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Dialog Axiata (Sri Lanka’s biggest mobile company) just bought a big share of German-backed start-up Anything.lk – 26% for 1.59 million USD, valuing the less than two year old* daily deals company at around $6.3 million. I’ve known anything.lk since it was a directory site run by a few friends, to when it partnered with the international Rebate Networks to relaunch as a daily deals company in 2010, which is why I say the company is two years old.

The daily deals business model is that businesses offer big discounts, say 50%, to attract customers. So you’re sell, say, a meal for Rs. 500 which would usually cost 100. Of that 500, anything.lk keeps 42%, so about Rs. 210. The merchant earns Rs. 260. So they’re probably losing money or barely breaking even, but what they do get are customers. In this sense anything.lk is competing with the cost of a newspaper ad more than ecommerce per se.

Daily deals, however, is a somewhat dubious business model on its own. Groupon’s stock value has tanked and – while daily deals show high growth in the beginning – businesses do start to wonder why they’re giving away so much money for customers which become more and more deal-hounds rather than possible repeat business.

Anything.lk has been smart in that sense by quickly diversifying from the daily deals market, which they control like 90% of, to ecommerce (their, store, for just buying stuff outright), as well as events, travel, lingerie (a dedicated store) and delivering Litro gas.

Their international backers pumped in a lot of money, doing mainstream media ads, stickering buses, Facebook ads and gave them a big market base. They have an email database of over 280,000, more than 185,000 Facebook Fans and 30,000 regular buyers with over 60,000 deals sold. This was all acquired at great cost and with a staff of over 50 people (most sales, I think), but it makes the company a good acquisition target in turn.

Dialog has tried to get into ecommerce with ibuy.lk and tradenet, but neither of those really took off. I was at Dialog at the time they were developing iBuy and the problem is that, while they have the marketing muscle, they’re not really agile enough to be super innovative. Which Anything is.

I think a 26% stake is enough that Dialog can add value without messing the current culture of Anything up too much. They’ve been collaborating on mobile payments for a while now, but now it looks like iBuy and Tradenet will be folded in. While I think the deals market growth is going to slow down, Anything looks adaptive enough to, well, adapt. Here’s wishing them luck.

For more reading check the Echelon magazine article on Anything.lk CEO Reeza Zarook.

Posted on Monday, December 10th, 2012 in Business, Sri Lanka, Tech.