At Lightspeed, we are excited about entrepreneurs solving for India’s new internet audiences across content, commerce, finance and other categories. Companies like ShareChat (whose Series A we led in 2016) have paved the way for media platforms targeting millions of content hungry Indian users. As we explored content further, we were intrigued by news – not much disruption had happened here since Inshorts (great product, guys!) and there was certainly nothing that clearly targeted the “rest of India”. We wanted to form a point of view on what it would take to build a digital news company with meaningful scale. We will share some of our learnings in this post. But first things first – we love the category and here’s why:
Large, valuable audience for a high frequency use case:
High frequency uses cases are often the most valuable ones to go after – they enable customer stickiness, brand recall and deeper monetisation. News is a strongly habitual use case – whether it’s reading the newspaper every morning or tuning into the 8 pm news hour. According to the Indian Readership Survey 2017, out of the 380 million monthly newspaper readers, 80% had read a paper in the last week (in tech terms, WAU/MAU = 80%), while 45% had read one on the previous day.
In terms of media reach, news is among the top most categories, second only to Television. News was and remains one of the most important content formats for Indians after GEC (General Entertainment Content)
While the consumption of GEC happens across audiences of all socio-economic categories, news lends itself more strongly to NCCS A&B, making it an interesting category for advertising revenue. Furthermore, as per IRS, dailies have found greater affinity in the 15yrs to 30yrs age group – the largest represented segment in India and primarily responsible for driving India’s consumption story.
Lack of relevant content on traditional mediums:
Both television and print media have limited inventory – this increasingly ends up being devoted to either nationally relevant news stories or to the most viral content – scandals, Bollywood gossip, shouting matches etc. The decline of local news channels combined with increasing DTH penetration and the high cost of creating print newspaper editions means consumers often don’t get the news or opinions that they really care about. This is exacerbated in smaller towns where residents care most about local happenings. Think about it – the US government shuts down for over 25 days and Trump rallies for the “great wall of America”, but no one, literally no one cares about it in Arwal or Chamba!
Shift to digital:
Traditionally, television and newspapers have led Ad spend in India contributing to nearly 30% of total spend each. This split is changing at a rapid pace with digital growing at ~35% YoY. Lightspeed believes that news will become increasingly relevant for digital advertisers for a few reasons:
1. Immersive engagement for long durations – most digital news platforms can boast of 15mins – 20mins of engagement time per session
2. Sustained frequencies – at least 3 times/week
3. “Clean content” – most brands are hyper sensitive about where their ad appears and most news products can easily ensure very “clean” brand positioning
4. Concentrated access to NCCS A & B audience – brands/advertisers know they are spending on the right audience
A deep dive to understand what it would take to build a large company in this genre helped us discover a few challenges specific to news:
News is a commodity. Entertainment isn’t!
We believe that news as a category will attract tremendous competition in the early days. This is because unlike western markets, news in India is generated by stringers. Stringers are freelance journalists and supply news to multiple platforms. We have seen this before. If you turn on television today, pretty much every TV news channel will deliver the same news. What then makes an online news product stand out? Arnab Goswami did it for Times Now by encouraging debates. Live news broadcasts could be one approach (although easily imitable). Taking a cue from Bigo Live, live opinion chats could perhaps be another one. A digital news products will have to find a way to make their news delivery unique, entertaining and defensible. We believe that this category creates a product innovation challenge.
News does not lend itself to organic growth
News in itself can be quite boring. It is “need to know” for most people, but not “need to share”. It is believed that about 30% of the user base that receives news is likely deeply interested in news and an even smaller number of this user base is likely to “share” news. Building a news product that grows virally as such, is difficult. One approach to solving this problem is to use hyperlocal news as a way to build hyperlocal communities where people share opinions about the happenings in their region. News isn’t inherently viral (unless it is sensational), but opinions may be viral (generally polarising and thus also shareable).
Regional and hyperlocal will be indispensable; building a lean company will be a challenge
The largest consumption of print news in India is in regional languages. Furthermore, as digital penetrates the smallest towns in India, hyperlocal news becomes ever more relevant. Given the hyperlocal nature of sourcing and the importance of authenticity in news, news platforms will need to build local operations. Keeping operations lean will be a challenge, albeit an important one, in these businesses.
Monetisation may need to happen sooner than later
One can take a stab at building a news product but without virality these businesses could prove costly to scale and run. In such cases, startups will need to explore monetization sooner than later. The good news is that there is a huge base of local businesses that are keen to advertise to local customers and for whom other digital advertising avenues (e.g. FB, Google) aren’t targeted enough or often too expensive! Just take a look at the billboards in smaller towns – unlike Tier 1 cities, that are laced with brand adverts, in most towns across India, billboards are filled with local business ads.
Key here however, will be for companies to pick the right geographies and districts to expand into (analogous to Ola or Swiggy launching a city). For instance, there may be little point to setting up infrastructure for news aggregation in a region where the concentration of NCCS A/B user is low.
Personalisation will be paramount:
The bar for digital advertising is high and distractions for an average internet user are plenty. A big piece of the puzzle will be to build a platform that is capable of hyper personalisation. News is not just political content. News extends into entertainment, gossip, sports, business, jobs or even classifieds. and can mean vastly different things for different users (e.g. readers of Mumbai Mirror vs The Hindu). It will be essential for platforms to serve content that is most relevant to a user.
Lightspeed is very keen on news startups. We are looking for founders with a balance of incredible product chops and strong execution ability (seeing as how this segment can get operationally intensive). We believe that having a playbook for identifying the most attractive localities and having the right hook to enter a market will be critical to success. If you are building a news startup with a keen focus on the challenges mentioned here, please reach out to us at harsha@lsip.com and ishaan@lsip.com
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