21 highlights
-
Vijay Shekhar Sharma, Paytm’s founder, and CEO carries his company’s pitch deck with him at all times. Depending on whether you are an admirer or a critic, and whether Sharma takes an interest in you, he’s quick to pull out the deck on his phone and put on the charm offensive.
-
For old-time Paytm watchers, this is a stark departure from the days when Sharma’s sell used to be just one number: The millions of Paytm wallet users.
-
He also said that cash usage is one of the country’s foundational problems, and Paytm would solve it by getting half a billion users on the App. Just over one-third of India’s population.
-
On the back of demonetization in November 2016, when most of India’s currency was withdrawn overnight and slowly replaced over months by new notes and denominations, Paytm hit 200 million users in February 2017. It was also the year Sharma made it to the TIME 100
-
And so are Paytm’s ambitions of replacing cash, a mission that in the post-demonetization years has been craftily assumed by National Payments Corporation of India, or NPCI, and its payments infrastructure, the Unified Payments Interface, or UPI.
-
We are 45 days shy of 2020, and for all practical purposes, digital wallets in India are dead.
-
At the time, an elated Sharma said, “500 million by 2020.”
-
The current Paytm’s potential is a pale shadow of its former self. And to stay relevant, the company is entering new businesses (and failing spectacularly in some) at a pace that shows both a lack of clarity and urgency. Paytm is stuck between a glorious past that was built on the back of digital payments and a future that doesn’t look anything like Jack Ma’s Alibaba, one of Paytm’s largest investors and Sharma’s inspiration.
-
It is amply clear that digital payments in India is growing, unlike China, where the market is dominated by just two players, Ant Financial’s Alipay and Tencent’s WeChat Pay.
-
It is not surprising then that questions are being asked–if the NPCI owns the tech, and the UPI is the flourishing payments platform, then what is the value that payments companies are adding?
-
A large part of this valuation thesis, driven by both Alibaba and SoftBank, and later sold to Warren Buffett’s Berkshire Hathaway, was that Paytm would be the dominant payments option in the life of Indians.
-
That hypothesis has fallen flat. Sure, you can argue that Paytm does sell a toothbrush and a financial product today, so what’s the difference? There is one which will become more apparent as you read further.
-
Another venture capital investor, who has looked at Paytm’s journey very closely, says that the company increasingly reminds him of Yahoo.
-
By the time Yahoo realized its mistake–and acquired Overture, the company that invented paid search advertising, for $1.6 billion in 2003–Google was already steaming ahead. Instead of fine-tuning Overture to compete with Google’s more sophisticated system, Yahoo decided to build its own advertising platform mostly from scratch, says Flake, who came to Yahoo as part of the Overture acquisition. Code-named Project Panama, the new platform took nearly three years to complete. By then, the search wars were over; Google had won.
-
But more than that, Yahoo never really decided what it wanted to be when it grew up. Was it a technology company? A search advertising platform? A burgeoning social network?
-
One particular Paytm Mall hubris story has assumed the status of legend. Where Amit Sinha, COO of Paytm Mall, is said to have told his team that if Amazon and Flipkart were offering great deals, Paytm must offer products for free; why just stop at discounts?
-
“If you are going for 90%, then why not 100%? It is certainly better messaging. We are going to offer 100% cash back on select products during the upcoming sale. The point is, there will always be a bunch of products which are going to be attention grabbers; products on which you can give back as much as 100%,” said Paytm Mall COO Amit Sinha in an exclusive chat with ET Rise.
-
From mutual funds to bus bookings to selling tickets to events, there is very little value that Paytm brings to the table. There is the other problem that these businesses are already crowded with entrenched players.
-
To earn less than Rs 200 crore ($28 million) more from one year to the next, Paytm incurred an additional Rs 2,613 crore ($365 million) in losses.
-
Part of the reason is also that Alibaba is going slow in India. Between Snapdeal and Paytm, its hypothesis of becoming a key player in India’s e-commerce and payments businesses hasn’t played out. So, for now, the company is taking a pause.
-
For now, Sharma is making all the right noises about cutting Paytm’s losses and flying creative accounting birds called “contribution margin positive”. Amongst the many lessons that we have learned from the WeWork debacle is that founders high on accounting jargon can ruin the world as much as Wall Street bankers.