Just Dial, the local search services company, created waves at the Bombay Stock Exchange last year in June when it went public. It was the most successful IPO in the past couple of years, especially when you factor in a sluggish economy and lackluster markets that led several companies to scrap their listing plans. In its first outing at the markets, the company raised Rs950 crore by selling 17.5 million shares, giving its  investors—SAIF Partners, Tiger Global and Sequoia Capital—a whopping 850 per cent return. 

This business utopia seemed far from possible in 2009 when the company’s board hinted to VSS Mani, founder of Just Dial, that they might need to bring on an external CEO to run the company. Things had been rough at Just Dial. Their new “pay for performance” strategy, which the company had introduced on the suggestion of one of its US-based board members, had failed spectacularly. 

According to the new plan, the advertisers had the option to pay at the end of their advertising contract as per the leads Just Dial had generated for them. “The idea was to use leads as a tangible tool to track the return on advertising for the subscribers,” informs Mani. 

Business utopia seemed far in 2009 when the company’s board hinted to VSS Mani that they might bring on an external CEO to run the company.

The need to move from a fixed price advertising plan to “pay for performance” was to maintain, if not, increase, the subscribers’ interest in advertising with Just Dial. The global crisis might not have taken the Indian economy under post-2008 but it had strongly affected the perky mood of the businesses in the country, says Mani. 

Just Dial’s board was apprehensive that this dip in optimism would lead several small and medium businesses—the bulk of the company’s potential advertisers—to slash their advertisement budgets. The board believed a quantifiable tool such as the pay-for-performance metric would help convince companies to continue their advertising efforts with Just Dial. 

“Initially, our subscribers were quite pleased with this new model as they didn’t have to pay anything upfront,” informs Mani. But when the sales team approached them at the end of the contract, they had a tough time in getting payments. This was because the definition of performance for the two parties differed. The subscribers wanted to pay only for the leads that had generated actual revenue for them. They didn’t see the point of paying money for leads that hadn’t led to actual business. This tussle led to a “considerable” hit on the revenue growth in 2009, Mani confesses although he doesn’t give us exact numbers. Their relationships with many advertisers also suffered in the testy conversations that took place.

“The board was quite unhappy. They would talk about the need to run the business well, and there were indirect hints that may be an external CEO would make sense for us. I couldn’t let that happen. I didn’t want an external CEO to take over my company’s operations. I was confident that if I could build this company from ground zero, I could fix this problem too,” adds Mani. 

He understood though that simply backtracking to their old model of tenured contracts before the “pay for performance” debacle wasn’t a great idea either. In that model, customers could choose whether they wanted to advertise on web or voice search or both. Then they could select from three different payment plans—Silver, Gold and Platinum. Silver was a plain listing where the company’s name is randomly thrown up in the options sent to users; a Gold listing was where the company’s name comes up as the first three options, and Platinum was a premium listing that was  custom-built to the subscriber’s needs.  

“This approach gave customers too many choices and made their decision making complicated.” Also, in 2009, several subscribers preferred to advertise on voice over web listing. They didn’t use the internet so they didn’t feel the need to advertise there. This was obviously influenced by the fact that from the 82 million total user queries Just Dial received in FY2009, 64 per cent were over voice, 34 per cent from web and two per cent from users using internet from mobile. This imbalance resulted in a huge information discrepancy between the two platforms Just Dial offered—voice and internet search. 

Just Dial decided to stop giving subscribers the option to choose a platform. Everybody had to list on both internet and voice. They did offer customers flexibility in payment options; payments could be made in weekly or monthly instalments. They could even pay upfront as was convenient to them. However, implementing the plan didn’t lead to new customers being acquired, or clients signing up for higher value plans.  

To find out why the uptake was slow, Just Dial made a concerted effort to get customer feedback. Their telecalling teams found that very few of their subscribers knew about the new instalment model.

Mani confronted his sales team and discovered that the resistance for the plan lay with them. They would tell the customers about the new advertising packages but not the instalments scheme because their incentives were tied up with the payment collection. The sales team was worried that with this option customers might change their minds  and not renew their advertising plan. This would greatly affect their variable salary. Mani intervened and warned his sales team that if they don’t give their customers all the information they will risk their jobs. This got them back in the field with the complete advertising plan to share with the potential subscribers.

It was the start of a hockey stick like growth for Just Dial. The number of paid advertisers went up from 40,500 in March 2009 to 61,500 at the end of March 2010. It further spiked to 1,20,200 a year later. This tremendous increase in numbers led to revenues more than doubling in two years from Rs85 crore in FY2009 to Rs185 crore in FY2011.