Tag Archives: Group Buying

Daily Deal Aggregators – what is your business model?

Deal Aggregators – what is your business model?
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Movie 300 – One of the most inspiring scenes, when King Leonidas asks his army – Spartans, what is your profession?
watch it here – http://bit.ly/4csyEj
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Post the series of daily deal sites that have come up in India (or across the world) – there are many deal aggregation services that have been launched. There are on going debates – is there a business model for deal aggregation services?
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While daily deals and coupon services are growing in India and else where – many users/customers of daily deals services as well as critiques of this business models have complained that people usually end up buying things that they do not want or would not have purchased otherwise. Which is little illogical because you buy it for the deep discount – and you buy it by your choice.
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My example – I am a regular eCommerce transactor – at least 10-12 product/books (non-travel) transactions per year. However I am yet to buy a deal/coupon as most services are offering deals that are not relevant to me or not close to my location. As a consumer, here is my take – I will not be interested in a coupon that gives me Rs 200 off at a restaurant in Andheri (Mumbai). The economics does not work for me, total travel time of 4 hours, commuting cost between Rs. 100 to 500 depending on mode of travel and accessibility of the service provider.
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There are two primary needs of consumers in this space that are not yet solved completely:
– Relevance of the Deals
– Location of the Deal
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While this is the problem that most daily deals and coupon services are themselves trying to address – the aggregators can do a better job at this for following reasons:
  • Most deal sites are limited to anywhere between 1 to 5 deals at any given time. That limits their reach to about 5-10 suburbs in a city like Mumbai (Mumbai + Navi Mumbai + Thane) or Delhi (Delhi + Gurgaon + Noida)
  • A deal aggregator can get such 5 deals from 5 different websites – and will have 25 deals to showcase and in most cases the span of reach will be wider – about 20-30 suburbs (which covers 40-50% of Mumbai)
The above statement is very logical, however deal aggregators now have to think beyond just aggregation and focus on distribution of such deals to relevant audience – relevancy by deals and location. At least in India, it may not be the daily deal websites that can take this business hyper-local but definitely the deal aggregators can if they wish to.
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If deal websites are focusing on – Deals in Mumbai; aggregators should focus on Deals in Andheri, Bandra, Chembur, Colaba, Ghatkopar and more!
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My two cents – Business model for Deal Aggregators should not be aggregation of deals. That is a simple job and that is minimum expected out of them. Your business model should be Distribution – distribution of deals, thats where they start testing their capabilities and adding value to the ecosystem!

Predictions – Biggest Exits in Indian Internet Space in coming years

There would be multiple Consolidations, Mergers, Change of Strategies by lot of VC-invested companies by 2015.
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Product based eCommerce companies:
Lot of interest seen in recent times by VCs. LetsBuy, Snapdeal, FashionAndYou, Flipkart, and so on, Infibeam as well (though still not part of any portfolio yet). Future of eCommerce companies will depend completely on two factors:

– Internet penetration in India > 200 Mn by that time
– Improvement in eCommerce transactions (Infrastructure + User Comfort)

The rate at which investments are made are much higher than rate of growth of both the factors mentioned above – which in a way may be good – as all invested companies will act as catalyst in growth and get new set consumers on-board.

If we see an IPO exit for atleast one of product based eCommerce companies that will be awesome;  One or Two VCs in India (without naming any here) have been actively investing in eCommerce space. There may be a very high possibility that they may merge two or more portfolio companies to form an large entity, which may be just a good acquisition target for Amazon or an IPO exit.
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Group Buying companies:
Was surprised (like many others?) with GroupOn‘s decision of acquiring SoSasta. There are established players in Group Buying space, I’m sure GroupOn has seen some merit and synergies. For existing leading players like SnapDeal, Deals and You and Taggle – they will continue to grow and have to.

Possible exit for them will be Google (since they are starting with Google Offers) or an acquisition by eBay; or maybe GroupOn India may now want to expand presence with one more acquisition. Not to forget that LivingSocial will also come knocking. Now that eBay has ventured into Group Buying space – it has much higher accountability as deals are now served by eBay and not marketplace. eBay India may acquire someone if they decide to have an experienced them to execute this business vertical.

