"Serendipity,” exclaims Vijay Radhakrishnan, when asked about how Magzter, the company he co-founded with Girish Ramdas and is CTO of, came about. A self-confessed tech geek, Radhakrishnan was attending an Apple roadshow in Bangalore in 2008 to showcase its new mobile handset, the iPhone. Apple executives spoke of how they planned to develop an apps ecosystem built on the iOS platform.
At the time, recalls Radhakrishnan, there were only 100 or so apps and the executives told him how all the developers were already millionaires. “That definitely caught my attention,” he says with a smile. “I went back and told Girish that we should definitely start focusing on developing mobile applications since there was a lot of potential there.”
At the time, Radhakrishnan and Ramdas were working with Dotcom Infoway, an IT services company the latter had started in 2000 and into which Radhakrishnan had merged his own network management firm five to six years later. The first app Radhakrishnan and Ramdas developed was for Galatta, an online cinema portal focused on the South Indian movie industry that Ramdas had launched in 2000.
In 2007, the portal came out with a print magazine, Galatta Cinema. In the first year itself, the app which allowed viewers to get the latest news and gossip from Kollywood was downloaded over 100,000 times. “That’s when we decided to make app development one of our offerings,” says Ramdas, chief executive officer and co-founder, Magzter.
In 2010, Apple launched its iPad tablet and the Android operating system, too, began making its presence felt. Accordingly, Ramdas and Radhakrishnan launched versions of their app for Android as well as the iPad. They also started getting clients who wanted apps developed — operating as a division of Dotcom Infoway, their apps business developed over 300 apps between 2009 and 2011.
The eureka moment, though, came from Galatta and the realisation that developing apps for different technology platforms can be daunting for a publishing company. “If one magazine had this problem, then almost everyone would face the same issues. So, we wanted to make a product that would solve the problem and go global with it,” says Ramdas.
Thus, Magzter was born in May 2011 with an initial investment of ₹2 crore from the founders’ own savings. The product was launched a month later with Ramdas and Radhakrishnan moving to New York — the Mecca of publishing — and setting up headquarters there. It currently operates out of New York and Chennai, where the bulk of its 50-member team is based.
So, what does Magzter do? Essentially, it is a cloud-based system that allows publishers to upload magazines in digital form. It has a soon-to-be patented technology called “orey (Tamil for ‘just one’) click publishing”, which allows publishers to upload content that is then published over multiple formats almost instantly. Once publishers sign up and create their account with Magzter, they can upload PDF files of magazine pages whenever they want to distribute them digitally. The publisher doesn’t have to pay for anything — Magzter works on a shared subscription revenue model (more on that later).
Consumers, too, get the app for free and it works across different technology platforms, from iOS and Android to Microsoft Windows and Kindle Fire. They can buy the magazine of their choice from Magzter and read it across five devices. “Nowadays, everyone at home has a tablet or smartphone of their own. So, all of them can read it on their own device. It is pretty much how we buy a physical copy of a newspaper or magazine and the entire family reads it,” explains Ramdas.
From 35 magazines in 2011, Magzter now has 2,000 magazines in 17 languages across 30 countries. That includes leading publishers worldwide — the Hearst group (Cosmopolitan, Marie Claire, Seventeen, Good Housekeeping), Newsweek, Maxim, Fast Company, Outlook India (which publishes Outlook Business, among others), Living Media (India Today) and Bennett, Coleman & Co (Femina, Filmfare and Top Gear) are some of the publishers that have tied up with Magzter. All those together have brought in 10 million subscribers already and Magzter says it is adding 1 million new subscribers every month. Of the 10 million, 3 million are from India, an equal number from the United States and the rest from Asia and Europe (mostly the UK).
Magzter took off in India from the beginning. In just three months of its launch, it had surpassed Angry Birds as the most popular download in India from Apple’s app store. The first round of funding came from Kalaari Capital, which invested $3 million in 2012. “The bet on Magzter is on the overall mobility space. The introduction of smartphones and tablets has changed the way information is being consumed,” says Rajesh Raju, managing director, Kalaari Capital. He adds that magazine publishers are taking proactive steps in getting their digital strategy right because they don’t want to be caught on the wrong foot, as Western newspapers were by the online boom.
