Indusind Bank, Media, Infrastructure

Indusind Bank, Media, Infrastructure

SECTOR WATCH: Media

Q4 Review: The print and television media have done well in the quarter ended March 2007, with net profits rising by 40 per cent on a revenue growth of 32.5 per cent. The growth in profits can be attributed to an increase in advertisement revenues and decline in the newsprint costs.

The revenues of HT Media grew by 23.6 per cent, driven by a 32 per cent growth in advertising revenues due to the launch of new supplements and editions. NDTV reported a revenue growth of 16.4 per cent, after adjusting its net loss of Rs 17 lakh, resulting from new initiatives.

Trigger: Advertising growth in India is both cyclical and structural, with increased contribution from industry segments such as retail, real estate, telecom, automobiles and financial services.

According to analysts, media companies are strategically poised to benefit from buoyant ad revenues and softening newsprint prices. The newsprint rates have corrected by 20 per cent from the yearly peak.

Outlook: Deccan Chronicle has targeted sales revenues of Rs 750-800 crore for FY ‘08, a year-on-year rise of about 36-45 per cent. It has increased the advertisement charges by 30 per cent across all sections and editions, effective from May 2007. HT Media expects pressure on margins owing to its new initiatives such as ‘Mint’ and ‘Fever 104’.

The increasing literacy, emergence of local-centric businesses and broadcast clutter are driving advertising revenues for the print media. The growth has been further triggered by fund infusion of $675 million and entry of global brands such as the Wall Street Journal, Financial Times and so on.

The Indian advertising industry is likely to grow at a CAGR of 15 per cent in the next four years and the print media will share about 45 per cent of the incremental growth.

According to an analyst at Man Financials, the media firms are venturing into new advertisement verticals such as radio, out-of-home (OOH), event management and TV to benefit from the existing client relationships.

Media - CAS or No CAS - Reality Check

Media - CAS or No CAS - Reality Check

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Google and the selling of simplicity - Jonathan Weber

Can Google succeed in the print world the same way it has online?
The incredible success of Google is easy enough to understand - the company built a better mousetrap, and the world beat a path to its door. Its search results are generally much better than that of other search engines, and it has discovered that relevant text ads next to search results are a powerful advertising medium. The relevance of the ads that Google places on other publishers' websites is far higher than that offered by competitors and thus they get more clicks, and the publisher gets more money. I've seen this first-hand on NewWest.Net.

From another standpoint, however, Google's current dominance of the online advertising world looks anomalous. A large and growing chunk of Google's business involves serving as the middleman between advertisers and publishers and that's a position, in the age of the internet, which is supposed to be inherently insecure. That's especially true when the middleman takes a huge cut. Google is so powerful that it doesn't feel the need to tell its customers how much it is taking, but judging by the company's profits it is a lot.

In theory, cutting out this ravenous middleman should be easy. All a publisher need do is look at the ads showing up on Google Adsense, call the advertiser, and offer them the same link for less. The result? Cheaper ads for the advertiser and more profit for the publisher. But this kind of thing doesn't seem to be happening much - at least not yet. Google has made things simple and effective for the advertiser and they like it that way.

Indeed, it has succeeded so well in selling simplicity that the company is now widening its net. It is making a substantial effort to sell advertising in other media including radio, television and newspapers. Google will use its systems to target and auction ad space, and provide advertisers with creative support as well as buying power. It is, in part, a simplification of the services traditionally offered by ad agencies, which small advertisers cannot afford.

Google's initial foray into selling print magazine pages has reportedly been something of a bust but the company seems undeterred. Certainly, the agency system could use some modernising, and there seems to be a market for offering more and better tools to small advertisers. But will Google enjoy the same competitive edge in this business as it does in the world of search? I'm not sure.

Its online advantage is huge. For all the dramatic growth in online advertising and all the talk of millions of new publishers with blogs and podcasts and YouTube videos, a remarkable 75 per cent of all online advertising revenue is flowing to the ten largest ad-supported websites (with Google, of course, at the very top of the list). Either the consolidation of the new media world has already happened and the leaders have built a position of dominance that will last for some time, or we are still at a very early stage and the 'long tail' of smaller, newer internet enterprises is just beginning to wag. I tend to believe the latter.

Google continues to insist that it is not a media company because it does not produce or own content; it is an aggregator that provides services to the media industry. It would stand to reason that content companies, once they stop bemoaning the end of the good old days and begin re-making their businesses in earnest, will be able to develop some of these services themselves. At the very least, any business carrying the kind of gross margins that Google enjoys will attract - indeed is already attracting -a ton of competition. All kinds of intermediaries will be trying to connect advertisers with relevant media and specific types of consumer behavior.

A popular question on the conference circuit these days is whether Google is a friend or a foe of media companies. I think it is neither: it is a vendor, one whose services currently command a large premium because they are superior to those of the competition. Will that last forever? I have my doubts.