Rediff.com (NSDQ: REDF), arguably India’s first and largest horizontal portal,recently annouced its results and reported a net loss of $8.86 million in Q4 FY08-09. The company attributes the losses to the slowdown in the online advertising sector. Ajit Balakrishnan, Rediff.com’s Founder, Chairman and CEO, expects the situation in the onlineadvertising world to revive in about two to three quarters. He alsoexpects online advertising to match up with the TV advertsing in about two years from now. VCCircle.com spoke to Ajit Balakrishnan on the current situation in the online advertising market, and also on Rediff’s investment strategy. Excerpts:
How is the online advertising market doing right now?
Revenues are derived from two sources One comes from the other online companies and the second from offline advertisers. The offline side is doing fine but more than half of the revenues of the Indian online industry come from the other online advertisers such as job sites, matrimonial sites, consumer finance sites and travel sites. These and a few more normally account for more than half the revenue of the Indian online industry. Those have been severely crunched downwards.
All these industries are facing significant problems, for example, the airline industry itself is going through deep losses so the online travel agents arealso having a rub-off and are cutting budgets. Since the IT industry has stopped recruiting in significant numbers that has restricted the ad spend of the online recruitment sites. For all these reasons, the online industry has probably cut their budgets by half.
So to that extent online advertising has contracted since last quarter. It