Now, Magzter is in talks with a group of investors (including Kalaari) to raise a second round of funding of $10 million. This will be used to increase its footprint in the US as well as in emerging markets like Brazil, Russia and China.
There’s plenty of competition in Magzter’s field. Apart from publishers’ own apps, there are several strong players in the content aggregation business as well — Apple Newsstand, Kindle Newsstand on Amazon, and the oldest aggregator, San Francisco-based Zinio. How does Magzter stand out in this crowd? First, it works across platforms — Apple Newsstand is available only on Apple devices, while Kindle Newsstand only works on the Kindle Fire.
Besides, many of the magazines on the Apple Newsstand — such as Lonely Planet India, GQ India and Cosmopolitan India — are powered by Magzter, which handles their digital strategy, technology and payment platforms, so Ramdas and Radhakrishnan don’t consider Apple Newsstand a competitor. “We power 30% of the content on Apple Newsstand,” says Ramdas.
What also works in Magzter’s favour is its large presence in emerging markets, which global publications are increasingly eyeing as growth slows to a crawl in developed markets. But the real differentiator lies in the app’s device- and platform-agnostic technology. “This is an aggregation business and we need a strong technology and distribution platform to be a good aggregator,” points out Radhakrishnan. And while Zinio has been in the business longer, has more titles (over 4,000 magazines at last count) and is available across the iOS and Android platforms as well, it has a big downside. Zinio charges publishers an upfront fee in addition to taking a share of the subscription revenue, which makes it more expensive than Magzter.
What you pay, is what you get
But it’s not as if Magzter is cheap. Even if uploading content is free for publishers, the company takes half the subscription fees readers pay — and since this is from what’s left after paying Apple’s 30% developer fee and Android’s 5-10%, the publisher’s share comes down even further (about 85% of Magzter’s revenues come from Apple customers). But it does have something more than plain vanilla content aggregation. Magzter offers publishers a dashboard that allows them to see who is downloading their magazines, how many people are reading and what their areas of interest are, which means they can not only offer more targeted content but also reach out to relevant advertisers.
Digital advertising revenue is expected to grow at a CAGR of 12%
to reach $8.1 billion in 2017 from $4.5 billion in 2012
Magzter’s technology also allows publishers to monetise their digital assets more effectively by allowing them to run different ads on their digital editions than what appears in the print version. Usually, digital versions of magazines are replicas of the print edition, down to the ads, but some publishers such as Forbes India have begun running different ads. This is possible because while the majority of content is still in PDF format (whether on Magzter or other digital news and magazine stores), some of it is now in HTML 5, which allows for interactivity.
The team at Magzter has created a tool, Mag Fly, with which publishers can create fully interactive magazines that allow readers to tweet about and share their favourite articles on social media. More imporantly, from a commercial point of view, it enables e-commerce on advertisers’ sites in real time. “This will make digital publishing more lucrative for the publishers as they can leverage their digital assets better,” points out Ramdas.
In the next couple of months, Magzter will take the battle directly onto Amazon and Apple’s turf with the introduction of e-books. Comics and news from the RSS feeds of various publishers will also be made available. “We want Magzter to be a reading destination and the largest reading platform online. We want to build a contextual reading platform where we go by consumers’ interests and offer things based on relevance, not source. Once we add books and comics, you can pretty much buy anything you want to read on Magzter,” says Ramdas.
In just two years, the company has grown its revenues 150 times, to over ₹25 crore. For publishers, going digital has proved to be a win-win situation — not only does it give them access to readers across the globe, the feared cannibalisation of print consumers isn’t happening, either — 80% of digital consumers are first-time magazine buyers, thereby bringing in incremental revenues.
With distribution and printing costs skyrocketing, making money in print has become more challenging, which makes the digital medium more lucrative in the long run. But digital publishing is still a very small fragment (less than 5%) of the $75-100 billion global print market — according to PwC, the global digital publishing market is currently estimated at $2.9 billion and will grow nearly three-fold to $8.4 billion by 2016. But much of this success will depend on how fast this new medium is adopted by publishers and consumers.
Technology research firm IDC predicts that the number of smart connected devices (its term for smartphones, tablets and computers) will double from 916 million in 2011 to 1.84 billion devices in 2016. This means that the global digital publishing market is likely to grow by leaps and bounds and Magzter is all set to make the most of it.