Sticking to basics always helps. IPO-bound Robinhood’s basic premise is keeping its retail investors happy. So it is using its own IPO to further democratise investing. Something Paytm may want to look into. India’s stock market regulator though has a very different idea on the basics of getting more people. Now, if you ask Indian media, they will tell you, it is those who got their ABCDs right who are winning the negotiation match with Google.
The ABCD of cracking digital news business
B- Bollywood (or just any celebrity content)
These are the most-visited categories on Indian news websites any day.
It’s a formula developed by some of the country’s top ad-reliant publishers after years of SEO research. Industry insiders say it’s based on the school of thought that ‘medium is the message’ – the expression, coined by Canadian scholar Marshall McLuhan, is often interpreted to mean that the forms and methods used to communicate information often come to dictate what kind of messages they deliver.
It wasn’t long before the digital business heads of traditional publications realised simply copy-pasting the content from their newspapers wasn’t enough to crack the internet. If they were to attract more ad money, more traffic to the website was key. Soon enough, the ABCD formula was born—based on Google Trends—giving them some indication as to what content was in demand and what wasn’t.
Gossip, annually refreshed pages about festivals, celebrity photos—all added to the fuel. “A single page visit to a photo gallery would often generate 80 page views for the website,” a former Times of India executive says.
“No publisher will tell you that they do ABCD content. They will be holier-than-thou,” they add.
But the moral aspect of this is not what I want to discuss. It’s about how years of ABCD content has become crucial now as an all-new stream of revenue is opening up for these publishers—Google News Showcase.
Launched in India this May, it’s a multi-million licensing program that pays news publishers to feature their content prominently on the Google News platform. We published a detailed story on the topic yesterday, if you haven’t seen it already.
A key formula used by Google to determine a payout is based on how much the entire Indian news industry generates for the search giant in ad revenue, and how much a certain publication contributes to it, sources say.
Naturally, publishers which went by the ABCD formula have a higher leverage. That’s what came to Hindustan Times’ aid when it scored a deal in the range of Rs 30 crore (~US$4 million) per annum for three years—around 4X what The Hindu, which doesn’t have as much ABCD content, reportedly got.
Times of India, which industry insiders described to have mastered the ABCD art, meanwhile is still in negotiations with Google, with talks delayed over a final figure amicable to both parties.
Closing talks surely can’t be as easy as ABC(D)?
Paytm could pick up a trick or two from Robinhood
Robinhood, the controversial US-based investment platform, changed the way people invest. By enabling a free platform. By gamifying investing. By ‘gifting’ free stocks as an incentive to users who referred other people to the platform.
So it was only fair that it continued that ‘tradition’ of upending tradition when it came to its initial public offering (IPO), which it’ll launch this week.
First, Robinhood decided that it would set aside as much as 35% of its shares that could be bought directly by the retail customers on its platform. Typically during IPOs, most companies pander to the big institutional investors, who’re considered to be the long-term keepers of shares. And only reserve ~2% of shares to the retail folks. By setting aside a third of its shares for the small investors, Robinhood is in effect saying, ‘listen, we don’t want only the pros to make money when the shares pop (rise) on the day we list on the stock exchange. You little folks have made us the giant we are today, so you deserve to own a larger part of this company.’
And on Saturday, it took things one step further. Robinhood decided to livestream a presentation about the company to everyone(!) Even the small retail investors.
Again, that isn’t what companies typically do. Since the usual targets are the big banks and hedge funds, companies do elaborate road shows instead, wining and dining the executives at these firms to hype up the potential of the company during its IPO. (A couple of days ago, we wrote about how even for Indian foodtech Zomato’s IPO, investment bankers were paid the big bucks for hyping the company to these large institutional players. Zomato’s had allocated only 10% of its shares to retail investors. That’s the standard regulatory limit for a loss-making company going public in India.)
Anyway, by doing the presentation on a Saturday and not during the workweek, Robinhood is showing retail investors, the ones who’ve a 9-5 job but trade stocks on the side, that its priority is them.
And while Zerodha, a platform in India that also democratised investing, isn’t going public anytime soon, fintech player Paytm* is (expectations are for an October listing). And it has its brokerage platform Paytm Money, which claims to have over 7 million users. Especially from the smaller cities and towns.
Although Paytm is loss-making, and has to pander to the biggies to lap up its shares during the IPO, it could still use a playbook similar to Robinhood to drive its growth. Because even if it can only set aside 10% of its share to retail investors, its ‘users’ across its multiple businesses—payments, ecommerce, insurance, investing—are still the little guys. So by making that segment feel special, it doesn’t really lose out on anything.
Special livestreams for the public, AMAs with the top executives of the company, meet-and-greet with the founder 🤷 . And maybe even something else.
Companies sometimes have a special quota reserved for employees to buy shares at a discount during the IPO. While that option isn’t extended to customers, maybe Paytm can lobby the regulator for an extension of this to have a discounted quota for its most loyal customers by whatever metric they choose?
It’s up to Paytm what it does to really drum up interest and subsequently its own growth over the next few months.
*Paytm founder Vijay Shekhar Sharma is an investor in The Ken
If you want to travel…
Mutual fund platforms get a little too mutual?
If you invest in mutual funds in India, what’s your go-to option for executing a transaction?
- Physical forms?
- Directly on the fund house’s website?
- Free online platforms like Groww, Kuvera?
- BSE Star?
- MF Utility?
Investors are spoilt for choice.
Now, if the capital markets regulator Sebi has its way, there could be one more.
On Monday evening, Sebi published a circular asking mutual fund companies and registrar and transfer agents (RTAs)—who process and maintain records of transactions—to band together and set up yet another ‘platform’ to be a one-stop solution for mutual fund related affairs. Primarily for executing stuff. And for free. The one thing the platform can’t do is dispense advice. That’s left to the licensed pros.
Sounds great. And at first glance, it sounds like a direct attack on all the intermediaries that enable execution. But as an investor, why should I really use this new platform? What’s so attractive? Based on the circular, nothing. It’s everything that’s already out there. And there’s no incentive for whoever is building this to really create an attractive and simple interface which users love.
Here’s an edited excerpt of something we wrote in August 2020 (BFO#95) about all this disintermediation being attempted by the regulator.
A few years ago, the Association of Mutual Funds of India (Amfi) set up a similar free platform to make the lives of investors easier for executing mutual fund related transactions. The objective was exactly the same as the new one. It was called MF Utility (MFU).
So, something on these lines already exists. And the former CEO of MFU doesn’t seem to find Sebi’s new circular quite appealing.
Couldn’t Sebi just have asked MFU to step up its game instead of mandating the creation of yet another platform?
That’s it for today.
Don’t forget to write in with your thoughts and observations on the reshaping of businesses, societies, and economies. We will be back tomorrow.
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