How are Ola and FreeCharge sustaining their business in spite of lots of schemes, free rides and cashback offers?
Imagine a fictitious country, Anifauqa with only two cities CabCity andGoldCity.
You live in CabCity which has a population of 103 people. It is a self sustaining city with no dependence or any kind of need for external help.
In this city live - Tom, Dick, Harry and hundred other people.
Tom and Harry are close friends. They have heard stories of amazing fortune which people have found in GoldCity. Harry decides to go and try his luck and migrates there.
Tom decides to start a business.
He zeroes in on starting a radio cabs business and realizes that Dick is also starting the same business. Both of them start off with almost equal money, do pretty well and their service offerings suit the people in CabCity, based on their needs.
Soon, 50 people become customers of Tom's cab service and 50 people become customers of Dick's cab service, leading to equal market share.
Harry strikes gold in GoldCity
Harry who left CabCity in search for fortune gets lucky and finds stashes of gold in GoldCity.
He calls up his friend Tom and lets him know about his lucky find. And he gets to know about the cab service that Tom has started which is competing strongly with Dick's cab service and each of these companies has a 50 percent market share.
Together, Tom and Harry come up with an idea.
Harry invests money into Tom's cab service.
From his fortunes in GoldCity, Harry pours money into Tom's business and breathes in a new life.
Now, there is so much money with Tom that he can literally kill his competitor.
He starts offering several lucrative schemes and free rides. Even though, his company is not making profits now but he doesn't have to worry because he has lot of surplus cash with him. All the cost towards such schemes come from the money poured in by Harry's fortune from GoldCity.
And with this Tom's cab service starts taking customers away fromDick's cab service.
Dick realizes what is happening. His customers are moving away to the competitor. And he doesn't have the money to give such lucrative offers to his customers. He tries to get in touch with people in GoldCity to help him but no one comes to the rescue. He starts losing money and his company is no longer profitable.
In a few months, Dick realizes he cannot sustain his business and he is left with only one option.
Dick sells his business to Tom's cab service.
And with that, all 100 people of CabCity becomes customers of only one single radio cab company owned by Tom.
With time, the offers and schemes are removed. The company becomes profitable and becomes a success.
This story isn't entirely fictional.
It is loosely based on the events that have taken place in the recent past and I've tried to weave a story around this.
Pic: Ola purchased Taxi4Sure. Some interesting facts below.
Some Facts:
1. Softbank Capital invested $210 million dollars into Ola Cabs on Oct 25th, 2014.
Prior to that Ola Cabs had raised close to $69 million.
2. Taxi4Sure received its last funding of $30 million on 20th Aug, 2014.
Prior to that they had raised close to $14 million in addition to an undisclosed initial seed funding.
How did Ola kill Taxi4Sure?
These steps were taken on 22nd August'14, two days after the funding whichTaxi4Sure received:
Taxi4Sure couldn't compete with such offers from Ola Cabs. They lost their customers as well as their drivers.
The Conclusion:
Initially, Ola Cabs had only a slight advantage in terms of capital. Taxi4Surewas able to keep competing because at some time or the other the company believed that their competitors would have to withdraw their schemes soon and they would again be competing on level ground.
But the $210 million dollar funding (see the dates as well) dealt a final nail in the life of Taxi4Sure and the company sold out to Ola Cabs.
What is with Freecharge now then?
FreeCharge is competing with Paytm here.
PayTm has received an undisclosed amount from Ratan Tata. Not a bad guy to get funding from, isn't it. And the Chinese e-commerce giant Alibaba has also invested in them.
Freecharge, on the other hand, has already raised $113 million with the most recent one of $80 million coming in the month of Feb'15. [Edit: It is now part of Snapdeal.]
It is too early to comment on how things would play out here.
So what exactly is happening with Ola and FreeCharge?
These companies actually may not be earning money and in fact might even be losing money on each transaction.
At the moment they are here to capture the market and in for the long haul.
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4)What is Net Neutrality?? Simple explaination with example.
You live in CabCity which has a population of 103 people. It is a self sustaining city with no dependence or any kind of need for external help.
In this city live - Tom, Dick, Harry and hundred other people.
Tom and Harry are close friends. They have heard stories of amazing fortune which people have found in GoldCity. Harry decides to go and try his luck and migrates there.