Expect one very large player to enter Group Buying space in next 1-2 months, if well executed – in all probability it may give tough challenge to current market leaders.

Unfortunately many small players will hit the dead pool (few of them have already) due to execution challenges, expansion costs, and lack of operating revenues to keep going as the model is very easy to replicate, but not easy to scale with thin-margins and high acquisition cost.
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Online Travel Companies:
Clear IPOs for Yatra & Cleartrip. Will be great exit for all invested players. GoIbibo and ezeego1 are also leading players in travel domain – Goibibo’s exit may depend on ibibo’s overall plans, ezeego1 may raise capital through markets directly bypassing VC route.

Redbus is promising, they are very high on number of transactions – ticket size may be lower compared to Airline tickets, but % margins will be definitely higher. In all probabilities – Redbus may too hit an IPO or will be an acquisition target for Yatra or Cleartrip (listed travel companies by then as MakeMyTrip has acquired Ticketvala)

I hope someone in Indian Government thinks of the opportunity of listing IRCTC on stock markets.
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Ticketing eCommerce:
BookMyShow will expand to more geographies – they have presence in Malaysia & New Zealand. To get to more such markets, they will require more capital – further investment and definite IPO candidate. Reliance ADAG is trying to make it big in entertainment through BIG – they might knock doors.
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Technology Companies:
Pubmatic (industry’s first yield optimization player) may get acquired in few years. It faces good competition from AdMeld & Rubicon Project, however none of these yield companies are focusing on small publishers (the long tail) which may be the key to larger success.

iYogi by all speculation is IPO bound. Slideshare is leading in its segment and may be a great exit story. Fusion Charts is another one that may be acquired for technology and customers; and so is Martjack.
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Advertising Networks:
Existing players – Tyroo, Komli, Ozone Media, AdMagnet and others. Do not forecast a immediate exit for these players – the number of players in this segment has been same for long time (no new entrants) – and otherwise too existing players seem to looking outside of India, are they hinting saturation of market? The frequency of acquisitions of pure advt-networks has decreased outside India (no big news in so many months?).

There is no distinct advantage over each other and offerings (if Vizisense is treated as product outside of Advt-Network). Would have been great to see an situation like AdMax Network (owns up majority market share in countries they operate – very tough competition to Google as they have leveraged on local language audience which is majority).

Google has played a flattener by opening up its unlimited inventory on Doubleclick exchange through Google Certified AdNetworks program. Post which the publisher development story may have taken some hit, but wondering why have not the Indian Advt Networks integrated on Google’s Doubleclick exchange yet – expand you publisher network!

InMobi which is now the largest mobile advt network (outside of Google/AdMob) – maybe one of the biggest exits through Nasdaq IPO. There is no immediate need for Google to buy another mobile advt network – that leaves IPO as only logical exit unless AOL, Yahoo or Microsoft realize that they haven’t looked at the mobile monetization business seriously.
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Matrimony Portals:
BharatMatrimony (Consim Group) would be going for IPO in coming times. Not aware of any investors in Shaadi.com (although there are in Mauj & Fropper), if business is profitable and there are no investor pressures – unlikely to see an IPO from them (at least before BharatMatrimony).

Read somewhere that Jeevansathi has abandoned markets in South India (not sure of this), however its already a part of listed InfoEdge group, spin-off very unlikely as numbers are reported as part of InfoEdge.
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No Clear Exits:
SMS GupShup, Guruji, mCommerce companies (PayMate, mChek and others) are few companies I am not convinced of having an clear exit strategy. (Someone do throw light on this)
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Promising Startups:
The next wave of promising startups in India will be product-driven companies. Although the eco-system to fast acceptance of technology products is not so strong right now – it will be in coming years. Emergence of interesting start-ups like Practo, Zaakpay, Grexit, emo2, Workasaur are first steps in that direction.
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Hoping to see many success in next 5 years! Best Wishes

This opinion was posted originally as an answer on Quora at: http://www.quora.com/Which-Indian-internet-company-will-have-the-biggest-exit-by-2015

Social Buying: Attack of Clones & Indian Market

Group Buying in India: Attack of the Clones

Happy, Merry and Cheerful on success of Groupon. Social shopping was the way forward, most of them spoke of this since mid-2007; however the way Groupon solved the puzzle, no doubt earns them a success.

