Would Rediff.com do a search deal with Microsoft for Bing, emulating Yahoo? A hypothetical situation, but responding to MediaNama’s question on the companys earnings call, Rediff Chairman and CEO Ajit Balakrishnan appeared reticent. Balakrishnan declined to share the split between Search and Display Advertising – the information kept confidential for competitive reasons – but said that vertical search is an important source of revenue for the company. Rediff provides vertical search for airfare and trains, Jobs, Products, Mobile Ring Back Tones and Ring Tones, among several others. These are likely to be important contributors to its Fee based revenues.
Around a year ago, Rediff revamped its website design, and removed advertising from its homepage, once the hottest space for advertisers on portals in India. In a previous conference call, Balakrishnan had said the company expected no more than a single digit percent decline in revenues from the move. Responding to our question on whether Rediff has made up its losses from this revamp, Balakrishnan said that there has been growth in online advertising revenues (up 16% year on year) for the company, and revenues are close to having recovered, but reiterated that this is an investment in the future.
The new design, Balakrishnan has claimed in the past, is primarily an optimization for smart phones, and for improving the user experience. Rediff, however, doesn’t see mobile advertising as key source of revenue in the near future: mobile advertising, globally, is still at a nascent stage. Balakrishnan said that he expects fee based revenues to be the primary contributor to mobile revenues for Rediff. As we’d mentioned earlier, Rediff runs Ringtone and Ringback Tone Search services, the latter being a key source of revenue for the mobile value added services industry.
Our Take On Rediff: Promises, Promises, Promises
During its conference call, on multiple occasions, Balakrishnan mentioned the sale of 3G and Broadband Wireless Access (BWA) spectrum as a sign of good times to come, saying it is poised for tremendous growth in case broadband grows. Over the past couple of years, as Rediff’s profitability and revenues have fallen, Balakrishnan has pointed towards the investments that the company is making for the future. We heard it when it was announced that Rediff is opening up for developers to write apps for its entire site (this was eventually rolled back), when the minimalist design was introduced, and we’ve heard it every time when we’ve raised the question of the monetization of its video platform iShare. Rediff’s cash balance keeps reducing quarter on quarter, and profitability continues to be a distant dream. And now it’s waiting for 3G and BWA to deliver, even as Google, Yahoo, Microsoft and Facebook ink telecom operator deals. When was the last time you heard a telecom operator promoting Rediff to consumers? The Rediff website may be ready for mobile, but if Opera Mini is any indication, Rediff isn’t even in the top 10 for India among users of its browser.
To its credit, Rediff has attempted to stem the move away to social networks by launching two important features – MyPage to counter Facebook Pages, and the ability to get social network feeds within its own site; Yahoo has also done something similar, but these are primarily defensive moves.
Rediff has seeded its LocalAds platform, trying to compete in a crowded market against established yellow pages companies like JustDial and Infomedia (among many others) saying that it is readying local text ads for traction in 9-12 months time. Balakrishnan said that LocalAds are businesses of the future, and there are many competitors; “There’s going to be a strong product offering, but I think it’s going to take a little time.” Rediff has the click-to-call feature for LocalAds.
So, to summarise, LocalAds will take time, iShare will take time, Mobile and Wireless Broadband in India will be big but will take time. Rediff may be readying itself for the future, but you have to ask – will consumers choose Rediff? Will telecom operators choose Rediff? And above all, will advertisers continue to choose Rediff? Advertising may be returning to Rediff (16% growth in India-Online Advertising), but will it stay? Take a look at some stats I looked up on (Google) AdPlanner:
Now, the situation for portals in India, except Yahoo, does look rather bleak: more users appear to be spending significantly more time on Facebook.
The one thing that is particularly promising for Rediff is its MoneyWiz product, which has over a million users for its stocks portfolio service. As Balakrishnan said on the call, in the last six months, there has been a pick-up in advertising on the site with 2-3 new emerging players in online share trading. Finance sites, historically, have been dependent on online share trading platforms as advertisers, and Balakrishnan says that Rediff has seen growth there since 2 or 3 significant new players have emerged in the online share trading. Subsequently, Rediff has launched Hindi and Gujarati versions of MoneyWiz.
On competition from Web18 owned MoneyControl, and why perhaps yields aren’t as strong for MoneyWiz, as compared to MoneyControl, Balakrishnan said that “it’s difficult to compare because people have different strategies in presenting revenue. If we had a television company we probably would club television plus online at a consolidated rate, or if we had a newspaper like the Economic Times, we would probably club that and MoneyWiz and offer a rate.” Balakrishnan said that Rediff doesn’t spend a lot of time comparing revenue with competitors, and “each of them has their different strategy of how to make money, how much they want and how quickly they want it. I wouldn’t spend sleepless nights on this one.”
The Rediff stock is trading at $1.75, close to its 52 week low of $1.69. At this price, Rediff has a market cap of $50.93 million, though its $41 million cash balance must help. Meanwhile, Balakrishnan has launched Vubites, looking to provide local advertising on TV channels.
Update: contrary to what a lot of people appear to be saying after this post, this is NOT a call for Balakrishnan to move on and leave the task of running Rediff to someone younger. That’s not a solution. Just…stop selling a future you can’t foretell. It’s like saying you’re building a grand boat on the shore, waiting for the waves to come and take it to sea.
More than anything, this is a call for greater transparency in how various segments (fee based, display, e-commerce) are performing, quarter on quarter and year on year, and more importantly, what Rediff is doing to address specific issues. We didn’t learn about Rediff’s million dollar investment in games until it was written off because priorities for the company outsourced to, shifted. Rediff has made $300-400,000 investments in 4-5 companies, Balakrishnan said on this call, but said they’ll disclose later. Transparency.
Update: We’re yet to receive a response to a request for clarification sent four days ago, to Rediff.com’s investor desk and Chairman and CEO Ajit Balakrishnan, about whether Vubites.com is a venture personally owned by Balakrishnan, or by Rediff.com.
Disclosure: Yahoo & Network18 are currently advertisers with MediaNama.
Note: We’ve used Google AdPlanner data. Google AdPlanner is owned by Google, which competes with Rediff in India for advertising.