By Charles Assisi and Madhu Suthanan

There's a difference, merchant bankers say, when a corporate house makes an acquisition and when a venture capitalist places a ballpark number on the valuation. The difference essentially lies in the perspective. While on the one hand, corporate houses look at long term revenue streams, venture capitalists look at the most viable and profitable exit route.

To that extent, the argument goes, Satyam Infoway paid the kind of price it did, simply because as a corporate, its perceptions and value systems are different. Perhaps, the argument sounds fair enough when juxtaposed with the fact that the Internet is a relatively new medium and is acquiring a compelling logic of its own.

Valuation experts say the metrics are far too different from that defined by conventional textbooks. But the caveat here being that even if the valuation were to be done on the back of these new metrics, at $115 million, Satyam Infoway paid an awfully high price for its IndiaWorld acquisition. The ostensible reason being to capture the 13.5 million page views built up over five years.

If one were to go by the same parameter, Lycos, Yahoo, GoNet and Infoseek, among the largest portals on the world wide web (WWW), are cheaper to acquire than IndiaWorld.

Consider this. For a moment, ignore the fact that any of these companies have any earnings worth talking about. What they have instead, are page views. A page view gives an idea of how many times pages on a web site have been uniquely accessed. The more the number of page views, the higher a company's valuations are.

Yahoo, the world's most popular portal, averages 310 million page views each day. Lycos, another popular site, clocks around 60 million (See table alongside). As against this, IndiaWorld registers just about 450,000 page views. Rediff.com, another popular Indian portal and till a couple of days ago, competitor to IndiaWorld, brings in 600,000 pages views each day.

It can be argued these figures are not comparable because Yahoo and Lycos cater to an international audience while IndiaWorld and Rediff offer content to primarily an Indian diaspora.

But the argument is specious for two reasons. One, because IndiaWorld has been valued by international standards and the market buzz is that Rediff wants higher when it goes to the markets with an IPO. And two, both Yahoo and Lycos can tailor their content to suit the same audiences with minimal incremental costs and compete with India-born portals. To that extent, there are no local and international turfs.

Coming back to the point, moot question is, what kind of money are the stock markets willing to pay for every 1000 pages viewed? That is, the market capitalisation to 1000 page views. Infoseek gets $52.67, Lycos is rewarded $139.78 and market leader Yahoo commands $313.76.

As against this, IndiaWorld with its $115 million price tag, pocketed an astounding $255.56 - over five times that of Infoseek, more than twice that of Lycos and $47 over what Yahoo is valued at.

Assume for a moment this valuation is flawed and that it has to be based on revenue streams. The most apparent stream would be that which accrues from advertising and e-commerce.

Now consider this. The market for Internet advertising in India is currently estimated at Rs.6 crore. The company has publicly acknowledged Rs.1.27 crore as total revenues. Bear in mind that IndiaWorld's main revenue stream was providing Internet-based solutions for corporate houses. Given the fact that e-commerce has not taken off in the Indian context and that whatever exists is insignificant, it can be safely discounted.

Therefore, once again, optimistically assuming 20 per cent of revenues was accounted for by advertising, it tots up to just about Rs.25 lakh per annum. After adjusting these numbers with comparable last quarter ad revenues for major portals, Yahoo leads the pack with $115 million and GoNet remains at the bottom of the heap with $4.32 million.

IndiaWorld is nowhere in the same league at $15,630.

Juxtapose these numbers with the page views and what emerges is an interesting set of numbers. Advertisers are willing to pay an a little over $4.13 for every thousand pages viewed with the possible exception of InfoSeek which gets $6.59 -- possibly for the spending power of the audiences that it attracts.

IndiaWorld, however, manages only 39 cents.

Once again, the counter-argument here is very simple. That the advertiser is primarily Indian and quite obviously not willing to pay international rates for a medium he does not understand. Nor do the purchasers have the same buying power that the Americans have at their disposal.

This raises a pertinent question. Why in the world then did Satyam pay higher than international averages?

One more little thing. In the traditional brick-and-mortar world, companies are compared on the back of P/E multiples. Extrapolating this ratio into an online environment, the market value per thousand page views for every one dollar of ad revenue per thousand page views.

Infoseek has 8.9x, Yahoo gets 26.9x and GoNet is valued at 43.8x. IndiaWorld though, gets an incredible 662x.

Is there something more to IndiaWorld than what meets the eye? Perhaps not. Like it has been mentioned at the outset, it may simply be a clear cut case of differences in perception. Whatever, only time will tell.

If these multiples were to be applied to acquire Rediff.com, shareholders in the company could laugh all the way to the bank with a cool $281 million on the back of the 33 million page views that the company claims and the advertising revenues that it attracts.

But look at it this way. Of the Rs.6 crore generated through ad revenues from the Internet advertising each year, Rs.5 crore is split between the four major players. With IndiaWorld getting Rs.25 lakh like it has been estimated earlier, Rs.4.75 crore is split between the other three. Once again, assuming there is a very liberal three way split, Rediff should corner approximately Rs.1.5 crore.

If other revenue streams were to be factored in, the valuation is bound to go up by a couple of hundred million dollars. Though bear in mind that as far as e-commerce revenues go, there is very little to suggest Rediff makes anything substantial out of it. In pure value terms, selling books, music, assorted gifts, airline and railway tickets, cannot practically pump the bottomline to respectable levels given existing realities.