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The last great battle for serving offline ads | Sandeep Bomireddi @ Adonmo
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It’s no secret that the business model of the internet is basically advertising. Think about what you spend time doing online - there’s a high chance that 80% of the time you are viewing ads.
And you might think that the business of serving ads to consumers is done and dusted, but there are still opportunities for startups to win ad dollars away from the googles and the Metas of the world, and one such startup is Adonmo.
Adonmo started life as a company converting cabs into ad spaces by installing screens on them. And this was a smart move if you think about it - the offline advertising market is the last great untapped opportunity, and cabs are the perfect way to run hyperlocal ads that dynamically change based on location and time of day.
But life had different plans for this young startup, and they went through multiple near-death experiences before finally emerging as a dominant offline hyperlocal ads platform that has raised more than 40 million dollars from the likes of Zomato and others.
Listen to the rollercoaster story of Adonmo’s journey straight from its amazing founder Sandeep Bommireddi in this episode of the Founder Thesis podcast, with your host Akshay Datt.
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Transcript
Introduction to Adonmo's Advertising Model
00:00:00
Speaker
It is no secret that the business model of the internet is basically advertising. Think about what you spend time doing online. There's a high chance that 80% of the time you're viewing ads. And you might think that the business of serving ads to consumers is done and dusted. But there are still opportunities for startups to win ad dollars away from the Googles and the metas of the world. And one such startup is Adorno. Adorno started life as a company converting cabs into ad spaces by installing screens on them.
00:00:28
Speaker
And this was a smart move if you think about it. The offline advertising market is the last great untapped opportunity and Cabs are the perfect way to run hyper-local ads that dynamically change based on the location and time of the day. But life had different plans for this young startup and they went through multiple near-death experiences before finally emerging as a dominant offline hyper-local ads platform that has raised more than $40 million dollars from the likes of Zomato and others.
Sandeep's Entrepreneurial Journey
00:00:55
Speaker
Listen to the roller coaster story of Adonmo's journey straight from its amazing founder Sandeep Bormiretti in this episode of the Founder Thesis Podcast with your host Akshay Dutt. Okay, so Sandeep, what got you into entrepreneurship? Give me like an origin story of Sandeep, the founder.
00:01:17
Speaker
I mean, I grew up in a ah small, not probably, it's called a city, but for all practical purposes, it's still a town, a very large village in a way, right, called Rajamintri in Andhra Pradesh.
00:01:31
Speaker
So for me, growing up, ah childhood was simple only, not that I wanted to be XYZ or anything. But definitely one thing that influenced so my behavior since I was a kid was I was always the one kind of getting people together, trying to do things.
00:01:52
Speaker
make things happen, kind of a kid. Mostly towards organizing cricket and football matches, though nothing to do with useful academic stuff. oh My mom was definitely an influencer who kind of got me started ah got got me started on this one notion of starting a company on my own and all of that.
00:02:12
Speaker
And when I was in college, once I got into ah Microsoft, the whole idea was to then, okay, what what more can I do and achieve? And that's how the whole startup thing caught on. Of course, that's also the time when startups were just coming up, right? Zomato just raised their, I think, their Series B.
00:02:37
Speaker
um All of Flipkart was already a fairly large company by then and that's the first time we came across an ocean of startups and it really caught my eye, mostly not for the right reasons, probably for a little bit of glitz and glamour that was being associated with it and also the whole interest to really bring people together and then do something fun.
00:03:03
Speaker
um So that's how I got into this whole startup scene. And ah what you're doing today is like very different from what you started with. Just take me through that journey, the the pivots that happened.
Early Startup Concepts and Lessons Learned
00:03:18
Speaker
what what was the What was the version one idea and you know what happened when that idea met reality?
00:03:26
Speaker
Yeah, so when of course, there were a few failed startup items that we were doing while in college. In fact, our current head of product, head of technology, and I agree tried a couple of products which failed. What kind of products? Our first version was something like housing dot.com before housing.com became a thing. So we wanted to analyze each pin code and give insights and then have listings and all.
00:03:51
Speaker
The second product was a listing platform for hospitals similar to how Zomato is for restaurants. When I say failed products, it's largely failure to really get them to market. We we kept on building, building, building and then at some point the interest died out and then we would make a switch. And both of them are pre-revenue, of course. Not that we've done much work there. um But with this time in Microsoft, when I wanted to start, I really was looking at how how we can do it differently this time around.
00:04:35
Speaker
ah That's how my co-founder, Shavant, and I got together. Shavant came from a different kind of a background. He did his master's in the US, then went to ISB. He had a little bit of experience building a product vertical for one of the companies back then. And when we decided to start up, we thought it would be a good combination, both of us. We obviously share a lot of good friendship around ticket movies and All of that. Of course, he's about five, six ah six years older than I am, but we almost gel like we are classmates. And for us, when we wanted to start, we were looking at a bunch of ideas we were seeing where we can do something different. So this one article about, I remember the company's name was Rapify. It's a US-based company. It was about them where
00:05:31
Speaker
they were being called the Uber of advertising. So the whole concept was they would wrap the cars based on which location the car was driving in. The customers would pay them only for the relevant locations and the driver would get paid when they drive in the locations that matter. It was a very interesting idea of making advertising paper value kind of a moderate for especially the mobility advertising. So we initially started wanting to do that. Of course, very quickly we realized that that's not 10X better than what's already there in the market and it won't So, but already there is the holdings.
Adonmo's Innovation in Car and Cab Advertising
00:06:12
Speaker
Holdings and also even car wraps was there right in India. Car wrapping was happening. What we wanted to do is just slap a Google Map platform on top and then start doing tracking and give sort of analytics on where your car traveled, how many of those hours were relevant. Let's say if someone's driving outside on a highway, the client shouldn't pay for that time rate of advertising versus when it's being driven in the city.
00:06:38
Speaker
So we we it was definitely an incrementally better model than what was there, but we didn't feel it's 10x better so that there'll be a radical shift. So that's when we were in Goa and we saw this. One question, this you're still at Microsoft at this time? Yes, still at Microsoft.
00:06:57
Speaker
Okay. 2015 and all, I just finished my GMAT. The idea was to go for a go to a business school. I got a good solid 750 in GMAT. And that's when I wanted to take a short ah entrepreneurship again after college. And that's how this whole thing, Shravant and I got together. And then Shravant was also going to start up at some point and then we got I'm assuming Sramant would have gotten in the advertisers, like the the the business development part of it. like No, so the funny part is so for us, it's it was a whole one and a half, two years of journey before we even got our first advertiser.
00:07:45
Speaker
The product we eventually started building was screens on top of caps, right? And there was no off-the-shelf. How big a screen are we talking about here? like It's like a one foot, ten to three feet kind of a LED screen placed on literally on top of the cap, right? And this is a rear-facing kind of screen.
00:08:08
Speaker
So for us, obviously this is not a product that we can just buy from the market and then put it on the car and then start running. right So we had to literally make the product. There was something that of course was there in China. China literally produces everything in the world. So we got that device. It was almost as expensive as a car. Our first device was one and a half lakh and a used car we bought to put the device on was $45,000.
00:08:36
Speaker
So that's how absurd the economics were. So we then got the device and entirely re-engineered on how it is made in China. And then we made it in India for 28,000, 29,000 rupees. That's when the economics started making sense. So in all this process of doing this and then raising enough money to put enough devices on the road, it took a solid one and a half year before we got our first ah meaningful paying customer.
00:09:06
Speaker
We of course had few family customers who were paying us for the heck of it, but the first meaningful paying customer came at the end of 2017 and mid of 2018. By this time you had quit Microsoft.
00:09:21
Speaker
Yeah, end of two glance mean a mid of is when I quit Microsoft. What was the trigger? like did Was it the fundraise? You said you raised some funds. Yeah, so our first check came in in a funny way. and We were obviously trying to pitch to a lot of investors, trying to see if anyone will take the bite in our hole.
00:09:42
Speaker
perception of how fundraise was done in startups so was very screwed up, right? So we were thinking of smart kids with an interesting idea would walk into a room, make a pitch, they'll walk out with a few million dollars. At least that's how we were portraying it. And we believed that was true. And I remember our first pitch, we did it to this man who was a very early investor in Google. We somehow got connected to him through family.
