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INTERNET: Rediff.com faces stiff competition but the sheer growth in Net advertising could help it survive.

On July 1, 2006, Rediff.com unveiled its new Outlook-inspired Rediffmail and launched an advertising blitzkrieg to last three months "� the first time in five years that it's spending on commercials.

The site has been through 10 tough years. At one time Rediff.com hoped to earn 75 per cent of its revenues from the US. That has clearly not happened. Its ad-dependent revenue model "� advertising revenues grew 88 per cent in FY06 "� drove total revenues to $12.17 million in FY06, a rise of 85 per cent.

Of this, the growth in the US publishing (India Abroad) business was a tardy 7.5 per cent at $6.53 million "� a third of the total revenue. The highlight of FY06 : the company turned the corner, posting a small profit of $1.2 million. Nothing to email home about but way better than the $6.39 million loss it posted in fiscal 2001.

However, with the email space becoming crowded "� thanks to the entry of heavyweights like Gmail, Rediff.com's feeling the heat.

Hence the new look Rediffmail with a host of new features, some which Yahoo, MSN and Gmail already sport (like emoticons) and others like vernacular translations which they don't. Will it work? With 45 million registered users, Agarwal claims Rediffmail's running head to head with Yahoo.com, though he admits that not all users are using Rediffmail actively.

These numbers, unfortunately, cannot be verified but says a consultant, "It will become more and more difficult to innovate, given the phenomenal Google spend on R&D (six per cent of revenues of $8.2 billion in 2005) a me-too kind of product may not work."

Agarwal says the idea is to get users to become more active. That may be possible, attracting new users, especially youngsters, who for whatever reason, are hooked onto Yahoo or Gmail, looks difficult.

Also, the vernacular feature that has been added may not be as big a draw as the Rediff.com team believes it will be. "While the Internet is spreading across the country, how many users will use the vernacular facility remains to be seen," says Alok Shende, Frost & Sullivan.

The take the IM space. With Yahoo and MSN teaming up to launch Live Windows, Rediffbol's unlikely to live up to expectations and the kind of image Yahoo has. Youngsters today prefer to chat on Yahoo or MSN though Agarwal claims that Rediffbol is the fastest.

The point, though, is that it has been around for nearly six years now without too much success. Agarwal attributes that to lack of awareness, admitting that Yahoo has created much more awareness, adding that a new IM package is in the works. Says, Shende, "People usually use two IMs, not more than that."

What can help Rediff.com is the big growth in the internet user base and the consequent interest from advertisers.

Says Rajesh Jain, director, KPMG, " Advertising on the Internet will grow at 30-40 per cent per annum and both niche players and aggregators can survive if they have good content. Jain believes that foreign interest, whether from players or P/E investors, in this space is evidence of this. Says he, "Once broadband penetration increases, the spread of the Interet will be faster and advertisers cannot ignore the space." Today, over 160 brands are advertised on the Rediff site.

In May last year, a self-enabling classifieds section was started in which advertisers "� mainly SMEs "� post their banners on the site and rediff.com earns a fixed rate per click. This could be a winner because SMEs are spared the trouble of hosting a site or paying unless a user has clicked on the ad.

But other products like faresearch "� which zeroes in on the cheapest airline tickets "� are in danger of getting lost in an increasingly crowded world. As is rediff.com. With valuations clearly running ahead of performance, there couldn't be a better time.