News start-ups find investors

Can VC-backed news start-ups make serious amounts of money in a space dominated by Google and Facebook

In his third year at Indian Institute of Technology, Delhi (IIT-D) in 2012, Azhar Iqubal (22) tried his best to read newspapers. But, he would give up after two-three lines. Over several months leading up to 2013, he noticed that many young people had the same trouble. That is when it hit him, "Why not create something that gives the news in two-three lines or about 60 words." He and his batchmate Anunay Arunav dropped out of IIT. With Deepit Purkayasta, a friend from IIT-Kharagpur, they launched News in Shorts as a Facebook page in 2013. Soon T-Labs incubated it, the founders of Flipkart invested, so did Tiger Global and many others.

In 2015, the name was changed to Inshorts, as they diversified. The app, which has raised $24 million so far and has had five million downloads, gets about a billion page views a month and is among the top five news apps in India (see chart). And, it offers exactly what Iqubal wanted as a student - lots (about 300) of stories of 60 words each from mainstream news brands every day.

Inshorts joins an expanding list of news apps and websites funded by investors. Bengaluru-based Dailyhunt, arguably the biggest in the game, has raised $40.5 million so far. "Our thesis is that the next 400 million internet users will come from people who speak local Indian languages first," says Virendra Gupta, founder and chief executive officer, Ver Se, the company that owns Dailyhunt. It aggregates content from Indian language publications, has e-books, has had 95 million downloads and gets a four billion page views a month. From Rs 35 crore in March 2016, Gupta expects revenues to cross Rs 100 crore in March 2017. That is almost equal to what NDTV, one of the more successful online news brands, makes.

The News Minute, Newslaundry, ScoopWhoop and Scroll are among some of the others. Note that these are not funded or subsidised or associated with mainstream media firms, like say Firstpost by Network18 or Catch News by Rajasthan Patrika. These are standalone brands launched by entrepreneurs that investors have found value in.

Why news apps and websites

Much of this funding is driven by the idea that news consumption is moving online. There are 343 million Indians online. In 2015, advertisers spent Rs 6,000 crore trying to reach them via search, display or native advertising. It is way smaller than say newspapers, which reach over 301 million people and made revenues of Rs 28,300 crore in 2015. But, ad growth in digital is a scorching 38 per cent, more than twice the industry average. The basics for growth seem to be in place. But, "news brands need sustainable USPs that will enable them to attract and retain a community of faithful users and define a robust revenue model," says Ashish Pherwani, partner and head, advisory, media and entertainment at EY.

Most brands realise that.

The News Minute, set up by journalists Dhanya Rajendran and Chitra Subramaniam and management professional Vignesh Vellore, began as a news aggregator for the five southern states. But "we soon realised that we were setting an agenda on most days for stories from south India," says Vellore. That is when it shifted to reporting and currently 80 per cent of its content is original. "The southern focus has helped us secure a definite identity. We are the digital voice of the south," says Vellore.

Newslaundry, set up by a bunch of TV journalists on the other hand, promises to question anything wrong with the media or generally, through text, audio or video reports and gets an audience that enjoys its take on issues. In the process, it has discovered that "Hafta (its podcast) is bringing in good numbers. Audio is a great way to engage with audiences," says co-founder and CEO Abhinandan Sekhri.

The challenges

Most of them have burnt cash building audiences, but very few are anywhere close to break-even, even on a cash flow basis. This is where the other parts of the business become critical. Since its inception in 2013, ScoopWhoop, for instance, was so focused on building an audience that it hired a sales head only earlier this year. This has helped double revenues, says Sattvik Mishra, co-founder and CEO, ScoopWhoop. Also, the ticket size of deals has increased from Rs 5 lakh or so to Rs 20-25 lakh over three-four months.

The News Minute plans to scale up by "spreading ourselves (editorially) in more areas in the southern states, to have more regional language reporting, different forms of content such as sports, film, art, culture and video content," says Vellore.

Inshorts has already launched a Hindi version, and could do more languages. Plus it is toying with the idea of taking the app overseas a la Zomato.

But "scale and monetisation remain challenges," says Mishra. "The big challenge is money, news is a high-risk business and not attractive as an (agenda-free) investment destination," says Sekhri.

That is global experience, too. Ken Doctor, president of the US-based Newsonomics, says that Business Insider, Vice, Vox, Buzzfeed and The Huffington Post grew huge audiences in the belief that growth would provide a big pay-out. "Today, all face the same truth as legacy news companies," says he. The truth is that audiences (and their habits) may move online but revenues don't always do.

Expert Take: Ken Doctor

A handful of digital news sites - Business Insider, Vice, Vox, Buzzfeed and The Huffington Post - passed over a threshold, getting either bought or seeing investment by legacy companies. They have large audiences, yet only Vice is profitable. The others operate on an edge. They've been driven by the belief that growth itself would provide a big pay-out. Today, all face the same truth as legacy news companies.

The Google/Facebook duopoly now takes 85 to 90 cents of each new digital dollar spent, and about 70 per cent of all those dollars in the US, with their share of the market growing worldwide. Relative crumbs are left over for both digital native and legacy news companies. That's reflected in the recent Guardian cutbacks, the small constant ones at the New York Times as well as by the wholesale jettisoning of staff by regional dailies in the US.

These companies can be profitable. On national and global scales, there is enough audience to support digital-only journalism. But, at what level? How many professional journalists can these start-ups afford to pay, as they focus more on profits and less on audience growth. In the US, readers have been beneficiaries of all this venture-founded journalism. Many of the best reporter/writers have joined these companies from the legacy world. Now, as these companies re-compute their own futures - and decide how much to abandon text-based reporting for more lucrative video news - we'll see how much of what they've built remains.
 

Again, the question: Not if, but at what scale.

 

Lastly, I reported both the NYT and The Washington Post have now surpassed Buzzfeed and Huffington Post in overall digital audience for the first time in years. That's a new sign of the times of what is going on in the shaky news environment.

Ken Doctor, president of the US-based Newsonomics