00:10:08
Speaker
And we were audacious enough to ask him for $5 million dollars on a pre-product, pre-everything idea. And we were very surprised when he turned us down. That's how naive we were. We were almost like, OK, this is not how this is supposed to work, right? You're supposed to give us the check and then conclude the meeting. So that's how naive we were. And when our first check came in, a very unexpected location at my cousin's wedding, randomly struck a conversation with a stranger about what am I doing and all. I was telling him that I'm working at Microsoft, planning to go to a business school. Oh, by the way, we started this new venture recently, and this is what we do. And in the process of not actually selling the idea to him, I did a very good job selling the idea to him. And in that conversation, he told me, okay, you have a check for 20 lakh rupees, right?
00:11:06
Speaker
I was like, okay, what are you talking about? And he then told me he's an investor in Silicon Valley. He backed companies at the early stages. That's how we got the first check. And then once after we get the first check, it it literally the last 20 odd million dollars we raised was a fraction ah of the difficulty that we went through to raise the first 20 lakh rupees, right?
00:11:30
Speaker
and Then things started rolling and when we decided to quit Microsoft, our managers also invested into the company. There was enough validation for us to go full-time and we were young. We didn't have much to lose. Luckily, for both of us, we come from reasonably well settled families where we don't have to send money back home at least every month. How much money did you have in the bank by the time you finished that first round? Company capital, personal capital.
00:12:00
Speaker
The company in the company capital, we raised a total of about 40 lakhs, 40 to 50 lakhs. By the time we quit Microsoft. Which might have seemed like a big number, but now you know with hindsight, it's not a big number. It was crazy big those days, we were like 50 lakhs and then we were already superstars in our friend circle. Yeah, yeah, yeah. Okay, okay.
00:12:27
Speaker
Okay, so then you figured out that screens is the way to go instead of a wraparound. Why is that? Because screens are dynamic, content can be updated. Yeah, it seemed interesting. So we saw this cab go around in Anjuna Beach area, right, in Goa, advertising party at Anjuna Beach tonight and all. It wasn't a screen, it was still a static thing. But the whole relevance of that car doing that messaging in that location in that time made a lot of sense.
00:12:53
Speaker
And the only way you can achieve that is with the actual screen with dynamically changes. And that's how we got into this. ah By then, actually, we did not know this existed in the world. There was only one small company doing this out of the UK, which pretty much started one year before us. And then Firefly in the US pretty much started just after us. So it was literally almost the first time in the world that we were attempting to do it.
00:13:21
Speaker
And this is when you got your first customer. Who was the first customer? So the first general customer was obviously someone from the family. One of our hospitals came on board as our first customer, but ah the first real meaningful customer was definitely IPR, where we close like a 7 lakh rupees deal, right? And for us it was like life-changing, literally 7 lakh was something that we never imagined that could come from our customer.
00:13:53
Speaker
everyone po And it was it also happened in a very unexpected way where they they were setting up shop in Hyderabad, so the IT minister then bought them to T-HUB to just showcase how startup ecosystem is. And then we somehow, they happened to meet us.
00:14:14
Speaker
and Then after that for three months, we were continuously behind the back to do something with us and that's how it converted. and They got introduced us to GroupM and GroupM turned out to be our largest customer even till late. Okay. and Okay. It was our second largest customer too late, so and that was a great conversion. Typically, large enterprises prefer not to directly deal with yeah the media properties but work through an agency. Correct. So that the agency can manage everything. Correct. Interesting. Okay. So, GroupM came on board for IKEA. I'm assuming someone like GroupM coming on board means that if it works, then they would really help you scale it up.
00:14:59
Speaker
Yeah, I mean, it wasn't that easy also, because for the longest time for GroupM to take, I mean, of course, this is a request that came in from IKEA, so they had to take it. But for us, the thing is, we were still very small, we only had like a couple of hundred cars, it wasn't meaningfully large enough for GroupM to even look at, even if they buy the full inventory, it's only about 10 lakhs a month, right? And it's not large enough for them to even add a new line item in their media plan for taxi top advertising.
00:15:29
Speaker
It did help us give perspective of how the industry worked and also the longest time IKEA was the only client that GroupM gave us. But of course, when we diverted the model from there, it was all GroupM was able to help us quite a bit.
00:15:43
Speaker
And why did you pivot? How long did it run with IKEA before you got more clients in? and No, I think right after IKEA, we era our ah see round be raised We raised about, I think, back in the day, a million dollars, which was six about six something crores. Largely showcasing IKEA as a primary client. and By then we also had some of these interesting conversations with some of these celebrity investors like Rajmali and the producers of Bahubali and all of that. So that that was another interesting story where
00:16:22
Speaker
ah When we were around the time when we were looking to launch, Bahubali was also releasing and we went to them asking to advertise on our platform and they told us that brands are actually paying them to co-brand along with Bahubali. So they kind of asked us to pay them to advertise them.
00:16:39
Speaker
yeah That's literally not the way we imagined this business model to work. And somehow then eventually they were kind enough to say, OK, you advertise, but we won't pay you anything. And we were obviously naive enough to say, thanks a lot for that.
00:16:57
Speaker
So after the movie came out and it was a big success after a few months we went back to them to just thank the producer for everything and all of that and then he asked us are you guys raising funds are you guys looking to raise funds and then we started acting very pricey we were like we just finished around we're not in the market to raise money this is going to be very big you know All the typical formal stuff that all of us say, right? You had become pretty savvy by then.
00:17:29
Speaker
You understood the but investor psyche well. ah that struggle The initial struggle taught you well. Yeah, yeah, definitely. i think So then they were kind enough to actually put in a check and also back us with few nice introductions and everything. And that kind of started our real big fundraising cycle. And that and then IKEA coming and then re-raising a million, all of that happened in a span of six months, which was which was the first big substantial move towards a meaningful company. right And um with that, we continued building, we scaled up to 2,000 caps, then Ant Financial's early stage fund called Base Capital. They've come and invested looking for the focus media of India, right? That was their thesis. And unfortunately- What is the term, focus media?
00:18:25
Speaker
Focus Media is a Chinese company. They're over $20 billion in market gap. They do ambient digital advertising.
Challenges and Pivots During COVID-19
00:18:34
Speaker
So they put up screens in buildings. They were, of course, looking for that, but we were the closest thing they could find in India. They were evaluated a few other companies who were doing exactly what Focus Media is doing.
00:18:46
Speaker
But what companies that are learned interesting for them largely run in a more traditional way. So they invested in us with the hope that someday we will eventually get into building the focus media model also. But they like the cap model. So as soon as they invested, obviously COVID came. Before COVID came, we were we went out all aggressive, spent 80% of our investment to buy hardware for the expansion.
00:19:14
Speaker
And then as soon as COVID came, the hardware god was proven obsolete, right? And we literally had very little money in the bank, about three crores. And that's when we made the pivot, wanting to give one final shot at it, and then to see if we can actually get somewhere. And for us also during COVID. You must have ah thought that you were building the Google of taxi top advertising ah with a layer of data and a performance marketing kind of an ability allowing clients to bid on locations and I mean that all that must have been on your road map right like prime locations will get higher revenue because people will bid more for prime locations and stuff like that and some estimation of how many eyeballs did your ah ad get and also why pivot I mean did you feel that ah
00:20:11
Speaker
Covid may be long term because I mean driving was not like something which one would imagine would stop. right People would continue to drive. ah So the market would continue to exist, even if there was a hiccup due to COVID. Yeah, no, two things. First, yeah they're running the cap model in India was fairly challenging because of bureaucracy, right? And we had some horror stories on how ah bureaucrat ah bureaucrats actually um literally took us apart. of
00:20:46
Speaker
using their power. Of course, and I don't blame them because we were operating in the grey area. And it was proving to be more and more difficult. Of course, we were before COVID, we were just trying to endure that and not look sideways. Things went to a point like this one story. they do Right before Dasara, Dasara is a big festival for cab drivers because they do all the high-foods and all.
00:21:12
Speaker
Two days before that sort of they started impounding all of our cars, right? They were literally, they impounded some 50 cars. One of the driver, they've even locked him up because when they impounded, he was all swag about, you don't know who's behind this company and all of that. Just because we won some award from the chief minister for best backup award, he thought we are backed by the chief minister and he was giving all the people.
