How 500 million Internet users
Transform India
Half-a-billion internet users by 2018 could
birth a $200-billion digital economy and rewrite many rules. But connectivity
and languages are big challenges that need to be cracked, writes Shelley Singh
You could think of India's internet growth as a
primed-up athlete finally hitting his full stride.
First, there was a gentle warm up. It took ten
years for India to get her first 10 million users and another decade to hit the
first 100 million users. Then, the pace quickened. The next 100 million users
came in three years between 2010 and 2013... and the third 100 million took
only 18 months. Internet users crossed 300 million in December 2013. The
athlete has hit his full stride now. “We are adding five million new users a
month and that should take user base to 500 million by 2018-19,“ says Rajan
Anandan, managing director, Google India.
A digital population of 500 million could
transform India's economy , business landscape, governance and society beyond
recognition.
First, internet growth that could spawn an
economy worth $200 billion from internet-related activities, according to
Boston Consulting Group (BCG). This is a fourfold increase from where we are
today and this growth will come in just three years.
Says Alpesh Shah, partner BCG: “Every second
Indian will be an internet user by 2018. The biggest growth will come in
ecommerce, which will expand almost fivefold, while education and healthcare
via mobile internet will expand internet use.“
Second, it could catalyse entrepreneurship and
wealth creation. Global investors are already chasing Indian start-ups. Former
Skype chief operating officer, Michael Jackson is looking to invest in internet
start-ups in India through his $300 million venture fund Mangrove. “I'm bullish
on India's internet economy . With 500 million users it will be the size of
Europe. There are challenges like low bandwidth, but that won't prevent the
upcoming internet tsunami,“ says Jackson, partner, Mangrove Capital Partners.
Ace angel investor Anandan is willing to bet that each of the next five years
will see at least one new start-up scale to be a $1 billion company .
Third, internet growth will also lead to massive
job creation. About 4 lakh people now find direct employment because of
internet. This will expand to 20 lakh by 2020, BCG estimates. India's internet
economy could eventually create 65 million new jobs and increase per capita
income by 29% as more people come online, according to a Deloitte Consulting
report titled `Value of Connectivity .' Connectivity will impact businesses and
also improve socio economic indicators as well. Deloitte, in its report cites a
study done in two villages -one with connectivity and another without. Child
mortality decreased 14% in the village with connectivity .
Fourth, governance will improve, with or without
politicians. E-governance transactions increased from 0.5 billion to 1.7
billion between 2013 and 2014, according to etaal.gov.in which tracks internet
transactions.
Glacial Growth & Narrow Band Internet
Exact estimates vary. But most expect India will
have 500 million people online by 2018. Industry experts expect 500 million
internet users by 2018. BCG is more bullish, with a target of 583 million users
by 2018, almost all of them mobile internet users.
While studies make for a rosy outlook with
promises of eliminating poverty as the internet economy expands, there is a lot
consider beneath those numbers.At 300 million users, most of the English
speaking population is already covered.The next wave of growth will have to
come from vernacular users. Internet access is expensive, and out of reach for
most such users.
Quality of connectivity could pose a challenge
to access bandwidth heavy apps healthcare and education via audio visual aids
online or even watching movies and shopping.
“We will also be the world's largest narrow band
country as most people can't afford broadband data plans. With 300 million
users we have covered India, but Bharat is yet to get connected,“ says Subho
Ray , president, Internet and Mobile Association of India (IAMAI). “Growth
could plateau unless public, free WiFi does not happen in sync,“ he adds.
Not getting them online, leading internet
thinkers believe, will be as much a loss to those that are online. “To continue
connecting the world, we have to connect India. More than a billion people in
India don't have access to the internet. That means they can't enjoy the same
opportunities many of us take for granted, and the entire world is robbed of
their ideas and creativity ,“ said Mark Zuckerberg, CEO & founder,
Facebook, in a statement at the launch of internet.org app for India on
February 10.
Most of the internet connectivity in India is
2G. For example, only 11 million out of the largest telco Airtel's subscriber
base of 210 million has 3G mobile internet (as on September 2014). Moreover,
90% of the market is pre-paid with the average monthly spend per user as low as
Rs 150 and monthly re-charge of Rs 50 to Rs 70.There's no way they will access
3G where 1 gb data plan costs Rs 250 a month.
More people are going online--via free WiFi or
paid access. About 45 million access internet in public areas and time spent
online has gone up from 10 minutes per day one year ago to 45 minutes now,
according to Ozone, which has set up 6,500 hot spots at places including Mumbai
airport, KFC and McDonalds. But these are clustered mostly in the big cities.
Data Use Expands
Idea Cellular, the country's third largest telco
by user base, in its recent quarterly earnings, reported a 16.9% quarterly expansion
in data usage. Airtel reported a 23% jump in new data connections.
Despite the connectivity challenges more people
are coming online. “This is an encouraging sign. If building the network is the
highway we are at the parking lot,“ says Rajesh Janey country head, EMC, a
storage services provider. “More people are using mobile banking, shopping from
their smartphones and digital ads are growing.“
Janey says data storage will expand from 326
exebyte in 2013 to 2.8 zetabyte by 2020.Five exabyte is about all words ever
spoken by human beings. And one zettabyte is the size of about every person on
earth receiving 87 newspapers per day .
Airtel believes the future will be led by the
internet economy and more people will experience improved productivity and ease
of doing transactions by going online. Says Srinivasan Gopalan, director,
consumer business Bharti Airtel: “Out of the 300 million, 100 million users
have integrated internet into their daily lives. I am not as much concerned
about the 500 m users mark as about people who actually uses internet.“ Data
consumption per user, Gopalan says, averages 563 mb a month, close to US rates
and higher than in the UK. Data costs are also comparable with similar
economies. “It's less about costs and more about educating new users on what
they can do with an internet connection. And the good part is that's changing.
