We Are Betting Entirely On The Vernacular Market

Roy De Souza, CEO and Co-founder digital ad solutions company Zedo, spoke to Dr Amit Kapoor, Honorary Chairman at the Institute for Competitiveness, on the peculiarities of this young industry.

Tell us a bit about advertising.

In particular, we focus on the Internet advertising industry, which includes mobile and video advertising. The industry is in the early stages in India and eventually stands to grow here since 50% of the country’s population is below the age of 25. This has two implications—one, this chunk of population is a very important target for advertisers because they are potentially brand-loyal. Two, close to 600 million people are not exposed to the majority of brands yet, so the young demographic makes the advertising industry very interesting from a global perspective. And nowhere else in the world has that been available. So the high Internet usage will drive the advertising industry in this country to become very large and increase market size.

As a repercussion of the transition of the economy from demand- to supply-driven, there is going to be a huge shift in publishing, advertising and broadcasting. How do you think these sectors will be impacted?

When I started the company, I thought the Internet was clearly a pull-driven mechanism with people being the users and deciding on the product, information and advertising they want. This is a simplistic view of the advertising world because the people with the money are the advertising agencies and brands. They view advertising as an opportunity for increasing market share. For instance, Volkswagen started two years ago with 6% brand awareness and this has increased to 36% now. So they’re seeing the market as a very traditional advertising market. They are driving brand awareness and advertising. But this does not imply that the print media is fading, in fact it is growing everyday. From the perspective of investment, the Internet is going to be a lucrative sector because it is still in its infancy and has 50 or 100 years of growth.

Looking at the Indian publishing industry and specifically the broadsheet media, the largest selling newspaper is a vernacular daily, Dainik Bhaskar and the next largest is an English newspaper. How do you span languages?

Zedo is traditionally a technology provider to these newspapers and publishers. Increasingly, it sells the advertising for them too. That’s a much bigger business. The technology business is an extremely difficult business to build. But selling advertising is a very profitable business because you get a percentage of the money spent. Our Indian customers include India Today, Hindustan Times, Star TV, UTV Bloomberg, Sony Entertainment, Walt Disney, etc.

But if you look at the growth we have another set of customers in the vernacular space like Dainik Bhaskar, Divya Bhaskar, Amar Ujala, Rajasthan Patrika, Punjabi Herald and Malayala Manorama. They will surpass The Times of India without doubt because their growth is consistent and solid. And in Internet penetration; the users who prefer to read English are already online. But they are just 1.1 million users as compared to the 1.15 billion users who are not yet online, and this huge chunk prefers to read the local vernacular newspaper.

The challenge is that the agencies consider [regional readers] second-rate consumers, and they [regional readers] won’t pay as much to advertise. The challenge is for the agencies to understand this. So we are betting entirely on the vernacular side.

We’ve beaten the competition by providing unlimited customer service, both in India and in the US.

You’re primarily going to be a company that looks at user information. This will rake up a lot of privacy issues. How will you counter this?

Zedo is like a content management system for a website. The website has two key pieces of software—the content management system, where all the reporters write articles that go through a process of editing and review and finally get published on the website. The second is an adserving system where the sales representative sells the deal. He does not write the story but takes the image from the advertiser and uploads it on our system. He sets the rules for what is to be shown on the web. Software is very complicated, unlike the traditional newspaper or TV space, as here every single user is identified.

And as a technology provider, the privacy issues fall mostly on our customers because here the technology is customised to suit consumer needs. So, if a user is interested in travel, we will provide the technology to figure out if he’s interested in travel and show travel ads to him. We entered the media space a couple of years ago, where we sell advertisements on behalf of our publishers and customers. Here again the privacy aspects fall on the customers and so we work with the Network Advertising Initiative in the US, which is very strict about what user information you can and can’t store. We just know a broad category of sites that our consumers visit. This is how their privacy is not intruded upon.

Who’s your competition in this space?

In the advertising technology space there are four companies. But in India, we have a dominant market share of 75%.

As a technology company, there is a very real chance of copycats popping up. What’s your competitive advantage?

Ad technology is extremely difficult to build. It’s a huge complex platform, worldwide. For example, we have tens of millions of users. We figure out which country they’re in, what website they’re in, what they’ve seen today and what ads are available for them. And in milliseconds, compute which ad will make the publisher the most money. We do it in about 20,000 decision-making servers around the world.

As a result, there have been no new entrants in this space since 1999. It’s a daunting task and entrepreneurs prefer to go to a different sector. So, we’re unlikely to see new entrants. The space is busy and there’s lots of innovation, but it’s all in bolt-on [add-on] products.

Google has no interest in being a partner to publishers. It would rather build the YouTube channel or Google+.