Business Pitfalls: Ltd. – Introspeck

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Looking to invest in more and more of businesses that exhibit network effects, I happened to get real excited with the business prospects of Ltd., India’s largest online marriage portal. It’s incredible to know that almost 88% of all marriages in India as of 2016 were arranged marriages. Many factors cause this – kids living with their parents well into their 20s, strong community networks between families and comfort drawn in adjusting to people that belong to similar backgrounds. The value chain that enables persons of opposite genders to attract each other to the institution of marriage has moved over the years from senior relatives to marriage bureaus to the online marriage portal – all creating a platform for discovery, transparency and choice for the young ones to seek out a partner.

And online portals have a natural advantage over other forms of matchmaking in today’s world which is tech savvy and geographically diverse with prospects valuing choice and a sense of independence in making them. Online matrimony portals have scale, are accessible for both – parents, who are the decision makers in an arranged marriage and the prospects themselves, and exhibit textbook network effects – addition of each bachelor increases the choice pool for a bachelorette which in turn attracts more prospects, benefiting every additional user.

India has 3 prominent matchmaking portals (although 1,500 sites ply their trade) – (owned by, (owned by InfoEdge) and (owned by People group), all founded sometime in 1997/98, and all serve a specific geography and niche audience – leads in South India, leads in Punjab and Gujarat, while jeevansathi is dominant in North Indian communities. These are largely umbrella websites with many offshoots like language specific, religion specific, income specific sub domains.

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Looking at the fundamentals, it seems that both and jeevansathi are yet in their expansion phase, as can be seen from below comparison of revenues and EBITDA margins –

Source: and InfoEdge Filings

While jeevansaathi continues making losses, matrimony‘s EBITDA margins too have started improving only recently. These lower margins have been on account of high advertisement spends to acquire more customers. It is fascinating to realize that ideally, a prospective customer would end up using’s service only once in their lifetime (if the portal is doing its job right) and thus the engagement with the user is short lived, much unlike businesses of exchanges, job portals or search engines which are able to introduce some amount of stickiness as the user gets more familiar with repeated use and functionalities.

When you combine this one time engagement along with the ability of the user to simultaneously access multiple networks, ad spends incurred are invariably made to keep the existing user numbers intact, with long term benefits less significant. However, since a large number of arranged marriages have caste and religion as dominant factors, the prospect pool also tends to be highly localized, which is why marriage portals have strong market shares in specific regions/communities.

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Identifying the above, I thought of delving deeper into the company, but the below led me to drop the idea altogether – primarily earns from subscription services purchased by members looking to benefit from the additional features that are available on the portal, not available to free account users, that can help them find a life partner. Below is some data highlighting the revenue, and customer details –

Particulars 2015 2016 2017 2018 2019
Paid subscribers 647,000 678,000 702,000 745,000 731,000
Portal Billings (Crores) 237 260 285 327 343
Avg. fee / subscriber (INR) 3,657 3,830 4,066 4,386 4,688
Gross Up Service Tax 4,316 4,520 4,798 5,175 5,532
increase by   5% 6% 8% 7%
Source: Filings
for phone readers

While Average fee per subscriber has been as per accounts, we have grossed it up with Service Tax so that it can be compared with the rate card. Company offers various packages to the users starting from ‘Classic‘ to ‘Advantage’, with rates charged as follows (as of Dec 2019) –

Source: Rate Card

As can be seen from above, revenue per subscriber hovers closest to the most basic package ‘Classic’ for 3 months. This is questionable since company has a range of packages that ought to have paying subscribers too and average revenue per subscriber should not be at the lowest level. This is considering that the company also has platforms like ‘Elite Matrimony’ which charge as follows –

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There could be 3 possible reasons for the above –

  1. A very large number of subscribers are simply opting for the cheapest package and are not renewing.
  2. Company is giving large discounts to the customers on the mentioned rates. I had called an agent on the portal to bargain, but got no discounts.
  3. is overstating the number of its paid subscribers on the portal.

With all the 3 reasons negatives for a business, and even a possibility of the third point existing, I abandoned the idea. I have written to the company seeking a clarification, but have got no response yet.

Do you think there is something amiss here? Do write back and spread the love.

Happy investing!

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Umang Shah

Umang Shah

Through his writing, Umang shares his perspectives on how he thinks of investing, decision making, books and life in general.
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