Tom decides to start a business.
He zeroes in on starting a radio cabs business and realizes that Dick is also starting the same business. Both of them start off with almost equal money, do pretty well and their service offerings suit the people in CabCity, based on their needs.
Soon, 50 people become customers of Tom's cab service and 50 people become customers of Dick's cab service, leading to equal market share.
Harry strikes gold in GoldCity
Harry who left CabCity in search for fortune gets lucky and finds stashes of gold in GoldCity.
He calls up his friend Tom and lets him know about his lucky find. And he gets to know about the cab service that Tom has started which is competing strongly with Dick's cab service and each of these companies has a 50 percent market share.
Together, Tom and Harry come up with an idea.
Harry invests money into Tom's cab service.
From his fortunes in GoldCity, Harry pours money into Tom's business and breathes in a new life.
Now, there is so much money with Tom that he can literally kill his competitor.
He starts offering several lucrative schemes and free rides. Even though, his company is not making profits now but he doesn't have to worry because he has lot of surplus cash with him. All the cost towards such schemes come from the money poured in by Harry's fortune from GoldCity.
And with this Tom's cab service starts taking customers away fromDick's cab service.
Dick realizes what is happening. His customers are moving away to the competitor. And he doesn't have the money to give such lucrative offers to his customers. He tries to get in touch with people in GoldCity to help him but no one comes to the rescue. He starts losing money and his company is no longer profitable.
In a few months, Dick realizes he cannot sustain his business and he is left with only one option.
Dick sells his business to Tom's cab service.
And with that, all 100 people of CabCity becomes customers of only one single radio cab company owned by Tom.
With time, the offers and schemes are removed. The company becomes profitable and becomes a success.
This story isn't entirely fictional.
It is loosely based on the events that have taken place in the recent past and I've tried to weave a story around this.
Tom's Business = Ola Cabs
Dick's Business = Taxi4Sure
Harry's Fortune = Softbank Capital
Pic: Ola purchased Taxi4Sure. Some interesting facts below.
Some Facts:
1. Softbank Capital invested $210 million dollars into Ola Cabs on Oct 25th, 2014.
Prior to that Ola Cabs had raised close to $69 million.
2. Taxi4Sure received its last funding of $30 million on 20th Aug, 2014.
Prior to that they had raised close to $14 million in addition to an undisclosed initial seed funding.
How did Ola kill Taxi4Sure?
These steps were taken on 22nd August'14, two days after the funding whichTaxi4Sure received:
- Ola Cabs dropped their mini cabs rate by one-fourth, from Rs 13 per km to Rs. 10 per km and that made Ola Cabs cheaper than auto-rickshaws.
- Ola Sedan prices were dropped from Rs 16 per km to Rs 13 per km.
- Driver schemes were modified. A driver who did 30-40 trips a month received a bonus. This enticed the drivers to work for Ola. A daily driver scheme was introduced in the month of September.
- Cash back and other schemes were offered for customers.
Taxi4Sure couldn't compete with such offers from Ola Cabs. They lost their customers as well as their drivers.
The Conclusion:
Initially, Ola Cabs had only a slight advantage in terms of capital. Taxi4Surewas able to keep competing because at some time or the other the company believed that their competitors would have to withdraw their schemes soon and they would again be competing on level ground.
But the $210 million dollar funding (see the dates as well) dealt a final nail in the life of Taxi4Sure and the company sold out to Ola Cabs.
What is with Freecharge now then?
FreeCharge is competing with Paytm here.
PayTm has received an undisclosed amount from Ratan Tata. Not a bad guy to get funding from, isn't it. And the Chinese e-commerce giant Alibaba has also invested in them.
Freecharge, on the other hand, has already raised $113 million with the most recent one of $80 million coming in the month of Feb'15. [Edit: It is now part of Snapdeal.]
It is too early to comment on how things would play out here.
So what exactly is happening with Ola and FreeCharge?
These companies actually may not be earning money and in fact might even be losing money on each transaction.
At the moment they are here to capture the market and in for the long haul.
You might also like this:
1)Do You Really Know Him/Her , Or you know the one he/she pretends to be??
2) India Vs Pakistan Military Comparison
3)Choose Your Products Carefully
4)What is Net Neutrality?? Simple explaination with example.
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