Dr Paul Philipp Hermann is currently a Co-Founder at Lamudi.com - a global real estate classified platform. Prior to this Mr Paul Hermann had worked for the Boston Consulting Group (BCG) for three years and founded an online recruiting start-up. He holds a Ph.D. in Law from Bucerius Law School in Hamburg and a M.Sc. in Internet Studies from the University of Oxford. Following is an edited excerpt of a recent conversation BR Research had with Mr Paul Hermann.
BR Research: What kind of business does Rocket Internet have around the world?
Paul Philipp Hermann: In general, it is into the internet business. It has 60-70 companies around the world starting from Linio, Jumia or Jabong, which are similar marketplaces for products like Amazon, to fashion platforms like Lazada, to classified models like Lamudi, Carmudi, and Kaymu to some extent.
BRR: What is Lamudi's presence globally?
PPH: I was working for a management consulting group before I joined Rocket Internet. Together with my co-founder, we launched Lamudi operations back in 2013 in several parts of Asia, Africa, Middle East and Latin America. In 2014, Lamudi expanded its operations in Asia to Pakistan, Philippines, Indonesia and Sri Lanka and today we are live in 34 countries around the world. So I would say that we in the emerging, developing economies ranging from Mexico to Myanmar.
BRR: Why not in some developed market?
PPH: In all developed markets, and even in some of the less developed markets, there already exists a big player. And this is a business where you generally have one to two players in a market or in some instances like USA there are three industry players, but not more than that. So it doesn't make sense to enter a market that is already saturated.
BRR: How do you compare yourself with Zameen.com?
PPH: Zameen.com started seven to eight years ago, and Lamudi came only two years ago. So Zameen.com has a five year head start. Also, Zameen.com was launched in Pakistan, whereas Lamudi expanded to 34 countries in the first two years of its launch. So considering the time we have been in the market, we are already at a strong number two position with a couple of other players in the market like Homes Pakistan, OLX, etc.
The agents and the brokers in the market might not see us as number one, which is fair enough, but they do see us as a good second player, and they want us to be successful here as well.
BRR: A key component in this game of leading the online portal for real estate is the focus on marketing. What is marketing like for Lamudi especially compared to its biggest competitor?
PPH: Compared to Zameen.com, our marketing strategy is slightly different; we have a very heavy performance-based marketing. We look very closely into what marketing spend brings us in what is required by our brokers and users. Therefore it looks slightly different from the perception, but from what we bring to the brokers, we try to really focus on spending well so that agents get the best out of it. We are working on real estate expos and fares for our agents and brokers, and we are also working closely with are brokers to make them understand when and where they need more leads. We are also offering international marketing to our clients - something that is unique to Lamudi only; we are offering properties from Pakistan to Pakistanis living abroad. We are not into TV commercials or any such marketing at the moment. Our focus right now is the product and the service.
BRR: How do you generate revenues?
PPH: It's a classic kind of a marketplace model where we generate revenues from the agents as they pay us for listing their properties, ads like banners on our website, and dedicated services like dedicated campaign for particular properties. We have about a hundred thousand active listing in Pakistan.
BRR: What's your organisational set-up here in Pakistan and how many employees does Lamudi have here?
PPH: We have 50 employees in Pakistan. To explain the setup, we have one centralised platform in Berlin with centralised IT team, marketing team and product team for all the 34 countries. And locally we have, product managers who feed in the local requirements into the system; we also have a PR and sales teams, finance and HR teams, and quality assurance and offline marketing teams locally. This setup offers benefits from both sides; the centralisation offers cost cutting, same knowledge base and standard quality and hence economies of scale along with the benefits of customisation at the local end.
BRR: Are you looking for any mergers or acquisitions here in Pakistan?
PPH: We have acquired a portal in Philippines. The decision worked out well for us. At this point in time, we do not see such opportunity in Pakistan. We are not up for sale either; we just got $16 million last October, and we are constantly talking of growth and our interest of investing further in the country.
BRR: Are you cash flow positively?
PPH: We are not, and we are currently not aiming for it because investing in growth is a better option for us. We have only been in the operations for two years; however in about two years from now, we should be positive on local operations plus the marketing spend. That's roughly the time when we should start considering whether we should spend more or look into making profits. Of the money we have received, Pakistan is among the top four countries we have invested in.
Lamudi wants to be profitable in the long run. For our kind of market, many classified portal around the world are profitable now and are making good money. So, we should also make good money eventually.
BRR: What are your future plans for Pakistan?
PPH: Going forward, we think we have the right team to move ahead with. We have a very reactive marketing strategy that is updated on a month on month basis, not even quarterly basis. And our main target in marketing is to level off broker requirements. Before going to more conventional form of marketing, we plan to develop our brand by providing quality service, value, and best products.
We have our Lamudi App up and running already and we are working further in making certain details available along with quality. We believe that the company that provides the best product and service is the one that wins; therefore we invest heavily into the product.
The rental market is a bit complex as the mortgage culture has not really picked up in Pakistan; we have partnered with one bank at the moment, but in the long run we plan to have more banks to compare mortgage rates across different banks for offering cheaper loans.
We are also looking to making use of data and presenting it in an informative form. But gathering reliable and accurate data takes time. We are getting more active in disseminating information; we have quarterly reports that just started. We believe that a real estate portal can really help people in two ways; one is to show accurately everything that is there on the market, and second is to give buyers some indication of the industry, market trends, prices etc. In general, the real estate portals need to work on adding the correct information, pictures and data that would guide the clients in the right direction.