Flipkart takes the brand ads route for revenue

Ropes in 50 leading brands to advertise on its platform

India’s largest e-commerce firm Flipkart has tied up with leading brands to serve ads on its platform as it explores alternative revenue streams to offset losses made by its core business.

The company has signed up 50 partners like YES Bank, L’Oréal, Micromax and Intel to go live with its ‘Brand Story’ ad format.

Flipkart is encouraging large brands that sell products on its platform to appeal to their customers through interactive story format ads on its website and apps. It will also allow third-party brands in sectors such as real estate, fast-moving consumer goods  and automobiles that do not sell products on its platform to advertise with it.

CLICKING IDEA

• Flipkart is looking at additional revenue streams as losses mount
   
• It posted a loss of Rs 2,000 cr on a revenue of Rs 11,000 cr in FY15
   
• It has 50 mn active users on its app
   
• 50 global brands have partnered with Flipkart to advertise on its platform

“We are offering a platform where brands can target and engage with the largest qualified commerce audience in the country. The propensity to click on the advertisement is higher,” Ravi Garikipati, senior vice-president.

With 50 million users on its platform and a deep understanding of the shopping behaviour of every one of them, Flipkart says it has the ability to target the kind of audience that brands are looking for. The company had earlier begun allowing sellers on its platform to list their products more prominently through its product listing ads.

The move to open up its platform to advertisement comes at a time when Morgan Stanley, a small but key investor in Flipkart, marked down its investment by 27 per cent to $58.9 mn in December. In relative terms that values Flipkart at close to $11 billion, down from $15.2 bn it was valued at during its last funding round in July.

In a release announcing the launch of brand ads, Flipkart did not disclose its valuation, something it has been consistently doing in the past.

The markdown comes at a time when Flipkart is competing with global e-commerce giant Amazon and Snapdeal, which is backed by China’s Alibaba. Experts said the move was indicative of a return to normalcy in the Indian start-up ecosystem where an abundance of funding had inflated valuations.

Flipkart has been seen as coming under pressure from investors to move towards profitability. Apart from advertisements, the company also plans to open its logistics service, EKart, to third-party online and offline sellers in the second quarter of 2016. Flipkart is looking for someone to head EKart, which is now overseen by newly appointed chief executive officer Binny Bansal.

In 2014-15, Flipkart’s losses nearly quadrupled to around Rs 1,933 crore on revenue of Rs 11,050 crore, according to the company’s filing with the Registrar of Companies.