Zapak Breaks Even: $3M In Revenues Last Qtr, $1M From Advertising

Reliance Entertainment President Rajesh Sawhney has disclosed that Zapak, the online gaming businesss from the Reliance ADA Group had reported revenues of $3 million for the last quarter, and has broken even. What’s interesting is that only $1 million of the revenues were from advertising: Sawhney told MediaNama that the rest was from other revenue streams like subscription, and in particular - Events.

So it appears that Events are becoming a major component of Zapak’s business: a couple of days ago, the company announced the Zapak Gaming Championship with Gillete Mach 3 Turbo Winner razor as its headlining sponsor, and with total prizes worth Rs. 1 crore. Prior to this, they had organized the Zapak Corporate Gaming Championship, with Timesjobs as the lead sponsor, and gifts as prizes. Zapak claims a registered user base of 6 million users.

What we’d really like to know about, is how much money Zapak is earning any money from in-game sales - are users playing its Massively Multiplayer Online Game paying to upgrade their racing carts, buy avatars etc., or are they just being given upgrades as prizes or for loyalty? The fact remains that while revenues may be coming from the offline component, the opportunity for scale exists on the Internet - online advertising and in-game commerce should be its primary source of income, and that doesn’t appear to be the case. Dependency on offline events alone will limit Zapaks revenue growth - how many events can they do in a year?

Sandeep Murthy Of KPCB & Sherpalo Ventures On The VC-Entrepreneur Dance

Sandeep Murthy of KPCB & Sherpalo Ventures, in response to Sloka Telecom CEO Sujai Karampuri’s comments on the apathy of Venture Capitalists towards technology componies: 

Interesting discussion… here’s how I look at our business:

As in all businesses, VCs will look to find ways to mitigate the risks involved in generating returns… a starting point for this is a need to understand the market that the entrepreneur is addressing… in understanding this market there needs to be an alignment of vision between the entrepreneur and the VC that the market has a need, the opportunity exists to disrupt in that market and that the chosen path is the best manner in which to disrupt. This is a large part of what the VC / entrepreneur dance is all about.

I agree that Excel spreadsheets are not the metric for decision making. Excel spreadsheets provide insight into the entrepreneur’s underlying assumptions… what are the revenue drivers, what are the cost drivers, at what pace does the entrepreneur believe the market grow, what are the views on the long term margins in this business, if everything turns out as projected. This in turn gives insight into the factors that the entrepreneur believes are necessary for success. It is not an “end all be all” of understanding the opportunity, nor is it the sole means to learn about an industry; it is a tool that helps align views on what must happen in the world to make the business a success. In addition to the drivers of the Excel model, customer references and validation play an important role in providing comfort that there is market for the product and insight into the pain points… we spend a lot of time speaking to people in the industry in an effort  to understand the market and the opportunity.

The reason “Me-Toos” are attractive is that the market is understood, the execution challenges are clear, so with tweaks (sometimes minor, sometimes major) there is a belief that the risks in these businesses are manageable.

 One way to make the dance between VCs and entrepreneurs easier is to engage with VCs that understand your space… find people that know the industry you operate in (i.e. if you are building a telecom solution, see if you can find the firm, or even better, the partner at the firm who knows about the telecom vertical)… if you find the right person that understands the industry, you will no longer have to worry about helping them mitigate the general industry risk and perhaps they have enough understanding to dig into the core of the product differentiation and have the requisite contacts to be able to get the market validation.

 On the topic of Entrepreneurs as VCs; I agree that more entrepreneurs should go and start businesses rather than become VCs, but the reason many entrepreneurs find themselves valued in the venture community is that they provide comfort that post investing in the business the VC can help beyond just the money… here again this is about risk mitigation… knowing that you can be a part of helping with the end outcome gives some comfort while investing in new areas.

This is a great discussion and I applaud Sujai for taking the time to voice his opinions and frustrations… hopefully through ongoing dialogue we can find a way to make the process of matching money with innovative ideas as frictionless as possible.

#Headstart09 : Indian Technology Companies Don’t Get Funded

Note: If any VC would like to respond to this, whether publically or anonymously, do get in touch with me at nikhil@medianama.com or +919810310053 (SMS)

Where Venture Capitalists Are Failing In India - Sujai Karampuri, CEO of Sloka Telecom

Much spleen vented at Venture Capitalists by Sujai Karampuri, CEO of Sloka Telecom at Headstart.in, being held in Bangalore: 

“Venture Capital refers to taking risks, fund ideas coming from people who don’t have their own money, but are first or second generation entrepreneurs…and funding ideas that can disrupt, make things better through innovation and technology. If you look at the most VC investments in the last 2 years, they are staying away from technology companies, and funding Me-Too companies, replicas of Ebay, Netflix, Facebook, Amazon, Travelocity, Monster. 

