Through Integration Of AI And Machine Learning, Ibibo Is Looking To Mobilise 120K Hotels In India From Offline To Online
Walking up to the 19th floor of a swanky corporate building to interview the man who has built an empire through sheer ingenuity, you cannot help but feel a sense of nervous anticipation. Fumbling your way from the elevator, you finally reach the office and meet a friendly, bespectacled man who is surprisingly easy to talk to. He is someone who believes in creating value by embracing innovation. With $2 Bn in annual sales, his company has an unrivalled presence in India’s online travel space. This man is Ashish Kashyap, the founder and CEO of Ibibo Group.
A quintessential tech entrepreneur, Ashish has donned many hats in his enviable career, from being the Country Head of Google India and the co-creator of PayU India (which acquired CitrusPay last year) to the main architect of the ecommerce business at Indiatimes. He went on to found Ibibo. From a team of eight in 2007, Ashish has grown Ibibo Group into a formidable establishment with properties including Goibibo.com, redBus.in, ibibo ryde, YourBus, and Travelboutique to its name.
Nearly 10 years since its inception, Ibibo Group now boasts of an international reach across countries like Indonesia, Singapore, Malaysia, Peru and Colombia. The company’s flagship apps have reportedly been downloaded more than 25 Mn times, and have handled over 24 Mn transactions. However, these achievements haven’t made Ashish complacent. During an hour-long interaction, it became clear that he is on a relentless mission to mobilise India’s 120K hotels and accommodation facilities from offline to the online travel space.
To that end, Ibibo Group merged with MakeMyTrip last year in what has since been touted as the biggest consolidation move in the country’s online travel aggregation space. The $720 Mn merger deal, which was finalised in February 2017, has created an entity that Morgan Stanley valued at $1.8 Bn.
According to Inc42 Datalabs, the combined entity will leverage nearly 34.1 Mn total transactions, 9.7 Mn air transactions, 6.6 Mn hotel transactions, and 17.5 Mn bus transactions in the travel space. Of these, around 45% are mobile-based transactions. In the first quarter of 2017, the merged entity reported a 135% increase in net revenue to around $141.2 Mn. Overall revenue has grown by around 55% to $192.1 Mn, compared to Q1 of 2016.
To get an insight into the story behind Ibibo Group’s phenomenal success, we at Inc42 recently conducted a Facebook AMA session with the man himself. Here are the most interesting views that Kashyap offered during the session:
Ibibo: Birthed As An Incubator, A Journey Of Mergers & Acquisitions
Inc42: Not many people know this, but Ibibo actually started as a social networking service in 2007. Goibibo, as we know it today, was launched in 2009. What made you change directions and foray into travel aggregation? What were some of the hurdles you faced during the pivot?
Ashish Kashyap: Firstly, if you go back in time in 2007, what I was trying to create was an incubator. Social media properties was just one aspect, but there were numerous other experiments that we were doing. If you look at life today, the concept of accelerators and incubators are pretty well known. In 2007, the notion and understanding of incubation systems and accelerators were absolutely unknown. So, my journey from 2007 to end of 2008 was all about looking at smart teams, investing in young startups and also using the umbrella of Ibibo, which we called at that time “I Build I Bond”. Ibibo was all about creating, connecting and experimentation.
Goibibo and PayU (branded as Ibibo Pay earlier) were some of the properties that were born out of the incubation. I think that culture of experimentation has continued to be alive with us, which is what helped us to become a significant player. It further precipitated the recent merger with MakeMyTrip.
Inc42: What was the rationale behind the Ibibo and redBus merger?
Ashish Kashyap: I think the benefits of the merger have already been proven. We have grown redBus six times over since the merger. The bus, as a market, is a nice, supplier-fragmented market. It’s again a two-sided market, where bus passengers are reviewing bus operators. There are network operators as well on the platform. Besides growing redBus six to seven times since our acquisition, we have also taken the business overseas, including Peru, Colombia, Malaysia, Indonesia and Singapore. All the redBus supply is now powered on Goibibo and MakeMyTrip also.
