Pocket FM: How an audio entertainment startup is building a global business

Pocket FM is awash with funds and listeners, but this is the result of a long and iterative process of finding great stories, finding ways to market them, and finding people who would pay for them

About six years ago, when Harsha Kumar of venture capital firm Lightspeed was two years into investing, video content was a big business around the world and growing bigger, but more so in India, riding on the data democratisation done by Reliance Jio.

But Kumar, two years into investing, was also struck by the rise of podcasts in the western countries. She also noted that while people were consuming podcasts, they were not paying for them. The content format was proven, but monetisation was not.

“Monetisation of a platform is a product problem,” Kumar tells Business Standard.

So, she looked for founders who would excel at building products, and ran into Rohan Nayak and other founders of Pocket FM. At once, she was struck by their clean product thinking, which she could spot easily because Kumar had herself played product roles at Ola and Zynga.

The odds were high. Audio books had not taken off in India (still have not, really) and there was free content sloshing around on YouTube (still is), which could also be just listened to despite being videos. Curiously, it was the YouTube videos that gave them hope, because many of the comments sought audio links or expressed the wish for an audio platform.

“We needed engagement, retention, and monetisation,” says Kumar.

These would require lots of content, meaning enough stories for everyone and their differing tastes, this had to be content that appealed to people over and over again, and they needed blockbusters. After all, Netflix was not built in a day; it was built by House of Cards, Narcos, and other hits. People go looking for blockbusters and often stay with the platform where they find them.

But Netflix is video, where there is a plethora of content. And what you do not have, you can buy, especially if you are Netflix. For audio, the content has to be created especially for the platform.

Long form as shorts

Pocket FM may be in a comfortable situation today, awash with funds and listeners (see graphics), but this is the result of a long and iterative process of finding great stories, finding ways to market them, and finding people who would pay for them.

Along the way came breakthroughs, the first of which was identifying long-form audio content as the thing to do. The second was to break the long-form content into short episodes, of 10 to 15 minutes each. And the third was arriving on micropayments as the smooth way of monetisation.

“Long-form entertainment used to be movies and television shows. We built a third category,” says Nayak. “What worked for us was micro transactions. Give some free, and then charge per episode. It is like gaming.”

Above all, investors understood that Pocket FM’s users are not audio consumers, but entertainment consumers. And Pocket FM, for its part, understood that this is not video.

Its stories are not books being read out loud. These are stories especially created for listening.

“If you close your eyes, you can visualise the whole thing,” says Nayak. It is engaging and fast-paced. In a book, you can go several pages without dialogues, or have a lot of description. Not in audio. Writing for audio is about explaining what is happening with interesting dialogue and without too many filler words.  

But more was needed to create a blockbuster engine.

 

Blockbuster engine

How do you find stories and how do you figure out which of them will work? After all, the Harry Potter books almost did not get published.

So, Pocket FM relied on its users and their feedback, instead of someone or a small team poring over scripts and deciding which of them would work. It started doing pilots, in-app and outside the app, and collected signals from in-app data and social media.

How many people click on it? How many completed the first hour? How many two hours? How many are willing to pay? After consuming the entire video, do they download the app? If a show fulfils these criteria, it has a high probability of becoming successful.

“We built a blockbuster engine,” says Nayak.

Spreading wings

Once the model was established, Pocket FM was emboldened to push the boundaries, literally. It went to the United States in March 2022 and the United Kingdom in January this year. Germany and Brazil are due in a couple of months.

The advantage with a content company is that it can replicate its India playbook, something that won’t be easy for an operation that involves a lot of on-the-ground action. If there is a story that has worked in India, it can be modified for New York with small changes, such as character names, locations, and cultural nuances (a romance in New York need not involve the parents).

The product and scale-up strategy need not change.

“India’s strength in numbers is a special advantage for consumer companies that want to go global. The R&D effort is far lower here. The cost of acquisition of customers is probably a 10th of what it is in the US. We can do a lot of experiments, and then take it to the US,” says Nayak.

For the rest, there is artificial intelligence. It can help writers write better content. It can help writers convert their stories into audio with a few clicks. It can also do hyper personalisation of content: One story that can have multiple variations, maybe even the listener’s inputs. 

That leads to user-level personalisation of a story.

More importantly, AI can predict blockbusters.

Listening to Nayak and Harsha, you wonder if it is fantasy, which is the largest selling genre on Pocket FM. That is, until Nayak gives you the numbers.

Pocket FM had zero revenue in January 2022. This increased to an annualised revenue run rate of $150 million in end-December 2023. Of this, more than $100 million is in the US.