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Netcore CEO on taking the acquisitions route to building a marketing cloud stack

Netcore CEO on taking the acquisitions route to building a marketing cloud stack
Netcore Solutions group CEO Kalpit Jain  |  Photo Credit: Netcore
25 Nov, 2020

Earlier this week, SaaS-based marketing automation technology company Netcore Solutions snapped up Hansel.io, a real-time, no-code, product experience platform, marking its third acquisition since April last year to bring on board frontier technology capabilities.

The Mumbai headquartered company bought conversational artificial intelligence-powered (AI) chatbot engine Quinto.ai in April last year, and AI-first omnichannel personalization and recommendation engine Boxx.ai in November. 

Netcore was founded in 1998 by serial entrepreneur Rajesh Jain, founder of IndiaWorld Communications (owner of a series of portals called Khel.com, Khoj.com, Samachar.com and Bawarchi.com). 

In an interview with TechCircle, CEO Kalpit Jain, who also happens to be Jain’s brother-in-law, spoke about the recent acquisitions, the company’s journey up the curve and its plans to merge the new-found capabilities into its existing suite of product offerings.

Edited excerpts

There has been a significant surge in the firm’s M&A activity lately. Why? 

In 2019, we thought that it was important to aid brands with the overall customer experience -- that is when we started our journey of inorganic acquisitions.

In April 2019, we acquired Quinto.ai, a conversational AI platform, since consumers increasingly interact with brands through chatbots. We realised that personalised and contextualised messages on a website or app would result in high customer engagement. I’m sure we’ve all experienced the personal customer engagement services that brands such as Netflix, Uber and Amazon offer, catering to individual user’s requirements. Product recommendation services have become increasingly important, leading us to acquire Boxx.ai, primarily a machine learning-based product recommendation platform. 

And then we realized that there are more and more apps and websites getting launched. And this whole digital first-economy is booming and growing very fast. It is very important that you help the product managers and the growth marketers in the digital first companies make real-time changes on the website without actually really interfacing with the software development team within the organization. And this is where we came across Hansel.io. We saw a great platform where you could, actually in real-time and without making any code changes, change the app design layout.

The idea is that as more and more consumers are getting onto apps and websites, how do you get basically the attention of the user to stay on to the app for as much longer as possible. And this is where Hansel.io primarily helps the product marketer engage with the consumer to do better onboarding, to do better activation, or to do purchase conversions while the consumer is on the digital property of the brand.

Let’s say, if you're on one of the gaming apps, you've been constantly playing, let's say cricket. But now the IPL season is over. How do I as a marketeer nudge the consumer to go and play, lets say, football as a game on my app? Hansel.io basically helps you to highlight specific places within the app so that consumers are nudged or pushed to go and consume a particular feature or consumer specific functionality within the app. So this is what Hansel.io basically lets you do. And all of this can be done, technically, without any code change.

When did Netcore take notice and act on leveraging frontier technologies?

In 2018-19, is where we also launched a lot of machine learning and artificial intelligence capabilities on the customer engagement platform. And then we also realized that while customer engagement, customer communication, customer retention are very important aspects for a lot of B2C brands, what is really evolving and coming out is that all of this is very important, because we want to improve the overall customer experience for the consumers. 

And this is when we started saying that, okay, let's expand our thought process and let's build towards a vision of saying, how can we be a customer experience, platform company, where we not just help brands engage through an email, SMS, or WhatsApp, or over app and web push notifications, but also make the communications very contextual and personalized. At the moment, if you are on the website, what kind of messaging can I show you? When I'm sending you an app notification, can the notification be contextualized and personalized to your past historical behavior with the brand is what we were all doing.

Why is 2019-2020 the chosen time for unboxing Netcore’s inorganic growth?

There are two-three reasons why maybe there is a lot more focus now. Obviously, while we’ve been there in the industry for the last 23 years, the real growth for the organization has happened over the last 11-12 years. We have grown phenomenally better, and we've always believed in building a profitable business. We do not have any external investors, and a lot of what we built were through internal projects. Part of the reason for maybe why we have not invested in as many companies in the past, is because we’ve been building our profit engines and making sure we have enough cash in the bank to be able to make some of those bets. 

Second, and more importantly, I think what's really happened over the last two or three years is that we've seen a lot of these niche companies like Boxx.ai and Hansel.io, and many others having built some very unique capabilities. And some of them solve very unique problems for a lot of these digital-first companies. Now, can we build some of these capabilities? Yes. But would it take us at least a couple of months, or maybe in some cases, a year to build? Yes, definitely.

So we realize that it's better to then start looking at companies who have a great product, and probably have a great team who can become a part of Netcore. And together, we can build out a great entire marketing cloud stack. 

The other thing, we also realized is that there were not as many product companies back in 2014-15 that were coming out of India. In the last two or three years is where you see a lot of B2B SaaS companies coming up in India. 

