Month: May 2011 Will It Work?

It won’t.

Before I get into the economics of it, let me first tackle the concept. Going by Raghav Bahal’s introduction:

Today, news is a hyper-active, multi-point phenomenon, with you at its epicentre. You read, write, bounce, redirect, navigate, pick, choose, reject, reinforce, tweet, facebook and firstpost it … Yes, you Firstpost it.

I am not sure what exactly does that mean beyond previous attempts at a forced transformation to a verb like “blishing it”. Ironically, in all the activities mentioned in the quote, “firstpost it” is the odd man out. You don’t need to do any other activities mentioned in that sentence. The introductory post aside, the concept seems to be built along the lines of early days of The Huffington Post (the current avtaar is a totally different story from what it was like when it was launched).

Huffpo was reportedly set to make a profit in 2009, ‘nearing‘ its first annual profit (no numbers disclosed) by the end of 2010 and was not “rushing to be bought” only months before they were acquired by AOL in March, 2011. The company took $37 million in venture funding pre-AOL and had done $30 million in revenue in 2010. There is no available estimate of how much it costs to keep the operation going, but it is reasonable to expect that the number is non-trivial. It is an interesting model, but not a new one. You can always get traffic on the internet by throwing money at it, but it does not scale (well, other than the exception of Demand Media and they work on a different model altogether).

Let us tackle the numbers. Huffpo does an estimated 23 million uniques (figures from Compete and a guesstimated correction based on an earlier gap between internal and estimated numbers) in a month. On a comparative note, Facebook had an estimated 21 million uniques from India in 2010. As you can see, even with money thrown at it, similar scale will evade a product like in India. The publication has nine employees on its editorial rolls. Other functions, I would assume, are handled by shared resources with the parent division.

My guesstimate puts the payroll for full-time employees at around Rs 1 crore annually. Distribution costs should be a tiny blip on the general Network18 infrastructure. They are running an out-of-home campaign supporting the product, but I don’t have an estimation on the costs and it could also be a barter or a non-cash deal like how the network sites were running an interstitial yesterday. If you factor in a variety of miscellaneous costs, I would think they would have to do at least Rs 1.5 crore in its first year of operations to reach break even.

Assuming the very unlikely situation of the product being able to sustain about 10 million page views in a month, at an average of four ad impressions per page view and Rs. 200 CPM, we still don’t cross Rs 1 crore in revenue. It is possible to run campaigns based on spots and innovations, but the revenues would be lower too in line with that. Needless to say, even at reasonable scale, they will struggle to make ends meet.

The problem is that scale is impossible in the domain once you stop massive SEM spends and leveraging network traffic. Mind you, I like the product. I have been looking forward to a content product from India that is produced and written well and tackles the topics that I am likely to follow. But, at the same time, I am also aware of the fact that an audience that comprises people like me is very much a niche. If we truly value products like these, we should also be willing to bear at least a part of the costs involved in putting it online. by no means is not the first attempt at such a product. The first version of and the long-dead The Newspaper Today had attempted the same – trying to bring out a web-only well-produced publication. Even though seems to be spending much less than what it had cost either or TNT to get going, I am afraid the market dynamics have not changed much since then and it will suffer a fate that is not considerably different from them and unfortunately for a Huffpo-esque escape into the arms of an AOL is not an option to them.

Disclosure: I have been previously employed by Network18, Tehelka and The India Today Group Online at different times in my career.

Filed under: India, Internet, Media

Quick Note On IPL Live Streaming Revenues

Going by YouTube’s own numbers (as of 9:30 AM, May 12, 2011), the channel seems to have recieved about 5.7 million views so far this month, which is also the month of the IPL. Going with a CPM of Rs. 200 for the pre-rolls, that would have generated about Rs. 11 lakh in revenue so far. The channel has four banner spots when the live match is on. Even if you go with the really unrealistic assumption of Rs. 200 CPM for each of those slots the total revenue would add up to less than Rs. 60 lakh so far. Even if we were to blindly double the numbers (2x everything), the revenue is not going be more than Rs. 2 crore. I’m being extremely cavalier with the numbers here and erring massively on the side of overestimation.

Now, why is this important? Simple reason is that the rights holders need to monetize at the rate of about Rs. 65 crore per year to even break even on what they paid for the rights. There is also streaming of the clips on Indiatimes itself, which should bring in additional revenue and other aspects like mobile should chip in chunks on their own, but I don’t see it all adding up to Rs. 65 crore this year. Granted, the numbers maybe way off from what is actually the case (the slots could also be spot than CPM, making the estimates entirely invalid) and the consortium that got the rights were rushed into selling it at the last moment and they could do a better job next year, but the bottom line is that monetizing this right is going to be tough. Really tough, in fact.

Filed under: India, Internet, Social