00:21:39
Speaker
police officer and then he got locked up and he started getting these calls at around 6 p.m. in the evening and also the night and the next day and there was so much pressure from the drivers to get their cars out because they had to travel to their places so they had to take their families so a bunch of these and the police that we were dealing with then made sure that the cars did not come out for the next one week and we were constantly sitting at their offices requesting them to Let us go and all of this was after we have a certain level of permissions not that we were operating completely with without permissions right It was purely because that one officer did not want us to operate for whatever reason
00:22:18
Speaker
So that incident taught us that there's just too much power in one entity to shut us down overnight if they want to. So we definitely wanted to de-risk the business that was one. And second, while during COVID, we did not want to lay our team off because it was the worst time to lay off. And so we were continuing our payroll. Of course, all of us took voluntary pay cuts on whatever we could.
00:22:43
Speaker
And we had the last two and a half, three throws. And we did not know how long the lockdown or the whole effort go up. And as long as people worked from home, caps were not as much in use, which meant that we didn't have as much advertising inventory to sell. So it was kind of a force pivot for us in the short term.
00:23:04
Speaker
But in the long term, of course, it's so much more easier to run this business versus the Captop business. So it worked out in our favor. Okay. The Captop business was ah like a three parties in it. One is the advertiser who pays some money, then you, and then the Cap driver come owner. I'm assuming this would be like driver come owners whom you had deals with. ah ah How was the revenue split?
00:23:32
Speaker
Yeah, so was so it was you're right. It's like a three-way marketplace where we are the kind of enabler platform and then there are drivers who would come on board, have the devices and produce inventory and advertisers who would buy the inventory. So we would pay the driver per hour that they would produce in form of inventory whether the advertiser bought it or not.
00:23:54
Speaker
And we would, of course, charge the advertisers for every hour that they purchase. But what we would pay the driver is is obviously a small amount compared to what we charge brands. So that's where we were able to create the margin to run a profitable, I wouldn't say profitable, at least gross margin profitable business back in the day. And driver's work also made about some of the actually well-performing drivers made as much as $89,000 per month.
00:24:23
Speaker
which is literally half of their entire savings that that they were able to save for the month. so And on an average, drivers made about 2-3,000, which was still good, meaningful revenue for them. And brands would pay about, let's say, in terms of cab hours, they would pay about 100 rupees an hour. Basically, one car advertising the brand for one hour would mean one cab hour, which is about 100 rupees.
00:24:50
Speaker
Why would some drivers be better performing? this is like ah Someone who would drive let's say long hours, some of the cars had two shift drivers who would drive go it okay okay is drag prolong it mean better yield on hardware for but And your screen had an inbuilt GPS which would tell you if the car is in motion or not, where all is in motion. As soon as it entered specific geographical regions, it would automatically change the ad and you would have ads also being tailored based on the traffic conditions and a bunch of these kind of parameters, time of the day.
00:25:27
Speaker
And we did a bunch of interesting campaigns. We would do campaigns like when it's passing by a restaurant, we would do a happy hour for the restaurant and and nice if the footfall is low in the restaurant. right So we would do some very interesting real-time campaigns for these local friends.
00:25:47
Speaker
ah Fascinating. So ah what was the what was Plan B then? So this was Plan A, which due to COVID and due to the fact that it was a regulatory gray zone causing new problems, you thought was maybe there were scale challenges there.
Adonmo's Growth and Market Position
00:26:05
Speaker
So what was Plan B?
00:26:08
Speaker
I mean, we always had the vision to kind of build, ah so like literally our tagline was Google Ads of ambient advertising, right? So we always had the vision to be everywhere ambient. So I would say COVID kind of accelerated that. We first wanted to win the cap space and then get into this, but then COVID kind of made us jump directly into it.
00:26:35
Speaker
So, um I would say it's been there ah since the beginning. What is ambient advertising? Like what does it include?
00:26:46
Speaker
Yeah, so if you think about it, Akshay, so there are primarily two forms of advertising, right? One is when you're actively consuming something, you get interrupted and then you good have some ad. It can be TV, it can be digital in some cases, in some cases even print.
00:27:08
Speaker
i And then the ambient advertising is more subconscious where you're just going about by your day and then your subconscious consuming i advertising and content. So ambient advertising that way has a very unique value proposition in terms of having a very subconscious effect on your mind. And also that's also one of the traditional advertising spaces which was positively affected by digitalization.
00:27:39
Speaker
compared to other traditional formats like print, radio, TV and all, which were kind of disrupted by digital revolution, right? So, i mean advertising is any advertising that's in your ambient spaces, which you kind of consume passively. Like in an airport, you have all those screens. Yeah, airport, even your outdoor billboards, something that you see inside your elevators, all of that counts as ambient.
00:28:06
Speaker
so okay ah By the time COVID hit, how much revenue were you doing in the Captop advertising a month, 20, 25 lakhs a month. Besides IKEA, who else was there as customers?
00:28:27
Speaker
I mean we had a lot of local brands ah and then we have we had some relatively larger brands like Exide Batteries was there and then we had Apollo Tires. But mostly local brands because we were also ah mostly only in Hyderabad and a little bit in Mumbai by then. so aye Most large brands only come on board once you have like a pan-India network. <unk>t know go okay okay okay Okay, got it. So tell me about the the pivot then that you made. what Which part of ambient advertising did you go after? how did you What was the journey of building that up? So for us, the pivot was also an accidental pivot, right? It was not fully planned that this is what we wanted to do, elevator advertising or anything.
00:29:17
Speaker
So before COVID, one of our customers called us up saying that there is this company that wanted to put elevator screens in their community and for to approve that bid, they needed a competitive bid. That's how he spoke to us saying, can you guys send in a competitive bid? We told him we're not into that space, we're not interested. Somehow that transaction did not close and the same transaction came to us after six months saying, ah please give a competitive bid, whatever value, it doesn't matter even if you're interested, really give a go with the other company.
00:29:46
Speaker
And then that's when we sat down to think about, OK, should we actually do this now that we don't have a meaningful business at hand? That's when we sat down, gave our actual formal bid, and then we won it. So that's how we got into it. Very accidental. By then, the viva um we were, I think, down to about two crores or so in the bank. And we had to literally repurpose the entire tech from the cab use case of this and then build the entire hardware understanding and everything. And we've somehow miraculously managed to do that in three weeks time.
00:30:27
Speaker
right deployed our first screens. So deciding to get into actually deploying our first screen was just a three-week transformation. The team was like super focused because they've not been doing much work for the last six months due to COVID and they were like so hungry to get back. at So, this is in elevator or in the lift lobby? this that you In the lift lobbies, we started with lift lobbies and later started doing inside elevators as well. Okay. In data communities because back in back in the day during COVID lockdowns, and all people were just spending time at home and nowhere else. So, we started with data communities and eventually expanded beyond.
00:31:09
Speaker
ah yeah I think this has been happening in at least restaurants for the longest time. right like i remember even there was yeah One generation of companies who tried to do this back in 2007, 2009, they were trying to do it in CCDs, McDonalds and places.
00:31:28
Speaker
That's also one of the most frequently asked questions from investors saying okay they they've had bad experiences in the past and why do we think it will work this time around and all. So the that generation of companies which were doing it in 2006-07 focused on restaurants, they did not deliver great outcomes for investors, is it?
00:31:50
Speaker
No, they all burned money. In fact, some of them raised insane amounts of capital as well. So ah the back in the day, of course, that's when focus media became, or rather the initial success of focus media in China came about and they went public and all right.
00:32:07
Speaker
So it obviously inspired a bunch of entrepreneurs to do the same in India. But the problem was infrastructure wise, India was not ready. We did not have enough high-rise buildings. We did not have enough infrastructure on telecom site to actually deliver content remotely to screen. So people were running it out of spend drives.
00:32:26
Speaker
And the problem with places like CCDs and all is not like you have tens of thousands of them in the country, right? You could probably across the country have five, six hundred screens or thousand screens, which does not mean anything really. So it it did not work for multiple reasons and also icon of economies were not working out because hardware was very expensive.
00:32:49
Speaker
advertising costs were very low. There was not enough spend on consumer advertising. So all of it put together, things did not work then. And we did not know of those models when we started this in India. Only after talking to investors is when we realized, okay, there were models earlier as well. So it sounds like this is a market in which building supply is supremely important, as opposed to a lot of markets where you focus on building demand. Here, building supply is more important. like The more supply you have, the more inventory you have, the easier it is to attract demand.
