Just Dial Ltd

NSE:JUSTDIAL

Earnings Call Transcript 2018-Q3

[Operator]

Good evening, ladies and gentlemen. I'm Rashad your moderator for this session. Thank you for standing by, and welcome to Just Dial results conference call. [Operator Instructions] I would like to now hand over the conference to Mr. Ashwin Mehta. Thank you, and over to you, sir.

[Ashwin Mehta, Executive Director of Research]

Thanks, Rashad. Good evening, everyone. On behalf of Nomura, I would like to welcome you all to the 3Q FY '18 Earnings Call of Just Dial. We have with us the Founder and CEO of Just Dial, Mr. VSS Mani; and also their CFO, Mr. Abhishek Bansal. So without any further ado, let me hand it over to the management.

[Abhishek Bansal, Chief Financial Officer]

Hi, everyone. Welcome to Just Dial's Earning Call for Third Quarter of Fiscal '18. I can quickly run you through financial and operational highlights for the quarter. Total operating revenue for the quarter stood at INR 196.8 crores, witnessing 9.2% year-on-year growth. Operating EBITDA stood at a healthy INR 46.5 crores witnessing strong 81% year-on-year and 17.5% sequential growth. Adjusted operating EBITDA margin excluding ESOP expenses stood at 25.8% which was up 375 basis point sequentially. Net profit for the quarter stood at INR 28.6 crores which was up about 4.2% year-on-year. Growth rate in fact was subdued primarily because we had lower other income during the quarter. Other income stood at INR 2.6 crores versus INR 20 crores in previous quarter and same quarter last year. However, a point to note is that drop was mainly due to increase in bond yields in December quarter resulting in mark-to-market losses in certain long maturity investments such as tax free bonds that we hold in our investment portfolio. Overall, business continues to generate strong free cash flows. Cash and investments stood at INR 1,085 crores as on 31st December. Coming to operational highlights. Traffic continues to be strong at about 108 million unique user for the quarter. We continue healthy trend of new listings addition and we now have about 20.7 million active listings in our database which witnessed 20% year-on-year growth. Close to 50% of the database is now geocoded and 41 million images are present in that database which was up about 48% year-on-year. In terms of paid campaigns, this stood at about 441,000 as on last quarter. Realizations continued to see a sequential uptick. Compared to lowest levels of 4Q '17, realizations are up about 7%. Overall, I think it was a decent quarter for us. Revenue growth was highest in last 5 quarters. Efforts are on to build further on current growth rate. Our efforts over last few quarters on optimizing cost, improving productivity are already visible. Bottom line growth was subdued, but that's fine since other income can have quarterly fluctuations. There have been quarters in the past where we have significantly benefited from falling yield. So this quarter saw some reversal of those gains. As a business, focus continues on growing usage of our product and chasing profitable growth. We shall now open the floor for questions.

[Operator]

[Operator Instructions]

[Ashwin Mehta, Executive Director of Research]

Sir, this is Ashwin from Nomura. In terms of -- we've had a pretty decent margin performance this quarter, but one risk that we wanted your feedback on was do you think the expense rationalization can risk longer-term revenues for you? What are you trying to do to ensure that that's not necessarily the case? Because for almost 2 quarters running now, the advertising and selling expenses seem to have -- advertising expenses seem to have come off?

[Abhishek Bansal, Chief Financial Officer]

Ashwin, on margins, as for the costs that have been weeded out, we have weeded out only bad cost so to say. Whatever inefficiencies that had crept into the business over last several years, we have tried to ensure that efficiencies are brought back. Considering -- on your point on advertising and selling expenses, see, advertising spend, we are clear as a business that this business definitely needs certain amount of sustained advertising. In this digital era, we need to be present in users' minds. So we would definitely allocate say 8%, 9% of our top line on a sustained basis to advertising. However, on a quarterly basis, there could be fluctuations. Like last particular quarter, we wanted to experiment that if we reduce our mass media spend, spend more on digital, how does the traffic pan out, whether the traffic growth that we are getting is sticky or not, whether the traffic is of high quality or not, so all those experiments obviously need to be done to ensure that, if a business is spending INR 70 crores, INR 80 crores on advertising, the return on investment actually takes place. And in terms of other expenses, whatever we have curtailed, those are primarily on account of efficiencies that we could bring in. In terms of employee costs, again, rationalization is primarily in those departments where automation has helped us get same or more output with lesser manpower. So I don't see any particular reason why this particular cost rationalization should hamper revenue growth in coming quarters.

