What’s driving regional language video news apps in Rural India?

Over the past year, several young founders boasting impeccable academic credentials and work experience have been moving to small town India, launching hyperlocal news apps funded by venture capital firms (VCs), like LocalPlay, Lokal, Awaaz, and Circle.

LocalPlay is focused only on Moradabad, Circle gives you news about Agra, Mathura, Vrindavan; Lokal focuses on three districts across Telengana and Andhra Pradesh; and Awaaz across Uttar Pradesh. All are non-English and primarily use video snippets.

Smartphones and Jio driving content

Traditionally, Indian hyperlocal news has been the backwaters of print and regional TV. There wasn’t a serious business model for the largely ad-led nature of our media business, which meant any product catering to rural small town readers was unattractive for advertisers. Given this, it is interesting to see the sudden surge of interest in hyperlocal vernacular video news apps.

What has changed that we are seeing a number of startups emerging in this space? Two recent inter-related trends matter—spread of smartphones, which total about ~380 million at last count, deep into India2 (my short hand for the less-affluent non-English speaking India), the Jio effect, which has seen data prices fall by a tenth, and over tenfold rise in data consumption since its launch.

India2 doesn’t consume much text, instead it gorges on video. Increasingly short-form video content has emerged as the dominant media unit of India, spurring the emergence of homegrown social networks such as ShareChat, Clip, and Mooshak, as well as the rise of news aggregators such as DailyHunt, NewsPoint and NewsDog. And now they are driving the rise of hyperlocal news apps built around video.

Monitoring, monetizing challenges

The short video content in these apps is typically supplied by newspaper / TV “stringers”. They are paid ₹ 50-250 per video, though the odd likely-to-go viral video may well be purchased for a higher amount. Supply is not an issue —there is enough free content as well, which however needs to be authenticated, and “produced” or upgraded for release.

A start-up I spoke to estimated their annual cost for sourcing, authenticating, producing and distributing content (20-25 videos per day) to be close to ₹ 40 lakh a year per district. The authentication part is critical, given what we see with the spread of fake news and rumours across Whatsapp and Facebook, especially with elections around the corner. The other business challenge is monetization. This isn’t a worry for now, because the VCs are paying for the product, which is free to consumers. All of the hyperlocal players believe at some point that they will be able to monetize their audiences via ads. I am not so sure, for in India, there has always been a considerable discount on vernacular audiences.

Market sizing, second order effects

The number of digital local language news consumers varies anywhere from 106 million (KPMG & Google, ’16) to 180 million (Reverie Inc. , an Indian language translation start-up). The ad market that caters this audience is pitifully small— ₹ 750 crore for FY18 in my estimate. This comprises ₹ 300 crore for digital audiences of TV channels like Aaj Tak, ₹ 250 crore for those of print news sites like Bhaskar and another ₹ 200 crore online news sites such as DailyHunt.

So, 180 million audiences and ₹ 750 crore = ₹ 4 per user per year! Given that each district should yield about 50,000 monthly active users, we are looking at annual revenues of ₹ 2 lakh. But, perhaps local newspapers are a better proxy, given that hyperlocal apps are high engagement products like them. Vernacular newspapers have 350 million readers and get ₹ 15,000 crore print ads, that is, ₹ 400 per user, which we can discount to say ₹ 100 per user (excluding metro audiences and national ad flows). This has a potential annual ad revenue per district of ₹ 50 lakh.

That said, these apps aren’t sitting still. They are expanding fast. With 30-40 districts and larger audiences, they will have access to national ads. And we will soon see new interaction models and use cases emerging, which will spur new business models as well—via subscriptions or as a platform for e-commerce or government interactions or like a social network like Nextdoor. As they grow, we will see established players such as Jagran or Eenadu, or perhaps even Chinese firms (as we saw with NewsDog, Helo) flock to this sector, attracted by the fast growth and valuations.

Thanks to smartphones and cheap data, an entirely new sector has emerged. Only time will tell how it evolves and who will win.

The author is the director, of Blume Ventures