Abolition of transaction tax could cost govt . 7,500 crore a year
The capital markets division of the finance ministry has mooted a proposal to abolish or substantially dilute the securities transaction tax (STT), a levy that fetches the government around . 7,500 crore a year but is disliked by investors as it adds to the cost of buying and selling shares in the country.
A senior official in the capital markets division said this proposal along with other measures such as reducing stamp duty is being discussed with the revenue department. The BSE Sensex recovered from an intra-day low of 15801 to close down only 111 points at 16051 on strong recovery in the European markets and the government's STT proposal. The revenue department had in 2009-10 rejected a similar proposal to remove STT and even if there is agreement this time, any change in the regime will have to wait till the next budget is presented in February 2012.
The STT was introduced in the 2004 budget by then finance minister P Chidambaram and over the years, the rate of this transaction tax has come down from 0.15% levied initially. Currently, a 0.125% tax is levied on both buyers and sellers in case of delivery-based trades. In the case of day trades, the levy is 0.025% on the seller only. Investors, Stock Exchanges Want the Tax Removed
The removal of this tax is a long-standing demand of investors and stock exchanges who argue that a multiplicity of levies such as stamp duty, service tax, exchange turnover fees, Sebi charges, in addition to STT itself, make India one of the most expensive markets as far as transactions costs are concerned. "Removal of STT or cut in rates will lower transaction cost substantially and benefit short-term traders, hedgers, arbitrageurs and intraday traders and boost overall market sentiment," says Motilal Oswal Financial Services CMD Motilal Oswal.
According to Praveen Malik, vice-president in charge of compliance at Centrum Broking, the removal of STT would certainly help in attracting more volumes. The capital markets division had pitched for complete abolition of the tax ahead of the 2009-10 budget, but the revenue department prevailed as it wanted the STT phaseout to be timed with the rollout of the Direct Tax Code. The code was to unveil a new method of taxing capital gains on securities. However, the DTC Bill finally introduced in Parliament does not propose any change in the capital gains tax regime and it remains to be seen whether the revenue department will now agree to remove STT
The revenue department has also in the past been keen on STT as it allows it to collect tax on sale of securities from FIIs routing their investment through Mauritius, thereby enabling it to trace a trail back to offshore tax havens. On stamp duty, the department of revenue has agreed a single countrywide rate of 0.003 % from a high of 0.005% in some states for most securities transactions, both, in the futures and cash segments. For currency derivatives, the Department of Economic Affairs is pushing for reduction to 0.0001% to boost trade in this segment. Finance minister Pranab Mukherjee will take a final call on the rates before the stamp duty amendment bill is taken up by the cabinet. The reduction in rates on financial transactions is a part of the exercise to overhaul the 150-year old act and any change in rates will have to be agreed upon by the states.
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Monday, September 26, 2011
STT may be Cut to Fire up Mkt
Posted by Unknown at 9:50 PM 0 comments
Labels: Finance
Govt Reviews Options to Put Divestment on Track
DESPERATE TIMES CALL FOR DESPERATE MEASURES
The finance ministry has ordered an overhaul of the government's disinvestment strategy for the year after the stake sale programme managed to raise just 2.75% of the annual target in the first six months, portending trouble for its budget calculations. Officials said options being considered include bringing first-time public offers of firms such as Hindustan Aeronautics, India's biggest defence aviation company, and state-owned construction firm NBCC to the front of the disinvestment queue and do bulk sales of equity of stateowned firms to domestic financial institutions. As an extreme step, cash-rich staterun firms could be leaned upon to buy the government's stakes in other public sector firms.
"We have asked the disinvestment department to get back with a plan B," a senior finance ministry official told ET.
The ministry is determined to stay within the targeted fiscal deficit figure of 4.6% of GDP this year despite the possibility of lower revenues due to slowing economic growth and a higher-than-budgeted subsidy burden. Most independent experts expect the fiscal deficit to exceed 5%.
The government will need the . 40,000 crore it has budgeted from disinvestment if it has to meet its fiscal deficit targets. It had lined up a series of follow-on public offers (FPOs) in state-run firms. But choppy markets have derailed its plans, resulting in it raising just . 1,100 crore through the sale of 5% equity in Power Finance Corporation.
Different Strokes
Will the markets dance to the govt's new tune? Unlikely. The STT forms a minuscule part of an investor's trading expense and a cut may not cheer brokers worried over Greece, the global crisis and govt's policy paralysis
So why is it pushing ahead?
