How does freecharge make money?

Replies

• 

  vishnu tej

  According to me, it is the advertisement they provide on their sites and tie-ups with other portals which earn them real money.
• 

  Satya Swaroop Dash

  Disclaimer: My answer to the above question is a result of my own intuition and it may or may not be correct.
  
  There are two ways FreeCharge earns money
  
  (1) From Service Providers: Just like your local shop earns some (a very little) commission from service providers by providing recharge facilities for the company’s, FreeCharge earns in the similar manner but since it caters to a much much larger customer base its earnings get proportionally higher.
  
  (2) Coupons from various companies: This option may sound a little unintuitive but when you understand the business side you get a clearer picture. Companies pay freecharge to put up their coupons on the website which freecharge offers you for free or by paying an additional meagre amount. I was previously naive thinking as to why companies will allow people to buy products from them with help of coupons but the book “The Power of Habit” helped me understood how the whole couponing process is a marketing ploy by a company to drive its sales. You can read the excerpt How Companies Learn Your Secrets - The New York Times.
• 

  Kaustubh Katdare

  The way Freecharge makes money is very interesting. Apparently many people wonder how can they offer coupons to equal up the amount of account top-up. Freecharge generates its revenues from their tie-ups with telecom service providers. Because they are removing the retailers and scratch-cards; telecom companies can offer them more commissions. Referring to multiple sources, it looks like the company had about 2-3% of net commissions of the total transaction value.
  
  Freecharge founders have said that they operate on razor-thin profit margins and hence the bigger revenue numbers comes from more users using freecharge to top-up their phone accounts.
  
  I'm also guessing that freecharge would be charging some money to the coupon providers because that platform acts like an advertising platform for the brands. If you get a coupons worth Rs. 50 from McDonalds two things will happen:-
  

  • You will not want to waste that Rs. 50 coupon.
  • You will therefore go to McDonalds and eat stuff at least worth Rs. 500
  • Given the astronomical profit McD will make; spending Rs. 50 on acquiring a customer ain't a big deal for them. At least it's a form of advertising that has more returns guaranteed!

  Basically - they take money out of your pockets by making you believe that you're getting it all for free. It's just a part of the entire game, you see! 😀
  
  PS: FreeCharge has been acquired by Snapdeal; which is heavily funded. I bet Freecharge does not have to worry about profit margins and revenues anymore.
• 

  Ankita Katdare

  Kaustubh Katdare

  Basically - they take money out of your pockets by making you believe that you're getting it all for free. It's just a part of the entire game, you see! 😀

  This is scary when you put it like that. I read an interview of Freecharge CEO Kunal Shah, where on asking about their revenue model, he wrote:
  
  

  We don’t have a defined model – sometimes there is listing fees, redemption model, or just distribution of coupons. We’re focused on giving value to merchants.

  Do you guys think that a mix of the three elements he has listed is how freecharge makes money?
• 

  Liju P Nandanan

  I don think they really make money. Because the commision which they get from service providers is very much low, approx 1.7-2.5% if its a bigger player like Airtel,Idea,Vodafon. They also need to pay almost 2.5% +tax for the payment gateways. then how they would be prifitable?
• 

  Ankita Katdare

  Liju P Nandanan

  I don think they really make money. Because the commision which they get from service providers is very much low, approx 1.7-2.5% if its a bigger player like Airtel,Idea,Vodafon. They also need to pay almost 2.5% +tax for the payment gateways. then how they would be prifitable?

  Interesting point raised by Liju here. They are left with hardly 0.5% of revenue per transaction. (Not profit). From I saw earlier Freecharge offered coupons and it got commission from brands whenever someone redeemed their 'free coupon'. However, the rate definitely has to be really low. I guess it is the site's popularity (read: huge market share) that keeps its boat afloat.
  
  In an interview, Kunal Shah said that they do take fees for listing of different coupons from the likes of McDonalds, Cafe Coffee Day etc. So, that's one way of making money for Freecharge.
  
  Recently I saw Freecharge has entered into various segments. Including bill payments for electricity, landline and gas, Mumbai Metro passes, DTH recharge for all top players and data card recharges too.
  
  Has anyone checked the new Freecharge site? It works super smooth. But there is no trace of any 'advertising'. Someone said they do content sponsorship. That's no longer true either. I couldn't find any paid content on their site.
• 

  surendra kumar Agraharapu

  from where will i come know how much commission will they get.urgent pls reply
• 

  Kaustubh Katdare

  surendrakumar999

  from where will i come know how much commission will they get.urgent pls reply

  That information would be difficult to get. You'll need to get in touch with a company insider who's aware of the contracts. But as I'd guess; they are into 'volume' game with thin margins. But that's just my guess and I've no knowledge of how they work. Maybe we'll get their founder to do an AMA session on CrazyEngineers? 😀
• 

  Shahbaztamboli

  Hey i think they are exchanging the coupons like freecharge give 50 rs coupon to a person to shop on snapdeal and here freecharge has to pay 50rs to snapdeal insted of paying 50 rs to snapdeal freecharg gives rs 50 coupon to snapdeal then snapdeals offers you to shop for 500 and get 50rs freecharge coupon so that 50rs is back to the freecharge and this prosess goes on goes and goes on
• 

  Shahbaztamboli

  Hey i think they are exchanging the coupons like freecharge give 50 rs coupon to a person to shop on snapdeal and here freecharge has to pay 50rs to snapdeal insted of paying 50 rs to snapdeal freecharg gives rs 50 coupon to snapdeal then snapdeals offers you to shop for 500 and get 50rs freecharge coupon so that 50rs is back to the freecharge and this prosess goes on goes and goes on