Rediff - Will it Survive the Dotcom Bust?
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Case Code : BSTR010
Case Length : 7 Pages
Period : 1995 - 2001
Organization : Rediff
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Media and Entertainment
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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The Success Formula
The USP of Rediff seemed to be its 'Indianness.' However, it had to look beyond because the net user base in India was very low. Rediff always emphasised on news and information services as the main attraction for NRI visitors to the site. However analysts questioned Rediff's capacity to provide continuous, up to date and original news from India particularly in the face of competition from newspapers and news agencies. The site was also not generating enough attention among the NRIs. Rediff claimed that on an average1.8 million netizens visited its site with 12-million page- views per month...
Questioning Rediff's Success Formula
Despite being a successful brand, Rediff was not making any profits. Analysts felt that Rediff would have to translate its five years of work, the first mover advantage and the brand into real profits. Rediff's business model was borrowed from Yahoo! which was a pure play dotcom. Analysts felt that in an age of media and infrastructure alliances, Rediff's pure play model could lead to trouble. Balakrishnan did not seem to be interested in acquiring an ISP. "The moment an ISP sets himself up to compete with the World Wide Web in terms of content, he's gone," he said. However others like Satyam Infoway's George Zacharias disagreed saying, "We have been able to leverage our access part as many synergies exist between the two...
Will Rediff Survive?
One area where Rediff's performance had been exemplary was cost management. Rediff had the highest gross margin at 60% among the Asian dotcoms because of its low cost structure.
Analysts felt that if Rediff continued with its prudent cost management, it should be able to turn profitable by September 2001. With cash of $32 million in its balance sheet in August 2001, Rediff seemed to be in reasonable financial shape although its shares were trading at US$1 in August 2001. From the Q1, results in 2001, it was obvious that Rediff had successfully integrated its online and offline businesses. 87% of the first quarter revenues ($5.75 mn) up from $ 1.5 mn in Q1 2000, came from the newly acquired offline businesses, India Abroad and Value Communications. Analysts felt that Rediff would be able to survive the dotcom bust and if it did, it would be because the company had moved from being an Indian dotcom to being a dotcom of Indian origin targeting the NRIs...