Shri Ajit Balakrishnan is a 6th batch alumnus of IIM Calcutta. He is a successful entrepreneur, an able business executive, and an admirable administrator. He had started his entrepreneurial venture with Rediffusion, an advertising firm now known as Rediffusion DY&R which he co-founded with Arun Nanda and Mohammed Khan, when he was only 22. He later co-founded PSI Data Systems in mid 80's with two other partners hailing from Stanford.
Rediff.com, a hot house of creativity founded in 1995, was listed on NASDAQ in 2001 and now ranks among India's most successful Internet companies. He led Rediff.com India Limited (Nasdaq: REDF) win the prestigious 2016 CIO Choice Award for the best Enterprise Email Solution for the third consecutive year. He also received the laudable award of Elite Strategic Business Communicator given by Association of Business Communicators of India in the year 2011. He was also named as the Chairman Emeritus of the Internet and Mobile Association of India (IAMAI). He has served as the Chairman of the Ministry of Information Technology, Govt. of India and also chaired a Committee appointed by India's Ministry of Human Resource Development on 'Research and Faculty Enhancement at the seven IIMs'.
Ajit is a popular writer. His masterpiece, The Wave Rider: A Chronicle of the Information Age, speaks volumes of his insights into the waves of changes involving industrial and technological revolutions shaping the modern world.
Mr. Balakrishnan served as the Chairman of the Board of Governors of Indian Institute of Management Calcutta for two successive terms spanning over ten years. With his extra-ordinary leadership, IIM Calcutta achieved phenomenal growth and international recognition during his tenure. The institute community will remember him as one of the most significant contributors to the institute.
Interviews
A serial entrepreneur who has made it against all odds, Ajit Balakrishnan, the Rediff.com founder and CEO, is a pioneer in the field of Internet related businesses. The second edition of the International Association of Advertisers (India Chapter) Webinar held at a Google ‘Hangout’ event on May 23 had the Rediff.com head discuss about his journey and IT’s evolution in the Indian Industry.
Along with co-chairs of the organising committee for the Series, Abhishek Karnani, Director, Free Press Journal and Manish Advani, Head — Marketing & Public Relations, Mahindra Special Services Group, the other panelists included Ajay Pandey, founder and CEO, Badhai; Gaurav Mendiratta, CEO, Sociosquare; Aditya Kuber, CEO, Media Sphere Communications and K Narssimhan, CEO, Commit. The hangout was moderated by Pradyuman Maheshwari, Editor-in-Chief and CEO, MxMIndia. Excerpts:
There is little doubt that the internet has come a long way since all of us started messing around with it around 18 years ago. The way I look at it is that it has often been a surprise to me that the web technology and internet happened first in the media world and my suspicion is that very soon we are going to see internet and web-based thinking in trade areas like education, healthcare etc what I call as the less-frivolous parts of human endeavours. I for one, am looking forward to that.
Q. With a large number of players venturing into the digital space, how according to you can brands fight with the larger players and continue to make a mark in the digital media space?
Let me say that every giant killer started off by being small. I remember Google when it started in 2000 was a tiny company with revenues to the tune of US $35-40 million. I think the successful ones that we have seen throughout the world tend to offer some consumer promise in a new technological way, which they manage to deliver. If you manage to do that at all times then you have a chance to upstage the big players. I have no doubt about that whatsoever; the field is wide open at all times.
Q. When you started Rediff, what did you expect in terms of users or economic outcome…?
I did not start hoping for any financial outcome from entrepreneurship. I saw an interesting idea at that time and was fascinated by the possibilities that the internet had to offer. I was fascinated by the possibilities of the internet by watching Compuserve and AOL experiment with the medium. So I told Arun that I am going to take a room somewhere in Fort, South Mumbai and figure out where this has to go. So I didn’t have the faintest idea where this would go to but yes, even today it is very unclear to me where the internet is headed next. I personally think that the technological tricks dominated the trade are going to pass in a year or two. In fact among the top 100 companies, everybody uses the same technology; there is nothing unique one can do. The problem in India is that early adopters of sophisticated technology are very small but all that will change soon.
Q. The same could be said of Rediff as well which has undergone a change in the way it now presents itself on the online space. Is that an indication of the changing times…
We essentially took a ‘tight look’ as one would like to call it. Web is increasingly becoming a visual medium today. That is different from 10-15 years ago where it used to imitate the newspaper paradigm. But it is now moving to be a visual metaphor. There is a big swing being observed towards video as well but as yet nobody in the world knows how video on internet will play out. But one part of it is where pirated video is played out more and the second part of it is bloopers. Nobody knows what will be the grammar of the 2-3 minute video but I am sure it will arrive soon. In the early days of television there were not much popular sitcoms, people played movies. But then the sitcoms arrived with 2-3 slots for ads, so something like that will happen for 2-3 minute videos as well.
Q. What according to you will be the low hanging fruit that will make the fence-sitters start using this second screen to complement television, newspapers etc?
I feel the reason why digital ad agencies are not as big as the others is because they tend to be conservative. I have been on that side so I know how it happens. Their best clients are typically the ones that are very large and that make products for mass media conservative audiences. Be it a Colgate or the others, the main market for such clients is outside the sophisticated audience. The internet doesn’t make as much sense to them because their growth comes from smaller towns and rural India. So, big ad agencies tend to be full of such clients. But there are clients in the financial services sector for example, who love to have a sophisticated audience. I’d say do not give up, wait for 2-3 more years and you will see big bucks coming to the sector.
