• Seeking Alpha comment by @nixxin / Nikhil Pahwa , deleted from

    Rediff.com Finally Sees Some Growth Catalysts - http://bit.ly/9TOEaP

    Rash,

    I feel compelled to respond since you're accusing me of playing to the gallery, which I, as a rule, never do. I'm not out to win a popularity contest (I wouldn't), but I provide an independent viewpoint based on my observations and information available at my disposal.

    In the recent past, I've written an article on Rediff.com drinking its own kool aid bit.ly/arryRN , but I'll address specific points made by you here:

    On the points you've made in your article and the comments:

    1. Search Deal: I had asked Rediff on their investor conference call if they would consider a search deal with Microsoft, given that they have been struggling for growth. Mr. Balakrishnan was reluctant on the call about any such thing, and also declined to disclose the split between search and display. If you're suggesting that Rediff is doing a search deal, then you have insider information. What is the source of your information? On what basis are you saying that a deal will be announced "very soon"? Can you disclose whether you've had any interaction with Rediff since the Q1-11 earnings announcement, before making this recommendation to buy?

    2. Newfound Aggression: Rediff has new-found aggression every few quarters. Two years ago, it was about opening up their platform to developers, and that bombed: they had to roll it back. Then it was the minimalist design which impacted revenues, but the pitch there was that it would make the site mobile friendly. The third pitch is this social friendly change, but they're losing the battle there against Facebook and Yahoo*. In.com* is catching up (though that's another problematic story), and advertiser attention is switching towards social networks in a big way.

    3 Internet Penetration: just because the broader market will benefit from a growth in the Internet user base, doesn't mean that it will have a significant impact on Rediff. Mr. Balakrishnan declined to disclose any information of the usage trends for the company on the mobile platform. He said that they don't expect mobile advertising to provide sufficient revenues on mobile, and instead revenues will be fee based. In India the only payment mechanism for the mobile is through telecom operators, and margins there are wafer thin.

    4. Mobile opportunity: Internet access in India on the mobile is driven by two main access modes - the telecom operator deck and the handset. Rediff is yet to ink any deals with either telecom operators or handset manufacturers, despite there having been tremendous growth. In comparison, Google, Yahoo*, MSN, Facebook, Twitter, and relative unknowns like Mig33, RockeTalk, Nimbuzz and Apalya have all done deals with either or both. Indiatimes (owned by the Times of India group) has a substantial mobile content business, and is well entrenched with most telecom operators. However, I do grant that Rediff has deals in place for fee based revenues (ringtones and ringbacktones), through its vertical search. Incidentally, the vertical search is what Mr. Balakrishnan said is a source of revenue from search, but did not elaborate on the trends in that business.

    And even if 3G and Wireless Broadband networks are rolled out (spectrum is being given in September, but expected to be delayed till December), it will take a few years until consumer adoption increases and price of access to wireless broadband and 3G becomes rational and affordable. Keep in mind that most of India's wireless market is pre-paid, ARPU had been declining, and a majority of the customers rarely has more than Rs. 10 (around 21c) balance on the handset to spend, which the retain mostly for making calls.

    So both an explosion of broadband usage and Rediff exploiting it are a pipe-dream. If at all, Rediff has been unwilling to explain how it intends to go about growing this business.

    5. Rediff content as a differentiator: Rediff content is hardly what it used to be. Much of it is wire service content (I'm told that it is upwards of 60% wire, though it might have changed over the past month), and much of it is barely accessible on its homepage. After the change in its homepage, which showcases less content on loading, Rediff has ceased to be a significant content destination.

    6. Advertisers: Rediff was once a default destination for advertisers primarily because of the impact of advertising on its homepage. By pulling advertising off its homepage, and reducing content available there, Rediff forced advertisers to look elsewhere. Rediff has a strong brand, and spends will continue to be directed towards it. But it will not dominate. Yahoo* leads the market, and another key competitor is planning a massive revamp and push, when Rediff is at its weakest. Consumers are choosing social networks above Rediff, and it's a matter of time before advertisers make that call too.

    7. Alexa & Comscore: both are weak indicators of trends within India, and might work for a comparative analysis, but hardly on an absolute basis.

    8. Transparency: my biggest problem with Rediff is its lack of transparency. Rediff goes out with a generic 'everything is hunky dory' statement every quarter, but does not comment on specific trends in yields, search vs display, advertising vs fee based revenues. We know very little of the performance of its e-commerce business, while several other companies have made substantial gains in e-commerce.

    On Rediff conference calls, disclosures about investments have only been made when Mr. Balakrishnan has specifically asked about it, or even then.

    If you were on the conference call, I asked Mr. Balakrishnan about the reduction in their cash balance. He said they've invested $300,000-400,000 in startups. He did not disclose which specific companies, and said they would make a public announcement soon. Why? As far as I know, when shareholders money in invested in startups, the management should announce it. Rediff.com

    There have been reports of Rediff having invested in Fintact bit.ly/99mRX1 , but Rediff's investor desk has not responded to my email for a confirmation of this, sent Jun 21, 2010 at 4:15 PM

    In the past, investments in Examville ( bit.ly/doSJL ) and increased investments in Tachyon ( bit.ly/HVsO ) have only been disclosed when we've asked about it on the conference call.

