Just Dial: First Mover of Indian Local Search Market

Stock Opportunities
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PP,

I am not sure from where you got $100mn of GMV from SearchPlus for Q4. In the Q4 transcript this is what JustDial highlighted where they talked about $100mn in revenues for the entire year, which is entirely from Search business except 0.5% from other sources. If I consider entire income from other sources is from SearchPlus and assume 10% of referral fee (Amazon has a range of 5-15%), JustDial would have GMV of $47mn for the entire year.

Analyst - Sure, fair enough. Looking forward to hear probably feedback on the next call. Sir my second
question is in terms of revenues you mentioned on the call over 99.5% is from our Search
business just trying to understand sir on our Search Plus platform we have the JD guarantee
deals you had mentioned we can book cinema tickets, airline tickets, hotel, why we are not
receiving revenues from them or is the uptick extremely slow?

V. S. S. MANI:: Not that, we are doing close to 100 million in revenue when you do a $100 million revenue to
get to that even if I make couple of million dollars in these transaction commissions we will
still not be anywhere. But the thing is, the good thing about transactions once it takes off it is
just going to geometrically multiply off so that is the key, so what you focus right now is not
actually trying to make as much commission as possible but have as many people sell their
products to us and that is what is our goal right now. And as you know that we have not even
yet gone and advertise or publicize our services, there are lot of people who may even be
aware of this are still waiting for us to do an official launch before they start using it.

In Q3 management claimed that Just Dial has been getting good traction in reverse auction. In 3QFY15, the management quoted 4,000-6,000 queries happening with a 56-60% conversion. For E-Commerce companies playing in niche in India has ticket size of Rs700 to Rs2000. Based on these numbers, Just Dial might be selling things worth Rs1.7mn to 7.2mn per day, after launching reverse auction in September 2012. If I assume high end of ticket size then also JustDial would have $40mn of GMV for the entire year. For some perspective, Amazon India did Rs60bn (about $950mn) of GMV in 2014, within 16 months of launch.

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Here is the data on online scheduling services.

Practo charges about Rs900 per month to doctors for providing its scheduling service. They earned Rs2.2 crore in revenues in 2013 and expected Rs20 crore in revenues by March 2015. If they hit those numbers then about 15% of listed doctors actually paid for Practo’s services, which is much higher than JustDial 2.2% paying subscribers.

I get reviews and online scheduling service with Practo so as a new customer, I would rather rely on Practo to learn about doctors in areas where the extent of information asymmetry is huge. So on qualitative basis, I get much better experience from Practo compared to a mere listing on JustDial. Since Practo is just about online scheduling for Doctors, as a Doctor as well as a user I get more rich information and attention.

Of course, JustDial has about 340,000 Doctors on its platform so they do have a potential there. Practo just provide a better experience and has its app with most of the relevant doctors. I doubt that a Doctor would be willing to subscribe to multiple scheduling systems unless they see tremendous benefit from them.

About online grocery, I tried both Bigbasket and JustDial. I already shared my JustDial experience on my blog. JustDial’s grocery vendor neither supplied anything nor bothered to inform me about cancelation of my order. My experience with Bigbasket has been seamless so far. Most of these guys are still new to think about net profits so if you want to evaluate them then look at their unit economics.

Since its inception in May 2012, LocalBanya has done around Rs 15 crore in gross revenues as of June 2014. The start-up claims that it currently delivers 750-plus orders a day. Institutional clients (restaurants and eateries) account for a third of its business; senior citizens and NRIs another 16 percent. It claims to be growing at 30 percent month-on-month, has a fast-expanding vendor network, and an improving basket-size (number of items in every order). This kind of stable customer composition helps as it helps drive volumes, which increases negotiating power with vendors.

LocalBanya’s average order size is Rs1350. If I assume two orders per month and ten months of life time (based on generic data from Lightspeed Ventures), then LTV for LocalBanya is about Rs3,700, considering 15% margin (Source: Zopnow). As online grocery retailers do not spend as much as typical ecommerce players on customer acquisition, I would consider lower level of Rs700 for customer acquisition cost range in India (Rs700-2,500), which is very much in acceptable range of CAC/LTV ratio.

