After the deluge, the churning. The bottomline of the dotcom shakeout is, well, Concentrate on the Bottomline. Forget eyeball-chasing, forget B2B, B2C, today's buzzword in the business is P2P. Path to profit.
As with any good business, it's not just the big idea but a sound revenue plan that is helping some dotcom companies swim against the tide, even prosper. It's not just the burn rate but the earn rate too. "Today you have to start with the numbers, the big idea comes only afterwards," says an investment banker who has brokered several dotcom deals. For proof, take a look at some dotcoms which have defied the shakeout—so far, at least—largely because of a business plan that was not eyeball-centric. They tout concrete revenue models and are more concerned with immediate results rather than the megabucks in the pipeline.
Sanjeev Bikchandani always believed he was starting a business, not just a dotcom. So when he started his job site naukri.com in 1997, he had a revenue model in place from day one. He felt there was a large market of unadvertised jobs that could be made available to the consumer free of cost. At the same time, he could recover his cost by charging the employer. By the time the Net hit India, Bikchandani already had a database of jobs ready.
For the first six months, naukri.com allowed firms to list jobs on the site free. Then it charged Rs 350 per listing. Today, companies can take an annual subscription for Rs 6,000. But that's not all. Naukri.com now has various revenue streams: the slot "Hot Jobs', where a listing costs Rs 1,500 and an annual subscription, Rs 75,000; a page called "Great Places to Work' which microscopes and talks about a company for Rs 6 lakh; get your resumé written for Rs 1,000 and display it on the site for Rs 500 for a year. At any given time, the site lists about 13,000 jobs.
Naukri.com got its first round of funding of about Rs 8 crore in April this year from icici Ventures, but Bikchandani claims to have started making profits from the second year. The turnover that year was Rs 20 lakh and profits, 10-15 per cent of that. Bikchandani hopes to end this financial year with a turnover of Rs 2 crore. "When we launched, there was no such thing as valuations and VC funding, so we had to earn money to spend it," he says. Naukri gets only 5 per cent of its revenues from banner advertising.
It's the same story with other dotcoms vying for a pie of the small online advertising business worth just Rs 40 crore to Rs 50 crore. What happens when eyeballs or pageviews don't work with the advertiser? Ask Alok Kejriwal of Contests2win.com (C2W) who has found a way to get around the problem. At one level, his site assures every visitor a chance to win by participating in contests, at another it assures the advertiser an opportunity to actually interact with the consumer by sponsoring these contests. Says Kejriwal: "When a brand owner puts an ad in a newspaper or on TV, it is simply a case of spray and pray; the results are not known. But on C2W, we help the client not only formulate a Net promotion strategy but also help track the performance of the promotion." It also gives the client a demographic profile of the consumer who actually interacted with the brand. And for this complete solution, a brand owner will have to shell out between
Rs 1 lakh and Rs 1.25 lakh a month. The site also gives the client the option to pay a fee per response registered.
C2W was launched in August 1998 and for a year-and-a-half, did not charge anything from clients, it simply asked them to talk about the site. Like mtv made their veejays announce: "Come visit us on C2W." Today, Kejriwal has already worked with over 250 clients. C2W has already broken even and is making an operating profit of a couple of lakhs every month.
While C2W can be called a pure "dotcom", many market analysts believe that the future lies more in a click-and-mortar model. Indiacar.com, launched in October 1999 and promoted by 31-year-old Ashwin Sanghi of Mumbai-based Sanghi Motors, is one such site. Here, one can buy and sell cars. Sanghi sources new cars from dealers of various manufacturers. For every car he sells, he gets a commission from the dealer. Sanghi explains: "I am not carrying an inventory but know the inventory position of every dealer in town and can bargain a good discount from him, a part of which I pass on to the consumer." And 66 per cent of all new car purchases have a trade-in, so indiacar buys your old car, refurbishes it and puts it on auction on the site with a 12-month warranty. Indiacar sells 100 used cars and 150 new cars a month. It broke even last month.
BY being on the Net, Sanghi has knocked off overheads like maintaining a showroom and inventories. Further, he is not forced to be the exclusive dealer of just one car maker, as is the norm in the market. "I already knew the business. What the Net did was help me reach a wider audience. The site has 3,000 visitors daily. Can any showroom get such a crowd?"
Harsh Roongta of apnaloan.com too has no pretensions of reinventing the wheel on the web. "I simply made a profitable real-world business more consumer-friendly and efficient," says this ex-banker. Apnaloan.com is nothing but an agent that brokers your loan or credit card deal and survives on the commission. For every car loan apnaloan gets sanctioned, they get to keep 2 to 3 per cent of the loan as fee from the bank. They keep 1 per cent and pass the rest on to the consumer. Apnaloan claims to be bank-neutral and gives its consumers real-time market rates as opposed to brochure rates. Till date, it has submitted 4,000 credit card applications and for every card approved (the hit rate is 70 per cent), it gets a flat fee of Rs 400-500. It hopes to make an operating profit by March.
One other way of earning money, besides a strong revenue model, is to reduce the burn rate. Many dotcoms have begun to drastically cut down on operations costs as well as on customer acquisition costs. Take education site mindzones.com. They launched in April and have spent a total of just
Rs 1.1 lakh on sales and marketing. Their monthly outflow is as low as
Rs 3 lakh. Says former investment banker Neeraj Batra, who co-promoted the site along with psychiatrist Dr Sanjay Chugh: "We are a school site. Does it make sense for us to advertise?"
Mindzones too has a very "real" revenue model. Though they plan to get into distance learning pay programmes and also tap the highly lucrative tuition market on the Internet, right now they make their money by managing offline events. They have already organised eight to 10 events ranging from quizzes and art competitions to a graffiti contest. They create the programme, find sponsors and run it as well. A part of their revenues come from banner advertising. Mindzones says it is close to breaking even.
These dotcoms clearly have their feet firmly on the ground. With VCs turning cool to Net ideas that look good only on paper, dotcoms that dream of making it big have to show a healthy earn rate instead. Says an insider: "Look what happened to horizontal portal chaitime.com. It had solid funding but because its burn rate was too high, approximately Rs 5-8 crore a month with just 15 million page views, it did not survive." A healthy balance-sheet, clearly, makes even the virtual world go round. n