Waking from the dot-coma

Waking from the dot-coma

By K. Basrie

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?

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?