What a difference a year makes. Last year around this time, Internet companies could do no wrong. The world was a place where cash flows did not matter, the measurements of value was in eyeballs, traffic, growth at any cost and red ink. There was talk of Yahoo buying Disney. In India, almost every hoarding in sight was proclaiming the arrival of a new dot-com, and newspapers were carrying full-page ads from companies eager to spend the latest round of venture capital so they could raise the next one at many times the earlier round. The Internet would change the world.
The Internet will still change the world. That has not changed. Everything else has. The challenge before Internet companies now is to survive and grow in the face of skepticism from investors. Investment has all but dried up. And yet, there still exist many companies and entrepreneurs. In a once-forgotten world, it was tough to raise money, and easier to then build a company. In the Internet world, money flowed like water. Now, the entrepreneurs are realizing how difficult it is to build a company.
The Internet revolution is not over. We are living through it. Revolutions do not happen in months. That is why for many who are part of this revolution it sometimes can get confusing – is this the beginning of the end, or the end of the beginning, or has it ended? A few years from now, it will be easy to do all kinds of analysis and say why what happened actually did so. But, the real challenge is to live through it and create companies out of this which can survive and grow. Because there will be winners. Only a few winners.
One of the problems about today’s world is the rapid dissemination of information and the inter-linking of economies. We live so much in the current – it is a real-time world. And yet, strategy is long-term. We need to not only produce results quarter after quarter, and build a company where customers and profits grow quarter after quarter. This requires not just short-term measures which can be effective in the next 90 days, but also a long-term perspective and vision which can create differentiation and sustainable competitive advantage.
The US had a few years where an incredibly large amount of money was available through venture capitalists, the public markets and the corporate spending which helped create the Internet infrastructure and culture extremely rapidly. The base of PCs was also there so people could get connected, and access information and services on the Net. In India, it all happened too quickly (start and finish in a few months), and the infrastructure (and therefore, the customers and the spending) was also missing. The result: the Internet revolution in India has almost been a still-born, and this has led to quite some disillusionment all around. How can this change? The solution lies in the leading Internet companies becoming profitable, so that investment can once again start coming into this sector.
This week’s series of columns will look at various Internet business models and discusses what companies should do going ahead in the Indian context to be among the winners.