Meenakshi Rohatgi

One of the biggest challenges small business face is lack of advertising spend. Budgets simply cannot accommodate this 'luxury'. And if you're talking television advertising, not a chance! It was a challenge Mohali-based Janta Land Promoters Limited was grappling with, till they were told they could advertise on national TV - at a price that was less than even advertising on radio. Better still, to play on the relevance factor, their ads need not be broadcast across the country but targeted at potential customers only in Punjab, or even just Mohali.

This unbelievable proposal came from Amagi Media Labs, a Bangalore-based technology and media start-up that is challenging the very model of television advertising in India. Founded by three buddies, all of them techies, Amagi calls its innovation 'micro-targeting' or 'geographic targeting' of advertisements.

How It Works?
Amagi buys pan-India ad slots from TV channels and then slices and resells them to small and local businesses. While each mini-slot is affordable for small and local entrepreneurs, Amagi's revenue from each slot is more than the sum of its parts. It's as simple as that. Since these mini-slots are cheap, entrepreneurs as tiny as beauty salons, namkeen makers and even local kirana stores can advertise on national channels - and in a city-specific way.

And, guess what? Amagi's software delivery platform seamlessly and automatically inserts its clients' ads into the national signal of a TV channel, without any manual intervention. This is achieved through agreements with TV channels, cable MSOs and DTH operators to install Amagi's software at their headends.

How it started?
Amagi Media Labs was founded by college buddies Srinivasan K A, Baskar S and Srividya S, who wanted to take a contrarian path after they sold their company ImpulseSoft, a Bluetooth audio solutions provider. Sensing a huge opportunity in the Rs 4,500-crore regional advertising space, they figured that the prohibitive cost of TV advertising was due to the fact that every ad was by default being broadcast to a national audience. Even if convincing broadcasters wouldn't be easy, the answer was simple - figure out a way to allow local businesses to advertise in a city-specific way.

The trio began working on a new technology platform in 2008 and managed to bring on board N S Raghavan, one of the founders of Infosys, as well as some media biggies as advisors. Next, they worked on ad inventories with four TV channels. The trio finally began commercial operations in 2010. Today, Amagi has tie-ups with 15 TV channels and cable operates across 65 cities in India, while its client list comprises an impressive 1,000 advertisers.

Revenue Model
Amagi began with a seed capital of Rs 40 lakh and earns its revenue solely from selling television ad space. The company sets aside some of its revenue for cable operators and the broadcasters it works with, to incentivise them. "Advertisers were happy with our value proposition and we started getting ads from the first month of the launch itself," says Srinivasan.

Considering the prohibitive cost of television advertising, Amagi needs vast sums of money at its disposal and has raised Rs 37.5 crore in funding to date. And it's paid handsome returns - the start-up has experienced 365-per cent growth over last year and is adding around 90 advertisers on a monthly basis, as the success of this model rests on scaling up.

Just how cost-effective is it for, say, a local optician or a fruit-seller to advertise on TV? "It costs only a fraction of the cost of advertising on national TV - in many cases 80 per cent less," reveals Srinivasan. He claims that for the cost of a quarter-page ad in a local newspaper, Amagi can offer as many as 20 TV ad slots per day, for a whole month.

Amagi sets 5-8 per cent of its total expenditure for a marketing budget, and uses it to advertise in the print and online media apart from social media and Google ads.

Hand-Holding
To build its brand and widen its client base, Amagi has a dedicated team to create advertisements for clients who are unable to create an advertisement that would match the standards required for national TV. The start-up also shepherds small entrepreneurs through the entire process of launching a television ad, since many of its clients have never advertised on TV before. Part of this hand-holding is educating the brands on validating and measuring analytics, once their ad is released on TV.

Road Ahead
"When we started, the biggest challenge was the absence of such a concept," says Srinivasan. "But this helped us gain visibility. There was no such ecosystem earlier, so we had to create a need in the market for this." It's a long way from there to here - individual targeting, or targeting ads at individual households, depending on the household's viewer profile and TV-viewing patterns. How cool would that be?

You can send your feedback on smementor@moneycontrol.com or simply post comments below