The Dunzo deal is a fine example of Google’s increased interest in investing in India. This $12 million funding of Dunzo is Google’s first direct investment in an Indian startup, and it comes after Google International LLC’s Rs. 1,204 crore infusion in Google India Pvt. Ltd.
The Dunzo deal was materialized through Google’s Next Billion Users (NBU). At the funding round, Dunzo’s earlier investors Blume Ventures and Aspada were also present.
The deal comes across as sign of Google’s growing interest in the Indian market. Google’s Indian division has been profitable for over a decade, however, Google had not been very keen in spending in India. With the dunzo deal in motion – considering the scale of infusion – it looks like the search engine giant has now come to realize that the indian market is matured and big enough make investments.
Though Google had funded several indian startups in the past through its Launchpad Accelerator Programme, this direct investment made all heads turn.
Let’s see what kicked up the interest of this search giant to invest in a hyperlocal concierge app like Dunzo.
What Dunzo is all about?
Dunzo is a hyperlocal startup founded by Kabeer Biswas, Ankur Agarwal, Dalvir Suri, and Mukund Jha in 2015. The Dunzo app facilitates running errands for its customers. It could be cleaning the house, buying groceries, or fixing a broken phone, Dunzo’s go-getters will run around, find it and deliver it to your home. All the customer needs to do is to get into Dunzo app, set up tasks of when, where and what needs to be done, and the Dunzo’s dedicated team will run the errands for its customers in less than the usual time.
Everytime a user sets up a task in their app, the program determines the best possible way to execute that task by considering parameters such as users’ history, location, credit rating etc. Also, Dunzo allows to exchange images of items requested by customers. If a customer is looking for a specific hand gloves they can send the picture of it. Then, either the runner (delivery person) or the partner (vendor) can send the pictures of the gloves they have found. If the customer confirms the product, it will be delivered to the mentioned address.
Dunzo uses Artificial Intelligence (AI) and human operators to help fulfil its customer needs.
Dunzo revenue generation is not solely dependent on the money customers pay for errands. For example, in over 40% of cases customers do not specify a store, in these instances Dunzo directs the traffic to its partner merchant (vendor) and takes a cut of commision on each transaction. This becomes an additional revenue apart from charges it levies on other certain transactions.
Currently Dunzo operates only in Bengaluru, and the company is planning to the spread its services to others cities soon.
Why Google was interested in Dunzo?
The big question one everyone’s mind was why would a search engine company of this magnitude would invest in small concierge app which has some 3,000 to 4,000 transactions per day?
The answer could not be defined in a single statement, and it goes without saying that Google would have considered various factors before making its decision.
First, just like Dunzo, there had been several hyperlocal fulfilment startups; unfortunately most of them were unsuccessful. Dunzo had persevered, and its daily number of orders were growing fast. And most importantly, it was focusing on a relatively small, yet deeply loyal set of customers, which had helped the startup clinch the deal.
Second, it was a win-win situation. “It’s a signal on both sides,” said Biswas, one of the co-founders. “We use a lot of their products and drive growth and signal for ourselves, and we can build a lot of product data at our end which make them better.”
Biswas also stressed that: “If you were to build a search function in the fulfilment world where it’s possible to get you anything in 30 to 40 minutes, we are what local search would look like.” This has piqued Google’s interest.
If you look deeper, the platform kicks up a series of actions right from the moment a user enters a request; and the platform gets data from three different search indexes to understand and fulfil its user requests.
Third, one of the main causes for the failure of other hyperlocal startups is its inability to keep the delivery person fleet busy enough to justify their salaries, while still remaining profitable. This becomes even more challenging when you are targeting multiple cities, but Dunzo has a plan ready for that. Dunzo plans to counter this challenge by having a dynamic pricing structure to determine the value of each task to justify the cost and effort of the delivery person. Which means, the price will vary according to the task and the effort carried out by the delivery persons.
Fourth, the data from the app can shed insights on users behavior and preferences (their likes and dislikes). It can help predict a pattern through Dunzo’s heatmaps.
Fifth, Dunzo uses several Google APIs such as Google Maps API (for efficient routing), Distance Matrix API (to calculate distance between two points), and Google Places API (helps delivery person in contextual information, such as when a store will close).
Above all, experts believe that Google’s interest in Dunzo could be due to two prime reasons, one is that the app’s uniqueness lies in solving a local problem. And the other is more strategic – after launching its own hyperlocal app, Aero, last year, Google wanted to get a deeper understanding of the underlying commerce of the local markets of India, and the only way to accomplish it is to dive deeper into it. And apps like Dunzo can help them gain that insight.
And it is also been reported that Dunzo’s long-term goal is to have an in-built integration with Google Maps.
Dunzo’s future plans
Dunzo plans to expand to over half a dozen cities across India by the end of 2018, and is aiming to ramp up its transactions (currently) from 3,500 – 4,000 to 100,000 transactions a month by the end of 2018.
The startup claims that their team is trying to build a machine learning model which allows them to recognize and track patterns from historical transaction data, in turn, enabling them to get insights on when a store gets its new inventory, which products are in demand, what days the store remains closed, and so on. Also, on the cards are plans to get into bike-sharing.
Dunzo, according its ambitious founders, is a kind of a product that aims to completely eliminate the need for search. Evidently, any innovation related to internet search grabs the attention of Google. With Indian markets growing at the tremendous rate, top conglomerates are getting ready to explore the vast possibilities that Indian startups are throwing open.
Deals like Google and Dunzo are setting the stage, and it is not hard to surmise that more such investments are likely to follow.