MANAGEMENT DISCUSSION AND ANALYSIS Global Economic Review Globally, spending on advertising will rise from $538.75 billion in 2012 to $676.17 billion in 2016, as the advertising industry has proved quietly resilient despite ongoing economic hurdles worldwide. Worldwide, digital ad spending passed the $100-billion mark for the first time last year, according to new eMarketer estimates, and will increase by a further 15.1% in 2013 to $118.4 billion. Much of the growth is coming from Asia-Pacific, where, more than 1 billion people will use the web at least once per month. By 2016, this audience will number almost 1.4 billion. Asia-Pacific will be home to some 2.15 billion mobile phone users this year. In China alone, the mobile consumer base will top 1 billion in 2014. That will put worldwide digital ad spending levels-including online and mobile advertising spending, other than messaging-based formats-at 21.7% of the total spent on ads in all media this year, and on track to account for more than one-quarter of all ad spending by 2016. As a percent of total ad spending, Western Europe's digital spending is slightly ahead of North America's, at 24.9% this year vs. 24.6%. Asia-Pacific is not far behind, though in the world's lagging region, the Middle East and Africa, just 7% of all ad dollars go to digital media. eMarketer expects this percentage to nearly double by 2016, but the region will still be far behind the near-30% of ad spending devoted to digital in Western Europe and North America. North America and Western Europe also boast the highest regional levels of digital ad spending per internet user, at $168 and $112 this year, respectively. The fastest growth in spending will come from the emerging markets of Indonesia, India and Mexico—though that growth is coming from a relatively small base of spending. North America Economically speaking, the US and Canada were both characterized by "firming momentum" in early 2014, according to the International Monetary Fund's "World Economic Outlook." In 2014, North America will remain the largest single contributor to the global ad economy and rebrsent 35.6% of the worldwide total, eMarketer estimates, as regional spending reaches $193.86 billion. With the online population still growing, as well as time spent with digital platforms climbing, digital ad budgets will leap again this year. Spending on internet and mobile ads in North America will rise more than 17% to $54.34 billion, eMarketer brdicts—almost 39% of the worldwide total. Growth will continue in the double digits through 2018, ensuring that digital also expands its share of total media ad spending during that period. Europe Digital ad budgets in Central and Eastern Europe will grow 23% to $4.55 billion this year, or 3.9% of the total spent on paid digital media worldwide, new figures from eMarketer show. This relatively low spending level will help boost the region to the second-highest growth rate in the world this year, behind only the Middle East and Africa, with a further 16% increase in digital ad spending projected for 2014. Digital advertising has evolved at different speeds in the leading Western European nations. Germany, the largest Continental market, is more mature than France in this respect, and both are more advanced than Italy and Spain. In most of Western Europe's major ad markets, expenditure on search ads is diminishing as a share of total digital ad spending, while display advertising is increasing. The popularity of video ads among both consumers and advertisers is a major driver of display's growth in the region. Asia Pacific Digital advertising spend in Asia-Pacific is expected to rise 30.3% to total $46.59 billion this year. Just like in 2012 and 2013, the region will boast the second-biggest share of digital ad spending worldwide, trailing only North America. This trend will continue through 2016, though Asia-Pacific will gain share during that period at the expense of North America. In 2017, Asia-Pacific will pass North America in total digital ad spending share worldwide, at 36.9% vs. 35.7%. With investments in online and mobile advertising totaling $23.70 billion this year, China will maintain the largest share of the region's digital ad market, at 50.9%—a trend that will continue through 2018. Japan and Australia will rank second and third, with respective digital ad spending totals of $9.07 billion and $4.52 billion this year, eMarketer estimates. Latin America This year, Latin America is expected to boast of the highest total media ad spending growth globally. Magna Global forecasts that advertising expenditures in the region would improve by 9.9% in 2015, down slightly from 11.3% in 2014. Though Latin America's growth rate will clearly surpass those of Asia-Pacific (6.3%) and the nascent Middle East and Africa (5.4%), the region will still be far behind all others when it comes to share of total ad dollars globally. Latin America accounted for just 7% of the total media ad spending worldwide last year. Looking forward, Latin America is the only region worldwide in which double-digit growth rates for total media ad spending will continue through the end of our forecast period. Such heated growth will bring total regional spend to $65.54 billion in 2019, but it will not result in any ranking changes, given that Latin America's higher growth in this metric comes from a significantly smaller base than the more advanced markets in North America, Asia-Pacific and Western Europe. Business Review: During the year, your company achieved a turnover of Rs. 1957 crores as against Rs. 1673 crores in the last year. This is an increase of 16.95% against last year. The EBITDA for the year was Rs. 585.89 crores as against Rs. 368.65 crores last year; an increase of over 58.92% year on year. The profit after tax for the year was Rs. 342.22 crores as against Rs 262 crores (excluding extraordinary items) last year; an increase of over 30.6% on year on year. The earnings per share for the year was Rs. 7.19 as against Rs. 4.64 last year. Strategic Initiatives: Business: During the year, Ybrant Digital Limited was officially renamed to Lycos Internet Limited and was listed on the NSE. A new division focused on consumer internet products (IoT) was launched in June 2015. Lycos Band & Lycos Ring were launched. Lycos TV was also implemented with new channel added for gaming using Socialtron feed. Ed Noel was appointed as new GM of Lycos Media (US). Lycos Media : MediaBuy (Publishers)- The Media division has added