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Guess I misread what the management was saying about $100 million… Thanks for pointing out…

Av.ticket size as per management is Rs. 17000 (as per Q4 earnings transcript)… IF I plug in that number into your calculation - then the GMV for FY15 is between $210 million and $340 million… Quite high, I think for pre-launch / pilot phase (No advertising has been done by JD yet)… Maybe not as good as Amazon - but then it is unfair to compare pre-launch JD numbers with post-launch Amazon numbers…

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Everyone is throwing revenue numbers, without looking at profitability…

Good to hear that Practo is having some customer traction (with both doctors and patients) - but then is it profitable traction OR charitable traction?

Let me put this in perspective for you…

Practo had 1000 employees in FY15, earning 20 crores…
JD had 9500 employees in FY15, earning 600 crores…

Revenue per employee of JD is more than 3x of Practo… Cost per employee may be the same - in fact most likely it is lower for JD by around 20% or more… So, that is the business dynamics… Practo’s ability to churn out profits is nearly zero… Will this change? Very unlikely - because most of the employees are salesforce, and a JD salesforce can serve every kind of SME in the locality vis-a-vis a Practo salesforce who can only serve the few doctors in the locality (and this mostly explains the productivity difference)…

Agree that Practo today has a superior user experience…But how long do you think it will take JD to catch up with that? I suspect, if JD puts its might behind it - it will not take more than 6 months…

In short - Practo’s advantage in superior user experience is not sustainable… While JD’s economic efficiency is extremely difficult to beat… (The inferior economic efficiency of Practo comes out in the form of raising fresh funding every now and then…)

But, then lets not miss the larger picture… Even if Practo, Uber, Zomato are successful (as businesses, and not as charities) - JD has another 100 categories to milk with little or no competition… JD will just need to refocus its efforts on other categories…

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I am considering a fully loaded number for average ticket size as composition changes when you expand across categories and user base. If JustDial is really doing $200-300 in GMV and not monetizing it then they really have issues. Even coupon websites with that kind of GMV are highly profitable. I find it hard to believe that they are leaving $21-30mn (basing it on Amazon’s commission structure) in revenues on the table, especially when they have $100mn in revenues.

JD’s SearchPlus was launched in end of 2013, after 18 months of launch if they are still not doing any meaningful revenues from 24 categories then it does say something about their execution. In the end, I would be willing to do a 180 on JustDial as I still like their core product, I am just not too convinced about SearchPlus execution.

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JustDial was launched in 1996 and Practo was launched in 2012. So I will give them some leeway to figure out things and ramp up. Moreover, I just gave Practo as an example. There are many other companies who are chipping away across 24 categories of JustDial.

In the beginning people hire a huge salesforce with land grab mentality. One can optimize the team once operation stabilizes so I would not be too quick to write-off Practo as long as unit economics makes sense.

Practo enjoys network effect that would be hard to replicate for JustDial. Unfortunately, the might argument does not work in technology. There are countless examples where money just can’t buy experience. For example. Craigslist is a real bad website when it comes to UX but everyone is on it and they would not leave because of network effect. In JustDial’s case, they could have easily incorporated reviews but they relied on star ratings system and paid listings (for showing results). In the end, JustDial ended up being an online Yellow Page while other websites like Zomato, Practo, Amazon, and many others developed a superior UX.

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I really don’t know what the GMV is…

But they had clearly said they won’t monetize before launch… So, there will be no pre-launch revenues from Search-Plus… I think it is legally safe to not monetize in pre-launch / pilot phase…Once you start charging - then a whole lot of regulatory risks faced by commercial services come into picture (most of these regulatory risks aren’t there for free services)…

Their plan for monetizing is around 1% - 1.2% of trasaction size… So, even if they monetized, then $250 million of transaction size would have delivered revenues of $2.5 million (and not $25 million, as you say) - which is not significantly changing their overall revenue numbers…

To make a significant effect on their revenue numbers, they would need to do at least $1 billion in FY16, and $2 billion in FY17.

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Gross Merchandise Volume, a metric used by online retailers and auction sites to track the value of transactions.

I doubt that any company of JustDial’s size would leave so much money on the table for some regulatory risks that so many other smaller companies in similar businesses are dealing with. JustDial can easily hire a team of lawyers to deal with regulatory related to regular things.

