Messages

811

Web 2.0 / What is Carwale.com Business Model ?

« on: February 18, 2015, 04:24:16 PM »

Carwale was founded in 2005. The company has three key platforms: Carwale, Bikewale, and Powerdrift (a video platform).

The company has 18.5m unique visitors (Carwale 14m+ and Bikewale 4m) and 65% of traffic is coming from mobile. Mobile traffic is growing 120% yoy. The company has reached 900m monthly page views. It has more than 3100 dealers on its platform, up from 500 dealers two years ago. According to management, the new car dealers are 280 and used car dealers are 3100 on its platform. A new car dealer spends on an average Rs2000 with Carwale. The revenue model includes a subscription-based model as well as pay per lead model. Conversion rate on leads is ~10% and pay per lead is US$3-4.

Carwale believes the used car market would be a big opportunity in India over the next few years: Its relationship with dealers would be key to sustaining/improving its market leadership position. It has started new services like certifying cars in order to build trust with the consumers.

In comparison to the horizontals like Quikr and OLX, a vertical-specific platform like Carwale has significantly better quality of leads.  The company gets 79% of its traffic from direct and organic sources: 45% of leads come from mobile and conversion rates on mobile have been improving.

812

SmartPhones & Apps / ItzCash - Business Model and Customers

« on: February 18, 2015, 04:21:49 PM »

Itzcash provides various payment-related solutions: These include payment of utility bills, recharges, remittances, online purchase of travel and other products. So far it has issued a cumulative total of 88m unique prepaid instruments, out of which 25m are active and 10m are mobile users. The total payment value has grown from USD450m in F13 to USD1333m in F15. The four key verticals are travel, recharges, utilities and remittances. Average ticket size is US$10.

ItzCash Mobile users have been growing rapidly for the company: This base grew from 4m in April 2014 to 10m in Jan-15. The company's remittances business has grown to become one of the top 3 players in the country. Monthly volumes have grown from US$7m in April 2014 to US$50m in January 2015.

The average commission rates would be 2% of total payment volumes and it shares 1.5% with its channel partners. 80% of business comes from direct relationships with consumers and merchants; the remaining 20% comes from aggregators.

The company has 50k retail outlets in 3000 cities with ?feet on street? team size of 300 people. So far the company has invested cumulatively Rs300 crores in the business. It plans to expand its payment volumes to 10x and for that it plans to expand the reach of its retail outlets to 150-200k.

813

Web 2.0 / Insight into Freecharge Business Model

« on: February 18, 2015, 11:37:39 AM »

Freecharge provides prepaid mobile recharge services to consumers. It launched its app in February 2014 and gets 85% of its traffic from mobile. Cumulatively, app downloads are 9 million.

Freecharge has a user base of 20m and average number of transactions per day is 400k. Average value per transaction is Rs125. Key revenue streams include recharge commission from telcos, paid coupons from merchants, and in some cases it charges for directing traffic to merchant partners. Freecharge generates a few hundred thousand leads every month.

Telcos pay, on average, a commission of 2.5% on recharges, and Freecharge pays a payment gateway charge of 1.5%. Currently, two-thirds of traffic is acquired, and the remaining one-third is organic.

The overall online recharge market is only 2-3% and can go up to 40% over the next few years. Currently, the market leader in the recharge market is Paytm, followed by Freecharge. MobiKwik would be third, followed by a long tail of several competitors. A large number of transactions in the Freecharge platform are paid by cards, and debit cards form a large portion of cards.

814

Web 2.0 / What is BankBazaar Business Model ?

« on: February 18, 2015, 11:35:37 AM »

The Bankbazaar platform has automated banks and insurance underwriting processes through its platform. It is a category leader in online loans and credit cards. It was getting 750,000 visits via organic search in January 2015, growing 2x per quarter. Organic (free) traffic has increased from 16% to 36% over the past few quarters.

