The year 2011 witnessed phenomenal changes in the way we consume digital data, be it social network, net banking, buying goods or accessing information. The changes have been evidently pointing at a rapid inclination towards digitalization. The reach of Internet has been one of key driving features. In India, we have gigantic pool of Internet users, which roughly come up to 80 million. We are accepting newer technologies within our reach with wide arms; like about 6 months of 3G services has managed to garner 10 million 3G connections, which is almost equal to wireline broadband connections. There are several factors which have helped achieve this feat like wider acceptance of 3G, Internet connected devices and more. The Avendus report states the increasing digital trends and several factors that still need to be taken care of. Let’s unfold them one by one.
One of the key factors triggering the increase in the use of Internet is larger penetration of PCs. The increase in the number people opting to use Internet services for errands is obviously directly proportional to the time users spend online. This year has shown a rise in awareness as the penetration in tier II/III cities and towns has been faster, though it’s dominated by tier I cities. The increase in mobile users and introduction of 3G services has also played an essential role in the growth. However, on a whole, India contributes to only 7 percent of the global Internet use. Although there are 55 million PCs in India there seems to be only 15 million PC broadband connections (estimated to grow to 216 million by 2015). Likewise, the number of Internet users is expected grow to 38 million by 2015. These changes could come through the introduction of 4G services, wider acceptance of 3G and easier accessibility to data cards and net banking.
Most time was spent on…
Indian Internet users have been very active on the social networking front. There are three key players in personal networking, professional networking and micro-blogging, which is currently dominated by Facebook, LinkedIn and Twitter respectively. In India, Facebook has 33 million users (until August 2011) and Twitter has become the preferred micro-blogging site with 3 million users that include celebrities, sports-persons and business tycoons, too. Google+ got its initial sign-ups, but struggled then on. However, the Indian social networks didn’t seem to hit the right chords and we didn’t see much from Gogio, ibibo and others. Some companies have leveraged on the Facebook platform, such as Zynga and its popular games like Farmville, Cityville and so on. Zynga is now purportedly estimated to have a higher valuation than Electronic Arts. In fact, social networks is a threat to portals and other Internet activity as users tend to spend their free time on these sites.
Taking into account the overall advertising market, about 7 percent is online, which is driven by video, mobile and social advertising. In fact, online videos get the majority share of their income through advertisements, rather than subscribership. The online classifieds have already made their mark in the Indian terrain and it isn’t something new for the year with players like Naukri.com, Shaadi.com, Sulekha and more contributing to about 41 percent of online advertising trend. Facebook advertising has added another feather in the cap and Google and Facebook together contribute to 29 percent of the overall advertising revenue. Portals like Yahoo!, Rediff, Web18, Times Group and some more account for 22 percent.
Online advertising comes from…
Now, before we begin, the eCommerce in the Avendus report has been sub-segmented into online travel and e-tailing. The ecommerce market in India is estimated to be around Rs.28,500 crore for this year and online travel contributes to a sizeable 87 percent of the market. The online travel penetration is 28 percent in India, which is comparatively higher than China and Japan. It is currently dominated by ticket bookings with air and railways, while bus, hotels and tour packaging is catching up. MakeMyTrip stands atop the list with 44 percent market share, followed by Yatra and Cleartrip. The Indian railways has become the undisputed winner when it comes to online ticketing. On the other hand, e-tailing had a slower and sluggish start. However, it is believed to get a typically slow start, which invariably increases to become a dominant force as the sector evolves. The two factors responsible for the slow start are the lack of touch, feel and time to build consumer trust and comfort. This notion has changed, and now we have more consumers who prefer buying goods online. Some Indian e-tail players are Flipkart, Futurebazaar, Homeshop 18, Fashionandyou, Bestylish and Letsbuy. Though companies spend years before getting into mass media, Flipkart, Bagittoday and Infibeam have been doing well. Flipkart seems to be leading and estimates to cross Rs. 300 crore in the FY 2011-2012, which is more than four times its revenues in 2010-2011.
For Indians, adoption of electronic transactions has been slow. The population using cards for payments is lower and typically are a cash-driven population. People also fear keying in card and other banking details online. One cannot trust an e-shop that easily, owing to the numerous online frauds. This trend, too has been changing over the time. Easy payment options have come to the rescue, along with a steady increase in the trust that consumers have starting building for online sites. Most of the popular shopping sites have several payment modes like cash on deliver, EMI options, cheque, DD along with credit/debit cards. According to IMRB’s I-Cube 2009 survey about 99 percent active Indian Internet users do not shop online, as they don’t trust online transaction. This notion saw a significant change, this year. However, we still need to work upon a few aspects that discourage customers like long checkout procedures, connectivity issues and site’s integration issues with payment getaways.
Booking online tickets on a rise
While iTunes has become the biggest online music store in six years, Pandora is said to the largest FM radio channel. Pandora’s revenue is said to be growing over 100 percent Y-O-Y. There are also other players like Amazon, 7digital, HMV, Napster and Rhapsody. In Indian market, digital music distribution has grown at a rate of 44 percent. Companies like Raaga, Gaana and Saavn are trying to go the Pandora way with freemium models. The emphasis till now, though, has been just on adding subscribers, and taking away the share of the illegitimate music sites. However, the advertising pie remains small to support such websites. Mobile phones come to the rescue for the music industry in India.
Videos have become one of the most preferred content categories online. Despite of subscription models available, larger part of the revenue come through video advertising. Needless to say, YouTube is the key player, but there are others like Hulu and Netflix, which are quite popular. In online video viewing, India has about 25 percent of its overall Internet users spending time watching videos – 5.1 hours/user per month. However, the revenue generation is still low due to factors like piracy.
The Indian gaming market was estimated to be about Rs.810 crore, last year. Mobile gaming had a larger share of the pie by contributing to about Rs.530 estimated market share. In India, online gaming comes through localized gaming content from Zapak, Indiagames, ibibo and Hungama, along with EA, Microsoft and Atari who offer premium content. The top players have simplified payment models to further trigger online gaming. Due to growth in Internet, 3G and 4G services, mobile gaming is expected to grow even further. Social networking sites eat up a major share of online gaming content.
Overall, entertainment models in India have been more successful on the mobile platform.
Healthcare and eLearning
Healthcare and education still seem to be in developing stages in the online segment of India. The healthcare space is popular for health related content and global players like Webmdhealth and Everyday Health dominate in India, too. Some models, include Instahealth and Healthcaremagic. Government has been initiating telemedicine in India with some contributors like Apollo Telemedicine Network Foundation, Televital India, Vepro India, Prognosys Medical Systems, I-diagnosis technologies and Karishma software. Looking at the education and health scenario in India, even small online initiates in this space would make a lot of difference.
The digital media space is still developing, but this year saw a significant rise in the way ‘India goes Digital.’ There are several start-ups in this space with negative cash flow as the same traditional strategies don’t work here. The next year or rather the next few years are predicted to show even more rise in the digital space with evolving 3G and 4G services, deeper penetration of PC/mobile (hopefully). There are also speculations surrounding the growth of apps on augmented reality, location-based services and more. We may see several new players and old ones strengthening their roots in the market. Offline retailers could enter the battle to intensify it further. Amazon is likely to enter India, which could give it a boost.
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