    Above all, the word in the market is that Mr. Balakrishnan is looking to raise money for a new venture called Vubites.com bit.ly/ckyZvY . Mr. Balakrishnan had agreed to speak with me on Vubites (email on Apr 29, 2010), but we never did have that conversation. Since then, neither Rediff.com investor desk nor Mr. Balakrishnan himself has responded to my email requesting clarification on whether it is his personal venture, or a venture owned by Rediff.com (email sent Aug 2, 2010 at 4:35 PM). As far as I've heard, it is his personal venture, but that is unconfirmed.

    Mr. Balakrishnan has always been focused on the future, and aware of the broader, emerging trends. No questioning the mans vision. It's the lack of transparency and execution that leaves me befuddled.

    To summarise:
    - limited plans, opportunity and lack of evident execution on the mobile
    - threat of switch in advertiser spends towards social networks
    - lack of transparency when it comes to investments, deals and performance
    - Stretched management bandwidth and possible diversion of focus on a new personal venture

    You might say that Rediff is undervalued, so there might be a market opportunity in this business. It is not my place to make a market related suggestion, in comparison with numbers from other competitors in the US or India. What I'm saying is that given the issues that I've mentioned above, it's a huge gamble to bet on Rediff.

    The portal space by itself is struggling in India: problems are being faced by competitor Web18, whose cash cow MoneyControl.com monetizes better than Rediff MoneyWiz, but horizontal portal In.com has been leaking money, and not going anywhere. Cricket portal CricketNext* doesn't have sustained user traction, except during tournaments. At the same time, I'm far more bearish on In.com than on Rediff.

    Then again, you can dismiss my views in the same flippant manner you have in the last para of your last comment. After all, you're an "analyst", while I'm just a journalist.

    Nikhil Pahwa,
    Editor, MediaNama.com
    nikhil@medianama.com

    *Disclosure: Rediff competitors Yahoo and CricketNext (Web18) have advertised with MediaNama.com within the last three months.