00:33:26
Speaker
Correct. For us, luckily, it wasn't too much of a chicken and egg problem. Of course, we will need capital to add supply, which otherwise in a traditional way it would come from customers. But venture capital, that's where exactly is built for models like this, right which will help you hack your way to a large supply without meaningfully large demand.
00:33:52
Speaker
So that's how Zomato's check kind of was life-changing for us. how does ah Just tell me the economics of adding supply. like If you want to add a thousand more screens, what would it cost? like What are the different elements of that? Of course, there is a hardware cost, but beyond that, what else is there? like I mean, there's hardware costs and then there's cost of operating the screens in terms of the rent that we pay to the property owners. The overall maintenance costs that goes into maintaining the network, the network costs, a bunch of these costs. Of course, I can't get too much into specifics, but that's like what makes up our overall costs.
00:34:42
Speaker
What's like a ballpark cost per screen? ah We tracked a pretty low cost way of getting the screens and all. We also make them here locally. We have specific OEM partners, but product is designed by us. So a bunch of things that we do where we get that advantage both on pricing as well as design. So we also customize these screens to the interiors of the buildings and all of that.
00:35:08
Speaker
Customers, as in the size, the color, the look at these? Size, color, sometimes we add fancy frames around them to make it look like a painting and a bunch of things that we do. And this one-time cost is the biggest part of the cost or the monthly cost is equally high? Like what is the split between? It's mostly the biggest cost is obviously the rents that we pay to these buildings, which also is the moat which we have with someone coming into this business can't pay as much as we can do buildings because we have so much more advertising revenue coming in than let's say a network who is trying to set up five, six hundred screens.
00:35:48
Speaker
So, that kind of becomes a cyclical mode into the business. Classic network effect kind of business model. The more inventory you have, ah the more advertisers you will attract. The more advertisers you will attract, the more you will be able to sweat your inventory. And the more you are able to sweat your inventory, the better you are able to pay for acquiring more inventory. Correct.
00:36:12
Speaker
You said that the check from Zomato was a life changer. Tell me about that. like How did that come about? and ah you During COVID, you ran this experiment with one contract for one probably a residential high-rise complex, which you would have done. How did that convert into your primary focus leading up to the Zomato round?
00:36:32
Speaker
Yeah, so but when we still got into the business, the cabs were still our primary mode of business, right? And once we got in, we really gave it a proper shot. We then converted a bunch of other buildings and we got to some 300 screens. And I think we were doing about 1, 2 lakhs, 3 lakhs of revenue per month, ah and a little bit more eventually.
00:36:58
Speaker
So, with that it was enough traction ah also to go back into the market and we raised another small 3 million post-Covid. Largely still talking about the taxi top business that this is our main core and then we also have the side business which is already starting to give out revenue and all.
00:37:21
Speaker
So then after that 3 million we were able to reasonably expand. In the next six months we've of course decided to shut down our capital business and then we started focusing on expanding this business and we got to a reasonable scale of about 2,000 screens across three cities.
00:37:43
Speaker
Then and this kind of this was outbound or like responding to this ah RFPs or like this. We went on ground acquiring communities very traditional really cold call and everything right.
00:38:01
Speaker
Like the RWA or the the whoever is doing the maintenance for a residential complex would be your target audience here. okay And your pitch to them is that extra money free of cost. There's nothing you have to do. yes And of course, the infrastructure is something they also like because they could do their notices on the screens. They could put their pictures of their events. And also, we were giving the infrastructure for free to do that.
00:38:28
Speaker
and look And extra money, obviously, right? And we would do some more engaging content on the screen, which would engage users when they're waiting there and all. So that ah that when we were expanding on that, of course, the second wave of COVID came in and it completely slowed us down. Unfortunately, we lost our head of VP sales during COVID, which was a big blow to us.
00:38:54
Speaker
So, we then somehow picked ourselves back up and that was also the time when Zomato was going public, right? And Zomato then, obviously back in 2019 was introduced to us by AMP Financial folks, a mode to work as a customer and we were trying to do bike screens with them to see if that's the model that we got.
00:39:22
Speaker
cloud So, we were still trying to convince them on the bike screens idea and all around the time when they were going public. And then Deepinder one fine day after like a series of texts and then I left like let him be after a couple of months he just texts me saying can we have a call tomorrow. And then not knowing what the call is about, I, again, obviously went into the meeting having the bike screens as the primary agenda item. And then he just started talking about the business on what we're doing and all. And we obviously... He was up to date. He knew that you were getting into this lift lobby.
00:40:05
Speaker
Yeah, easy news because ah the round before that, VSS participated and we wanted the vendor also to participate, so I kept hounding him on the updates and what's happening. And of course, areas of collaboration on what we can do with Zomata and all, he didn't come into the round, obviously.
00:40:24
Speaker
But on that conversation, it was a very quick half an hour conversation. He said, not the byte screens, let's not talk about that. And he just asked more questions on the business. And then he said, can you guys fly to Delhi tomorrow? And it was Diwali that day, the next day. And we told him it's Diwali. And he said, OK, day after tomorrow.
00:40:44
Speaker
Then we flew to Delhi, man met them at their office literally 45 minutes and then ah he said, ah we we want to invest $20 million. dollars And then we we told them that we can't really taken that amount of money at this current scale, we don't need so much and all, and we somehow settled at the 15 million figure. And that's how our first big check came in. And by then, Zomato was of course a customer, and then their their teams have seen a reasonable traction on the platform, so they understood the product.
00:41:23
Speaker
So the vision completely transformed in terms of how fast we want to scale up. right And that was the first big meaningful the meaningfully large check that could be materially that could materially change our course of growth.
Financial Challenges and Operational Efficiency
00:41:41
Speaker
And that happened and from there I think we went on a rapid scale journey and we wanted to literally hit 50,000 screens in the next one year. so How many screens were you at when this happened, this conversation? About 2-3,000 screens. okay
00:41:58
Speaker
i mean the club right is ah Why did Zomato want to invest? what was Was it a like, say, Info Edge invests in a lot of companies purely as an investor? there's no there's no like It's not a strategic investment, it's a venture funding which they do. Yeah, it was mostly financial. and So they were they were investing in a bunch of companies. They invested in magic and they invested in culture and So the the delivery companies, of course, should rock it. And also for them, they like hyper-local space. They like the fact that local businesses will be able to advertise more effectively. They felt that this is a piece in terms of local businesses being able to promote themselves. So they liked the space. They understood the space also quite well because they were they had a sizable, large advertising business selling to restaurants and all.
00:42:55
Speaker
So, they liked the company and it was a financial investment that they have made. okay okay okay guard okay but good And this was, of course, also during the frenzy days of twenty twenty one twenty early when valuations didn't make any sense at thought yeah as all. Because also, obviously, what we were valued at was a frenzy day valuation rate. How was were you valued at in the tomato round? We were valued at 770 crores post money.
00:43:32
Speaker
wow And the year before that we had 3 crores of annual and new revenue.
00:43:41
Speaker
great How much was your net worth on paper at that time? 100 crore plus. think both of us together we held about forty a over 40% of the company then.
00:43:57
Speaker
incredible mind-blowing experience right to and how quickly the decision was made to invest such last summer something that we couldn't wrap our heads around because we were coming from the days when we spent literally one year trying to raise 20 lakhs right and yeah so I mean, that was only the beginning of it, right? We thought our struggles are done now and we are in Disneyland stuff like that. to all of you too, I'm surprised that with big money comes big troubles. What kind of big troubles?
00:44:38
Speaker
So we, of course, Big money forced us to set ourselves on a course to kind of hit rapid scale. right Like we spent literally 18 months getting to 2000 screens and we wanted to get from 2000 to 50000 in 12 months time. And that would mean literally tripling our size every month at that point, leveling our size every month kind of.
00:45:03
Speaker
So we we went we went on a rapid hiring spree. We went from being a 50, 60 people company to being a 1200 people company in a span of three months. And literally every new person we hired, his job was only to hire more people.
00:45:21
Speaker
and While we were going on the trajectory, of course, we were delivering on the growth targets, at least on the supply side. ah we We were totally ignoring demand side, because at least at that point, the perception was money is not a limiting factor.
