TECH TALK: Dotcom Nostalgia: India and China

The Internet industries in India and China grew very differently. Because China had a better telecom infrastructure and a higher per capita income, there were more Internet users there. So, even though the Internet was still somewhat controlled by the government, portals like Sina, Sohu, Netease and managed to raise hundreds of millions from international investors through Nasdaq listings. In comparison, India had only two listings: Sify and Rediff.

The bust hit the Chinese Internet companies hard. But they had the cash and a consumer base to discover a new business opportunity. Mobile users. China’s cellphone user base was very large by then. The portals had the cash to switch track and focus on building services for the cellphone market. India, by contrast, did not have that then.

The mobile market gave the Chinese portals a much-needed shot-in-the-arm, and they thrived. Over time, broadband started picking up and with it came both Internet advertising and online gaming. Also, China had a much larger number of well-capitalised Internet companies which also resulted in a wider range of services. In contrast, the boom-and-bust in India was all too short. There were only a handful of VC investments and the result was that the Internet services growth has remained stunted in India.

The richness of China’s Internet has seen the emergence of Shanda in the online gaming space. Shanda now has a higher market capitalisation and faster growth than the three portals Sina, Sohu and Netease. Shanda is a relatively new company having been launched in 1999. But the fact that it emerged through the bust is a testimonial to the depth of the Chinese Internet.

If I look back, had the governments been smarter about the importance of telecom and broadband in India, we could have had a stronger foundation to sustain multiple entrepreneurs through the dotcom bust. In fact, the bust need not have happened in India valuations would have come down to rational levels, but the opportunities would have stayed. And, regrettably, our continuing short-sighted policies on broadband handicap Indians and the Internet companies. Which in turn cuts off the oxygen of venture capital to aspiring entrepreneurs.

India needs to build the right infrastructure for its entrepreneurs to succeed. Today, product-focused start-ups tend to be back-end operations for US-based front-end ventures. This needs to change. We need to look inward at the market that exists within India. But for that, the infrastructure and user base has to improve dramatically and rapidly. Only then can we dream about creating the next big successes out of India. Else, we will be playing second fiddle to Chinese entrepreneurs and companies because armed with their domestic success, they will be in a good position to target India.

Tomorrow: The Future

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.