The UPA regime is facing a crisis of confidence and credibility. It is trying to improve sentiment and attract greater capital flows
Bureaucratic, logistic hurdles
Lukewarm investor response may not be the govt's only problem. The STT is a direct tax and cannot be changed without Parliament's nod
Plan B for disinvestment The government is discussing three options: Push Hindustan Aeronautics and NBCC into the market; get cash-rich institutions to buy stakes; use cash-rich PSUs to buy stakes in each other
Old wine in new bottle
Many of these measures have been used in the past with little success. The markets want bold reforms. Hike in FDI limit in insurance, allowing foreign investments in multi-brand retail and easing rules that stifle corporate investment IPOs may Find Takers if Priced Well, Feels Govt
Although the FPO was attractively priced, the stock has been hammered in the markets and officials fear this could dissuade retail investors from investing in other follow-on offers.
Shares in Power Finance Corp have fallen to . 148.65 apiece, well below the offer price of. 193.5.
The finance ministry earlier this month decided to pull the plug on a follow-on offer of shares of the country's top oil company ONGC after it feared a tepid investment response. But the thinking within the government is that initial public offers (IPOs) could still find takers in the current market if priced attractively. "IPOs have a better chance than FPOs since with FPOs there is a price hangover," said Yogesh Kapur, senior vicepresident at Enam Securities.
Secondary market prices of shares of state-run firms have fallen after their FPOs are announced in anticipation that these shares will be offered at a discount to prevailing prices.
Finance ministry officials said IPOs would fetch the government more money because the price discovery mechanism would not be influenced by the overhang of existing equity and also because the companies in which share sales were being considered were good, profitable companies. For instance, they are expecting good interest for HAL stock, not least because the company had a net profit of . 2,114 crore on a turnover of . 13,000 crore in 2010-11. One of HAL's defence sector peers, state-run Bharat Electronics, has a market value of . 12,000 crore. It posted a net profit of . 861 crore on a turnover of . 5,471 crore. Based on the value for BEL, officials expect a 25% stake sale in HAL to fetch the government a tidy sum. "IPOs priced aggressively on the lines of Coal India could generate a lot of interest," said a senior executive in the capital markets division of a leading securities firm, referring to the IPO by Coal India last October which was heavily oversubscribed. The other option that has been discussed is getting cash-rich state institutions such as the Life Insurance Corporation (LIC) to buy stakes from the government. This route has been used by the government to divest its holding before.
The last, and according to officials the least preferred option, will be to ask cash-rich public sector companies to buy shares in other state-run companies from the government. Companies like Coal India and NTPC have cash running into thousands of crores.
Posted by Unknown at 9:48 PM 0 comments
Labels: Divestment
Saturday, September 24, 2011
INDIA: Slowdown ahead, say macro-indicators
India Inc.'s performance in the June quarter shows that sales and profits have grown at a decent clip with CNX 500 companies witnessing a 29 per cent expansion in sales and a 9.5 per cent growth in profits. But the question for stock market investors is whether this growth will continue. Right now, signals emanating from the economy hint that the current pace of growth is unlikely to linger. If stubborn inflation, rising interest rates and a slowing factory output are not reasons enough, growth blues in the European and US economies are not doing any good to the 'India' growth story. What lies ahead for Corporate India? A good advance indicator of the pulse of the economy is the OECD Composite Leading Indicators (CLI). The OECD Index, based on a country's industrial production, is designed to signal turning points in economic activity, about 6-9 months before it actually happens. For example, back in February 2009, when pessimism was still high in the air, the CLI pointed to a possible trough in economic activity in India, indicating the beginning of an upswing. Linked to this CLI, the OECD business cycle clock traces an economy through the four stages of expansion, downturn, slowdown and recovery. With '100' remaining the long-term trend line, an 'expansion' implies that the CLI is above 100 and is displaying an increasing trend. If the CLI is still above 100 but is showing a decreasing trend, the country is said to be witnessing a 'downturn'. Similarly, a CLI below 100, showing subsequent falls month after month, indicates a 'slowdown' whereas a CLI below 100 but progressively rising, denotes a recovery. So, how is India positioned currently? According to this clock, the CLI for India moved out of the 'expansion' phase as early as July 2010 (100.9) and began its descent towards a 'slowdown' in October 2010 (100.2) itself. This has happened even as the IIP showed a robust 11.3 per cent growth during the same month. Since then, the CLI has displayed