The second in the International Advertising Association (IAA) India Chapter’s IAA Webinar series themed ‘World goes Digital’was hosted on 23 May. It featured Ajit Balakrishnan, founder and CEO, Rediff.com.
Abhishek Karnani, co-chair and director, Free Press Journal group and Manish Advani, head - marketing and public relations, Mahindra Special Services Group, are the co-chairs of the IAA Webinar series. The Webinar was moderated by Pradyuman Maheshwari, editor-in-chief, MxMIndia. Edited excerpts:
Setting the expectations
Balakrishnan set the tone for the discussion, observing that there was little doubt that the internet had come a long way since he started ‘messing around’ with it 18 years ago. “It has often been a matter of surprise for me that the web technology and internet happened in the media world. Earlier, innovations like electricity and steam engine did not happen first in the media world, but happened in industrial settings. So, by some accident, internet has taken flight in the media world. My suspicion is that internet and web-based thinking will penetrate areas like educations, healthcare and, what I call the less frivolous parts of the human endeavour,” he explained.
Overcoming aggressive marketing from larger players
Ajay Pandey, founder and CEO, Badhai, questioned Balakrishnan on how newer brands with smaller budgets could make their presence felt in the digital space.
Citing the example of Google, Balakrishnan responded, “Every giant-killer started small. I still remember that in 2000, not too long ago, Google was still a relatively small company. Its revenues were USD 30 to 35 million. The kind of stories that we have seen on the internet throughout the world (and not just the USA) tend to offer some combination of consumer promise and a newer or better technological way to deliver that. People who do that at all times have a chance to offset the giants of the industry. I have no doubt about that, and the field is right open all the time.”
Changes in customer behaviour and expectations
Gaurav Mendiratta, CEO, Sociosquare, posed a question on whether there had been any change in customer behaviour and expectations (of online users) through the years, and whether Balakarishnan expected to see a change in the next three to five years. “India is in the early stage of internet revolution,” remarked Balakrishnan. He added, “The number of users who have unconstrained access to high speed broadband on phone or PC is very small, about 10 to 15 million. India has a middle class of over 300 million people out of a 1.1 billion population. So, people who are online now are the privileged and more westernised group, they are pretty tuned to what is happening in America, their brand values are built around what they see on the internet. I have a feeling that when the unconstrained users rises to 100 or 200 million users in the next three to five years, that is the time when more typical Indians will land up. First of all, English might cease to be the primary language. Secondly, the kind of things that they do on the internet will be different.”
Expectations from Rediff when it started and its evolution
Answering a question on expectations when launching Rediff, Balakrishnan revealed that he hadn’t thought about the financial outcome of entrepreneurship while he launched the venture. “I was fascinated by the possibilities of the internet by watching Compuserve and AOL experiment with it. I think nobody had the faintest idea where it would go to, and yes it is unclear to me even now where it is headed next. The technological phase of internet is going to pass in a year or two. Among the top 100 companies, everyone has the same technology and there is nothing much unique. There are some people who know how to do it at scale, and there are some markets with lot of sophisticated users. In India, these kinds of users are small and so, you cannot make a worldwide impact. However, it will change soon.”
“The first 10 to 12 years, (the internet) imitated the newspaper paradigm with lots of textual material. Our guess is that it is swinging towards a visual metaphor. There is a focus towards video too, but nobody around the world has yet figured out how it will play out. We have pirated content of well-produced content and celebrity videos or bloopers. Nobody really knows what will be the grammar of the two or three-minute videos. I am sure it will arrive. In the early days of television, people played long movies entirely on television. Thirty-minute sitcoms were a later addition. Something like that will happen in the internet domain too and it will come from a creative genius and not a technological guru,” he explained.
Challenges of e-commerce in India
Balakrishnan pointed out that there are a lot of good things happening with Indian e-commerce, but voiced some concerns too.
“In my estimate, around USD 500 to 600 million were pumped into the Indian e-commerce sector across maybe 50companies. That woke up the sleeping e-commerce economy,” he said.
“The good part is that there is excitement around it, but the not so good part is that the infrastructure around e-commerce is not quite developed. Debit card transactions have a very high failure rate, and once that is resolved, the 100 million debit card users will provide the e-commerce space a much needed boost. The cost of Rs 30 to 40 per delivery is quite high, and courier companies have to efficiently deliver goods at a price point of Rs 10 and still make money out of it. This is one of the reasons why some players were tempted to have their own delivery boys. So, e-commerce is still two to three years away from a gigantic boom in India,” explained Balakrishnan.
Growth of online video
Answering a question about online video consumption posed by Aditya Kuber, CEO, Media Sphere Communications, Balakrishnan said that video content would be among the most watched. He revealed that on Rediff.com, among the most watched pieces of content, there were one or two video stories each day.
“The big advantage for video in India is that it jumps across the language barrier. With text, you are restricted to people who are comfortable with English as Indian-language internet has not taken off at all. People in our sales team are telling me that advertising agencies have woken up to video and I believe that it is because they understand pre-roll video ads better as it is similar to ads on television. Currently, online videos are restricted to celebrity-led content or pirated versions of premium content or content provided by traditional media houses who expect a 50 per cent revenue share. All three are not suitable for a sustainable model. So, the need is to have three to five-minute videos at a low production cost. This may spark a video revolution,” he explained.
Noting that talent retention issues were not restricted to start-ups, Balakrishnan explained the need for people planning. He said, “There are some who love doing innovative things, some who like the security and some who love the thrill of changing jobs. It is a challenging thing to understand, and these are things that you cannot control. At all times, try and get a team of four or five people who are a critical part of the success. Make them partners of some kind of the other, and it need not necessarily be financial in nature. The risk again is that the core group whom you think today might not be part of the coretomorrow.”
Non-fragmentation of ad revenues
Free Press Journal’s Karnani posed a question on digital advertising budgets: on a majority of spends (70 per cent) tending to go to the top five websites. Asked for his view, Balakrishnan said the phenomena was not restricted to internet. “In newspapers, whoever is number one typically takes 60 per cent of revenue, number two takes 20 per cent, number three to ten barely hang in for sentimental reasons, while all others hang in for prestige reasons and lose tons of money. This is becoming true for television as well. I think the top two or three channels take 70 per cent of revenues. Unfortunately, media has this tendency of winner takes it all as consumers usually gravitate towards what is the most popular. And, what is most popular is based on a socially constructed phenomenon. It is not based on any objective criterion. Internet is no different. The people who mix creativity and technology platform efficiently will win. People have done that. Take the case of Facebook. First is, you need to get the audience. The revenues will follow.”
Increasing the digital advertising pie
Balakrishnan underlined that big advertising agencies which control 90 to 95 per cent of spends in India were looking for ideas,and said that if one of them succeeded, others would follow. “Overnight, the pie will increase tenfold; I promise. I have seen this happen when print advertising came by in 1973, again when television came by in 1980s and later when outdoor happened,” hesurmised.