Portals contest heats up (Sify Vs Rediff or Integrator Vs Content Provider?)
(Internet groups jostle for subscribers at home and abroad, writes Krishna Guha)
-Courtesy:Financial Times,London
The race to dominate India's cyberspace has entered a decisive phase. At stake is a glittering prize: leadership of the internet economy in a nation of 1 bn people and a booming technology industry. The winner, or winners, may emerge in a few months time.
Last week Satyam Infoway, India's biggest private sector internet service provider, pulled off a deal that many analysts believe could give it the winning edge.
Satyam Infoway agreed to buy India World, the No 2 internet portal company, for Rs5bn ($115m) in cash, using funds raised when it listed on Nasdaq earlier this year.
India World has a portfolio of high-profile web sites, including Khoj, the most popular search engine. These sites are particularly popular with Indians living in the US, because the content includes cricket, news and Indian recipes. In October, India World recorded 13m page views. Satyam Infoway's own portal site, Satyam Online.com, also had close to 13m views, mainly from India itself.
"It is a natural fit," says R. Ramaraj, managing director of Satyam Infoway. "Satyam Online.com focuses on the Indian audience in India. India World's properties focus on the Indian interest audience outside India. We now have a global audience. It gives us leadership in this business."
The merger poses a strong challenge to Rediff, India's leading portal company, which had 29m page views during the same period. Rediff is scrambling to stay ahead in the portal business.
In September, it launched a new search engine, which has become India's second most popular after India World's Khoj. Now Rediff plans to close the funding gap with its own initial public offering on Nasdaq, scheduled for the first quarter of next year. The money raised will be used to ramp up its content business and will give Rediff the option to buy other internet properties.
Rediff has the widest range of India-related content and services today, with a strong news service. But the content divide will narrow sharply when Satyam Infoway integrates its portal site with India World's sites. It is shaping up as a contest between an integrated internet business model and the content-only approach, and as a powerful example of the benefits of first-mover advantage.
Satyam Infoway aims to emulate the success of America Online. Rediff hopes to follow the example of Yahoo!. "We decided that we want to be active in all aspects of the internet: infrastructure, connectivity, content and commerce," says Mr Ramaraj. Satyam Infoway, the first private ISP, has more than 100,000 subscribers.
Mr Ramaraj says the extra content from buying India World would ensure these subscribers stick to Satyam Online.com as their portal site. This would allow the company to build revenues from advertising and e-commerce, even as competition whittles away its subscription fees.
Due to SEC regulations, Rediff is unable to comment on its strategy ahead of next year's listing. But the company is known to stand by its content-only approach, and has been in contact with Satyam Infoway's rival internet service providers.
"No private company will control more than 15 per cent of the internet service market," says an analyst who follows Rediff. "Rediff will provide content and services to the other 85 per cent. Those companies will not want to deal with Satyam Infoway."
Rediff was the first portal company to provide the range of features and services associated with the US "megaportals" and still benefits from early market leadership. But Satyam Infoway, with its stream of subscription revenues, beat both Rediff and its ISP rivals to Nasdaq.
It reaped a publicity bonanza and first choice of potential acquisitions. "It was very important to get to Nasdaq first," says Mr Ramaraj. Others argue that providing Rediff is able to list successfully in the US early next year, it will suffer no lasting disadvantage. "Lycos was the first to list in the US, Yahoo! was second or third," says the analyst who follows Rediff. "The important thing is to be in the first batch."
Other companies are also jockeying for position in India's cyberspace. These include Bennet Coleman, India's leading print media group; Zee Telefilms, the biggest multimedia company; Bharti, the number two private ISP; and VSNL, the former public sector monopoly that still has the biggest internet subscriber base.
But the betting is that Satyam Infoway or Rediff will emerge as India's dominant portal company. "This is not a market that can sustain 10 players," says Amit Chandra, co-head of investment banking at DSP Merrill Lynch. "India [which has less than 500,000 internet subscribers] will have maximum two megaportals, maybe only one."
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