[Ashwin Mehta, Executive Director of Research]

Okay. So as a follow-up, in terms of paid listing growth, what is your outlook and if the paid listing growth starts to improve going forward as you expand into Tier 2, Tier 3, do you think the realizations can still be stable?

[Abhishek Bansal, Chief Financial Officer]

See, on paid listings, the thought process that we have is, first of all, what matters to us is overall revenue growth for the company. The revenue growth, obviously there are 2 levers, one is paid campaigns, other is the realization. Ideally, business would want both the levers to fire together, but there could be quarters where like this particular quarter or last 2, 3 quarters have seen us taking advantage of price increase. So when we launched our advertising campaign, at that point of time, we took price hikes on certain entry-level products which have continued to help us. Going forward, as I mentioned that we would want to optimize on revenue per sales employee, revenue per SME and hopefully we would continue to build on current growth rate levels. Yes, there could be a scenario wherein there might be certain low profitability campaigns which might -- which we might even sacrifice. At the end of the day, we want to ensure whatever incremental campaigns we acquire, they should come at healthy margins. There could have been a scenario that I might chase 15% campaign growth and I might sacrifice [ 10%, 12% ] in realization, net-net, business would grow 2%, 3%, but we are clear that we don't want such a scenario to pan out. Top line should grow and operating profit, both should grow.

[Operator]

Next, we have Mr. Gaurav from Citigroup.

[Gaurav A. Malhotra, Vice President and Analyst]

Just had couple of questions. One is if you can just give us how much was the absolute spend on ad campaign during this quarter? And that's my first question. The second is just a follow-up on the campaign growth. When should we see the uptick in campaign growth start to happen as we get more into the Tier 2, Tier 3 cities? I can see that the listing number has gone up quite substantially over the past say 3, 4 quarters. So when would the benefit of say the monetization of these listings start to take place?

[Abhishek Bansal, Chief Financial Officer]

Gaurav, ad spend for last quarter was approximately about INR 14 crores. Coming to your second question on campaigns. See, it's not that we cannot grow campaigns right away. We can quickly -- there are multiple ways to solely grow campaigns. You can reduce prices, you can suddenly hire 500 people and grow campaigns, but all those particular campaign additions come at a cost. We want to ensure that whatever campaign additions that happen, they should happen at a decent realization such that our operating profitability does not suffer. In terms of venturing more into Tier 2, Tier 3 cities, yes, we want to increase our feet-on-street because that is the team that is growing at a very healthy rate for us, primarily because product is more of a show and tell product. Earlier, SME's were coming into the paid ecosystem solely from the perspective of getting these from the very next day. Today, I need to explain to that SME that Justdial has created a dedicated page for you on its platforms, there are photos, videos. Ratings, and reviews matter. So considering all of that, feet-on-street is what we want to grow. As we mentioned earlier as well, just that we are ensuring that whatever optimization that we have done over last 2, 3 quarters in pursuit of those particular expansion plans, those gains should not get reversed.

[Gaurav A. Malhotra, Vice President and Analyst]

Okay, just a follow-up, in terms of your cost rationalization, making things more efficient, how much do you think more is left either when it comes to employees or the other sort of -- like you said the bad costs, how much more is left in the system to be sort of taken out and how much -- so how much -- let me go this way what -- how much more is the low -- sort of the low hanging fruit left to help your margin expansion?

[Abhishek Bansal, Chief Financial Officer]

See, let us break our employee costs in 2, 3 or 4 buckets. The first 3 expense that we have is the employee benefit expense. Again, employee benefit expense can be split into sales and non-sales. Sales, obviously it will grow primarily in line with whatever increments that happen and headcount addition. Non-sales, as far as the current trends go, we think that particular component should ideally grow in line with whatever increments that we would be giving. On the other expenses, again that has 2 components, one is the advertising spend, the other is the spend that we have on our offices, rental, [ part ] fuel, telecom spend et cetera. Again those expenses, I don't see them to be increasing materially. So overall, this particular year, we have been extremely, extremely frugal in terms of managing our employee costs. So on a full year basis, last full year employee cost was INR 440 crores. Ideally, that should have grown by 8%, 9% to INR 480 crores, INR 485 crores, but seeing current run rate, we should be able to manage it at even much lower than INR 440 crores of last year. However, to be able to sustain the same year-on-year obviously is difficult, there will be certain amount of increments et cetera that will come in, but as a percentage of revenue, which means EBITDA margin, I think the blended that we saw in first 3 quarters [ 22%, 23% ], that should be sustainable at even current levels of revenue growth. If revenue growth accelerates, which is what we are focusing on, then ideally operating leverage should help in expansion of margins as well.

