Telecom service providers have seen a sharp rise in revenues from data services. As 3G and later 4G services proliferate, the demand for data services is expected to rise phenomenally—videos could account for 67% of operator data revenues by 2017. It is in this space that the US-based, 8-year-old Vuclip—which offers premium video-on-demand services for emerging markets—operates. Although much of its content is free, it has a subscription model that 6 million people access every month. Nickhil Jakatdar, the founder & CEO of Vuclip, spoke to Anup Jayaram on the way forward in the emerging mobile data space.
You have been part of three start-ups. How is the current experience different?
I’ve learnt that you do not always have all the answers. While we had very strong viewpoints on mobile video, networks being a challenge and content consumption pattern, we kept the business model open-ended. Eight years ago, it was primarily feature phones. Then we offered a mobile browser service. We had a strong team with two sets of people—one had PhDs with video processing skills and the other had a background in data mining. We realised the differentiator will come from personalising content. As content increases on smaller screens, personalisation was going to be important.
What was the big learning?
Consumers in emerging markets are value-conscious. They don’t like to pay. If you offer a subscription service, consumers will move on to the next free service. Mobile advertising was not anywhere close to as evolved as it should be. In emerging markets, we came up with a micro transaction subscription model—monthly, weekly and daily subscriptions—R100 a month or R5 a day. The R5 one doesn’t come across as overwhelming and it’s worth taking a shot to see if they enjoy the experience. To get the consumer to pay R5, we started integrating it into mobile pipes of carriers directly. We realised if you can integrate into operators, they can give you intelligence about the user, which can be utilised to provide targeted content. We also discovered if you give the consumer enough free content, they will come to the site. We use data mining to understand what genre of content is being consumed—then we can offer her premium content in that genre for a fee.
How many viewers you have in India?
We follow a freemium model—both free and paid users. In India we have close to 20 million free users, who are completely mobile users. They come to us across the app and the browser. Of these, we have 6 million paid users every quarter. There are two types of churn—voluntary and involuntary. Voluntary churn is when the user says she doesn’t want to pay. What we find problematic is involuntary churn where the user wants to continue using the service, but doesn’t have enough money on the prepaid card, for example. Such users churn out, but when they have the money, they return to the service.
How does sourcing content from others work?
We get content from about 270 providers—from the Hollywood types to regional as well as local. Our discussion with content providers is that we provide content and monetise it—the higher the monetisation for us, the higher is theirs. Initially, every content provider wants her content only on a subscription model. We show them that while they can make money with subscription, there is not enough scale. We sit with each provider and try to understand which part of the content they are willing to offer for free and what they want behind the subscription paywall. People love news, but if you ask consumers to pay for it, they are not willing. However, if you are looking for content such as the best of English Premier League goals, you won’t find original content on free sites. So there is a greater willingness to pay for such content. We keep looking for patterns on what people are willing to pay and where.
While YouTube has over a billion downloads, yours are in few millions. How do you compete?
We have 5 million downloads, which is small compared to YouTube. Many of our users have historically come from the browser side; the app part will rise now. We have 100 million active free users globally, small compared to YouTube. We are focusing on providing the best experience for consumers in these markets. When we went on the subscription model, people said no one pays. But on mobile subscription for video, we are far ahead.
Are there other revenue models apart from subscription and advertising?
Right now, 90% of our revenues come from subscription while the balance 10% is made up by advertising.
How do you compete with Hotstar and Spool, which are advertising heavily?
Hotstar, Eros Now and Spool are putting in significant amount of money in above-the-line and digital advertising. We continue to invest in consumer experience. Our 100 million users are doing it without us spending any money to get them. If you look at all these guys and see the uninstalled rate, it is very high. It’s a leaky bucket when you get a million downloads and 90% uninstall.
And how do you plan to compete with social networks like Facebook pushing video content?
We look at Facebook as an interesting partner. Yes, it is doing a lot of videos, but it is driving it through advertising. They are looking to monetise video inventory. Our video inventory is of a premium variety. Facebook is putting its software development kits (SDKs) into other people’s apps. The value that can be provided on Facebook can now be provided on third-party sites like ours. It is as much in Facebook’s interest, as they are running short of video inventory. They have more ad dollars to spend than video inventory to put it on. YouTube has the biggest video inventory and they don’t need Facebook. So they are after as many folks that can provide premium video inventory because Facebook alone cannot keep up the ad sales that their team is pulling up, which needs video inventory.
India has been an ABC (astrology, Bollywood and cricket) market. Is that the same for you too?
Most people believe that since Bollywood and cricket do well on all platforms, they will do well on mobile too. But our data shows it need not necessarily be true. In India, cricket is big, but when it comes to watching a full match live, the average time spent by the consumer is just 20-27 minutes. On mobiles, most consumers don’t have long session times, because a mobile doesn’t lend itself to long session time. We’ve seen 90% of sessions are of 10-15 minutes. It’s largely humour, stand-up comedy and sports highlights that people watch in 10 minutes. It’s no different in the US. It’s a very romantic notion to believe that whatever I watch on TV, I will watch on the mobile.
Do you have revenue-sharing agreements with operators?
Operators want to drive data, but that can be done only by video. To watch two movies, you need 2 GB, but not for a Facebook post. While we may never have a full data share, we will soft bundle or hard bundle video with the data pack. You already pay for a 2 GB data pack; the carrier will throw in video as part of the package. But that means taking money out of the existing pack. In the hard bundle, if you are paying $1 for a data pack, by paying $1.2 you can get a video pack that would otherwise have cost 30 cents. That is more popular.