It has done product integration with 70 partners already, and plans to take it to 100. It already has an international site for Malaysia and plans to launch five new sites for different markets by March 2015.

815

5G / Wi-Fi / Reliance NetConnect Mi-Fi Devices to Disrupt Broadband

« on: February 18, 2015, 10:55:39 AM »

Reliance Communications would introduce mi-fi devices soon; these would be able to connect to 10 devices simultaneously, with a four-hour battery backup. We look forward to how the company prices and bundles its mi-fi plans. This will use the underlying CDMA EVDO network for Data Communication.

On stagnant 3G investments, the RCom management said that the company has the largest metro footprint amongst Indian telcos and currently do not see much scope for expansion, especially given the relatively low market-readiness for 3G services. The management said that its plan is to currently milk existing 3G assets, with likely expansion in the future, as adoption increases.

Expectedly, the management did not give too many details on their auction strategy, however it re-assured that (1) RCOM is in a healthy financial situation and (2) it has sufficient fallback options in its seven renewal circles to maintain business continuity. We expect the current auctions to be tougher for RCOM than what the management commentary suggests.

816

3G / HSPA / EVDO / 900MHz Spectrum Auction - Min Block Size to Create Competition

« on: February 12, 2015, 10:42:57 PM »

900 MHz should see fierce bidding as it is a renewal auction and the minimum bid size is 5 MHz; implying only two operators can acquire it in each circle. In addition, 800 MHz and 2100 MHz are also being auctioned.

Idea has 92% of its 900 MHz spectrum coming up for auction, thus faces the highest risk. Given its balance sheet strength, we think that Airtel will bid aggressively to acquire more spectrum.

Data volumes have been growing 20-25% QoQ and hot spots in the country are witnessing congestions. Our case study on Asian operators suggests as data increases, so does capex to sales, which is over 25% in Asia currently

817

3G / HSPA / EVDO / Airtel Vs Idea on Investments & Profits

« on: February 12, 2015, 12:45:08 PM »

Bharti Airtel's invested capital (IC) in its India wireless (mobility) business is Rs1,071bn. Contrast this with Idea Cellulars IC at just Rs600bn (30% of this or Rs182bn is spectrum assets).

Idea?s IC is 53% of Bharti?s IC but its revenues at Rs80bn in 3QFY15 are ~61% of Airtel's 3QFY15 India wireless revenues. Idea?s relative underinvestment in spectrum/capex vis-a-vis Bharti may allow it more leeway to exhibit much greater flexibility on pricing but can this be an enduring state of affairs?

What might Idea do on voice pricing in the future as/when it scales up its capex (currently, 12% of revenues vs Airtel's 15-16% for India wireless)? Maybe, there could emerge greater pricing discipline on Idea?s part as and when it feels compelled to raise capex and also as voice/minutes growth slows down for Idea. We think that it is only a matter of time until Idea can hold out. We believe Idea must follow suit on capex else it risks a P&L miss in FY16 and beyond (more so in FY17 as we expect RJio will be fully competitive on the ground by then).

Both the Companies going forward will face number of structural issues.
ARPM vs MoU trade-off (so voice pricing increase cannot really be fully passed through)
cannibalization of voice by data, which we think will play out over 1-2 years;
the impact of the imminent entry of RJio impacting data pricing, profitability and elevating capex
the impact on the balance sheet due to upcoming spectrum prices in early 2015

818

SmartPhones & Apps / How OTT Apps Killed SMS ?

« on: February 09, 2015, 04:14:04 PM »

OTT services are web-based ways of communicating that bypass traditional voice/SMS services. These apps are popular & growing rapidly in India ? WhatsApp (70m users; 30m in Nov13), Hike (35m; 15m in Feb14), Viber (33m) & Line (30m). WhatsApp currently has ~70%  penetration amongst smartphone owners in India. Popularity of OTT messaging apps can also be highlighted from their ranking in India (on Google Play) based on downloads (WhatsApp ? 1, Facebook Messenger ? 3, Hike ? 20 & Viber ? 27).