Does the acquisitive mood signal hunger at a time when valuations have been tempered by the pandemic?

We've been looking at acquisitions, pre-Covid or post-Covid. We’ve honestly not waited for the pandemic to arrive. Our M&A activities have been robust for over 12 months now. 

We're also now expanding into many geographies outside of India, including the United States and Europe. We see that there are great product companies out here, which we believe we can add to our entire full stack platform. It will only help us perform a lot more stronger into some of these very advanced markets like the US and Europe. We've been applying for patent rights from the last 12-15 months. There is an opportunity for us to get more companies which might be looking out for partnering with mid-to-large sized players like us. 

So the number of opportunities that we'll come across could be a little more right now, given the fact that Covid-19 is there. Some of the businesses might have gotten impacted. And they might want to partner with companies like that. But at a Netcore level, we’ve been aggressively looking for such companies for more than 12-15 months.

Post acquisition, how are the startups’ product offerings integrated into Netcore?

The startup’s standalone products remain. But the names are changed, because we eventually move them under the Netcore umbrella. So Boxx.ai’s product is now called Netcore personalisation platform. Similarly, with Quinto.ai, it is called the Netcore chatbot platform. And with Hansel.io, we will eventually call them the Netcore product experience platform.

What revenue impact do you expect from the new acquisitions?

The acquisitions have helped us add a new capability into our product portfolio. Over the period of 1-2 years, we expect each one of them to at least contribute to a 5-10% minimum, to our overall top line growth. And eventually, over the next 2-3 years, how do we grow that to a 20-25% estimate is where our expectations lie.

Each of these products have very large market opportunities, because these are very new areas. So there is not enough competition in the space. For instance, in personalisation, where Boxx.ai operates, there are not too many Indian players who offer product based, or algorithmic based recommendation engines. And that's where the advantage comes in that you're now opening up a completely new, what is called a, total addressable market (TAM) that goes up for us. And these are very hot spaces in the marketing-tech space, globally. Salesforce, recently, acquired a company called Evergage in the personalization space.

Our sense at Netcore is that we already have a very large Indian outreach. We are already present in eight countries today, India being the largest. We’re Southeast Asian, Middle East, and European markets.

What is the revenue breakup across geographies for Netcore?

Currently, about 25% of our total revenues come from the international markets. And that's now growing very fast for us. We hope that in the next 2-3 years, that goes up to at least 50-60%. While India is definitely growing, we believe that there's a lot of growth opportunities in some of the other markets also. 

What is the revenue breakup across industry verticals?

In terms of an industry-wise breakup of our total revenues, all digital-first companies contribute about 55% of the revenues, followed by BFSI which contributes about 30% of our revenues, and the rest is travel and hospitality, and other sectors. In the last few years, a lot of the growth has been coming from the digital-first companies that include a lot of the unicorns in India and Southeast Asia.

How are the contracts modeled for clients?

Most of our contracts are subscription based. Usually there is a one or two years contract with most of the clients, given that there is a lot of deeper integration, which we need to do when our platform gets implemented. When I say subscription based, it could be based on the usage of our platform. Let's say, if a contract is around email marketing, then the number of emails which are being sent through our platform could be one of the payment models. If someone is integrating their app, and they're using our entire marketing automation feed, then the model could be based on the number of monthly active users who have interacted through our platform. A third model, in some cases, could be on the number of events which are flowing into our system and the amount of data which we are collecting on behalf of the brands. There are multiple options, because there are multiple products.

If you look at personalisation, we charge the brand on the basis of the number of website visitors. That’s a simple metric. So that’s a result-oriented contract. During the Covid-19 lockdowns, if a brand’s visitors would have dropped, then the model changes again.

What are some broad learnings for Netcore through 2020’s pandemic?

We have a lot of business coming from these online and digital companies. For the first three months, when there were strict and absolute lockdowns, there was a sharp drop in the amount of communications and the amount of engagement with the consumers because there was no point in someone trying to send you an email on making a purchase of a product, because ecommerce deliveries weren’t allowed in the period. 

One of the learnings is how do you hold on to your customers during such challenging times. Rather than losing an account, you might as well, give them some flexibility, either in payment terms or in terms of discounts. When the business goes up again, benefits to be reaped also come back up. Continuous ideas and suggestions were also given to brands who were not selling as many products then. At least, communicating and helping brands with ideas on how they can still engage with consumers, especially the brands from the travel and the hospitality industries -- with product not pertaining to direct product selling, but instead around knowledge and information.

Will outsourcing marketing capabilities be out of fashion any time soon?

A lot of brands have large marketing teams in-house. Why should they look at platform providers like us? Our belief is that today a lot of these brands are realizing that partnering with a platform provider might be the best way to scale, while they have their core business to worry about. A number of them continue to outsource such capabilities to platform providers like us. It's letting the best guy in the industry help, instead of doing it all by oneself.