123India's Search For e-Xcellence

While Brothers Kajaria have netted surfers, their future hinges on their ability to compete with the Big e-Boys.

FACT FILE

Arvind & Sharad Kajaria: "Once you deliver good service, users stick to it"

Name: Arvind & Sharad Kajaria
Age: Arvind: 32; Sharad: 24
Education: Arvind: B.Com (Hons), St Xaviers, Calcutta, 1984; BBA in Marketing, Adelphi U, New York, 1986; Sharad: B.Com (Hons), St Xaviers, Calcutta, 1995
Business: Maintaining a search-engine, 123india
Company: IntraSoft Technologies
Work Experience: Arvind: Manufacturing water-pipes, 1986-97; Sharad: None
Initial Investment: Rs 20 lakh
Track Record: Visitors at the site grew from 20 per day in 1997-98 to 1.30 lakh per day in 1998-99
Number of Employees: 25
Management Credo: Hard work
Hobbies: Arvind: Golf, listening to Indian classical music; Sharad: Reading books on infotech

For the nth time that evening on June 22, 1999, Arvind Kajaria inspected his visage in the mirror. He was nervous. And justifiably so. After all, it wasn't everyday that the 32-year-old Director of the Net start-up, IntraSoft Technologies, got to rub shoulders with the biggies of Bollywood. The promos for Taal--Bollywood veteran Subhash Ghai's musical--were being presented to the producers of the film, who had chosen 123India, the Net search-engine offered by IntraSoft, to showcase the movie.

They were approved, and were seen by 7.50 lakh visitors who, according to the Calcutta-based Kajaria, visit the site every month. In a connected world, 123India's USP is swadeshi. In September, 1998, the Association Of Search Engines, which nominates one site from each country, selected 123India as the "Indian Hub." Since its launch in November, 1996, 123India has also changed in character, graduating from being a search-engine into a full-fledged portal--a Website that allows surfers to access a variety of other Websites.

That's nothing out of the ordinary in the nano-second world of business on the Net, where continuous mutation is a given. In fact, all other major search-engines--like Yahoo!, Lycos, and Excite--have gone the portal route as surfers prefer them to the plain-vanilla search-engines. So has the Kajarias' IntraSoft, which registered a 70 per cent jump in turnover in 1998-99 at Rs 1.92 crore, and is, predictably for Net start-ups, loss-making. "Now," avers Kajaria, "in the next 6 months, we will be expanding into e-Commerce." Does IntraSoft have a viable strategy for this dynamic sector?

Providing information about India was the starting-point for the company. That is why Kajaria, along with his brother, Sharad, set up IntraSoft in September, 1996. The firm had an initial capital of Rs 20 lakh, raised from encouraging friends. The brothers roped in a software programmer friend to design their site. A couple of months later, in November, 1996, 123India was formally launched.

At present, the search-engine's database has 20,000 live Websites, and users can either type in keywords or skim through a directory to ferret out information. The search-engine is not driven by state-of-the-art meta crawlers that return results after conducting searches on multiple engines. Instead, 123India offers a combination of a search-engine and directory-based search service, where each link has been scanned, verified, and validated before it is placed in a directory. Cautions Pankaj Kapoor, 26, Research Analyst, INFAC: "123India will have to keep working on making its software more robust, particularly as demand for audio and video searches will grow."

Kajaria claims that 123India scores over rivals when it comes to providing extensive information on India. Explains Sharad: "If you want to listen to R.D. Burman numbers or scan the educational institutions in India, 123India is where you have to hit." Agreed. But 123India does not operate in a static environment. Deep-pocketed competitors like indiatimes (promoted by The Times Of India Group) and RediffSearch (hosted by the portal rediff.com) host extensive portals.

With 13 lakh visitors per month, RediffSearch--launched by Rediff On The Net in July, 1999--is a formidable rival. "Search is most used on the Net. Rediff On The Net could become the one-stop site for information," claims Rohit Varma, 38, Vice-President (Brand Marketing), Rediff On The Net. And then there are competitors like Khoj, which claims to have 30 lakh visitors per month. Confirms INFAC's Kapoor: "Khoj is the only success story among India-driven search-engines."

In contrast, consider 123India's 7.50 lakh visitors per month. "No one knows us," concedes Kajaria. That is a problem since a portal's ability to attract more eyeballs depends on the brand, not technology, since the latter is fast becoming a commodity. But Kajaria, who holds a post-graduate degree in marketing from New York's Adelphi University, brushes off the competition, claiming: "Once you deliver good service, users get accustomed to it and prefer to stick to it."

While portal stickiness is, indeed, an established phenomenon, 123India has to also grow its customer-base. Beginning Independence Day 1999, the Website--which provides e-mail and detailed nationwide weather coverage--has begun a news-service, which includes a listing of the headlines from leading national newspapers and live stock quotes from the National Stock Exchange. It also plans to include a section on the festivals of India. Also on the cards is another section targeted at NRIs.

The Kajarias have also pegged their ad-rates lower than competitors'. So, while advertising on RediffSearch costs Rs 1,500 for 1,000 impressions, it costs only Rs 1,000 on 123India. While most of the ads 123India attracts are targeted at NRIs, that is now changing. Says Vijai Mathur, 54, Vice-President, Gillette India, which advertises on RediffSearch: "The Net gives us an excellent avenue to reach out to our customers as it attracts a lot of urban traffic."

Ad-revenues are crucial in this business, particularly as IntraSoft is still not breaking even. For running its services as well as meeting employee costs, 123India has to shell out nearly Rs 20 lakh a month. And although the company claims to have packed ad bookings till October, 1999, the Rs 16 lakh that the ads--mostly from advertisers based abroad--fetch every month is still Rs 4 lakh short of their monthly expenditure. Says Kajaria: "We need Rs 7 crore to meet marketing expenses, and will be approaching venture funds."

He's obviously thinking of Citicorp Information Technologies, Intel India, and ICICI Venture Fund, the major venture capitalists eyeing fledgling Net-based set-ups in India. But, in order to attract funds, the Kajaria brothers have to offer more. Either expand into other services: e-Commerce and on-line sales (like amazon.com or ebay.com), become an Internet Service Provider (like America Online or a Microsoft Network), set up community sites (like Geocities or Xoom)--or come up with an innovation, like Third Voice, the Net company that allows surfers to stick digital Post-It notes on any Website.

Or even extend their services, as Yahoo! did when it hooked its service onto local cellular phone companies in Hong Kong whereby it could transmit its Web-services to the cellular subscribers too. That said, apart from Yahoo!, none of the portals on the Net has evolved a winning business model for itself--yet. That's because there is actually little for a customer to choose from between competing portals, all of which offer essentially the same service. The fallout of that is evident in the hectic M&A activity on the Net, with portals buying up one another to reduce competition.

Significantly, a reverse move, back from full-fledged portals to plain-vanilla--but extremely fast and powerful--search-engines has begun in the form of services like alltheweb.com. But to do this, 123India will have to list more sites; allthe web.com, for instance, lists 100 million sites. The Kajarias, though, are not moving in this direction. Instead, they hope to rake in much of their revenues from e-Commerce.

However, e-Commerce in India hasn't taken off and the Net business is expensive. Says Arvind Mahajan, 43, Executive Director, PricewaterhouseCoopers: "Development of e-Commerce in the country will depend on regulatory reforms." Till that happens, the brothers hope the swadeshi USP of their Website will help them survive. Claims Arvind: "Whenever there is need for India-specific information, we want people to use our search-engine. We realised that naming the search-engine with digits and that too with 1 would make it the starting-page of all India-related pages on the Net."

Smart, but if 123India is to compete against powerful domestic brandnames on the Net, they will need to be smarter. What the brothers have not articulated, but must have definitely considered, is the option of selling-out. Indeed, the portalisation phenomenon has proved to be the saviour of many small loss-making Net start-ups. Unless IntraSoft works on giving its customers better reasons to visit its site--and keep coming back for more--it could, eventually, become fodder for larger predators that roam the Net. For, on the Net, success and failure can be just a 1-2-3 mouse-click away from each other.