September 04, 2006

Net Vibes

Help! Both The Hindustan Times (in the delicious Brunch) and The Times of India have declared that the Internet is the new happening social scene in India. While HT takes a look at it from the point of view that it has not done a great deal of good to the singles (welcome to my world, thank you) in the city, ToI does a 'what-the-hell-is-it-all-about?' story on the same, with a new mental health therapist (Samir Parekh is on vacation?) also thrown in for good measure. And to add to the mix, we have K's post on the struggle within traditional print houses on how to deal with the whole internet juggernaut, which I could not respond to because of a lack of time and the office firewall barfing on the infamous media blog he'd linked to from his pages.

Internet and social networking is hardly anything new in India. Just because Fropper spends a great deal of money on advertising, it does not mean that social networking, blogging and other 'community' oriented stuff has taken off in India. One of the best kept secrets of the online industry is that you don't necessarily diversify into other areas because there is essentially a market available for your wares, or even that you can do it better than anyone else out there. You often do it out a sheer lack of advertising inventory to pitch new clients with.

For most online properties, organic growth flattens out after a point (with the notable exceptions of Youtube and Myspace) and with that comes stagnation in your numbers related to your most visible property - the hallowed homepage. Almost every top website in India struggles with overbooked homepage advertising slots that are not available for any rates or for anyone for months to come. Thus you end up doing the predatory act, of moving into areas that really do not belong to your core set of competencies - like email, social networking - just for the sake of beefing up your stock of inventory. It often helps, when you get into such forays, if you are a Rediff or an Indiatimes, whose presence in the average Indian internet user's psyche is mind boggling.

Even with a 10% conversion ratio, for such major internet players, the numbers can turn out to be quite beneficial. Let us assume that of the half million unique visitors that an Indiatimes or a Rediff would get on a daily basis, the 10% conversion would translate into 50,000 users from the word go, which is an awesome number for any new service. In such set ups, they are not limited by infrastructure or development costs that constrain smaller start ups. And if you can convert even half of that 50,000 into regular users, you end up with 25,000 users who could comfortably be generating upwards of 8 to 10 page views per user. That's at least 200,000 page views worth of ads you can now now serve on a daily basis. Not bad, huh?

In all of this, the odd man out is Orkut, which is yet another of Google's much ignored services. For some weird reason India has fallen in love with Orkut all over again. The phenomenon is nothing short of an alternative lifestyle, where you have to be a wizard to follow conversation threads in forms of 'scraps' with everyone's replies stacked on different pages. And really, what is it with high traffic websites and awful user interfaces? Myspace, Hi5 and Orkut are nothing short of third degree torture to use. When did they change the rule book that you need to be completely unusable and slow like hell to be successful? And here we are breaking a sweat in trying to brand even our second newborns as a 'two point ohs' and pouring DHTML and Ajax goodness all over it.

Coming to K's post, what I can say for sure is that credibility is not a major factor anymore. One of the good and bad things about recent developments in media is that we are gradually throwing out the 'unbiased' label. Media was never unbiased. Hell, no human is. So how can something that is created by the same humans ever be unbiased? The difference between print and online right now is that they represent different activities. Online can't do a print. Most people don't log on to news websites to read stories in excess of 1000 words. They want it in a jiffy, scan and run back to whatever they were doing earlier. At the same time, print can't do an online. It can't really 'break' news anymore, that's a competency it has long forfeited to internet and television.

What has changed recently is reach. More people are on the internet these days, while you've probably reached everyone you'd want to reach with print as the medium. And even then our penetration is so pitifully low that the potential numbers are worth bucket loads of marketing and ad sales drool. Print also has a problem in terms of inflexibility with target demographics. I can advertise in a publication knowing the target audience, but my message would still be lost on a small percentage, who are the minority within the publication's readers, because they don't fit the profile I want to advertise to. The beauty of online ad delivery is that I can specify by region, by platform, by time and by frequency, who and where I deliver the ads to, even without forcing them to register on the website.

But none of this what is going to create the maximum amount of trouble for the traditional forms, print and television. What is giving them trouble are costs, of production and distribution. In print it is not good enough that you can create a lovely newspaper in QuarkXpress every night. You still need someone to dirty feet, hands and risk other parts of their anatomy in the awful world of print distribution. Costs of newsprint are awfully high and from what I remember it is a process that is still strictly regulated. Most of the publications can afford to sell their wares for an 'invitation price' because it is underwritten by the advertising, the rate for which is hiked every time the new circulation numbers come in, provided you've held your ground or even improved on it. Effectively, the reader gets an increasingly smaller piece of the pie because, well, he does not really figure in the picture.

Television pretty much follows a similar pattern, though production costs are considerably higher there (unless you are one of those fancy nuts in print who still own a printing press of their own), which shows up in exceptionally high advertising rates. Again, distribution is the nasty piece to bite on here. Ever wondered why some godforsaken channel that nobody wants to watch still shows up in your prime band? It is not because your cable guy has a soft spot for the channel, it is because he's been paid a nice sum of money to do it. That guarantees the channel a minimum degree of viewership, which in turn brings more than enough cheers to the ad sales teams.

That leaves us with the question that was asked, how do you monetize your internet audience? For starters, start up costs are minimal on this side of the town. A cheap dedicated server with truckloads of bandwidth will only set you back less than Rs 6000 these days. The average internet set up does not need more than a designer, a technology person and two for the editorial. Even with page views in the thousands in a day, an optimized website will generate enough cash by means of AdSense to cover the costs of at least half of the set up. That, of course, is doing things on the cheap.

When you have the moolah to throw around, you profile your audience like your life and your entire family tree's depended on it (a certain company based in Mountain View is very good at doing this, raking it billions every month) and keep your costs under control (not in the maha kanjoos way, but in terms of spending in places where you can actually recover your cost or acquire a new bunch of visitors). Marketing and advertising yourself does get you new visitors, but if you don't have a good product to flog, they'd never stick around. So, it is generally a good idea to be at least excellent at what you intend to in the first place. Rest is to incentivize every damn thing. How do you do that? Well, that's worth a lengthy post in itself.

But, to answer the core question, yes, people do make money publishing on the internet and some of them make a lot more than what you or I would give them credit for. The industry still suffers from the age-old ailments of inflated numbers and other artful misrepresentations, but the clients are wizening up and it is a practice that's very much on the decline. The numbers are still nowhere in the region of what print or television can boast of, but, like I said earlier, the production and marketing costs are lower in this side of town too, thus making my margins much more healthier. All you need is a bit of patience, a good product and oodles of respect for the user.

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