Tag Archives: India

What Emerging Markets Customers Really Want from the Internet: An Indian Perspective

[This article was published in PDMA’s magazine Visions, issue Q1 2013, based on my paper presentation at PDMA Conference 2012]

Introduction

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.

[slideshare id=14856633&doc=tvpdmapim2012-121023162654-phpapp02&w=650&h=500]

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.

Indian Internet CafeThis 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.

Engagement

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.

Online Retail

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.

Conclusion

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.

Why we might never become a great nation ?

At the Frankfurt Airport recently, I sat down for a coffee. As all tables were occupied, I ended up joining an American returning from Dubai. Well, it turns out, he was coming back from Iraq. He works for some recontruction firm and has seen eight of his colleagues (or was it his employees ?) getting killed in recent past, the last one just a few weeks away. Less than fifteen feet away. Right in front of his eyes. He used to work for army earlier and said the only difference from then to now is that he doesn’t have a gun.

Why is he there ?

I think a nation does not become great by its policies and moves (howsoever controversial they might be). I think a nation becomes great when people are willing to sacrifice their comfort and tap opportunities that are not in line of sight. Take another case. China. I lived in China in 2002 in the beautiful city Shenzhen (you can reach it by ferry, bus, car, taxi or train from Hong Kong). A great testimonial to the amazing grit and determination of Chinese people to get little more than a foothold in world matters by making great strides in their economy and infrastructure. I will not get into political or other issues that often distract conversations such as this, but will only focus on what I saw there. I probably saw more Mercs there than in most European cities that I have been to. I saw practically no underfed or underclothed people, I saw hardly any beggers. In my company, almost everyone I knew was working minimum of 70-75 hours a week since they started working. If they were married, their spouses were doing the same. If they were parents, they were meeting their children only over weekends. Now, that might be objectionable to some. Nevertheless, they were clear on one vision as a nation: if we want to achieve glorious future, we must be willing to sacrifice our comforts today and work for it. To a foreigner, it appears that the policies seem to help people achieve just that.

Cut to India. We are a nation of billion-plus people aspiring (or is it begging) to become a global power. We did not go to Iraq becase we felt it was a wrong war, we did not go to Iraq because we are not sure of our foreign policy. We don’t know how to handle something like Iraq without offending the vote base, for that matter, not just Iraq, but just about anything under sun ! We have no guts to eliminate our own enemies: corrupt politicians, freely meandering gangsters. It took years before Veerapan was eliminated. Perhaps there are several small veerapans roaming in our cities, our neighborhood and making a mockery of our law and order system. The question is not who can stop them, the question is who wants to stop them. We have accepted that bribery is a part of the tax you pay directly to the government servants, rest of it anyway goes to them. We have accepted illiteracy, poverty, dowry, caste system, reservation as part and parcel of life. Where are we headed to ?

Oh yes, there is a ray of hope. One of the taxi drivers I met in San Jose was from Gujarat. His 12 year old daughter and 9 year old son were back home. He wanted to gift them his three-year old HP laptop on his next trip home. He is surely burning himself bigtime to achieve for his family what seven more generations might not achieve if he drove taxi in Gujrat. I am sure there are millions of such Gujratis, Keralites, Punjabis, Biharis and a whole lot Indians in practically every nook and corner of this tiny planet. Their money sent home is helping their families realize their dreams faster than people who are supposed to benefit from ‘reservation’ policy. What has government done to help these millions of people. Many of them perhaps landed as illegal migrants or sold their ancestral house to buy ticket on the boat that landed them in more greener pastures. How about changing the policy from ‘reservation’ to arm people with skills and export them around the world. How about creating Amdamans like another Hong Kong, or another Singapore.
I think we owe it to our nation and fellow citizens to help create awareness in minds of people that helps them realize their goals. I am a strong believer in ‘thought leadership’ and believe if we must invest financial resources to help uplift our downtrodden, it must be to give them the confidence that they are winners in life. It must be not to give them bread or butter or a roof above their heads but to light a spark in their minds. A spark that vetoes their failure in life, that short-circuits the part of brain that stops them to succeed. Investment in awakening human capital. That’s it.