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The Struggle to Survive

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DQI Bureau
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A team of top managers gather around the conference table for

an emergency meeting. The one-point agenda: How to save their company from

collapsing. A number of solutions are offered–change in business strategy,

alternate revenue options or worse, huge salary-cuts and layoffs.

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Desperation is clearly written all over their faces. Sounds

familiar? Of course. It’s the way most dot-com dreams have ended up. Though it

is difficult to put an exact number to the dot-coms that crashed, worldwide

estimates indicate that dot-com layoffs in the second half of 2000 increased by

600% in comparison to the first half.

"I quit my job in that ‘stinking’ conventional

industry to do ‘something on my own’. And the Net seemed tailor-made for my

fantasies. The next Sabeer Bhatia in the making… with stakes worth millions of

dollars," remembers Pankaj Aggarwal, a young B-school graduate, who like

most others had also wanted to explore his entrepreneurial capabilities.

Alas, that wasn’t meant to be. As dreams got shattered and

reality set in, the euphoria was taken over by a struggle to survive. Dot-com,

aka ‘the shortest route to success’, was replaced by ‘urgency to sustain’.

It was time to go back to business basics. No room for short-cuts, please.

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Back to business basics

Plush hi-tech offices, slick managers paid astronomical salaries, not to

mention ESOPs, the popular choice amongst employees who didn’t even understand

the term. Everything seemed in place. But there was a problem: No one was quite

sure from where the revenues would flow in. So, the inadvertent had to happen.

After all, how long could you endlessly spend investors’ funds over

extravagant ad campaigns and those so-called creative pursuits? Money that was

spent less on value creation and more on keeping pace with the hype had to run

out some day.

Says Dinesh Agarwal, CEO of Indiamart.com: "They overlooked the ground

rules of business and marketing. Building brands rather than valuable products

or services; Getting into valuation games rather than keeping an eye on

costs." Most companies did not realize that a dot-com is also like any

another business and needs to demonstrate profits or at least the path to it.

"Dot- coms lived out of capital and expected that profits would

automatically follow, which unfortunately never happened," adds Kasi

Viswanath, COO of financial e-marketplace, Apnaloan.com.

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Profitability is the key to sustain any business, and a dot-com is no

exception. As most dot-coms today realize this fact, their focus is shifting. A

‘strong revenue model’ is considered the most important ingredient for any

successful dot-com. This is clearly reflected in the fact that it emerged the No

1 success factor in a random dot-com poll conducted by Dataquest.

Top

Ten Success Factors

A quick survey reveals

some of the key ingredients of a good dot-com, in the order of importance:

1. A Strong Revenue Model: Back to

basics. Ensuring profitability should be the prime objective of any

business. If your revenues don’t sustain your business, you are only

running it for charity

2. Quality of Content and Delivery: Another key factor is

content, whether it is in the form of useful information, entertainment or

utility services. Unless it fulfils the customer’s need, he will never

come again

3. Innovative Concept or Idea: Very important to start with, but

equally important is the effective implementation of that concept

4. First-mover Advantage: Although it may not automatically

ensure success, but it could be a big help in establishing your name

5. Reach Out to Your Target Audience: Works well if you have

defined a specific target audience or are catering to a particular segment

like the steel or chemical industry, for instance

6. Branding and Advertising: You

could catch them online or create an impact through offline promotions or

ads, but brand building forms an important part of the business

7. Promoters or Management Team: They are the people who will

ensure effective implementation of any plan. So, it helps if you have some

experienced and prominent people on your team. They would certainly add

more credibility to the organization

8. Look and Feel of the Site: This may not be on the top of your

agenda, but a well-designed Site with quick downloads definitely helps

attract and retain your customers

9. Value-added Services: Add-ons and freebies are always

welcome. Being used effectively by many dot-coms to differentiate

themselves and pull more people

10. An Offline Presence: This would depend on the product or

service offered. It may not be applicable to all dot-coms, but it has been

observed that a strong offline presence usually ensures steady business

"Do(n)t-com", cry investors

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There was a time when VCs and angel funding entities were gung-ho about ‘big-ideas’,

big brands investing heavily to ‘get there’ (most still don’t know where).

Stock markets for dot-com surged to an all time high, ad-budgets of ‘mom &

pop’ dotcoms soared and then it all faded out… All this only left the

investors and customers with a notion of disbelief regarding dot-com name-games

and virtual brands.

For some time, investors may have been bewitched by the more than lucrative

returns from the likes of Indiaworld.coms and Sabeer Bhatias of the game that

were not justified by any ROIs or PE. But they have already burnt their hands so

much so that they do not intend to even look at anything that is spells close to

‘dot-com’. No more crazy ideas in the name of innovation, they plead, as

dot-coms turn into don’t coms. Unless the idea is backed by some real

knowledge, it does not hold value for the funding agencies anymore.