[Operator]

We take the next question from Mr. Parag Gupta from Morgan Stanley.

[Parag Gupta, Executive Director]

So just a couple of questions out here, you guys talked about some macro issues in the previous quarter, especially on the back of GST. You also talked about how the entire business is changing in terms of educating merchants et cetera. So the first question is, are you seeing the macro recovering or do you still see some macro headwinds, which are kind of impacting growth either on paid campaigns on pricing? So any color on that would be appreciated. The second is you are talking about any potential acceleration in revenue growth going forward. Now I just wanted to understand, how much of this would be driven by incrementally more hiring and how much of this could still be driven by better productivity? And if it's based on hiring, then could you just give us a sense on what are your hiring plans for the next couple of quarters?

[Abhishek Bansal, Chief Financial Officer]

See Parag, on the macro headwinds that we talked about, right, the structural changes that have happened in the economy such as GST rollout, my sense is that now everyone knows that there is no going back on that particular GST front. These particular changes are sort of, they are long-term changes. It won't happen that just in 1 quarter, 2 quarters, everyone will be back to normal. One key indicator that I used to measure impact is, how is my internal team coping up with GST. So even though about 2 quarters have passed on, my particular team's feedback is also things are yet to stabilize. They are still struggling with re-filing or re-returns for say first or second quarter. So to that extent, I think probably it will be a gradual recovery that will happen in terms of GST impact on SME. The second component that you talked about, say educating SMEs to the new Internet era. Again, as we mentioned, we have 440,000 campaigns, right, so on one hand, such kind of huge base act as an advantage that no single vertical contributes significantly to our revenues. On the other hand, whenever education needs to happen for structural changes, it takes some time to percolate in the entire ecosystem. Coming to your second question on revenue growth and hiring plans, so as I mentioned that definitely, we want to expand on our feet-on-street, we have been mentioning earlier as well, but for me to say this particular 2,300 feet-on-street will go to 3,000 in 3 quarters, 2 quarters, in reality, it doesn't really work that way. What we are -- the way we are going about it is in branches where productivity is already high, those branches are already in say hiring mode or expansion mode. Branches where productivity levels are low, those branches are being encouraged to first of all achieve a certain threshold of productivity and from there on, build. So as I mentioned earlier, for us, what matters is that revenue per sales employees and revenue per customer both should ideally be maximized.

[Parag Gupta, Executive Director]

Got it. And just a few more if I can add. One is, in your presentation, you've shown a lot of the new services that are probably now up and running and live and also the new chat feature that you've now integrated. So could you give us a sense of what kind of traction you've seen, I don't know if it's still very early days, but how are you monitoring this? What has been the feedback so far? If you can just share anything in terms of user engagement, anything in terms of feedback, that will be useful?

[Abhishek Bansal, Chief Financial Officer]

So what you see in the presentation, those initiatives are in the pipeline. So in about 4 weeks to 6 weeks from now, we are expecting release of the revised version of our app. The look would be much cleaner. It would have a real-time chat system integrated with it. It would have a lot more curated content. Primarily the objective is that if we can increase user engagement, if we can increase the time that user spends on our platform, in longer-term it would actually help us. So some of those initiatives including complete revamping of our mobile site to make it extremely fast, all those are in pipeline and should get rolled out in about next 1 or 2 months.

[Parag Gupta, Executive Director]

And finally, could you help us with some metrics on top 11 and outside of top 11 in terms of growth and what was it broken up into volumes and pricing?

[Abhishek Bansal, Chief Financial Officer]

See, in terms of revenue, Tier 2, Tier 3 cities outside top 11, they contribute about 20% to revenues. In terms of campaigns, they contribute about 40% to 43% to campaigns. So that would give some idea on what is the [ differential ] between the top 11 versus Tier 2, Tier 3.

[Operator]

[Operator Instructions] We take the next question from Mr. Arya Sen from Jefferies.

[Arya Sen, Equity Analyst]

Firstly, thanks for the detailed disclosure in the presentation, Abhishek. I had a question on your comment on advertising spend, you said that you expect to spend about 8% to 9% of revenue going forward. Now if I look at your first 9 months of this year versus last year, the incremental ad spend appears to have been around in the ballpark of INR 40 crores to INR 45 crores and if I look at your incremental revenue, that also appears to be in the ballpark of INR 45 crores. So I mean in -- from that perspective, how effective has advertising really been or is that even the right way to look at it?

