InstaMojo, a website that currently allowing users to give things away for free, has raised money from angel investors Rajan Anandan and Sunil Kalra, InstaMojo co-founder Sampad Swain told MediaNama.

Founded by a team of four (Swain, Aditya Sengupta, Akash Gehani, and Harshad Sharma), InstaMojo will integrate a payment gateway and start allowing its users to sell goods online by the middle of next month.

But how is it different from Gumroad?

The website is building traction by allowing users to give away anything for free – for example, author Vijeyendra Mohanty is giving away copies of his ebook Ramayana 2.0 away for free (I’ve claimed a copy), another user gave away Angry Bird pens, and we’ve even noticed people giving away an hour of their time to anyone who wants to claim it. Swain says that Gumroad started by allowing users to sell things online, but the biggest challenge in the marketplace is user trust.

“When people are buying from ebay, they’re buying because they trust ebay as a brand. We flipped the model, saying buying and selling will happen, but we how about you give stuff away, and get goodwill.  It will build credibility and trust, even before we go for the selling model. We want to make Instamojo more social. There is also anonymity in gumroad, which we don’t want at InstaMojo.” In addition, Instamojo will focus on selling only virtual goods and digital content. “It’s a zero inventory model. You can sell one item to a million people, and delivery is instantaneous.”

Our Take

– Challenges With Freemium: We found the approach, of giving away things for free, fascinating, because it does create excellent buzz and goodwill. However, once the payment gateway launches, it shouldn’t be that people primarily look for free things, and just don’t buy. One of the challenges which, for example, the Google Play store has is that a users instinctive reaction is to look for free items, rather than paid. Maintaining a free-paid balance that is healthy (for Instamojo) will be challenging for the company, especially since they’ve begun with the free model.

Seller Side Approach: Each seller has its own page, and traditionally, marketplaces have taken a buyer site approach. That is, they market the marketplace and allow buyers to find goods, and sellers to find buyers. The focus is largely around helping the buyer find what they want to buy. Instamojo (and gumroad) have taken a seller side approach, wherein they allow sellers to create their own mini stores, and then market it to buyers. The onus of brand building is being left largely to the seller, with Instamojo being just a means to an end. For example, one might find out about Mohanty’s book giveaway from his twitter profile.

– Discovery & Buyer Side Approach: One issue with not having a searchable marketplace in place is that discovery gets killed. While trying to write this report, I was hard pressed to find give-aways online, and didn’t know where to look. Just because you are taking a seller side approach to build credibility and reducing marketing costs doesn’t mean that the buyers needs to find goods shouldn’t be addressed. A marketplace or a social discovery model needs to be in Instamojo’s roadmap.

Gamification: We’d like to see Instamojo look to gamify selling and buying on its platform, to encourage transactions, and aid discovery, and more importantly, help keep people more active on the platform. Badges can be given for someone who has, for example, given away 25 items in the last month, or allow users to discover top sellers, top donors, top buyers, hottest selling goods, hottest freebies, most active seller, most active buyer etc.

– Copyright violation challenges: the biggest challenge that Instamojo will face is that because it is primarily dealing with free goods, people might use it to give away copyrighted material. Now, under India’s IT Rules, a platform (an intermediary) is not liable for the content its users put up, if it acts on takedown notices, but we’ve seen instances in the past of intermediaries being taken to court under a different law. This is tricky territory, and while Instamojo might not face these issues in the early days, if the service scales, things could become tricky.

When I accepted Mohanty’s offer of the free Ramayana 2.0 ebook, an email was sent to both giver and taker, asking us to complete the transaction:

I was expecting to receive a download link for the book, which perhaps indicates that Instamojo is not going to store virtual goods. I’m not sure of this, but because it is not delivering the content, there’s a possibility that it might not be considered liable in case of copyright violation. At the same time, what if Mohanty doesn’t give me the ebook? The credibility of the site will be affected.

P.s.: If you’ve read this far, as an experiment, I’m giving away four slots of 30 minutes of my time this Friday and Saturday.