We had broken the story about Reliance launching a social networking site Big Adda. In the five months that have elapsed since, the site has switched to beta, and now has video content as well. They’ve recently launched an advertising campaign...but why is Reliance launching a social networking site? What’s the business model? When do they expect to break even? Are they innovating in any way? Is Reliance Entertainment considering an IPO? I spoke to Rajesh Sawhney, President of Reliance Entertainment for some answers…

What’s the reason behind Reliance Entertainment starting a social networking site?
The World is moving towards broadband, and Reliance has a big stake in the success of broadband. Our insight is that the growth of broadband is determined by the youth, and what the youth wants is entertainment. Web 2.0, media sharing and user generated content are all driven by the youth. The core of that is going to be communities and friends, which are going to power media sharing platforms that we are building. That’s why we’ve launched Big Adda.

Could you explain the structure...what is Reliance Entertainment’s relationship with other concerns like Big Adda, Zapak and Adlabs?
Reliance Entertainment is a part of the Reliance ADAG group. Then we’ve got companies that we’ve acquired, like Adlabs. And we’ve got operations like Zapak and Big Adda with their own specific teams. A part of our content strategy is the production of movies, TV and Broadcasting. As you know, there’s no global conglomerate today without an Internet strategy, and that’s because of the youth, which we are targeting.

Can you elaborate on the nature of holdings?
Not at this point in time.

You’d spoken once about how Reliance Entertainment’s properties serve RCom in a converged scenario. You seem to be taking the Internet way to the mobile, and not the mobile way to the Internet. Why is that?
That’s not true. We’re taking both routes. On the mobile, we have R-World, which is open only to Reliance users. Our Internet properties will cater to a larger ecosystem, since many may not be Reliance Communications customers. We will also be working with other operators. It’s like in Adlabs, we make movies and have multiplexes as well. That doesn’t mean we restrict ourself Adlabs multiplexes only. On BigFM, Airtel and Hutch are major advertisers.

But broadband growth is minimal. Is this the right time to launch a social networking site?
That’s a chicken and egg situation. What comes first - the infrastructure or the content? I think they’ll follow one another. My personal belief is that we’ll see an inflection point in broadband in the next year or the year after that. The last mile problem exists for the new players alone. So do I want to launch before the inflection point, or after? We have a long term plan in place.

What’s the business model for Big Adda?
Internet advertising. Right now, Internet advertising in India is around $100 million. In five years, it will at least be $500 million, if not more. India’s GDP is growing at 8-9 percent, and over 50 percent of the population is below 25. It’s all being driven by the youth.

More Q&A after the jump

What kind of advertising will you have? How many users do you currently have at Big Adda
We’ve got 100,000 users so far. We have a video sharing platform, search, banner. But we really want to beyond the usual...the next generation in advertising, because this is an interactive platform. Like we have advergaming at Zapak, we want to do something different here as well.

What’s your budget for Big Adda? How much of your advertising spends are online, and how much on search marketing?
For this (advertising) burst, the advertising budget is around Rs. 5 crores, of which Rs. 2 crores is online. Search is a fairly big component of the online budget.

So by when do you expect Big Adda to break even?
We expect that it will break-even in three years.

Your positioning in the TV commercial for Big Adda is different from Zapak. It’s not as quirky...
With Zapak, we wanted to build a brand in an MTV kind of way. Here, it’s about connecting people, discovering old relationships – it’s more emotional, softer. We’ve hired Ideasatwork - the same team that did Airtel’s Express Yourself campaign.

How many people are there in the Big Adda team...and are you spending anything on R&D and innovation? You don’t seem to be doing anything different...
You have to try out the site to see what we’re doing in terms of innovation – there are 15-20 innovations within the site, which help people consume content. We already have 12,000 videos. In general, tech spend is biggest on servers, software and bandwidth. Overall, 35-40 percent of the cost goes into tech, 30 percent into manpower and 30 percent into marketing. Much of that 40 percent is on R&D and product development. We’ve got a team of 45 people for Big Adda.

But are we going to see anything innovative or disruptive from you?
The disruption that you’ll see is going to be around mobile, and we’ll announce it in a quarter or so.

You mentioned 12000 videos. You’ve actually got a banner on the site that asks people to upload Hollywood and Bollywood videos. Aren’t there copyright issues?
All the content that we’ve sourced ourselves is copyrighted. In fact, agencies have approached us to put up branded content. Travel companies and TV companies (for cooking shows) have shown interest – so it’s not just about music and movies. About unlicensed content, those that are flagged as inappropriate or copyrighted will be taken down.

What about music?
We will launch a music platform in a months time at Big Adda.

One gets the feeling that though Reliance Entertainment is launching new properties it really isn’t dominating anything. Why is that?
The question of domination doesn’t arise because we have a startup mindset. We see ourselves as pioneers. But in Gaming, Zapak has done very well – it has 2.5 million users…

There are people who question your numbers...
Then you should look at the Comscore numbers for the last 2-3 months. In May, we had 1.7 million unique visitors for Zapak. But still, we’re not fighting a numbers game, and as management, I feel satisfied with what we’ve done so far.

How come Reliance Entertainment hasn’t taken the portal route, and created something like an Indiatimes or a Rediff? Why separate niches?
Our core business is youth centric. India has the best youth demographic in the world, and we’re building next generation portals. No point in doing models from the previous generation - we want to redefine entertainment.

Is Reliance Entertainment considering an IPO?
No.

I later also checked on Reliance Entertainment’s plans for incorporating local languages into Big Adda. The company says that local languages will be incorporated eventually, but they have not decided on a timeline.