Tuesday, May 1, 2001

Remarkable Transformation for Internet in India

A new Report from the Yankee Group, "Asian.Portals.com—India," reflects the results of significant primary research and extensive interaction with Internet service providers (ISPs), relevant companies, as well as the end users to obtain their viewpoint and prognostications on the BtoC topography in India in general, and the viability of the portals in particular.

The state of the Internet is currently undergoing tremendous metamorphosis in India. The continued progression down the path of deregulation in relevant areas; the impending arrival of multiple undersea cable systems (and their associated capacities); the reduction in bandwidth procurement costs; heightened consumer awareness; and preferences for better access have all contributed to an astounding growth in the Internet and related services in the country. The success of many Indian-born entrepreneurs in both "pure-play" dot-coms and other Internet technology companies has also stoked the ambitions of many in the country, which, when combined with the large talent pool, has allowed the creation of many new companies in the consumer and Internet space. This, in turn, has further increased user cognizance and expectation of the possibilities that the Internet portends.

Aditya Puri, an analyst with the Yankee Group's Internet Strategies Asia-Pacific research and consulting practice, comments, "Worldwide investors' tepid attraction for technology in general, and BtoC Internet in particular, is forcing companies to rework their business models in order to meet profitability thresholds sooner. BtoC portal models are reliant upon advertising as their primary source of revenue, with contribution from e-commerce and other ancillary services being relatively much smaller.

The BtoC landscape in India is in line with current global BtoC trends—anemic stock performance, investors' demand for expedited profitability goals, and cessation of smaller untenable operations are some of the prevalent characteristics."

States Lose $1.4 Billion From Online Tobacco Sales
Today, more than 100 tobacco e-tailers sell tobacco tax-free and without verifying buyers' age -- creating challenges for parents, public policy advocates, and lawmakers. By 2005, tobacco e-tailers will sell $5 billion of tobacco products, causing states to lose $1.4 billion in tax revenue, according to a new consumer packaged goods Brief, "Online Tobacco Sales Grow, States Lose," by Forrester Research, Inc. (Nasdaq: FORR).

"Tobacco products are the perfect online replenishable because they are cheap to ship, nonimpulsive, and not taxed, which saves heavy smokers a lot of money," said Robert Rubin, director at Forrester. "Two-thirds of Internet tobacco retailers are located on Indian reservations, making it impossible for states to collect tax revenue."

"States will have to say goodbye to lost tax revenue, but technology will play a vital role in stymieing underage purchases," said Rubin. "Federal lawmakers and the antismoking lobby will force tobacco e-tailers to place bar codes on all shipped boxes containing tobacco products. Child-safety software vendors will help keep kids away from tobacco sites by providing parents with a PC-based filtering tool to restrict access to tobacco Web sites -- similar to today’s filters for pornography sites."