MentorsCohort

Why PhonePe wants to buy Zest money. Is it a good strategic move?

PhonePe is a well-known brand in Indian. It is one of the top players and has over 45% of the UPI market share in India.
Although it is its core business, but PhonePe is not making enough money from this as UPI is free in India.

PhonePe’s revenue comes from
• Commissions from merchants when customers pay through phonePe
• Commissions on bill payments like electricity or water bills
• Advertisements
• Distribute Mutual Funds
• Insurance Business

Diversification – Consumer lending market in India grew by 10.2% in 2020 to a value of $377.7 bn. With an estimated retail market of $820 Bn (of which 4% is online), there is a lot of potential scope of providing credit in this industry itself.

PhonePe wants to diversify into this money lending business as Digital Lending is currently $270 billion market. Its biggest UPI competitors such as Paytm has 11% percent of its revenue from lending. With cheapest mobile network data and smart phones in India, it has also become easy to deliver financial products to the customers.

Build vs Buy the Product Strategy
1) Since RBI is not providing a lending licence to PhonePe, it is trying to take another route by acquiring Zest Money (A buy now pay later platform) who has a lending licence already.
2) Building the product will take time and since PhonePe is already late to the race, acquiring an established company will help it to get back into the competition. Zest Money has a register users of 11 million that is spreaded to 99% of the pincodes of India. It is present in 75,000 stores across India. It has a strong network of 25 lending banks and NBFCs to enable access to credit for Indian customers

So acquiring Zest Money will not only open an another option of revenue for PhonePe but also help in leveraging the strong network Zest Money has built in last 7 years.

Follow https://www.facebook.com/profile.php?id=100089006991405 for more updates

For the most part of 2010, Apple used to launch new iphone with a price difference of $100 odd from the older iphone. This was the case when apple had only iphone as a winning product.

Now with launch of airpods and watch, apple prices its new iphones at similar prices as that of older models. I would say - it's marginally cheaper if we take into the account the inflation.

The reason for similar prices being -
1. Apple wants you to buy iphone and enter into its ecosystem and then buy airpods, and watch. With this approach, apple gets $1500 min from premium and loyal segment. We know how magical is the experience of watch and airpods with iphone :)

2. The other reason (which is more prominent, IMO) is its SERVICES business. In the last keynote, Tim cook stressed a lot on maximising average revenue per 'installed' user. Installed user is user with any apple device. Now, this is a key metric for any org in services business. The strategy, here, 'might' be to get users in the ecosystem at a lower price (by not raising iphone prices) and then sell services.
Such loyal, premium are bound to spend on appstore (apple gets 30% commission) and apple services, increasing the average revenue per installed user :)

Why is Microsoft early to VR / virtual reality? (Microsoft partnered with Meta recently to launch its office 365 or rather Microsoft 365.)

There are a couple of reasons to understand why a productivity app / platform ecosystem (which we call as office 365) would partner with something like VR:

Microsoft, as per its strategy until 2022, has relied mostly on windows and targeting PC market. Remember, all its apps/ products available only on windows for a long time. MS didn't realise the importance of iPad and smartphone market and was very late to enter.

Well, devices are just gateway to cloud or apps we use. In our lives / workplace, we will be surrounded by different platforms / OS / hardware. But MS imagined its products and future around its own creation - windows and PC.

It missed the boat of phones/ tabs. But it doesn't want to repeat the same mistake by being late to VR.

So in a couple of years. when you wear meta headsets, you may see MS teams, xbox games, word, PPT.

Thoughts?

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Podcast with Product Manager || Karan Singhania || Myntra In this podcast with Growjunction, Karan Singhania, Product Manager at Myntra is talking about his journey and experience to becoming Product Manager at Mynt...

Zerodha → ₹2,094 Cr profit for FY 2022 🎯
Airbnb → ₹12,300 Cr profit for Q3 2022 🤯
Here's the core reason to profitability ⬇️

Quick context 🗓
Zerodha made it's financial results public for FY 2022 & it's a huge profit machine now. Interestingly, Q3 results for Airbnb posted a crazy $1.5 billion net income.

These are mind-blowing numbers 🤞🏻
Airbnb's close competitors are in loss, the category has been a dead fish in the water - take OYO's example for that matter. Even most online broking companies aren't profitable which compete with Zerodha.

Airbnb & Zerodha profits have hyper-grown 🤯
Zerodha 2X'ed it's annual profits & Airbnb's net income grew by 40%.

So, why are Airbnb & Zerodha winning? ⬇️

First/ Nailing distribution at a cost 💰
Airbnb solved for referral led growth to distribution (with it's world class referral design). Zerodha solved it with revenue share led affiliate model. Both nailed controlling customer acquisition cost & spending money only for converted customer.

Second/ Killer customer retention 🔁
Power Airbnb users do 3 bookings/ year. Average Airbnb bookings in US are 4.1 nights per stay. Average booking rate per night in US on airbnb was $110 in 2020. That's USD $1,300 customer lifetime value annually for power users.

Zerodha is one beast of retention too 🎯
Out of it's ~6 million active customers, majority are traders. Average trades per user per year are in hundreds. Zerodha makes money on each trade. This cycle is so strong that Zerodha has natural customer resurrection (churned traders coming back), in turn never a need to spend random money to retain customers.

Third/ recurring revenue 🤑
Zerodha makes money on every demat account opening - and annual fees on each of them. This is unheard of in it's VC backed competitors. Strong moats of 1st mover advantage but what's commendable is founder conviction to charge from day 1 & not build funding led business models.

Fourth/ build for the user & repeat 💙
Both companies keep users at the center & build breadth of products & iterated like anything. Go complain about your Airbnb stay and see for ourself how they keep you at the very core. Similar for Zerodha - when every new startup in broking was getting funded - it kept building for the user - not launching random features for competition.

So what's next for Airbnb & Zerodha? 🎯
Short answer - category expansion. And that's what both are doing with Varsity -financial education from Zerodha & Summer releases from Airbnb. They will create new customers with education (Zerodha) and converting 'wants' into 'needs' (Airbnb).

One of the common questions that is asked - what is the difference b/w platforms and aggregators

Platforms are the foundation on which the products are built. They provide the tools for ecosystem to function. For ex: operating systems such as windows, android are the platforms.

Whereas aggregators usually aggregate a critical mass of users and leverage the control of demand to charge suppliers. For ex: Google search in context of advertising.

Which one of this abused by owner?
Well both can be abused, the difference is to what degree - which is where regulators are important.
For ex: Microsoft window bundles its own products such as explorer by default, despite being a platform (on which other browsers are also created)

Aggregators does the same thing - incentives their own supply if they build so. For ex: google shopping v/s amazon

Regulators need to be really vigilant to ensure fair competition in the market

What do you think?

McDonalds in south of India introduces fried chicken, stepping into the world of KFC.

After loosing market share to Burger King (especially whopper burgers) in its premium category, it was high time for McD to figure out ways to turnaround.

First it introduced beverages with the introduction of McCafe and now, it is fried chicken and expanding.. .

Let's see what comes next -> McPizza or McPasta!!

Brands need to innovate at a consistent pace to stay relevant. McDonalds should realised the threat of Burger King in the Asian markets long back.