Shailesh Nalawadi, CEO of Mavin, on how Gigato aims to spread “more internet, in more places, for more people” without violating net neutrality
With more than 700 million people in the country still not connected to the internet, a lot of smart people are trying to find solutions to this problem. Apart from infrastructure, a major impediment is still internet costs. A solution presented by way of the Gigato app promises to shake things up. But does it violate the spirit of net neutrality? If you remember even the well intentioned attempt by internet.org (freebasics) came under the scanner for this very reason. We ask Shailesh the head honcho at Gigato why their concept is different.
Digit: Let's start with you explaining to us what Mavin is and where Gigato fits into the overall picture?
Sailesh: Sure. Mavin is the parent company and Gigato is our first product. The founders of the company have in some capacity or the other worked on internet related technology over the last 15 years. Our strong feeling was that wherever possible providing more internet access for more people in more places is unambiguously is a good thing for society. So, we started with a very high moral concept asking ourselves the question what can we do to spread internet access to more places and particularly in emerging markets like India where we have 130 million smartphones in circulation within the country and only 60 million 3G connections. Our goal was simple: what can we do to spread the internet? And that’s why we started Mavin. After a lot of deliberations and trying few different things we decided to go to markets with a very specific product which we felt bolsters the long-term vision of the company and that product is Gigato. What Gigato does is it provides a platform that allows mobile app developers to pay for the data that their users consume. Think of this as toll-free data. We have today, the concept of toll-free numbers right? All these 1-800 numbers which if you call you do not incur the call charges. So our concept is very similar, except that the app on your smartphone is toll-free. So you can use it without paying for any data charges.
Digit: How does the arrangement work between you and the app developers?
Sailesh: They come to us and say "we’re interested in sponsoring certain amount of engagement. We want to reach a certain segment of our community of users, and we want to reward them up to a certain amount of engagement". How much the engagement is, depends entirely on the app. If you are a music streaming application, it comes down to the number of minutes of music. If you are a shopping application, it might come down to minutes you spend browsing or it may come to the number of pages that you view. Similarly with news applications they might say we want readers to read 10 news articles or watch 3 news videos without incurring data charges. So that’s the way our mobile apps think about it. When they come to us we take that idea and we convert it into specific megabytes that they have in mind, whether it is 10MB of streaming music or 15MB of surfing on say Amazon or say 20 mins of reading news on Times of India. And then we launch a promotion within Gigato that would say use ‘x MB’ of this streaming music app for free.
Digit: What’s in it for each of the players both you and the apps themselves. Also, the examples you mentioned – such as Times of India or Amazon – are these actual clients on board or just examples?
Sailesh: So those are examples, the actual app clients that are on board are actually in our app. If you install our app and open it up today, you would see a whole list of names that will be very familiar with you. So for example Saavn is one of our partners and so is Jabong. We have faasos on the food delivery side and we have Dainik Jagran, which is on the news application side.
Digit: So let’s take the example of Faasos. Through this tie up with you they obviously get users to use the app, and use their services and get a small taste of what using their service is going to be like. So how does the arrangement work? Who pays the network or operator for the data?
Sailesh: That’s what we do, so we take care of all of that detail, so the only thing
that the app developer has to worry about is how many overall megabytes of promotion did I incurred. We send them a consolidated bill that says here's all the megabytes that were consumed during our promotion via your application and that is the bill they pay. What does the consumer get? Obviously the consumer gets to use the app without worrying about data charges. If they are sitting on a bus heading home, there is a big traffic jam, they can listen to some music, maybe they can read the news or order their kathi rolls that will be waiting for them by the time the they get to home. So all these things which require internet connection we want the consumers to use the internet for that.
Digit: Interesting. So you guys have tie up with the network or the internet providers right? How do you channel all that data? Is it some kind of deep packet scanning that you do to allow those data bits to transmit for free or what is the system?
Sailesh: So, just to be clear, what you are describing is zero rating – when you are looking at the packet and saying this packet is free and this packet is not free – we don’t do that. All we do is on your phone our app looks at the consumption of data of the sponsored application, measures the consumption of data and then basically says you have used as an example, 22 MB of Saavn in this 24 hours from those 20 MB were free and we basically say those 20 are free for you and you have basically earned a 20MB data refund. We keep track of all the earned data and when the earned data refund gets to 150, we give you a data pack of 150MB.
Digit: Interesting concept. Is this something that would primarily be used by the cash-strapped youth of the country? It would really help understanding your target demographic if you could elaborate on some of its usage figures to know how popular this concept it.
Sailesh: So we launched basically about ten weeks ago. At this point we have upwards of hundred and fifty thousand users. We started off small, we haven’t done crazy promotions like billboards advertising our products. We work quietly with our partners so that they can promote to their users saying, “hey look, Jabong is having a sale for Independence day and in addition to the usual set of 20% or 30% coupons we are going you to invite you to surf on Jabong, save data charges if you install Gigato.” Those are the kind of ways we have been promoting our app and growing our userbase. And as I said, just over the last 8 weeks, we’ve grown to about a hundred and fifty thousand and we continue to grow at that pace and we may at some point as we get more partners, our growth rates kind of kicks up because they are the ones who are seeing increased engagement of their application and they find it beneficial to reach out to their users and invite them to try Gigato and get a refund for using their app.