SMS as % of rev (GSM) fell from 9% in Dec11 to 3% in Jun-13 but has remained there for the last 5 qtrs; drop rate in no. of SMS sent too has lowered. The subsiding trend comes when rate of OTT app downloads is high. This could be due to early adopters (heavy SMS users) having already migrated. While the overall trend will still be declining rev % from here, pace should be moderate (Airtel's SMS rev % fell 0.2% in last 2 qtrs v/s 1.1% in prev. 2).

Impact on local voice is unlikely to be meaningful in the near term 1) already low tariffs, 2) 3G coverage still inadequate (telcos focusing on top 4-5 cities/circle), & 3) rising 3G utilization (with low spectrum allotment) will start to hurt voice quality on an IP network. Roaming will get hit though some impact has already been felt (6% of rev; down 2.6% in the last 6qtrs).

819

3G / HSPA / EVDO / Airtel Happy With Lower Growth & Higher ARPU / Subscriber

« on: February 09, 2015, 04:04:18 PM »

Defending its slower-than-Idea volume and revenue growth in India, Airtel management essentially indicated that the two companies are pursuing different strategies and the company is internally extremely satisfied with the performance of the India wireless business. We agree that Bharti?s performance on the India wireless side has been solid in the past few quarters in its own right; however, volume growth differential (on voice and especially data) versus Idea is too glaring to dismiss, in our view.

Airtel's management, like Idea?s, reiterated that it does not foresee a need for meaningful fresh 3G/4G cell sites for the next few years. This is in line with our view that 3G/4G cell site additions would be primarily in the form of loading.

The company, while avoiding any meaningful discussion on the upcoming auctions, did indicate that it expects the auctions to be rational. Definition of ?rationality? is the real unknown here and we maintain that the outcome of upcoming auctions is tricky to call.

820

4G / LTE / How Reliance Jio Launch will Lead to Another Price War ?

« on: February 09, 2015, 02:10:44 PM »

Reliance Jio'saspirations and game plan extends beyond the mobile to include content and video to the home; so to try and assess a business case centering on just mobility may be placing too narrow a lens on the analysis. The relevant question to ask is whether RJio, with its deep pockets and staying power, can alter the industry picture on pricing, margin, capex, data adoption, spectrum payouts, quality of experience/network profile in a manner adverse to incumbents while it competes.

For sure, Tata has poured in enormous capital/investments over the past decade with little to show for all of it (so, we are not making a case for RJio?s success) ? that said, didn?t Tata along with Reliance Communications (RCom) contribute to severe voice pricing erosion that hurt the India telco industry? Why can?t RJio do the same for data and spoil its currently attractive economics for incumbents?

821

4G / LTE / Why Reliance Jio Mega Launch Delayed ?

« on: February 09, 2015, 01:22:52 PM »

Reliance Jio Infocomm has delayed launch of its services from 1HCY15 to 2HCY15, which some investors may believe is due to technology/strategy issues. Not true. RJio is planning to launch services in 900 towns initially (as per its annual report). RJio envisages a pan-India presence in the course of time. Notably, a very low proportion of towers in India are linked through fiber in India and data transfer speeds/quality is constrained by microwave communication.

RJio needs to lay large amounts of fiber before launching services. To get municipality approvals in 900 cities/towns and laying fiber across the cities is a time-consuming exercise. Particularly, the time taken to get the approvals/permits to lay fiber can be unpredictable, which is likely the primary reason for delay in the launch of services. Premature entry resulting in sub-par data services could cause wide-spread negative word-of-mouth undermining RJio?s ability to attract subscribers. Hence, we do not think that the delays in RJio?s launch of services are due to any technical issues/glitches or sub-par experience.

