Justdial (JD) provides contact information and user reviews about local businesses, products and services to its users through telephone/SMS, Internet and mobile Internet platforms. JD database contains 9.1m business listings (as of March 31, 2013) – predominantly comprising small and medium enterprises (SMEs) – across various towns and cities in India. Some of these businesses pay JD for priority listing in its search results and also to get leads to potential consumers that seek supplier information through JD.
JD had first mover advantage and was one of the first companies to offer comprehensive local search services in India. However, alternatives have come up in niche verticals like burrp & Zomatio on the Mobile & Web, AskMe and GetIt in Calling and not to forget the Google Local Search with Maps.
Will expansion to new cities contribute significantly to revenue growth?
The market is unclear. The high concentration of sales in a few markets (Mumbai and Delhi together account for ~35% and 11 cities account for ~82%) has been an area of concern for investors. The revenue base of new cities is too small to make a meaningful contribution to the overall business. New cities could exhibit higher revenue growth due to the small base but are unlikely to be a key growth driver.
Mobile Internet Search Growing
The pace of conversion of current listings into paying customers as search requests continue to increase rapidly over internet and mobile internet platforms prompting businesses to use JD’s platform as an effective medium of advertising. The share of search requests over mobile Internet as a percentage of total search requests for JD has increased significantly from ~2-3% in FY10 to ~12% in 9mFY13. During 9mFY13, JD’s average monthly search requests through mobile were ~3m, an increase of 178% over FY12.
Typically, in India advertising is a limited and discretionary expense for SMEs. SMEs may not have a fixed advertising budget and may make advertising expenditure decisions based on the prevailing economic conditions and business outlook. In addition, SMEs have fewer financial resources and less knowhow than bigger corporations, and if the Indian economy were to slow, they
could decrease the discretionary portion of SME marketing and advertising expenditure – thereby hurting revenues.
JD’s paying advertisers may choose to discontinue advertising due to alternative opening of channels or budget constraints in the tightened economy thus adversely affecting JD’s revenue growth and profitability, in our view.