"Earlier dot-coms had a short-sighted vision. Even the teams was

constituted of people from all walks of life, whether they had the domain

knowledge or not," says Mani Sam, Executive Vice-President,

Auctionindia.com

"The market size and medium itself was over-valued. Therefore too much

money was spent in creating excess capacity, which became financially impossible

to maintain," says Sunjeev Swaroop, Senior Manager, 123india.com. Now the

focus is high on deliverables as ‘quality of content and delivery (No 2)’

comes before an ‘innovative idea or concept’ (No 3), according to the DQ

dot-com poll. "In the long run it is your delivery which matters most. If

you can clearly specify the deliverables and consistently provide them to your

customer, your site has greater chances of success," says Mani Sam.

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Catch me if you can: Customer

For all practical (non-virtual) purposes, the customer is still loyal to his

conventional buying habits. No matter how hard you try to delight him, he is

tough to crack. And yet, in this entire game, he is still the most important

entity. How much can you please him with virtual services, virtual brands or

virtual security? The money he has to pay is real after all. As of now, he wants

to have fun… surfing, gaming or even learning. But is he willing to pay for

all this?

What Makes them Click?
While others vanished from the scene, some

sites managed to pull through even under adverse market conditions. Here

are some factors that helped
 

  • Big first-mover advantage;
  • Leveraged on branding to attract funds; &
  • In the process of evolving a business path

  • Based on strategic service partnerships;
  • Prudent financial management and revenue strategy; &
  • Stayed away from extensive advertising and media hype

  • Focus on a niché service with a clear advantage on offer;
  • Prior experience of promoters in financial services; &
  • Creating an offline presence to supplement business

  • The first-mover advantage;
  • A brand image with mass appeal; &
  • Large database of Indian jobs

  • Two major tehelkas–match-fixing and corruption in



    defence deals;
  • Created a strong brand image that draws attention; &
  • Prior experience and reputation of the Tehelka team

  • Clickforsteel is backed by three steel majors–Essar, Mukand and

    Uttam Steel;
  • Niché market focus that attracted initial response; &
  • Has a decent revenue model in place

  • Strong management team that attracted funds;
  • Clear focus on profitability; &
  • Attractive bargains on offer

  • Capitalized on Interactive element of the Web;
  • Built a strong brand image in its field; &
  • Positioned as an effective tool for advertisers
Note: Based

on feedback from industry observers and experts, we have randomly selected

names of some sites that are going strong. The list is not exhaustive and

does not claim to cover all dot-coms
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Pay the customer to see your sites, pamper him with freebies and attractive

road shows and he would be happy for sometime. But dare you send any spam-mails,

sales or promos, for his mailbox is far too precious to be filled with your

junk. And when it comes to making a purchase... catch ’em if u can! ‘Brand

loyalty’ did you say? Yes of course!…For all ‘virtual’ purposes

customers are loyal to the dot-com brand that offers the most freebies and asks

the least number of questions. (Dot-coms think they have created the largest

customer database by making customers fill their registration forms. The fact is

that they forget passwords to their registrations by dozen every week!)."

That’s your customer and he’s much smarter than you think. And cautious, of

course!

Reaching out to the target audience, thus, becomes extremely pertinent (No

5), and brand building (No 6) comes along with it. There are some sites that

cater to specific sectors like Automart for automobiles, Clickforsteel for the

steel industry. But by and large, most sites are not very clear about their

focus and this would naturally come in the way of reaching out. Unless you

clearly know where to make an impact, you are most likely to be lost in an

attempt to please everyone. Value-added services also form also forms a crucial

part of the whole exercise. "Customer service has not been given the

importance it deserves. Internet is a tool, not an end in itself. It can be used

effectively to communicate with your customer," says Jai Raj Gupta, CEO,

Shaadionline.com.

Reality Bites

You’ve got your business model in place, the customers like your content

and your brand building process is also going fine. But is that enough to ensure

success. What will you do with the @#$*&# net connection? Poor ISP services,<br /> low bandwidth and other infrastructure issues are also real. You can’t ignore<br /> them. "Internet is just another medium for dissemination of information.<br /> One should understand the strengths and limitations of the medium and use it as<br /> effectively as possible within the given constraints," says Sidharth Gupta,<br /> Chief Operating Officer, Asianvendors.com.</p></p> <p>So, in the end what determines success? There is no single golden rule.<br /> "I strongly feel that it is a combination of factors which is responsible<br /> for the success of any venture. This would vary depending on the objective of<br /> the respective models. It is important to effectively integrate the model to<br /> complement your main line of business," says Gupta.</p></p> <p>Still, the hard fact is that no business can remain<br /> unaffected from this phenomenon. Whether it is in the form of a pure dot-com or<br /> the e-enabled enterprise, the Net is gradually creeping in everywhere. It will<br /> have to go through its ups and downs, until it finally takes shape. The question<br /> at this stage is not B2B or B2C, but how keep going through this phase of<br /> evolution.</p></p> <p><b>Shweta Verma–Dataquest</b></p></p>

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