It appears to have something to do with a safety factor. What happens to a technology company company? The usual reaction is “You Must Be Bluffing”? We have the worlds smallest and cheapest telecom base station. We’ve done this through technology, and yet for the last four years, we remain unfunded by Indian VCs.

Excel sheets do not capture technology. They’re the safety net. In five minutes or 10 minutes, I cannot explain the whole spectrum of the wireless industry to a VC, and then tell where I have the advantage. Tech entrepreneurs and VCs are different - Entrepreneurs have a higher risk appetite; they cannot remove all the risk.  A company is limited by the vision of their leaders. What happens when you meet VCs who want you to do small things, be careful. 

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At IAMAI DE08: Should Content Be Made Separately For The Mobile?

Should content be made separately for the mobile, and separately for the television? A hint of a disagreement between Manoj Dawane, CEO of Mauj, and Viren Popli, SVP & Head of Mobile Entertainment for STAR. Popli said that no one today is producing content for Internet or mobile - they’re producing content for the cinema screen and the Interent is just getting leftovers. “We do the numbers, in terms of downloads, but how much money do we make? We don’t want to make content specific for this space, because we won’t make the money back.” Dawane, however, was of the opinion that content is not made for a medium, but for human beings. People who make content for celluloid may be experts in their medium, but they don’t produce content for the medium.

My take is that content consumption patterns of different media are different - you may sit and read an article in a newspaper, but you more likely to skim it on the Internet. You may choose to watch a clip on the mobile, while you may be patient enough to view a 30 minute show on TV. The attention spans vary according to the medium, and while compelling content on one medium can be compelling on any - the form, the camera angles and approach to the content needs to vary. For the Internet and Mobile space, you may prefer to cut to the chase - to follow the Inverted Pyramid approach, unlike more traditional forms of media.

More comments from the Mobile Entertainment panel at the IAMAI Digital Entertainment Conference, including comments on 3G:
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At TiEcon2008: On OnMobile, Nokia And Entry Barriers; What They Said, Didn’t Say, And What Can Change The Game

What they said
Cutting a deal with an operator is difficult
Arvind Rao, CEO of OnMobile: In the telco space, winning your first customer is the most difficult thing. Telcos aren’t dinosaurs, but they’re very very complex entities to deal with - they’re risk averse. They’ll say ‘go deploy with someone else show me it works, and consumers want it.’ It’s a chicken and egg problem. You’ll have to wheel, deal, do anything to get your first customer, but be fair and cut a deal that you can renegotiate at a later point. We had access to all the operators through our VC contacts, but we couldn’t get a break.

Scale is an issue, and we’ve already have the distribution, revenue model, and access to the consumer
Arvind Rao: We have our platforms installed in almost all operators in India. We are migrating to a point of opening the platform, and launching the OnMobile Developer Platform. Entrepreneurs can create companies and application, and wont need to go through the hassle of negotiating with operators, discussing commercials and integrating with such huge systems. You can’t manage with 20-25 people - for managing telcos, you need Industrial strength. A telco sent us such a team to us - they liked the technology and didn’t want to deploy, so they asked OnMobile to deploy. We liked the technology, and decided to buy them. So the thing you have to think about is “Why am I doing this? Am I looking to build an institution and a large company? Or something that I’ll sell in 3 years. There is consolidation in the VAS space in India.

What they didn’t say
If you don’t partner, we’ll just take you out
Look at what OnMobile has done in South India - they went into the market, and signed up 40 odd deals with SIMCA, using the money at their disposal to take many of the existing players out. Nokia also has in the works a music service, just as Motorola has MotoMusic. With larger distribution network and operator tie-ups, if you’re not creating exclusive content or have a large community at your disposal, it looks like you don’t have an opportunity in the mobile space.

In a way, Nokia did respond to this situation - very soon the consumer will have to choose between one location based service ad the other. You don’t know who will win. When people approach the same consumer and same market from different sides, they will approach it differently. Internet companies approach messaging from a web base point of view. Operators will approach it from revenue point of view. Nokia looks at messaging as a part of every service that we offer - even N-Gage. When Nokia enters the space, we don’t just look at one payment or distribution mechanism, so there’s opportunity for entrepreneurs.

