Kunal PHALAK posted on 26 May 2020
Vertex Ventures Southeast Asia & India recently led Kuku FM’s Series A funding, an audio content platform. What started as an endeavor to understand the vernacular digital content landscape in India ended up with us building conviction in the audio content space and backing Kuku FM.
So what led to our decision?
Large gap in the off-screen entertainment space
People are spending more time on their smartphones¹ and the time spent can be broadly categorized into two parts: (a) on screen and (b) off-screen.
Kuku FM targets the off-screen time of a user and fills the gap of on-demand audio content. It offers both entertainment as well as knowledge/ information related content. Users get a large variety of audio content in categories such as motivation, comedy, various genres of stories such as horror and love etc.
Since it began in 2018, Kuku FM has grown a sizable user base that exhibits tremendous user love — people are spending nearly an hour on the platform every day! A Kuku FM user shared that the platform actually helped him reduce on screen consumption time and be more productive!
“The main problem is Youtube app needs to be kept opened, to listen to anything, therefore I prefer to listening audiobooks on KuKu FM” - Working professional, Bengaluru.
Shift towards meaningful/value added content
Media consumption patterns evolve with time and there is a shift happening, particularly within the student and working professionals audience groups. A typical user will eventually move beyond instant entertainment to new use cases such as learning or self-improvement content. Audio content lends itself well to this shift, as its medium type leads to more focus on the content. It is also a good alternative for conscious users wanting to limit his/her screen time.
Evolved digital economies such as China have already seen this shift — knowledge platforms such as Ximalaya have over 480m registered users and their 123 Knowledge Carnival, a Black Friday equivalent for digital content, was able to sell digital audio content worth $27m on a single day².
In India, users too are looking for meaningful content, particularly those seeking self improvement.
“I feel watching videos on YouTube is a time waste. I have big ambitions and dreams. So, to fulfil them, I listen to audiobooks especially recommended by Warren Buffett and Bill Gates to gain the knowledge and later apply the same when given an opportunity.” - College student, Noida.
With a growing population of tech savvy, knowledge hungry internet users, Kuku FM is catering to this shifting behaviour to provide audio based entertainment and knowledge-related content.
India is going digital and vernacular first
With a ~3x increment in smartphone penetration from 8% in 2014 to 26% in 2018³, smartphones and cheap data have been the main drivers of the growth in digital media consumption. It is no surprise that with a further increase in smartphone penetration, estimated to go up to ~60% by 2023, time spent on digital media will overtake traditional media. This change is accelerated in certain segments such as the millennials, where digital media consumption will very soon overtake the traditional media, if it hasn’t already.
Going forward, vernacular content will play a large role in sustaining this digital growth momentum, as 72% of internet users are projected to be vernacular first internet users by 2021⁴. This is evident from the fact that 93% of OTT media consumption and 95% of Youtube’s consumption today are non-English⁵. While Hindi has the largest share in the content, the lack of content availability in other languages such as Marathi and Telugu presents an opportunity, as people prefer content in their mother tongues.
“I like to hear stories and other audiobooks in Gujarati, since it is my mother tongue I have better understanding.” — Working professional, Ahmedabad.
Kuku FM’s focus on vernacular audio content plays to this macro trend and will be key to its growth in the coming years.
Content is King
It has been about two and half decades since Bill Gates’ famous essay “Content is King”⁶ in 1996 and the internet today has not only democratized content creation/consumption but also empowered these creators to monetize via various forms. Producing content at scale is always a challenge — while the likes of media technology companies like Netflix and Disney can afford billion-dollar budgets, it is important for new age players to explore other ways of producing quality content consistently.
KuKu FM is looking to address this by empowering its creator community with tools to produce content at scale. Right now, it is focused on building its creator community, with the longer term aim of helping them monetize their content. The fact that over 30–50% of people we surveyed are open to paying for content in various forms, be it a monthly or pay-as-you-go model, is confidence inspiring.
As more people turn towards their smartphones for their media needs, content will be key towards capturing their attention and wallet share. KuKu FM’s singular focus on content variety and quality, as well as the overall user experience of its platform will differentiate them in the long term.
This is one of our first digital media investments in India and what helped seal the deal was the capabilities and passion of Kuku FM’s management team. From our interactions with co-founders Bisu, Vinod and Vikas, we could see how well they worked together, this being their second entrepreneurial venture together.
More importantly, we were impressed by the deep understanding they had of the audio content industry and their target audience, as well as their focus on creating a vernacular content ecosystem to drive long-term growth.
Vertex Ventures Southeast Asia & India is super excited to work with the Kuku FM team and we look forward to building India’s most loved audio platform, together.
Podcasting has quickly moved from a niche obsession to an area drawing considerable investor interest across Asia. Consider India’s Kuku FM, which brought in $5.5 million in a Series A round backed by Vertex Ventures and its existing investors this February.
COVID has allowed us to make a pivotal shift: go from being a sales-led driven company to a product-led growth company.
Vertex Ventures Southeast Asia and India started our journey with Sunday Insurance in the second half of 2018. Over the last eight quarters, we have witnessed the tenacity of the team, their drive and agility to adapt to an ever-changing and intense environment.