Freecharge.in today announced a fund raising of Rs 20 crore from Sequoia Capital India. The company allows customers online to recharge their mobile phones, DTH services and mobile data cards. In addition, it monetizes by marketing coupons to those customers who have recharged using their platform. Freecharge has active relationships with over 100 merchants, 50-60 of which are always doing coupons with them. Its merchant base is of national brands, and not local stores, unlike daily deals sites. It has under 30 employees, with less than in sales.
MediaNama spoke with Kunal Shah, co-Founder and CEO of Freecharge.in about what they plan to do with the funding, how the dynamics have changed with a big-spending competitor, how it gets impacted when telecom operators like Airtel launch their own online recharge services, among other things:
MediaNama: Why have you raised funding?
Kunal Shah: (We’ve raised funding) for working on multiple things – getting our product up to a certain level, and to expand to multiple platforms, create mobile apps, and try and bring on board more prepaid services. We’re looking to add more couponing partners, and different types of couponing, and try to create a product which can scale to handle tons of transactions. We’re looking to increasing our base, and get more users to come on board.
MediaNama: How are the margins in the recharge business?
Kunal Shah: The problem of this business has always been that it has low margins. We were the first to add couponing, and many other companies have copied that angle. the idea is to convert it from low margins, to slightly better margins, and add merchants who pay us money.
MediaNama: How have the dynamics changed because a competitor (Ed: Paytm*) is spending so much on marketing?
Kunal Shah: It’s helping us, because more people who come online gives them a potential for switching. in online, one can switch, and it’s about habit. we’re happy that marketing moneys are being spent, because a market is being created. this category has a lot of potential. it’s prone to its own issues – it’s not as evolved as its ticketing.
MediaNama: Would you look to extend your billing services and become a payment gateway?
Kunal Shah: There are players who are eyeing this mode. We are not in this space – we’re a customer acquisition and customer engagement model.
MediaNama: What are the pain points?
Kunal Shah: We have tons of failures, timeouts, and instances of telcos not passing on the balance, and we’re hoping that they’ll also work towards improving their systems. A lot of the failures that happen – I collect money and go to the gateway, transactions fail through. Their systems are getting better, but a serious effort will come only if players like us bring significant volumes to them.
MediaNama: Airtel recently launched its own recharge gateway. How does that impact you?
Kunal Shah: More people coming online, it only makes things better for you. Our angle was never pure recharge, it was to bring uniqueness. This is our business. Will Airtel do couponing? They might, but will it be their core focus?
MediaNama: Well, there’s a danger that they can pull recharge away from you and the others…
Kunal Shah: Yeah, but look at Bookmyshow. They don’t have PVR ticketing. Do they cease to exist?
MediaNama: The rumor is that you’re planning to send notices to those who have emulated your couponing business model.
Kunal Shah: We have a patent pending status on this business model. There are guys who have copied our screens as it is, from how it works, and tabs, and even emails. It creates a wrong impression, wherein customers think they have recharged using our site, but we don’t have that order number. The copying has to be something which doesn’t jeopardize the original site and mislead customers. We won’t send court notices, but we are going to talk to them. Many of these are virgin e-commerce customers, who are not used to this – some of them even ask us if they should email carefreecharge.in or firstname.lastname@example.org
MediaNama: Why are you not on mobile yet?
Kunal Shah: We’re not a rich company. We’ve just raised money
MediaNama: How are you doing in terms of revenues and profitability?
Kunal Shah: We are positive, at an economics level. Our focus has been on profitability. We’re not going to make this an unsustainable business.
MediaNama: So where do you stand, in terms of marketshare?
Kunal Shah: rechargeitnow existed for years – and guys like paytm and ourselves have taken some of their share. These are the three top players, but there are others in this space. On the couponing side, time will decide if the merchants are getting the results or not. we as a company are focused on trying to make the merchants get maximum benefit, instead of growing customer base. The industry is wide open, like an OTA (Online Travel Agent). Can you say that one OTA is a winner and the other is not? There are players like goibibo who come in late and take the number 3 prosition. One day, someone will offer a great coupon, and make a big announcement, so what kind of loyalties will come in?
MediaNama: With competition, how have things changed on the merchant and telco side?
Kunal Shah: Telcos will be in the same mode. (On the merchant side) couponing is fighting against advertising. Advertising costs of acquisition are going up, and with a bidding model, and if three people come in and bidding costs go up. In couponing, if you look at offline and online merchants, both are still getting to know about couponing. There are products who want to do couponing, and we’re trying to figure that out. Kingston pen drive, for example – I wouldn’t have thought of them approaching, but I can do a successful campaign for them. We’re different from the daily deals guys – they are the standard couponing business, but they have a blasting model. I’m not going to do that.
MediaNama: How do you get paid?
Kunal Shah: We don’t have a defined model – sometimes there is listing fees, redemption model, or just distribution of coupons. We’re focused on giving value to merchants.
MediaNama: How are the margins different in each case?
Kunal Shah: As long as you have a win-win situation on two sides, your win will be figured out. At times we make more money through listing fees, at times through opt-in. McDonalds, and Cafe Coffee Day have been doing a campaign with us for a year and a half, and I’m giving them consistent business. What is the value on that? We’re satisfying a need, and enhancing a value, and that relationship will continue. Every business has a different margin structure, and an acquisition cost, and uptake pattern.
MediaNama: What are your plans for mobile?
Kunal Shah: Mobile is so huge, that we’d be stupid to look at other things without addressing this. We’re a user acquisition company, and our focus will be on that. With mobile, we want to create something where users can have the same transaction through mobile. We don’t want to get into mobile wallet. That’s a different business altogether. As the DNA of our company, we’re a marketing company.
MediaNama: Are you looking at IVR?
Kunal Shah: We’re going to stick to the 80:20 rule, and the question remains how many transactions happen on IVR. If less than 10% of recharges are on IVR, we will not go there. For now, there’s a lot more to be done in the core web business.
Disclosure: Paytm is an advertiser with MediaNama