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That is a really BIG statement.

So, 2.2 crore revenues in 2013, and 20 crore revenues by march 2015.

Which means that 90% of doctors who are paying Practo are merely trying it for the first time… They have subscribed it for one year (most likely due to the aggressive sales techniques of VC funded firms), and no guarantee they will subscribe the next year… Any data on ROI earned by doctors by subscribing to Practo? Why will they subscribe again?

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I think I will take some rest now… Market is made up of differences of opinion about the future… So, happy investing!

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Startups grow on month-to-month basis so I would not be surprised by revenues growth. For example, Jabong grew by 135% last year. You can imagine startup revenues like a hockey stick.

There are more nuances than doctors paying for the first time. Some of these listings are free listing and some are on trial. It is similar to any other online subscription business. I did not do any extensive research on Practo and again it is just an example. However, to build my case about Practo, a young doctor with a fairly established practice for 5-6 years spends Rs20,000/month on a newspaper ad in a tier-2 town for the local edition of Dainik Bhaskar. He has no idea whether the ad would be viewed. Also, everyone is going mobile so paying Rs999 for Practo makes sense. At least, a Doctor gets online presence, tracking of his ad spend, a scheduling software, and stays on the top of new trends.

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This model looks interesting. As of now no model exists to bring in the area wise SME onto the platform. Lot of time I see that the prices offered by FK/amazon are matched by local SME operating out of the small area. Its a local area market place which is missing from all the e-com site…

Practo is offering the additional services then just listing and hence might be earning more or might have more doctors listed…

With this new platform JD will be offering something more then just listing… and also to the people who don’t have mechanism to be online. Lot of time I felt that it would be good if the grocerry shop outside can take order over what’s app or any online mechanism… or if i can contact and see the local shops in my area/ etc… That gap will get filled out with JD’s platform.

FK / AMazon is for india wide market place … and JD might be for the local market place… where price doesn’t matter but immediate delivery matters.

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Q1 results

TI 168.62
NP 33.17
EPS 4.67

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YoY Revenues up 24.8%, PAT up 16%. Sequentially Revenues up 7.9%. PAT up 10% if you remove one time other income (write back of provisions in Q4 FY 14-15). I am personally happy on sequential growth numbers. YoY seems to be a bit muted though.

Diclosure: Invested at 1300

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JustDial earned Rs1,687mn in revenues compared to a median estimate of Rs1,695mn; missed estimate by 0.5%.

Search ARPU decreased by 4.6% on y-o-y basis, potentially because of small town effect. In the end, Q1 2016 is pretty lacklustre.

JustDial once again extended SearchPlus launch deadline so I am not sure when will it see the light of the day.

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Considering that this is the second time they are delaying the final launch of Search Plus - and management claims they want to launch with a fully improved product and UI - I hope that the new product and UI are really good enough to justify these delays…

Results are more or less inline with expectations. JD is expensing all the investments on Search Plus, instead of capitalising it… Since about 2.5% of revenue is being spent on Search Plus (without any monetization of Search Plus) - if you make adjustments for this - the PAT growth would be much higher,

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Interesting thought on platforms like JD: “Winner takes all”.
Please see min 11 to min 12:

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“Winner takes all”… whatever…

Pre-2000

Desktop OS: Windows
Search: Google

Post-2000

Mobile OS: iOS, Android
Smartphone: Apple, Samsung, Others
Social: FB, Twitter, Whatsapp, Linkedin
Browsers: Chrome, Explorer, Mozilla
Ecommerce (US only): Amazon, Ebay, Groupon
Travel: Expedia, Priceline, Tripadvisor

Don’t see this “winner takes all” theory working out in practice after year 2000 in any industry. Still academics and economists (and VC investors) keep repeating this cute theory like parrots. Cleary, multiple players with differentiated strategies are doing well within each industry.

I cut short watching the video - the moment I realized it is by Mckinsey :smile:

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@rational people: rational views invited

@rationalizing people: Since rational arguements are very difficult to understand, here’s food for thought:

First line in this thread:

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Just Dial is a pre-2000 business… Check out its history… :smile: