Key numbers for quarter ending September 30th, 2009:

• Total Revenues – 4.19mn (India: 3.08, US: 1.11).
• Gross Margin: 66% (as opposed to 75% in Sep’08 qtr)
• Net Loss (before Income tax): 2.6mn (0.42mn in Sep’08 qtr) – details

Rediff Redesign Impact - Average Page view per Visitor

We earlier covered how the non-intrusive experience, combined with a ‘white’ experience has actually resulted in overall increase in pageviews (surprise! surprise!) as well as total visits to the site – signs that show long term value(?).

Rediff’s big bet has been the enablement of social activity on the site – i.e sharing with friends, usage of ‘MyPage’ and ofcourse, the  overall improvement in user experience.

But beyond that, the content/product strategy doesn’t’ seem to have any significant direction. What’s your take? Do you sense a ‘solid’ strategy behind Rediff’s new avatar?

Goo-Hoo!

At the first glance, Yahoo!’s run of lower revenues like the last two quarters as compared to last year continues. Yahoo! pocketed a revenue of 1575 Million USD in Q3,  and 1573 and 1580 million USD respectively in Q2 and Q1. This amount may look like pocket change in relative terms when compared to Google’s mammoth 5945 Million USD. An
interesting point to note is that the TAC [Traffic Acquisition Cost] for Yahoo! also hovers around the 27-28% mark as that of Google. A change in that percentage in this quarter, whether positive or negative will signify as to how in the short run the “You” campaign of the company has faired for them.

A further point of note when compared to Google’s revenue patterns is that Yahoo! still generates a far greater fraction of its revenue from the home market (a whopping 75%) as compared to a more modest 50-50 distribution of Google. This percentage has practically remained constant since the past year.

So though unlike Google there is sharp YoY decline in revenues (15%) (Google had a both QoQ and a YoY growth), the future still looks positive given the statements by company board members, they are banking heavily on their UI overhaul, and at the first looks I find it very pleasing, an opinion shared by many others on various internet review sites. Also their mobile mail interface is definitely one of the best I have seen till now, all this should convert to higher visitor count and in turn revenues.

The reason for bullish stock performance near the announcement of the Q3 results despite the fall in revenues, was the fact that the results beating the expected and predicted  results by Yahoo! and Wall Street. Though the current quarter was nothing Yahoo! could be very proud of, it was definitely better than expected with a strong positive outlook for the next quarter, so I guess I will end it by saying Yahoo!

Image Courtesy:  http://www.uycw.co.cc

Is Google Evil?

“When in doubt, ask Google” – Captain Obvious

So we shall look no further and start with Google as our first case.  Sourcing our information from http://investor.google.com/, we will start with the first and most prominent measure of companies performance, that is “Revenues” (Please don’t flame me on this). We will be using GAAP( Generally Accepted Accounting Principles) measures to ensure uniformity.

Starting with the quantitative angle, It is hard not to notice that this has been the strongest quarter of Google in recent times. They earned a total revenue of 5945 million USD, with a 7% Y/Y (compared to 3rd quarter last year) and a 8% Q/Q (Compared to last quarter this year) growth.

On the qualitative side, it isn’t surprisingly that over 66.5% of the revenues were straight from Google.com, while about 30.3% coming from their Network and only the remaining minuscule percentage from Licensing fees. This is an important point to consider, since this implies practically all their revenue still come from advertisement and even with a finger in every pie, Google is still primarily a search engine company.

Global presence of Google can easily be estimated by the fact that 53% of their revenue came from International market, this percentage has been on a marginal increase over the years. But if you are a startup targeting revenues from the Internet, take notice of the fact that US with just about 15% of global internet user percentage provides about 47% of the revenues to Google.

Tossing over the coin and moving towards analysing their expenditure pattern. The first point of interest is the noticeable increase (Up from 1453 in last quarter  to 1559 million USD in this quarter)  in absolute cost of TAC (Traffic Acquisition Cost). TAC simply means the amount of money any Internet company spends on making the customer (that is you) to visit their website. But TAC as percentage of Advertisement revenue remained nearly the same (27.1% as compared to 27.2% last quarter) justifying the increase in expenditure.

