Digital-only news: Regulation, availability of capital to determine future

The first lot of these online entities is finally making money. But regulation and the availability of capital will determine their future

“Unmasking the killer behind the Cobra: How Kerala cops cracked the case.” 

“Tiger T-23 captured alive in the Nilgiris after 21-day hunt.” 

These were some headlines on The News Minute (TNM) on a typical morning this October. The news site founded by Dhanya Rajendran, Chitra Subramaniam and Vignesh Vellore remains resolutely focused on India’s five southern states. “We don’t touch on other states. Our niche is here,” says Vellore, CEO, TNM. 

This, along with its on-ground journalism, has meant that six years later, “TNM is very close to profitability,” says Raghav Bahl, co-founder Quint Media and an investor in the site. Its flagship, The Quint, shut the year with Rs 22 crore in revenues. “It has been profitable for the last four quarters and in the current one it generated free cash flow,” he adds. 

Six years after its launch, Inshorts, which offers news stories from different newspapers, agencies and websites crunched to 60 words each, is one of India’s largest news aggregators. In 2019, it launched Public, an open news platform a la YouTube. Till early this year, it had 60,000 “creators”, including ward members, MPs, MLAs, among local residents, in hundreds of small towns who use it to upload short videos on local happenings. Public brings in about 80 per cent of Inshorts’ 75 million unique users. In March 2021, Inshorts got over Rs 102 crore in revenue. “If everything goes well, we should hit Rs 150-160 crore in FY 2022,” says co-founder and CEO, Azhar Iqubal. 

The Quint, TNM and Inshorts are the happy green shoots of something that began in 2014 – the rise of journalism-driven websites offering or aggregating news. The number of Indians accessing news online has risen from 150 million in 2016 to over 461 million in July 2021. “The sheer time spent online and competition have increased,” says Neha Singh, sales director, Comscore India (see chart). “But how do you monetise?” she asks. 

That’s the first big question. 

Ad rates for digital news remain woefully low at Rs 50 to Rs 250 for every thousand unique visitors, according to data from media buying agency Lodestar UM. Print gets six times and TV three times that. Google and Facebook, by virtue of being the biggest gateways into the internet, have the largest audience. In 2020, they walked away with roughly three-fourths of the Rs 23,500-crore advertising money spent on digital. This leaves just about 20-30 per cent for thousands of digital brands. To this, add the pandemic. “During both these (Covid) waves, users and inventory increased but revenue fell,” says Puneet Gupt, COO, Times Internet.

The push for pay 

The Morning Context was set up in late 2020 with funds from friends and family. The idea behind the subscription-based business site was to do “long form quality journalism,” says Ashish K Mishra, editor-in-chief. It claims to have a renewal rate of 60 per cent on its small base. “Annual subscribers are in sync with the product. They hang out longer and their renewal rates are higher, too,” says Mishra.  

Many of the early movers and legacy brands are learning what The Morning Context has within the first few months. “It is important for us not to chase reach. What really helps us is deeper investment in our stories and video to get subscribers,” says Ritu Kapur, co-founder and managing director, The Quint. 

As the focus shifts, “it (the business) becomes a mix of advertising and subscription, and both have different compulsions,” says Gupt. While immediacy of news is important for the ad-driven audience, depth is more important for subscribers. It is, however, the advertising part that is the “mainstay for building subscriptions. Though ARPU (average revenue per user) on subscription is 20 to 30 times that of advertising, it will start showing only when there are tens of millions of users,” Gupt adds. Currently, India has less than a million subscribers to news sites. Entertainment OTTs, by comparison, have over 60 million.   

Reaching, say, 10-20 million paying subscribers is tough even for the Rs 1,625-crore Times Internet, which has 395 million unique visitors. “Lot of data science goes into understanding who is likely to pay or not. If I push the wrong user to a paywall, I will lose him. Algorithms on who needs to be shown the paywall are critical,” reckons Gupt. This requires investing in artificial intelligence (AI), key to Google and Facebook’s dominance. 

That’s the second question: where is the capital? 

“Raising money is a challenge,” says Vellore. “In the short-term, revenue models are not defined. Three years back it was possible to build a business on the back of advertising. Now, that may be true only for the bigger guys. The future of independent media in India will involve some element of reader revenue.” Mishra adds, “To build a sustainable business you need capital for three years. However, to raise even a million dollars (Rs 7.5 crore), we need permissions. No Venture capitalist (VC) or benefactor wants to go through that. The Wire is a Section 25 (non-profit) company; for-profit firms need to build some proof of concept.” 

Bahl agrees, “VCs are not investing in media; they prefer e-commerce or ed-tech. They will not fund your path to profitability, but may come in if you are profitable.” 

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, notified by the Indian government in February this year, have posed another challenge. The code has a grievance redressal mechanism with a heavy regulatory hand. While it has been taken to court, the fact remains that setting up and running an independent news organisation has got tougher. 

What drives traffic in the cacophony of thousands of sources is credibility. “The source of news online has become important,” says Shrikant Shenoy, general manager, Lodestar UM. The trickle of revenues into the digital news ecosystem then is the proof of concept that investors need.