COO | 03 Apr 2003
The issue with online advertising is that the clients and agencies still have a phobia. Actually, they have not invested enough to understand the medium. And there is a problem with the Internet industry itself.
In the last few years, the Internet space in India has shrunk to very few players. And perhaps the most dominating portal currently is indiatimes.com. A fact even acknowledged by its archrivals. The aggressive marketing strategy backed up with a wide range of content and services delivered through multiple platforms sets it apart from rest of the players.
But the journey has not been so easy inspite of the strong back up of the parent Bennett, Coleman & Co Ltd. (BCCL). Still, indiatimes has managed to achieve what the likes of Yahoo and MSN failed to reach inspite of their first mover advantage thanks to their international lineage. And the man who has played a pivotal role in taking the business to its current heights is Rajesh Sawhney, the proud COO of Times Internet Ltd. Before joining Times Internet, he had 8 year stint with the parent BCCL. There he carried out a number of strategic cross-functional assignments in different businesses: Publishing, Television & Radio.
Sawhney holds a Bachelor's degree in Electronics Engineering from Delhi University, and Masters in Management from Mumbai University. He also has to his credit Chevening Fellowship in Leadership & Globalisation from London School of Economics & Political science.
In an interesting session with Akshay Bhatnagar and Luvleena Walia of exchange4media, Sawhney shared his views on the various issues affecting the Internet industry in India and what makes indiatimes such a major force in the Net space.
Q. To begin with, what are the key issues facing the Internet media in India?
Well, Internet in India is going through a period of transformation definitely. We can point at three issues related to the media right now. First is the 'crest of disillusionment'. We are coming out of a huge down turn. We have sensed it in the last two to three months. Now the romance is beginning to come back. This development is manifested not only in advertising but also for investments going into the business as investor's interest is renewed again.
The second bigger issue with advertising is that the clients and agencies still have a phobia. Actually, they have not invested enough to understand the medium. And there is a problem with the Internet industry itself. We have been so obsessed with our page views and technologies in our own vocabulary that we have not gone out to match our vocabulary with client's vocabulary and here the big mismatch happens.
Thirdly, the industry has given too much value to the clients for too little. We have sold cheap. For example, if Citibank asks for an estimate on how much is sold and then they would pay accordingly using the cost per lead or cost per fulfillment method then this becomes a very tough job to be in the business. This means they are paying for just sales but not for rest of the other benefits including brand awareness and exposure etc. So in a way, we have not done a good job of selling ourselves.
But in the last two years, most of the people who took decisions have themselves become users of the Net. Earlier, they were not using it but after becoming the users, they have begun to understand the media better. And have also started demanding now.
Q. With this kind of a backdrop, what has been the strategy of Indiatimes on this?
Indiatimes has done the best job. The likes of Yahoo and MSN come to us to be out of mess that they are in. And suggest that if three of us come together, then we can evolve a new model.
But the problem is, it has been too short a period to move from CPM (cost per impression) to CPL (cost per lead/action) as expected by the advertisers. So in one year, it was too much of a dramatic change. The pricing model of the industry also changed three times over the year. On the other hand, the pricing model for print, TV and radio has almost been the same. So there has always been a tussle between agencies, clients and companies like Indiatimes on this front.
The main agenda today is to get more and more clients to come in. Not enough clients are sampling the media. The need is not only to sample the media but also grow the market.
Q. What do you think is the number of clients who sample the media?
There are not more than fifteen to twenty clients. So in year not more than 100 clients advertise on Internet. There's a scope to take this hundred to thousand. On the other hand, there are four thousand advertisers on TV. The first issue is to get clients to sample this media. At indiatimes, once we start working with the clients, 95% of the clients renew with a better spends.
Internet alone cannot be the only medium as we neither have the number nor the engaging ability to deliver on all the ad objectives of the clients. Even a spend of 5-10% of the total ad budget on Net could be a huge money creating a multiplier effect. There have been studies that show that clients get far more benefits by taking multi media approach. This is towards the advertising front but I personally feel even this is not enough for a big website unless you have a multiple revenue stream strategy. So for the next two to three years, no websites will make money from only one revenue stream that is advertising, if they want to do good job to the consumers.
Q. How much of your business comes directly from clients?
We have seen 80-90% of our business come from client interfaces. While only a small amount of it is through agencies.
Q. What could be the reason for this? Is it because agencies feel that it's too little to drive or there is something else...
Well, I don't think they are inherently disinterested in this business. I think they are very much interested in understanding this media by taking it to the clients. But the effort it takes to sell this media to the clients is very high. You need to go to the clients with very convincing argument. So what we suggest to ad agencies and media is to think of Internet as an innovative medium that combines mass media reach with innovation. And innovation on Internet is very cheap.
Second reason is that there's a lack of education amongst the agencies. On issues such as data mining and sales convergence, ad agencies have not created the competence the way they have done with media planning or creative or strategic planning. They need to understand that Internet not only gives a branding exposure but also goes into another dimension. So this competence, we need to have in the structure. And it's beginning to come.
Another aspect is patience. See we had a very successful relationship with our advertisers like with ICICI and Citibank. But the process of selling has taken us three to six months.
Q. What do you think is the currency that helps in determining the traffic on the websites?
See, the common currency used to be the page views but this is an imperfect and irrelevant way. Which website has how many page views is no longer the issue. The main issue is what is the audience you have, the frequency of the visit of those audience and quality of audience.
