In the last few years, Vijay Shekhar Sharma’s mobile Internet company One97 Communications has grown many folds. The company grew from Rs 11 cr run rate in 2007 to over Rs 700 cr this year. There have been twists and turns in the journey, including an about turn from a planned public offering, but he has managed to catch on to a few big trends. As the Value Added Services market bottoms out, One97 has put much of its weight behind its commerce business, fronted by the Paytm brand. As the company pushes forward in the mobile commerce space, consumer interest in Paytm has also picked up (see figure). “There is still a lot more to be done in the payments space,” said Sharma, whose 11,00 people company is gearing up for a few more launches and expansion in Bangalore. Edited Excerpts of the Interview.
How far along has One97 come with the consumer business?
Until recently, One97 has done content and mobile marketing business. Nearly 95% of our revenues come from India and we believe we are market leaders in these segments. We had two choices to grow. Either go international with these businesses or enter another area within India. We chose to get into commerce as a business in India and that is where Paytm comes in. It is our brand name for all consumer facing product offerings. While it is dominated by our commerce offerings, it also includes some of our content apps such as Paytm games and Paytm video which is also consumer facing.
From being a Value Added Services (VAS) player, when did you decide to go into commerce & what was the rationale behind the move?
In 2010 when 3G was being launched in India and smartphones were happening, the trend was obvious. That year, we clearly found out that mobile Internet is where the buck is going globally and when 3G goes mainstream in India, it will happen here too. We started focusing smarphone platforms iOS & Android. It was becoming clear that the relationship between telecom operator and a consumer was being hijacked by the device manufacturer and app stores. Consumers who used to buy things through operators are now buying through app stores. In mid 2011, we launched Paytm.
How far have you come with Paytm and your efforts to shift revenues to a healthier mix of commerce & VAS?
First, we aren’t trying to shift revenues. We are trying to add another line of business. Growth in the other two lines are not very high as we are used to seeing in our company. In that sense, it’s adding another engine of growth. In late 2009, we figured out that we had to do something beyond content and marketing. Those days, the mobile payment experience was broken. We decided to solve that problem from scratch. At the time we thought telecom carriers would be our first customers. Incidentally, they didn’t move fast enough. We thought: What if we started selling top-ups directly and decided to start a consumer brand. This was the time when I got to see Freecharge, which was doing an incredibly great job by doing recharges & free coupons. It was very interesting. We were talking to them to partner. We also discovered that people were logging in more from the mobile. So we quickly built the mobile apps which were able to use our payment platforms.
In 2011, when we became a lot more serious about it, we started with a few online consumers. We were up against very savvy, cult brands in the market. We weren’t interested in the coupons business from the start, so we concentrated on a simple recharge. Later we launched bill payments, tickets and other digital goods.
There is still a lot more to be done in the payments space.
What percentage of your revenue comes from the web and what percentage from mobile?
Today we do over 100,000 orders from mobile in a day. I’m less worried about the revenue split, I already know that everybody will be on the mobile. We are playing it for mobile dominance.
What will be the impact of 4G on your business?
It will bring about better experiences on smartphones. We can create much more immersive experience when the consumer is on 4G. Majority of transactions every day on One97 platform come from smartphone already.
Is that versus feature phones? Or web?
I’m talking only about smartphones. The significance of feature phone and Desktop Internet will erode in a few years.
What’s NextBigWhat for Paytm?
Not many people in India have been able to build a great consumer experience in commerce. There is a lot we have to do. For example, we launched Fast Forward a couple of days back on Paytm. We have always dreamt about doing a recharge in one click and not take more than that effort. Today, it takes about 4-5 clicks in most other services. Fast forward lets you do it with one click. We want to launch a couple of more such features before we go into some other categories.
What are the launches going to be like?
With Fast Forward now, consumers are able to finish the payment cycle in one click. The next level to Fast forward is that users will be able to complete the entire order in one click.
How has the recent Trai regulation affected VAS business, activation has gone down by 50%?
There were enough and more malpractices in the system. I’m glad that it got reduced. By adding an extra step of confirmation, as expected, we saw a 20% decline in revenues from these services. The market is reaching its optimum size.
Do you see VAS growth slowing down?
If I assume that VAS is a business where you are selling something to the consumer using telecom operators wallet, that market will see bottom in a month or two. From that point onward, telecom operator wallet can be utilized for smartphones and app store billing also. So it will come back. Telecom operators also add data internet connections as part of VAS. So for them, VAS will continue to grow as more people continue to subscribe to mobile Internet.
How big have you grown over the years?
Gross billing at One97 will cross Rs 700- 800 cr depending on how we are looking at the year. In 2007, we were at a run rate of Rs 11 cr. On a consolidated basis, our EBITDA last year was about Rs 70 cr. We are more than 1100 people and are opening up a large development center in Bangalore.
Has there been a change in the way you are looking at investing from the mobility fund?
At one point of time we used to invest into businesses which we were not into. Today we are now looking to invest into businesses that are aligned to our core. Our investments will be more about transactions. We are not going to do any content or social network sorts of investments.
Do you see yourselves concentrating in rural areas?
There is no doubt about it that mobile payments is a need in rural areas. But we can only solve few problems and not all. We will first solve what is best for our primary customer with smartphone and mobile Internet. Due to low penetration of these, we can’t solve it for rural market. It is a great opportunity, but not for us yet.