Saturday, July 11, 2009

An Agenda to grow the Indian Internet market

This (somewhat lengthy !) post will be of interest to well-wishers of the Indian Internet industry. We will arrive at five things to do by and for the industry.

A. Growing the Internet user base has been a key thrust area for the Indian Internet industry.

Internet firms today derive their revenues primarily from advertising, and they believe online ad market revenues correlate with the overall number of (Internet) users. And these user numbers for the Indian market have, as I wrote in this blog in Oct 2007 as well, been growing at just about 20% a year.

Estimates of the current Internet user base vary. The most reliable numbers are those from IMRB, India’s well-known research agency, see summary graph here. By this measure we seem to be at about 50 million active users (active = used Internet at last once a month, the globally accepted definition).

The same graph also shows growth in Internet subscribers, as given by TRAI. The IMRB and TRAI numbers serve as a proxy validation for each other.

The industry believes this user base is rather small in absolute (Internet penetration versus other countries) and in relative terms (mobile users have grown over 8 times faster). Notwithstanding this, by one estimate, India is today the world’s 4th largest Internet market (after China, U.S. and Japan).

The Internet ad revenues themselves have been growing at a fair pace - by one estimate they today constitute 5.4% (Rs. 5 billion) of the total ad market, and will grow at 44% in the current year. But this is clearly not enough to satisfy every Internet player’s aspirations, the lion’s share goes to 2-3 (Google with Yahoo a distant second) of the hundreds of players. Hence the industry’s clamour to grow the user base.

B. Recommendations to grow the user base were recently tabled at a Keynote at the 5th Digital Marketing Conference of industry association IAMAI.

IAMAI is the Internet and Mobile Association of India.

Recommendations that were given at this keynote address, being taken here as a proxy for what the industry believes, are not new. Some look correct in principle, but will be tough to implement.

These recommendations include:

1. Government needs to play a catalytic role by
- boosting the broadband subscriber base (TRAI recommendations of year 2004)
- provide support to ISPs

- Encouraging the cybercaf├ęs business
- encouraging debit cards for e-commerce
- enable easy funding for start-ups
- and (this is new and important) reserve part of upcoming 3G spectrum allocation for data (not voice alone)
2 Indian languages need to get a boost on the Net
3 Mobile operators need to play ball with content providers by giving higher share of the VAS revenues to them and by not moving into content themselves,

Various questions arise related to the above. In this post, we concern ourselves with just two :

1. Is the government likely to do something at all? Who will bell the cat? Is the IAMAI well suited for this?

2. The above wish list is rather long, if one were to prioritize, what would these priorities be?

C. Roadmap to grow the Indian Internet Market (5 suggestions)

1. Join hands

The tasks before the industry is huge. The IAMAI does not have a history of lobbying the government, nor do it’s members itself have much experience in government affairs.

Other associations like MAIT, the PC manufacturers association and the ISP Association ISPAI as also software association NASSCOM itself, have been at government lobbying longer. Internet growth will benefit them too. An organization like TIE has clout. Then there are start-up associations like

IAMAI would do well to ally with one or more such experienced bodies to move the government faster.

At times, some of the
causes IAMAI champions seem rather small, fiscal measures, not on any big visionary thrust.

IAMAI’s seven founder members are in fact the country’s leading portals, who derive their revenue from advertising. IAMAI remains essentially rooted to it’s desire to grow industry revenue, rather than grow the Internet market. It’s power structure as well as it’s membership is still skewed in favour of media (read ad-revenue) firms.

An Internet association should have thousands of members, individuals included, not just a few dozen firms as is the case currently. The Internet is a public good (no different from water or roads) and too big and important to be represented by just one Association, no matter how well-meaning. E-governance, for example.

2. Understand the full value of the Net
We need organizations and professionals who can educate, nay form public opinion about the benefits of Internet use; preferably with empirical data from research studies.

The Internet can make a mammoth socio-economic contribution, giving a high return on investments made in it’s infrastructure. The above studies can establish the viability of government and financial institution funding for the Internet sector in the Indian context.

The government recently announced in the Union Budget that it would set up an online employment exchange for the country. The tragedy is that Internet access itself is restricted.

3. Develop talent for the industry.

There is a crying shortage of good web designers, trained product managers and Internet marketers. I work at a company which is a big player in informal education and we do provide certificate courses in web design, but neither we nor our competitors have kept pace with the fast changing knowledge. No university or college degrees or diplomas exist in the Internet field. These occupations are outside the province of IT companies and ad agencies as well. And all this in a field that advances by the day.

There are but few Seminars or events regarding Internet which provide great learning value. (The Bar Camps and the like are infrequent and of uneven quality). The ones which exist are often pure media events designed to cash in on the Internet hype (“Web 2.0”) and/or are “plugs” for a select group of industry captains. Silicon Valley is 10,000 miles away, where does a professional renew oneself?

A few digital firms as well as IAMAI have begun with Internet Marketing courses, but on the design and product side there is still a vacuum. Without good people, compelling applications and great user-experiences cannot be provided, and the Internet market will not take off.

The space is ripe for entrepreneurs to move in?

4. Language, language, language

Online content in Indian languages has been created over the years, but these sites failed to get traction. This is because today’s PCs do not support language OS and language keyboards are not in common use, so current PC users, ;eave alone Net users, are only those comfortable with English.

There is evidence that the No.1 factor stalling the growth of the Internet is language. If one looks at two numbers, viz. the number of computer-literates (as presented in the annual Internet market surveys of the IMRB) and “English knowing individuals over the age of 12”, there has over the years been a good correlation. These numbers are currently 72 million computer-literate (IMRB 2008) and 86 million

English-knowing individuals count is obtained from the National Readership Survey (NRS). I remember reading elsewhere that only 20 million Indians can really speak English. This comes as no surprise to me. When a few years ago I ran Rediffmail,’s email service which then had 35 million registered service, much of the customer mail I received was in abysmal English.

In effect, of 205 million literates in urban India, only 20 million have reasonable English-skills. The Indian PC & Internet industry has not yet marketed the right product for 90% of the urban population! It’s no use complaining about the lack of vernacular web content, let’s get the average user started first in Word & Excel in Hindi or Tamil.

A further discussion of what’s gone wrong regarding popularization of local PC hardware, software and web content requires a separate post.

However, it’s worth noting that India is perhaps the only country in the world where a local language (say Hindi) is not the lingua franca at the workplace. There is an inadequate push for the adoption of non-English PCs and mobile devices. This is a situation unique to India, which we need to break out of.

Separately, apparently, Hindi is the world’s third largest spoken language, after Mandarin and English, with about half a billion speakers !

5 . Compelling web applications
The Indian Internet companies and entrepreneurs themselves have a role to play by introducing compelling applications. What exactly is a compelling application ? How can an entrepreneur be sure he has one? This is a subject fit for a follow-on post.

(A declaration : I was, as Chief Marketing Officer for, involved in tracking and pondering on the growth of the Indian Internet market during 1999-2005 . I helped IMRB kickstart their annual Internet market surveys in '99. Was also briefly on the Government Sub-Committee of the IAMAI in 2004-05 ).

1 comment:

  1. Excellent post, very insightful read for all digital media folks in Inida.