What I’d also like to add is that it’s not just jugaad for poor college kids. Think of it this way – when someone tells you this is your insurance company, you can call us on this number or call us on this toll free number. Even someone like you is going to say, I’m gonna call up the toll free number because I don’t want to incur the call charges.
Digit: Definitely. That’s a no-brainer. No one wants to waste money.
Sailesh: It’s a no-brainer, absolutely. Even if the call charges are like Rs.4 or Rs.5 or even Rs. 8, anyone would say, why the hell not? And therefore this is not, as I said, only for the poor people, the first time users, and the Tier 3 village folk, this is for everyone. I started off by elaborating on why we started Mavin. Our goal was to help reduce the cost of internet access. And the cost of internet access in India, is actually three to four times more expensive (if you adjust for purchasing power parity) compared to most of the countries in the west. We think that the costs should come down. I can’t do anything about the operators charging you. But I can try to give you a certain amount of your usage for free and that in my mind helps bring down the cost of the data. So that’s why we are doing it. Our vision as I said is to bring down the cost, so more people try more services. Another way of looking at it is say you have Rs. 200 to spend on data costs and that Rs. 200 goes much further because maybe a third of your monthly consumption is free.
Digit: This seems to be an emerging trend, because a couple of months I was speaking to Bobby Sarin from Ozone – a company that aims to increase internet reach by setting up Wi-Fi hotspots across the country – and they also wanted to tap this huge potential user-base.
Sailesh: Yes, it is an emerging trend but I would say that as more people start purchasing smartphones, it's inevitable. These smartphone users are going to look for ways to come online. The first people in India that came online could probably afford Rs 600 per month. But the next fifty million users that are gonna come online for the first time in 2016, probably cannot afford Rs. 600 a month. What are you going to do about it. Are you going to say throw your hands up and say we are just going to wait until the operator does something.Or we are going to look for new solutions. If we look across the internet, whether it's Google with it’s Project Loon or it’s Facebook’s with internet.org or it’s these Wi-Fi based solutions, or if the operator is saying let’s have zero – everyone is trying to figure out what is the right model for the next hundred million or the next billion consumers worldwide who are coming online. So yes, this is an emerging trend because it is now become a critical problem.
So there are many smart people thinking about many different ways to address this problem and I think that’s the good thing about the internet industry. There is value here in bringing these people online, even if they’re a poor college kid in a college town in Tihar, there’s value in bringing this person online because this is tomorrow's internet consumer, tomorrow’s online shopper.
Digit: Absolutely. It’s funny you mention Internet.org because my next question was about that. Even Internet.org with all its goals in the right place did come under the scanner for violating net neutrality. So, does your concept violate net neutrality in any way? And if not, how?
Sailesh: Yes, we all believe that it is important to bring lots of people online who can’t afford it. There are many approaches of doing it and yes some of those approaches do violate the spirit of network neutrality. Network neutrality is important because it has helped the internet to get where we are today, and it is going to continue to keep the internet free. Our approach is in fact pro-net neutrality for a couple of reasons: First of all, you have to use your data and then you get a rebate. The data pack that you get back from Gigato, has no strings attached to it. It is 150 MB of data that you can use on any application! You need not use it only on the application that gave you that data. Second is, any service provider can decide “Hey I also want to get in this action and I also want to reward my users by giving free internet.” So we are not precluding anyone, and the third thing is everybody on our platform pays the same per megabyte charges. There is no backroom deals that says that Jabong pays less but Flipkart pays more!
Digit: With the point one and three, I can fully agree with, but point two, I find it a little questionable because it would mean that only established players with deep pockets can potentially come on board if they are intending to subsidize their users internet charges.
Sailesh: Look, that is an issue, but not a net neutrality issue. It has never been illegal to give cashbacks. It has never been illegal to aggressively discount your product. It does not violate network neutrality. Net neutrality talks about a different set of principles.
Digit: It talks about creating preferred highways for certain set of people. But in a way, at least in spirit, this seems to be the same thing. I'm not talking about breaking any laws.
Sailesh: Neither am I. I’m talking about the spirit of Net Neutrality as well. The question is, does someone giving you a cashback make it harder for smaller parties to participate in a business? If there is a shopkeeper, who says come to my store and buy rice and I will pay the bus charges that you incurred in coming to my shop, does that create unfair advantage? Well, if you say it does, that's what a free market is all about. Net neutrality is about a different set of things. There are no laws yet, the laws are being formulated, but the principles around which we all discuss, are principles of Net Neutrality and often in this discussion on “Save the Internet”, the issue of small player vs the big player comes into play. It kind of creates more confusion on the entire discussion on Net Neutrality that’s the distinction I wanted to make.
Digit: I get it. Nice analogy by the way.
