 "Low investment model draws investors to listing firms")
Such listing companies are not to be confused with e-commerce firms that sell online and consume much more capital.
“Although in the initial phases we are human-intensive, over a period of time when a brand is built, the same head count continues to yield more revenues for us,” says Sanjeev Bikhchandani, founder of Info Edge (India) Ltd, which runs Naukri.com.
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Zomato has said it will use a major chunk of its funding to employ more people.
“The increasing revenue base with the same cost line combined with the advertising revenue is a business model that is profitable in the long term,” says Mohit Bahl, partner, KPMG.
The value of a listing site such as Zomato lies in the quality product it offers to the consumer in the form of information, according to founder and CEO Deepinder Goyal.
“We have built reputation and loyalty over the years, which is a difficult task and that makes us different.”
Once a strong brand is built, the cost of hiring people is taken care of in the long run because many merchants would readily want to list, Bahl says.
In the case, Zomato, the brand is built through content over a period of time which does not require direct investment. Speaking on competition in the space, Bhikchandani points out that websites such as Zomato, Justdial and Naukri have created a certain barrier and standard for listing companies. “Any new player would have to reach that level to compete.”
Most of these companies list products and information free of cost and charge only for the banners and the advertisement on the website.
According to experts, with the growing internet curve, these listing companies have the opportunity to expand. The fact that listing companies’ valuation is disproportionately higher than their revenues shows investors’ interest in them . Zomato’s valuation is expected to be over 20 times its revenue for 2013-14.
However, there are challenges, too. Although there is no product cost in the listing business, the challenge is to get people hooked to the brand - a difficult task.
“If it does not click with the consumer, you could be out of business very easily,” says Bahl.
IN EXPANSION MODE
* Zomato.com has raised funds of Rs 227 crore from Sequoia Capital and existing investor InfoEdge which also owns naukri.com
* Zomato had recently said that it would use a major chunk of its funding to employ more people
* Zomato’s valuation is expected to be over 20 times its revenue for 2013-14
* For Zomato, the brand is built through content over a period of time, and this does not require direct investment