Building a hyper-local social network
MagicPin offers reward points to users for sharing their local experiences on its app, reports Ranju Sarkar
Samar and Shweta, working professionals in their early 20s, like to hang around with friends at different Delhi hangouts that play good music, offer good food and are easy on their pockets. Every time they meet in a group, they take photographs and post them on social networks. Facebook, yes, but also MagicPin, a new hyper-local social network.
Like credit cards, MagicPin allows users to earn reward points at local merchants like restaurants, salons or fashion stores for sharing their experiences on the app. ‘‘With smartphones, there’s an opportunity to disrupt the offline retail market. And, the way to do that is not with deals and discounts but engaging with consumers to share their local experiences,” says Anshoo Sharma, co-founder and chief executive officer.
He was earlier a venture partner at Lightspeed India. MagicPin was incubated by Lightspeed, which also invested in firms like Livingsocial in the US, which was bought by Groupon, and Dianping in China which merged with Meituan, the world’s largest offline-to-online entity. Last week, MagicPin raised $7 million in a Series-B funding from Lightspeed, Waterbridge Ventures and two family offices in Europe.
Starting with the National Capital Region, Bengaluru and Mumbai, MagicPin commands a million users who spend, on average, 30 minutes on its app every day. It has grown sevenfold in a year and enabled its merchants to clock $40 million in business (run rate based on May 2017 figures).
The concept
‘‘If you pin a location (locality) in a map, you can see the wonderful experiences other users are having,” says Sharma. This could be across categories like food and beverages, beauty (salon and spa) or fashion — soft categories where there’s a sense of experience. This inspires users to go out and talk about what they are doing in life. ‘‘Experience is more important than ownership. People care about experiences and like to talk about these, inspiring others to do so,” says Sharma.
However, users are already doing so on Facebook. Why do they need to do it on another network? Well, Facebook is more generic and, so, there are other networks like a Twitter, LinkedIn or Instagram. MagicPin is a hyper-local social network, where people come and share their experiences, which are consumed by others. The engagement is through content around local experiences. As all experiences are at a merchant, it provides an opportunity for them to engage with customers. There’s no way otherwise for local merchants to engage with customers or bring them back. If a merchant wants to make an offer, she can make it on the merchant app, which appears on users’ feeds. It provides an engaged audience for merchants.
The opportunity
The offline retail market has been a white space from a technology perspective. The rising use of smartphones (90 per cent of users and merchants have one today) provides an opportunity to disrupt this market. E-commerce is likely to penetrate only five to 10 per cent of the retail market by 2020, when the latter’s size will be $2 trillion.
MagicPin focuses on ‘soft’ categories like fashion, food and beverages, and beauty, which offer higher margins of 40-50 per cent for merchants. And, they don’t mind sharing 12-15 per cent as commissions on the additional business they can get. Sharma feels it is a massive market. ‘‘Even if we grow 10 times, we are talking of $400 million or $0.4 billion of $1,000 billion. There’s huge room for growth,” he says.
Business model
The business model is to drive business for merchants, who give it commissions for an engaged audience, who share local experiences. Commissions are 12-15 per cent of the bill value; users need to take a photo of the bill and share it with the firm to get reward points. It also earns revenues from advertising and targeted campaigns by brands. The company is looking to enter categories like fast-moving consumer goods (FMCG). For instance, it ran a campaign for an Emami hair oil on the occasion of Mother’s Day, asking users if your mom is your stress buster. The idea was to drive engagement with the brand and induce trials (at salons). Some users also share their feeds on Facebook — the Emami feed got 50,000 likes — and this gives brands the additional kick.
The company needs a minimum of 5,000 users in a locality to get merchants on board, which takes around four months; more merchants get more users. For a locality to break even, the rewards it is giving should be equal to or less than the commission it is getting from merchants. The company claims it is in the positive in several localities but incurs a burn in the new ones it has entered.
Road ahead
MagicPin plans to add more categories, geographies and depth in its product and technology. And, improve its engagement with users and merchants. It plans to enter 10 cities in the next 10-12 months, even as it plans to go deeper in existing markets. While the company will grow at a much faster pace, it plans to keep its burn flat. The key challenge would be to get better at engaging with users and merchants.