Other spending patterns practically remained the same as last quarters with 13% of Revenues going for R&D. There has been a strong growth in EPS (Earnings per Share) which is currently at 5.13 up from 4.66 last quarter and 4.06 last year. EPS is one of the most widely used ratios for primitive fundamental analysis while stock picking and a higher EPS suggests good pick.

Overall the last quarter has definitely been a good one for Google and in the words of Eric Schmidt, CEO of Google. “While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.”

In the next part we will consider Yahoo, its relative performance to Google and also a couple of India companies.

Facts and figures courtesy  - http://investor.google.com/releases/2009Q3_google_earnings.html

The flagship portal, In.com launched MySchool.In.com (we were the first one to notice that) and has attracted over 50,000 registrations within 2 months of launch across 68 cities in India.

For quarter ending Sep’09, Web18’s operating losses are down from Rs 175-190 mn in Q2/Q3 Last Year To Rs 51 mn In Q2.

MoneyControl Statss

• Moneycontrol has achieved a registered user base of over 2 million members – highest in the country in ‘Finance’ category
• Average time spent on the site is over 23 minutes per visit as against an Indian average of 4-5 minutes per visit (*)
• 85% of Moneycontrol users, using the site’s Portfolio tracking service, have investments worth more than INR 300000 (on a base of approx 1.2 million Portfolio users)
• Moneycontrol had over 2.25 million monthly visits (*) during this quarter which is way ahead of Rediff Finance & Yahoo Finance.
  * – from Web18’s internal Google Analytics data (though one should use Comscore for a common/defined benchmark).

In.com Traffic Vs. Compeition

While Web18 claims In.com to be India’s #2 content portal, it actually lags behind Yahoo, Rediff and is now catching up with Indiatimes. Web18 recently raised $10million from Nokia Growth Partners and has put it’s IPO plans on hold.

Overall, the consolidated revenues of TV18, the umbrella firm that owns several other companies Infomedia18, News Channels and NewsWire18 has increased by nearly 31% YOY and 25% QOQ [download the report (pdf)].

The big question for Web18 still remains as it was earlier – is the consolidation of properties working for the site or is it that the portal, i.e. In.com is relying on few properties (e.g.moneycontrol/ibnlive) for it’s existence?
Is there a clear cut-out positioning for In.com? The earlier, ‘email with a difference positioning’ didn’t work at all, so traffic is in a way proportional to money that In.com spends on advertising.

What’s your opinion?

• Total Income in Q1 of FY 09-10 stands at Rs.619.37 million, a fall of 7.75% over the corresponding quarter in FY 08-09. Operating income is Rs.529.03 million, which is 16% lower compared to the corresponding quarter last year.
• EBITDA at Rs.219.12 million grew 5.6% compared

to Rs 207.5 million in the corresponding quarter in FY 08-09.

• Net Profit of 133.05 million compared to Rs. 129.73 million in the corresponding quarter in FY 08-09, representing a growth of 2.56%. At the operating level, profit after tax (PAT) is Rs.73.06 million.

80% of InfoEdge’s revenues comes from the flagship portal, naukri.com and other portals, like jeevansathi, 99acres and Shiksha.com are still in an investment mode.

InfoEdge Portfolio Companies - Traffic

Data from comscore gives a good indication of businesses across InfoEdge’s (top) portfolio companies.

As far as 2009/10 is concerned, the company sees a fall of upto 5% profit owing to the advertising expense (Hari Sadu is all over the TV channels).

Download the qtrly report (pdf)

• Quarterly Revenues dropped by 50% (as compared to Mar 31st, 2008) : $4.49mn vs. $9,06mn last year
• Annual Revenue stands at $25.43mn (as compared to $32.25 last year)
• Net Loss of $11.26 million for the year ended March 31, 2009, as compared to a net profit of $4.92 million in the previous fiscal year.
• Number of advertisers drops to 229 from 237 (as compared to Oct-Dec 07 qtr)
• Quarterly India Online revenues dropped 33% and stands at $4.099mn.

