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Q409 Call: Rediff Buys 26% In Examville, Writes Off Vakow; Debit Card Commerce; REST APIs

Corrigendum: We’ve mistook Ajit Balakrishnan’s statement comparing Rediff Moneywiz to CNBC-TV18, as a comparison with moneycontrol.com. According to Balakrishnan, Rediff Moneywiz is closing in on the TV channel CNBC-TV18. The error is regretted, and has been corrected below.

Rediff.com has picked up 26% in Examville, a US based company which provides educational testing services for SAT Exams etc. The amount of investment was not disclosed. Rediff Chairman and CEO Ajit Balakrishnan believes that the exam preparation market is a promising market; Examville has a team in New York that is targeting that market.

Vakow Writeoff

Balakrishnan said that the founders of Vakow have decided to move on, and Rediff has written down that investment fully. Rediff had invested $125,000 in Vakow in June last year. Rediff liked the idea, but the founders expected it to grow faster than the market would allow it to.

Eterno Infotech and Tachyon

Balakrishnan is most bullish on Eterno Infotech and Tachyon; Rediff has 40% stake in Tachyon. Their basic business is to provide a solution to newspapers in India through mobile. They’ve had around half a dozen wins of late. Tachyon continues to make significant gains in providing transliteration services; Balakrishnan considers Tachyon “a star”.

E-Commerce And Debit Cards

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“E-Commerce is holding up much better than the other segments. This quarter we had to amortize some costs, so it doesn’t look great. We’re changing the navigation system, in order to make it much simpler to use. We’re optimistic on the e-commerce front: that is partly due to the fact the our key competitors – Futurebazaar.com, Ebay and IndiaPlaza – we don’t see much activity in terms of the range of services they have, and they’ve considerably lightened.”

Balakrishnan believes that e-commerce is one of the great promises that hasn’t showed up yet. It’s driven by two factors – broadband penetration and penetration of credit and debit cards. There are only 9 million unique credit card users in India, but what is promising is that there are almost 100 million Debit cards: “the last 2-3 months, we’ve seen quite a bit of activity, with banks coming and enabling debit card payments online. The wiring up process for them has begun, and they’re solving some small latency issues. I think in the next 2 months, Debit card based shopping will be a fact of life in India. The arrival of Debit cards may change the scene dramatically.”

Switch From Facebook API To REST Based API

“We did not get an uptake from local developers – only US based developers. Maybe these developers need to be funded at at least the angel investment level. We’re now getting ready – almost done- to provide REST based APIs instead of FQL and FBML (Facebook API) since that experiment did not work. We’ll give it another shot during this quarter.”

Advertising Split

Total India Online revenues were $3.43 million
Advertising revenues were $2.34 million
Fee based revenues were $1.09 million

Disproportionate Decline Is In Performance Advertising

Balakrishnan said that there’s no improvement in online advertising in India, since key sectors – those which are online. “The travel trade is marooned, the jobs advertisers are dependent for half their revenue on the IT sector. Acquisition of credit cards has been silent, and the shopping and real estate sectors are challenging. This group used to account for roughly half advertising the spends in India, and they’re the ones who do performance advertising. 2/3rd of the decline on a year-on-year basis has been contributed by the performance advertisers. The growth is coming from the offline companies, but the conversion for brand advertisers is slow. These are business cycle changes.” The brand advertisers are not looking at clicks, but are asking for things like GRP and TRP; “we need to make sure that it is acceptable in terms of metrics and measurement, and that process is still underway.”

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Video Advertising, iShare & T-Series

“We’re very hesitant to run more than very basic pre-rolls on iShare. Just how the consumer experience is. I don’t personally believe that the solution for iShare will be pre-roll ads. But the next version has not arrived yet. Our focus is to make sure that iShare is the leading platform for video uploading and sharing, as well as photos and music. We’ve recently expanded the relationship with T-Series and licensed over 100,00 songs and videos. Right now, I think we’re in a place where we need to drive usage, rather than drive revenue during a difficult economic time.”

Google Ads On Rediff In The US

Some of our readers had informed us of Google Ads on Rediff. Balakrishnan said that one wouldn’t see Google ads on the India site; they experimented in a limited way in the US, just to see how much better they can be compared to Rediff’s own ads, “but this is not something strategic for us. Not at all.”

On Powering The Mobile Portals For Telecom Operators

Google has a tie-up with Airtel for its WAP portal, and MSN and Yahoo both have tie-ups. Balakrishnan is almost dismissive of it from a return on investment perspective” “Useful to do. Economics matters – what it costs you to get it done matters. If you’re in a big investment mode, you can do that. Is it make or break? I don’t think so. Often big amounts are needed to get it done, and we have no plans to spend major amounts of money to do that.”

Right now, nobody knows the future: the revenue sharing deals in India and most of Europe are not worth it, since the telecom operators and the government take more than 75% of the revenue. Content costs are high. So that’s not the route. Mobile will only take off when smart phones and 3G arrive. Our site in the US is getting a great reception.

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Balakrishnan said that Rediff’s finance portal Moneywiz has gone from strength to strength, and is closing in on TV channel CNBC-TV18 in terms of viewership.

Bringing The India Abroad Interface To Rediff.com

We’d reported on the new interface for India interface four and a half months ago, though Rediff only recently announced its launch. Responding to a question on whether the interface will be replicated for the India site, Balakrishnan said they hope to do so: the issue is that it has significant social features like social bookmarking, and it will take time to work. The company is happy with the pageviews growth. Product development costs have not declined. Around 10% of the revenues for the International part of Rediff’s site comes from the homepage.

Cost Cutting: Employee Reduction

The headcount has declined year on year from 350 to 325. The company has added 25 people in the Computer Science group, and decreased 52 in all the others. “We’ve shuffled the deck of cards.”

P.s: We’d like to thank @shalombook and @viajero_in for their questions: hope many of them have been answered.

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