00:45:39
Speaker
So halfway into the journey, we got to about 20,000, 25,000 screens in, I think, six months, five, six months. ah we We get hit by this hard reality that markets literally shifted 180 degrees and that no more new capital is coming into the company. And by then we went through Most of our 120 odd crows we raised and we had like 30-40 crows and then our monthly burn was a million dollars a month. right We were burning by 8 crows a month. You had a couple of months of runway basically. Yeah, 3-4 of runway and it was it was just mad and we were sure that we were heading into a mountain and we are going to die.
00:46:28
Speaker
So, we had obviously two options. One, to absolutely cut costs and even undo the growth that we've gone through, let go of properties and all of that and then come to again a bare bone structure where probably we have five, six thousand screens and then control everything.
00:46:51
Speaker
Or we could do something very radical and try to survive the scale while making it work before we one run through the money. So we obviously took the later part, later approach where it was super risky which meant we could die but we still felt we could make it work.
00:47:09
Speaker
So we didn't have enough time to, again, hire all sales people to get the demand up. Demand, of course, did not grow along with supply because we weren't focusing on it. It was still around the same level what where it was when we had 3,000, 4,000 screens. So what we've done was very interesting. Actually, we went and repurposed the people who were otherwise selling to apartments to get screens onboarded. And we bought them onto the team, which sold to businesses.
00:47:35
Speaker
to get business for the screens, right? And to our surprise, they've performed phenomenally well. And in just, I think, a couple of months, we came to break even, um at least at an EBITDA level. And they started delivering unbelievably good numbers. And we We were able to control the burn and get things under control and ever since we've continued to kind of stay near that bit of positive while we grow the business.
00:48:13
Speaker
Amazing. What kind of customer segment were you targeting? Like what kind of advertisers? Like ah local businesses? ah or like Now 25 odd thousand screens obviously we could do both. We had a team going after the large national businesses which was also working out and then we had a team that was going after actually small local businesses which was also working out.
00:48:38
Speaker
So we were doing both and I would say local businesses was uniquely solved by us because there are not many options for them to advertise. But at the same time we were very big with the large brands as well.
00:48:55
Speaker
I used to run a local business of about 15 years ago which was a spoken an English training business offline and I remember at that time my advertising options were largely newspaper inserts because newspapers were getting delivered so that's how you would reach homes and I'm assuming that this death of the newspaper meant that they needed more digitally savvy options and which is where these screens would have come in Yeah, so for at least the local businesses, is the problem is slightly more complex, right? Of course, one, ah newspapers are dying, but the other option that they have digital is just a complex world. They then have to hire a digital agency, which meant it's additional retainer costs. And even then it's like so complex that they don't understand what's going in and coming out.
00:49:44
Speaker
they needed something more simple which they can understand at the same time which can effectively target even however digital savvy campaigns you run it still targeting a three kilometer radius is insanely difficult.
00:49:56
Speaker
You have no idea how much accuracy you're hitting. So I think that's a sweet spot that we figured that we solved for a smaller businesses. For them, this is a very clean replacement of the newspaper insert. right The newspaper insert is also hyper-local. You can speak to the vendor who's delivering the newspaper in a particular society. you know so yeah yeah I understand, amazing. What kind of revenues do you do now? What's your ARR or MRR? Last year we have done over 100 crores, we closed it around 107. Wow, amazing. How much do you expect to close this year? This year we would be most likely growing another 50%.
00:50:39
Speaker
What is the split in this? How much comes from large chains and how much from hyper-local businesses? Largely for us, we have we have a big participation from the local businesses, which are in some of the cities make up more than half of our earnings. And we of course have the agencies that contribute to some revenue. We do large national direct brands.
00:51:04
Speaker
that contribute to the revenue. And then we ah we do other ancillary things in some cases. We do some activations in these communities, which again is a very small portion of our revenue. So that's how the mix of revenue for instance. What do you mean activation? Let's say a brand along with so let's say some um someone like aoses along with advertising on the screens, they also want to display a car in a community. We sometimes facilitate that as well. Because you have the relationship to make it happen. And you're still at 1200 headcount? What's your headcount like? No, we are at 800. How did you rationalize? How did you figure out whom to keep, whom to not keep?
00:51:57
Speaker
ah So largely the 1200 count, the p the difference between now and the 1200 were essentially growth teams. So once we've repurposed people into selling to brands, there was natural chart where people who did not want to do this format of sales.
00:52:17
Speaker
Because the earlier format of sales is where you had to give money to communities. It was so much more easier. And this format of sales is where we had to take money. So there was a lot of natural junk where people moved out, found other things to do, who did not want to do this. So we we did not do any explicit layoffs on our end. It was more natural adjustment of the business that got us to where we are.
00:52:39
Speaker
How do you balance the two growth engine the supply growth engine and the demand growth engine like you know in terms of which one do you focus more on ah and which one do you want to invest more in?
00:52:51
Speaker
So it's not a this or that or anything. So it's more in phases for us, very honestly. So last couple of years has been purely on ah ah focusing on demand, getting to profitability, improving model at scale, and all of that.
00:53:11
Speaker
And now, after the most recent fundraise, of course, i again, the shift now is back on growing number of screens. While having said that, we want to grow while remaining a bit profitable, right? So we have to now do both simultaneously. So it kind of goes in phases where at different phases, one takes precedence over the other, but kind of we have to keep balancing both throughout.
00:53:41
Speaker
okay okay Okay, interesting. ah So what is the recent fundraise about? So you had the Zomato raise and then you had that near that experience where you had a couple of months of runway and somehow you managed to bring the revenue up to survive. Then what happened after that?
00:53:58
Speaker
I mean, then now obviously the whole industry went into a slump, right? Number one, we were dealing with issues of reduced advertising spent from a bunch of these new age brands and all. So pre the slump, our largest 40, 45% of our revenue came only from startups, right? Like there were crazy spending and that was coming from new age companies.
00:54:24
Speaker
So now we had to deal with the fact that that went to almost like 5%, 10%. And then we were dealing with the bad investor sentiment, bad valuations.
Adversity and Business Discipline
00:54:37
Speaker
um ah Literally, we grew 10x. And then we had to really ah argue over transactions to get a 30%, 40% jump from what we had earlier.
00:54:51
Speaker
which is also the more sane valuation given the context of things today. ah So it was largely just putting our heads down and doing what the business needs and really not thinking of anything beyond making today work and just focusing on that core bit of execution to bring things to profitability. So it's it's been that. And of course, this round has come after almost two years since our Zomato round, which was a fairly long time given we almost ran out of money ah in 2022 itself.
00:55:32
Speaker
So that taught us discipline. The good thing about times like this is we kind of build in the systems in the company to get those resilience going. And I really love the the saying that adversity kind of makes you stronger. Even as a human being, I believe the ah longevity secret is really giving yourself controlled adversity.
00:55:58
Speaker
Same thing for companies, I strongly believe that for us, at least the Zomato, post-Zomato experience really was a controlled adversity which made us build in a lot of systems into the company, which now makes us a very efficient business. Like literally, for us to get from ah ah get to the 15, 20 million dollars of analyzed revenue,
00:56:24
Speaker
In our lifetime, ah we've literally only spent a about less than $15 million. And this is including the pivots we have made and everything. and which is And also the assets that we have currently. right So which ah which is something that we are very proud of, because so that's not something that will come when there is excess money around and there's too much capital to be spent.
00:56:53
Speaker
So which is which is good now, we know exactly on what what are our priorities how efficiently we can build scale from here how much exactly we need to raise and Can you Teach me how to make a business efficient like like you said that this adversity forced you to run the business better How do you run a business better like what is what are some of those?
00:57:17
Speaker
mantras yeah ah principles mean I might have I might have come across as someone who now has been there done that and knows everything but honestly everything we know will be proven wrong and just a month right so I'm no expert at it but what I can tell from our learning is so it is very important to really question every bit of spending right and when money is not an option you you won't realize but there are so many small choices that you make which goes in as culture to your team so you probably sitting on top would
00:57:54
Speaker
probably be thinking okay it's only 10 lakh rupees or 15 lakh rupees or whatever but it's not that 10 or 15 lakh it's the signaling that you're sending downwards into your organization which happens and compounds at every level by the time it goes to the bottom you're actually spending a lot of money which was not really needed right.
00:58:12
Speaker
So, it's more that cultural shift of even questioning that spend off 1 lakh rupees on, do we really need to spend this? Is it worth spending this money? And which again compounds as it goes downwards now. and Now, in fact, Shavant and I, we have a tough time convincing the teams on ground to actually spend.
