Waking from the dot-coma: the second wave of e-volution
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A recent survey of 30 countries revealed that only 6 percent of the world's six billion people go online. Billions of others are not surfing the Web due to a lack of interest, computers or funds. No wonder this industry, including in Indonesia, has been at a low ebb. But is this the reality, or is e-PR needed? ----------------------------------------------------------------
By K. Basrie
JAKARTA (JP): If you raise the above question with the CEO of a dot-com company or a computer trader in downtown Mangga Dua, the immediate response will be "No!".
You will then have to listen to their sermon on why this is so and also their predictions about the industry.
On the other hand, the world has seen unending reports on the deaths of many dot-coms across the planet.
So who is right?
"There's right and there's wrong," Ninok Leksono, president of Kompas Cyber Media (KCM), which operates Kompas online (www.kompas.com), told The Jakarta Post on Friday.
The websites of many Indonesian-based dot-coms are looking dull with a lack of advertisements. If there are any, most of them are based on barter schemes or are placed by sister companies.
To survive, many dot-coms have to be continuously injected with fresh funds due to cash burning.
KCM, which belongs to Kelompok Kompas Gramedia, the country's leading publication holding group, for instance, has increased its initial investment of Rp 3 billion by ten times that amount to allow its three-year-old Internet portal to exist in cyberspace.
"Last year, we survived with Rp 4 million (US$350) profit, but this year will be another uncertain and difficult period, if not diving sharply for us, since many advertisers, like many ordinary companies, have reviewed their financial efficiency," Ninok explained.
Many advertisers, he added, had "temporarily held" the placement of their ads at Kompas online for both efficiency and effectiveness reasons.
From its 2000 operations, Kompas online managed to earn revenue totaling Rp 1.7 billion, collected from several components and services, including website design and webstorage.
An Internet observer, Mas Wigrantoro Roes Setiyadi, revealed that many of the 700 Indonesian-based dot-coms are indeed in a precarious situation.
"They are finding it hard to survive but refuse to die," he said.
Following the Internet boom in 1998, the number of users snowballed from 50 million in 1997 to 400 million last year.
During its golden time, the world believed that the information superhighway would provide something extremely promising because it could shrink the communications divide around the entire planet. Many then rushed to invest their money in cyberspace and, like with many industries, only the early birds got the fat worms.
Domains, for example, were a gold mine. The address for www.business.com, for example, was bought at US$7.5 million and www.altavista.com at $3.5 million. www.jakartapost.com and www.jp.com were put on offer at a lofty price.
Several years ago, giant billboards for several dot-coms, like Astaga.com, decorated the major streets of Jakarta and other big cities in the country. But in a matter of months, the dazzling boards disappeared.
Many companies in Indonesia also planned to expand their businesses to establish dot-coms for money-making reason, denying that they were simply following the 'me too' business trend.
Some of them hastily announced plans to list their newly- operated online services at the Jakarta and Surabaya stock exchanges.
Two years later, the world started witnessing several grim stories about the former gee-whiz e-biz. Almost every week, the world saw brutal job-cutting in the Internet industry.
From December last year to January 2001, TheStandard.com reported that 51,400 dot-com employees lost their jobs in the U.S. alone. Such enormous dot-com layoffs continue.
The initial belief voiced by many big dot-com gurus, including Bill Gates, that print media would be demolished swiftly by the Internet has been proven wrong. The reality is, in fact, that many newspapers, magazines, TV and radio stations happily enjoy the massive advertisements placed by the dot-com brothers.
e-Commerce could not even help the unexpected situation. And then came the growing number of illegal misuse of credit cards over the Internet.
In Indonesia, according to business weekly Warta Ekonomi, the most recent 'dot-bombs' were Lintasbisnis.com and Matamata.com.
It appears that many of the smaller, independent dot-com firms have also been swallowed up by their larger competitors or have fallen into bankruptcy and eventual closure.
