A dubious diabetes drug, regulatory confusion, and a potential PIL

On September 26, Prime Minister Narendra Modi said, “CSIR has developed the first Ayurvedic medicine of the country for diabetic patients. All of you are aware about the potential of this medicine. Now our goal should be to make people aware of the benefits of this medicine so that they can make best use of the same.” He was speaking at the 75th Foundation Day celebration of CSIR.

Clearly, the Prime Minister trusts CSIR to do scientific work and can’t possibly ask for evidence. But other scientists and doctors are asking questions, and they can’t find any answers. The so-called drug is technically herbal extract and is being marketed as a medicine which is “scientifically validated” and “meets allopathic standards”.

Both these claims are dubious.

First, the definition

Since the drug is available in any chemist shop, marketed sometimes as Ayurvedic medicine and sometimes as a ‘diabetes drug’, it calls for a clarification. Because if it is the former, it needs to offer clinical evidence of safety and efficacy of its drug properties; if it is the latter then it is illegal as advertisement of drugs is a criminal act in India and it ought to have the Drug Controller’s approval.

If an Ayurvedic product falls under the category of “Classical Preparation” in the Ayush system, those documented in the ancient text, it need not seek the Drug Controller’s approval. It’s like Chyavanprash; any number of companies can make it. But the extract that BGR-34 claims to be made of does not fall in the Classical list. Moreover, it’s a composition of extracts from six plants. A non-trivial feat if the mechanism of action, safety, efficacy and evidence of clinical management of diabetes is proven and peer reviewed. Except, it is not.

Several researchers, even among CSIR, and medical doctors have been rummaging the literature but can’t find any documented evidence, not even of the clinical trial which CIMAP claims to have conducted on 56 patients at Agrawal Dharmarth Hospital Society in Shakti Nagar, Delhi.

When asked, CIMAP director Anil Kumar Tripathi said the two institutions have done “pre-clinical studies on small animals to optimize the efficacy of the formulation and its ingredients and evaluated the safety”.

Why isn’t the data public?

Because the researchers have filed for a patent; a “scientific paper disclosing the content of the patent can be published only six months after the filing of the patent”, said Tripathi. He says his team is ready with a manuscript now. To put it in perspective, it may take anywhere from a few months to a year to publish, depending on the quality of the journal.

However, as per the PCT rule, a patent application automatically gets published after 18 months of filing. So was BGR-34 patent, published in December 2015. On the face of it, it is a weak process patent and in the long term may not even be granted, says seasoned pharmaceutical scientist and IPR consultant Mohan D Nair.

But that’s not what makes it complicated.

A drug which is claiming intellectual property and aspires to position itself as a “botanical drug” globally, as the PCT filing implies, does not even follow the botanical drug route in India. Botanical drugs are derived from plant materials and it’s a promising and clearly defined category under the US Food and Drug Administration. In India, it is known as phytopharmaceuticals and has a new approval mechanism under the Drug Controller.

In the case of BGR-34, even before anyone could review the data, the product is being sold.

Why is that a big deal? Consider this study in contrast: A similar work by a group of Indian researchers and industry was published in July in the Journal of Ethnopharmacology. It is also a polyherbal extract but this study shows it is safe to be developed further as a botanical drug.

The claim

There are inconsistencies galore – in the number of patients BGR-34 is tested upon; the duration of the clinical trial; the span of research itself, which ranges from 18 months to five years. A senior scientist who has worked at CIMAP says the lab did not even have an animal facility until 2013. “Between 2013 and October 2015, when the drug was launched, it is hard to believe anyone could have done the quality science required to prove the claims,” says this scientist who doesn’t want to be named as he still works in the CSIR system and could face a backlash.

The gap you can’t ignore

Inspired by what Erica Baker did while at Google, we sought to explore what happens if we talk about our salaries in the open. And we asked you to talk about it as well, through the survey. Can transparency about salaries clear the air about why employees earn what they do? Can it help address the sticky issues around women’s pay?

Report after report claims that the gender pay gap is real. Just earlier this week, the Monster Salary Index said that men in corporate India made 25% more than women. Even our limited sample data points to that.

But at the same time, consultants we spoke to point out that there is no conscious bias that companies have when it comes to employees’ salaries. Undeniably, though, a slew of factors from a maternity break to fewer jobs changes, all drive a wedge between the salaries of the sexes. And then there is the question of negotiation skills, which many women grudgingly admit, they lack.