strategically valuable direct Publishers to its portfolio. Among these publishers are "DailyNews" which is one of the top US news magazines; "MyFoxTV", a top entertainment US website; "NYPost"; "Medula Networks", a big LATAM Media House that operates major websites across Latin America; Play Buzz' which is one of the most popular social content publishing platforms; 'The Denver Post' the leading daily newspaper in Colorado and one of the largest circulated newspapers in the US. Technology : Compass(OneTag)- Compass is the new name of One Tag, our in-house solution for managing publishers using a new-generation system, providing a turnkey solution that simplifies the publisher's integration and monetization tracking through a single platform and single tag. Video- During Q2, we have signed a deal with "Yashi" -a platform focused on programmatic video advertising on large-players, targeting the geographies - US,UK,CA,AU. Bright Roll Video Summit- The participation and sponsorship of this event has enabled the company to get the latest insights from advertisers when it comes to implementing programmatic buying and viewability. Sequential Targeting- We have implemented Sequential Targetting ability to match the one announced by Facebook during the year. Research & Development: During the year, the company has incurred Rs. 269.74 Crores on enhancing and creation of existing and new products respectively, that are as follows: Lycos Media: • We had made significant enhancement on our Ad deployment platform to increase efficiency with Bot traffic filtering technologies and algorithms. • We have developed LYCOS TV to incorporate 3rd party content acceptance systems for Video feed (CNN, Reuters). • Specific enhancements were made to the following legacy properties: TRIPOD, WHOWHERE, HOTBOT and ANGELFIRE. • The following Channels were developed during the course of this year: News, Business, Education, Health, HGTV & DIY, Humor, Learning, Life and Leisure, Local Movies, Nature, Politics, RAM country, Science and Technology, Travel Channel and Viral videos. Lycos Entertainment: We have developed and deployed LYCOS TV during the year. Significant developments were : • Content management system, Showbiz, Drone Landscape, Entertainment, Fashion, Food, News, Entertainment Network, Featured Videos, Hooplaha and Sports Videos. Lycos Life: Developed a base intelligence system for IOT endeavor of the company. 1. LYCOS Life App 2. Android OS 3.iOS • LYCOS Life Band: Firmware and design integration • LYCOS Life Ring: Design Integration. Intellectual Property Development: IP development effort was made in the following areas: • Web Search: During the year IP development was done on various Lycos Search platform and whowhere. • Programmatic buying/advertising: Programmatic Buying integratation with SSPs (Supply Side Platforms - Publisher side) and DSPs (Demand Side Platforms Advertiser side) to deliver imbrssions with highest in real time (sub milli second latencies). Advertisers / Agencies are increasingly seeking effective budget utilization RTB is a natural progression for Lycos with a perfect ecosystem. With DMP and a Tag Management System in place, LYCOS can switch into a new orbit. • Internet of Things (IOT): Lycos has launched Lycos Life products i.e Lycos Band and Lycos Ring which come under Inter of Things. New Branch Development: During the year, we have enhanced the sales infrastructure and branch offices in the following countries: a. Brazil b. Argentina c. Chile Financial Review: During the year, your company has taken affirmative action and has decreased the consolidated trade receivable days from 171 days to 158 days. For digital division the number of days Account Receivables is reduced from 110 days to 106 days. For Software division the number of Account Receivables days is reduced from 336 days to 325 days. During the year, Rs.80.91 Crores was the free cash flow generated. Out of which Rs. 67.85 Crores was used to repay long term bank debt and bank working capital loans during the year. The balance amount of Rs. 13.06 Crores is in the form of bank balance with banks. Risk management The Company has identified major focus areas for risk management and mitigation, ensuring smooth organizational functioning. The major concerns for the company and their mitigation are briefly discussed below: Risk Enhanced competition in the US market may reduce price and revenue margin. Mitigation The Company is expanding globally, and penetrating into potential markets like Brazil and China. Going forward, it would focus more. Risk Consolidation of service providers may affect the Company. Mitigation The Company has also ventured into strategic acquisitions and tie-ups to capitalize current market opportunities. Risk Rapid technology upgradation may entail huge capital investment and jeopardize business sustainability. Mitigation The Company focuses on technology upgradation and innovation to keep abreast of evolving customer requirements. Lycos has launched innovative services like One Tag and Lycos TV. Risk Business can be affected by privacy legislations and other regulations. Mitigation The Company discloses all its collection statements and dissemination practices in a published privacy statement in its website. Risk The new acquisition and tie-ups may create problems of integration. Mitigation Lycos enters into an agreement after extensive research, both internally and externally. Human Resources: The Company firmly recognizes the importance of its human resources to achieve its vision. Lycos has significant policies to acquire and retain new and existing talent. It trains its people in a variety of ways to create an extensive talent pool. Apart from providing attractive remuneration to people, Lycos also focuses on providing a stimulating and multicultural work environment. Internal control System: Lycos has a proper and adequate internal control system to ensure authorized business transactions. Internal audit function is an independent function, which is carried out by internal auditors through extensive audits. Regular internal audits determine the operational and financial efficiencies of the company. Moreover, the Audit Committee of the Board of Directors conduct periodic reviews of pan-organizational effectiveness and recommends improvements whenever required. The internal control system also formulates well documented policies, guidelines, authorizations and approval procedures and ensures compliance with applicable policies and statutes. |