It's the horizontal surprise of the year. While everyone was expecting indiainfo.com to be the first casualty in this space, it was 'here comes the sun' go4i.com that took a fall-its CEO quit and a key partner withdrew. As the year draws to a close, the news isn't getting any better for those gateways to the web. The two pedigree players-Rediff and Sify-are receiving a royal bashing at NASDAQ. Rediff's ADR quotes at a little over $3 against an issue price of $12; Sify has plummeted to $6, down from a 52-week high of $113. That's what the market tells us; by all indications, the news at other portals isn't bright. And cash-rich global biggies like Yahoo and msn have marked their Indian presence.

What a contrast from the beginning of the year, a euphoria trip fuelled by VCs. ''After the downturn in NASDAQ, the expectations are rather realistic now,'' says Raj Raman, Vice-President (In-charge), Sify.com. As VCs tighten the purse strings and path-to-profitability becomes the next million dollar question, the dynamics have changed from full-page advertisements. ''The market has matured beyond the number of page views. What kind of traffic you are drawing, what is the profile of your users...those are the kind of questions being asked,'' says Atul Kunwar, CEO, Mantraonline.com.

The answers centre around advertising revenues, which account for 90 per cent of the take-home. ''Advertising revenues have shown a huge growth,'' says Raman, conceding at the same time that the pie at Rs 50-60 crore is too small. Many portals are thus looking at database marketing, albeit quietly, thanks to privacy concerns. ''Having captured unique profiles of users, they are not only able to offer differentiated advertising, but this may also be looked at as a separate revenue opportunity,'' says T.S. Mohan Krishnan, Research Director, IMRB.

Accounting for only 1-2 per cent of revenues, domestic e-com has been a non-starter this year, and this trend is expected to continue until the usual infrastructure issues sort themselves out. ''E-commerce is not taking off for another two years,'' predicts Krishnan, adding at the same time that one must aim at being a long-term player in the market. That explains the conscious move towards NRI audiences, which have attractive demographics. Both Sify and Rediff have acquired an NRI-focused site each.

In short, the portals will not break even in 2001. ''It's a little ambitious,'' agrees Sify's Raman. For now, it's a bloody game to clamber up to the pole positions. With relative newcomers like Indiatimes.com displaying aggressive savior faire, the battle is getting interesting. At the end of next year, the gap will widen. Hopefully, by then we'll know what works in the horizontal space.

-Pooja Garg

Second Round For VCs
Money For Nothing

Are they to blame for all of this? Venture capitalists have spent the last year pouring cash into the dot coms coming their way. The messiahs of the New Economy-VCs and consultancy firms-organised melas, where some ideas would get funding on the spot. Those were the days. Now the morning after, the excesses are showing. For instance, if eVentures has a winner in contest2win, there's a casualty in horizontal portal chaitime.com. There are many other bad calls, too many to mention.

So, who's the fall guy: is it the Sensex or the nasdaq crash? Or should it be the VCs, who were fuelling a herd mentality by backing one type of concept, be it b2b or b2c? Disagrees Rashesh Shah, CEO, Edelweiss Capital: ''It's the market. After all, if the market had taken off, the VCs would have lost opportunity.'' Adds Pravin Gandhi, Partner, Infinity: ''Yes, some of the VCs did ignore the fundamentals. But the fact is, when new technologies have been introduced, people think that they should be early investors.''

Yet, it cannot be disputed that VCs blindly follow trends. Having burnt their fingers with some of the pure dotcoms, they are now moving on to other concepts. Says Shah of Edelweiss: ''VCs are now looking at investing in opportunities which are more global.'' The favourites: it-enabled services, embedded software, design of chips, mobile internet, and e-infrastructure. Adds Sumir Chadha, Managing Director, Westbridge Capital Partners, which set up a $140 million venture fund in November: ''The real issue now is who can help the entrepreneur beyond the money. In terms of contacts in the Silicon Valley.''

Though the VCs may have burnt their fingers, Chrysalis Capital is close to closing its second fund (the first had a corpus of $65 million). That is, after revamping and restructuring the business models of the investments in its portfolio to have revenue-earning streams in the ventures. All said and done, the VCs final call to investors is pretty simple: while chasing high risks, returns can vary. It's all part of the game.

-Roshni Jayakar

First Person
Death Of A Dotcom

Once upon a time, I was in the Valley, a cushy job in technical support with a leading company and a bright future. Then came the great Indian internet call. Along with five friends (drawn from companies like Oracle and Schlumbarger), we set up bluebrix.com through Eraylis Technologies, and with a pooled investment of Rs 10 lakh. We spent endless hours in cybercafes trying to find what surfers wanted. Finally, we zeroed in on a horizontal portal targeted at the youth.

Revenues? Advertising and e-commerce. Each time a registered surfer came to the site, he could accumulate points (we call them brixs). They could then exchange these brixs for steep discounts with vendors of various products. Our partners: Samsung, Revlon and Pizza Delight. We also went in for smart links, wherein the visitor could totally customise not just the homepage but all the channels on offer.

So far, so good. Now we needed VC funding...Only, there wasn't any. The tide had turned by March. Many VCs wouldn't even give us the time of the day. Only one VC gave us a patient hearing. But nothing worked out. A majority of the VCs move with the tide. The approach is investing into the flavour of the month or season. They have a herd mentality, rather than evaluating each project strictly on merits.

We cut down costs, even designed the site ourselves. We advertised in a leading financial daily looking for investors, but in vain. Soon, two of the core promoters left. Nevertheless, I feel that this is a fundamentally sound idea. I will give it another year. We can make a go of it. Till then, I will keep it running on a bare-bones basis with my own funds.

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