| Times Internet is finally set to make money: it is expected to declare a net profit of Rs 6.6 crore in the financial year ending March 2004
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| Quick, name the Rs 120 crore online company that auctions nearly 1,200 airline tickets in a day, sells Rs 30 lakh worth of goods – apparel, appliances, music and books – and will soon launch mobile banking services?
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| The answer is Times Internet Ltd (TIL), the online venture of Bennett, Coleman & Co, which publishes “The Times of India,” “The Economic Times” and other publications.
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| After struggling since its inception in April 2000 and accumulating losses of nearly Rs 11 crore????, Times Internet is finally set to make money: it is expected to declare a net profit of Rs 6.6 crore in the financial year ending March 2004.
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| The company’s KPMG audited figures also project a turnover of Rs 120 crore, up from Rs 75 crore last year.
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| Predictably, the TIL turnaround has pleased “The Times” group managing director Vineet Jain hugely.
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| “In one of my interviews at the peak of the dotcom boom, I had said that the internet is a 7 to 10-year game,” says Jain, who’s also chairman of Times Internet.
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| He’s visibly happy that his position has been vindicated, especially because he continued to nurse the loss-making venture despite opposition from Jain family members and senior directors in the company.
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| Till now, the group has sunk about Rs 150 crore in Times Internet (including the web farms at Mumbai’s Videsh Sanchar Nigam Ltd office).
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| Today, Jain claims that Times Internet (which includes “The Economic Times” portal, “The Times of India” portal and indiatimes.com) is the biggest net company in the country, in terms of revenues. Bigger than rediff.com?
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| “In terms of the total value of transactions, yes, though they may have more registered users on their website,” he says.
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| “We have no competition. rediff used to be competition,” he adds dismissively. Indeed, Jain goes so far as to say that Times Internet is bigger than all other portals, when it comes to shopping.
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| “We are huge. We are Yahoo, e-Bay and Amazon.com put together,” he exclaims in a bit of boosterism.
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| It’s difficult to verify such claims. Rediff functionaries declined to comment on all this, saying that this was the “quiet” period for the portal since it had to announce its financial results.
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| But rediff.com CEO Ajit Balakrishnan in an interview to Ice World (March 2003) was equally dismissive of indiatimes.com. He described “The Times” group’s portal as being a tenth of rediff’s size and equal in size to hungama.com.
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| According to the SEC site, rediff.com’s number of page views has grown by 1.73 million in a year, from 1.54 million in March 2002 to 3.27 million in March 2003.
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| And Alexa, the search engine that ranks traffic on the worldwide web, places rediff.com at 185 and indiatimes at 315.
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| But rediff certainly is not making money. According to rediff’s filings with the US Securities and and Exchange Commission (SEC), rediff.com India Ltd made a loss of $ 19 million (Rs 86.83 crore) in March 2003.
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| The filing also states : “As of March 31, 2003, we had an accumulated deficit of approximately U.S.$ 48.7 million (Rs 309.39 crore). We expect to continue to have net losses and negative operating cash flows for the foreseeable future. We expect to increase our spending significantly as we continue to expand our services, advertise and promote our brand, and invest in the expansion of our infrastructure and sales and marketing staff.”
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| Times Internet CEO Mahendra Swarup is unruffled by the Alexa ranking. He argues that Alexa is an old system which is hardly used today.
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| “Besides it monitors traffic. And according to Alexa, 65 per cent of the traffic on rediff is e-mail traffic. For us, e-mail constitutes only 25 per cent of the total traffic,” he explains.
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| Swarup adds that e-mail traffic is free traffic. “We focus on monetising the traffic we get on our website,” he adds.
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| Clearly, focusing on monetising traffic has helped Times Internet to improve its financial health. Swarup recalls that when he joined the company in 2001, it was a pure content portal with 525 employees on its rolls.
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| However, he quickly realised that paid content was not a viable business model in India. “At least, not yet. The other learning was that advertisers had not really warmed up to the medium,” he explains.
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| Consequently, not only was the 500-plus team size trimmed to 250 people (thus paring the annual salary bill from Rs 2.3 crore to Rs 90 lakh), but the focus shifted from content to creating new revenue streams.
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| The company looked at four or five new areas. It kicked off mobile internet services and launched 8888, a number that offers a range of services to mobile users. The number is common to all cellular networks – Hutchison Essar, Bharti, Spice and Idea Cellular – and their circles.
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| Among the value-added services it offers are jokes, astrology, dating and shopping. Times Internet general manager (mobile internet and alliances) T N Prabhu says that mobile internet services is the fastest growing revenue segment for Times Internet today.
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| “When it was launched in February 2002, the SMS traffic was 1.5 lakh per day. Today 8888’s daily traffic is 1.3 million.”
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| To boost 8888 service further, Prabhu is close to signing up with three banks to offer mobile banking services: mobile phone subscribers will be able to check the status of their bank accounts.
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| But rediff.com too has been aggressively addressing the mobile internet services market.
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| Its SEC filing states: “Our mobile services are slowly becoming popular as the Indian cellular industry enters a high-growth period...We believe that our success in this segment will be determined by our ability to launch relevant services and our skill in reaching mobile users through distribution deals. During this fiscal year we have launched products in all the categories we believe will lead to higher growth: SMS-based chat, dating, e-mail and games. We have also achieved alliances with operators covering 90 per cent of the cellular footprint in India.”
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| Its strategy for 2004 includes creating more online and offline revenue streams.