[Abhishek Bansal, Chief Financial Officer]

See, let us come to advertising this year. This year advertising kickstarted at the back of -- for the last 2 to 3 years, we had been guiding that we want to advertise, but we were in the process of building our internal product. So this particular year obviously was the start of our advertising campaign. Now when you compare in terms of incremental revenues, as we have mentioned earlier as well, that whatever advertising that we do, revenues -- incremental revenues would have some lag effect. So to compare that what is the advertising money spent this particular year versus incremental revenue, that I don't think so is the very right way. The way to look at probably should be that what are the incremental users that we are able to drive on our platform. Over longer-term, incremental users should ideally result into SMEs realizing there is higher value in investing in Justdial and that should result into higher revenues going forward. So what we spend today might get a healthy [ effect ] in future.

[Arya Sen, Equity Analyst]

Right, and secondly, if you could share how much of your traffic is -- within mobile is coming through the app versus mobile web and also how much of overall traffic is coming through -- coming directly versus via other -- Google and other search engines?

[Abhishek Bansal, Chief Financial Officer]

See as about 68%, 69% of the overall traffic originates from mobile, as we have mentioned earlier as well that if you see the design and the architecture that we have for our mobile site and app, it's very similar. About 90% plus of the traffic on mobile originates from our mobile site itself. However, considering that we are a local search engine whose prime responsibility is to ensure that information is disseminated to the user at the earliest. So I think that is what reflects in the composition of traffic. In terms of traffic that directly originates on our platform, about 26%, 27% of the overall traffic originates directly to us.

[Operator]

We take the next question from Rajiv from HSBC.

[Rajiv Sharma, Director]

Just had one small question about your hiring plans, total employees and breakup between the feet-on-street and the sales force, if you can just provide some color on that for the next 3, 4 quarters?

[Abhishek Bansal, Chief Financial Officer]

In terms of hiring plans, as we mentioned that even today we do higher feet-on-street and other particular employees on a monthly basis in order to ensure that we are able to arrest whatever attrition that takes place. Going forward, as a strategy within the sales department feet-on-street, cold calling team or the JDA team is what we ideally want to expand. We do have internal targets that this 2,300, we want to scale it up to say even 3,000 levels or even higher, but again, that depends on which geography we want to expand, which geography where we already have proper management, team leads et cetera in place to do that particular expansion. For me to put specific numbers in terms of whether we will be able to add 200 new feet-on-street every quarter or 100 new feet-on-street every quarter, that in reality would be difficult to ascertain at this point of time.

[Rajiv Sharma, Director]

That's helpful and lastly, on your ad spend, so you've done INR 45 crores, so what's the plan for the next quarter and the next year, if you can provide some color there?

[Abhishek Bansal, Chief Financial Officer]

See, first 3 quarters I think overall, we have spent about INR 55 crores, INR 56 crores on advertising. So last particular quarter was on the lower side as I mentioned that we did some experimentation. So probably this particular quarter, we'll have to see how it pans out, but for next full year we should -- we are thinking that probably INR 20 crores a quarter is what we would ideally want to do, but again having said that, if we see that there is a good amount of traction that we can get based on our advertising campaign, we might want to tweak it upwards or downwards based on that.

[Rajiv Sharma, Director]

So if I'm just repeating what you said that you will be planning, looking at a INR 20 crore number for the next full year?

[Abhishek Bansal, Chief Financial Officer]

INR 20 crores a quarter, sorry.

[Operator]

We take the next question from Shaleen from UBS.

[Shaleen Kumar, Associate Director and Analyst]

Abhishek, I kind of agree with you that revenue should follow with a lag with your spend on advertisement and all. However, what we are seeing that your traction app download traffic, everything is on an upward trajectory, however, your paid listing is on a downward trajectory. Now intuitively, this ad spend should act as a lever for your sales staff to add -- to get more paid listings which appears to be is missing, right or there is a higher churn rate happening over here. So that we are not able to understand because it's already [ 3 quarter ] here. So if you can share your views on this?

