How Info Edge managed to win consistently in the consumer internet space
Anyone and everyone who is even remotely interested in the Indian internet space has heard of Housing.com. The company and its controversial founder Rahul Yadav became a household name amongst start-up enthusiasts. Every Ram, Ratan and Hari in the start-up scene had animated discussions about whether Rahul Yadav was for real or just another flash in the pan. For a brief but memorable period, Housing had captured the imagination of entrepreneurial and youthful India. The brash energy of the founders epitomised what many young Indians were striving for and became a source of inspiration for them. But after some time and after millions of dollars were spent in glitzy ads, the frenzied excitement for Housing started to dissipate away. Funding became much more difficult to acquire and that seemed to take the wind out of Housing.com. People started realizing that raising large amount of funding is not the end all and be all of start-up success. What was much more important was whether the start-up had built a viable business which could stand the test of time.
While everyone and their granny were getting caught up with the Housing.com mania, one of their competitors was steadily building a real estate platform which effectively matched the requirements of buyers and sellers of properties. The company, 99acres.com, was also intently observing Housing.com but did not share the excitement of other start-up citizenry. Hitesh Oberoi, the CEO of Info Edge (the parent company of 99acres) was constantly fretting and complaining in every investor concall of that period that their competition had gone bonkers. The disproportionate and irrational spending on marketing was distorting the real-estate portal market and such kind of competition intensity would be injurious in the long run. Yet, it had no choice but to follow competition in marketing spend so as to maintain its market share which it had carefully built over many years of hard work and execution. It did not help matters that the real estate market was going through a severe downturn and thus further eroding the return on marketing spend. There was just not enough bang for the buck to merit such humungous spends.
Eventually, sanity prevailed when the investors of Housing.com decided that enough was enough and the antics of Rahul Yadav had to come to an end. He was fired unceremoniously and a new CEO was installed with more adult supervision. A more dignified version of the same story is playing out currently in the Cyrus Mistry-Ratan Tata saga. With the departure of Yadav and the acquisition of another competitor commonfloor.com, the marketing spends declined drastically. Housing and other loosely funded start-ups started losing out business to companies with better fundamentals and tighter ships. A jazzy design and elegant interface were great but what the customers really demanded was a closure of their real-estate transactions. That was the experience that Housing could not provide while 99acres excelled at it as that was what it was built for. Now Housing is on a slow decline (Its million dollar valuations are steadily turning fictional) while 99acres is constantly improving its leadership position in the real-estate classifieds market.
A careful analysis of the situation shows that 99acres was following the template designed by Info Edge which had craftily won the jobs classified market and is currently dominating through Naukri.com. The framework can be simplistically described as follows. Have a minimalistic yet user-friendly interface. Focus and Focus hard on the Supply-side. Build a hard-working Enterprise Sales Team. And finally, when all the above aspects have been sufficiently achieved then go for the Demand-side in a big way through quirky and humorous marketing (Remember the Hari Sadu ad?). The important milestones lie on the supply side and demand side would eventually follow once the supply is sorted. The template which worked really well for Naukri is working well for 99acres too. Though it’s too early to call the winner in the market as Magicbricks is providing tough competition, it is undeniable that 99acres is in a steady footing.
Even for Naukri, it was not all smooth sailing. It was battling a hard and even fight with another local start-up, JobsAhead.com founded by Alok Mittal. What changed the tide was the acquisition of JobsAhead by Monster Inc. For Naukri, it was as if someone had just taken a foot off the pedal in terms of competition intensity. Naukri raced ahead while Monster was busy getting accustomed to the Indian market. After that, Naukri has not looked back and made sure it won the market decisively. Even currently, Naukri is miles ahead of its competitors like Shine, Timesjobs and Monster. It does face competition from Linkedin which is garnering a sizeable share in the recruitment market. Linkedin, though, may not prove to be an existential threat as there will always be a requirement for a pure play recruitment platform like Naukri. Also, Naukri is taking adequate steps to adapt to the changing landscape by becoming a major part of the recruiting ecosystem rather than only enabling handshakes between recruiters and jobhunters.
The success of Naukri has made it a virtual cash-cow which generates cash of around Rs. 250 Crore every year through which Info Edge bankrolls other consumer internet companies like 99acres, Jeevansathi and Shiksha. It also uses that cash to invest in start-ups and has succeeded in hitting pay dirt through Zomato and Policybazaar. Zomato looks especially promising with its global presence in restaurant discovery and an online ordering business in India. Zomato too seems to have borrowed and is greatly benefitting from the Info Edge handbook that 99acres followed and Naukri laid out. Of course, Deepinder Goyal and Pankaj Chaddah, the founders of Zomato have added their own unique approach especially with regards to the aggressive global expansion and acquisitions. Zomato may or may not live up to its unicorn tag (Which means the company has a Valuation of Billion Dollars or more) but it has a lot going for it in terms of loyal customer base and decent unit economics. While it does not face too much competition in its major markets in restaurant discovery it does face stiff competition in the form of Swiggy in the online ordering business. Zomato was criticised for being a late entrant to the online ordering business but its stance seems vindicated with the disintegration of companies like Foodpanda. Food delivery start-ups invested millions of dollars in creating awareness of the product and Zomato is reaping the benefit by swooping in like a vulture while the carcass of competition is rotting away.
With its diligent execution and time-tested principles, Info Edge has managed to create a quintessential consumer internet company in India worth more than Rs. 10,000 Crore. While many billion dollar valuation tags turn out to be a figment of the imagination of esteemed private investors, Info Edge has created sustainable shareholder wealth as a listed entity. While many unicorns turn unicorpse at the slightest hint of trouble, Info Edge looks well poised to handle the next economic downturn whenever it occurs. Sanjeev Bikhchandani and Hitesh Oberoi, the duo at the helm complement each other quite well. While Sanjeev is the big picture guy who projects the vision for the future, Hitesh is the engine for the vision with his data driven and execution mindset. Both seem to share an affinity for being slightly paranoid and their eagerness to respond nimbly to the changing dynamics of consumer internet. The new age start-ups can learn a thing or two from these veterans on how to survive, succeed and even thrive in the treacherous and highly competitive consumer internet space. On the whole, the odds are that Info Edge will play a further winning and pivotal role in the ongoing consumer internet revolution in India.
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