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How Amagi tweaked geography to cash in on targeted TV ads

Amagi Media Labs Pvt Ltd, a Bangalore-based technology and media startup that facilitates geographic targeting of television advertisements, thrives on the contrarian school of thought. Perhaps, it has taken a cue from its founders, who themselves believe they are “abnormal people”.

When everyone in Earth and Mars were rooting for IITs, Baskar Subramanian, one of the founders of Amagi, dropped out of IIT Mumbai. He was working before joining IIT, but left his job to join the premier institution.  Subramanian later learnt that there is no substitute to embracing skills on-the-job and there ended his IIT stint.

When the universe anointed Internet and mobile as the future of digital media, Amagi Media chose to look the other way– It embraced TV.

“We chose TV for a couple of reasons. Even though broadcast TV is the largest digital media worldwide, it was still not leveraging technology in a big way. It was also the only medium where there was no geographic targeting of advertisements, except by regional language channels. And regional SME advertising on TV was a fast growing, but a largely unaddressed space,” said Srinivasan Karapattu (or Srini), co-founder, Amagi.

Amagi facilitates geographic targeting of television advertisements. Simply put, if viewers in Mumbai and Delhi are watching same TV channel, they will still see different ads, depending on their geographical location. For example, if it is a Magicbricks.com ad, the Mumbai viewer will see the ad for properties in Mumbai, while the Delhi guy will see the same ad for properties in Delhi, thanks to the technology to facilitate targeted advertising developed by Amagi.

“Before Amagi, targeted advertising was only time-slot based, we added location to the mix. We provide regional brands with an opportunity to advertise on a national platform. The national brands already have that,” said Srini.

The startup was founded by Baskar Subramanian, Srinivasan KA and Srividhya Srinivasan in February 2008. Prior to Amagi, they had also co-founded another technology company, Impulsesoft Pvt Ltd., a bluetooth audio solutions provider. Impulsesoft was later acquired by SiRF, a Nasdaq-listed semiconductor firm based in the US. After the acquisition, they held key positions at SiRF, before ushering in Amagi.

Last August, Amagi raised Rs 25 crore from the Nadathur Group, an investment firm founded by Infosys’ co-founder NS Raghavan. The firm has so far raised Rs 37 crore. Nadathur has invested in all its three rounds of fund-raising, primarily spent on R&D, technology, expansion into new cities and marketing.  The company is looking to raise more funds in the next couple of months.

“Amagi intends to raise about Rs 50 crore in its second round of funding. The funds will be used for ramping up its revenue by scaling its ad inventory purchase from TV networks and for expanding its reach across all the Hindi-speaking markets,” Baskar Subramanian, co-founder, Amagi.

A peek into future

“Targeting advertising on the regional level is big business. The regional print advertising market is already worth over Rs 4,500 crore, while advertising on regional TV channels is a nearly Rs 1,000-crore market. Hence, targeted TV advertising on the basis of geography (on both regional as well national TV channels) has the opportunity to grow to a Rs 4,000 crore market in five years,” says Srini.

As a startup, Amagi too faced the routine bout of scepticism, since broadcasters were unable to figure out the value of targeted ads. They did not see any merit then in partnering with Amagi. It actually took Amagi a year to tie up with their first TV channel. It started the pilot in Hyderabad in 2009. “Advertisers on the other hand were happy with the value proposition and we started getting ads from the first month of the launch itself,” says Srini.

As of now, it has tie-ups with more than 15 TV channels including Network 18, Zoom, UTV and TV Today. The company counts 600-plus advertisers in its kitty, including Chevrolet, Bikaji, Skoda Toyota and IIJT and operates in 40-plus cities across the country. Bangalore-headquartered Amagi, which has over 150 employees in its rolls, is adding around 90 advertisers on a monthly basis.

Now, Amagi is again treading a different path. Instead of individual cities, it has now started covering entire states like Maharashtra, Karnataka, Punjab and Orissa, etc. primarily to focus on bigger regional players, instead of small stores. Its reach, or the number of people watching Amagi-facilitated ads, is more than 150 million people as of now. The company aims to increase this reach to 400 million by 2014.

“We want competition, since targeting regional advertising is not a very well known concept in India as of now and competition will add credibility to the market. As of now, we only see Rediff doing something similar to us,” says Srini.

Rediff had in 2010 acquired a company called Vubites, a local TV advertising firm founded by Rediff Chairman and CEO Ajit Balakrishnan in his individual capacity. Rediff entered the local TV-advertisement market through this acquisition.

Filling the coffers

The startup generates revenues from selling ads space, which is then shared with its partners (the broadcasters). Without disclosing the revenue-sharing pattern, Srini admits Amagi bags the lion’s share. Amagi has grown 5x in the last three years and the same growth rate is expected this year as well.

International expansion is also on the cards. Srini says Amagi will make a foray into Europe and Asia Pacific in Q3, 2012. The model, though, would be different. Instead of replicating the same business model overseas, Amagi plans to leverage its technology and is in talks with some international broadcasters for licensing its technology for their markets.

What is in store

The focus will remain only on TV since as of now Internet and mobile are nowhere near TV in terms of reach. And Amagi’s founders believe they won’t come close for a while. The startup is currently trying to build a technology that will take targeted advertising to the next level- individual targeting.

“Individual targeting means that even two neighbours can be shown different ads on the same channels, according to their TV-viewing patterns.” said Srini.

For example, if one of households watches cartoons regularly, it means there is a kid in the house and hence the ads shown will be for products for children, even if they are viewing a news channel. If another household watches Saas-bahu serials a lot, they could be shown jewellery ads. After developing the technology, Amagi plans to pre-install it in the set top boxes.

(Edited by Prem Udayabhanu)

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