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Why the Great Indian Media Companies will Fail on the Internet…..

From Actionable Insights into the World of Indian Startups

Since my move to India in 2004,  I have worked with several of the Telecom and Media giants in India at a very strategic level and spent a year at Yahoo! India after the Zimbra acquisition.   Over time my belief that the Online Media industry in India is in big trouble has been reinforced time and again.    Every single meeting I have had with stalwarts in the Media space continue to reinforce my beliefs as I can see the “cluelessness” in their minds about the online space.   The big three tend to believe that their brand will carry them through the digital era and they refuse to believe that powerhouses in the worldwide Print industry have fallen prey to the smaller, nimble highly technology savvy digital companies which is what will happen in India if they fail to wake up from their slumber.   While these large media companies continue to invest in their digital businesses heavily the results are shoddy.      Even the true Internet players from the early days of the Internet era in India like Rediff and Sify continue to underwhelm the market with poor product offerings and declining ad sales.   Let us take a closer look at the digital industry in India:

1. Rediff.com  - considered to be the grand daddy of the Indian Internet industry is really starting to show its age.   They are really old in the way they think and execute thanks mostly due to their aging leader Ajit Balakrishnan who is considered to be the father of the Indian Internet industry.  I think we should honor him with the title of grand father of the Indian digital media industry now.    I have had the honor of meeting him personally in 2006 when we were starting Zimbra in India and after the meeting I could only walk away saying ” what an arrogant man full of himself”.    Confidence is a great virtue in a leader but arrogance just shows that the person is afraid…..very afraid of young companies just disrupting what Rediff does and he is just trying to intimidate them so that they don’t take up the challenge of competing against Rediff.    I compared notes with several valley startup founders to be told the same story that I had experienced with Ajith.  All of these companies rose quickly in the last 2 years and built incredible valuations while Rediff continues to decline and Age.  Even Zimbra sold to Yahoo for US$350M may be 11 months after we met Ajith.  For a  company founded in 1996, to achieve enterprise value of US$42 million in 2009 is a joke.  Their profit margin is off by 61% YOY and operating margin is down 44% YOY.  Their quarterly revenue growth declined by 40% year over year and they are running at a loss.   Hmmmm… if this is the state of the best in the industry we need to wonder how the rest of the digital media companies are doing.    Rediff truly believes they are the Google of India.    Ajith has boasted openly about how Larry Page and Sergey Brin come to his office to meet him.    My meeting with Ajith actually taught me an important lesson,   Indian media companies don’t have the slightest clue about the Internet.   They believe that they can fast copy what great startups in the US do and try and launch it in India and start getting traffic.   They do not believe that having great technology and technologists is an asset.    They continue to hire people that are under qualified and operate like the services industry (fill the ranks with 100s or 1000s of below average people) an then wonder why they can never produce anything cool that consumers love even after fast copying and why it costs them so much to build something.

2.  Indiatimes.com –  Indiatimes was a customer of ours and I have great respect for Vineet Jain.   Vineet is a visionary and lives and breathes the Internet.   However, he lacks a decent team to support his vision.   We supplied Zimbra to Indiatimes in 2006 and they did a huge launch around email in 2007. I was very impressed with their ability to market and create a buzz.   Where Indiatimes is lacking is people at the leadership level.  In the 3 years that I worked with them, they have hired and fired 3 CEOs and not to mention the rank below the CXO level.   In one of my articles I wrote about how I had worked with a large media house that had hired a conman as their CTO.     Well! that company was Indiatimes.   The digital media industry in India is filled with people who started their careers in print and TV and then moved to the Internet and then grew along with the industry.   They do not have a background in Technology and the Internet.    They take technology and innovation for granted.    They think brand and content is king.     I just did some analysis on one of the most trafficked financial sites in India and found that only 1% came there to read news.   So, there goes your content investment down the drain.   Content has become commodity.   I would argue that 2 years from now most Indians will get their news update from Twitter and not from any of the news sites.   For example, I read the TOI yesterday and did not gather that George W Bush was in India for the HT Leadership Summit.   When I logged into twitter, I was surprised to see a tweet that Bush was in India.

3.  Web18 – I have a lot of respect for this group.    They have done amazing things in India in a short period of time.   However, I believe that they also lack the leadership to create a huge Internet giant in India.   My assessment is based on what they deliver to the end users (the user experience sucks) and the technology investments and competence of their teams.

4. The Rest –  I think we can safely throw the rest into a bucket called “the rest” which don’t really matter as they are purely noise and don’t have a shot like Sify.com etc…  If the top 3 companies don’t have what it takes to achieve Internet greatness, then it is not worthwhile talking about the rest.

So, why are the Indian Media Giants failing on the Internet???

