FreeCharge.in, run by Mumbai-based Accelyst Solutions Pvt Ltd, is one of the key mobile recharge players in the country. It recently netted $33 million in Series B round of funding from existing investor Sequoia Capital, with participation from Belgium-based investment company Sofina, besides Russian VC firm ru-Net. Founded in 2010, FreeCharge has just added a co-marketing link which allows users purchasing products on partner third party sites to get credits on FreeCharge.
Techcircle.in spoke to FreeCharge's CEO Alok Goel to know more about the new product, future plans and more. Here are the edited excerpts:
How is your user base changing and how mobile centric is your business?
As of now, we have 12 million registered users. Almost 80 per cent of our transactions come from our mobile consumers, compared to just 5 per cent around five months back. So, we are slowly transitioning from a desktop play to a mobile-only platform.
The total transactions on our platform have grown over 7x in the last one year.
We are now looking to launch more Delights-like products and cross 1 million transactions per day by March next year. We also want to be the first company to do 10 million transactions a day.
What did you do to boost the transaction in the past five months?
Indeed, we launched a number of products during this period including a new product called 'Delights'. Also, our Android app got a lot of traction. FreeCharge app is now one of the top 20 apps on Google Play Store.
You raised around $37 million in two rounds. Why do you need this much capital, given that you are a low-capital intensive business?
It is true that we are a low-capital business, as we don't need to set up factory, machines or any other costly physical infrastructure. However, we are investing money in two growth areas ---human resource and branding. We want to launch more Delights-like products in future so we need to hire more talent for the same. Secondly, it requires a lot of capital to establish FreeCharge to become a great household brand.
I think it is the right time for us to invest in marketing and advertising. In my view, a company should run a TV commercial when it has a great product. If someone launches a TVC before coming up with a great product, people will just try it out and leave it. If someone having a great product doesn't do TVC, then people will not get to know about the product and the company will lose an opportunity.
Are you looking at more funding in the near future?
Investment happens at the opportune time. However, we are not aggressively looking at it yet. But we are certain that our existing investors will participate in the next round, as they are very bullish about our business.
We will also welcome new investors. In my view, there are three sets of investors. One is called dump investors who give you the money but don't know what to do next. The second set is that those who give you the capital and help you succeed in the business. The third set is that those who give you the money and help you fail. We prefer to go for the second set of investors.
Are you looking at global markets?
We are seriously thinking about going global and we keep getting queries from various foreign markets. However, we are yet to decide on which markets we will go first to.
We are looking at various high-growth markets. If you look at Indonesia, it is almost similar to India in terms of internet penetration and this market is evolving. And if you take the US market, it looks more interesting from an economics point of view. If we take Latin America, it is one of the fastest growing markets in the world. Europe also looks interesting, as it has already evolved in terms of smartphone penetration.
While you are targeting the smartphone user-base in India, you are losing an opportunity to leverage the feature phone user-base. How do you look at this?
Indeed, I have a very radical thought on this. We are actually building products for future. If we are building products for today and the future is different than today, then the business will become obsolete in future. A nice analogy is Google. If Google was still looking at the future phone market and didn't develop Android, it would have lost to the likes of Apple. This learning is so amazing and that is why we are also looking at future rather than present.
Currently, there are around 500 million feature phones, compared to 80 million smartphones. However, there are around 8-10 million smartphones being added every month. And if this is the pace at which the growth is happening and given that Micromax, Xiaomi and Android One are launching under Rs 5,000 smartphones, India will have 450 million smartphones in the next three-four years. And so, feature phones market is going to be redundant and irrelevant in the near future.
There are many other companies like Paytm, Mobikwik, Rechargeitnow in this space. How tough is the competition?
In terms of competition landscape, there is a very interesting phenomenon happening over the last six-eight months. While Flipkart, Amazon and Snapdeal are fighting together to be the market leader in the e-com space, the fight is between OLX and Quikr in the online classifieds space. In the online taxi booking segment, the battle is amongst Uber, Ola and TaxiForSure.
Likewise, in the online recharge space there is completion among FreeCharge, Paytm and a few other firms. However, FreeCharge is having a different battle to fight. Our closest competitor Paytm has now become a mobile marketplace and is competing with the likes of Flipkart, Amazon and Snapdeal. In the same way, Mobikwik has become a mobile wallet and it is fighting with other mobile wallet firms. So, our competitors are taking a different path.
But your competitors could have diversified into other verticals because recharge is pretty commoditised with low margins?
Yeah, as you just mentioned, it is actually a low-margin business, and everybody who is operating in the market has realised this fact. That's why Paytm forayed into m-commerce and is now fighting the battle with these e-com honchos. Similar way, Mobikwik is fighting with PayPal and payment gateways. However, we are different company. We are a marketing company fighting our battle with the likes of Google and Facebook.
What is the future of online recharge, given that it's low-margin business?
As I mentioned earlier, the future is just moving from a desktop to mobile-first. In my view, online recharge is playing a huge role in promoting the mobile internet in the country. It is easy to recharge online than go and do it at a physical shop. It saves a lot of time and effort.
Secondly, there are 80 million recharges happening in the country on a daily basis, and it is about 160x bigger than online ticket booking happening at IRCTC platform. Of this, around 20-30 million recharges are happening in the online world. Even Amazon doesn't command more than a million transactions a day. Online recharge is a high volume business and it is clearly driving the mobile internet ecosystem in the country.
You had acquired Preburn and brought on board the Wishberg team. How have these panned out for FreeCharge?
Wishberg was an acqui-hire and the people are now part of our marketing team. It is working towards developing consumers-facing products for us. Preburn was a strategic acquisition and the company is developing a new product which will hit the market soon.
Walk us through the new addition to the site. Since we see others also doing some similar free recharge along with partners, tell us about the attraction for such a model.
'Delights' is basically a marketing tool for marketers. It is a platform that rewards consumers with FreeCharge credits for every transaction done on our partner e-commerce sites. These credits can then be used for any transaction on FreeCharge and these rewards are valid over and above all the normal merchant offers. A consumer only needs to click on the offer to visit the merchant site for shopping and literally that's all required for getting rewarded.
Before coming to the specific financials, let me draw an analogy. There is a company called Ebates in the US which was recently acquired by Rakuten for more than a $1 billion. Ebates offers a product similar to Delights. You go and shop anywhere on internet in the US and you will get credit back to your account. If such a model can work in the US, it should definitely work in India and other markets.
The whole power in the e-com lies in having the power of customers. Nobody commands more money than the person who owns customers. That is why Google is able to get all the money through ad world by partnering with e-commerce companies. So we believe this model is here to stay.