“Ixigo Trains — the daily utility app for million of Indians.”
That’s how Aloke Bajpai, CEO & founder of Ixigo, showcased the app to potential investors during a conference in Shanghai organised by Fosun RZ Capital earlier this week.
The train booking app has played its part well for the travel marketplace. Ixigo touched 25 million active users (MAUs) in December 2018, a two-fold year-on-year growth, surpassing MakeMyTrip’s 19 MAUs. It also saw a 70-80% growth in active users from tier 1 cities and 120-130% growth from tier 2 cities and beyond.
Ixigo is now looking to raise USD 50 million in Series C this year from existing investors such as Sequoia Capital and Fosun, and a clutch of new investors to further product innovation, R&D and brand marketing.
“Four years ago, nobody thought they could actually make money from train bookings. That's why nobody focussed on it,” said ixigo’s Chief Technology Officer Rajnish Kumar during an interview with The Passage.
Bajpai added this was why MakeMyTrip and Yatra “couldn't crack it”. “They were too busy competing on hotels and to some extent on flights. The reality of the market is that the next billion users are going to come from among train passengers.”
The early user experience at IRCTC (Indian Railway Catering and Tourism Corporation) made the intermediaries more relevant. The platform was the butt of jokes, and anyone who has tried to book a ticket through IRCTC would vouch for the stories of struggles that people went through.
Ixigo was started in 2007 by IIT Kanpur batchmates Aloke Bajpai and Rajnish Kumar as an informational and metasearch platform. They aggregated travel inventory from multiple online travel agencies (OTAs) and redirected users on their sites to complete the booking.
Ixigo partnered with IRCTC to sell train tickets on its website in 2010. It rolled out a separate app for train passengers three years later. However, in 2015, Bajpai and Kumar decided to give it a more serious shot: the company has since launched PNR (passenger name record) prediction, crowd-sourced offline train status, multilingual capability and an augment reality feature that helps iOS users in predicting their coach numbers, among other things.
What helped ixigo turn around the game was its move to become a marketplace from a metasearch engine. Ixigo used to earn money when users clicked on the partners’ link (cost per click). Over the last few years, metasearch engines like Ixigo moved to a new model where they need users to transact so as to earn money, say experts. Ixigo added transactional capabilities for flight and hotel bookings in 2016, and for train tickets in early 2017.
Integrating booking engines of their partners inside ixigo’s app paid off. “Our conversion rates improved dramatically and as we scaled up, we had access to better deals. The combined effect of these two gave us good improvement in the overall monetisation per user. For the same number of users, we are doing more transactions,” said Bajpai.
Ixigo now works with around 120 travel partners. Bajpai claimed the company provides its partners a way to grow faster at predictable cost, much lower than any other marketing platform.
By the end of 2019 fiscal, the Gurugram-based firm expects its revenues to reach USD 25-30 million and gross transaction value to touch USD 250 million. Its overall transactions recorded a 6x year-on-year growth in 2018, touching 1 million passenger bookings per month.
The billion people opportunity
“Sometimes the most attractive piece is the most boring piece,” said Chetan Kapoor, co-founder of travel advisory Videc and research analyst at Phocuswright. Still, the bigger OTAs didn’t give Railways their all.
Train is the biggest medium of transportation in the country with over 8,000 million annual passengers against the approximately 130 million a year for air.
“Railways pays marginal commissions and also charges intermediaries to access its content. Because of this they (OTAs) seldom make money from train transactions,” said Kapoor. Naturally, for MakeMyTrip, Yatra and Cleartrip, Railways never became a priority.
Satish Meena, an analyst at Forrester, said apart from building traffic around flights and hotels, most players were shifting towards tours and packages, the high-ticket services. “It was difficult for ixigo to compete with MakeMyTrip and other bigger OTAs. So they targeted categories like trains and buses, and customers beyond tier 1 cities.”
What started as a feasible option became the next big opportunity for ixigo. As the company tapped frequent train travellers, it saw its user base growing rapidly. “The frequency (of booking train tickets as compared to flights) results in a bigger market opportunity from a user acquisition standpoint. That can ultimately act as a catalyst in transitioning users to other products,” said Kapoor. “The real opportunity is to cross-sell and upsell around that, because your pool of audience is that much bigger.”
That’s what ixigo did, while online travel companies fought over flights first and then hotels during the last decade.
“By 2015-16, ixigo hadn’t raised as much funds as some of its other competitors. And then Paytm Travel happened” said Kapoor. “They further validated that there is a tremendous opportunity beyond flights and hotels.”
Paytm started selling flights and rail tickets in October 2016. A month later ixigo raised USD 10 million from Sequoia Capital. The company has so far raised a total of USD 28 million.
IRCTC, which had a monopoly on online ticketing operations of the Indian railways, now has a 65% market share. Companies now directly compete with it for traffic and charge nominal service fee from passengers. “If a company can even pull one percent of the entire railway booking, that itself is sizeable. It is not just ixigo or Paytm, you have a smaller intermediary like ConfirmTkt that has been built on the success of PNR confirmation, which is only big data based,” said Kapoor. RailYatri is also a player that has seen rapid growth in this space. It started out as train information app, before becoming to a full-fledged OTA and is backed by Omidyar Network, Blume Ventures, Helion Venture Partners and Nandan Nilekani.
Ixigo doubled its conversion rate after it started booking train tickets on behalf of IRCTC on its app. It expects to cross one lakh transactions per day by next year. “In tier 1 markets, we have grown significantly, but still have headroom to grow. Whatever growth we are seeing in tier 2 and beyond, we are eating into the market share of other players,” said Kumar.
The road ahead
According to Videc’s Chetan Kapoor, half the train bookings are done online as opposed to about 15% of total hotels booking.
Bajpai said trains tickets are becoming a strong contributor to revenue growth, though the larger part still comes from flights and advertising. “And it is bringing a lot of organic users to our platform.”
The company has partnered with Amazon’s Alexa to roll out its voice-enabled travel assistant TARA and is working with Apple’s Siri for the same. It has also tied up with smartphone companies like Xiaomi, Samsung and Panasonic, among others, for integrating train-related services on their platforms, said Kumar. He added that a deal with iOS is in the pipeline.
While their apps for booking flights, hotels and trains receive about 3 million users every day, the company is seeing “things happening on the apps to book buses and cabs as well”.
Meanwhile, the larger OTAs have begun paying some attention to trains. Sean O’Neill from Skift, a travel news and research firm, has written that rail ticket booking will be a critical factor that determines who leads in India’s online travel race. “MakeMyTrip, Paytm, ixigo, Yatra, Cleartrip, and other companies, will, to varying degrees, try to use rail as a gateway drug of sorts to lure people into buying flights, hotels or other products.”
Last year, GoIbibo launched its app for trains, which lets users check PNR status and book trains along with flight, hotels and buses through a voice-enabled chatbot. In late 2018, Google acquired Sigmoid Labs, which had created Where is my Train app to check train status.
“Going forward, ixigo may compete with new entrants like Flipkart’s PhonePe because they are also building a similar platform to bring users in. We may also see Google and WhatsApp tapping into the market,” said Forrester’s Satish Meena.
Bajpai and Kumar realise this and seem prepared to take on the fight. “When it comes to user acquisition, everyone is competing with everyone else. Airlines are competing with OTAs and OTAs are competing with hotels, and everybody is competing with Google,” said Bajpai.