Quikr, a free online classifieds company with 25 employees, last week announced its third round of fundraising. Including the $6 million (around Rs 268 million) it raised in its Series C round, the company has so far raised around Rs. 500 million from Norwest Venture Partners, Matrix Partners and the Omidyar Network. MediaNama spoke with Quikr CEO Pranay Chulet, and founder Jiby Thomas to get a sense of where the money is being spent, and how their business is being monetized…but for me, this discussion leads into a larger debate – that of tactical, short term revenue focus, versus a long term (potentially expensive) focus on building scale. I do feel that the much of Indian Internet space is divided between two types of businesses – those trying to build products and usage organically, and those doing arbitrage (buying traffic from Adwords, and selling to advertisers).

Do share your views after reading this interview. In addition, please do take a look at an interesting numbers driven debate, here on Google Buzz.

Excerpts from the interview:

You appear to have spent a lot on marketing since the last round of funding. Has all the money you raised earlier been spent?
We have stayed away from the strategy of burning cash, and it’s not that the money we raised in the last round is all spent. The reason that we raised this round is a combination of several factors. We have grown very fast and we feel that the users have really adopted our platform very well. We think we have a lot more room to grow. Part of the fund raising is to expand our products, and the solutions around it, and part of it is for marketing as well. The other factor is that Norwest Venture Partners brings in a lot of experience. (ED: post this conversation, we were reminded by our readers that Norwest is also an investor in another classifieds focused business – Sulekha)

How much are you going to invest in marketing?
At this point of time we are not disclosing that number. In the past, we focused on Internet marketing, and a large share of spends would still go to digital media. Radio is something we have effectively used last year; it’s been fairly good in articulating our value proposition,  and we will extend that this year too.

Where are the investments going, in terms of the products?
We do innovate a lot in our mainstream, web based flagship product, spending it in the mobile space. We can’t talk in detail of some of our plans in that area but we are making investments in software development, new media and also in understanding our users. Analytics is an important component as well.

Where would you invest in a classifieds product?
It will not be possible for us to discuss specific features but building a product of this scale takes a lot more than two software programmers working for a week and rolling a feature out. Technology is the key, and the underlying technology or the product itself is strategic for us at least. We don’t think classifieds as a business where a feature set is common across all companies and basically dependent on marketing.

I am trying to get a sense of where the product differentiation lies in the free classifieds business; because they all look the same…
Our name (Quikr) itself suggests that our aspiration is to get our users the quickest responses to their needs. We just cannot not invest in making the platform simple to use. It could involve how you guide people to their counterpart with whom they can trade, to matching between buyers and sellers; its not that you get these things right at the first time and some work and some don’t. All these things are not visible to the eye, what you see is what we finally roll out, a lot of testing we do it is not exposed to the entire set of users.

In terms of the user base, where are you getting traction from?
We are in a leading position in all the metros, are seeing good growth in smaller cities as well. Delhi, Bangalore, Mumbai, Hyderabad and Chennai are some of the top cities where listings and transactions are coming from.

One big trend we are seeing in our business is people-to-people trades; people like you and me, whose purchase cycles are getting shorter, and are buying new models and looking to dispose old ones. There is another section in our society that has the same aspirations but not the same affordability, so there is a lot of demand for used stuff also. Traditionally there has been no platform where people can trade in a convenient way: newspapers are too expensive, you will not advertise your used cell phone there. That’s one trade we are seeing, and lot of our growth is coming from people trading with each other.  Not only used goods but also real estate.

So what would the ratio be of C2C (customer-to-customer) versus small business?
It’s very hard to put a number, but it is beginning to get pretty equal, somewhere in the 40-50 range, depends how you look at it. In terms of listings, businesses post more listings, but in terms of transactions, almost half is C2C.

How do you make money?
There are two different ways of looking at this business; one is the media business, where you basically take money from advertisers. Second is where you get a little closer to the transaction, and still not getting in the way of it. That’s when you start looking at featured listings or leads for small businesses. We are testing customer leads. Premium listings over the last couple of months have been in Mumbai. Recently we have extended it to Gurgaon, Pune etc, but still on a small scale. We prefer to understand, learn more, refine it, get user feedback; that’s how we do most of the work and then sort of extend it to sort of a larger scale.

You talked about lead generation. Are you looking to put together a sales team?
At some point at the right time we will look into that, but not right now. A horizontal, by definition, plays across several categories, and you can’t possibly have a sales force in each of those verticals. Our strategy is looking more to a business in slightly more scalable way, driven more by products as opposed to huge sales force presence in the market.

How are you doing in terms of revenues?
So, revenue wise we can’t talk specific numbers, but our revenues have grown as fast as the traffic in the past one year, and we are expecting a 3-4 fold growth in our revenue in the next one year.

You have a mobile business in place? One of your investors, Matrix Partners, has also invested in a classifieds business on the mobile (Ver Se Innovation). Isn’t there a conflict of interest?
We are, I would say right in the middle of building our extension into mobile. With Ver Se, it’s a different business there. We are partners: they are an aggregator, collecting content from people like us and providing it to mobile users. So it’s a different business. The whole business of aggregation is based on revenue share, but I can’t speak much about that but, yes, they are a revenue source for us.

So will you be looking at the same business model as a revenue stream: funneling your listings on to the mobile?
Our strategy is, first of all, is not get into aggregation. We believe than in the long-term that you create more value by getting more users to post content. When it comes to us giving our content to other players in the market, well that’s another possibility we can look at. I think in the short run, mobile for us would be about engaging users, as opposed to trying to make money off it.

A two year old company that has raised three rounds of funding…where is the exit for your investors?

We would rather focus on the growth and invest in it, as opposed to…you know, you can throttle a good thing, and just worry about getting revenue in too soon. You can miss out on a lot of growth that is yet to come, and that’s the reason we want to be patient in building this business, as opposed to either looking at an exit or just focusing on very tactical kind of cash burn issues. We want to have that room for breathing. The opportunity for someone like Quikr is humungous in India, especially because pure online commerce has not taken off the way it should have. We think that the size of the pie is so huge that it justifies being a little more patient and focusing on the growth of the business.

Just focusing on the growth of the user base has really not worked out for many businesses?

In our case the focus in on increasing the real value, meaning increasing the number of transactions and the number of buyers and sellers. And it is not just about having a larger user base, but also about facilitating, enabling and addressing their needs. Tomorrow if you are convinced that you list your apartment on Quikr for renting – you will be able to rent it out in 10-15 days and save on the broker fee, you are much more likely to be willing to pay Quikr. There are more revenue streams sitting in the transaction itself, however it takes time to get things right, and we want to be patient about it; and that’s the way we define growth.