1. Top Down Management  -   In every media company I have worked with, I have seen a cultural difference between how a valley startup is run and how these top heavy Indian companies are run.    I think by now we should all acknowledge that the biggest baddest companies of the Internet were built by 20/30 somethings and not by 40/50 somethings.  In all the traditional media companies I see the whole company rallying around a 40/50’s something person (“the leader”) or in the case of Rediff (“60 something”).   The whole company does something just to satisfy this one person.   I experienced this when I was working with Indiatimes and launching their mail platform.  It was always about – hey we need to do this because MD wants it this way even if it was something that did not make sense.    The younger Internet savvy individual contributors literally have no say.   They are just there to satisfy their masters whims and fancy.     Zimbra deployed a 80+ server system distributed in 2 data centers, wrote migration scripts, migrated 800K mailboxes and architected and deployed a system to scale for 3.5M users for Indiatimes.com in 4 months with 3 employees who worked for me all in their early to mid 20s.     In comparison there was an army from Indiatimes which was assigned to our project who could not even configure a load balancer correctly.    I saw the same pattern at Rediff where it was all about satisfying Ajith.   Let us all understand that if Top Management always intimidates their ranks and the ranks cannot freely share ideas with them, they are not going to be able to bring the best of everyone out.  The greatest ideas often come from the ranks and not from the leadership.  Intimidation only gets you a bunch of  ”Yes Men”  and not a bunch of young innovators.  As long as Indian media companies try to function in the top down manner we cannot see them scale the walls of greatness.

2.   Taking Technology for Granted – None of the Indian Media companies I have worked with in the Indian Media space have demonstrated any technical competence.   The Rediff management seems to be too caught up in the NIH (not Invented Here) syndrome.   If it is not invented in the Rediff labs then it must be no good. Unfortunately Rediff Labs is filled with below average people.  When I was hiring for Zimbra we received numerous resumes from Rediff and not one made the cut.    The CTO at Indiatimes was an industry joke.  He claimed to be Scott McNealy’s right hand at Sun etc etc but could not spell Java and turned out to be a conman.   If the CTO was that bright, one can imagine how the rest of the tech team would be.   That should explain why I have not been able to sign up to Indiatimes for the last 3 weeks.   Their Integra registration/SSO engine fails every time I try and register.   If they lose users at registration due to technology imagine what rest of their site is like.    I think I have made my point.    None of the Indian Digital Media companies attempt to try and build a young, vibrant high tech culture which is so very vital to creating great companies.

Here is some interesting data per Alexa:

-  57% of the sites on the Internet are faster than Rediff.com

- 84% of the sites on the Internet are faster than Indiatimes

- 88% of the sites on the Internet are faster than in.com

So, why is it that we don’t have a single online media company in India that can optimize a site to be fast and deliver that amazing performance to users?

3. Lack of Innovation –   It really amazes me to see the Indian media companies launch product after product that are a poor copy of the core US idea.   Can someone please point to anything they thought was new and innovative in the media products that are peddled to us.   Almost all the media houses saw the social media trend emerge  and made investments – Digital Martini of HT, iTimes of Indiatimes, BigAdda of the Big ADAG group.   If you go look at the usage numbers it is appalling.   Most Indians continue to throng to Facebook and Orkut.

3.   Belief that Brand is everything –   Brand is hugely important when reaching out to consumers and the Media companies do enjoy huge brand affinity.   However as proven in the western world, young nimble and dynamic tech companies can easily and quickly disrupt this.   I would argue Google is probably the most important brand on the planet today and it is a matter of time until facebook achieves huge brand recognition.  Both companies were started by 20 somethings and have built a brand faster than any traditional media company.  New York Times is arguably a very popular media brand with a legacy of 150 years.      But, my 3 year old nephew in the US recognizes Google and uses it and has no clue about NYT.    Inspired by the movie “Wake up Sid”   I would like to say “Wake up Indian Media Industry”.

4.  Belief that Content is everything – Several media companies I have met argue that content is king. I agree….. but what type of content is king today in the era of blogging where every human on the Internet has the ability to become a journalist with an audience.  Editorial Judgement is valuable but a lot of individuals better qualified than Journalists in their areas of interest/expertise are starting to express their opinions and people are starting to follow them.  So, it is arguable if there will be rockstar journalists to look up to in the coming era of blogging and micro-blogging.   For example, I have just started writing about the technology startup industry recently and there is an audience that is slowly attaching itself to my blog around a very narrow area “high tech startups”.    This audience should have been getting this information from the online tech channels but they cannot.    So, I am slowly starting to build up an audience around a very narrow niche.     This is the long tail.   This is something the Media Industry has to learn to leverage or lose eyeball time.   Citizen Journalism, aggregation of good personal blogs and creating a revenue sharing model around these will ensure that Media companies stay competitive.   Let us all face it, most media companies are consuming news from wires for a fee and then repurposing this content with their own editorial judgement and then peddling it to us under their brand.  How long before the human race evolves and starts to consume these wires directly.   I can argue that with the advances in the Internet man has evolved to be able to process information at a faster pace than the pre-Internet era.   We can all now seek information in an instant, get millions of points of view, digest it and form our own opinion from the Internet.    We automatically are being trained to look at many points of view.   The Media industry’s premise is that their point of view is the most important.  This is no longer the case in the digital era. Don’t fight this trend.   Blend with it and you win!