The Feelings

“I was happy when I joined as an assistant manager at a salary of Rs 45,000 per month. But a month later, my friend (male) from the same business school with similar experience joined as a manager at nearly double my salary. When I raised the issue with HR, I was told that the decision was made, and there was nothing they could do. The HR tried to justify with some explanation about the relevance of experience, which was not justified as we had similar experience. It was much later that I found out that he had negotiated far more forcefully than me and ended up with a much better position and salary,” says a Delhi-based 31-year-old marketing manager at an Indian retail company.

While it is true that a pay gap is introduced by the choices women make, knowing why it exists can make a world of a difference when it comes to judging whether women or for that matter even men, feel fairly paid.

Our survey showed that 55% women and 44% men felt that they were underpaid. And that feeling kicks in mostly after spending four to eight years in an organisation. Over 40% of those who felt that they were underpaid worked in mid-management.

For the HR fraternity reading this, this is an early warning sign of low engagement.

“This means that there has been no clear communication of how the company has rewarded its employees. It also shows that the employees and managers are benchmarking their salary in very different ways,” says Sandeep Chaudhary, chief executive officer of Aon Hewitt, an HR consultancy firm.

If employees have an idea of what their peers and colleagues earn, they would be better placed to assess their own salaries. And this brings us back to the point of transparency.

Indian companies are becoming more transparent thanks to mandated corporate governance norms. The remuneration details of the CEOs are known, and details of individuals who earn more than a crore are disclosed. So how can more transparency hurt?

As Chaudhary says, “Transparency [in salary] is good for both men and women. Depending on the maturity of the workforce, transparency can help bust the myth of the gender disparity in pay.”

And bust it does. As this piece in the New York Times points out, companies like PricewaterhouseCoopers (PwC) in Britain have tried being transparent about the difference in wages. And it revealed what caused the gap.

Variations

It found a 15.1% pay disparity, which was a result of fewer women being in senior positions. Having uncovered the problem, it dug deeper and evaluated its promotion policies. What it saw was telling. In 2013, even though PwC had 30% women in the grade just below that of a partner, only about half of them were promoted.

Not just that, there also seemed to be a pattern wherein men received more bonuses than women. While the men who were not promoted were given retention bonuses, women weren’t offered any. The men who threatened to leave got one, whereas the women made no such demands.

Similarly, in the US, a tech startup called Buffer created a list of the salaries of all its employees and put it out for everyone to see. It uses that information to identify areas where it can improve.

 

Flipkart: Dance of the dragons

From $6 billion in July 2014 to $11 billion in December 2014 to $15.5 billion in July 2015.

Back to $10 billion in March 2017.

Down rounds are tricky. Unless managed proactively and communicated positively, they can be the beginning of a death spiral for startups.

The clock is turned back on a company’s valuation, replacing investors gains with losses. New investors get more shares per dollar invested as compared to the ones already around. Older investors either end up owning even lesser of the company than they already had or thanks to “anti-dilution” clauses they manage to extract their pound of flesh from the company in terms of more stock. Employees and other equity holders are left with options with negative worth. Bitterness and ennui everywhere.

Hectic Schedule Ahead

To Flipkart’s credit, it seems to have pulled off its down round rather well. Normally in down rounds, when a newer investor comes in at a lower valuation, older investors are issued additional stock at no extra cost so that their earlier shareholding levels aren’t “diluted”.

But hectic behind-the-scenes discussions between Flipkart’s older investors (there are 15-16 of them) convinced them to not exercise their anti-dilution rights when Tencent and Microsoft invested $1 billion.

No Indian investment bankers were learnt to have been involved in the deal. Instead, the deal was orchestrated by a heavyweight Goldman Sachs’ partner, Pawan Tewari, who’s based in San Francisco.

And when the dust from the discussions settled, Flipkart had done a “clean reset” of its overvalued past and established $10 billion as its new valuation benchmark. $5 billion of notional gains had been erased without much acrimony.

If that hurt Tiger Global, Flipkart’s biggest investor, staunchest backer and largest shareholder, it didn’t show it publicly.