a steadily decreasing trend, touching a new low of 95.7 points as per the latest available July 2011 report. Since the OECD index has about 6-9 months lead time, it seems the worst is yet to come for the Indian economy. A second lead indicator of economic activity is the survey of purchasing managers of about 850 manufacturing and service sector companies across the country. Called the HSBC-Markit PMI (Purchasing Managers' Index), this study captures the trends in new business orders, employment, input/output prices, backlog of work and stock of raw materials/finished goods every month. For August 2011, the PMI for the manufacturing sector slipped to a one-year low of 52.6, down from the peak of 58 recorded in April 2011 (the 50-point-mark differentiates expansion from contraction). The services PMI too recorded a one-year low of 53.6 points in August 2011. Sub-components of the survey reveal that more bad news is in store, in line with the CLI. Consider this. For the over 1,500 listed companies, net sales grew at a healthy pace of about 26 per cent in the June 2011 quarter. But, going forward, top-line growth is likely to be constrained. That is suggested by the fact that purchasing managers, for five successive months since April 2011, have indicated weaker growth in new orders. New order growth in August has been the weakest in the last 29 months, pointing to a possible softening of domestic demand. Numbers on the export order front are also not encouraging. Although the Government's export-import figures for June and July show high double-digit growth rates, the PMI's sub-index for new export orders had already slipped below 50 points (indicating a contraction) in July. The index contracted further in August, hinting at weakening prospects for export-oriented sectors such as textiles, gems and jewellery, etc. Auto exports too might take a hit. The August 2011 manufacturing PMI gives out two other hints which support the proposition that volume growth might take a breather. One, after showing signs of slower expansion, backlog of work actually contracted for the first time since March 2010, pointing to lower capacity utilisation. This is in direct contrast to the situation of roughly a year ago, when backlog in work for both manufacturing and service industries showed a steady uptrend, leading to capacity constraints in a number of industries. Two, the stock of finished goods has also decreased, attributable to a slower production growth and fall in inventory requirements. This apart, business expectations of the respondents over the next 12 months are less optimistic. Hiring too has been reduced in recent months. The employment index for the service sector, for example, has contracted to below 50 in July and further down August, signalling successive monthly declines in staffing levels. Finally, growth in intermediate goods, as captured by the IIP, has turned negative, at -1.1 per cent in July after several months of sluggish growth. Used as raw materials, a slackening demand for these intermediate goods from companies gives an advance indication of cooling off demand for the finished products. What might provide some relief to companies is that commodity prices, which hurt profit until the first quarter, have eased off quite a bit. But, with the demand moderating for rate-sensitive sectors and the PMI survey pointing to weakness in overall demand, the road to margin expansions may not be smooth. Besides, survey respondents have already thrown hints at not being able to pass on the full impact of cost inflation to customers, pointing to a loss in pricing power. At the net profit level, what could squeeze margins additionally is the lag effect of successive interest hikes. That said, big corporates have indeed reduced their leverage in FY-11, both by raising fresh equity and by repaying debt. At 0.49 for the top 500 companies, the debt to equity ratio for India Inc. is the lowest in five years. That could do its bit to ease the interest cost burden. That the interest rate cycle in India is close to its peak also adds credence to this line of thought.
PARVATHA VARDHINI C.The OECD Composite Leading Indicators Index, which has 6-9 months lead time, and other indices too seem to indicate tougher times ahead for the Indian economy. LEAD INDICATORS COOL OFF
PAUSE IN CORPORATE GROWTH
SOME RESPITE
Posted by Unknown at 9:23 PM 0 comments
Sunday, September 18, 2011
With Bold Moves, Subbarao Gets Reddy for Criticism
In his Predecessor's Steps: RBI guv has earned more critics than admirers in the past few months
When career bureaucrat Duvvuri Subbarao took the wheel at Mint Street in September 2008 at a time the financial world was crumbling, the popular belief was New Delhi would get a firm handle on monetary policy. The Lehman Brothers collapse and the 'synchronised' handling of the crisis between the government and central bank strengthened the belief. Three years later and the next crisis possibly round the corner, the story is different. Subbarao has earned more critics in recent months for supposedly killing growth, but a few admirers too for his conviction. Events are unfolding to create a landscape similar to the one that confronted his predecessor Yaga Venugopal Reddy — heaps of criticism for supposedly stifling growth and innovation.
