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There’s a lag effect in ad spend and user growth, listings growth in case of JustDial: Abhishek Bansal

The primary challenge “for our sales team is to be able to justify the kind of price hike that we are asking for this particular year’s renewal,” said Abhishek Bansal, JustDial’s chief financial officer (CFO), during the company’s Q3FY18 earnings call. Answering an analyst question about why increased expenditure on advertising isn’t leading to an increase in paid listings, Bansal said that 3-4 years back it was comparatively easier to witness 25-30% incremental increase in paid listings year-on-year (YoY) when a contract was signed with a merchant. This was so because a lead generated via JustDial’s voice platform was shared with 7 merchants. However;

Today when everything has shifted to Internet, the same person maybe calls 2 or 3 vendors, negotiates the deals, closes the transaction, though business from that unique visitor still goes to that one SME. However, earlier 7 SMEs were feeling satisfied and today 3 SMEs feel satisfied.

Internally, JustDial is re-training its sales team to enable them to be able to explain to merchants that “returns should be evaluated not just on cost per lead, but overall on cost per visibility, and cost per reach basis as well.”

Bansal agreed that normally advertising should directly result in higher sign-ups, but he mentioned that in case of JustDial there’s an indirect effect which creates a lag.

Advertising results in more users coming to JustDial platform, more users should result into better value being delivered to our paid clients which should result in more people signing up and existing people willing to pay more to JustDial. Since this is an indirect sort of relation, there will be a lag effect in terms of advertising spend and metrics such as user growth, listing growth, etc and incremental paid campaigns, paid listings etc.

Both Bansal and JustDial CEO, V.S.S Mani echoed that the company is focused on revenue maximisation, and not on number of paid campaigns or ticket size. However, Mani mentioned that in all this they do not want to compromise on traffic

On Advertisement

Bansal said that the company is well aware that in its line of business a “certain amount of sustained advertising” is necessary. The company will be allocating about 8-9% of its revenues on advertising. He added that this number might fluctuate a bit quarter-on-quarter (QoQ) because they are still figuring out the ideal approach to advertising. In the previous quarter, “we wanted to experiment that if we reduce our mass media spends, spend more on digital, how does the traffic pan out, whether the traffic growth that we are getting is sticky or not, whether the traffic is of high quality or not, so all those experiments obviously need to be done to ensure that if a business is spending 70-80 crores on advertising, the return on investment actually takes place.”

JustDial spent about Rs 15 crore on advertisement in Q3FY18. It had spent about Rs 18.3 crore on advertising in Q2FY18. Overall, the company has spent about Rs 55 crore on advertising across the three completed quarters in FY18. Bansal also mentioned that in FY19, JustDial is planning to spend about Rs 20 crore per quarter on advertising.

On Venturing Into Tier II & Tier III Cities

Bansal said that JustDial’s primary strategy regarding venturing into more tier II and tier III cities is to increase its feet-on-street. He added that;

That is the team that is growing at a very healthy rate for us primarily because products now are more of a show-and-tell products. Earlier, small and medium enterprises (SMEs) were coming into the paid ecosystem solely from the perspective of getting these from the very next day. Today, I need to explain to that SME that Just Dial has created a dedicated page for you on its platforms. There are photos, videos, ratings and reviews matter. So considering all of that, feet on street is what we want to grow.

Note that JustDial mentioned that tier II and tier III cities (that aren’t part of the top 11 cities for JustDial) contribute about 20% to the company’s total revenues, and 42-43% to total paid campaigns.

On Employee Expenses & Hiring Plans

In FY17, JustDial had spent Rs 440 crore on employee expenses, and the company said that normally the expenses should have increased by 8-9% to about Rs 480 crore. However, thus far, in FY18 company has been “extremely, extremely frugal in terms of managing our employee cost,” and expect to spend lower than Rs 440 crore by the end of the current fiscal year, said Bansal.

As mentioned earlier, JustDial wants to expand its feet-on-street team, but Bansal said that it’s not possible to accurately predict the exact number of employees that will be hired.

The way we are going about it is in branches: where productivity is already high, those branches are already in, say, hiring mode or expansion mode; branches where productivity levels are low, those branches are being encouraged to first of all achieve a certain threshold of productivity. So, as I mentioned earlier, for us what matters is that revenue per sales employee and revenue per customer both should ideally be maximized.

On Real-Time Chat System

JustDial will be releasing a revised version of its app in 4-6 weeks’ time. The app will feature a real-time chat system, with significantly higher curated content.

Primarily, the objective is that if we can increase user engagement, if we can increase the time that user spends on our platform, in longer term it would actually help us. So, some of those initiatives including complete revamping of our mobile sites to make it extremely fast, all those are in pipeline and should get rolled out in about next one or two months.

Mani added that the chat system will also allow “a user and the vendor to send payment and receive payment.”

Note that JustDial’s payment feature JD Pay is currently still being tested, and Mani informed that it is processing about Rs 75-80 crore worth of billing per month.

On Traffic

Answering an analyst question, Bansal said that over 90% of the traffic on mobile originates from JustDial’s mobile site itself. In Q3FY18, traffic from mobile stood at 73.6 million, up 57.3% year-on-year (YoY). It accounted for 68.4% of JustDial’s total traffic share. Bansal also mentioned that 26-27% of the total traffic originates directly from JustDial’s platforms.

On Categories Generating Most Revenues

“Bulk of our revenue comes from service-oriented categories. Within those particular categories, say, movers and packers, pest control services, repairs and services, fast loans, doctors, dentist, car rentals, real estate agents, all these categories are key revenue-generating categories for us. So, no such category contributes more than 3-4% of the total revenue, but these are some of them,” said Bansal.

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