Zee announced an investment of Rs 522 crore in Margo Networks, which offers streaming and ad services as SugarBox. What makes the company special?
A few days back, media and entertainment company Zee Entertainment Enterprises (ZEEL) announced that it was pumping Rs 522 crore into SugarBox, a platform it acquired in 2017. SugarBox is a hyperlocal Content Distribution Network (CDN) that allows users to access content and services without internet. It is, in a way, similar to the in-flight Wi-Fi-based entertainment options. SugarBox targets public places, intercity buses, trains, villages, hotels, co-living spaces, malls, hospitals, restaurants, etc. as its key distribution hubs.
In a conversation with afaqs!, Rohit Paranjpe, co-founder and CEO of SugarBox, opens up about the platform’s origins, present day challenges and future plans.
While the platform was launched in 2016, the idea and the insights came in 2014 from Paranjpe’s previous venture Digitainment, w a B2B2C video streaming service called Your Movies available as a default option on Nokia devices. Paranjpe recalls that over 90 per cent of consumer complaints about the service were of two types. First, the service wouldn’t work due to poor internet and then, users were disappointed that a free service would incur additional data charges.
Paranjpe says that the idea was to replicate a TV-like experience, where consumers enjoy seamless service, without worrying about connectivity, costs, usage limits, etc. “The entire financial viability of our business model is built on the idea that we will never charge users,” he adds.
The project was piloted at Mumbai’s Goregaon railway station in 2016, with the app providing access to almost 200 movies over a local network. Paranjpe says that the results were “extremely encouraging” and the next step was to hunt for content owners, and large content houses. Zee acquired 80 per cent stake in Margo Networks, SugarBox’s owner company, in April 2017. The 90-member-strong team is now being scaled up. Close to 70 per cent of the workforce is in tech (which also includes infrastructure and product).
With ZEE5 at its disposal, SugarBox got access to an existing user base for its trials and experiments. The beta version of the platform was made accessible to the public for the first time in October 2019. Close to a million users have accessed it since, as per claims. In Hyderabad Metro (trains), the app witnessed a sustained traffic of 27,000 people daily (110,000 unique monthly users).
How does it work?
The SugarBox app is nothing but an open platform that can carry content from various sources. Consumers have to connect via a Wi-Fi network to access the content stored in a local server. In case of trains, a local server is installed inside every train.
The servers installed in train yards, or the parking bays, execute the bulk data transfer to update the local one in the train.
The heavy transfer, say, the gigabytes of content can’t happen over a telecom network. The train server depends on a SIM card for connectivity and is used only for minor sensitive data transfer. A third tier of infrastructure is located at data centres, like any other CDN.
The phase, post-acquisition, was about making the platform scalable (to reach the masses), without making it isolated (which has a limited use case), like in-flight entertainment.
By focusing only on the content delivery part, the team failed to realise a bigger challenge.
By focusing only on the content delivery part, the team failed to realise a bigger challenge. “Content is the simplest part of making a connected app work offline. All the other parts rely solely on cloud and need to be online. Things like user registration, payments, advertising and, most importantly, content security were cloud-based,” Paranjpe mentions
The last couple of years were spent in tackling each of these problems, either by utilising available resources, or creating new technology.
Paranjpe reveals that the platform isn’t wholly ad-based. The model is close to how telcos work with OTT platforms, or how affiliate networks work. “We are a single ride from the data centre to the consumer, and we actually cover the role of all three - CDN, telco, and an affiliate network. SugarBox is an open platform and anyone can come to us. We take a share of any revenue that is generated for consumption on the SugarBox network using any revenue model. Let’s say ZEE5 shows an ad and earns Re 1, we’ll charge a share from it. Or say, ZEE5 sells a subscription, we’ll charge a share from that. Same for e-commerce, etc. The model isn’t ad-based, but on the earning of the ecosystem.”
But targeting is a core function of any digital ad-oriented platform and it requires internet.
An ad network works basis an ad tag that is triggered by the user’s device. The tag carries demographic information and is sent to the cloud-based ad server. The network captures this, which is followed by delivering the most relevant available ad campaign. This is further followed by attribution and registering impressions.
“We have replicated the exact system offline. Say the app needs to deliver an ad, the triggered ad tag, instead of the cloud server, reaches the local server. The local server has a set of campaigns on it and is able to serve the most relevant campaign based on the tag. We also use a patented algorithm to sync the attribution data with the cloud to figure out impressions, which is time sensitive. Other than attribution, everything else is happening offline,” says Paranjpe.
“The whole point of the platform is that any real time delivery is not feasible."Rohit Paranjpe
He stresses that real time advertising via RTB (real time bidding) and DSPs (demand side platforms) processes are not possible in SugarBox’s format of content delivery. “The whole point of the platform is that any real time delivery is not feasible. From my conversations with certain businesses and apps, I have realised that close to 50 per cent of their content consumption happens offline. RTBs and DSPs will never be 100 per cent of the ad delivery. In India, it is a single digit share and will grow, but a large chunk of advertising will always work on a planned basis,” he says.
SugarBox’s key offering here is ‘hyper-targeting on a planned basis’. In the Indian Railways, for example, ads can be custom delivered based on different networks, say, Mumbai Suburban Network or the Chennai Suburban Network. Within Mumbai, Western Line or the Central Line can be chosen. Again, it can be chosen between Ladies First Class compartment and General compartment. The team is busy creating opportunities for advertisers.
“We are an infrastructure-based business and that’s where our largest investment is into.”Rohit Paranjpe
Speaking about the utilisation of new funds, Paranjpe says, “We are an infrastructure-based business and that’s what our largest investment will be into.”
A little over half of the new funding will go into capital expenditure and the rest to operations, which include “large long term exclusive contracts” with transport bodies, for competitive advantage. The rest is dedicated to scaling up operationsacross geographies, and new deployments in 100 cities.
SugarBox is specifically looking at transport for its next bucket of users.
Apart from entertainment and gaming, the platform is also looking at enabling e-commerce, payments, music streaming, last mile transport booking, food ordering and other relevant value-added services. Pilot projects have been initiated in public buses in Mumbai, intercity buses, co-living spaces, bastis in Mumbai, hospital OPDs, villages, etc. SugarBox is specifically looking at transport for its next bucket of users, the kind who travel for hours on end and are stuck in one place where there’s no network.
The platform also sees opportunity in the sparse rural internet reach and the recent spike in telecom tariffs, along with the possible surge in the cost per gigabyte of data.