[Abhishek Bansal, Chief Financial Officer]

See Shaleen, let us try to understand fundamentally what is the challenge that we face as a business, right. 3 years back, 4 years back, it was very easy for me to get that 25%, 30% incremental hike over last year whenever a contract was due for renewal because one particular user coming to Justdial via voice platform, the lead was shared with 7 clients. Today, when everything is shifted to Internet, the same person maybe calls 2 or 3 vendors, negotiates a deal, closes the transaction. Though business from that unique visitor still goes to that one SME, however, earlier 7 SMEs were feeling satisfied, today 3 SMEs feel satisfied. Now we have spent a lot of time in re-training our sales team that whenever they visit a client, they should explain to the client that returns should be evaluated not just on cost per lead but overall on cost per visibility, cost per reach basis as well. In this re-training, one key component is for our sales team to be able to justify the kind of price hike that we are asking for this particular year's renewal. Now there were 2 teams that actually get us revenue. The one team that focuses on new customer acquisitions. They try to get client fact or whatever entry level or slightly higher prices. There is another team that picks up from there and does better value building. So the team that picks up and does better value building, in recent quarters, we are seeing they are able to do a better job. The other team, obviously paid campaigns. There again I don't give them targets of -- that in a month, you need to do so many paid campaigns. I give them a target of in a month, you need to get me x amount of revenue. Now whether that person gets it through 5 campaigns or 1 campaign, till the time absolute revenue is maximized, I'm fine. In our particular case, the way you are trying to correlate that advertising should result into higher [ sales ] agreed but this is an indirect effect in our particular case. Advertising results in more users coming to Justdial's platform, more users should result into better value being delivered to our paid clients, which should result in more people signing up and existing people willing to pay more to Justdial. Since this an indirect sort of relation, there will be a lag effect in terms of advertising spend, metrics such as user growth, listing growth et cetera and incremental paid campaigns, paid listings et cetera.

[Shaleen Kumar, Associate Director and Analyst]

Abhishek, I completely agree with you, whatever you have said over here and I completely agree that there is a lag effect and both are 2 different things to look together. So the only worry over here is the decline in trajectory of paid listing campaigns and though we are seeing a healthy growth in app. So that's the only missing link we are trying to figure out. Like how much is the lag over here? This is the only point.

[Abhishek Bansal, Chief Financial Officer]

See Shaleen, when we commenced our advertising campaign, we took a conscious call that for last few years we had not taken price hikes, our realization had been on a decline since Justdial is now visible right, left and center, it would be the best time to effect those price hikes in the ecosystem. So there could have been a scenario, I would not have taken any particular price rise, there could have been structural declining prices, realization might have declined 5%, campaigns would have grown 10% and we would have attributed that okay 10% campaign growth is attributable to advertising campaign, but even in that scenario, probably we would not have been able to generate the kind of incremental revenue that we are able to generate now.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

Back to the point, this is Mani here. See, our goal is to increase the revenues and from time to time, the management takes a decision to get on to the right mix, what is best for the company for those quarters. Now we are like having a 7,000 member sales team, you need to get them focused in a particular direction. So we figured out that there are certain levers, which we can use right now to get the growth and our goal is to get to double-digit growth as early as possible and improve the profitability at the same time and continue to keep an eye on traffic growth. So you -- we want to see all 3. So we're not obsessed with any particular mix. What is best is decided, in fact to a great extent, the branches are empowered to come up with their own mix and so I have branches which have got growth in the number of campaigns and thereby leading to growth in revenue. There are branches, which haven't seen that kind of a growth in campaigns, but they've seen much better growth in revenue. So the company needs to focus what is best to increase the top line. There is no such obsession with the number of campaigns or ticket size as such, but yes, we do not want to compromise on the traffic. We definitely want more and more Indians to use Justdial, not just that, we want them to spend more time with Justdial, engage for more things than they have done in the past. So that activity, there's no compromise on the number of people using it and obviously the average usage per person in the period of time.

[Operator]

Next in line, we have Mr. Akshay from Fidelity.

[Akshay Javlekar]

Congratulations on the great show on the cost side and also just trying to get the realization up. I had a slightly medium-term question that if we look at the opportunity canvas for you guys in terms of the number of SMEs out there in the market and you have only 1.5%, 2% of -- even the companies which are there, they are listed on you who are paying you. And to that extent, I guess the previous question was that there's a slowdown on [ campaigns ] and that's what we are thinking about. And you guys have seemed to have thought through various cost elements on a granular basis on where it will be on a quarterly and a yearly basis, but just when you are looking at the business in terms of paid campaign growth, company used to grow at 40%, 50% and then 20% and then 10%, and this year could be flattish, right?. So just -- and I understand what all you've done to fix the problems in terms of either communication, the product, the ad campaign, but just looking forward over the next 3 to 4 years, how should we be thinking about paid campaigns growth? That was question one.