Inc42: In October 2016, Ibibo Group merged with MakeMyTrip. However, the merged entity has since been grappling with losses due to increased expenditure on marketing and sales promotion. Henceforth, what strategy will the company implement to stay afloat amidst losses and competition?
Ashish Kashyap: I want to cover a couple of things here. The first thing is that, for us, our biggest focus is to pick up the heavy weight of moving the offline market online. The penetration of categories like hotels and buses is still very weak. The only category that is well penetrated is air ticketing. That is also one of the sectors in which Ibibo turned profitable last year. Accommodation is a very fragmented sector in the travel space. There are about 9,000 towns, cities and semi-urban areas with hotels in this country. We have actually been able to aggregate them.
But the biggest challenge is to move the offline to online and it is going to be expensive. At the very outset, Ibibo was ambitious to say that it wants to build a travel aggregation market. We obviously built it in the main cities and towns. But now, going forward, we are really focussing on deepening our penetration and move offline to online. If markets are online, then it’s pretty easy. If markets and suppliers are not online, then it is difficult to bring demand online.
There will be cost attached to it. But we will also continuously keep optimising upon our bottom-line spends as we go forward. Besides market creation in the travel space, a lot of work is happening on the technology and innovation side.
Ashish Kashyap On AI, Machine Learning And The Role Of A CTO
Inc42: During the merger and even as recent as April 2017, you had talked about an AI-based product offering? Can you shed specific light about the product and launch date?
Ashish Kashyap: A lot of stuff that we are building is based on machine learning and Artificial Intelligence. Today, a very significant percentage of our customer queries, post- transaction, are answered by our AI system. Our entire user generated content is currently moderated by machine learning and AI. My belief is that as we execute further, everything that we do has to have machine learning and AI principles interwoven into the same.
Inc42: What are the qualities and skills that one should look for while hunting for a CTO for one’s startup?
Ashish Kashyap: The number one quality is that the CTO should be absolutely hands on. He/she should be able to code on his own and, at the same time, encourage lots of developers in the company to be able to create scaled systems. A CTO needs to be not just your employee, but he needs to be a partner and your co-founder. He is the guy who needs to embrace change and should be willing to constantly experiment, and willing to fail fast. Those are some of the attributes of a good CTO. If it’s a technology startup, the CTO is one person you need to bring on board who is well-suited for the job.
Inc42: Should one build a tech team bottom-up or top-down? How does one justify the tradeoff?
Ashish Kashyap: If you are a technology entrepreneur yourself, I think it is a good idea to sometimes do things bottom-up. I have seen a lot of successful startups which don’t have a concept of Chief Product Officer or Chief Technology Officer. They basically build these small pods that allow them to learn and create. On the other hand, if you don’t have a technology co-founder, it is really critical for you to get someone to fill the shoes.
Inc42: Where there any products that Ibibo was working on, but never saw the light of the day?
Ashish Kashyap: Yes, there are many such projects that we either killed or wouldn’t have seen the light of the day. There was one project in the early days called Family Tree. There were many other entertainment projects that we had worked on in the travel space, but unfortunately couldn’t see them through.
Ibibo Group: Focus On Value-Based Marketing
Inc42: What was the best marketing strategy that worked for Goibibo?
Ashish Kashyap: I will spill the beans. There were two phases in marketing campaigns that really worked for us. Number one is we launched the GoCash referral programme. The thinking there was very simple i.e. if I am spending INR 100 a day on acquiring new buyers from Google and Facebook, can I move this money to this wallet called GoCash? The viral effect of that campaign was huge. Of course, there were lots of nitty gritties in terms of execution. But that really helped us back in 2013 to suddenly take off.
The other key thing for our business is that we don’t want to be just a buyer-facing company. We want to build network effects on our platform. To that end, we have integrated user-generated network content. Our entire hotel ranking system works on user feedback. That two-sided network effect was the second thing that helped the company to gain a stronger footing.
