AI Shifts Direction: Companies Redirect Focus towards Artificial Intelligence, Resulting in Job Cuts and a Decline in Staff named Josh
VerSe Innovation, the parent company of DailyHunt and Josh, has faced significant financial hurdles in recent times, particularly due to its association with Builder.ai, a now-collapsed AI startup.
The relationship between VerSe and Builder.ai involved substantial financial transactions over several years, with VerSe spending more than $80 million on Builder.ai and receiving about $53 million in revenue for advertising services. Reportedly, Builder.ai accounted for up to 8% of VerSe's revenue at times. However, investigations uncovered questionable accounting practices, including "round-tripping" transactions between the two companies, which artificially inflated Builder.ai's sales figures and raised concerns about the validity of VerSe's revenue and inflated financial statements.
As a result, VerSe made substantial downward revisions to its revenue, reducing its FY23 revenue from ₹1,456 crore (approximately $175 million) to ₹1,104 crore (about $133 million), indicating a notable financial hit.
Despite these challenges, VerSe's co-founder Umang Bedi has publicly defended the authenticity of its transactions with Builder.ai, asserting that all revenues and expenses were legitimate and verified by a 'Big Four' auditor for the last decade.
To turn around its fortunes, VerSe appears to be relying on its strong user base and operational core. With over 350 million daily users for DailyHunt, the company likely aims to leverage its large user base and core content aggregation expertise to stabilize and grow organically beyond the fallout.
VerSe may also focus on shoring up governance and financial controls to prevent future irregularities, especially in the wake of such a high-profile disruption linked to AI sector partners.
In a bid to reduce cash burn, VerSe managed to cut customer acquisition costs, server costs, and employee expenses by 56%, resulting in a reduced cash burn of INR 814 Cr. The company also introduced a subscription model for the 1:1 call feature on Josh, with prices starting at INR 14 per minute on the call.
However, the decline in users on Josh has led to a shrinking revenue stream, prompting the platform to pivot to adult content videos to stop the churn in its userbase, according to VerSe insiders.
VerSe has also laid off 30% of its workforce to shift focus from grey cells to black boxes due to AI disruption. The company is now betting on AI-first adtech and subscription-led business to turn around its fortunes.
One of the strategic initiatives by VerSe is the implementation of NexVerse.ai, an AI-powered programmatic AdTech engine, which is expected to increase VerSe's revenue by charging a premium from advertisers and growing the average revenue per user.
VerSe acquired Magzter and rechristened it as Dailyhunt Premium to provide bundled e-subscriptions with a sticky userbase. The company expects over 75% surge in revenue in FY25, outpacing an anticipated 10-15% growth in digital advertising.
Despite the financial challenges, VerSe continues to emphasize transparency and audit-verified legitimacy to restore confidence and navigate the AI disruption fallout.
In light of the financial difficulties encountered by VerSe Innovation, the company might choose to strengthen its financial controls and governance to prevent future financial irregularities, particularly with regards to partners in the technology and business sectors. To boost revenue streams, VerSe plans to focus on its AI-first adtech, subscription-led business, and the implementation of NexVerse.ai, an AI-powered programmatic AdTech engine, while efforts are made to reduce cash burn and cut expenses.
