Snapdeal acquires Freecharge to expand e-commerce ecosystem

Snapdeal acquires Freecharge to expand e-commerce ecosystem

Finally, it’s confirmed. Snapdeal has acquired Freecharge. The rumours that have been around for couple of weeks now can be put to rest. Although, the financials of the deal have not been disclosed, however one person familiar with the deal stating that Freecharge acquisition cost Snapdeal in the region of $450 million through a mix of cash and equity.

Why Snapdeal Acquired Freecharge?

While Freecharge is a online recharge and couponing site, Snapdeal is a pureplay ecommerce marketplace, so what is the reason for FreeCharge acquisition?

Online recharge and eCommerce are cousins of each other in ecommerce world. FreeCharge’s subscriber base is probably the biggest reason why Snapdeal acquired Freecharge. Take for instance what Paytm is doing – they initially started at a online recharge portal, but added ecommerce marketplace to the platform once their subscriber base swelled. Given that demographics of people who do online recharges and people who make online purchases are nearly the same, recharge customers can be pushed make online purchases as well. And, that’s what exactly Snapdeal plans to do with FreeCharge – attract customers to Snapdeal after they have done their recharges and vice versa! Now Snapdeal can inherently offer recharges and coupon for their customers as well.

On the other hand, Freecharge acquisition means that Snapdeal will get a strong set of people in their ranks. FreeCharge has Kunal Shah, Alok Goel, Sharath Khurana and Rajesh Biyani who have strong experience in ecommerce verticals.

One interesting thing to note here. Ratan Tata is investor in Snapdeal as well as Freecharge’s competitor Paytm. Now that Snapdeal has acquired Freecharge, Ratan Tata will have invested in 2 stringent competitors!

Snapdeal acquires Freecharge to expand e-commerce ecosystem

Now, Snapdeal and Freecharge will together generate more than 1 million daily transactions and have 40 million users on the mobile. Even though a majority of these transactions are low value, money-losing recharge deals and these will hit Snapdeal’s current average revenue per order, the sheer size of transactions may help the company attract higher valuations.

“The strongest use case for a consumer to do a mobile transaction is a mobile recharge,” Snapdeal chief executive Kunal Bahl said. “It’s important for us to make sure that our ecosystem provides an opportunity for this tsunami of new users who are going to come on the mobile Internet to make their first transaction, post which we will offer them a host of products and services that they can buy from.”

Mobile commerce is booming in the country and the number of mobile Internet users is expected to increase to 480 million by 2017, according to a joint report by Google and A.T. Kearney.

Bahl said Freecharge and Snapdeal will offer incentives and other promotions to their respective customers to persuade them to buy products and services on the other platform.