00:58:31
Speaker
yeah along with the same and know and i'll be got interview you we need to start spending again to grow faster and all of that. So it's it's a good balance that we bring and it's mostly just the behavior that you kind of get emulated within the team about.
00:58:52
Speaker
trugality And frugality is one of our top core values right now. And um these are some of the small non-obvious things that kind of happens when you don't have enough money. And I think that's that's our learning from that. So that's about controlling costs. What about growing revenue? Because you managed to grow your revenue pretty fast, right? Like to hit 100 crore last year. What was the previous year before that 100 crore?
00:59:19
Speaker
We did 70 crores on that, but 70 and 100 was on the same supply. So we had the same number of screens. So you were able to sweat the inventory better. Correct. Almost all of the increase was straight going into EBITDA. So for us, ah that the growing revenue part, honestly, we as founders, we shouldn't take too much credit for it. It's a lot to do with.
00:59:48
Speaker
the right people who are in the right places, who really got it done right. And for us, some of the people like literally, Sura is one of our first persons in the team, right? He's like employee number two, who joined us even before we came in full time to the company.
01:00:08
Speaker
he he still continues to head a big part of our sales team. And obviously, along the way, we had some other brilliant people who joined us, some from GroupM, some from um other media segments. So I think It was largely driven by our sales leaders and how they've transformed the company. All we were doing is kind of giving guidance and really setting the tone on this needs to be done or we might die tomorrow. right That really motivates people. And what happened during COVID and the actions that we've taken as
01:00:49
Speaker
probably promoters of the company to not let go of people to give attention to what do they need then what the company needs right. That really helped us because that also gave this cultural notion that people first and I know it's cliche but when you put people First, they put the company before themselves. right And that was actually true. Everyone really rolled up their sleeves, worked very hard during that phase to make things happen. And and also a lot of luck for them but things to work on. We shouldn't take too much credit also beyond a point. I think founders often struggle with the managing sales teams.
01:01:32
Speaker
I mean, you could end up being too prescriptive, like say creating a script, this is how you sell the product, and asking you how many calls did you make today, et cetera, et cetera, at a smaller scale, at a larger scale. I mean, you understand what I was saying, like getting too much into the details versus if you let it be too much, then again, people may slack off. How do you find the right balance of managing a sales team?
01:01:58
Speaker
I think for us, we at ah at least at the vice president level, we give a lot of freedom. We let them set their own processes and their own way of working. And presidents right now all in sales. And then we have a sales director who works very closely with us, who the vice president's reporting to.
01:02:26
Speaker
at the Obviously, the sales director and vice president's level, we only talk about the larger numbers we need to hit and we don't get too much into, okay, this is the kind of process you need to run for your team, or anything like that. right So each vice president sets their own tone, discovers their own process that works for their team. Some of them are very method driven, some of them are more, um I would say unstructured, but very still very effective. right And we believe in our learning, we've also understood that it's kind of very important to do that because India, as you travel across the states behaves very differently culturally, right? And what works in Hyderabad might not work in Mumbai, might not work in Delhi.
01:03:08
Speaker
So having that decentralized system while still maintaining some kind of a common culture across was important. And I think that's what worked in our case, driving sales. And for that reason, we do not, we of course have those weekly meetings, review stuff and all, but we don't set too much of process on or how each of the ground teams need to function until the last level.
01:03:34
Speaker
Are these ah tough calls, these weekly review meetings, or are they like fun calls? the ass-kickers type, right? We don't really like you either perform or leave kind of of style of management. ah we ah we And of course, all of these people are people that have been with, a lot of them have been with us for over five, seven years since the beginning of the company. We play cricket together.
01:04:12
Speaker
Almost every week and some of them are even our schoolmates and ah people that we grew up together as well. So there's inherently a lot of trust. So very rarely that we will have to do conversations, tough conversations to really ah make them perform or anything like that.
01:04:35
Speaker
But of course, time to time there will always be one that scenario where we'll need to really put our foot down and then act. So that is there, but otherwise our management style is not ah the stick and carrot style of management.
01:04:54
Speaker
ah This round which you've just raised is ah like the largest round you've raised till the date of 25 million. I think it took you a fair amount of time, right? About one and a half, two years to get this done. ah What were your learnings at the end of getting success here? like What worked? and Is it just about being patient and things will eventually come around? or like you know What did you learn?
01:05:20
Speaker
I mean it's a little bit of obviously being patient and just focusing on the business and all but also realizing that there's some things that not everything can be controlled by us. like A bad environment is something that's just unfortunate not just for us even the VC firms who are trying to raise capital for them as well.
01:05:44
Speaker
So ah largely it is about still trying to do the things right way and trying to focus on the metrics that matter, not doing too much of to too many choices purely focused around only raising the funds in the short term and really continuing to build towards long term irrespective of what happens short term.
01:06:08
Speaker
And for us, luckily, our existing investors believed in us to back us for this round and they kind of started ah putting in money and that's how it snowballed into a much larger, much larger fundraise. Who were the new investors who came in, like the major new investors? and So he had Rijal Capital come in there as Singapore based fund. So the the partner who came on board was introduced by Zomato. Interestingly, he was an investor in focus media in their early days.
01:06:44
Speaker
okay
01:06:47
Speaker
So a partner called Matt, so he understood the business very well. So I think that's one of the crucial things for our investors to have because other otherwise not everyone would get a business model like ours and it's not a very conventional model where you have like 10 or 15 comparable models, you know exactly how they turn out to be and all
Future of Ambient Advertising in India
01:07:14
Speaker
of that. right So it needs a little bit of that experience of handling and looking at models like this and which comes from the China experience. So that partner was investing actively in China market 10-15 years ago. He understands China models very well.
01:07:35
Speaker
but as obviously China would have been a very easy place to raise funds from if not for the geopolitical issue that was going on. right So that that way it took us a little bit of time, but we didn't get people who really get us and get the model on how it works.
01:07:54
Speaker
is the ah the you know What's the basic picture that as more people as more urbanization happens, there will be more supply of inventory and ad rates will increase?
01:08:11
Speaker
Yeah, I mean a basic pitches is right. 80% of Indian advertising budgets are chasing literally 10% of India, less than 10% of India, which is quite literally the urban affluent. And they are responsible for over 50% of consumer spending.
01:08:30
Speaker
or almost 80% of discretionary spend. So these audience, luckily for us, if you look at the India context or even Asian context in general, are very densely located in case of India in a very few cities.
01:08:50
Speaker
And the places where you can find them in extremely high density are extremely large IT parks, gated communities, and these kind of co-working spaces, and Hartford kind of gym networks. So for us, the thesis is to get to as many locations as possible where we can tap into this 10% to 20% India.
01:09:15
Speaker
which would which is the which is not the Bharat, but the India, right which is responsible for all the consumer spend, and then become a meaningful part of their day-to-day life, where they might find out small interesting information on the screen, or they might discover a brand offer, or whatever, where we add a little bit value to their life, and then get embedded into their life. So whether you're going into your gym, or your office, or your home, your elevator, So we want to be present there talking to you, engaging you and interacting with you. So that is our larger thesis. And then obviously advertising dollars will then become kind of a byproduct when you have that level of distribution. That's our thesis for business. Okay. And what is your estimate of the TAM for this market, the total addressable market? How big is this market going to be?
01:10:10
Speaker
So just as I've said, ah ah the like for any advertising product, this is true, right? Even for Google or Hindu or hot style, the core product is really attention of users. So you're not selling a print ad or you're not selling a TV ad or anything. You're literally just selling attention.
01:10:33
Speaker
So that way, in the advertising world, your tabs between media types are very fluidic. So it's not necessary that, let's say, if we are growing to a scale, we will have to pull money out of other ambient advertisers, right? And especially, as I've earlier mentioned, a big part of our mix comes from non-ambient advertising budgets, non-outdoor budgets, right? Almost 70% of it.
01:11:01
Speaker
So for us that way we would look at our time as the advertising dollars that are chasing urban effluent as a category and that's almost 70% of Indian advertising spend. And that way I think it's a fairly large time and there is scope to build a fairly large network as well. And in China to give you a perspective focus media has over 800,000 screens. And that is that is only one of the similarly large companies. There's another Shinsha which is again 600,000 screens and a bunch of those kind of screens. And all China probably has over 3 million screens. So that's the scale that is potentially possible and can be built in India over the next 10-15 years.