Even tigers get the blues

In January, Tiger Global emerged from the shadows from where it was alleged to have controlled Flipkart, and took centre stage. It did this by installing Kalyan Krishnamurthy, previously an MD at Tiger Global itself, as the new CEO of the company, formally marking the passage of Flipkart to being an investor-run company. Sachin Bansal and Binny Bansal, the founders of Flipkart, were both, in turn, shunted out of the hot seat of CEO and given respectable sinecures.

While there is no doubt that a meaningful part of Flipkart’s ascent could be credited to Tiger’s bold and early bets, it might be pertinent to keep in mind that Tiger itself is a venture (or even hedge) fund that has to show “exits” sooner or later in order to deliver returns to its own investors. Tiger’s first bet on Flipkart in 2010 was a seminal event that reset startup valuations and funding round sizes in India. Since then it has ploughed in more than a billion dollars into Flipkart over multiple funding rounds. At some point in time, it needs to start harvesting these investments and actually return money to its own investors.

Tiger is learnt to be in discussions to sell a large percentage of its Flipkart equity to recoup some or all of the money it has invested in the e-commerce company till date, around $1 billion.

The two most common ways for an investor to exit a company are through an IPO or an acquisition. Unfortunately for Flipkart though, it is probably too big for a simple and outright acquisition. And an IPO seems unlikely in the short term.

Thus, what Tiger needs is a new investor—someone who can give it a “secondary” exit by buying a large chunk of its Flipkart stake. Which investor could possibly be a knight in shining armour to Tiger and give it the exit it seeks?

The answer might be obvious in hindsight but comes with its own set of attendant challenges.

Most favoured strategic investor

Of the prospective buyers, Tiger Global has had discussions with, the strongest candidate is said to be SoftBank.

Masayoshi Son, the founder and CEO of SoftBank, is one of the rare few tech investors left in the global arena who has the capital, vision and chutzpah to take long bets on technology. His latest fund, announced in October 2016, is a $100 billion one, which will invest in technology companies.

Given the long bets that Son likes to take, an investment into Flipkart, the largest e-commerce company in a country that’s got the most potential for growth, doesn’t seem that tough.

The Instagram opportunity

Consider some numbers, exclusive to The Ken: India has close to 31 million users (aged over 13) on Instagram or nearly 5% of the social network’s overall user base (600 million as of February 2017). Dig deeper, and you will see a sweet spot emerging, with over half its Indian users (16 million) falling into the 18-24 or ‘millennial’ age category. For perspective, in September 2015, the network had only 4 million users in India. Over the last 18 months, it has managed to achieve nearly 8X growth, and almost all of it organically. According to AppAnnie, the total time spent on Instagram in India on Android phones rose from 17.8 billion hours in 2015 to 61.5 billion in 2016. (AppAnnie breaks its data down to quarters and provides data close to the latest quarter. In this case from Q4 2015 to Q4 2016)

Advertisers and brands are taking note.

Ad bundling

Over the last two years, Facebook has changed the way it pitches Instagram to advertisers.

“When it launched Instagram ads in India, back in September 2015, it had a hard time selling it to advertisers,” says a Gurugram-based digital marketing professional, on a condition of anonymity. “They were deemed expensive, nearly 5-6X of what people spent on Facebook for a similar reach. Say, if Facebook charged you Rs 50 per 1000 impressions, Instagram was priced at Rs 250-300 for a similar metric.”

The focus now is on bundling, or in agency-speak, ‘FB+Insta’. He adds, “Typically when a Facebook rep does his presentations, he pitches an Instagram-also option, which definitely helps in increasing reach and reducing our cost per impressions.” With the FB+Insta option available on Facebook’s advert manager dashboard, advertisers can buy additional reach by paying a little extra. What also works for Instagram is that if the creative on Facebook is of the same size, the ads automatically appear on its platform.

“Asia-Pacific, including India, is an important region for us,” said a Facebook India spokesperson in an emailed statement. “Since we opened advertising to businesses of all sizes two years ago, this region has seen strong results. We’re seeing significant marketer demand in business areas like e-commerce, technology, FMCG/CPG, retail, entertainment and gaming across APAC.”

Working with limitations

Instagram, advertisers say, has overtaken Twitter as the preferred number two platform for social media marketers in India. But there are some real pain-points for advertisers, both in terms of perception and execution.

