The money web

BS OPINION

Are web-based businesses beginning to make money in India? Wednesday's report in the Ice World section of this newspaper suggests that Times Internet, which runs indiatimes.com and the Times publishing group's news portals, may announce a net profit of Rs 6.6 crore on a turnover of around Rs 120 crore in the year to March 2004.

In the absence of details, no one can be sure how exactly the money is being made and whether the profit is indeed "net", given the liberal use of in-house media and infrastructure to promote the Internet business.

From the sketchy numbers available, it seems as if the bulk of the Times Internet turnover comes from airline ticket auctions (around 60 per cent). The balance comes from online sales of products and services. Very little revenue is generated from sale of content or online advertising.

Against this, portals that draw more surfers than indiatimes.com are still bleeding "" though less profusely than before. Rediff.com, the largest of the Indian portals, lost $ 900,000 (over Rs 4 crore) in the quarter to September 2003, on revenues of just $ 3.4 million. Sify.com, the other big portal, made net losses of $ 4.46 million on revenues of $ 12.95 million in the June quarter.

What this means is that people are beginning to make money in providing infrastructure and services built around the Web, but not necessarily from the core of the Web itself "" at least not yet. Globally, despite the greater availability of bandwidth and higher PC penetration, the Web has destroyed more businesses than it has built.

Businesses ranging from real estate to broking to ticketing and hoteliering have been hit by gale-force winds. Brands, products and services have been commoditised owing to the Web's ability to allow people to compare all prices and features at one place, thereby reducing information asymmetry.

On the other hand, the Web has not been as successful "" so far "" in building new business models to replace the old ones it has destroyed. In fact, the only kinds of Web businesses that have succeeded are those that built a unique business proposition using the power of the Web (eBay, Amazon, Google, Yahoo!, E*Trade), or those that used the web as an additional (or even the main) channel for existing businesses (Dell).

In India, we are a little less down the learning curve due to low levels of Internet access and PC penetration. China's big portals are all profitable primarily because of higher PC and mobile penetration levels of 60 million and 200 million, respectively.

The rapid growth of India's mobile population, thus, offers hope. While Internet access will continue to increase from the current 15 million, the big bang should happen in mobile telephony. This will make some form of Web service available to millions of people at one stroke.

SMS is already one of the biggest money-spinners for portals; it is only a matter of time before m-commerce starts becoming the next big thing in India.