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How Competition Is Changing 99acres

99acresInfo Edge’s real estate portal 99Acres, which depends on online advertising for half its revenues, reported its revenues 39% year on year to Rs 19 crores for the quarter ending December 31st 2013, and reported a small profit of Rs 44 lakh, the company shared on its earnings conference call topline in Q3 grew 39% to 19 crores. Hitest Oberoi, CEO of Info Edge, mentioned on the call, however, that the company isn’t chasing profitability at 99acres yet, choosing to focus on increasing marketshare: profitability can be achieved by reducing advertising spends, Oberoi said.

Paid listings in Q3 were 5.5 lakhs, up from 4 lakhs in the same quarter last year. Nine month revenues for 99 acres were around Rs 53 crores (give or take Rs 50 lakhs). Things also slowed down for the company in Q3 partly because of low activity, transactions and launches in the Delhi NCR region “owing to the elections in Delhi with no clear mandate to any government”, Oberoi said.

Advertising Spends Set To Grow Because Competition Has Raised Funds

Advertising spends, however, are set to increase: “2-3 of our competitors have raised money recently. They will be aggressive, which will translate into higher marketing spends, and we will have to react in order to raise brand awareness.” Questioned by investors about rising competition in online real estate space (competitor Housing.com raised $2.5 million 7 months ago), Oberoi claims that while 99 Acres doesn’t appear to have been affected in terms of traffic share (on comscore), they’ve seen the gap between 99Acres and its nearest competitor (MagicBricks?) increase because the newer players are eating into the number two players’ market-share. “The new players are at number 3 and 4. The only way to gain share is to keep investing in the business. We made a small profit because a lot of this depends on whether we invest aggressively or not. Q3 is traditionally a weak quarter from a sales and marketing perspective for us. In the near term, making a large profit is not our principle objective: our objective to gain marketshare.”

What’s interesting is that most of marketing spends from Info Edge are on 99Acres and Jeevansathi (their matrimonial portal), while spends on their cash-cow Naukri (recruitment is around 73% of topline, 53% EBITDA margins) are comparatively small as a percentage of revenue. “Any increase in spends on advertising 99Acres will be on TV. We won’t spend much on non-TV advertising. TV advertising doesn’t impact revenues in the short term. A lot will depend on how fast the market is growing. Non TV advertising, we can expect it to grow 20-25% per annum in 99 Acres. TV, we might do 2 bursts and then none.”

Focus on Product & Data Quality

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The other flank that competition has opened for 99Acres to defend is on the product side, which appears to be forcing the company to invest in improving its offering for brokers and consumers: It has launched an Android application, and making its website device and platform agnostic. An iOS application is in the works, and a map based search is being rolled out in the next few weeks. Most interestingly, though, given the questions around reliability of data in real estate listings, 99Acres has rolled out a pilot real estate verification service in Delhi-NCR, Mumbai and Bangalore. “We are investing in data quality to ensure quality of information, in sales and opening new offices. We’re also investing in brand building, and get higher traffic share. We will continue to invest.”

Responding to another investors query about competition, and which are the stronger markets for the company, Oberoi said that 99Acres is a strong player in virtually every market, but there is competition. Outside of three key areas that Info Edge is going to invest in for 99Acres – brand building, product and data quality – the fourth is in scaling the sales team. “We are currently in 12-14 cities and we want to expand to more cities, and increase coverage in the cities we are already in.” Responding to more queries about which markets they’re strong and, and which are seen as weaker markets, Oberoi said “We are a strong player in virtually every market, and we’re doing well in every market. Delhi NCR got impacted a bit. We are a clear leader in Delhi and Bombay, and in the South the market is very competitive because of lots of players, but we’re getting out act together there as well.”

Readers should remember that Housing.com first came into prominence for their usage of maps for real estate listings, and subsequently followed it up with verified listings. They’ve recently launched an agent Map for agent search as well. Commonfloor has also raised $10 million from its investors. It has an android app witha augmented reality listings. Indiaproperty.com has also raised $12 million from Bertelsmann and others. Times Internet backed MagicBricks, once the market-leader, has introduced a series of products like deals, apart from locality specific pages, and a luxury segment.

Also read: #Outlook14: What Indian Online Properties Listing Companies Plan To Do

Expanding The Team

Hiring is expected to increase for 99Acres, by 20% in the next few months. “We have scaled up our team substantially this year. If we continue to get a good response to our product development perspective, we might need to hire more people. It won’t double, but it might increase by 20% in the next few months. In terms of headcount, 99Acres is already around 75% the size of Naukri. It’s a little junior, so the cost of the headcount is a lot lower than the cost of the headcount in Naukri. Hopefully, 99Acres will grow faster than Naukri for the next few years, and the margins will start improving over time. If we want to break even, we can break even today and make a small profit. The opportunity here is huge, it’s a large market and category, and there are lots of opportunities for us to pursue. We would want to keep trying out new things in this category, so that we can make a large business in the long run. For example, if we hired 100 people in verification, but if we get massive returns, we would expand to 500 people. We will do whatever it takes to defend and strengthen our position.

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