As of today, Instagram offers only 3 or 4 ad formats to advertisers and publishers, which is in stark contrast to Facebook, where the options are multi-fold, nearly 10 or 11. Karthik Srinivasan, national lead, [email protected], says, “Instagram has limitations. It doesn’t appeal to major clients like say Infosys, which would still prefer Facebook and Twitter for its messaging. The only major content on Instagram, in this case, could be around employee branding.” Equally, the platform has a certain inflexibility about it. “It doesn’t cater to brands wanting to do quick follow campaigns or a quick shot boost, that brands often do, but build a community. This is unlike Facebook and Twitter,” he adds.

There’s a growing perception about Instagram being a ‘spoilt brat’s network’, presumably owing to its user profile. A September 2015 Nielsen study commissioned by Instagram indicates that over 50% of Indian Instagram users purchased products or services from the brands they followed. And being “avid travellers,” 50% of them took four vacations the past year.

However, what could really stop Instagram’s charge is if users abandon the platform and go elsewhere. Which is why, upon realising the potential threat from Snapchat, Instagram has managed to clone and integrate some of its best features. “As long as it still keeps attracting newer users to the platform, keeps engaging them, it will continue to grow. And advertisers will take notice. The digital pie is still open for everyone to win,” says the digital marketing professional.

Users aside, Instagram has minimal personnel presence in India. It doesn’t have a product team here or even for that matter, someone heading its operations. Its sales in India are managed by Facebook executives, who typically liaise with an agency or brand every quarter through presentations and one-on-one meetings. For the year ending March 2016, Facebook earned a revenue of Rs 177 crore from its operations. This includes Facebook and Instagram.

What’s worked for Instagram?

Needless to say, Facebook, particularly in India, has been careful about Instagram’s positioning. This reflects in its pitch to advertisers and brands, where it says that if you want to reach a young, urban, aspirational, high-on-lifestyle audience, Instagram is THE platform to tap. Curiously enough, this used to be Twitter’s strong point, but that has since faded away.

High noon at Snapdeal—Who blinks first?

Together with Snapdeal’s founders, Kalaari and Nexus are learnt to have asked SoftBank for $150 million in cash (and not the stock of any acquiring company) in order to agree to a sale transaction.

A sale transaction because any further meaningful or sizeable venture investments into Snapdeal are out of the question. The one-time number-two e-commerce player is in a downward spiral of falling sales, shrinking employee base and collapsing valuations out of which there is no coming. At least not in a way that makes sense for any late-stage venture investor.

Which is why SoftBank wanted to find an acquirer for Snapdeal—Flipkart. The deal was simple—Flipkart acquires Snapdeal at an enterprise valuation of $1 billion, following which SoftBank invests another $1 billion in the company as a continuation of latest $1 billion round. It then acquires $500 million to $1 billion of Flipkart stock from its largest investor, Tiger Global.

SoftBank was understood to even have offered 80 cents in cash for every dollar in Snapdeal stock held by its investors, but at a valuation of $1 billion. Snapdeal’s peak valuation was $6.5 billion.

If things went well, the sequenced transactions would be completed sometime as early as May.

But things didn’t go well, and now SoftBank is locked in a who-blinks-first game of chicken with Kalaari, Nexus and the Snapdeal founders.

The chicken game

There is now the very real possibility that Flipkart may not acquire Snapdeal.

So what, you may ask. Surely there are many other potential acquirers? Better yet, why does Snapdeal even need to sell itself? Didn’t it just announce its decision to go for an IPO?

Snapdeal is a unique company. It’s a company that is trying to hold on to its past valuations even as its current revenues and future growth look appear very dim. Its current revenue (GMV) run rate is estimated to be between $350-400 million annually. In contrast, Flipkart’s is estimated to be closer to $4 billion.

That’s 10x of Snapdeal’s.

Interestingly, if Snapdeal is indeed valued at $1 billion during a potential acquisition, how would that compare to Flipkart’s current valuation?

10x again (Flipkart raised its current $1 billion investment at a valuation of $10 billion).

But we digress—the point is Snapdeal has been in the market for months, to either raise money or to find a buyer. None have materialized. And the reason even Flipkart is considered a potential acquirer is only because of SoftBank.

Acquiring Snapdeal is the ‘tax’ a Flipkart would pay in order to secure SoftBank’s trust and money down the round.

