Ashish Kashyap , the 39-year old chief executive officer (CEO) of ibibo Group, has been leading the company since 2007, and has seen it transform from a social media platform to a gaming network, and now, a “provider of trusted transactions”. This ranges from e-commerce to payments to travel, an area where ibibo extended its reach through the acquisition of Bangalore-based redBus.in last week. While Kashyap did not want to comment on the exact terms of the deal—which media reports suggest was worth Rs. 800 crore—he spoke in an interview about the logic behind it, and why there will be more such acquisitions in India in the future. Edited excerpts:
How do you see the current state of the e-commerce industry in India? Do you think that the scenario has changed significantly?
In the last three years in particular, the ecosystem has really come together. The first thing is that there are a lot more entrepreneurs around these days. People who are creators, who are building for web, who are building for mobile, who are looking at local problems and creating local products and trying to solve problems. This is a big change.
The second thing is that there is now a proper ecosystem for funding. Even five or six years ago there were plenty of VCs (venture capitalists) around, but they weren’t early funds. Today, there are incubators, early-stage VCs and seed funds, who are coming in now, and we’re seeing proper angel economies develop. And then there are also platforms like ibibo; we have systems in place for execution and have incubated businesses as well.
This is creating a critical mass of investment, which has been driving up the demand side as well. Earlier, demand was a definite problem. I remember, in 2002, launching an e-commerce product, and at that time, reaching 1,000 users a day was a nightmare. Today, these milestones are much easier to reach. That makes it a much better time to be an entrepreneur.
So if the last three years were all about building the ecosystem, where are the next three headed?
We’re going to see a lot more destruction now—a kind of creative destruction. The big challenge is to learn to appreciate failures. I think there’s a tendency in India to look at failure as an endgame, which must change.
Another development is that more companies are now big enough to acquire smaller players. I think that we’ve started seeing that now, and it’s going to build a healthier ecosystem for younger companies, as it gives them an exit, and something to work towards. This will also encourage VCs and seed funds, and create a more vibrant ecosystem, with more successful exits.
Speaking of acquisitions, can you talk me through the deal with redBus? You were already in the same segment, so what did acquiring the company bring that you couldn’t have built?
We integrated redBus’s service with Goibibo six months ago, and we saw excellent growth. All the metrics that we look at were doing really well, whether it was traffic or repeat business. So clearly there is an audience. Goibibo is an aggregator, and we also do fulfillment. That’s the basis of our DNA, we want to help people by providing trusted, dependable transactions online.
RedBus makes sense because it addresses a whole new market for us, and adds scale to our portfolio, and they are not just a demand-side company either. Aside from the website for customers, redBus also works with the bus operators, and provides them with tools and technology, so they’re very deep in their vertical. The work that they do is very different from the role that a typical OTA (online travel agency) does. That also means that the value proposition is a lot higher.
Ibibo started as a social network in 2007, then pivoted into games, and again into e-commerce and transactions. Can you talk us through the changes?
Like I said, I’m not scared of creatively destroying. We started off in social media and we built up a good amount of traffic, but social media is about the network effect, and that means that it’s a winner-take-all situation. In that particular scenario, you can’t compete with a global leader.
What’s important is to learn to fail, and to kill fast. The Internet is about iteration, all the time, and so for us, the focus shifted to solving local problems. And there was a lot of energy, and traffic, that we had been able to build, which really drove our entry into e-commerce and helped us to gain the numbers we needed to be a success there. And that, in turn, led to our entry into payments which has been a big success for us as well. Learning to fail and learning to evolve and grow are the most important lessons in this industry and today, the cost of starting up is also really low, so there is very little risk involved, and more and more Indians are finally learning to fail, instead of hitting the same walls again and again.
Why did the gaming platform not take off?
I’ll be honest—I would have loved it if games took off and I felt there was a strong potential. What we saw was that monetizing games was very difficult. The mindset is very different from what it is in China, or South Korea, where these kinds of gaming platforms are really successful.
We were building free social games, with a freemium model, so you get the game for free and then you pay for virtual items. But the virtual identity isn’t a priority here. People want to know about jobs, or education, or deals. They want to save money and to make money. For now gaming just isn’t a priority for us. We started e-commerce at around the same time, which took off, so that’s where our focus is.
And along with e-commerce, ibibo also runs a payments service, PayU. How do these two parts come together?
Wonderfully. It all started when we were experimenting with Goibibo. What we felt was that the biggest pain point at the time was with payments. It’s difficult, and not enough people were providing a smooth, stable experience. So we decided that to build trust with the customer, we’d take ownership of the payments side as well.
So we did that, and what happened was that as Goibibo grew bigger, it also helped PayU. Because PayU was handling a significant volume of transactions, that improved their relationship with the banks, who gave PayU better terms. So at that point, we took it to third parties as a service, and it did really well, and today a large percentage of Indian e-commerce sites are using PayU. This was a virtuous cycle because PayU also became better in the process, and this helped Goibibo, and Tradus, and our other e-commerce sites with conversions, and that in turn would help us to improve PayU, bringing in more third party users.
With the growing importance of cellphones, do you think payments could be a problem again?
It is a problem, and whoever solves payments on mobile is going to be very rich. The problem is that most credit card verification pages are not properly mobile-optimized, and so we see a lot of people want to buy something, enter all the details, and then you lose them at the last step.
The moment someone can make this process smoother, we’ll see mobile double or triple. Mobile users are already around 15% of the transactions we do every day, and I believe that in the next 24-36 months, we’re going to see mobile transaction volume surpass PC (personal computer). And this is with all the problems that are there. This is an area that desperately needs disruption, and will be the next big thing.