Came across Andrew Mason’s take on Groupon Clones on TechCrunch and through links stumbled upon Sanjay Mehta’s review on one of the India offerings – Wanamo that incidentally was also one of Groupon clones. An interesting discussion between Sanjay and Wanamo’s founder follows the review.

So back to my crunching game – how large can Social Commerce or Group Buying become in India. What potential lies in it?

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Current Scenario:

Market Stage: Chicken or Egg? Still nascent stage, but already crowded – too many chickens and too any eggs.

The Players: Snapdeal, Wanamo, Mydala, Mobstreet, Grabbon, Koovs, Group2Deal, and others I haven’t noticed yet.

First Thoughts: Star Wars – II. Attack of the Clones (or Cousins). Incidently one look at all of them, and you see all design elements, features and placements are similar with each other and with Groupon. A few of them actually ripoffs.

What would differentiate: Quality of deals, execution of ideas & ability to innovate this space.

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Group Buying: What is the market size in India??

Known group buying websites in India: 7, Estimated: 10
Average Transaction Size offered:  Rs. 500 (80% of them are under Rs.400)
Average Successful Coupons sold: 50 (as claimed)
Current Cities Catered: 4 (Top Metros only)

Total Market Size: 10,00,000 INR per day = 1 Million INR per day
Thats a kewl: 365 Million INR per year or 7.3 Million USD per year

These numbers are assuming that all ten Group Buying services see 50 Transations per day in all 4 Metros. This is were the analysis starts…

Will this model be successful in India… NO (Not till the point attack of clones continue)

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Why Groupon succeeds and has potential to grow:

  1. Original concept & product. First mover advantage.. and its huge!
  2. Groupon has plans to move to 100+ cities across world
  3. Groupon sells about 200 to 2000 coupons per day from $10 to $125 in each city
  4. They are already in 45+ cities as of today

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What Group Buying services in India need to re-think upon & probably revise their business strategy:

  1. It worked in US, it will work in India too approach
  2. The front end UI has been adapted/copied. Hopefully some player has built a robust backend too.
  3. India does not have 100 (or even 20+) highly penetrated ‘Internet’ cities. It would pinch beyond the IPL cities (Cities with representations in Indian Premiere League – IPL Cricket) on both sides.. Consumers & Partners.
  4. Most rely on Social Media for marketing & buzz. Good.. but Social Media is notoriously known for buzz and communication, and not conversions. However for Group Buying deals – this might just work if the deal fits right.
  5. Most deals in US are for Food, Spa, Coffeshops. Unlike US, in India we have choices not just in restaurants but also cuisines… Punjabi, Mughlai, Goan, Chinese, Indian Chinese, South Indian, Goan, and so on. Deals, typically on food & restaurants need to be much wider to appeal to wider audience.
  6. India.. We still don’t know how many users we have (Claimed 50 Million Internet Users)
  7. Others concerns – Internet Transactions, Security, Credit Card Penetration. But for the kind of audience they choose.. this might not be significant issue. But would be when they expand to more cities.
  8. Indians by culture and by nature love to bargain by themselves! And take pleasure in doing that :-)
  9. We love to choose – don’t we? One deal per day might not fit our appetite.
  10. Cricket & Bollywood; Cricket & Bollywood; Cricket & Bollywood
  11. You are not alone to solve these problem.. at this early stage itself you have huge competition!

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Ending Remarks:

So now that you have started, get started on the execution. Few cues to work for this model in India are:
Multiple Deals in a City, Payment Options, Alternate Revenue Channels like Advertorials & Advertising, Go beyond Internet… (Mobile) and much more.

Innovation and adapting to Indian market will hold the key for Group Buying services. And they need to execute that fast, as many deep pocketed services that are remotely and closely associated to related domain (like city event trackers, and hotel review sites… & you know who else?) will find it much easier to replicate this business model overnight.

A clone will be clone… so Innovate & Differentiate :-)