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Are Internet Portals In India A Case Of Death By A Million Cuts?

A curious aside from yesterday's post on In.com is that almost anyone who has a portal in India is not having a good time. There are not many who can claim to running one in India these days. I can only think of Rediff (Rediff.com), Times Internet Limited (Indiatimes.com), Web18 (In.com) and Sify Technologies Ltd (Sify.com) as the only players out there. The common thread between all these companies is that they are all in the red. It is a flaky to point out the portal angle as the only connection between these companies and their losses, but it is not without merit.

My reasonable guesstimate puts the top line for a company (it is a guesstimate, so do pardon me if the numbers are way off) close to Rs. 100 crore in revenue for a year. Most of these companies have a head count that is not lower than 150. With such a head count, compensation itself can easily be over Rs. 20 crore for the companies in a year. Servicing the facilities will add up another Rs. 5 crore a year to the bill. The technical infrastructure can add another Rs. 6 crore to the annual bill. Add another Rs. 15 crore in marketing expenses and it all adds up to a good Rs. 46 crore in a year.

The problem is that the head count is way over 150 in these companies (especially in those companies that are doing Rs. 100 crore in revenue) and the expenses I have listed are on the lower side. I have also not added other significant components like content licensing costs as they vary wildly from company to company. In the portal side of the business, advertising on content is more or less the only avenue for revenue and with the cost structures these companies have, it is impossible to scale those without a corresponding increase in costs. After a point, it is a case of chasing your own tail unless you can alter the fundamental variables in the equation.

The numbers mentioned above are not authoritative by any means and a lot of it can't be corroborated in any meaningful or public manner. But it demonstrates the point that doing more of the same that has been done so far will take you nowhere. This also represents a reasonable opportunity for a well-funded new operation that can be small and nimble. This also explains why the successful larger companies on the Internet India have been mostly transactional nature, which is only of limited relief since none of those have managed so far to diversify out of their core offerings.

What do you think?


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