  • Seeking Alpha comment by @nixxin / Nikhil Pahwa , deleted from <br /> <br /> Rediff.com Finally Sees Some Growth Catalysts - http://bit.ly/9TOEaP<br /> <br /> Rash,<br /> <br /> I feel compelled to respond since you&#039;re accusing me of playing to the gallery, which I, as a rule, never do. I&#039;m not out to win a popularity contest (I wouldn&#039;t), but I provide an independent viewpoint based on my observations and information available at my disposal.<br /> <br /> In the recent past, I&#039;ve written an article on Rediff.com drinking its own kool aid bit.ly/arryRN , but I&#039;ll address specific points made by you here:<br /> <br /> On the points you&#039;ve made in your article and the comments:<br /> <br /> 1. Search Deal: I had asked Rediff on their investor conference call if they would consider a search deal with Microsoft, given that they have been struggling for growth. Mr. Balakrishnan was reluctant on the call about any such thing, and also declined to disclose the split between search and display. If you&#039;re suggesting that Rediff is doing a search deal, then you have insider information. What is the source of your information? On what basis are you saying that a deal will be announced &quot;very soon&quot;? Can you disclose whether you&#039;ve had any interaction with Rediff since the Q1-11 earnings announcement, before making this recommendation to buy?<br /> <br /> 2. Newfound Aggression: Rediff has new-found aggression every few quarters. Two years ago, it was about opening up their platform to developers, and that bombed: they had to roll it back. Then it was the minimalist design which impacted revenues, but the pitch there was that it would make the site mobile friendly. The third pitch is this social friendly change, but they&#039;re losing the battle there against Facebook and Yahoo*. In.com* is catching up (though that&#039;s another problematic story), and advertiser attention is switching towards social networks in a big way.<br /> <br /> 3 Internet Penetration: just because the broader market will benefit from a growth in the Internet user base, doesn&#039;t mean that it will have a significant impact on Rediff. Mr. Balakrishnan declined to disclose any information of the usage trends for the company on the mobile platform. He said that they don&#039;t expect mobile advertising to provide sufficient revenues on mobile, and instead revenues will be fee based. In India the only payment mechanism for the mobile is through telecom operators, and margins there are wafer thin. <br /> <br /> 4. Mobile opportunity: Internet access in India on the mobile is driven by two main access modes - the telecom operator deck and the handset. Rediff is yet to ink any deals with either telecom operators or handset manufacturers, despite there having been tremendous growth. In comparison, Google, Yahoo*, MSN, Facebook, Twitter, and relative unknowns like Mig33, RockeTalk, Nimbuzz and Apalya have all done deals with either or both. Indiatimes (owned by the Times of India group) has a substantial mobile content business, and is well entrenched with most telecom operators. However, I do grant that Rediff has deals in place for fee based revenues (ringtones and ringbacktones), through its vertical search. Incidentally, the vertical search is what Mr. Balakrishnan said is a source of revenue from search, but did not elaborate on the trends in that business.<br /> <br /> And even if 3G and Wireless Broadband networks are rolled out (spectrum is being given in September, but expected to be delayed till December), it will take a few years until consumer adoption increases and price of access to wireless broadband and 3G becomes rational and affordable. Keep in mind that most of India&#039;s wireless market is pre-paid, ARPU had been declining, and a majority of the customers rarely has more than Rs. 10 (around 21c) balance on the handset to spend, which the retain mostly for making calls.<br /> <br /> So both an explosion of broadband usage and Rediff exploiting it are a pipe-dream. If at all, Rediff has been unwilling to explain how it intends to go about growing this business.<br /> <br /> 5. Rediff content as a differentiator: Rediff content is hardly what it used to be. Much of it is wire service content (I&#039;m told that it is upwards of 60% wire, though it might have changed over the past month), and much of it is barely accessible on its homepage. After the change in its homepage, which showcases less content on loading, Rediff has ceased to be a significant content destination.<br /> <br /> 6. Advertisers: Rediff was once a default destination for advertisers primarily because of the impact of advertising on its homepage. By pulling advertising off its homepage, and reducing content available there, Rediff forced advertisers to look elsewhere. Rediff has a strong brand, and spends will continue to be directed towards it. But it will not dominate. Yahoo* leads the market, and another key competitor is planning a massive revamp and push, when Rediff is at its weakest. Consumers are choosing social networks above Rediff, and it&#039;s a matter of time before advertisers make that call too.<br /> <br /> 7. Alexa &amp; Comscore: both are weak indicators of trends within India, and might work for a comparative analysis, but hardly on an absolute basis.<br /> <br /> 8. Transparency: my biggest problem with Rediff is its lack of transparency. Rediff goes out with a generic &#039;everything is hunky dory&#039; statement every quarter, but does not comment on specific trends in yields, search vs display, advertising vs fee based revenues. We know very little of the performance of its e-commerce business, while several other companies have made substantial gains in e-commerce. <br /> <br /> On Rediff conference calls, disclosures about investments have only been made when Mr. Balakrishnan has specifically asked about it, or even then.<br /> <br /> If you were on the conference call, I asked Mr. Balakrishnan about the reduction in their cash balance. He said they&#039;ve invested $300,000-400,000 in startups. He did not disclose which specific companies, and said they would make a public announcement soon. Why? As far as I know, when shareholders money in invested in startups, the management should announce it. Rediff.com<br /> <br /> There have been reports of Rediff having invested in Fintact bit.ly/99mRX1 , but Rediff&#039;s investor desk has not responded to my email for a confirmation of this, sent Jun 21, 2010 at 4:15 PM<br /> <br /> In the past, investments in Examville ( bit.ly/doSJL ) and increased investments in Tachyon ( bit.ly/HVsO ) have only been disclosed when we&#039;ve asked about it on the conference call.<br /> <br /> Above all, the word in the market is that Mr. Balakrishnan is looking to raise money for a new venture called Vubites.com bit.ly/ckyZvY . Mr. Balakrishnan had agreed to speak with me on Vubites (email on Apr 29, 2010), but we never did have that conversation. Since then, neither Rediff.com investor desk nor Mr. Balakrishnan himself has responded to my email requesting clarification on whether it is his personal venture, or a venture owned by Rediff.com (email sent Aug 2, 2010 at 4:35 PM). As far as I&#039;ve heard, it is his personal venture, but that is unconfirmed.<br /> <br /> Mr. Balakrishnan has always been focused on the future, and aware of the broader, emerging trends. No questioning the mans vision. It&#039;s the lack of transparency and execution that leaves me befuddled.<br /> <br /> To summarise:<br /> - limited plans, opportunity and lack of evident execution on the mobile<br /> - threat of switch in advertiser spends towards social networks<br /> - lack of transparency when it comes to investments, deals and performance<br /> - Stretched management bandwidth and possible diversion of focus on a new personal venture<br /> <br /> You might say that Rediff is undervalued, so there might be a market opportunity in this business. It is not my place to make a market related suggestion, in comparison with numbers from other competitors in the US or India. What I&#039;m saying is that given the issues that I&#039;ve mentioned above, it&#039;s a huge gamble to bet on Rediff. <br /> <br /> The portal space by itself is struggling in India: problems are being faced by competitor Web18, whose cash cow MoneyControl.com monetizes better than Rediff MoneyWiz, but horizontal portal In.com has been leaking money, and not going anywhere. Cricket portal CricketNext* doesn&#039;t have sustained user traction, except during tournaments. At the same time, I&#039;m far more bearish on In.com than on Rediff.<br /> <br /> Then again, you can dismiss my views in the same flippant manner you have in the last para of your last comment. After all, you&#039;re an &quot;analyst&quot;, while I&#039;m just a journalist.<br /> <br /> Nikhil Pahwa,<br /> Editor, MediaNama.com<br /> nikhil@medianama.com<br /> <br /> *Disclosure: Rediff competitors Yahoo and CricketNext (Web18) have advertised with MediaNama.com within the last three months. : Shorten, Share, Bookmark