"It was unnecessary given the sharp deterioration in the global environment and a significant slowdown in domestic activity," said Tushar Poddar of Goldman Sachs after the governor raised policy rates 25 basis points last Friday amid slowing economic growth. A basis point is 0.01 percentage point.
Industry was not far behind.
"At a time economic policy should focus on the creation of jobs, it is unfortunate that the economy is being forced into a sluggish growth phase," said B Muthuraman, president, Confederation of Indian Industry.
Subbarao, who parroted the policy stance of global central bankers during much of his first term, is deviating significantly. Policymakers in developed nations are keeping rates near zero and Federal Reserve Chairman Ben Bernanke has promised to keep it low till the middle of 2013. Most Asian central bankers have left rates untouched this month and Turkey and Brazil have cut interest rates. Subbarao is the odd man out by promising to keep raising rates till prices cool. Many admire his independence. "Subbarao is a pragmatic and astute central banker who has taken independent decisions based on his well-researched conviction," says Madan Sabnavis, chief economist at rating company Care. Warrior Caught in Padmavyuha
"He has recognised inflation as being the single most important malaise afflicting the economy and pursued the goal of increasing rates, notwithstanding the pressures being exercised from different quarters, displaying a lot of character."
Industry has been seeking a halt to raising interest rates, which started with 'baby steps' in 2010 with the governor's public admission of confusion with reference to his position being similar to a warrior caught in 'padmavyuha', a battle formation that is easier to get in, but difficult to get out.
The noise was loud enough to force him to declare last November that he would be putting the brakes on rate increases as manufacturing data showed weakness despite climbing prices. Industry and markets cheered, but it was short-lived.
He abandoned the baby steps for a shock treatment by raising rates 50 basis points in July, double of what the market forecast. "What the RBI will have to consider is that interest rate tightening has not had the desired impact on inflation that we were hoping for. It is having an impact on growth," Kaushik Basu, chief economic advisor to the finance minister, said before the rate hike decision last week.
The wildly-fluctuating Index of Industrial Production was presented as an argument for a pause. But Subbarao began to dig the surface. The economist in him found that data from the government was unreliable. A new series that was peddled by the government statistics department to be more reliable has been described by the governor as 'analytically bewildering'.
ASSERTING RBI'S AUTONOMY
It is not just his monetary policy actions by which Subbarao has asserted the central bank's autonomy. He has spoken out in public on some controversial issues such as the government's inability to rein in fiscal deficit, criticising banks that sold derivatives to unsuspecting customers and steadfastly resisting demands for investing foreign exchange reserves to build infrastructure.
He has spoken out on other matters as well. "The establishment of a statutory joint committee is itself problematic and raises issues about its potential misuse in ways that impair the autonomy of the regulators," Subbarao wrote to Mukherjee expressing his reservations about setting up a council headed by the finance minister to reconcile differences between regulators. But on this, the government ultimately had its way. Monetary authorities, in an unwritten rule, do not comment often about government finances. But in the last few months when criticism mounted on the RBI for raising rates, Subbarao said the government was not helping much to contain prices. In effect, saying that those in glass houses shouldn't throw stones at others. "Beyond the short term, the threat to the independence of central banks emanates from factors apart from public anger... as countries contemplate exit from these expansionary policies, the familiar tensions between monetary and fiscal policies are showing up again," he had said. "Many believe that these tensions are temporary, and will melt away once recovery takes root... that may not well be the case."
INCREASING TRANSPARENCY
Transparency is probably a word that does not exist in a central bank's dictionary. The RBI is probably as opaque as most central banks, but Subbarao has taken 'baby steps'. One example is the decision to make public the minutes of the technical advisory committee meeting. It probably may not be as significant as it is in the West due to non-voting nature of the members, but it has helped in at least one way — to show Subbarao does not hesitate to differ. Twice he has gone against the majority view of the advisory committee. The steps towards greater transparency are not surprising given his agenda all along has been "to improve communication" and "de-mystify the office of the governor".
"Since this governor has taken charge, the language in the policy statements has acquired much greater clarity as has the guidance for future policy actions," says Jahangir Aziz, Asia economist, JPMorgan Chase.
Ever since taking charge of monetary policy, he knew part of his job was to hold a mirror to the government. "The central bank has performed the role of being an effective counterpoint to the government, which often has to concentrate on short-term objectives," he had said. "The Reserve Bank has been able to take a medium-term view and what is prudent and optimal comes out of this synthesis. We should continue to do that."
