A Fine Balancing Act

“Where there is media, there is content creation. And this content creation requires monetisation. With the digital medium, digital marketing is a critical element to growth,” says Suresh Reddy, chairman and chief-executive officer of digital marketing firm, Ybrant Digital (Ybrant). And Reddy adds, in simple terms, that Hyderabad-based Ybrant’s objective is to focus on the monetisation by fundamentally helping content builders find suitable advertisers and providing advertisers with an effective medium.

However, this business clarity took its time coming to Reddy. The company began as a digital greeting cards concern in the U.S. and morphed with a change in market dynamics. “There is a definite difference between having a business plan and implementing it in the face of market realities. We went from being a dot com to a services provider to advertising networks in the U.S.,” says Reddy. He adds that the team saw that this move was impacting them positively and prompted a decision to climb higher in the value chain. “This was a move that was more due to opportunity as opposed to facing a difficulty,” he opines. And if turnovers tell a story, the move was certainly in the right direction. Ybrant ended 2009 with revenues of close to U.S. $ 70 million and today, its presence has spread to over 20 countries.

The growth story

If one were to look at Ybrant’s growth, thus far, it would be easy to spot that they favour an inorganic approach to growth. Over the last four years, the company has completed eight acquisitions, adding newer areas of operations. “There are two ways of courting growth, one – you build yourself or two – you buy into an opportunity,” states Reddy. Choosing a route to grow depends heavily on reading the markets. Reddy explains that when a market is consolidated at a quick pace, it is better to join hands with a market leader as opposed to playing the waiting game and building the same volume of business. He further elaborates that both methods have their pros and cons. “With organic growth, you could lose out on the timeliness of addressing an opportunity whereas with inorganic growth, high costs could be hard to justify.” The trick is to keep a fine balance between the two.

 “With organic growth, you could lose out on the timeliness of addressing an opportunity whereas with inorganic growth, high costs could be hard to justify.”

Snap Shot

Founded: 1999
Revenues in 2009: U.S. $ 70 million
Employee strength: 400
Standout: End-to-end solution providers for digital marketing needs with a strong presence in the emerging markets, where growth potential is higher

“We have focused on buying companies to strengthen our sales in emerging markets,” explains Reddy. Ybrant’s latest acquisition closed in August 2010, when it bought its first web property, search engine and web portal, Lycos. Lycos, once a struggler, now has an established brand presence in the U.S. and Reddy attributes this change to the inception of a stronger management team. He justifies the acquisition by saying, “Lycos has effectively monetised the U.S. digital markets, but, could do with some help in other geographies and this is where we can help. Even when we purchase strong companies, we can improve their efficiency through use of our technology platform, which is what we bring to the table.” The presence of its own web property through Lycos also allows Ybrant to fine tune to the needs of its clients and leverage on price.

Finding investors

In addition to growing inorganically, Ybrant has raised numerous rounds of funding from external investors. “There is only so much we can achieve with profits, so, we opted for outside cash infusion,” says Reddy while adding, “With growth, we found it easier to find the right kind of investors as opposed to the early stages.” Ybrant raised U.S. $55 million in two rounds of private equity funding – from Sansar Capital (U.S.$ 20 million) in 2007 and from Hong Kong-based Asia Pacific Capital (U.S. $ 25 million) in October 2008. Between 2007 and 2008, the company was poised for an initial public offering, but, this did not go through for reasons that include waiting for a more receptive market. The company is still waiting for the right time to go public and Reddy says that keen assessments are being made in this regard.

Reddy believes that the markets are looking up again and the future will see consolidation of digital players, globally. He also adds that there will remain only 15 to 20 major players and sees Ybrant as one of them. The company is looking to boost its global presence by making a foray into the Chinese and Brazilian markets. “Initially, we will look at growing organically, but, we are open to assessing business opportunities that come our way,” says Reddy. Despite the fact that close to 95 per cent of Ybrant’s revenues come from its global operations, India, too, will remain a key region in the company’s growth plans with product launches in the future. As Reddy says, the integration of mediums such as the digital medium and mobile phones will impact Indian users in a positive manner. And by comprehending this blurring of lines between traditional media and emerging media, Ybrant can keep pace with changing trends through constant updates to its technology. This, coupled with the company’s keen eye for business opportunities in emerging markets, gives it a distinct edge over competition.