Dinesh Agarwal

How many dot-coms can you think of that are not VC funded? Can you think of even one that has achieved break even in the very first year of its operation? Well there are exceptions in every sector, and Indiamart is certainly an exception in the dot-com world.

Unlike other dot-coms who are primarily funded by VCs, Indiamart was started with a nominal personal investment and a small office space. The only loan the company has taken is for its upcoming development centre in Noida, which is expected to become functional by July this year. In addition to break-even in the first year itself, the company has been steadily growing its business at an annual average growth rate of 110 percent. After ending fiscal 2001-02 with revenues of Rs 4.18 crore, Indiamart expects revenues to touch the Rs 7 crore mark by the end of fiscal 2002-03.

But things were not so rosy in 1996 when Dinesh Agarwal, CEO, Indiamart, started the site. The Internet was in its infancy in India and VSNL was the only ISP. Apart from the lack of Internet penetration, Indiamart did not have a good database of buyers and suppliers, a key requirement for any e-marketplace. But unlike most of his peers who were convinced that e-commerce transactions would touch billions of dollars, Agarwal realised early that being dependent on transactions was a risky business model. He had to find a way that would help Indiamart make money from day one. To start off he began developing Web catalogues for exporters and tour operators.

Agarwal started using this data to build his e-marketplace. But as Internet awareness was low, Agarwal knew that this was going to take a long time. To get around this problem, Indiamart started offering listing free of cost. Gradually, the database grew and in late 1996, Indiamart forged an alliance with Assocham, which gave Indiamart a huge database of members. This was the trigger that gave Indiamart the respectability and the critical mass it needed. Today the site has over 450 product and service categories, with a mammoth base of over 60,000 registered companies from India. Realising the immense potential of sectors like auto, travel, handicrafts and apparel, Indiamart started developing a vertical segment for each industry.

Specialised verticals currently account for over 70 percent of the site’s revenues. Today, business catalogue development and promotion contribute the maximum to the company’s revenues (205.61 lakh), followed by e-business projects, Web advertising, co-branded online promotion campaigns and B2B auctions.

The main reason behind the site’s success, Agarwal says, was to promote business using the Internet and having a clear revenue model. Says he, “If most dot-coms had taken a realistic view and had adopted a more traditional Old Economy business model, then the failure rate would not have been so high.” In addition, the company extensively uses promotional techniques on the Net to boost the image of business catalogues. Indiamart has also innovatively used the fact that more than 40 percent of any site’s traffic is due to search engines. Currently, Indiamart has a strong position on search engine listings.

After building the business model for its listing services, Indiamart is now moving into the second level wherein it will be looking at a transaction based system where it can provide its clients a platform for negotiating with buyers. This year, the company has also launched two new services, indiantradeportal.com for electronic trade offers, and indiantendersportal.com, a site dedicated to tender notification services. On the travel front, the company has re-launched its travel portal, indiantravelportal.com.

Agarwal puts across a very strong thought when he says, “We do not owe our success to a unique business idea, but a successful and profitable implementation of a simple idea.” Perhaps, if the same thought was shared by other dot-coms, we could not have reached a stage where one can count the successful dot-coms on our fingers.