01:11:54
Speaker
ah What is the total number of screens in India as yeah as an estimate? like ah paper tv on ah I'm only talking about advertising screens, like the 4 million in China is all advertising. In India, today probably there will be like 60,000, 70,000. Wow, okay. okay a long long okay okay ah I assume there would be probably then a lot of VC interest in this space, right, considering the like the massive gap between India and China and where India would most likely go to, ah like it's a good bet for a VC to take.
01:12:36
Speaker
Yeah, it's definitely a it's ah it's definitely a good bet obviously as a founder. We strongly believe in that and that's the reason we're in this business to begin with. But even if you look at the macros, right India is almost at the tipping point of the consumption boom and almost every new per capita GDP dollar that comes in gets added to the discretionary spend.
01:13:01
Speaker
bucket, which would mean even with the 3x in GDP will 10x in consumption with a 10x in increase in consumption advertising will further compound to a maybe a 15 or 20x, right?
01:13:12
Speaker
So there is a very strong indication of a large ah vicious cycle of consumption leading to more advertising leading to more media spend and everything else. So we are at the beginning of it and I think as long as we can ah get the distribution and then retain ah the kind of customers and meaningfully engage them on a daily basis, there's a very large opportunity to build in India, especially in the ambient space, because this is not a space where the large heavyweights like Google or Facebook can come dominate overnight. And that's one of the things that not very good about India is that most of the advertising dollars are going to companies that are not Indian, right?
01:14:00
Speaker
which is something that also is good to change. And I think in India, that shift today, though it is almost 60% Google, Facebook would not be as much in the times to come. So this is like the land grab phase right now, the the more supply you can lock up.
01:14:20
Speaker
the more probability of being the dominant network. Who are the other horses in this race, like funded companies in this space of ambient advertising? yeah they are They are a bunch of smaller regional players. Of course, we control 85% market share. oh sort That's significantly large and that's also a very strong mode for the business because never ah in any of these countries like China, Vietnam or any of these other countries where this model was prevalent, the number one player was ever displaced.
01:14:59
Speaker
And the player that gains the most market share to begin with will continue to dominate the market. And is that also is the reason why the literally tens of competitors who come in and die every year over the last four, five years also is happening. Amazing. Yeah. what What's the supply split here between office buildings, residential complexes, and commercial establishments?
01:15:28
Speaker
So for us, about 70% makes a presidential, and 30% makes his offices. And as Jim's and all, it's a small percentage. But in terms of audience, more than fifty i am now about 50% audience come from offices, and 50% come from residential.
01:15:49
Speaker
As we go forward, the contribution of offices is only going to increase. At the end of the day, structured workspaces are increasing significantly faster than structured data communities. site So it's going to be much larger.
Advice for Founders on Ambient Advertising
01:16:08
Speaker
OK, fascinating. OK, give me one second. Let me look at, I had a bunch of questions to ask you, which I have written down. OK.
01:16:17
Speaker
um
01:16:20
Speaker
For a founder, what advice do you have with respect to considering ambient advertising? because i mean you probably don't want a founder to burn money on ambient advertising when they're not ready for it. ah So you know when is a company ready for spending money on ambient advertising? When should a founder consider this seriously? At what stage? ah What are some best practices? Can you give some examples of people who did who got an outsized a ROI on the money they spent for ambient advertising? And what were the hacks that really worked for them?
01:17:01
Speaker
Yeah, I mean, ah so two ways of looking at it, right? if you're If you're in a phase where you need to do a lot of brand promotion, which typically comes once you hit a certain revenue scale and there you have to start building your brand more than getting into your performance marketing and all of that. So there it's like a no-brainer because when you're getting into brand, it's very difficult to do targeted branding and I mean, advertising is one of those kind of media platforms which can let you still be very targeted while you're doing brand promotions. And on the contrary, it also works very well for extremely small or very small new companies where you for you
01:17:50
Speaker
getting to this particular set of audience is all that matters. And there is literally no other platform that can get as targeted as we can when it particularly comes to locational intelligence or data like that.
01:18:07
Speaker
So we've seen brands be extremely successful on both these both ends of the spectrum and um I would say in India especially we are still a very early brand country. right a Majority of our brands are still some hundred million in revenue And India as a country also will go through that tipping point over the next five years where majority of the brands will start moving their focus on performance marketing to brand marketing, which will then meaningfully grow frequency for those brands and all now of course, Zomato, Blinkit and some of these brands have already gotten there. But a majority of still D2C brands are still sitting on the performance side.
01:18:51
Speaker
So these are some things that will change and I think that's the fitment for These two ends of the spectrum and particularly for the smaller claims. They were very small startups who literally did not have Capital to spend on anything. They just had anything five six thousand rupees. They only did couple of communities got their first meaningful user traction from there. They of course coupled it with a bit of on-ground activation of talking to people, getting um getting their customers signed up and all of that. And those cases worked very well when you do a combination of, especially for smaller brands, when you do a combination of offline activation plus the screens.
01:19:32
Speaker
And what are some case studies of successful use of ambient advertising? Like, for example, should you put a QR code on your ad? How long should your ad be? Should it be video or static or an image? and I'm assuming these are all muted, right? So there would be no audio playing here. So what is your best practice?
01:19:54
Speaker
oh So for us, the typical life cycle of a user is that you walk into your elevator lobby or your building or a reception. You look at the screen, you discover something, find something interesting. Your first instinct is to pick up your phone, Google the brand, right? To interact with the brand. If it's already something like a blanket or a tomato, you exactly know what app to open, what to do.
01:20:17
Speaker
If it is, let's say, something like your neighborhood store, there's not a real action that you would take online, but you would rather visit the store whenever you feel like. Or if it's, let's say, a real estate one, we'll probably pick up on the phone number ah on yeah on their website when you Google it.
01:20:34
Speaker
So your most obvious action is to complete the brand action with your phone. So there's not too much value in having a QR code slapped onto your campaign, unless it's a very unique, difficult to discover kind of a product, right? ah Let's say ah SEO is not there and then you still want people to discover you, then probably QR code will still act as a funnel to get users to you but we would still recommend people actually start spending on this format of marketing when there is reasonable SEO around their product because that's the lifecycle user journey that happens. So in terms of content
01:21:17
Speaker
We've seen a significant shift come in terms of the production from having very static imagery when we started this model three three and a half years ago to a lot of at least 60% of the brands now do interesting short videos. And that kind of coincided with how social media trend also shifted more towards a short video campaign. And our media is exactly the same form factor where your production that you've done for your social media can be reused onto the screens.
01:21:46
Speaker
ah which is another macro trend that really helped the media and obviously short videos are always more attractive compared to a static imagery. And in terms of using um call to actions, ah the most effective way was obviously for local guys, phone numbers, which they would put if you're a real estate kind of folks. i For the larger guys, they would put unique offers that were going on our experience and our work for customers. Would someone actually take the effort of noting down a phone number?
01:22:22
Speaker
Or you need to have a video picture okay and then do it. But again, as I said, it it only comes if they're not able to discover the brand organically on the web. So it also is one of the misconceptions. A lot of times brands think, OK, we're not getting leads from the platform just because people are calling that phone number on the screen.
01:22:43
Speaker
But they would see increase in leads on organic Google traffic. And we will have to tell them that, OK, see, this is also traffic caused by that because this is the user journey. So it's a non-obvious thing that doesn't always come to the client, which also is a little bit of education that we need to do and expectations. Right. So before you advertise, make sure a consumer can just open his phone and find you. ah Otherwise, that money is not well spent. If you're a D2C brand, then probably you need to make sure you're on all the QuickCommerce apps so that someone can just search for you on a QuickCommerce app in order and order.
01:23:20
Speaker
you should be in stock also, not be out of stock and stuff like that, okay. Yeah, we've a bunch of times had this experience where as soon as the campaign went live, there was a spike in demand, everything went out of stock and then the brand had to come back to us request to pause the campaign and we are usually very flexible with pausing and restarting campaigns because it's fully digital. still So that that did happen a bunch of times with customers. How important is it for you to build attribution in your product. And by attribution, I mean, evidence to an advertiser that your money spent on this platform has led to X percentage increase in sales. Yeah, so because we are largely categorized as top of the funnel media, right, ah which is largely- What does that mean, top of the funnel media?
