Profit chase leads Rediff to group-discount site wagon

Rediff, the once-shining star of Indian e-commerce, made a late entry into the already-getting-crowded ‘group discount’ deals bandwagon.
Group discount deal websites such as Groupon — which recently entered India by acquiring sosasta.com — aim to monetise the social nature of the internet by getting brands and stores to offer discounted deals if a certain number of users are willing to buy a product or service.
A typical deal could be a spa offering 50% discount on a certain service on particular days if 25 users commit to buy it.
“This is a new ad medium which gives local vendors access to local users in an affordable way and manner that wasn’t possible earlier,” said Ajit Balakrishnan, Rediff chief executive, who founded the company in 1996, after announcing the Rediff Deal Ho Jaye! initiative.
Balakrishnan is looking to make Rediff profitable again as global competitors like Facebook, Yahoo and Google have made deep inroads into the Indian internet commerce space that was once Rediff’s backyard.
For now, Rediff’s new service would be available in 40 cities including smaller ones such as Cuttack, Patna, Nagpur and
Vijayawada. Larger cities like Mumbai would have even further localisation for different parts of the cities to make it relevant for the suburban residents.
Balakrishnan said the new offering would stabilise over the next 6-9 months but added that the potential would increase as India’s broadband penetration improves from the current 2%.
Once the leading portal in India, Rediff has been slipping in rankings and is currently No. 9 among Indian websites assessed by Alexa.com.
On the revenue front, too, Rediff has seen some slippage.
In the January earnings call, Balakrishnan had mentioned that discount deals space is a natural evolution for Rediff and that an announcement may be expected soon.
Taking cue, Rediff shares listed on the Nasdaq stock exchange in New York, gained steadily the last month or so touching $11.44 or close to the 52-week high of $11.90.
Rediff listed on Nasdaq at the height of dotcom boom in 2000 at $12 a share.
In the year ended March 2010, Rediff had revenues of about $18 million. In the nine months of current fiscal till December 31, the company recorded revenues of a little over $16 million and accumulated losses of nearly $5million.
The discounted deals space in India, although at a very early stage is already getting crowded with the pioneer in that space Groupon entering India by acquiring SoSasta.com in January.
Established e-commerce player Ebay also already started offering social shopping options in India and social networking site Facebook.com is expected to launch discounted deals to users in India as well.
“While it is commendable that Rediff is trying different things to stay relevant, what they should be really worried about is the continuing erosion in their user base and how to arrest that,” said an market analyst who tracks e-commerce space in India “It may be already too late,” the analyst added asking not to be named as he is not authorised to speak to the media.