India is a new gold rush market. Home to some 1.2 Billion people, half of whom under the age 25, and buoyed by the recent economic growth, the country is poised to be a major economic powerhouse for the next few decades before becoming the second largest economy by 2050. In this short article, let’s review some of the data and trends that I discussed earlier in my presentation at the PDMA conference in Orlando, Florida.
Internet in India officially started on the 48th Independence day, 15 Aug 1995 when VSNL started offering services. However, adoption for the next ten years remained elusive largely due to poor bandwidth of the then dial-up connections and relatively high costs of computers. In 2004, government formulated broadband policy, and adoption picked up in 2005 but has always remained below worldwide averages.
Impediments and Growth
Some of the digital impediments that still hamper speedier adoption of Internet in India include poor and costly bandwidth, lack of content in Indian languages, payment and delivery issues in online retail sector and lack of one-stop e-governance solutions. Despite these formidable challenges, India today has 140m Internet users, which is roughly 10% of the population. It grew 25% from last year, and the projections are 300m Internet users by 2014.
This is in sharp contrast to 950m cellphone subscribers, out of which 350m have data plans, and only about 30m smartphones. The recent growth in smartphones can be attributed to the entry-level Android devices that have dramatically lowered the price-point for an Internet device, thus fuelling an entirely new category of ‘new to net’ users who will perhaps skip the desktop devices altogether. However, this new class of users is responsible for a good 60% of the Internet access. As an example, 30% of new Facebook registrations are happening from mobile. Clearly, mobile as the default access device is a critical success factor.
Top five activities on Internet by the amount of time spent include Social Networking, Entertainment, Portals, Emails and Search. In Social Networking, Facebook is the clear winner, and India is the second largest country with 65m users that has grown eightfold in last 2 years alone. Projections are that by 2015, India will be the largest country on Facebook. Similarly on LinkedIn, it is the second largest and also on Twitter in terms of active users. Clearly, that is a growth category. In terms of Entertainment, India thrives on Bollywood and Cricket, and hence it is not a surprise that this is a highly prized category. Bollywood produces over 1,000 movies a year and Indian Cricket is the largest market for entertainment cricket (i.e., five-year old Indian Premier League that is roughly a $5Billion industry now) as well as the professional variety. Another high-growth area of infotainment is news, which is evident from literally dozens of national, regional and local news channels in a country that is also the largest DTH market in the world.
One category that is not in top five is the online retail. It stood at $10B in 2011, and is projected to grow to $14B this year. It had a slow start, plagued essentially by problems in payment and delivery systems, but some new trends are very promising. 80% of this comes from travel, which has been a traditional pain point in India. Other categories like books, electronics and apparels are looking up. Flipkart, an online book seller, now ships over 30,000 orders a day and is poised to be the first Indian internet company with $1Billion valuation. IRCTC, which is essentially a government owned corporation and sells railway tickets, which has been another painpoint for ages. It does close to 200m payment transactions a year for a network that carries 10Billion passengers annually.
An interesting data-point here is that a good 150m Internet users are ‘internet-ready’ but only 10m are actually shopping online. So, there is a huge opportunity to bring them online by creating innovative solutions that take the pain away from online buying cycle.
Internet breaks down barriers of pricing and distribution that have traditionally kept big multinational players away from several emerging markets. In the context of India, it is fast emerging as a high-growth vehicle for markets that have been historically underserved, even by local players. The key to success is in being able to design products that eliminate bottlenecks in the complete online buying cycle at an affordable price-point. Indian markets allows Internet-scale problems to be tested for key hypotheses, which can then also be taken for global rollouts in comparable markets globally.