Sailesh: Yes! So Internet.org focuses on some of the problems, which is that they kind of handpick who is in the internet.org ecosystem and who is not. They are now trying to change that. Second, it requires working closely with an operator and the only operator that it works with it in India is Reliance. But what we do works on all operators in all circles which is important for us because when we go and work with Jabong or TrulyMadly or Faasos, in some sense they don’t really care who your operator is. They want your business and they want to reward your loyalty. They going and buying a data pack for say the Mumbai circle from Vodafone for you, and an Idea data pack for someone else…. that’s too much complexity for them.
Digit: So within your set of partners, do you try to safeguard existing partners from a “conflict of interest” type of situation? For eg. If Jabong is on board, would you get Myntra on board?
Sailesh: Not true. Everybody gets to come on board and we tell all our partner that there is no exclusivity. It is absolutely in my interest to have more people, more apps on this platform because then there is higher likelihood that more the apps that you use on a regular basis are sponsoring data. And that is important to me, because conceptually I want to bring down your cost of the internet. This is about putting more megabytes in pockets of consumers.
Digit: Lofty ideals, serving greater good – I’m totally on board with all of that. Though the question arises – what’s Gigato’s business model?
Sailesh: We charge for every megabyte that we give out to users. The app developers have to pay for that and we take a small commission on top. For every user that’s on our platform there’s also a fee. But basically the model is: there is a cost per megabyte (which we purchase) plus we charge a small commission to the app developer.
In effect we are buying data packs from the operators and it is exactly the same price that you would pay for a data pack so we don't even get any preference from them.
Digit: So there is no monetary involvement with the network beyond the buying of the data like any other consumer?
Sailesh: Actually we don’t even buy from the network operators. We buy from third party intermediaries – the same ones that Paytm and Freecharge uses. So there are third party layers that help internet companies with data packs. They have done all the hard work of integrating with all the 13 operators in all the 20 circles. All the companies like Freecharge Paytm, Gigato, Mobikwik – we all use these intermediaries to do the transactions.
Digit: It certainly is an interesting concept and I am definitely going to try Gigato
Sailesh: There is one caveat though. That is it only works for the prepaid users.
The reason is because there is no concept of data packs for postpaid users.
Digit: But if you hit your free data allotment, then you start getting charged. So in effect there is a concept of data packs within the billing side as well, don’t you think?
Sailesh: There is a concept of data packs, but you have to go to the operator and change the packs right? While in case of a prepaid data pack, you can get it anywhere. You go to Paytm, Freecharge and so on. To kind of make things simple for us, and to get our service out to market, we chose to first start with prepaid only users. Eventually going to make it available for postpaid users too. However, as of today the service works for prepaid.
Digit: Speaking of multiple people approaching this particular problem of how to get more people online, do you have any thoughts on the top three emerging trends that you foresee in the near future in the telecom space?
Sailesh: My whole perspective is biased by what I am working on but I do think that over the next two years another hundred million Indians are going to come online. They are going to come online by means of a smartphone, not a PC, not a tablet and that these users will have very different purchasing power from the current hundred million that are online. There is going to be a need of whole different set of services optimized for these next hundred million users. So it may not necessarily be online delivery of high-end groceries to your doorstep purchased from your smartphone – that’s a problem for the first hundred million users. The next hundred million users may need more different things. Access to information, transportation services like buying bus tickets, railway information, finding out about the traffic, or what’s going on in your neighbourhood, what’s going on in my state. So I’m talking on very general fronts, but the point I’m making is that the next hundred million users in India are going to have very different characteristics from the first set of users to have come online and our mobile ecosystems is going to have to fully adapt to those users and to come up to different solutions.
Cost of access, devices and apps – are all going to have to be tweaked and this next hundred million isn’t just an Indian problem, but actually a global problem. That is why this is such a large opportunity and that is why there are so many players, which you’ve been observing, that seem to be talking about this problem.
Digit: How is it a global problem? In the developed world I would imagine internet penetration is much more. It’s probably even reaching the saturation point right now.
Sailesh: Yes. However countries like Indonesia, Philippines or South Africa – the emerging economies – are quite large. So this is an interesting problem to solve right? It’s not like “hey let’s create an amazing application for a single white men living within 50 miles of San Francisco”.
I’m deliberately I’m making a point, talking about solving more fundamental problem as we said students living in Tier 2 cities probably have much more in common with someone who lives in a second tier city in Brazil. Their aspirations, the kind of things that they want to do and the kind of services they would love to see etc. For example education. Can we create some way for them to access Khan academy content so that they can improve themselves? In spite of living in a place where the teachers regularly don’t even come to the classrooms.
So yes people are aspirational. Everybody wants to improve themselves and now with the internet there’s at least the promise that the playing field can be levelled one day. It’s still not the case of course but for a college kid in a tier 2 or tier 3 city who wants to learn about astrophysics he or she could potentially watch a video and learn from a professor at MIT. What’s coming in the way as a barrier is cheap and ubiquitous access to mobile data. Point is the desire to improve exists within people and that’s an economic opportunity – there is a way to make money from it. It does not always require governments to build and giveaway free Wi-Fi.
Digit: Great! I’m at the end of my list of questions. If you have anything to add or say to our readers, we’re all ears.
Sailesh: As I said, more internet, more places, for more people! That’s what we want to do.
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