The revenue numbers for the quarter were also adversely impacted by 25% y-o-y average depreciation of the Indian Rupee vis-à-vis the US dollar.

The quarter and fiscal year end results also include a non-cash goodwill and intangible asset impairment charge of $6.9 million – impairment of goodwill arising from Rediff’s acquisition of the print newspaper “India Abroad” in the United States in 2001.

The Traffic

Rediff traffic

Over a period of 1 year, an increase of 10% (worldwide traffic) leaves nothing much to speak on Rediff’s ability to engage users.

What about Rediff’s open initiative?

Rediff announced it’s open API in July 0f 2008 and literally hasn’t yet got any love from the developer audience (pretty much expected).

Most of Rediff’s investments have been in small features (which they call products) like webinmail which aren’t path breaking or anything of that sort.

What about investment in startups?

• Rediff invested in Vakow which we mentioned few months back that founders have been looking out to sell Vakow
• Rediff has invested in Eterno Infotech, Bangalore based mobile startup.

Is it time to change the gears? Or Maybe, the Vehicle itself?

Should Rediff take a non-editorial route and engage users? [Read: Have Indian Content Sites Hit the Ceiling?]

Most of their products are as disconnected as they shouldn’t be  – it’s time for Rediff to figure out the most important product line and close the not-so-profitable ones.

Investment in technology – Rediff is mostly an editorial site with not so strong focus on technology. Maybe it’s time to change that equation. Or if it’s a content portal, partnering with other media is the key (otherwise they will lose out ot in.com)

I believe it’s time to shake up things at Rediff, and even though one would say that all advertising based portals are in red (recession effect), Rediff’s challenges are much deeper than that.

What’s your take?

Download the report | Earnings Release

• Advertising revenues for Rediff India dropped 41% (compared to same quarter, 2007; and 34% compared to last quarter)) : $4.1 million.
• Total # of Advertisers : 229.
• US publishing dropped 29% compared to last quarter, and 50% compared to same quarter, 2007 : $1.2 million
• Total revenues stands at $5.3million – 38% drop compared to same quarter, 2007; and 29% in comparison to last quarter.
• Registered user base stands at 75 million.

Traffic

No significant growth in traffic since Dec 2007.

What do you think is happening with Rediff? Time to innovate (rather than bet on primitive products, like webinmail?)?

[Download Q3 2008 financials, earning slides]

If you were a consultant to Rediff, what would you recommend?

Here is a quick snapshot:

• India Online services are down 2% to 5.62mn$ [Gross margin: 83%]
• US Publishing services are down 20% to 1.7mn$ [Gross margin: 53%]

Though Rediff’s India revenues have gown up by 5.5%, but weakening rupee’s impact did erode the overall growth.

Overall, Rediff posted a net loss of %0.42million in Q2 – and that’s surely not a good news.

Interesting to note that total number of advertisers remains at 261.

Rediff Traffic: What’s Up/Down

Rediff claims a total user base of approximately 72 million (monthly growth ~8.6% over the prev quarter) and is relying heavily on it’s newly launched initiatives:

• it’s open platform initiative
• recently launched mobile application

Traffic Data:

As per comscore’s Sep ’08 data:

• 9,319 Total Unique Visitors (000)
• 1,432 Average Daily Visitors (000)
• 11 Average Minutes per Visit
• 8 Average Visits per Visitor

Let’s look at the data trend for the complete picture:

• Average Daily Visitor stat seems to flatten ..or has started declining?
  
• Ditto with Total Pages Viewed
  
• What about engagement? – let’s look at avg pages per visitor :

The biggest challenge for Rediff is that it’s a disconnected/disjointed portal and doesn’t have a strong social graph (most used features are it’s homepage/content, email service without any common reason for users to connect to other rediff users) – lack of strong community keeps it in a relatively weaker position against Google, Yahoo, Orkut and Facebook of the world.

The next few quarters will be testing times for the portal as Display Ads Pricing has gone down by 27% (in US) and Indian advertisers too have slashed their budgets.

Is Rediff innovating enough to sustain the downturn?

What’s your opinion?

Download Rediff’s Jun-Sep 08 report