But a $1 billion valuation for Snapdeal would be terrible for Kalaari and Nexus, both of which not only have a veto power on a potential sale decision but also certain ‘tag along’ rights on SoftBank shares.

A ‘tag along’ right is a contractual obligation found in venture capital deals that gives some shareholders (usually earlier or smaller ones) the right to sell their shares if a larger or later investor is selling theirs.

Thus, not only is SoftBank unable to get Flipkart to acquire Snapdeal (because Kalaari and Nexus will veto, unless their terms are met), it is also unable to sell its Snapdeal stake to certain potential acquirers because then Kalaari and Nexus too would demand their stakes are bought on the same terms.

Huge investments

Kalaari and Nexus might wager that SoftBank, with $900 million invested, would be more desperate to recoup it. SoftBank, under Masayoshi Son, an investor that does not take kindly to arm twisting. Both SoftBank insiders and investors beyond talk in hushed whispers of Son-san’s legendary ability to not only take huge bets that seem extremely risky at day zero but also his sense of whimsy that has seen him call off deals where he feels affronted or coerced into doing something that is not of his own choice. Not only might Son-san not take too kindly to Kalaari and Nexus asking for a ‘sweetener’ for letting the deal go through but also he could well reckon that Kalaari and Nexus might not have the stomach to walk away with nothing for their Snapdeal investments if the acquisition by Flipkart falls through.

It would be no surprise if Kalaari and Nexus also recognise this and if the media stories that have been appearing in the last few days are part of a PR battle to even the odds in this staring contest with SoftBank.

Earning money is never a easy task at all

Earlier last month, in September 2016, I set out for Hyderabad. To Heera Group’s head office located at Masab Tank, to find out more. With ten companies, thousands of investors and crores of funds, I had a certain picture of their group head office. What I saw was a small commercial building, various businesses running operations on the ground floor – a private cab operator, a Haj & Umrah travels company, a Hero Motors showroom and a men’s parlour. One of these shops belonged to Heera Textiles; the entire first floor occupied by Heera Group companies. But right at the entrance, there was a notice from a Debt Recovery Tribunal on a case between Indian Overseas Bank and Shaik, putting a stay on recovery of property until 8 September, 2016.

Shutters were drawn down on three of the five stores, which were branded as Heera Fancy World. There was a working jewellery showroom. I was welcomed in the office and I met the lady manning the front desk who refused to disclose anything about the company and asked me to send queries to [email protected] – an address reportedly accessed by both Shaik and her personal assistant, Molly Thomas.

Multiple emails, with a detailed questionnaire sent to this address went unanswered.

I did meet Thomas though; only after showing up uninvited at their second operational office. This office was more well put up than their head office. Thomas too didn’t reveal much. She was not authorised to speak on behalf of the company, and she added that she was a mere employee who kept her head down, clocked in her hours and did what she was told to do. A little puzzling though, that a mere employee had access to tens of CCTV cameras streaming from various locations at her desk. She wouldn’t confirm if Shaik was in town and also expressed inability to initiate any meeting with her, until directly authorised.

In search of answers, I spent time in Hyderabad visiting the offices of Food, Safety & Standards Authority of India (FSSAI) and Bureau of Indian Standards (BIS) and the white collar offences team of the crime branch, Hyderabad police. I also spoke to agents, sub-agents, ex-employees, and investors for this story – few were willing to go on record.

Places from which it operate

Apart from being a hobby photoshopper, who is Shaik? She is a director in at least ten companies in India — running the gamut from gold exports and imports, jewellery, financial services, packaged foods, bottled water plant, Haj & Umrah tours, trading blankets and bedsheets from China. All co-founded and co-owned by her, Mubarak Jan Shaik and Khamar Jan Shaik (perhaps sisters going by most accounts, but The Ken couldn’t independently confirm this). Shaik is a self-professed pious Muslim from Tirupati. The group also operates from satellite offices in Mumbai and Dubai. They have retail jewellery shops in Mumbai and Navi Mumbai and claims warehouses and offices in Dubai and other parts of UAE.

Depending on which way the wind is blowing, she is referred to as Dr, Aalima (gendered title for Islamic scholar), CEO, chairman, director, MD, CMD or Aapa. Aapa is commonly used in Urdu-speaking and Muslim circles to address any lady with respect, especially one who’s pious or religious.

