Instamojo, a platform which allows users to buy and sell their digital goods, has said that it is close to cashflow break-even. In a blog post, its Founder and CEO Sampad Swain writes that "We are at a stage where we can think profitably without making a trade-off between business growth and our burn rate. In simple words, we will continue posting strong growth numbers Q/Q without compromises." Where have I heard this before? Typically about Info Edge owned marketplaces: it's something the company used to say often about 99Acres, before competition started heating up, and even Jeevansathi; more recently, we heard similar comments from them about Zomato. What's interesting here is that the business reaches a level where profitability depends on an increase or decrease in marketing spends. Swain writes, on customer acquisition costs: "Unlike many other businesses, Instamojo’s growth is not hinged on advertising & marketing to acquire users. We depend on WoM (word-of-mouth) and referrals which is purely derived from the inherent network effects which our platform enjoys." "As we add more merchants to our platform, we expect our CAC (customer acquisition costs) to go close to Rs 0 (currently at low double digits) which is a huge competitive advantage and perhaps our absolute economic moat," Swain added. From the blog post, Gross Margin is up 191%, Contribution margin is up 565%. Operating margin is up 93%. 4% increase in expenses. -57% decline in advertising and marketing spend. 76% decline in customer acquisition costs. That close-to-profitability scenario…
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