[Abhishek Bansal, Chief Financial Officer]

See, as we mentioned in terms of paid campaigns, you rightly mentioned that against 20 million SMEs we only have about, say 1.5%, 2% of the population paying us. Over long-term, we definitely internally when we do our particular planning, we definitely think that why should 5% of the SMEs not be paying us. There is a significant amount of value that we are delivering to our free listings as well. So yes, in recent quarters, there could be a different mix that could drive revenues. Over long-term, yes, paid campaigns would also need to grow. Realizations obviously, they can grow revenues to a certain extent, either to grow realizations, we will have to come up with additional offerings such that we are able to justify that particular higher value per customer.

[Akshay Javlekar]

Okay, fair enough. Second question was directed to Mani that we had couple of thoughts on where we could pivot this business model to whether in terms of how many are Search Plus and maybe correctly so with hindsight, you focused on the core business in the last 3 to 4 quarters as results are showing, but again, as an entrepreneur, as a promoter of the company when you are looking at this [Audio Gap]is this the only…

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

Your voice is breaking, can you repeat it, please?

[Akshay Javlekar]

We've had couple of thought process in the past around JD Omni, Search Plus on what we want to do from there and how that could possibly be a monetization engine for the company. This year the focus has been on the core business, but if you are looking at the business 3 to 4 years out, will we still continue to be getting revenues from the online classifieds or do you see yourself trying to do another sort of Search Plus or an Omni type of a business model out of this business?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

So there has been a lot of learning for us in the last several quarters and we figured out that there are things that we should do one thing at a time, one; and two, wherever there are certain type of, say, verticals or -- I'm talking about Search Plus, where would they have really gone way ahead in terms of attracting users, incentivizing them to use their product and all that, we should look at more such partnerships with such verticals and such other players rather than trying to be -- do something like an [ also-ran ] in that space. So you will see that as a user, you would have superior experience as you move forward using Justdial app, you would see that, you are actually able to transact and some of these transactions are powered by certain other vertical players. So that's got to do with Search Plus. As far as Omni is concerned, we need that big kind of a launch, which we are thinking that we should probably do it like gathering some [ few hundred ] business owners in one kind of conference room -- place and then kind of present it to them and take them through the power of Omni, what it can do for their business and see what's the response from that. And we want to do this in some of the cities and see if the response is good, then -- and that sales process for this will be very different from what we have on JD. Because we also realize that, having a regular salesperson selling ads on Justdial, campaigns on Justdial, it's extremely difficult for him to actually go and demo an exhaustive product like Omni, which has probably hundred other features to talk about and what we are actually selling and so that's somehow not -- both selling together will not work for us. So business will be purely basis in wide and having a large gathering and doing a demo and then see how it goes. So -- but again, I want to highlight that our goal is right now to quickly get to a decent revenue growth path and continue to have the margins and profitability and then take one thing at a time rather than trying to do too many things in one go. Just to highlight, see, this quarter EBITDA if you see on a year-on basis, it's gone up by 80%. That's a remarkable achievement for any company, although revenue has only grown by 9%, which means that there was ample room to run the business much more efficiently and we still see there is room for more scope for improving things and efficiency. So that is where I want to kind of put your attention to. And regarding this -- an earlier question of campaign growth and this thing, these are only mixes, campaign growth and revenue growth and all those things. For example, the number of campaigns in the fourth quarter FY '16, if you refer to the old numbers, it was 3 lakhs, 68 thousand, 368,000 and that in the first quarter FY '17 went to -- went up 18% to 435,000, whereas during the same period, the revenue went up by only 6%, actually 5.79%. So what is important for the company? Is it revenue growth or just campaign growth? I think the overall revenue growth is far more important than being obsessed with campaign growth. And on the same time, if you look at profitability that also grown up, the EBITDA growth by 80% despite advertising increased over 125% in advertising costs. So all this is a lot of things to pay attention to, rather than getting obsessed with one kind of a number of campaigns stuff like that. We might surprise you also with sudden growth in the number of campaigns, but that's only when we are really comfortable. This is now time to pursue for an aggressive more campaign and not compromising too much on the average ticket size.