5.  Big budgets – big plans – lack-lustre execution –  Most of the Indian Media companies identify leading trends, create big plans, big budget but flounder when it comes to execution.   They lack the design and product finesse required to deliver something compelling to the end user and technology execution is just very underwhelming.   I really pity the VCs who have put money into these media houses.   I am afraid that all of them will have to write it off or try to offload their investment at a throwaway price and book a loss.

6. Too much focus on Eyeball time and Ads as opposed to creating valuable transact-able events for the user and growing networks –  If you go to some of the most trafficked media sites in India they suck primarily due to the generous smothering of Ads which hugely annoy the audience.   The Media companies know how much this sucks but suck it up to the advertiser just so they can keep their measly handouts from these companies alive.    If you analyze this a little it is obvious that the Media houses know that they have nothing compelling to offer to the end user as they were a “me too”  site to begin with and their product and technology is not good enough to attract huge audience.  In the absence of compelling services, the best one can do is to spread oneself really thin and try and do it all where each service lacks in quality and fails to draw the right audience. So they try and plaster advertisements on literally every page they generate to capture some of the crumbs left behind by Google and Yahoo.  If you really look carefully at the Industry all the Major Indian Internet players are crumb eaters.

7. Lack of Audience Intelligence- The Indian digital Media industry universally (except rediff I think) uses Google Analytics to get insights of their audience.   Guess who has the advantage in learning about their customer base – Google – not the media houses!  They see it immediately as a part of their global numbers and can use it to their advantage.   If  the media industry had the technology muscle to build their own analytics and profile their own users they could be so much more valuable to advertisers.

I still believe the Indian Digital Media industry holds great promise and I came back to India with the hope that we can create quality companies in India that apply technology and innovation to cool services that consumers love.

My message to the young, innovative type graduating from colleges is to seek out small startups that are doing quality work instead of working for the big name media houses just to be resume worthy.   Resumes really don’t matter…. what you  learn and achieve matters a lot.

My message to startup founders is that if you have a great idea please don’t short sell yourselves to any of the larger Media houses.   Most of the business/ corporate development teams in these Media houses don’t have the people or the ability to identify big opportunities, teams or technology and end up signing really crappy deals with a bunch of small startups mostly opportunistically.   How many times have you been in meetings to be told that you (startup founder) need to guarantee revenue if you want to partner with these media houses and that they cannot provide you anything else in return other than their brand.   Challenge them. What brand?  What are you numbers?  Ask for revenue guarantees.  Don’t sign bad deals with them as it could kill your company.   Ask them to separate their numbers for Digital from Print or TV and then watch the fun.  Every single Internet Media company in India is losing money.     They just don’t want to talk about their digital businesses standalone.   They always try hard to mix it into their overall group numbers so they don’t look ugly.     Think about this…. If Rediff is the most trafficked Internet site in India and has a enterprise value of US$48M with cyclical revenue decline of  40% YOY then where do you think the rest of the Industry is at.  Don’t be intimidated by them.   They are just hiding behind their past glory days.   Time has come for small startups to kick butt.

Posted in India, media industry, newspaper, print, startup, Technology

About Nathan Kaiser

Comments

  1. Praveen says:

    What can i say, you have just hit the nail on its head.

    There are a lot of valid, TRUE points that makes a lot of sense.

    Kudos!

  2. viji says:

    Hi , Really nice post about the India internet industry… Even i have all the concern about india internet media companies

  3. Prash says:

    I agree with most your points but it’s unclear if you are talking about media companies or all internet companies in India. There are a few good ones out there, even though they also suffer from some of the issues mentioned.

    There are couple of other thoughts I like to add:
    1) Sharing of wealth by Founder – Infosys is probably an exception but even that is limited compared to some of the companies in US. Most founders are focused on keeping a larger share of the pie rather than to increase the pie size by sharing wealth. Employees who have stake in the company are definitely more motivated than those who do not. This applies to both start ups as well as established enterprises. I’m not talking about 10% additional salary benefit from stock options.
    2) Passion to learn and excel by Employees – I see very few people who have the passion or who are motivated to be the best at what they do – whether it comes to technology, design, product management, online marketing, QA, etc. Most of these skills are not taught at school (not in India), and it has to be self taught. I’m not sure if this is a cultural issue or what, but could this be another reason why companies run top down?

    Hoping that budding start ups with change this game.

  4. An excellent overview of the Indian Internet/Media Industry. I couldn’t agree more!

  5. Prashant says:

    Amazing you has just hit the nail at the right spot.
    The experience which I have with most of the media house is the focus to amass wealth by selling anything under the sun rather than focusing on what they can actually do better by leveraging the right skill. Another misconception which these media companies live in, is that they are technology agnostic but fails to understand that they are not unless and until they invest on technology (both hard, soft and people ware)
    Another popular situation they live inside the confusion whether they are technology solution providing company or Media Company which is technology enabled and lot of times confuse their clients by presenting literatures which will boost about their technology competency and media competency. May be they want to grab the order.

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