822

Technology / Weak IT Systems Forcing Airtel not to Roll out Bundled Services

« on: February 09, 2015, 01:18:22 PM »

We found Bharti Airtel's reasoning to not offer bundled services clubbing its wireline, wireless and DTH offerings a bit surprising. The Management indicated that the reason to not offer bundled services is the disparate IT systems of the three businesses. This surprised us, coming from the leading telecom company in India.

If the market is ready for bundled services, such system aspects cannot be a reason to not pursue it aggressively. There is a new large player on the horizon who intends to pursue bundled offerings aggressively, if the media reports are to be believed. The new player starts with fresh IT systems and we do believe that Bharti would not want to risk losing business on account of inferior IT systems. We may be stretching our argument here a bit but as we said earlier, Airtel's (honest, we appreciate) response surprised us.

823

Web 2.0 / Baidu's Mobile Search Queries Surpass Desktop

« on: February 08, 2015, 01:12:34 PM »

Baidu seems to maintain its dominant position in mobile search area with little immediate competition. On Baidu, mobile traffic in 3Q for the first time surpassed PC traffic, with the rev contribution hitting 36%. We expect this number to increase to 39% in 4Q, mainly driven by ever-growing mobile traffic and narrowing CPC discount to PC. Baidu is once again restructuring (last done mid-13) into: 1) Mobile Services (combining Mobile cloud & LBS), 2) Emerging Business (combining New Business, User Spend, Globalization), 3) Search (combining the Cloud and Mobile Search Union teams).

In order to ?connect people and service?, we expect to see deepening offline campaigns for O2O offerings such as Baidu Connect and Baidu Nuomi group-buy, which could pose pressure on further margin recovery in 2015. This new O2O offering, launched in 3Q, currently has covered ~ 500K offline merchants, who are mainly engaged in dining, travel, education, finance services etc

Baidu Investing in Lenovo SmartPhone
Baidu is investing over USD100m in Lenovo's Fancy Maker smartphone brand. With all of China's large internet platforms eyeing OS development, we view this small investment as betting conservatively on a very high-risk, low margin area.

824

SmartPhones & Apps / Why Flipkart Moved from Desktop to Mobile ?

« on: February 06, 2015, 10:49:01 PM »

For the majority of Internet users in India, mobile devices are their primary portal to the online experience. Only about 5 percent of
users in India own personal computers. According to Unitus Seed Fund, 34 percent of people in India access the Internet
exclusively through mobile phones.

In light of the strong disparity between PC and mobile usage in India, some companies have crafted their business models to capitalize on the mobile revolution.

Flipkart, India?s largest e-commerce marketplace, caters to the huge numbers of people in India?s towns and cities who rely on mobile devices for commerce. Consumers can use the Flipkart app to search, share, compare prices, and shop from thousands of third-party vendors in more than 70 categories.

More than 10 million people in India have installed the Flipkart app. Mobile traffic growth for the app is twice that of PC-driven traffic
growth, and over 50 percent of the company?s traffic comes through the mobile app and the mobile website. Flipkart anticipates that mobile commerce through the app will constitute more than 75 to 80 percent of all user traffic in India by 2016.

825

Technology / China 2015 Digital Ad Trends

« on: February 05, 2015, 04:24:44 PM »

iClick CEO Sammy Hsieh sat with HK-based investors last week, offering them a preview of 2015 Digital Ad Trends. Sammy's Tech Team is working to link up to the ever-growing number of APIs Tencent Ad Exchange.  Mr. Hsieh expects Tencent to see faster Ad Revenue Growth.

While there have been gradual improvements in the back end, we believe advertisers await more marked improvements in Qihoo click-through and conversion rates.Amore important development would be the introduction of an even more powerful mobile search solution which would improve Qihoo's market position significantly, although we see few leading indicators to suggest its imminent delivery.

A smaller amount will come from Weibo spend along with current brand ad spend and budgets previously devoted to China's largest e-commerce platforms. Buy Baidu and Tencent. Most Moments and broader GDT spend will come from offline budgets.