Earlier this month, the company clinched its largest deal to date, acquiring US-based subscription service Magzter in a cash-stock transaction of undisclosed value. This strategic move was aimed at foraying into international markets, and enter the premium subscription segment.
“We have always been looking at acquisitions to improve our tech capabilities, product functionality, etc. Now, we are M&A-focused than ever, and our criteria (for target companies) is to have significant revenue scale, besides being Ebitda-positive,” Bedi said. Ebitda stands for earnings before interest, taxes, depreciation and amortization.
The company will finance the acquisitions using its existing cash reserves. “We still have a lot of capital left over from the last fundraise.” VerSe Innovation has significant dry powder of over $100 million, and is in “no rush” to raise primary capital, he added.
In April 2022, VerSe was valued at $5 billion during its $805 million round. It counts Goldman Sachs, Falcon Edge Capital, Sequoia Capital India, Omidyar Network India, and Matrix Partners among its investors.
The company is targeting acquisitions to strengthen its core business, including news and infotainment, short-video content, and ad-tech. The acquisitions will be funded using a combination of cash and stock, Bedi said.
READ MORE: https://www.livemint.com/companies/news/dailyhunt-parent-acquires-us-based-magzter-11713419478538.html
Citing examples like Meta’s acquisition of Instagram and WhatsApp, Deepika Ramani, a partner at executive search and talent advisory firm ABC Consultants, said social media companies with a certain scale can effectively expand their user base and offerings through acquisitions.
“If you look at any organization of this nature, they are looking to increase revenue-generating opportunities, and subscriber base. For instance, the Magzter acquisition in many ways is going to do them a lot of good as the company has an extremely extensive catalogue. With this acquisition, VerSe could see their valuation increase multifold,” she added.
In the last five years, VerSe has acquired social media app GolBol, photo-video sharing community app Vebbler, AI solutions provider Cognirel and online news platform Local Play, according to data sourced from Tracxn. It has spent less than $100 million on each of its previous acquisitions.
The company has been in advanced talks to acquire social networking startup Koo, according to news reports.
How VerSe sailed through the ad-downturn
Experts anticipate a surge in consolidation in the social media space, with companies struggling to generate revenues and sustain growth amid uncertain macroeconomic conditions, and declining advertising budgets.
The funding winter, coupled with regulatory changes, such as a 28% goods and services taxes (GST) on online gaming, along with bans on betting and gambling, have added to the woes of the advertising industry.
Even major players, such as Google and Meta, have seen stagnant or slower revenue growth, reflecting the broader industry trend.
However, according to Bedi, VerSe managed to buck the trend, and is witnessing steady revenue growth from online advertising and subscription services across its applications, influencer marketing, and other online platforms. In FY23, its operating revenue grew 51% to ₹1,456 crore, the company’s latest filings sourced from Tofler showed.
To sustain growth, VerSe has also been innovating. It introduced Xpresso, an artificial intelligence-driven newsfeed in local languages, tailored for younger audiences. The platform also signed licensing agreements with over 100,000 partners, including influencers and news portals, for aggregating content. These partnerships work on a variable revenue-sharing model.
Furthermore, the company employs AI algorithms to analyze content and tailor feeds over time, leveraging users’ implicit browsing behavior, likes, and click-through rates to provide a more personalized experience.
Such initiatives helped the company post “very high, double-digit growth” last year. he added. Besides, with the decline of print, the company saw an uptick in advertising from small and medium enterprises.
“We moved a lot of that money to digital by reaching out to small businesses through the thousand-plus smaller agencies that we work with, as well as our 250 sales force on the street.” About 65% of VerSe’s business now comes from small enterprises, Bedi said. The company is yet to file its FY24 financials.
Overall, it boasts 215 million monthly active users on the app, and another 100 million users accessing all its platforms through websites, external links, and WhatsApp. According to the company, nearly 120 million users visit the platform daily, spending an average of 31.5 minutes across six sessions.
In 2018, Bedi joined forces with VerSe founder Virendra Kumer Gupta, as a co-founder of Dailyhunt. The parent company was established in 2007.
The platform targets affluent English-speaking individuals in Tier 1 cities, as well as the mass-affluent, educated audience in Tier 2 cities who prefer local language content.
Monetizing short-video app Josh
Much like Mohalla Tech which operates Sharechat and short-video app Moj, VerSe ventured into the short-video space with Josh in 2020. Josh was positioned to fill the void left by TikTok, the popular Chinese video hosting service, banned in India in June 2020.
READ MORE: https://www.livemint.com/companies/start-ups/sharechat-and-moj-are-floundering-can-the-businesses-be-fixed-11711889823792.html
Short-video apps are still in the early stages of monetization and are struggling to scale up due to the higher costs associated with creating video content. Despite these challenges, Bedi claimed that Josh achieved an annual recurring revenue of $100 million within just one third of the time it took Dailyhunt to achieve the milestone.
“With this rate of growth for Josh, we are seeing the revenue trajectory growing very steeply. Now, with a rationalization of spends, we intend to become Ebitda profitable at the company level by FY25.”
The company heavily invested in Josh for setting up servers, technology infrastructure, cloud services, AI/ML capabilities, content creators, and marketing initiatives.
During the pre-monetization phase, losses had widened significantly to ₹2,563 crore in FY22 from ₹808 crore the previous year. However, in the following year, it managed to narrow its losses to ₹1,910 crore.
With around 75% of its content in text format, Dailyhunt achieved Ebitda profitability in 2023. Josh is expected to turn profitable later this year, with the burn rate reducing and monetization efforts paying off, Bedi said.
“We were not monetizing Josh like we do today across three lines of business: advertising, VerSe Collab (Influencer Marketplace) and giftingot tipping.”
VerSe Collab, a technology-driven influencer marketplace, consolidates influencers from Josh, Instagram, and YouTube, as these platforms do not provide direct compensation to creators.
Instead of making direct payments, the platform assigns campaigns to influencers, and earns a commission from collaborations, which are then promoted as ads.
Other avenues, such as livestreaming and tipping, allow users to give gifts or tips to their favorite celebrities and influencers. Additionally, the company operates an ad-targeting platform to enhance ad performance.
“(Overall), the company has been able to capture and engage with a multilingual audience, a tough feat to crack in a diverse country like India,” Ramani said. Dailyhunt has a larger angle of community engagement, unlike any other home-grown social media platform so far, she added.
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Published: 28 Apr 2024, 04:51 PM IST