2020s Socials 🤝🏽 1990s Scams
An (irrationally) exuberant market and unchecked creators bring back a ‘90s style Ponzi scheme. Also in today’s edition: notes on PVR-INOX’s third quarter.
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Back in the 1990s, a new kind of scam was doing the rounds: plantation schemes.
The plantation scheme was a straightforward Ponzi or pyramid scam: gather money from investors offering them part ownership in a plantation/farm for an assured return. Take money from new investors to pay older ones. Rinse and repeat. Ads for these schemes were splashed in newspapers and on TV screens, and scheme (scam) agents made door-to-door rounds in small towns and villages to gather potential investors.
In 1997, Sebi classified all such agriculture-related investment schemes as collective investment schemes with rules that protect would-be investors. The next year, it banned them from taking fresh investments until they secured a credit rating. Only 34 out of an estimated 3,599 schemes managed to do so. Famous ‘90s plantation schemes such as Anubhav Plantations disappeared overnight with investors’ money. Eventually, plantation schemes faded away after Sebi began taking them on, though they did crop up from time to time (such as this one from 2009).
That should have been the end of it. So why are we discussing this now, over 25 years later? Blame social media.
How Growpital Resurrected a ‘90s Ponzi Scheme
Growpital’s official Telegram channel has gone quiet since January 26, when the admin wished followers a happy Republic Day. There are now 26 comments on the post, all from investors asking for their money. Last week, Sebi issued an interim order (pdf) freezing Growpital’s bank accounts and banning the company from raising fresh funds.
Growpital is an agri-investment company founded in 2020 by Rituraj Sharma and Krishna Joshi. It allows investors to fund farms managed by the company, guaranteeing returns of up to 17% on their initial investments. Growpital turns each investor into a designated partner in an LLP, distributing the company’s profits to all of the LLP’s shareholders.
Sebi’s order explains that Growpital was illegally operating this structure with hundreds of partners. These partners have no actual ownership of the company’s assets, do not oversee day-to-day operations, and are more like customers of a collective investment scheme (CIS). But, Growpital isn’t registered as a CIS.
Several YouTubers reviewed Growpital’s investment schemes. This one, by the Bekifayaati channel that has over 1.28 million subscribers, praised the scheme for being free of negative comments. Another did underline the high risk inherent in such investments and that there may be legal issues in the way these investments were structured. Besides these, Growpital, Zetta Farms, and Rituraj Sharma show up on endless small YouTube channels with a few hundred to a few thousand subscribers selling the dream of a no-risk, guaranteed return investment plan making (tax-free) money on agricultural income. Several of these are in Hindi. Growpital is running a YouTube channel of its own with over 5,000 subscribers, in addition to its Telegram channels and WhatsApp group.
None of the Growpital reviews I found pointed out the obvious flaw in Growpital’s ‘investment’ plan: the promise of guaranteed returns is a red flag. Forget complicated, high-risk assets such as Growpital, even fixed deposits aren’t guaranteed beyond the government-backed deposit insurance of ₹5 lakh (~$6,000) per depositor. Some had already cottoned on to all these problems. Mint cautioned would-be investors in this story last July that Growpital’s assured returns promise and LLP structure could be problematic.
But Sharma also bagged legitimacy from some mainstream media outlets. India Today Group’s Kisan Tak, an online platform and YouTube channel dedicated to agriculture, ran this long interview with him with precious few questions that probed Growpital/Zetta Farm’s business model. Sharma was also awarded The Times Group’s ET Leadership Award in August last year.
For now, Growpital’s investors are left high and dry, fighting via texts and voice notes in the company’s discussion group while its admin remains AWOL. A webinar meant to address investor concerns on February 2 is seemingly postponed, per complaints from the group, and the company’s website has a note on the landing page assuring visitors that it is replying to Sebi’s concerns regarding its business model.
But Rituraj Sharma’s interviews with YouTubers, like this one, still has queries coming in in the comments section from people wanting to partner with Growpital/Zetta.
What once required an army of persuasive con artists to trick unsuspecting people into Ponzi schemes and chit fund scams can now be done smoothly on the internet. All you need is a few clickbait videos, the promise of untold riches, and the veneer of respectability via interviews and awards.
PVR Needs Movies
The September quarter was a bumper one for multiplex chain PVR-INOX and the movies business in general. But it was probably a one-off party and not an indication that cinemas are booming beyond pre-pandemic levels. That’s exactly what happened. In line with market expectations, PVR-INOX posted a mixed set of numbers in the December 2023 quarter (pdf). Compared to a year ago (before PVR and INOX merged), the company’s revenue was up just over 6%, although profit after tax increased more than 11 times. Net profit margin was a wafer-thin 0.8%. And the cinema chain admitted 36.5 million people in the quarter, 2% fewer than the year ago, while occupancy fell marginally to 25.2%.
In this edition of The Impression, I had explained that the metric to watch out for long-term business recovery was PVR-INOX’s advertisement revenue. For now, that seems to be on track: the company’s ad income grew 23% year-on-year, the highest growth rate among all of its lines of revenue. It was also up 19% quarter-on-quarter, meaning ads are rolling in throughout the year.