In fact, in two years, demand won't be a constraint, it will be supply ,“ adds
Gopalan.
In China telcos have 80 Mhz spectrum, compared
to 5 Mhz in India. Hence quality of services is not as great as it is in China.
The middle kingdom boasts of 300 million online shoppers and 600 million
internet users.
Connecting Bharat
So far internet penetration in India has been in
English, while new users will demand local languages interfaces to shop, pay
bills, to reach out to doctors online and more. “ About 75% of new users will
come from non-English speaking backgrounds.They won't find it easy to navigate
unless they can shop or study in their own language,“ says Shah of BCG.
Facebook is now available in 12 languages
including three recent additions -Urdu, Oriya and Sanskrit. Says Kevni D'Souza,
head of growth & mobile partnerships, Facebook India: “These 12 languages
cover a large part of India's population.Hindi alone covers 400 million people.
We are also making it easier to use Facebook with Re 1 per day access to
address low ARPU problem.“ Facebook, which has 110 million users in India, is
seeing nonEnglish language user base double every six months. HDFC Bank, which
has an English app that enables 75 transactions like booking fixed deposits to
ordering cheque books, is now focussing on expanding its Hindi app as well. The
Hindi HDFC Bank app enables 26 transactions at present and the bank plans to
add more transactions this year. “60% of our customers use mobile banking and
this will expand to 80% in two years. We will scale up Hindi to make the bank
accessible to more users online,“ says Nitin Chugh, head digital banking, HDFC
Bank.
Mobile payment services provider Paytm, which
claims 27 million users, is developing vernacular versions and expanding beyond
payments to become a market i place. Another start-up ikaaz founded by former
Nokia managers is working on making payments easy using smart phones--in English
at present with plans for vernacular languages soon. It's tied up with
Development Credit Bank and claims 9,000 merchants on its platform which
enables B2B payments.
At e-commerce major snapdeal.com, the mobile app
is English only while the website offers Hindi and Tamil interface as well.
Says Ankit Khanna, senior vice president, product management, snapdeal.com:
“Language access is seeing single digit growth. We will introduce four more
languages in the next three months.“ These include Kannada, Telugu, Gujarati
and Bengali. About 70% of snapdeal's 5.5 million daily shoppers land on its
mobile app.
“We need to focus more on languages and more on
the mobile. With 500 million internet users there will be at least 100 million
online shoppers and 1 million sellers. The challenge is to create relevance for
the expanding user base and enable quick decisions,“ adds Khanna. Snapdeal is
meeting both challenges by adding languages and profiling users -so shoppers
who land on its site or app quickly get to what they might be looking for.
Adds Srikanth Pinninti, vice president,
marketing, Myntra, a fashion e-tailer, that is now a part of Flipkart: “ At
present, we are English only with a roadmap for languages. But we believe
internet penetration is not impeded by languages. Its far more visual and
textual and understand i ing shopping patterns.“
How 500 million Internet Users will Impact the
Following Five Areas:
ECONOMY & FINANCIAL INCLUSION
10% rise in internet penetration increases GDP
by 1.08% If internet were a sector its weight in GDP would be greater than that
of agriculture or utilities Increase in net maturity in the West led to rise in
GDP per capita of $500 on average in last 15 years. It took 50 years of
industrial revolution to achieve the same Aadhaar-linked mobile banking and
payments will accelerate spread of banking pan-India. The have-nots will
leapfrog into banking. Without internet, increase in banking penetration could
take 30 years Internet will enhance market reach of products and services
JOBS
For every one job lost 2.6 new jobs are created
in an internet economy.In France, in last 15 years 5 lakh jobs were lost and
1.2 million jobs created due to internet Job creation will be both direct--in
tech-based enterprises and indirect--to support the internet economy like
digital ads, services support for devices 15-20 lakh new direct jobs will be
created by 2018 in internet sector Internet economy will enable a shift to
highskilled labour and increased autonomy to labour In e-commerce alone new
jobs are increasing by 30% a year
CONSUMPTION
Bandwidth per person per month is around 500 mb.
This will grow by 10x in a few years Internet economy to balloon from $60
billion to $200 billion in the short term. This includes e-commerce to sales of
internet devices like smartphones Music & book stores have already shut
down.Any product that can be bought via a code (like smartphones, TVs etc) will
be bought online.A network of sensors exchanging information through the
internet will cut wastages & help respond to crisis rapidly It will be an
app-driven economy. Apps will connect buyers to services, like it has been seen
in the taxi business
ENTREPRENEURSHIP
There will be more internet-driven startups Cost
of starting a company averaged $5 million in pre-internet era and now it's
under $50,000, attracting more people to start companies The gestation period
to test whether an idea works or not is less than 18 months now. This along
with low cost to start ventures is increasing risk appetite Govt's `10,000
crore fund for startups, Nasscom's 10,000 startups initiative, etc augur well
to make access to capital easy, a big boost for entrepreneurship There will be
at least one startup that scales to $1 billion valuation in each of the next
five years
SOCIETY
Transparency in transactions Efficiency: quick
turnaround times, like with Passport Seva time to issue passports has come down
from 12 weeks to four weeks.Will reduce further as enforcement agencies, police
use analytics to verify claims Productivity gains: cut the queues save time-pay
bills, taxes on smartphones App-driven economy: learn, play, entertain, work
with apps End of the middleman: People who thrive on inefficiencies of the
system will be eliminated Source: McKinsey Global Institute; BCG & ET Research
ET26FEB15
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