Most analysts are questioning the rationale behind Satyam Info's US$ 115 m buyout of IndiaWorld, a portal.
Satyam Info's argument for the purchase is that IndiaWorld has a large non-resident Indian (NRI) following - 13.5 million page views per month. That amounts to a lot of eyeballs even if they are worth US$ 115 m. At that price, Satyam actually paid US$ 8 for each page view! Even Internet companies like Yahoo! and Amazon have an average capital cost of US$ 2 per page view.
If one goes by the average (of US$ 2), Satyam should have paid only US$ 20 m for the IndiaWorld deal and not US$ 115 m. Internet valuations across the globe are getting more and more incredible. In the absence of any benchmark, it is difficult to arrive at any consensus on what is expensive and what is very expensive.
Exactly why Satyam Info is so keen to grab to those eyeballs is highlighted by some eye-opening statistics. Recent statistics underline the fact that about 60-70% of the traffic to Indian portals originate in North America. Another 15% from the NRI population across other countries in and around Europe. The balance traffic comes from India.
One reason why Satyam Info has shown urgency in buying out IndiaWorld is due to the fact that if they had not bought it, some other competitor (Rediff.com) would definitely have stepped in.
But some concerns remain. Mainly, how does Satyam Info propose to pay the balance US$ 87 m. There is some talk of America Online (AOL), Satyam Info's alliance partner, financing the balance.
But debates continue on whether Satyam Info has paid a heavy price for IndiaWorld. Some believe that it has sparked a trend, which will see more buyouts, at obscene prices.
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