Internet industry hit hard last year
Moch. N. Kurniawan, The Jakarta Post, Jakarta
After experiencing euphoria over the Internet business last year, Indonesia, like most countries around the world, this year witnessed the collapse of its dotcom industry.
Last year, newspapers were packed with advertisements from Internet startup companies looking for employees, while public places, including the roadside, featured numerous banners carrying the names and logos of new dotcomers.
Today, such advertisements and banners are rarely seen.
Most of the dotcomers that were born last year to much fanfare are already dying or have ceased operations.
Amid bearish global sentiments over information technology shares and a spate of revelations about the bankruptcy of Internet companies, three Internet firms -- Internet service provider (ISP) PT Dyviacom Intrabumi, PT Kopitime Dot Com and business portal PT Indoexchange Dotcom -- decided to float their shares in Jakarta, while software developer-cum-Internet center operator PT Myohdotcom Indonesia did so in Surabaya.
Aware of the bearish sentiment clouding dotcoms, the companies cut down on the number of shares offered to the public.
Kopitime offered 60 million shares, as against the 120 million initially planned, while Indoexchange cut its offer to 120 million shares from 250 million under the initial plan.
Dyviacom shares closed at Rp 110 on Nov. 29, compared to Rp 250 on the first day of trading in December 2000.
Indoexchange closed at Rp 105 on Nov. 29, compared with its initial trading level of Rp 125 in May this year.
Kopitime shares closed at Rp 305, as against Rp 300 on its first day of trading in April.
An initial public offering (IPO), which during the golden days of the Internet boom provided a chance to raise a lot of funds, is no longer a bonanza for dotcomers.
Leading Internet firms -- such as PT Agranet Multicitra Siberkom (Agrakom), which operates news portal Detik.com; PT Cyberindo Aditama, which owns the ISP called CBN; and M-WEB Indonesia, which operates various news portals, Internet centers and Internet corporate service facilities - have thus far announced no IPO plans.
The question is: Does the Internet business still have a future in this country?
M-WEB Indonesia, a subsidiary of South Africa-based telecommunications and Internet firm Myriad International Holding (MIH), is still confident that the Internet business holds good prospects. M-WEB has subsidiaries in 50 countries.
"We're optimistic about the future of the country's Internet business. We'll invest more here to make M-WEB Indonesia our (MIH's) largest company in Asia, competing with M-WEB China," company director David Burke said.
M-WEB, which began operating here last year, has invested US$20 million and plans to invest another $10 million next year to further develop the contents of its portals, establish more kiosks in the country and buy more equipment and software, Burke said.
M-WEB started its Internet business in the country by acquiring an ISP called Cabinet last year. It then entered the news portal business by acquiring Astaga.com, Satunet.com, Kafegaul.com and developing its own portal M-WEB.co.id. All the portals now receive about 1.4 million visits every day.
The company then expanded into the Internet kiosk business, by establishing giant Internet centers in various universities. It recently launched a new service to help the corporate sector conduct its business on the Internet.
Burke said the company, for the moment, had no plans to float shares on the stock market as it had strong financial backing and could make money from its business.
"With strong financial support (from its parent company MIH) it's obvious that we have no intention of looking for funds from an initial public offering (IPO), like others have done," Burke said.
Separately, Budiono Darsono, chief editor of Detik.com, said Agrakom had managed to survive the slump by focusing on its popular news portal, after failing to expand into the newspaper business.
"That's our key (to survival). We are now focusing on enriching (the news portal)," he said.
Detik.com, the country's first Internet news portal, was launched in 1998.
Last year, Agrakom, emboldened by Detik.com's success, tried its luck by publishing a newspaper with contents drawn mostly from the news portal. It later decided to close the business down due to financial problems.
Detik.com, with about 700,000 page views every day, continues to enjoy strong revenue growth from advertising, maintaining its position as the leading news portal, according to Budiono.
Up to November, the portal's revenue accounted for half of Agrakom's total revenue of Rp 13.2 billion (US$1.26 million), or Rp 1.1 billion a month, an increase from Rp 850 million a month in 2000, he said.
Internet business analysts RM Roy Suryo and Mas Wigrantoro Roes Setiyadi said the dotcom slump over the past year was part of a natural selection process that would lead to the survival of the fittest in the industry.
"We can see it clearly. The survivors are those who have good market diversification and differentiation," Roy Suryo told the Post.
Aside from M-WEB and detik.com, Roy Suryo said, Mizan.com and Sanur.co.id, which sell books online, and others selling furniture online, would survive.
Wigrantoro said the demise of many local dotcomers was also partly due to the industry's failure to realize that Internet users in the country were still few in number and "immature."
"It's difficult to expand dotcom businesses when the number of Internet users is not increasing," he said.
According to him, the country has around 1.5 million Internet users, less than 1 percent of the country's population.
Besides, he said, people still felt unfamiliar and insecure about conducting transactions over the Internet. That's why, he said, local e-retailers were continuing to suffer losses.
Wigrantoro believes the Internet business will recover quickly in the future once the number of Internet users in the country picks up and people feel more secure about online transactions.
Burke admitted that it was difficult to estimate when the Internet business would rediscover its golden days.
"But we believe there will be progressive changes in the country's Internet business when the government revokes PT Telekomunikasi Indonesia's monopoly over domestic telephone lines in two years," he said.
He said the liberalization of the telecommunications sector would cut the cost of telecommunications connections and this in turn would boost the number of Internet users and broaden the market for the country's Internet industry.
Budiono predicted competition in the industry would decrease, as few companies would survive the current slump.
"Whoever is good at selling will survive, whoever is not will die," he said.