JustDial can’t beat Google and it should stop trying to, say analysts

• JustDial’s operating revenue declined 6% last quarter compared to the same time period last year.
• This comes as a surprise as the festive season of October-December quarter is usually the best time for any consumer-facing business.
• While the recent management change after Reliance acquisition may be one reason for the recent decline, over-diversification may be another.

While many other digital businesses like Zomato, Nykaa and Paytm have recovered from the impact of COVID-19 a long time ago, JustDial seems stuck.

Market watchers say it could be because the app is trying to be Google, without the resources to be one.

Once again, JustDial's quarterly revenue declined on a year-on-year basis, which is a cause of concern since October-December quarter is usually the best time for any consumer-facing business. It is the time when customers are on a spending spree because of the festive season of Diwali and Christmas.

However, the decline in JustDial’s operating revenue came as a surprise, especially when the company seems to offer every service that can be sold online. The stock was down over 3% on January 19, the first trading day after the earnings were reported.

From food to flight tickets, from delivery services to at-home beauty services, you name it and JustDial would have a seller on its platform. Yet, the revenue declined.

Market watchers say, being a jack of all trades may not be working well for this 26-year-old company. Neha Khanna, director at Value Prolific (ValPro) Capital, tells Business Insider that JustDial has spread itself too thin and it has made it susceptible to competition from all sides.

JustDial — which offers at least 14 different services — is currently in competition with all the big newage digital businesses one can think of.

Few examples include Paytm, BharatPe, Google Pay, PhonePe and others for its payments/fintech business, BigBasket for its grocery delivery business, Zomato and Swiggy for food delivery business, and Urban Company for at-home services vertical.

This stands true that JustDial is a discovery business, therefore, it simply has to sign up vendors/professionals willing to offer the service. It is still not doing the company any favour.

“Google has taken away their core offering [of services discovery], and other players are emerging much stronger in different verticals,” Khanna says while explaining the knots in JustDial’s business.

Yash Gupta, Equity Research Analyst at AngelOne, tells Business Insider that the nominal decline in JustDial’s business in the third quarter could also be attributed to the recent management change after the Reliance Retail acquisition. There is usually a dull period for the stock due to cleaning of the balance sheet, he notes.

But that could only be a part of the reason. Gupta explains that JustDial is a ‘pull’ sort of business model, where they need to go to customers and get them to start paying for its services. Meanwhile, other companies — such as Zomato, Swiggy, and even Google — where customers come on their own. This becomes the first challenge for the company.

Secondly, the failure of JD Mart — the business-to-business (B2B) ecommerce marketplace of JustDial — to do anything substantial in the three quarters has further disappointed the people who keep track of this space, Gupta added.

JD Mart competes with IndiaMart, which has been reporting higher revenue than JustDial for the past two years by focusing on B2B ecommerce.

The crux of all these problems is over-diversification that prevents it from going big in one segment, Gupta says. They would have done much better if they focused on one vertical, he adds.

ALSO WATCH: A ₹3,000 crore fund manager says even conglomerates in India struggle the moment they have more than two verticals ⁠⁠

The common thread running in what both Valpro and AngelOne analysts are saying is the fact that both have not been able to figure out why Reliance decided to acquire JustDial. “I don’t really see any value proposition for Reliance in JustDial,'' says ValPro’s Khanna.

Things can become clear one Reliance unfolds its plan for JustDial, AngelOne’s Gupta adds.

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