Ads top revenue contribution; premium listing, lead generation to perk up in future: Quikr CEO

29 Nov, 2012

Attracting multiple rounds of funding is surely an indicator that signals a successful startup. Moreover, by bringing on board a top tier private equity firm to the mix of investors, Pranay Chulet, the founder & CEO of Quikr.com, has hit pay dirt. For the IIT Delhi-IIM Calcutta passout, Quikr is his second venture after the web education startup Excellere.com. The online classifieds startup faces quite a few competitors such as OLX and Craigslist, and claims to have over 26 million visitors a month while its business comes from online ads, premium listing and lead generation. The firm raised around $50 million in five rounds of funding over the past four years. And the most recent one was worth $32 million, led by Warburg Pincus that joined a list of existing VC investors. However, Quikr's most integral investor is eBay who has played a key role in shaping up the business model and the target is to grow the company five times its current size in the next three years.

Techcircle.in caught up with Pranay Chulet in a video interaction to discuss what the company's next phase of growth would be and what his targets are for 2015. Here are the edited excerpts:

How did you come to believe that the concept of Quikr.com would work when there were already so many players in the market in 2008?

We thought it made a lot of sense. A model like this should work in India because we are still a developing market where a lot of people don't have credit cards for online shopping or many of them are first-time internet users who are not used to purchasing a product without having a look at the actual product. So Quikr makes a lot of sense because it is an online classifieds platform where a buyer and a seller can meet online and conduct an offline transaction in person. In the end, it is about leveraging the power of the internet while retaining the traditional buyer-seller interaction intact.

How does the business model work then? Aren't you offering free classifieds online?

The power of this platform is that it is free for most users and that's why we have grown this way. A lot of people want to sell used products and if they can do that without the advertising cost, it appeals to the Indian sentiment that focuses on value for money.

Our business model has three revenue streams, though. One is the good old advertising on the site – like the text and display ads from Google AdWords. Second is the premium listing. As the site matures, some users realise the power of the platform and they want to pay you to get more responses for their ads. Generally, these are the sellers whose ticket sizes are bigger. So they think – why not pay Rs 100 for an online platform when I am paying Rs 1,000 for a newspaper classified without getting any premium service. Lead generation for small businesses is another channel for revenues. Small businesses in categories like real estate and automobiles want to expand their business via advertising and here we provide them with leads. As long as their businesses are running well and we are giving them leads, it is a healthy growth for both of us. But they have to touch a critical mass for this model to work out.

It's obvious how online ads make the major part of your revenues when you get 26 million views per month. But what's the revenue percentage from premium listing and also from lead generation?

I can't give you specific numbers, but advertising definitely contributes the biggest chunk. However, premium listing and lead generation are close to contributing equal amount. Going forward, it should be a balanced ratio from these three streams.

Quikr has some of the top VCs and a large private equity player backing it up. What's your USP that other classifieds have not been able to sell to investors?

First of all, we are quicker. So it's difficult to compete with our pace. Plus, we have the best team in the market. We have built it from the ground up and that's why it's a lot more important to us. To borrow a phrase from a great man, 'You can never underestimate the power of five guys in Blue Jeans.' So we are a small team that works nimbly and has an agile way of looking at things.

You have raised $50 million which means you are still very well-funded as expenses are low. How are you going to deploy the rest of the funding?

Our biggest focus is going to be aggressive marketing, in addition to building the platform and the team. We believe that Quikr needs to grow organically first. We didn't throw the money into marketing and expected people to use the platform. We knew that we must create enough supply and demand before getting more customers on board. If we had gone heavily into marketing before, we might have got the people who want to buy from us, but then, who would sell? So for the first two-three years, we have let the business grow. And we have started aggressive marketing only recently, about 7-8 months ago.

But you are not the only one in the market who is advertising. OLX has also become aggressive over the past 7-8 months. Does it mean the market has reached a critical mass?

We have seen a sudden surge in the number of mobile phone users and we expect that the market will grow substantially. Plus, we didn't want to lose out on those first-time internet users. So that's one reason. Moreover, with 26 million users per month, we think it's the right time to take the story to the market. Till about six months ago, we were the biggest open internet secret in India. The number of users on the platform was way larger than most e-commerce players had in terms of user base. But even then, we didn't go to market boasting about our size. We wanted to do so only when we could deliver a good customer experience. We reached that point six months ago and decided to go to market then. You will see a lot of interesting things from us on the marketing front.

But is advertising really a need? You were growing very well without it. Moreover, companies like Craigslist mostly do word-of-mouth promotion globally.

Well, Craigslist is a bit of an exception. It was started in the 90s – so they had a good 10 years of first-mover advantage. But today, everyone is in on the secret and you need to build these platforms fast. If you look at such platforms in the emerging market, you will find they have gone in for strong advertising campaigns.

Consumerism in India is unique and different. Moreover, Internet adoption is still fairly low in the country. Are you, therefore, a long-term play for investors?

We have invited investors who are long-term believers in this business. I think there is a firm belief shared by us that this business has to be built locally. What is Quikr today? It is a collection of 90 cities and each features so many localities because transactions get done at a local level. So it makes sense for us if we are able to crack the model in a local way. Many of our mobile initiatives are testament to that. So from that point of view, I can say that many of our investors come into the company believing that the local approach is the right way to go.

None of your investors hit the exit button till date. What liquidity route do you have in mind?

We are building the business without keeping in mind a specific exit route. Our investors have not exited because they want to ride the winning horse. They are all long-term believers in this business.

Do you see viable players for acquisition?

Yeah, we are in a dynamic industry and now that our core engine is humming, it (acquisition) is certainly a possibility. I always distinguish a market with a lot of competition from a market with a lot of noise. After all, classifieds is a deceptively simple business. A lot of people feel they can slap together a three or four-page website, but there's a lot more to create in this business. Considering that, I won't say there too many strong players in the market.

What are the targets you want to meet, say by 2015?

I would be surprised if we were not five times the size we currently are, by then. The simple reason being India is the only market where mobile users dwarf the number of PC users. So we are all in for that big surprise where the entire digital market size would grow several fold, thanks to our mobile phone users. Clearly, that's where Quikr will see a lot of growth happening. Also, as I said before, you will see some pretty interesting moves from us on the marketing side.

(Edited by Sanghamitra Mandal)