Different functions

All public functions and all her speeches come with a generous dose of:

–Bismillah (In the name of God)

–InshaAllah (God willing)

–Alhamdulillah (All Praise Due to God)

-Sermons of Quranic verses, Prophet Muhammad’s teachings, Islamic history

– Religious chants and songs (naaths) filling up the background

Heera Group’s brochures exhort readers to participate in this special opportunity of handsome profits and contribute to the cause of an interest-free society.

Lest you forget, Shaik and and her followers dutifully remind you that part of the profits retained by the promoters is used to run an Islamic school for girls and other avenues to empower and work towards upliftment of the financially weaker sections within the community.

But back to business. Gold trading of course, is just one. The flagship one. And then there are others: blankets imported from China into Dubai and India under “Diamond” mark. File it under Heera Textiles Limited. A bottled-water business under the brand “Heera Pure Drops”. File it under Heera Ice Drop Pvt Ltd? No, because all water business is conducted under Heera Retail (Hyderabad) Pvt Ltd, a different company, also cofounded by same set of promoters.

Raising funds for the startups is tough

On the other side, Knowlarity’s first customer was a political party who gave them an order of Rs 1 crore. One of the founders, Pallav Pandey, ran a political consulting company that presumably played a role in it. Pandey has since left Knowlarity.

After getting the order, Ambarish Gupta, co-founder and CEO of Knowlarity stated that “we came back and decided that though we have the money but we needed to build this product” and “we had money but not the product. We then built a software in the next 72 hours”. A quick-fix solution to an opportunistic opening?

Different focus

Knowlarity has only one product–a cloud-based telephony solution. The Ken spoke to many in the industry, who corroborated that such solutions are almost trivial to put together. There are several open-source and off-the-shelf commercial modules that can be assembled to contrive a sellable product.

Knowlarity’s antidote to battle this perceived commoditization was to bet the farm on sales and marketing. Given their funding war chest, focusing on sales seemed like the rational way to build a competitive moat.

Therefore the organization’s entire focus was on pushing sales and expanding the customer base. The company hired sales folks aggressively and expanded to cover almost the entire country and beyond–an international footprint that extended to more than 65 countries.

Unfortunately, an aggressive sales focus is a double-edged sword. While it can bring customers through the door, at many times the wins are ephemeral as the churn is high. Typically, customers churn out either because the sales team over-promise and the product team under-delivers or because the delivery infrastructure and customer support functions don’t scale to keep up with the growth in sales.

After funding, Knowlarity’s sales team poached several customers from Ozonetel. But many of them have since shifted back to Ozonetel. While these companies were loath to come on record on why they made the shift, we are given to understand that at least some of these companies had problems with the reliability of service and didn’t like the way they were billed. Equally interesting is the fact that many of Ozonetel’s customers are large startups that have been funded by Knowlarity’s investor. In spite of having the same investor as Knowlarity, these startups chose Ozonetel and what’s more, they did this despite Ozonetel’s pricing being far higher than Knowlarity’s.

On the other hand, Ozonetel had an engineering focus. They expanded their portfolio from a single cloud-based telephony solution to include a full stack–from the hardware (PRI cards) to multiple solutions ranging from cloud telephony to voice and text campaigns to cloud radio. In parallel, it invested significantly in improving the reliability and scalability of its platform, which was considerably easier since it owned most of the parts. The company has also moved beyond a solution provider to becoming a platform through a set of APIs that lets other startups build on top of this layer and offer their own telephony solutions to customers.

This emphasis on innovation and R&D also meant that Ozonetel spent very little on marketing–their monthly Google Adwords bill, for instance, was less than Rs 1 lakh. Admittedly, this was also because they didn’t have the funding firepower to spend heavily on sales and marketing.

Even with these constraints, not only did Ozonetel grow much faster than Knowlarity; it did so without once spending more than it earned.

Different markets? Maybe not

Ozonetel and Knowlarity are both cloud telephony companies but are they direct competitors?

When quizzed, Knowlarity’s Gupta said: “Ozonetel is most of the time not a competitor for us. They do more on-premise telephony while we focus on hosted telephony. We do mid-market while they do enterprises. You are kind of comparing apple with half-orange (sic)”.