Q. So there is no common currency?
Yes. The problem arises, as we don't have similar benchmarks across the websites. So Indiatimes.com will have different benchmark and competition will have different benchmark. The issue comes when the client does not understand industry's terminology and there are disputes on this terminology.
According to me, this is the most accountable media. Because when you run a campaign with any website, the kind of report we give no other media gives. We let you know how many consumers saw your banner, which part of country they come from, how many times they clicked and which channel got what kind of visit. So reporting is very good from the website but there could be an issue whether clients believe they are authentic or not because there's no certification. But this again is not the issue whether the clients believes it to be authentic or not. The issue is that clients need to believe in this media and they are beginning to do so while agencies are still hesitant and are slower to catch up.
Q. Don't you think an association of the websites on the lines of INS or IBF can help in that?
The formation of an association of website owners will definitely help in growing the market. But this cannot be seen as an agenda of one party. Three years back, when initiatives were taken, it could not happen. We need to start in a new way and definitely benefits will surely follow. We should be able to negotiate with the industry, lobby with government for concessions for e-commerce, should do an education campaign with advertisers, do seminars and yet compete with each other.
Q. What have been the key developments from the consumer side in the Net domain?
On the consumer front, market is expanding very rapidly. Net penetration is beginning but more important then that Mobile Internet is also growing very fast. Today, any Internet organization has to look at itself not just from the PC base but also from Mobile. And both of these put together, the base of the consumer has increased over 400 times in the last one year. While the mobile penetration has crossed a crore though it was less than half a crore a year back.
Secondly this year, the growth of broadband and Tata Teleservices, Reliance and BSNL combine will double the users this year. So, from consumers side there is no issue.
The key issue that remains is that do the websites have a strategy to monetise the traffic that they are getting? And here my suggestion is that advertising alone will not be sufficient. There is a need to have multiple revenue streams.
Q. Few years down the line, what will the Internet space look like?
Definitely, there will be some players. There will surely be some newspaper-based websites, which will exist. Television media will also come into picture, once the broadband comes.
In the portal market space, we have seen consolidation to four or five. I think, MSN and Yahoo are here to stay but their commitment to market will be driven out of their global compulsions. So, in the portal space, we will have one Indian player that will survive. And we are totally committed on this. This means running 50-60 websites and having multiple alliances. It's a huge commitment to develop this market.
The third set of players, which will emerge should be niche verticals. So the future will have two or three portals, large number of newspaper websites primarily financed by their ground operations and a large number of specialized niche players. This is the kind of model, which I foresee for the next two to three years.
The companies such as indiatimes will work with telecom companies more closely to create new services and share revenue. Because people come to net whether through mobile or PC for the content. So content is the destination and the benefit of this will also go to the connecting companies such as telecom companies. Which means telecom companies will work in close coordination with companies like indiatimes to create a large set-up of services.
Q. Ok. Tell us how the media industry is different from the FMCG products?
The media companies have historically had multi revenue stream, at least two to begin with, advertising and subscription. The newspaper companies have moved primarily towards ad lead models. While the TV industry is trying to move the other way round because there is not enough advertising for the high quality niche channels. Similar kind of thing is happening with Internet. The Internet business has to stand on its own feet and for that, it has to be innovative, focused to create revenues streams to match costs. This is the reason why last year we put in our multiple revenue stream strategy and it is paying off well.
Q. What are these streams, you are talking about?
Well, to begin with, the first stream is that of advertising.
The second is Mobile Internet, which is growing up. We already have a large number of channels on a paid model. And we engage in more than a million messages a day.
The third revenue stream indiatimes has created is that of e-commerce. We are today the largest e-commerce player in the country. Today, travel is in the core of our e-commerce business. So, our focus was with Sahara and Indian Airlines along with more players joining in the auctions space. Not only with airlines but also with travel operators and hotels with a large number of tie-ups already in place. Indiatimes.com is also looking at a tie-up with international airlines.
In e-commerce, there are three business models. The first one is auctions where primarily revenue comes from commissions on travel. We are also planning to put a listing fee model in place. The second model is the marketplace where indiatimes.com gives space on rental. We allow consumers to come in but we charge rental and take commissions on sales. The third model is merchandising store model, which further includes high traffic six categories like music, video, books, astrology, CD roms etc.
Our e-commerce business has gone up by 15 times in just one year thanks to our three-pronged model.
We also have a small but rapidly growing business of knowledge events on the behalf of the whole Times Group. The last and the most difficult business is that of subscription. Our strategy has been to develop specific revenue streams out of our existing portfolio without disturbing the advertising revenue. The idea is to migrate the free consumers by not threatening them but by enticing them with greater benefits on the paid service in the next two years. So, our free service will continue to attract costumers and our paid service will attempt to convert these customers to paid model. Similar model, we are planning to put in place in other multiple services, which will be not only in community space but also in content space.
Q. What are your future plans?
We will be launching a very innovative multimedia dating service. It will combine the power of print, voice networks and telecom, sms and Internet. Other than this, we are looking at other initiatives in the e-commerce space. We will also start news service in the domain of multi media messaging (MMS), entertainment and additional services for NRIs. Any move that helps us in expand market is totally welcome.