What can change the game?
Sitting pretty at the top of this value chain, but apparently not-very-interested, are the mobile operators. They’re tedious to work with, but by opening up to smaller players, they can easily take the opportunity away from Nokia, OnMobile and everyone else who’s moving from their traditional role (as a platform company or a handset manufacturer) and to a services role. A step has perhaps been taken in the right direction, with Airtel launching its incubation fund. One opportunity is in going off-portal - whatever their cost of operation, MyToday and SMSGupShup have shown that if you spend big, you can create a large enough consumer base, irrespective of the operators, VAS players and handset manufacturers.

Marketing 2.0: Digital Transformation - Niche to Mainstream - 14th Nov, Taj President, Mumbai

You’re invited to join MediaNama and 9.9 Media for the Marketing 2.0 Conclave being held in Mumbai:

Topic: Digital Transformation - Niche to Mainstream
Date: 14th November
Time: 9:00 AM - 6:00 PM
Venue: Taj President, 90, Cuffe Parade, Mumbai
Agenda: Download (pdf) 

To attend: Register here
To sponsor: mail advertising@medianama.com or call Umang at +919999000785

The discussion will focus on understanding how CMOs can leverage digital media like Mobile, Internet, Blogs and Communities, and we’re expecting participation from senior marketing professionals and decision makers from across FMCG, Auto, Telecom, Consumer Durables, Technology companies etc. Speaking at the conference, apart from yours truly, are:

Greg Verdino, Chief Strategy Officer, Crayon Consulting Group 
Ireena Vittal, Partner, McKinsey & Company
Ajit Balakrishnan, Chairman and CMO of Rediff.com
Santosh Desai, MD & CEO of Future Brands
Debabrata Mukherjee, Director Marketing, Coca-Cola Korea
Vikram Sakhuja, CEO, Group M
Partha Rakshit, MD South Asia, Nielsen
Mahesh Murthy, Founder & CEO of Pinstorm
Rajiv Hiranandani, Co-Founder and ED (Revenues) of Mobile2Win
Manish Vij, Co-Founder & CBO of Quasar Media

At TiEcon2008: Exits, Motivation And Speed; Diversify, Diversify, Diversify

On Startups And VCs
– Exits: On the first day, one VC said that many Indian startups are really don’t help the VCs who’ve given them money - once the VCs start talking to startups about an exit for the VCs, they act as if they’re being betrayed and tell them to figure out how to get the exit.
– Motivation: The most significant challenge for Venture Capitalists right now is in keeping entrepreneurs and startup employees. At the same time, VCs feel there’s a feeling that this is the perfect time to hire the riht people, and the suggestion for startups is - look at your team, and figure out whom you need to hire.
– Opportunity for entrepreneurs and companies that are adding value is still there. There’s opportunity in transformation in India - in transforming schools and colleges, who are still very open to evolving.
– There needs to be a clear path to profitability, but we (VCs) really need a road to revenues. Need to build a base of loyal customers.
– Entrepreneurship is more about speed than perfection. If you can get the timing right, you can change the story.

Diversify, Diversify, Diversify

Deep Kalra, CEO of MakeMyTrip
“IBM has a cut its travel spending by around 75 percent - all executives below the CEO are going to travel Coach. AOL has cut all travel for a while. ICI, and Indian company, has cut all travel except sales related travel. So there’s going to be a huge impact on travel. Aviation in India is down 17 percent. We’ll have to brace up. I think it’s acid test time. I don’t think it’s as if no one will do well, but it’ll separate the boys from the men. In spaces where there are too many players, you’ll see a shakeup.

It’s deja vu for Me. We started MMT in 2000. I think that’s going to help us now. We run a really tight ship, but we’re benefiting from the diversification which we started 18 months ago - we make money from things other than just airline ticketing. In fact, when we began shopping, we went against the entire board, apart from one independent director, Sanjeev Bikhchandani. We weren’t cutting any ice on holidays, and we set up 12 lines of business, including small holidays. Domestic holidays is making up for us. You don’t want to be exposed just to Airline tickets.”

Shantanu Prakash, Founder of Educomp
Important to reinvest cash and reinvent customer value propositions. Our business has a core proposition, and businesses like concentric circles around that core proposition. We will still be impacted, because of cost of debt has gone up. We’re building schols, and it’s capital intensive. Also, financial capital isn’t everything. You can build a business around intellectual capital, over financial capital.

Some comments on the Economic Crisis
– We’re seeing a time that we’ve not seen before; It’s almost like capitalism is being questioned. We’re entering territory where we’ll be questioning how capitalism works.
– The reality is that at the same time India started growing to 9 percent growth, there was a credit boom in the US. It was as if someone just printing cash, that spilt over to the rest of the world. We are going back to reality. As a country, we’ve only reformed when we’ve had a crisis.