Posted by Unknown at 9:40 PM 0 comments
Labels: RBI
FMCG Cos Put Few New Items on the Shelves
WAITING FOR COST PRESSURES TO RECEDE...
Dabur, maker of Vatika shampoo and Real juice, has delayed launching a new range of facial products from first quarter to third quarter. Godrej Consumer too has put off launch of a few products in the household insecticide and hair-colour segments from Diwali this year to early next year, say industry insiders close to the company.
Companies clearly want to keep their expenses low in the face of rising input costs and packaging expenses. "There have been petrol price hikes thrice already this year and commodity costs are not going down either. All actions, whether to launch new products or increase ad spends, have been linked to these cost pressures. Hence, companies are getting cautious," says Wipro Consumer Vice-President Anil Chugh.
Emami Director Aditya Agarwal says one reason for fewer launches could be a higher base last year. "We would like to consolidate our launches first and get it right before we are ready with new introductions."
According to IMRB data, 54 products and variants were launched between January and June this year as companies delayed big launches to save costs and focus on existing brands. This is 35% less than the same period last year (see table).
IMRB International Group Business Director Manoj Menon says 2010 had started with a positive note after a year-long slowdown in the consumer market following the global economic recession.
All product launches were on hold for a year, and launched in 2010. "In comparison, 2011 is more of cautious spending, especially when the inflation rates are still high," says Menon. Consumer product companies have been facing relentless rise in the prices of raw materials such as crude, palm oil and milk, and packaging costs. Commodity Prices Squeeze Margins
Prices of crude oil— a key raw material for making laundry, shampoo and household products—were more than 30% higher in the first half of this calendar while palm oil — the main ingredient in soaps — became 37% costlier.
Prices of crude and palm oil have been declining sequentially in the past couple of months, but they have not yet eased the squeeze on companies' margins.
To protect their profitability, companies have been consistently increasing sticker prices, besides reducing packet sizes and cutting costs, in spite of signs of downtrading, or consumers opting for cheaper alternatives.
Just last month, the country's largest consumer products maker, Hindustan Unilever, raised prices of soap brands Rexona, Hamam and Pears by 3-7% and skin cream brand Fair & Lovely by 5%.
Oralcare firm Colgate India too undertook 3-6% price increases across some of its key product packets.
In coffee, Nestle India and Hindustan Unilever have increased prices of some packages of their competing Nescafe and Bru brands by 10-12% over the past two months.
Some companies, meanwhile, say the slowdown in demand and launches is temporary and will pick up in the coming months when raw material prices are expected to stabilise. "Category growth rates have come down comparatively, but we believe that's a short-term trend. The next couple of months could be tight, but the key factor is the fundamental underlying story remains robust," says Chittranjan Dar, divisional chief executive of ITC Foods, maker of Yipee noodles and Sunfeast biscuits. Overall processed food growth may have slipped to around 11% this year from 15% last year, he adds.
Posted by Unknown at 9:33 PM 0 comments
Inflation Gains Currency & How!
India to print as many . 1,000 notes as . 500 ones in FY12
Rising prices are eating away the value of money, literally. The government is phasing out or printing fewer low-denomination currency notes, and printing more notes of higher denomination such as the . 1,000 note.
For the first time, India will print as many new . 1,000 denominated notes as . 500 ones in 2011-12. In value terms, this will be the first time . 1,000 notes will account for more money printed than . 500 notes, which were the mainstay of high-value cash transactions for some time.
Thanks to inflation, the . 500 note is losing its position of pre-eminence among the currency notes printed by the Reserve Bank of India.
Eleven years after the . 1,000 note was introduced in October 2000, the RBI has ordered 2,000 million new amber-red . 1,000 notes. This is double the number ordered last year. The order for olive-and-yellow . 500 notes, which came into circulation in 1987, has been halved to 2,000 million from last year.
In value terms, the new . 1,000 notes will add up to . 2 lakh crore, and . 1 lakh crore of . 500 notes. "ATMs can now dispense up to . 40,000 in one go. The . 1,000 notes are more convenient to dispense, fueling greater demand," said a finance ministry official.
Even banks want more . 1,000 notes to stock their ATMs, cutting down on the number of trunks full of cash they need to move between banks and cash dispensers.
