Alternate headline: VSS Mani’s mad love for Yelp

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A little over six months after JustDial founder VSS Mani said that revenues from its Omni business will (eventually) match its Core Search revenues, he was singing a different tune in the company’s recent earnings conference call:

“I would also like to highlight that we made several mistakes in the last several quarters, one was taking our eyes off the core business; we try to over-achieve by including several new products and trying to do too many things. We have a great running business, when we lost sight and it, you know, kind of, I have to tell because obviously it’s a question of management bandwidth right from the CEO downwards and experimenting with new products also kind of disturbs the entire sales rhythm, you know. So all that has been the cause for all the slowdown in revenues and the growth, and stuff like that.”

“So we said let’s go back to basics, let’s focus on the core and even within the core, even the most relevant thing, you know…”; of the 17 million businesses, “So if it just a 8 or 10 million which is what makes sense for you to monetize. Just focus on those and get the growth back to a decent double-digit maybe in the 20s or higher than 20s.”

JustDial is, and Mani said this twice, “majorly inspired by the turnaround story of Yelp, the way they kind of focused back to US market and the Search business, and then the way they could grow their revenues and satisfy the customers. So we really want to focus on our Core, with our Core team we want to focus on the Core Search business and we will find an alternate distribution model for Omni.”

“We were going too broad on Omni”

Omni, according to JustDial’s CFO Ramkumar Krishnamachari, reported revenues of only about Rs 1 crore during the quarter. The company, “Pretty much didn’t sell any Omni during the quarter.”

With Omni, JustDial was entering territory which is currently inhabited by the likes of NowFloats, an upstart which recently raised $10 million to enable small merchants to set up websites. JustDial was charging Rs 20,000 for a setup fee, then Rs 2000 per month as subscription, and Rs 3500 per month to also list inventory and services on JustDial. After adding 2500 stores in the quarter ended June 2016, JustDial now only has around 7000 accounts sold (or 9000 if you include combo, Krishnamachari said).

Strategically, Omni is a Google-like play: the focus is to get businesses online, get them to advertise on the platform, and over the years, focus on increasing their spends. A large SME population spending on JustDial also reduces dependency on any particular client, client type or city, and the increase in supply (from merchants) protects them from any major reduction in demand (from users).

But for now, this will have to wait.

“We were just going too broad on Omni,” Mani said, adding that “instead we should focus on certain narrow business segments. Also we had leveraged the existing sales team to a great extent to get the revenues, and that was hurting our core revenue and Core Search business, so we decided to really hold it for some more time and then rethink on our strategy for Omni all over again and focus a lot more on Core Search.”

To that end, “Omni is being handed over to one of the executives, senior person”, and “a couple of services we have cracked it very well which is, you know, medical services and doctors and restaurants and stuff like that. On the product side we have cracked very well retailers especially,” he added. The company is now figuring out its distribution mechanism for Omni: “should we have feet on the street to sell it or do we have some alternate way of distributing as more software companies have resellers, you know…”

“..but the core management team at Just Dial is right now focused on Search.”

And there has been a “sort of a turnaround” in core search revenue for JustDial. Core search revenue growth increased from 6% to 8% during the quarter. Kishnamachari pointed out that JustDial was “conducting approximately 424,000 campaigns as of 31st December and a y-o-y a jump of about 20%. During the quarter we added about 16,000 odd campaigns during the quarter. We had about 17.3 million database listings as of December and about 11,185 employees.”

“I think a lot of people will be redundant for us”

With the heady days of 2015 (and the lag the continued till the jolt of demonetization) behind them, optimisation will follow: “…as the growth slows down, our attention went to cost and we are seeing that there is a lot of inefficiencies in the system which we never bothered because, as a company, we have been growing at high double-digit, you know, for several years, so we, over a period of time, kind of increased this cost. So now our focus is, one, cut the wastage, cut the flab, bring in automation, reduce people…just more on process than people and these are all, as we roll them out, I think a lot of people will be redundant for us”…”so one-time cleanup is required and also be careful that in future we just don’t add the headcounts which doesn’t help in productivity.”

“There will be no compromise on sales, though, we need more feet on street, more tele-sales people, so that effort will continue and you will see in the coming quarters, you know, the sales team might just go up substantially.”

During the quarter, JustDial, from its sales team “rationalized bottom performers to the extent of about 200 odd, however, during Q4 we would continue the addition as far as salesforce is concerned.”

Yelp again

JustDial intends to roll out an ad campaign, and spend around Rs 100 crores over the next 3-4 quarters. “there was a time when Just Dial was a go-to destination for everything”, but “over a period of time JD as a go-to destination wasn’t happening as much as it should have”…”And if you look at Yelp, you know, a good majority of their traffic like probably close to 65-70% of their traffic comes directly from their app and their own site they are less dependent on the search engines. So our goal is also to shift our traffic more directly to our app, you know, the users should come and use it and obviously consistent advertising and communication with a great product experience will help us achieve that.”

Only around 12 to 15% JustDial’s mobile traffic was app; a majority was on the mobile web.

Watching out for Google curating search results

Google’s relaunched “My Business” initiative doesn’t appear to be a cause for concern, but something else is. Mani said that they haven’t been impacted badly, but “I would like to say that if we have to watch out, we have to really watch out strategies
of Google and how they want to really run their search engine because so far they have been acting as a go-to-place for… they organize information and show it to us, now it seems like some bit of it they want to curate and show it, so we do not know, but we have our own strategy to think of a world without getting traffic through SEOs, so obviously that’s our focus right now.”

Other notes from the call

– Tier 2-3 towns: Around 84% of JustDial’s revenues come from the top 11 cities, and 16% from the rest. This is an improvement over the last year, where, according to Mani, “our tier 2, tier 3 share of revenue roughly was at about 8%, 8 to 9 %.” A bulk of the growth is coming from the tier 2, tier 3 cities and there the ticket size is lower than what you would have in the main cities.”

– Demonetization Impact: “it did have a mixed impact on our business”, Krishnamachari said. “On the new business addition we did get impacted roughly about 7% odd. We did have a good 7-10% of our revenue coming from cash that got impacted and, however, this has been offset by increased and improved clearances from our existing ECS customers, so sort of a neutral impact as far as demonetization is concerned, which I would say is a positive under the circumstance.”

“…if you notice in Q2”, he added, “net campaign addition was about 18K and that actually dropped to about 16K in this quarter. So to that extent, yes, we have been impacted by demonetization on the new campaign addition.”

Mani added that “Overall realization improves because of demonetization” people are parking their money in the banks, so obviously more people are getting familiar with digital payments and generally thanks to the decisions that were taken, I think, overall we are seeing some turnaround in these kind of instruments; not just ECS, also cheques that are issued are also getting cleared on time and stuff like that.”

– Premium versus the non-premium listings: 10-20% of paid campaigns where premium, accounting for 45% of revenue.

– Unique visitors: 80.6 million in the quarter

– On personal assistant apps like Tapzo, Haptik etc: “it’s always a flavour of the season. I guess, it’s time for this kind of – I would say that if an app has to be successful, it has to have its own content; it has to have its own curated content and it has to have in-depth data and a horizontal in that case, of course, and in more in our case as well. If we are a horizontal, you have to really do a great amount of work to get this user experience to a new level. As a convenience just having one app as a shortcut to others may or may not work, I don’t know”…”Actually, JD does more than that. So you don’t have to worry because these apps are limited in a sense if you look at the new offering of JD and you would see that it is far, far superior to all offerings from the market”