Internet industry hit hard last year

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.