The . 100 note is still the mostprinted one, its print order growing from 4,300 million to 6,100 million this year. Fewer . 100 Notes in ATMs
But most banks have minimised the volume of . 100 notes at automatic cash-dispensing machines. Printing of the . 50 note has been slashed to 1,200 million from 2,000 million last year. "Lower denomination banknotes run out sooner and increase both capital cost and operating costs (of ATMs)," the RBI said in its annual report for 2004-05, commenting on the rise in demand for . 500 notes. The . 1,000 currency note is the biggest one printed in India, measuring 17.7 cm by 7.3 cm, a good 1 cm longer than the . 500 note.
The RBI did not respond to queries by ET.
Banknotes worth . 1,000 and . 10,000 each were in circulation before Independence, but were demonetised in January 1946 to curb unaccounted money. The . 1,000, . 5,000 and . 10,000 face-value notes were reintroduced in 1954, but were demonetised again in January 1978. The RBI is authorised to issue notes with a face value of up to . 10,000, and coins that are each worth . 1,000.
Posted by Unknown at 9:32 PM 0 comments
Labels: inflation
Google Made Me Rich
The story of web entrepreneurs who made plenty of money, thanks to Google and a great idea
With little to no capital required, taking your business to the web is clearly the way forward. But decoding the web is not that easy. As yet another tech blogger, 27-yearold Amit Bhawani, found out. Starting as a personal blogger (amitbhawani.com now techadvices.com), the MBA graduate from Hyderabad has 300 domain names registered under his company Digital World Solutions with 40 sites and blogs operational, covering technology, health, education and automobiles. Bhawani started blogging as a 22-year-old in 2006 and soon realised that it's the only business where there's an assured 100% year-on-year growth. Last year he made 1.2 crore from his blog with 70% of the revenue coming fromGoogle AdSense.
Unlike Agarwal, Bhawani has a team of content writers (four on the rolls) and is soon planning to move out of his home office and set up a team of 16 writers to feed his 40 websites. "It's easy to make money online and you keep hearing offhand stories of webpreneurship. But it's difficult to find any guidance," he says. There are no agencies telling you what to do, and competition will misguide you. The web is the only source. But as Mitch Kapor, founder of Lotus Development and supporter of many internet-oriented businesses, famously said, "Getting information off the Internet is like taking a drink from a fire hydrant."
In his five years as a web entrepreneur, Bhawani says the three Ps that help you are passion, persistence and patience. But a few pointers never hurt.
Find a Niche
While studying to be an engineer, which he never got down to pursuing, Rishi Sachdeva, 27, realised that there's no specific service that caters to NRIs who wish to deliver flowers to India. His mother had a small florist business catering to local clients. His idea: to provide "similar or better virtual environment". He started aryanflorist.com in 2004, when he was studying engineering. Based out of Yamuna Nagar, he built a network of 100 florists within India to deliver pan-India, even to remote villages like Sangrur in Punjab for an additional cost. Today, the company has started delivering gift items like champagne, chocolates along with flowers and has a pan-world presence with a network of 250 florists in countries like the US, the UK, UAE, Canada, Australia and New Zealand.
Sachdeva has Africa and Europe on his list next. After setting up the website in 2004, designed by a Delhi web designer, he only usedGoogle AdWords to popularise the site. "When I started out, there was no one to help me out. I made mistakes — in reading the Ad-Words clauses, how to get traffic to the site and the search keywords to be used — and learnt from them," he says. The first five years of business were spent in understanding how Google works and how to increase his site's visibility. The money that came in was pumped back into advertising. Result: what started as a 200 per day ad spend has spiralled into 50,000 a day (AdWords works on a pay-perclick model). "There has to be a key differentiator to your blog, site or service you offer that will drive people onto your site," says Raju PP, a tech blogger who runs the sitetechpp.com (started in 2008). It started as a personal blog in 2005 and took on a life of its own as a consumer and personal tech blog in 2008. In 2009 Raju quit his job with Infosys to start full-time blogging. The blog has 2 million page views per month with 1.23 million unique users. Raju says he's working harder than he has ever done in any job but he's happy with the results. AdSense contributes 60% towards his monthly kitty of a few lakhs while Tribal Fusion make the rest.