Q. What problems do you face in online shopping for Rediff where you have many big players in the space?
As a group, there are lot of things that are going good for Indian online e-commerce sites like us. First is that private equity has more or less withdrawn from organised retail. So if you are based in some Tier 2 town and you cannot find a good phone in a retail shop you can rush online and shop for your product from there. There has been a sudden explosion in 2011-12 in the range of $ 600mn that has been pumped in the Indian e-commerce sector across say 50 companies. That has woken up the e-commerce industry in India. This injection of capital and excitement has made a player like us grow by 100 per cent year-on-year. While that is good news, the bad news is that infrastructure around e-commerce has not yet developed. For example, if you have a credit card you can shop easily but the failure rates with debit cards on the internet tends to be in the range of 40-50 per cent. The reason for that is that for debit cards to work well through banks it has to be communicated well through an internet high speed line and that kind of telecom service will be tougher to achieve in smaller towns and cities. So while there are 100 million debit card users there are only about 8 million credit card users. But this problem is being looked into. Once this problem is sorted the debit card e-commerce will jump up.
The other thing is that the cost for courier companies is high in relation to margins. So the courier companies need to be much more efficient and make money in no more than Rs 10 per delivery. This is the reason why some players have their own delivery people to capture the imagination of the public. But there are some who are doing a good job compared to Blue Dart and the others that follow a hub-and-spoke model. But like all things in India, these things take some time but when it happens it happens very well. E-commerce is about 2-3 years away from a gigantic boom in India.
Q. How big a role do you see for video playing on the internet in India?
The thing about video is that it jumps over the language barrier. The fact is that Indian language-based internet has not taken off at all but with video, you leapfrog that barrier. So video is indeed terrific. In fact the sales people keep telling me that the ad agencies have woken up from their slumber on the internet and they love video because that is something they understand well. So video is destined to be successful.
Q. How do you mass-produce content that is creative and engaging enough?
We don’t need to mass-produce content, we should see how we can cost-produce content especially for a 2-3 minute video. I think at most it costs just 5 lakhs but the idea is much more important there than the grand production. I think with television it has come to a point where the ads costs at least 1-2 crore behind an idea which is laughable. I think they have bought this upon themselves. But nobody knows what kind of an idea would work. We are in a situation which Charles Dickens was or the book publishing industry was in the 1830s. Charles came in and showed with ‘Great Expectations’ how we can write a book and we all know that there were more than hundreds of imitators after that. We need such kind of creative geniuses.
Q. In India, most ad revenues go to global top 5 websites that works up roughly to about 75 per cent. What is left for everyone else is a small pie. What do you foresee of this trend?
Advertising has such a trend where the winner takes it all; it is not just a web phenomenon. Take the newspaper industry for example, whoever is No 1 takes about 60 per cent of the revenues while the No 2 takes in another 20 per cent. So from No 3 to 10 barely mange to hang in while all the others hang in for prestige reasons. A similar thing is observed with channels as well where the top 2-3 players take in 70 per cent of the ad pie. So media is akin to ‘winner takes it all’ situation partly because audiences tend to gravitate towards what is most popular. The internet space also such a practice but that will change as the industry evolves. People who mix technology and creativity platform will emerge winners. When things begin to change there is an opportunity to move in. I have seen many creative companies that have created successes especially from Korea. I think it is possible in India too. First we have to get the audience then the revenues will follow.
Q. As an industry, we still hover around the 4-5 per cent ad pie. At Rediff, have you taken any initiatives to increase the pie at a faster pace?
Where ad spends is concerned, my sense is that big agencies should control about 90 per cent of spends in India. I think they are looking for ideas. If each one is able to produce one success story for brands, overnight the pie could increase significantly.
Q. Do you see independent publishers including bloggers becoming financially independent in India?
I am a great proponent about blogging and I think the innocence about the internet was blogging. Individuals who had ideas could go and publish it without the consent of publishers and editors…that is the touching thing about the internet. Unfortunately, the business model has not yet developed but I am sure that it will develop soon. For example, if you see the NY Times paper, you will want to read the columnists first. I keep wondering what if somebody decides to have his own blog; what are they going to do? Many of us will go directly to the blogs. So in a way the magazines and newspapers ought to be threatened. So why is blogging not economically sustainable in India is because of the scale. If there are 300 million users and if even 4-5 million users come to your blog the ratio would be about $2 per user per year. You will end up being a blogger with about $ 3-400,000 a year. That is much more than what you would get if you work for somebody. So we are waiting for scale to come about but blogging will be about text and video in the future.
Q. If you were to invest $ 1 million in digital in the next two years what would be the three ideas that you would chase?
It’s a tough one but let me give it a try. I think one will be where there is a language application which does not depend on English or anything; probably more voice-based in approach. The other would be something that will be big for professionals like lawyers and doctors because their business models are local in nature. The web will allow them to practice across more places. So an idea that will enable them to expand their business models further. The third would be doing something in education but I am not sure what. These three are likely to be models that will be successful. And all these will also be highly successful on the mobile platform.
(MxMIndia was a partner to the IAA Webinar)
(The ‘Hangout’ can be accessed at https://www.youtube.com/iaaindiachapter)