This growth isn’t without risk. A majority of PVR-INOX’s agreements with advertisers are short-term. The company’s management told investors in an earnings call (recording) that only about a third of their ad contracts were long-term, lasting 3-5 months. “It is the balance, 65%, 70% that comes into play, which completely mirrors the content flow and the hype flow of the film,” Gautam Dutta, PVR-INOX’s co-CEO for North and South said in the earnings call. “So technically, you will need to keep the volatility of content and the seasonality in mind whenever you are trying to project advertising revenues.”
What this means is that if hit movies don’t keep releasing, most advertisers doing business with PVR-INOX may cut back on ad spends. Already, the total number of movies released in the December quarter fell 41% to 269, largely because of a drop in non-Hindi Indian films. But the festive season kept the ads rolling in. Will that continue this year too?
Perhaps that’s why PVR-INOX’s management ended the earning call with a promise to scale up the company’s motion picture business as well. As PVR-INOX CEO Kamal Gianchandani said: “We are working very hard in ensuring that PVR Pictures can be scaled up, and so that… the synergies between exhibition and distribution, can be exploited to the hilt.”
Last Scroll Down📲
Scan the big media headlines from the week gone by
All-in-one: Live sports are so crucial (and expensive) to the streaming industry that competitors are collaborating instead. Disney, Fox, and Warner Bros. Discovery announced a joint bundle with access to all their US live sports offerings, along with popular binge worthy titles like The Simpsons and The Bachelor. The bundle’s name and price aren’t decided yet, but it will be launched later this year.
Streak snapped: Shares of Snap Inc. fell 30% yesterday as the company reported lower than expected numbers for the quarter ended December last year. Although revenue increased 5% year-on-year and losses decreased, Snap’s results fell short of competitors. Meta, for instance, reported a massive bump in profits.
Presumably after seeing Snap’s fate, Reddit is resurrecting its plans for an IPO, but at half the valuation it sought in 2021. It may also float a smaller number of shares.
Surprise, surprise: Local social media app Chingari crossed ₹100 crore (~$12 million) in revenue in FY23, while it narrowed losses by 70%. Although it started life as a TikTok clone, the company pivoted to Web3 and live-streaming last year.
And the award goes to…:..the Grammys, for landing 34% more viewers for this year’s ceremony, making it the most watched edition of the music awards since 2020. This year, the Golden Globes also received record viewership as new ownership revamped the show and introduced a new awards category. The Emmys, however, had a bad year and as Variety argues, they may have been a victim of a crammed TV schedule. All eyes now on how The Oscars do this year.
How the newsroom crumbles: Last week, my main story in The Impression was on the busted business model in the news in India and abroad. Soon after it was published, US news startup The Messenger also announced it was folding mere months after raising tens of millions of dollars. This story in The Hollywood Reporter is a detailed insider account of how the company founded by media veterans Jimmy Finkelstein and Richard Beckman was undone by the founders’ stale vision and impossible ambition of landing advertisers on the promise of a “content factory”.
Trumpet 🎺
Dissecting this week’s viral ‘thing’
In this section last week, I wrote about two campaigns by major brands that pushed their ‘pre-buzz’ marketing into straight-up misinformation. Lucky me; that same day, internet sensation Poonam Pandey ‘died’ for the noble cause of raising cervical cancer awareness.
There was a (sort of) apology from the agency behind the campaign, Schbang, where they defended their decision by pointing out that Pandey’s fake death had generated tons of discussion on the cause and prevention of cervical cancer. But the damage is done. MSD, maker of the Gardasil HPV vaccine, has reportedly fired Schbang and denied having anything to do with the stunt. That also begs the question: did an ad agency run a high-profile campaign on its own without telling its client? Or is this damage control on MSD’s part?
At any rate, we are now irreversibly in the era of ‘shock marketing’, where getting attention will increasingly require crazier stunts and resorting to misinformation. Anoo Bhuyan, former health reporter, argues in this piece that perhaps stunts are the only way to get people interested in pressing matters of public health.
Maybe this stunt will actually translate to more young women signing up to get the HPV vaccine, preventing thousands (or even millions) of deaths from cervical cancer in the future. If so, Poonam Pnadey and everyone else involved in this stunt will go down in history as public health heroes. Already, the Serum Institute of India has launched a locally-made cheaper vaccine to compete with Merck (MSD’s) Gardasil and GSK’s Cervarix.
But for now, it’s likely that more advertisers will be tempted to execute ‘stunts’ to grab public attention. The cause will not always be as noble as fighting financial fraud or saving girls from cancer. Are we about to be awash in fake deaths and other affronts in the service of banal events, launches, and business milestones? Already, in 2022, a film producer circulated a fake CCTV clip of a hitman murdering a woman to promote their movie Maarich. It’s going to get harder to believe what we see/read.
That’s all this week. If you enjoyed reading The Impression, please share it with your friends, family, and colleagues. And please write to me anytime at soumya@thesignal.co with thoughts, feedback, criticism or anything you’d like to see discussed in this space. I'd love to hear from you.
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