Prior to the MMYT merger, the last thing we launched was the GoContacts programme. Here, the thinking was that most companies would do loyalty at an individualistic level. We wanted to create a loyalty programme determined by the behaviour that is demonstrated by networks, rather than individuals. The network effects of this programme proved to be very strong. Instead of looking at marketing in a linear way, we have adopted a prism approach to the whole thing.
Inc42: As influencer marketing is booming all over the world, what’s your take on this?
Ashish Kashyap: We have not gone full-on into trying influencer marketing yet. We have done some experiments, but my belief is that there are two kinds of influencer marketing. One is forced or orchestrated, the other is more organic. Either way, it is interesting because, in today’s date, we are consuming a lot more digital media than analog or traditional media. Besides the media that we are consuming, there is a social graph underneath it, be it Twitter or Facebook.
I think the nice thing about the concept of influencer marketing is that it leverages the power of social media to be able to reach out to large audiences. If done properly, you could create a reach much larger than even advertising on television. But, the method of doing it still needs to be sorted. Influencer marketing cannot be done in a totally inorganic fashion.
Symbiosis Rather Than Competition
Inc42: Majors like Taj and Hyatt are rivalling online hotel aggregators and travel agents by offering cheaper rates, complementary services and loyalty points on direct booking through their website? What’s your view on this?
Ashish Kashyap: If you look at the Indian travel space, it is beyond some of these chains. India has more than 120K accommodations, usually fragmented across 10,000 to 12,000 cities, villages and towns. These are the people who really need platforms like ours to be able to distribute to end users, solve their payment issues and pricing problems. So, these are the things majors like Taj or Hyatt can’t do. The second thing is, just like with airlines, online travel platforms are the primary source of liquidity, despite big hotel chains having their own websites. In the long run, it would be good for the large chains as well. At the end of the day, the point is to help customers search and book hotels. The goal is to build extremely intricate consumer experiences by reducing friction in the country’s travel space.
Inc42: Most product companies are resorting to the use of discounts on inflated prices, which tends to create a sense of false profit. Can a company run on a fixed cost model with optimised profit margin today and sustain? Will we ever be able to move away from the freemium model and provide services at optimised costs without discounts?
Ashish Kashyap: The answer to this depends on the lifecycle of the startup. If you are at a stage of lifecycle which is to create behaviours, at that time you could invest either in marketing or sampling via discounting. I think the answer here lies in the stage of lifecycle of the business.
Inc42: What is your take on Online Travel Aggregators (OTA), vis-à-vis the hospitality companies like OYO and Treebo? Which is the better model, and who will survive in the long run?
Ashish Kashyap: Firstly, online travel aggregators model is a two-sided marketplace model, where it enables tens and thousands of accommodation owners to list on its platform. On the other hand, it also allows travellers to interact. In this model, both sides are getting feedback loops. The question to ask in case of the other model is, what’s your ambition of scale? That question needs to be answered because the two are absolutely different concepts.
Inc42: Apart from the travel space, what are some of the biggest opportunities you see in India?
Ashish Kashyap: There is a huge opportunity in financial space, health space and education space. But, we need to look at solving these problems in a unique manner.
India’s Travel Space: A $48 Bn Behemoth In The Making
Having donned the entrepreneurial robe several times in his life, Ashish Kashyap is well-aware of the challenges in the travel aggregation space. While Ibibo Group’s air-ticketing business broke even in July last year, it will likely take a while for its hotel booking service to hit profitability. According to a Google India-BCG report, the country’s travel market (both offline and online) is expected to become a $48 Bn industry within the next three years. As per an IBEF report, the online travel space will likely account for 40% to 50% of total transactions by 2020.
Despite this enormous potential, the Indian online hotel booking sector has a penetration of only around 19%, according to a report by Deutsche Bank AG. Most customers in Tier II and Tier III cities around the country still prefer to book hotels and accommodations through offline means in the travel space. For Ashish Kashyap and Ibibo Group, the need of the hour, therefore, is to build a pervasive, technology-enabled network that could help customers as well as hotel owners move from offline to online platforms.