Track 1 on ‘IT and IT Services’ and Track 2 on ‘Internet Technologies’ took place simultaneously on Day 2 at the TiE-ISB Connect. Rajat Gupta covered the latter for us:
Day 2, Track 2
Ajit Balakrishnan, CEO and Founder of Rediff began his keynote address with an assessment that though mobile users outnumber Internet users in India, you can’t do much with it: GPRS is still not easily useful, and bandwidth needs to improve for mobile phones to be really successful. On the Internet, over the last ten years auctions, messaging, email, classifieds and travel have worked.
Auctions, he said, have changed the lifecycle of products: new products have great demand, and insufficient supply. Auctions are the best method for price discovery, particularly with the youth willing to pay. In the second stage of the life cycle, with competitive, similar products in the market, the consumer wants to compare them, and can be helped. Once a new variant is launched, price discovery for the original variant can be done again via auctions. In other words – let the consumer decide what price he wants to pay.
Balakrishnan said that the true internet business model is The Long Tail. Sales from hit products are far lesser than those from others. At Rediff, 5% of sales were from ringtones of hits, while 95% were of others.
Quoting Wikipedia and MySpace as examples, he said that the success of user generated content is another trend, though he has no clue what really works because there are still a thousand other sites with user generated content, and very little traffic or business.
He spoke of a Rediff community called ‘Get Ahead’ where people get questions answered by experts and other users; it is monetized by contextual advertising at the bottom.
He said that websites with network effects tend to get noticed, and get greater valuations on Wall Street. Addition of more users to the network add value to it, and local networks co-existing form a part of one big network.
Micro-payment online, he feels, is a huge opportunity in India, and it is now up to the credit card companies to make it work. The present model of percentages cannot work in case of micro-payments online.
Hitesh Oberoi (Naukri.com) , Sanjay Swami (mChek), Sandeep Murthy (Sherpalo Ventures), Raghav Kher (Seventymm.com), Samir Sood (Venture Investments and Google), Probir Roy(Coruscant & Paymate) and Ganesh Rengaswamy (Greylock Partners) joined Ajit Balakrishnan for the panel discussion, chaired by Krishnan Seshadrinathan of Motive.
Oberoi gave a brief on Naukri, and that they were lucky to have raised funding just before the dotcom bust; Naukri had received a valuation of Rs.50cr. Sanjay Swami felt most entrepreneurs worry about the exit strategy, though they shouldn’t. The entire effort should go into building a large company, and exit will take care of itself. Sandeep Murthy said that though there are opportunities in the market, people are shying away from risk-taking.
Kher, of Seventymm added that online movie rental has great opportunity, and they had raised $10 million in less than a year. Their survey had indicated that consumers were dependent on small shops with pirated movies; a highly fractured market. Their biggest problems were of collection of cash and inventory management.
Probir Roy said that Non-Voice VAS includes Data Content and Mobile payment. The idea of mobile payment appealed to them, but they decided to launch a mobile content company (Coruscant), and incubate Paymate there because of the lack of a mobile payment ecosystem. Coruscant Tec’s positive cash flow from the first year itself, helped built an ecosystem for Paymate, over 2.5 years.
Someone asked about whether Facebook or MySpace would work in India. Probir answered that Facebook has no relevance in India, and low Internet usage and lack of regional content is keeping volumes low.
Oberoi said that with 65% of the Indian population below 30, India is the most MySpace friendly country in the world; 80% of Naukri.com staff is on Orkut. Today, the online classified business is bigger than traditional classified business.
Ajit Balakrishnan said mobile operators think they’re in business primarily because of the apparent success of China Telecom, who started their VAS services at a revenue share of 25-75% in favour of the content company. Recently it was found that China Telecom automatically and permanently subscribed consumers to VAS services. Under orders from China’s Ministry of Information and Industry, this was stopped and dramatically affected the bottom line of VAS companies in China. In India, though, the mobile operators are smart, and the revenue share is in their favour.