satyaSulekha.com started as a community website and is now being projected as a classifieds site. Speaking to MediaNama, Sulekha’s President and CEO Satya Prabhakar spoke about the companys identity, direction and business performance.

“Sulekha is India’s version of Craigslist meets Yelp,” Prabhakar said, adding that the site is sustained by social media. Craigslist is an online classifieds website while Yelp offers reviews, local search, events, e100tc. Sulekha is designed as a one stop shop for classifieds.

Sulekha.com covers 50 cities today and has a user base of 6.2 million of which 80% are from India. In a presentation, he explains that the user base will boom when netbooks costing $100 (note that today there are only $200 netbooks available in India) will flood the country and the number of mobiles with Internet access grows. Isn’t this what most Indian digital media firms are praying for?

Tip Me

With businesses making cutbacks, ad revenues dropping, we expected most websites offering free services would start charging users. We read that Sulekha had also started a paid model, but it turns out that this is more of a tipping service. Sulekha’s users now will be prodded to pay Sulekha for the ad that helped them get a good deal or reach a much needed service. “They have an a priori choice to select one of our premium ads – which brings us Rs 300 – or they can post facto leave a tip after finding the information. It is entirely voluntary and we still are a free service.” Is anybody paying?

Apparently, yes. Five people a day choose to donate Rs 300 per ad to Sulekha. It has tied up with ITZ Cash and Techprocess Solutions, which offers direct payments from 11 banks. While this is not contributing significantly to the company’s revenues (which are primarily from fees for classifieds), over time he expects 15-20% of its revenues to come from users. Sulekha claims to have 1.35 milion local commerce and business listings, with users users posting 3000-4000 free ads on Sulekha per day.

IPO Plans On Hold

Last year, several reports stated that Sulekha was planning for an IPO in 2009. When we put forth the question, Prabhakar laughed, “The market is cold, I’m staying indoors.” He clarified that he had only said that they ‘could’ go in for an IPO. Now, he says Sulekha may not choose to go for an IPO even if the market picks up. Why not? He explains that the company has chosen to consolidate rather than opt for aggressive growth at this stage.

Flat Growth; Real Estate & Travel Affected; Key Advertisers

Growth has been flat for Sulekha during January-February-March but Prabhakar says it is reviving and is confident that the quarter April-May-June will be 25% higher than the previous quarter. Real estate and travel were affected and other verticals held through. The company cut down on administration costs, marketing costs and reduced by a third  pay hikes and incentives to employees. The company has 530 employees. Prabhakar said it has been tough as they were used to growing at 25-30% per quarter and that they will go full steam in the next quarter.

Online Classifieds

Sulekha’s revenues are primarily from classifieds fees from businesses listing their ads (75%) and 25% from display advertisements. When a call reaches a business owner from a Sulekha.com user, he pays the site anywhere between Rs 30-500 depending on the city.

Online classifieds has sucked out the business from newspapers, Prabhakar says.  “Newspapers used to get 40% of their revenues from classifieds, which are now disappearing off their supplements. The Internet is a superior medium – we have a farther reach so people can search for flats in other cities before they even reach there,” he explains.

Mobile A Distribution Vehicle Only

When asked if they’d take the tipping model to their WAP site too, Prabhakar dismissed m-money calling it “just a fancy concept that attracts media attention.” Convinced that it would only work in small countries where the government, operators and banks worked hard to build a single mobile wallet application like in South Korea’s Seoul, he said that in an “unruly” country like India, it would be a long while before m-wallets would go mainstream.

The ubiquitous mobile is not a moneyspinner for Sulekha. The mobile is firmly integrated into the site so Sulekha can deliver information right to the user’s mobile. Mobiles are being included only as a distribution vehicle and 40% of Sulekha’s interactions with the user – in the form of sending SMSs with contact information, a classifieds ad, or driving directions – is mobile-based. Its WAP site is not given much importance – it is just there as a face of Sulekha on the mobile.

Niche Play Wont Work

Unlike FMCG manufacturers Procter & Gamble or Hindustan Unilever Ltd, which can sustain different brands and products, digital media can not put up too many individual brands and maintain business efficiency and growth, according to Prabhakar. He gives the example of Yahoo, which launched and then shut down Hot Jobs and Yahoo! Music (Ed: Read about Y! Music closing here). Prabhakar adds that Indian auto and jobs classifieds sites are also losing money fast, with advertising getting expensive and low traction seen in this environment. So he plans to take a broad approach to keep stable and will continue with the model even after the recession rides out.

The website has over 1000 large brands and 20,000 small and medium businesses as key advertisers for its classifieds. Advertisers include Mahindra First Choice (previously Automart) and Sundaram Home Finance. Besides these, it also has ads coming in from education, training and movers and packers. Citibank, ICICI, Walmart, Incredible India campaign are others.

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Update: Corrected broken links.