Cleartrip.com earning report

According to Sandeep Murthy, CEO, Cleartrip.com, "We are expecting to close this March 2008 with a Rs 700-crore turnover". Link

700 crore is a huge number for an online ticketing website. Lets see how much of this 700 crores is actually earnings for Cleartrip.

I will make following assumptions.

1. Average ticket price is Rs. 2,500 (The actual would be higher)
2. Cleartrip.com makes Rs. 100 on each ticket (I know for a fact that ticketing agents make all of Rs. 50 on each ticket. I am assuming that Cleartrip.com has the muscles to get better margins).

Time for some simple maths.

Turnover: Rs. 700 Crores aka Rs. 700 00 00 000
Number of tickets: 700 00 00 000 / 2 500 = 28 00 000
Margin per ticket: 28 00 000 * 100 = 28 00 00 000
Net Earning: 28 Crores

28 crores in first few years of operation is actually not bad for an online ticketing company. After they recover their investment costs (which should not be more than 20 odd crores if they are prudent), all revenues are theirs to keep.

There is zero or negligible operating cost for a business like theirs. No raw material costs, no managing the back end, no overheads. All they need to do is pay the licensing guy and put money in marketing. Further once they reach a traction point, even the marketing costs would start reducing.

Actually no. Theirs is a business with zero competitive advantage. Any website offering better deals will get the chunk of the business. How can they build moats around their castles? If they cant build those moats, they will have to somehow figure out a balance point between marketing spends and revenues.

Recently Yatra.com paid 10 crores to Mahesh Murthy's Pinstorm for online marketing. Keeping in context Cleartrip's earning at 28 crores , I wonder how much is Yatra making and is Yatra breaking even with this kind of marketing spend?

The business looks really lucrative. No wonder everyone wants to get into online ticketing. The long term winner will be the one who can leverage marketing effectively.