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| Nonetheless, e-commerce contributes the most to Times Internet’s bottomline. According general manager, e-commerce, Ashsish Kashyap, indiatimes shopping rakes in sales of Rs 30 lakh to Rs 40 lakh a day.
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| “Of this 60 per cent comes from air ticket auctions and the remaining 40 per cent accrues from sales of products and services (apparels, accessories, books, movies, flowers, home appliances and life style products).” The company has over 70 merchants on its shopping mall.
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| Three months ago, a separate e-commerce division team launched a new magazine subscription business. This takes orders for national and international magazines and periodicals.
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| “We’ve already registered orders for 400,000 copies of different magazines and periodicals,” says chief manager, e-commerce, Pankaj Chandra. The margins in the business: 15-20 per cent.
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| “We may sell music and books worth Rs 1.7 lakh a day today but with better bandwidths, sales will only go up,” predicts Chandra, who looks after the company’s in-house shop on the net dealing in books and home entertainment products.
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| indiatimes’s air ticket auction service has been a hit too. Launched in April 2002, it started out as a strategic alliance with Air Sahara but the concept was later extended to Indian Airlines.
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| “Today, indiatimes is the only entity in the country to conduct online air ticket auctions and we’ve flown nearly 350,000 people,” claims Kashyap.
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| indiatimes now also offers air tickets to the US, France, the UK, Singapore and Japan in a tie up with Air India.
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| Next will be electronic ticket printing. “Currently, you need to fetch the ticket from the airline office. Soon you will be able to print it at home and collect the boarding pass at the time of the flight,” Swarup explains.
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| Times Internet has invested over Rs 25 crore in the e-commerce technology. “Of-course we continue to also make incremental investments as we scale up the business,” says Kashyap.
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| A foray into hotel room bookings too is in the works. “We’re working towards extending the concept to the hotel industry,” says Swarup.
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| Rooms have been sold at the Oberoi’s Trident chain on a trial basis. “It is an untapped area that we’re aggressively targeting,” he says.
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| Some rivals are impressed with such e-commerce initiatives. Says Hungama.com CEO Neeraj Roy: “indiatimes has clearly opened the air space in India by way of offering a robust engine to companies such as Air Sahara and Indian Airlines to offer discounted air fares.”
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| Roy adds that the way indiatimes has linked offline media to support the online purchase of books, music and CDs too has helped, though he’s quick to add that indiatimes may also be cashing in on the second coming of portals over the past one year or so.
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| “I believe that more companies are now believing in the medium. Since over 35 million people are digitally connected, it is a large enough community for advertisers to take seriously,” says he.
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| Some in the portal business, however, express scepticism about Times Internet’s success.
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| Says the head of an education-related dotcom company:”indiatimes is following the classic portal startegy of being everything to everyone. It pulls in people through chats and e-mail and then hopes that they keep coming back and do some business. There is nothing unique about the strategy. However, some of its innovative products – like the air ticket auctions – have worked. E-commerce will still take a long time to take off in India. I don’t think much of traditional shopping is happening there. Take their figures with a pinch of salt.”
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| Nevertheless, Kashyap claims that indiatimes accounts for approximately 80 per cent of the total e-commerce business in India.
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| In line with Jain’s vision of “paid views” rather than “page views”, the company has started focusing on paid services.
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| A few months ago it launched a paid e-mail service, mera e-mail, aimed at small and medium enterprises, and claims that it has enrolled about 10,000 subscribers. Times Internet is now offering the same subscribers website hosting facilities.
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| “We’re saying that now you have an e-mail address, we could create and manage your business website,” says Anurag Gupta, a senior indiatimes executive.
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| On the anvil too is a similar paid e-mail service for personal use, besides a new photo storage service where indiatimes users will be offered photo storage capacity on the web for a price.”Sooner or later, free services will disappear,” Gupta adds.
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| indiatimes executives say that it derives its strength from Promo Power, its brand of promotions and events business.
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| Swarup says that indiatimes designs internet-based promotion packages for different brands. However, rivals allege that indiatimes’ Promo Power is basically a “surrogate” response department for the entire Bennett, Coleman & Co.
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| “To discourage advertisers from using rival newspapers, it offers print space at heavy discounts under the guise of net promotions,” says the head of a rival dotcom.
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| Times Internet also benefits from the group selling advertising on the group’s portal and in its newspapers together. “Both are sold together,” confirms a group insider.
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| Counters Swarup: “The internet is all about interactivity and if I have the strength of print why shouldn’t I use it? Also, let me assure our critics that we offer no discounts unless we’re making money.”
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| Swarup, in fact, turns the argument on its head to score a point or two. He argues that rediff.com realised the synergy between print and internet and invested in weekly newspaper India Abroad in the US in April 2001.
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| “You cannot become a publisher overnight. Print is not an easy business to be in. Even Reliance did not succeed in the print medium.”
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| Secondly, he believes that rediff shifted base to the US thinking that NRIs would pay for online services.
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| “What Ajit Balakrishnan, perhaps, did not realise is that the NRI is more Indian than Indians and does not fork out money easily.”
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| Clearly, rediff may soon face bigger competition. Jain says that Bennett Coleman is open to hawking Times Internet equity to foreign investors.
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| “Though we don’t need the money now, we are open to it. We will also tap Nasdaq when we think we are ready.”
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| To which Ajit Balakrishnan could respond, indiatimes follows where Nasdaq-listed rediff dared to first venture. |
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