01:24:15
Speaker
So top of the funnel is where your intent is being built. Intent to purchase a kind of product, right? And then bottom of the funnel is where your final action to actually purchase the product happens. So as you go from top to bottom, it's more branding and then more performance at the bottom.
01:24:30
Speaker
So we as a platform are primarily catered around targeted branding as a mechanism. right So we are efficient while building intent because we only get you to the right kind of people that are relevant to you.
01:24:46
Speaker
So, it's not as critical as it is for, let's say, some of these performance-oriented channels. Let's say you're an online news aggregator. There, it's super important for you to prove that you are getting branch conversions because everyone on the artistic space does it, right?
01:25:02
Speaker
So in our kind of media, um especially performance, let it be i connected to TV or even some of these other IP radio kind of platforms and all, it's very difficult to track conversions performance and all.
01:25:17
Speaker
So there it's not as critical, but we do a bunch of things in terms of brand uplift studies and all of that, which we ah which help brand managers to understand what is the impact that's coming out. But mostly the brands that spend with us are more concerned about whether they're reaching the right audience or not, then whether the audience are converting ah right after looking at them or not. And how do you measure reach?
01:25:43
Speaker
So we obviously give them a certain signals that they can pick their target screens based ah on on in terms of income segment or ah location and all of that. And then we have very accurate data on how many people live or work in a particular building.
01:25:59
Speaker
And because we are in the most obvious areas like elevators and all, you have to pass to those locations. So it's not exact eyeball impressions that we give, but it's an opportunity to see that it's created for everyone in the building every day. So then they're more concerned about the reach metric in that manner.
01:26:20
Speaker
okay okay okay amazing um Okay, so what is your product? What's the role of tech in this? What has been the product road map so far and what is the product road map going forward? Is this more of a tech business or a logistics business?
01:26:37
Speaker
Yeah, so I'll actually simplify things a little bit actually. So most of the media businesses, kind of their primary focus will be on bringing in traffic, right? And that is either by offering a core value, like let's say in case of Google search or in case of let's say a daily hunt kind of case of content that they put on the platform and whatever.
01:27:02
Speaker
So in our case, new traffic is literally new buildings that we acquire every day. So every new building we acquire is a new traffic that's coming onto the platform. And the good thing for us is we don't have to pay to retain the traffic. Because once acquired, it's acquired. And we don't have to constantly compete to keep the customer. That's what number one keeps our cost low. So now that we don't have to solve this side of the product problem, our entire focus is on really building an efficient tech stack.
01:27:32
Speaker
which can do advertising number one more efficiently and which can also run the operations of the company in an extremely efficient manner where it's super obsolete right for us to run the model. So our product is more focused on both these fronts. So on the advertising we do everything from integrating into the online programmatic demand funnels to actually giving meaningful insights back to customers in form of reports and all of that. And we also have a dashboard where brands can come on board, pick and choose their targeted parameters, go live on, and all of that as well. So now we are doing a few experiments around how do we make it more consumer facing, how do we enable transactions on the platform, and all of that as well. So that's where, which is a more logical progression for us is what we do. How would a transaction happen on an elevator screen?
01:28:29
Speaker
like Of course, it's not on the screen on the screen, but you scan a QR code or use your NFC to tap on the screen and then you do the transaction on your phone. so Some of these models is something that we are experimenting with, which can be a big thing for us. Okay. That sounds pretty cool.
01:28:54
Speaker
So the screen would be NFC enabled and based on what I had displaying it would transmit a link to the phone which goes and touches the screen. And I guess most of the phones that an urban affluent user would be using all of those phones would be NFC enabled. Okay. Wouldn't there be some sort of Security firewalls on the phone or like NFC generally works through tap. that There's NFC usually works. OK, even nowadays you might be seeing those NFC enabled visiting cards that people just tap on your phone to exchange contact details and
Reflections on Startup Life and Team Success
01:29:34
Speaker
all. OK, no, I haven't seen those yet. They're very big outside, i especially in China and also in India also now they're coming.
01:29:43
Speaker
So NFC usually works, but even without NFC, QR is a very yeah standard mechanism that everyone understands. So that's also a good way of interacting with the screens. Like show a QR code, which if you scan, it gives you ah an additional discount just to drive an immediate purchase action or something like that. get interesting Interesting. So so then it's it's becoming more like enabling of commerce happening. Fascinating.
01:30:12
Speaker
Okay, so ah and let me end with asking you broadly advice for founders around fundraising and because you've had a phenomenal fundraiser journey from that 20 lakh to now 25 million. ah What are like your top three recommendations to founders who are building something which needs VC money?
01:30:35
Speaker
Yeah, I mean, it is obviously very stage dependent, especially to early stage founders, I would ask them to be super cocky about what they're building, and then just shoot for the stars, right? Especially when you're in early stage, if you are being very humble about what you're building and all, no one really gives a damn. You really... cause the oil What is the age of the talent? People who are stage are only the crazy ones, and crazy ones don't... by rational thinking, they're only by ah dreams and ambitions, right? So that's definitely my recommendation for early stage founders to really be out there, make as many connections as possible and then feel like you're the most important person in the room.
01:31:20
Speaker
right And this exactly goes inversely as you scale to a larger scale, because at a larger scale, investors want to see founders being more stable-minded, not extremely self-obsessed, and then being open to really looking at how things are rather than being blinded by a particular kind of ambition and all of that.
01:31:45
Speaker
And these founders are also the investors are also will increasingly get more and more risk averse and so will their mentality keep evolving as your stage keeps moving forward. I think at that level, it's more about building trust, making sure that you deliver on your promises, even if the promises are not extravagantly large right and being consistent in what you say and you what you do.
01:32:14
Speaker
and end of the day it's all numbers All of this is, of course, on top. But numbers make a really big difference, especially for businesses like ours, which are not necessarily some fancy tech that you're building, which will make money after 10 years. So that that, I think, is my suggestion. But I want founders to understand that selling is the first skill that they need to have. And in many cases, literally, the only skill that they'll need to have.
01:32:47
Speaker
as long as you have the right kind of team to build things with you. and And if you are a founder who are not so good at selling or who's usually shy, I would definitely recommend finding a co-founder who is good at doing that and then inspiring them and convincing them on the vision that you have. So that would be my satisfaction. Wonderful. ah What was your valuation in this round, the 25 million round?
01:33:16
Speaker
It was post money about $115 million. How much is that in crores? Almost a thousand crores. Amazing. So you are now personally worth like a couple of hundred crores.
01:33:35
Speaker
Yeah, I mean on paper, this is smart i believe ay many times the founder's journey is, I mean obviously the glitz and glamour and all of that, that's what media talks about, right but very often founder's journey just feels like it's not worth it and it's very extremely common.
01:33:57
Speaker
um because You're literally the last person to be paid after everyone in the value chain. and there okay let Let me ask you this. Are you living your dream? You told me that back in college you you had these big dreams, you were attracted by the glamour of being a startup founder. Are you living your dream?
01:34:19
Speaker
i would I would say of I did not imagine things to be this hard when we started doing this and I have definitely aged 15 years in the last 5 years for sure mentally and physically. Probably mentally I have aged 25 years in the last 5 years.
01:34:40
Speaker
10 years of aging. But about the moment of gratification is really when one of your early employees will was able to give that down payment to buy a nice house which they otherwise couldn't afford.
01:34:57
Speaker
or really when you return capital to one of your early investors who made a 10x on top of what they have put in by believing in you. I think those are the moments that are going and very often I feel founders are given way too much credit than what they deserve actually to be honest. I think beyond a point it's literally ah the team that runs the show, right? And in India and even abroad what happens is very often founder is put on the pedestal in and everyone thinks that's literally everything. He's making everything happen and that can't be far from the truth.
01:35:37
Speaker
So in many ways, I really like where we are today because we're doing interesting good work. There's a great team to work with every day. And of course, in the process, a lot of people will get rich and wealthy.
01:35:54
Speaker
and I think I still have a lot of ambition um for where we can get to and also how personally I can contribute back to the founder community and the startup ecosystem. Probably another conversation. Amazing. Thank you so much for your time Sandeep.
01:36:17
Speaker
Thanks a lot, Akshay. It's been wonderful talking to you. And I think one of the things that I love absolutely love about you is how you've really gotten people together. Some of these insights that come out of your podcasts, I personally found them very useful while we were building the company. So thanks a lot for doing that. now A great way of giving back to the community. Thank you so much.