Sify goes into cost-cutting overdrive

Padmaja Shastri in Chennai

Satyam Infoway Limited (Sify) is redefining its portal strategy by doing away with some of its non-performing sites, while at the same time expanding into new and lucrative areas of the portal business.
In the first quarter of fiscal 2002, Sify registered portal revenue of $1.1 million (Rs 5.18 crore). The Internet and e-commerce company is using the twin strategy of increasing revenues, while reducing costs, to bring down its ‘cash burn’ and losses.

“We will chop off all non-contributing sites,” said Mr Vivek Bali, president-Portals of Satyam Infoway. The company has already discontinued the Gujarati, Bengali and Kannada channels of Walletwatch.com, as most of its target audience among these regions was found mainly using the English version.

Among its other cost cutting measures, the company has completely stopped offline advertising for the promotion of its portals. The advertisement expenditure of Sify last quarter was just a fraction of what it spent in the previous quarter, according to Mr Bali. Though he did not disclose the exact reduction in spends, he said that the company was progressively reducing the average cost per customer acquisition. “We are now advertising only online - that too mostly across our properties,” he added.

In addition to hiking Net access tariff and hosting charges by around 10 per cent, the company’s revenue enhancing measures include getting into more lucrative areas of e-commerce like travel, auctions, etc., while offering innovative options to advertisers. Interestingly, over 75 per cent of the company’s portal revenue continue to come from advertisements. To boost its e-commerce revenues, it introduced ‘cash on delivery’ as a payment mode a few months ago, since it was seen that most customers shy away from using their credit cards to buy online. To drive more purchases on its sites, the company has revamped the homepage of sify.com, with prominent display and hyperlink to its shopping site—sifymall.com. It is also moving towards e-tailing more low volume-high value goods like watches, cameras, cell-phones and other gadgets.

After tying-up with Baazi.com recently for getting into auctions, Sify is looking at having a full-fledged travel portal, as travel is among the top three products purchased online—expected to be a Rs 450-crore market by 2005. “We are sorting out the back-end”, said Mr Bali. The company however is not planning any acquisitions for the portal business, he said. Not surprisingly since it is yet to recover from its acquisition of India World last year for Rs 499 crore.

The company is now getting more into co-branding and sponsorship deals with corporates instead of relying on banner ads alone. Typically, it charges Rs 15 lakh to Rs 20 lakh for sponsorship of a channel for a period of six months.

Also, Sify’s consumer portal Sify.com, now offers package deals just like most offline media do—customised combinations of sponsorships, microsites, interstitials, pop-ups, skyscraper banner ads, etc. Most of these ad-types are interactive and provide a hyperlink to the clients’ Websites. Some of the significant accounts of the company’s portal business include IBM, Unilever, Intel, State Bank of India, Samsung, ICICI and Citibank. Our portal business didn’t get hit by the dotcom bust as most of our advertisers were brick and mortar companies and our reliance on other dotcoms was minimal, said Mr Bali.