BT ANNIVERSARY ISSUE: TRENDS (Page 2)

The netspace is awash with desi dotcom flotsam. Here's a Team BT take on what the future holds for dotcoms and dotcommers.

Three new websites are being served up everyday to an Indian audience that numbers approximately 5-6 million users. It is not known how many sites are dying on a daily basis, but with 23,000 sites of Indian origin already floating in internet-space, there's tonnes of desi dotcom flotsam. Blame it on infrastructure, the plunging NASDAQ, or even on the VCs, dotcom is a dirty word today. Fuelled by extraordinary hype and entry barriers so low that virtually anybody could enter in search of eyeballs, many dotcoms lost all sense of proportion. Money was splashed like water in pursuit of a dream that has gone terribly awry.

But then, this is not about what went wrong. That much is apparent when you look at, say, Rediff's ads quote of $2.56 on the NASDAQ or read about second-round funding blues, or about job cuts in the more established dotcoms. After all, a shakeout was expected-the established players are welcoming it as a natural purging. Says Neeraj Roy, CEO, Hungama.com: ''People are not doubting the medium. We're lucky that the learning from the West is being implemented in double-quick time.''

The question, then, is not whether dotcoms will survive at all (a few of them will), but what form they will take. The internet is a new medium of communication and doing business, and there will always be space for players who can understand and react to this space with dexterity and flexibility. But will it be the bricks and clicks that will rule in the future? Will online advertising take off? In an essentially free medium, will online consumers shell out for services? And for goods? Who will be able to reap the obvious potential of e-commerce, and what form will that be? Team BT spoke to a cross-section of Indian netpreneurs, net technology firms, and venture funds to get their take on the future.

Ajit Balakrishnan, CEO, Rediff.com: Over the next three years, I expect at least two dotcoms to figure in the Sensex. One still cannot say whether the pure-play model is dead. All one can say at the moment is that pure-play e-tailing is difficult. Revenue generation in future will have to increasingly focus on advertising that is better targeted, more personalised, with sophisticated selling of space, backed by consumer-user research. I think the horizontals have a better chance of survival simply because they are the vehicles with the maximum reach.

dotcom watch
Future Of Funding

On the face of it, there's no problem. In 1998, there were half a dozen VC firms in India; today, there are more than 50. According to the Indian Venture Capital Association, VC investments in India are expected to jump to $3 billion in the next 18 months, a 10-fold increase over the $320 million in 1999. The VC industry is gutted with cash-looking at Westbridge Capital's $140 million and Chrysalis Capital's second fund, the money hasn't stopped flowing in.

Where will all this money go? Will it be pulled back into more lucrative, or safer, markets? Nay, say the VCs, deals will get larger, and the average round of financing will grow from $1 million at present to $5 million. VCs' portfolios will also become streamlined-with limited intellectual bandwidth, those days of sitting on 15-20 boards are over. Also, expect funding to be a mix of a debt and equity. The only problem: VCs' famous herd mentality, which translates into path-to-profitability in sectors like it-enabled services, embedded software, mobile internet, and e-infrastructure. Now, where does that leave the dotcom?

Anand Talwai, CEO in Residence, E4E VC fund: Everybody now realises that advertising is not going to give desired revenues. They should focus on building the business as a business rather depend on crutches like ad banners. I feel that dotcoms should have a clear focus, ally with brick and mortar firms, concentrate on the back-end rather than the front-end, try for a cultural fit, and focus on the bottomline rather than on market-cap. Technology cannot be a USP permanently. It is how the products and services are packaged to deliver value-added services that will count.

Bikash Mathur, Executive Director, Maveric Systems: Focus is important. Guys with the right operating talent are required. It needs to have some very serious, experienced hands from the brick-and-mortar world. The CEO of the dotcom must have the innate ability of taking money from VCs. In the next couple of years, global players will wrestly for space in India along with Indian dotcoms. Efficient processes on account of sound technology will lead to success. In every genre there will be the big three, but niche players will have their way.

K. Vaitheeswaran, Veep (Marketing), Fabmart: The model must be such that consumers are willing to pay for such products or services on a sustainable and long term basis. Assuming the model is based on strong fundamentals the biggest advantage will go to first movers. I believe that while a loyal customer base and a strong online brand will be very important, the biggest entry barrier in the internet business will be time. And this will accrue to the first movers only in their respective spaces.

L. Ravichandran, CEO, Chennaionline.com: VCs are no longer satisfied with just ad revenues. They want the complete model.

R. Ramaraj, Managing Director, Satyam Infoway: The revenue drivers at the moment are for e-enablers, as companies look for e-transformation. On the consumer side, future revenue streams will be linked to the ability to innovate and introduce the elements of personalisation and interactivity. The internet has still to be effectively used as a promotional medium. That's why it's wrong to say that the pure play model is dead.

Sunil Lulla, CEO, Indya.com: Given the vast landscape and distribution hurdles, the non-internet world plays an important role. As the on-line world gets bigger and more powerful, it will provide a more efficient base for audience management, transactions, and business building.

S.P. Narayanan, Chief, Incubator Group, ICICI Venture Funds: The pure play model is not dead, but it is not sustainable simply because business volumes are not enough, and an off-line component is crucial. Dotcoms that have been able to generate enough resources to sustain over the next couple of years and have created a window for themselves and entry barriers for others will survive.

Sankaran Raghunathan, CEO, Blueshift: Dotcoms will have to efficiently execute businesses and bring down transaction costs. The key for the success of a dotcom is not who is the strongest and can out-beat the others, but who fits in best with others. The first to build up volumes will succeed rather than the first mover. Patenting of business models will have to be closely debated before being allowed, as it will kill innovation.

S. Ramakrishnan, CEO, Intercept Consulting: Only focussed, personalised dotcoms which are of course interactive will survive. They should plan their businesses well and think of almost instant revenues. Dotcoms should build brands intelligently. The best way to gain awareness in the internet world is through the internet.