7/27/2019 Connecting Retailers to Consumers
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START-UP CORNER TRACKING EMERGING INDIA
While trying to recharge her
phone online a few months ago,Palak Agarwal stumbled upon
FreeCharge. The website had variousoffers, including ‘free’ coupons and dis-counts. Excited, Palak quickly spread theword among her friends.
Today, she and her friends regularlyrecharge their mobile phones onFreeCharge, which has about 10 millionregistered users.
The company launched operations onAugust 15, 2010, promising to provide ‘free’talk time to mobile phone users. Everytime a user recharges her/his phone, data
card or direct to home television (DTH)service through the FreeCharge platform,she/he is reimbursed through discountcoupons. For coupons, users can choosefrom 150 merchants listed on the site,including McDonalds, PVR, Costa Coffeeand Myntra.
A few weeks ago, the companyannounced it had raised $33 million inseries-B funding from a host of investorssuch as Sequoia Capital, Sofina andRu-Net.
Business model
FreeCharge provides a platform for retail-ers to connect with consumers. ShailendraSingh, managing director of SequoiaCapital India, says, “FreeCharge is creatinga unique new category — an advertisingplatform, with a ‘consumption graph’ forthe most valuable online consumers. Weare very impressed with the team’s exe-cution and the rapid growth and engage-
ment of users on the platform.”The company’s core proposition is
driving customers through coupons foroffline and online brands. Kedar Tenny,director (marketing & digital), McDonald’sIndia (West & South), says, “FreeChargeprovides us a unique value proposition of driving promotions. It has been able todrive in a significant number of customersfrom the online world into our restau-rants, with performance-tracking that ison par with online digital advertising.”Companies are able to measure the effec-
tiveness of their campaigns and collectdata on consumer preferences.
Sanjay Coutinho, chief executive of Baskin Robbins, says, “The exclusivitythe site offers is an attractive proposition.As the website features strong brands, weare able to maintain our premium value,and not appear as a discount brand.”
“There is a lot of traffic and a fairamount of brand visibility. Also, the costof acquiring new customers is low, com-pared to other avenues,” says SharatDhall, president (marketing), Yatra.com .
The company earns revenues from
two sources. The first is the fee it getswhen users recharge phones, DTH facil-ities or data cards through theFreeCharge platform. Experts estimatethis fee is two to three per cent of theamount spent. Alok Goel, chief execu-tive of FreeCharge says, “Currently, 90per cent of the transactions are in theprepaid segment, other segments aregrowing at an equally brisk pace.”
The other income stream is the com-mission firms such as McDonald’s payFreeCharge for driving traffic. While somecompanies might choose to pay every
time a user opts for its coupon, otherspay only when a customer walks intotheir outlet. Experts estimate this fee to betwo-five per cent.
Rather than focusing on profitability,FreeCharge seems to be following a strat-egy typical of online companies — creat-ing a system so big that it becomes diffi-cult to compete against. As Goelsuccinctly puts it, “The focus is on grow-ing, rather than on profitability.”
Weaknesses
“The absence of entry barriers couldencourage others to enter this space,”says an expert. Tata Sky, for instance, hasstarted offering a similar service on itssite. Telecom operators such as Airtel andVodafone, which already have large sub-scriber bases they can tap into, mighteasily replicate the model.
As FreeCharge’s ability to scale upoperations will be determined by anincrease in its customer base, expandingits services to keep customers engaged onthe platform is critical. Unlike sites suchas MobiKwik which, in addition to pro-viding recharge facilities, also offer usersservices such as utility bill payments,
FreeCharge is yet to offer these. While itis felt similar offerings from FreeChargemight be in the offing, there is delay inthis regard.
Nitin Sharma, principal at venturefund LIGHTBOX, says, “The question of how big such companies can become hasto do with whether advertisers keep see-ing good results on a sustainedbasis...Recharge is a very quick interac-tion. So, is there a clear context for brands
to engage consumers? Besides monitor-ing coupon-redemption rates, they mightlook at whether they’re attracting theright kind of customers who are shop-ping beyond initial discounts.”
Another issue, as a new user pointsout, is the limited set of merchants onthe site. A typical user in Delhi looking fora free meal coupon will be hard-pressedto find a wide variety of establishments to
choose from.
Way forward
According to Goel, “The immediate goalis to execute one million daily transac-tions by early next year.” While the com-pany didn’t share its estimate of theimpact of this milestone on its finances,it is expected this will give FreeChargethe negotiating heft to rope in brands andstrike more lucrative deals.
As many high-end customers (DTHand postpaid mobile data users) aren’taware of the site, the company has stepped
up efforts to establish its brand by launch-ing its first TV campaign. Goel says a “sig-nificant share of the $33 million raisedwill be used to create brand awareness”.
While there are concerns, Nitin Sharmasays, “The leading players can see a bit of a network effect — more users will bringmore brands and better economics (com-mission on airtime sold), and more brandsand more offers could mean more userskeep coming back.”
When itcomes todigitally
transactingusers inIndia,recharge isthe leastcommon
denominator. FreeCharge hasused the ‘recharge use case’well to acquire a largenumber of users.
It operates on getting a lotof eyeballs so that it canpromote various brands in the
form of coupons.From an advertising point
of view, the proof of thepudding lies in how manynew users it can acquirethrough this channel.
To become a relevantadvertising platform, it willneed three things — a largeuser base, diverse brands
willing to advertise with it andan intelligent platform todecide which brands to show
to which users.The challenge for the
company will be building atech platform that is able todeliver on advertisers’ needs.How well it is able to deliveron this front will define itssuccess. A number of adnetworks and affiliatemodels already exist in the
Indian market.Most of these (web/mobile)
have their own publisher
networks which, collectively,might be far larger than theFreeCharge user base.
So, it will be interesting tosee how things work out forFreeCharge through the nextfew years.
Upasana Taku, is co-founder,
MobiKwik
EXPERT T AKE
Connecting retailers to consumersWhile FreeCharge provides a unique value proposition of driving promotions, keeping customersengaged on the platform is critical, writes Ishan akshi
FreeCharge offers discount coupons every time a user recharges her/his phone, data
card or DTH service through its platform. PHOTO: THINKSTOCK
Kunal Shah
Co-Founder : Prior toFreeCharge, Shah wasthe CEO at PaisaBack
AlokGoelCEO- Prior to FreeCharge, Alok was COO of redBus.
He was also head of search & mobile products forGoogle India
Vasanth Sastry
CFO- Prior to FreeCharge, Vasanth was CFO forRediff.com’s US operations
Ninad Takpere
C O- Prior to FreeCharge, Ninad was businesshead at timesdeal.com
Sandeep Tandon
Co-Founder : Tandonalso owns TandonGroup
FOUNDERS’ BACKGROUND
TEAM
