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Search, a half a world away

When it comes to portals, Yahoo and MSN are nothing beside Rediff.com. Meet Ajit Balakrishnan, CEO of a Net giant you've likely never heard of.

East is East and West is West, particularly when it comes to Internet usage.

While e-commerce constitutes a huge part of Net use in Western Europe and North America, for example, it's still only a blip in places such as India and China. And the fact that more people in those countries get to the Web through cell phones than PCs is changing content there.

The cultural differences have worked to the advantage of portal Rediff.com, an Indian company that last month celebrated the five-year anniversary of its IPO on the Nasdaq.

To stave off the competition, Rediff.com plans later this year to unfurl a series of enhanced services aimed at exploiting the way people access and use the Web on the subcontinent.

CNET News.com recently spoke with CEO Ajit Balakrishnan to get his views on this evolving market.

Q: Give us a quick overview of Rediff.com.
Balakrishnan: Rediff.com has a registered user base of 35 million. To put that in context, India has 20 million Internet users and 50 million mobile phone users. All studies we have done indicate that we've reached in excess of 70 percent of the Indian market. Yahoo is a close number two, and MSN is a poor number three.

Our market by now should have been about four to five times the current size in terms of the user base, but telecom deregulation in India got stalled for about four years, roughly from 1997 to 2001, and started galloping after that. This year and next year, we'll see explosive growth. About 110 cities have been wired up with broadband now. Our challenge is to remain the leader while the market grows from its present 20 million to what many policy makers believe will be 100 to 120 million users in the next three to four years.

How did you get your start in the tech world?
Balakrishnan: In the mid-1980s, I and three other guys were building microcomputers. We used to make them and sell them from Bangalore. Bangalore was not a high-tech city in those days, and we found one person to buy the product finally after six months of struggle. It was a young Citibank branch manager in Bombay. He was clearly a visionary, because I think he went on to head Citibank worldwide.

Rediff.com has kicked off a social-networking product. What are you trying to accomplish?
Balakrishnan: Social networking has been hyped up quite a bit in the last two years, but we feel that we have a genuine way to execute on it. For example, if you live in Bombay, and you want to get a dinky little hotel in Goa, that hotel may not be on the Internet. So when you search for it, you don't find it. But what you can do is look around our user base and find somebody in Goa who can tell you something about that same dinky little hotel.

Somebody within your social network, or somebody who may be a complete stranger?
Balakrishnan: It'll trace a path between that person and you to two or three of your friends. So when your request goes to that person, it goes through a known set of links. There are half a million users in beta.

I am tending toward the view that search is a subset of connections. I'll tell you why. There are a lot of events going on in the world, but those events are not represented in Web sites. Maybe 2 percent of real life events are on the Web site. Once there, a Google or Yahoo or us can do a little page ranking and get you that information. But things like the dinky little hotel in Goa we talked about, or a guitar teacher in Bombay, aren't there. Guitar teachers in Bombay don't maintain Web sites, by and large. Even if you could use search, we would probably be able to get you there faster and quicker. Most important, that person may respond simply because it's going through a chain of your acquaintances.

What have you changed or discovered about the product through the beta tests?
Balakrishnan: The biggest challenge is that our office in Bombay is full of very bright people, who assume that everyone is very computer savvy. We have had to make the product simpler to use. We are struggling to find the quickest path to the right people. I showed this to some nontech friends of mine and they said, "We don't know what you are talking about." I then went back to the office and told our kids "See?" And they answered, "What's the problem? You'd have to be an idiot not to understand."

Do your consumer customers mostly connect at home through broadband or dial-up connections?
Balakrishnan: Neither. In India and in China up to 60 percent of access is through Internet cafes. There are 65,000 Internet cafes in India, of which roughly 10,000 are broadband-enabled. This is how it differs from Western modes of access, and that is a very important structure because that has shaped the evolution of the industry in ways different from the U.S. model, for example.

How so?
Balakrishnan: For example, gaming is starting to show much greater traction in cybercafe lead markets. There are some very interesting things going on in the IM world. The IM evolution in the United States has been mostly frivolous. Young people use it to connect after school. In countries like India--and to an extent, China--it is a way of reaching across the national divide. VoIP on IM helps people to go to the Internet cafes and speak to others in other parts of the world for free. It's a utility tool, not just something that teenagers do.

Will a lot of your new users come from mobile phones?
Balakrishnan: Absolutely. Again, it's a feature for both India and China. The number of mobile users is many times larger than that of PC users. Mobile phones are cheap. The learning curve isn't that much, and you can do wonderful things. In Asia, the mobile phone is the basic perquisite for any teenager; otherwise he won't get self-respect.

Does Rediff.com derive most of its revenue from advertising, or do you also participate in connectivity deals with carriers?
Balakrishnan: We have relationships with all these mobile players. Bombay city has eight different mobile phone companies, so it's a great consumer opportunity. What happens is that when somebody downloads a piece of music or a ring tone on a phone, we get a share of that percentage.

If the trend works out the way you're suggesting, then the dominant percentage of your customers will access the Rediff home page through mobile phones. So then what are the implications for content?
Balakrishnan: The first challenge is for a journalist to deliver a news report in 160 characters. Cricket is the popular sport in India, as you know. Match reports from our service are 160 characters. Every hour or so, a journalist submits the score and some words to describe the action. Our Indian journalists have, I think, been dragged kicking and screaming into this new world. Stock market updates on a mobile phone as an SMS message is very important.

How about lottery tickets or e-commerce?
Balakrishnan: I think it won't be lottery tickets; it will be movie tickets. In mobile commerce you need instant gratification. You don't need to go back to something. You want it now and you want it from where you are.

Our Indian journalists have, I think, been dragged kicking and screaming into this new world.

I was intrigued that matchmaking seems to be a big part of your site.
Balakrishnan: You were looking at the international site. Matchmaking is of importance to us, as the Internet is excellent for connecting people. It's been extremely popular, and part of the reason for the popularity is the 25 million Indians who are outside India.

Why has the Internet and technology as a whole boomed so strongly in India, while if you look next door at Pakistan, they're at square one?
Balakrishnan: Tough to say. I think it's got to do with investments in education. The investment in education, which happened in India over the last 50 years, is different qualitatively. Indian education is very science-oriented. Pakistan has a relatively high literacy rate, but I do not believe that it's as science-oriented. The Indian university system also is different. There is a large number of universities, and some of them are very old.

Do you see any kind of competition from Google?
Balakrishnan: Google is the search king. There is no doubt about that. I think they've made some progress in India as well. But search volumes are relatively low in markets like India and China, and there is a very strong reason for that: commercial search volumes. The U.S. Internet economy has been built around e-commerce and there've been e-commerce sites here now for years. When you search for an iPod, there's a good chance that you would find 500 people offering that. When you have such a situation, then there's a role for product comparison sites. Commercial search in the United States accounts for about 20 percent to 30 percent of all searches. In countries like India and China, it's still very small--maybe 2, 3 or 4 percent.