(This was published in Mint, 19th November 2018, albeit in an abbreviated form due to space constraints. This is the complete piece.)
The latest and hottest startup sector is presently invisible to ‘People Like Us’ living in metros. Over the past year, several young founders boasting impeccable academic credentials and work experience have been moving to small town India, launching hyperlocal news apps, viz., LocalPlay, Lokal, Awaaz, Circle etc. These apps, all funded by venture capital firms (VCs), are hyperlocal, e.g., LocalPlay is focused only on Moradabad, Circle gives you news about Agra, Mathura, Vrindavan; Lokal focuses on three districts across Telengana and AP; and Awaaz similarly across UP. All are non-English and primarily use short video snippets.
Smartphones + Jio driving hyperlocal, video, vernacular content
Traditionally Indian hyperlocal news has been the backwaters of print and regional TV. There wasn’t a serious business model, for the largely ad-led nature of our media business meant any product catering to rural small town readers was unattractive for advertisers. Given this, it is interesting to see the sudden surge of interest in hyperlocal vernacular video news apps. What has changed that we are seeing a number of startups emerging in this space?
Two recent inter-related trends matter
- spread of smartphones, which number about ~380m at last count, deep into India2 (my short hand for the less-affluent non-english speaking India)
- the Jio effect, which has seen data prices fall by a tenth, and data consumption rise over ten times since its launch.
India2 doesn’t consume much text, instead it gorges on video, thanks to cheap data. Increasingly short-form video content has emerged as the dominant media unit of India today, spurring the emergence of homegrown social networks / platforms such as ShareChat, Clip, Mooshak etc., as well as the rise of news aggregators such as DailyHunt, NewsPoint, NewsDog etc. And now they are driving the rise of hyperlocal news apps built around video.
Monitoring and monetizing are the two key challenges
The short video content in these apps is typically supplied by newspaper / TV ‘stringers’ (freelancers). They are paid Rs 50-250 per video, though the odd likely-to-go viral video may well be purchased for a higher amount. Supply is not an issue – there is enough free content as well, which however needs to be authenticated, and ‘produced’ or upgraded for release. A startup I spoke to estimated their annual cost for sourcing, authenticating, producing and distributing content (20-25 videos / day) to be close to Rs 40 lacs per year per district.
The authentication part is critical, given what we see with the spread of fake news and rumours across whatsapp and facebook, especially with elections around the corner. The other business challenge is monetization. This isn’t a worry for now, because the VCs are paying for the product, which is free to consumers. All of the hyperlocal players believe at some point that they will be able to monetize their audiences via ads. I am not so sure, for in India, there has always been a considerable discount on vernacular audiences re advertising.
Market sizing and second order effects
The number of digital local language news consumers varies anywhere from 106m (KPMG & Google, ’16) to 180m (ReverieInc, an Indian language translation startup). The ad market that caters this audience is pitifully small – Rs 750crs for FY18 in my estimate. This comprises Rs 300crs for digital audiences of TV channels (Aaj Tak et al), Rs 250crs for those of print news sites (Bhaskar et al) and another Rs 200crs in online news sites such as DailyHunt etc.
So 180m audiences and Rs 750crs = Rs 4 per user per year! Given that each district should yield about 50k MAUs (monthly active users), we are looking at annual revenues of Rs 2 lacs. But, perhaps local newspapers are a better proxy, given that hyperlocal apps are high engagement products like them. Vernacular newspapers have 35cr readers and get 15,000crs print ads, i.e, Rs 400 per user, which we can discount to say Rs 100 per user (excluding metro audiences and national ad flows), i.e., potential annual ad revenue per district of Rs 50 lacs. Hmmm….not exactly the stuff unicorns are built on.
That said, these apps aren’t sitting still. They are expanding fast. With 30-40 districts and larger audiences, they will have access to national ads. And we will soon see new interaction models and use case emerging, which will spur new business models as well – via subscriptions or as a platform for e-commerce or government interactions or like a social network like Nextdoor. As they grow, we will also see second order effects where established players such as Jagran or Eenadu, or perhaps even Chinese firms as we saw with NewsDog, Helo etc., rush to this sector, attracted by the fast growth and valuations.
Thanks to smartphones and cheap data, an entirely new sector has emerged. Only time will tell us how it evolves and who will win.