Get the Numbers
Ultimately it's all about the numbers, read the traffic on your site. "It has to be more content creative than resource intensive as the people will come back to you only if they like what they see," says Hitendra Merchant of YoBoHo New Media. Merchant hosts 35 YouTube channels and nearly 10,000 videos on Bollywood, Hollywood, general entertainment, cooking, kids and yoga and is part of the YouTube Partner Program (YPP). An old hand from the music industry, Merchant was in music marketing with HMV and Times Music for some time. In 2007, he joined promoter Shripal Morakhia who exited out of ShareKhan in 2007, to launch a service for digital downloads. The licensing hassles stopped the idea from taking off.
Then they decided to create entertainment content for mobile phones, but were few years too early. In December 2007, the same set of animators designed web content and desimad.com was launched. But Merchant and his men were still struggling with the numbers and thus getting the advertiser interested. In 2008, Desimad started uploading on YouTube. "Within 7-8 months, YouTube started paying up and as soon as the YPP started we got regular cheques within 45 days from them, very encouraging for a start-up, and now we are one of the leading partners with the YPP" he says.
YPP is Google's way of sharing advertising revenue with its most popular and successful video creators. Once in the YPP, ads start appearing overlaid or next to their videos. The content developer gets 68% share of the revenue while Google pockets 32%.
"There's a fair bit of handholding from Google, as they advise on what content will fetch us more views, key searches, feature placements on youtube etc," Merchant says. But over time, he has found out that sometimes what they think will work and what actually does are poles apart. Take for instance, some of our nursery rhymes on the Hooplakidz Channel on youtube gets YoBoHo nearly 50,000 views a day.
For 40-year-old Saameer Mody, part of the YPP, YouTube has been helpful in getting the numbers. Mody, along with two friends, started 1takemedia.com to provide opportunities within the Indian Film & TV Industry. The site also had job postings — a sort of yellow pages for the Mumbai film industry. "In 2009, we took the next step by deciding to set up a distribution platform for short films and documentaries through YouTube," Mody says.
The 1takemedia channel on YouTube has over 14 million views and is adding over 50,000 views a day for its library of over 1600 videos from over 800 independent and aspiring filmmakers. According to Mody, there's been a 400% jump in the company's revenues. "The way content is consumed today is changing and it's this evolution that keeps me going," he says.
Optimise your Earnings
Mody is now planning to launch a video app for Apple and Android platforms, which will generate revenues through AdMobs from Google, one of the world's largest mobile advertising networks, offering solutions for discovery, branding and monetisation on the mobile web. He also regularly conducts short film contests including the recent exclusive branded contest called Gorbatschow Pure Shorts. Agarwal of labnol.org has started making tech videos for YouTube and monetises it through YPP but as he says it's a "work in progress".
Once the idea takes off and you have the eyeballs, the rest is a matter of channelising the same resources to develop more content. M R Hari of Invis Multimedia that runs indiavideo.org is an old hand at developing video content. It was in 1996 he got into the industry and made several cultural videos for Kerala Tourism. In 2004, they realised that DVD is on its way out. And indiavideo.org was born. But how to monetise it? In 2008, their YouTube channel started. From less than 1,000 views a day they are at 50,000 views per day at present. "This is amazing as most of our content is serious and educational in nature," he says.
But more than numbers, aligning with Google has had other benefits too. Like using YouTube as a host server rather their own, which helped in cutting down on bandwidth, server and security costs. "Our annual savings in this regards is more than 10 lakh. Plus, we are free of technical hurdles and save on manpower too," he says. While Indiavideo made 25 lakh last year from YouTube, they follow suggestions from YouTube and Ad-Sense that help in maximising revenues. "Our group is one of the earliest certified marketing partners for AdWords. We use the skills of the advertising team in increasing revenues from advertising by selecting most searched topic in content production," he says.
Also, since 50% of their viewership comes by way of related videos, they have started setting up brand pages of clients on their host site with videos uploaded to our brand channel in YouTube. "This has become a major player in multiplying our revenue and we are seriously thinking of a shift in policy," he says.
What Next?
Sachdeva of Aryan Florist has hired a UKbased web service agency to carry out search engine optimisation (SEO) plan for Aryan Florist that will help to get it on the first page of Google search engine as a search response to certain keywords. "I will keep using Ad-Words but I want Aryan Florist to grow organically too," he says. And after that he plans to have a physical presence for his company through florist and gift shops.
Mody has also launched an education-related video content channel called Pocketgyan which will have tutorials for engineering students and will extend it for other subjects as well.
"You could have started your online venture just for fun and it paid for some time but you can't sustain it without continued focus. It's not rocket science," says Bhawani of techadvices.com. After all, failure can be a click away.
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