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I think there is a lot of potential and hope, especially now, for founders to start online (only) services businesses. Indian consumers seem to be opening up to paying for online B2C services, where purchase and most fulfillment is online. This trend is a natural outcome of India’s increasing online population (>125M now) and familiarity with online as a channel (20M bought online in last 12 months, 7M of which were non-travel). Barring a few exceptions noted below, this space has historically been challenging but I hope to see that changing in future.
Successful examples of existing online services in India include matrimony (Shaadi and Bharat Matrimony) and also aggregators across categories like travel (rail, air, bus), movies and mobile phone recharge. While the aggregator segment has been more successful because of direct linkage to offline services, it is relatively less interesting (and more capital intensive) because of low absolute margin per transaction and dependence on offline delivery for scaling versus a service which is purely digital in nature.
Subject to a large potential paying consumer base being available, pure online services are fundamentally very attractive to entrepreneurs and investors because of:
- High capital efficiency (high gross margins).
- Become disproportionately valuable (given B2C/branded nature).
- Ability to grow quickly, since they are not constrained by offline buildout (not applicable everywhere).
Here are a few examples below in categories where we are anecdotaly seeing early growth in new online consumer services:
- Education: Online higher education, Online certification and Test prep (very nascent) are showing that consumers are willing to pay and consume online.
- Jobs: Linkedin’s Premium Membership, ABC’s Head Honchos and Naukri’s premium services are showing early signs of monetizing through consumers.
- Apps: Evernote, Apple iTunes/App store and Google Play are monetizing on an Indian user base – this could be a massive trend given the rate at which smartphones and mobile data users are growing.
- Financial Services: Previously, the web was used primarily for lead generation. Now, certain types of insurance (Auto, Life, Travel) that are delivered end-to-end online are gaining traction.
- Auto: Classifieds for used cars
It is still early days for these trends – but I hope that the growth continues. If you know of other online categories or businesses which are getting traction, I would love to learn about them – please add to the comments section below.
PS: While mobile operator value-added services (MVAS) is a great example of online services, in my opinion, these services have not really been B2C. As a result, I am not including MVAS in the list above. My list also does not include businesses which collect revenue from offline vendors (e.g. Zomato) or have large offline delivery responsibility (e.g. goods ecommerce).