rediff,Northgate technologies where we have seen heavy losses in their valuation and revenues despite boom times & some decent market share cornered by them earlier.
Having run an online startup in India for over 3 years, couldnt agree less with you
Sometimes it takes a shot of vodka or two to get the courage to write such a masterpiece.
I quite agree with Vishal, arvind and others here… frankly speaking, compared to US and London, Angel/VC scene here in India is a bit hopeless.. Environment and support over there for an entrepreneur is quite conducive to the growth of a startup and new ideas to flourish..
This blog says the same thing – http://indiansinuk.net/blogs/Funding-for-Real-Innovation-in-India-UNAVAILABLE.html
We are also in the market for some angel-funding for new-age media NRI portals but the crux of the problem we are facing is best explained by this post from Vishal.
Cheers
Aditi
forgot to mention this awesome blog about startup scene in India.. although the blog’s title is India Or China but it actually talks more about startups and issues they face.. http://windia.blogspot.com/2009/11/india-or-china.html
Cheers!
Have you ever thin “Why Indian Media companies have late back attitude in upgrading them self in entering in any new media ? Is this is the trend worldwide on here in India only ?”
I personally assume that the reason of this ‘Media Industry is not as much profitable as it looks that’s why companies are not able to save sufficient ammt. to enter in new market’ or ‘they are busy in managing their existing problem’ or ‘all the time a new technology come and new kind of skill set is require to manage their products..so perfectionism type of things is always missing with them ‘
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