Whereas Ozonetel’s CSN averred: “We do compete with Knowlarity wherever there is an opportunity regardless of the segment and mode of delivery, but it need not be considered as personal rivalry”.

The answer to this riddle lies in the fact that both companies do compete in one segment of the market–cloud-based telephony solutions for small and medium businesses in India.

This market is like the Holy Grail. Everyone knows it exists and is large, but no one in the country has figured out how to crack it. The reasons for this are well-documented: Indian SMBs are laggards when it comes to adopting technology and are loath to pay anything, much less a meaningful fee, for technology.

 

Of Rajasthan Patrika’s travails with Catch News

Only fair then that the sales team was having a tough time selling. So very little advertising money: just under Rs. 7 lakh per month. (Not to put too fine a point on it, but one knows things are dire when a ‘World Famous’ astrologer occupies premium ad real estate on a news portal) Anyway, costs, salary of editorial staff and other expenditure was out of whack: anywhere between Rs. 70-90 lakh per month. The dilemma before Kothari, the owner of Catch was this: If the burn rate is way ahead of the ad earning, then does it make sense as a business? Just to keep a brand alive? To what specific end, really? Hence, the trudging visit to Delhi, from Jaipur, where Kothari and Rajasthan Patrika are based. And the plan.

Let’s bump up the numbers. More stories = more clicks = more advertising money.

How exactly would that pan out? Well, this is what Kothari told the editorial staff. Starting tomorrow, first thing in the morning, reporters at Catch should call up the editors of the various city editions of Rajasthan Patrika. Ask them, what are the three to five big stories of the day that they are planning. Next, call the individual reporter on the story and chat them up. Take notes. Throw in some of your own research and file a 200-word copy. Every reporter should do this. Every day.

The Solution

Problem solved. Productivity goes up at least 3X. More stories = more clicks = more advertising revenue.

Needless to say, the editorial staff at Catch was aghast.

They had questions: What the hell? Five stories a day…what exactly is the value add here? Why would any reporter give away his story? Maybe one day, maybe a few days, but every day, why? No chance in hell of that happening. No chance in hell that we are doing this. So, they hemmed and hawed. Some complained. And a few quit, thinking of the move as the “last straw” at Catch.

“For the last three weeks, we’ve been in a state of shock,” said an employee, who requested not to be identified because he didn’t want to get into any trouble with the management. “Only a few days back, the move was rolled back but you can never be sure if it is dead for good.”

This is not an isolated incident. Not at Catch News. Not in the media business in India or the world; where every media organisation wants to be in on digital. Somehow, figure out the internet. Because that’s where the audiences are. Stroll through any media newsroom today and you will overhear hushed chatter of page view targets — anywhere from 4 million to 80 million per month. Of course, everyone has heard or read about the prize money:

The problem is not so much about the target, as it is about, how do you get there.

Which brings us back to Rajasthan Patrika and Catch News.

Rajasthan Patrika is a 60 year old media group. In these years, it grew from a quarter-sized evening paper to a national publication. Its Hindi daily, called Patrika, is sold across eight states, and has more than 250 editions. According to data from the Audit Bureau of Circulations, Rajasthan Patrika is the seventh largest newspaper in India, with a circulation of 18,11,758. Catch News was the group’s foray into digital media in June 2015.

Proper Execution

The initial plan was something along these lines. There’d be three divisions. Speed news: instant news updates from agencies or breaking developments. News plus: deeply researched pieces and exclusive stories. Content marketing: social stories told in a way to get advertisers to sponsor. The overarching theme – let’s unlock the infinite potential of the Internet, unlike television or print and build a differentiated product, which combines old values of journalism and new ways of telling stories — researched, informed and conversational. The start was sure-footed.

“In the beginning, I was allowed to experiment,” said Shoma Chaudhury, former editor of Catch News. (Before Catch, she was the managing editor at news magazine Tehelka) “So bring numbers to quality and we were doing long, short, informed stories with background. It went well and we got good feedback.” Yes. Catch News, in late 2015 and early 2016, was clocking around 3 million page views. That’s a good number for a year-old media website. Enthused by the response, there were other plans — a Hindi website, which was launched in December and another portal, specifically for non-resident Indians in the US and Gulf, which never saw the light of day.