[Akshay Javlekar]

All right, one last question, Mani, if I may. If you -- so you're delivering certain value to your customers and by asking for them to pay more, you’re trying to extract that value, a part of that. Historically, from what I recollect, you had a problem with churn, right, where customers don't renew, et cetera. Is that a risk that you've got customer into the bucket in year 1 and then they don't renew next year? So basically what I'm asking I guess is, have you seen any increase or decrease in the churn rates of your existing client base in the last 6 months. That's my last question.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

Actually speaking there is not -- there is no true churn as such, that is not substantial. You must understand SMB, there is a mortality of business also. 18% to 20% of SMBs worldwide wouldn't exist next year same time. But at the same time, there will be another new 18% to 20% core pickup. So that's not -- the maturity if you look at it, like we don't panic saying that oh, there is [ mortality ]. Secondly, advertising is a [ discretionary measure ]. Take our own example, we ran a TV campaign for first 2 quarters aggressively and third quarter we reduced it and actually in the fourth quarter we kind of had a negligible campaign. That does not mean we have quit television, we'll again come back and pump in the money. So these SMB's have this tendency to come in and get out, there are certain sometimes seasonal behaviors. So we are never really worried about this kind of a churn. And also as you know, there is a bit of irrationality the way small businesses work and they don't really get into the task of really analyzing how much ever data you give them, it's just a perception game they play. So it's better to have them realize in the longer period that Justdial was the most value-for-money advertising medium for them and the ROI's from JD is far, far superior to any other alternate medium. That's why you can see that our kind of campaigns have grown also substantially. So that is something you should take note of.

[Operator]

[Operator Instructions] Next in line, we have Mr. Ashwin.

[Ashwin Mehta, Executive Director of Research]

Yes, Mani and Abhishek, you've talked about that realizations have gone up partly also because of the bundling of products. So how successful have you been in terms of bundling of products out of your 440,000-odd campaigns and is there a material scope in terms of going on increasing this bundling so that the realizations can go up from where they are?

[Abhishek Bansal, Chief Financial Officer]

See Ashwin, bundling of products essentially depends on what are the incremental products that are coming in. So last quarter, 3, 4 months back when we launched these websites for SMEs, we said that, okay, let us allow SMEs to get these websites on a standalone basis plus they could also club with the existing packages and premium listings that we sell. So there were certain bundled products we launched wherein we felt that okay if you pay certain rupees upfront, then you get this particular listing plus that site, plus even banner on Justdial's website, plus even a ratings and review certificate. So those particular bundled products, there could an SME who would see better value in those. There could be an SME who could come just for the sake of website. So all sort of products are available to SMEs to actually come on to their sales platform. Incrementally to your question, whether we can increase this particular bundling, bundling obviously depends on -- if we can have further products to sell to these particular SMEs. In that case, yes, there could be a standalone product plus bundling with the existing products as well.

[Ashwin Mehta, Executive Director of Research]

Okay, fair enough. And just one question in terms of -- you've talked about that you are open to strategic tie-ups. Now what are the areas where you think these strategic tie-ups are possible and are there enough candidates out there which can help you in terms of some of these areas?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

Basically, we are open to strategic tie-ups, but that's not like a be-all-end-all for us. We can do without any strategic tie-up also, but we feel that there can be tremendous value created if there is a strategic tie-up. Of course, there are about a couple of, 3, 4 of them we can talk to and we are looking at it, but then that's immaterial whether that tie-up happens or not, the business is going to continue. You going to see the top line growth and the profitability growth and those things, but we are definitely open to strategic tie-up.

[Ashwin Mehta, Executive Director of Research]

But any particular areas? Any areas where you think a strategy tie-up can help you in terms of speeding up things?

[Abhishek Bansal, Chief Financial Officer]

See in terms of area, there isn't any specific area per se. As we think that the next leg of growth in India is mainly going to be in SMEs. There is hardly any player who has the kind of data reach et cetera to reach out to these particular SMEs. From that particular perspective, in case, like government recently put out that India has around 50 million, 51 million SMEs. So in case there is any partnership which quickly helps us grow from 21 million SMEs to 50 million SMEs, which helps us grow our paid campaigns from 440,000 to 1 million, 2 million, yes, we would be open to evaluating. So that is the only thought process. Obviously, for any such tie-up, there has to be a win-win for both the parties involved.

[Operator]

Next in line, we have [ Mr. Rajesh ] from Credit Suisse.

[Unknown Analyst]

Can you give me some color on the current usage of the JD Pay and the chat feature? And I was also interested in figuring out if you think there is a possible strategic tie-up with WhatsApp now that WhatsApp is getting into payments if there is something that could possibly help you grow your listings?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

So JD Pay, we are doing about INR 75 crore, INR 80 crore worth of billing in a month thereabout. We have been pushing it only with our existing customers, not even the old ones, just whichever new customer we are acquiring. That's still in the pre-beta level and we are just doing a lot more testing. Once we are confident about it then we will step up. By the way, we also have our own payment gateway. We might as well lend payment gateway solutions to any business which has an online play. So as far as the names that you took, I'm not able to comment on those. The other important thing that we are going to launch this -- in the coming months is a chat feature where you can actually have live chat with the businesses that are listed on JD. So that's quite similar to any other chat app that you've seen. So you can actually not necessarily only call or drive down to a business or to transact online, but you can also have live chat. So that is a thing that we are quite excited about and we feel that in the future people would have more -- will be more keen to have a chat -- on live chat rather than do things the old-fashioned way. So and that chat also allows the user and the vendor to send payment and receive payment. So that's a big feature that we have.