Ipsos-Reid, which conducted the recent survey of Internet users in 30 countries, said that in the developed world, a substantial number of people who can go online very easily have decided not to.
"They see no compelling reason to be on the Web. The hype and the promise of the Internet clearly hasn't impressed them -- not yet at least," the company's senior vice-president, Brian Cruikshank, said.
Latest figures from the Association of Indonesian Internet Service Providers (APJII) and Indonesian Internet Business Community (I2BC) disclosed that there are nearly 2 million domestic Internet users, mostly high school and university students. Only 180,000, or 0.09 percent, of Indonesia's 200 million people, have conducted online transactions. In term of access, 42 percent use warnet (Internet shops) and 41 percent have access at their offices.
Experts said that the failure of many dot-coms is simply a process of natural selection.
"They come and go. The flimsy players will lose the game," said Christanto Suryadarma, architecture manager of Intel Australia.
According to him, the players in this Internet business should be able to explore high-class innovation to introduce new products.
"Then, the companies must focus on ways of achieving immediate returns. Not like the current trend, where many dot-coms only plan to gain profits after five years of operation," Shristanto added.
Markus Straub, a CEO of indotradecenter.com, a newly-founded business to business (B2B) e-commerce portal based in Serpong, Tangerang, predicted that many dot-coms, particularly those in the business to consumer (B2C) sector, would probably close down soon.
"When analyzing the dot-coms that closed down one can see that most of them operated in the B2C sector, usually having strong venture capital financing and plans for stock-exchange listing ready before their actual business was running," he told the Post.
This, he added, worked well in the early days of the dot-com business and many dot-com founders made a fortune but, with the technology share crash, the end of this business strategy had arrived.
Furthermore, the revenue sources for most B2C dot-coms is limited to advertising. This doesn't make the situation look much better for the remaining B2C dot-coms, as these revenues dropped dramatically after the bankrupt dot-coms stopped placing advertisements, Straub explained.
According to Ninok of KCM, restructuring is a must.
"Dependence on ads is no longer profitable. Aiming only to be a pure dot-com will lead us to bankruptcy, so we have to work hard on replanning," he said, adding that KCM spends Rp 150 million a month to employ its 40 staff.
"But we'll never give up and we firmly believe that the future of this business is still promising. We're just waiting for the second wave of momentum."
Ninok hopes that the expected new government in Indonesia will provide a fresh business environment in the country.
But, several operators have said that the business is already on the rise again.
Detik.com, for example, claimed that its advertising revenue has already reached Rp 325 million per month at the beginning of this year.
Straub said that the future of dot-coms definitely lies in the B2B area.
"Transactions between companies, be it for the purchase of indirect materials, raw materials or for selling final product, need to be carried out in almost every business," he said.
As Indonesia today has Internet usage lower than one percent of its population, any outlook for a B2C concept is not too bright, Straub said.
"There are some local dot-coms, mainly operated by news and entertainment business doing quite well, but, for most of them, advertisements seem to be the only source of income.
Other concepts like Online-Stores, Shopping Malls or Auction- sites mostly face the same problems: potential customers in cities prefer to buy their products in shopping malls, where they can test and touch the products. This attitude is quite understandable, as it seems that window shopping was invented in Indonesia.
However, Straub said, following the international trend, the future outlook for Internet businesses in Indonesia looks quite different when considering the B2B segment.
"In this area Indonesia has huge potential, as it provides a wide variety of commodities that can be exported. By marrying this supply with global demand, the exported commodity volume can be increased and the business enabler, who are bringing supply and demand together, will profit from that as well," Straub said.
According to observer Christanto, dot-com business activity has not become stagnant yet. Globally, the business could still grow by between 30 percent and 40 percent, he predicted.
"This is not a me-too business. Operators are required to have the creative talent to produce content and top management abilities," he said.
Far from being dead, the Internet has large growth potential everywhere, but progress is destined to be slower than its most enthusiastic advocates might have envisioned a few years ago.
So?