[Unknown Analyst]

But Mani, you'll end up competing with WhatsApp which has about 200 million users in India, right?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

We are open to anything strategic in nature. As far as using WhatsApp or leveraging their infrastructure for pushing our -- disseminating our content, we are more than keen. We are -- we would definitely reach out to such companies. I think that in our ecosystem, the effort is to see that a user doesn't have to quit JD. Say supposing he wants to use maps for directions, within Justdial, there is JD Map which gives you turn by turn navigation and similarly within JD, there is a chat application so you don't have to obviously always call the business owner, you can even have a live chat which is what I'm trying to highlight here. I understand the power of these platforms, which have several million users and we are open to any kind of strategic tie-up, that's what I was trying to highlight that our idea about strategic tie-up should be like a 1 plus 1 not 2, it should be 1 plus 1, 11. So that scope to play there, we have shortlisted certain names and we will be talking to them, we are in terms of talking to some people also, but that's very, very early stage. Not much we can comment.

[Unknown Analyst]

What I was trying to figure out was what about the possibility of you instead of having a JD [ pay hike ] on the application, what if you had like a WhatsApp icon there which allows people to do payments. Isn't that like a win-win? Even if you don't do a strategic tie-up with WhatsApp, given the fact that your app, JD app, you can now integrate and use the payment interface with WhatsApp, even that allows a lot more incremental users, right?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Director]

See, I'm not aware of the payment interface in WhatsApp. We will have a look at it if there is one. That's powered by WhatsApp, the payment interface?

[Unknown Analyst]

WhatsApp has just launched an app in India called WhatsApp for business. I think they are in process of sort of copying the [ west ] and integrating the payment interfaces. So maybe if that's something you could maybe think about, I think it will lead to a lot more incremental users with a lot less ad spend for you.

[Abhishek Bansal, Chief Financial Officer]

Sure, we also read a news article about their business app and plans to integrate payment. So let's see how it goes.

[Operator]

[Operator Instructions] We take the next question from [ Suresh ], who is an individual investor.

[Unknown Attendee]

One question is with regard to which type of business gives you maximum revenue? Is it movies or hotels or any particular type of business, what is the share of various type of businesses if could tell?

[Abhishek Bansal, Chief Financial Officer]

See bulk of our revenue comes from service-oriented categories. Within those particular categories say movers and packers, pest control services, repairs and services, spa's, salons, doctors, dentists, car renters, all these categories are key revenue generating categories for us, real estate agents. So no specific category contributes more than 3%, 4% of the total revenue, but these are some of the [Audio Gap] for us.

[Unknown Attendee]

Okay, one more thing, in the past there has been news that there is a proposal of a merger between Google and Justdial. So in the past there were comments by Mr. Mani that he mentioned that there is a time and place for that and he can't comment on such things unless Board takes a decision. So just wanted to understand whether such discussions are still on or have they fallen through?

[Abhishek Bansal, Chief Financial Officer]

See as far as such particular news flow is concerned, this sort of news flow keeps surfacing from time to time. As we mentioned that currently we are focusing on ensuring that we continue to grow our business. Along the way, if there are any opportunities, any synergies we see, we would be open to evaluating. So there is nothing like that, we had a proposal or we were evaluating -- whether we are evaluating or not. So it's more to do with how is it reported in the news market.

[Operator]

[Operator Instructions] So as there are no questions in the queue, I would like to hand over the floor back to you for final remarks.

[Abhishek Bansal, Chief Financial Officer]

Thank you, everyone, for joining us. As I mentioned earlier, we have focused on consolidating our business over past few quarters. Efficiencies are being brought back. Focus continues on inputs for higher revenue growth. Hopefully, we should be able to build on current growth levels both in our top line as well as bottom line. As far as turnaround in top line is concerned, it might seem gradual, but we want to ensure it is sustainable as well as profitable. In case you have any further queries, please do reach out, we would do our best to address. That's it from our side. Thank you.

[Operator]

Thank you, speakers. Thank you, participants. That does conclude our conference for today. Thank you for participating. You may all disconnect now.