India: the online opportunity

There has been much consternation among investors and entrepreneurs alike about India’s online promise as several Internet businesses have withered on the vine waiting for eyeballs and clicks.   It is almost contrarian to be thinking about investing in online businesses now and there is a healthy dose of skepticism about government figures which boast that India has nearly 81M active internet users. This would place it in the top 5 countries for Internet penetration.

The problem is that nobody believes these numbers since they do not add up in any way other than what the regulator does — he counts every account ever opened regardless of level of activity.  Here is my attempt at sizing this market.

PC Users

  • The regulators claim that 8M active broadband users exist today and are active.  Industry figures are closer to 6.3M 6.6M.
  • Vizisense,  says 30M+ uniques visit Google and Yahoo from India each month.  This I have verified by other means as well
  • There are a few million folks using regional sites but not visiting the global destinations.
  • There is a long tail of other sites which get material traffic.
  • This data does not include Internet cafes and other NAT’d environments
  • My estimates end up in the range of 35M to 40M PC based users

Mobile Users:

India is a low PC-penetration market and has 400M mobile subs;  in addition to 35M online PC users, a lot if not most of online activity is mobile.  Through a set of assumptions about GPRS usage, I have arrived at a number of 8M active mobile internet users.  This brings me to my current conservative estimate of 35M to 40M addressable Internet users in India.

Details of my rudimentary analysis are on SlideShare.  As always, full screen views help.

43M is about 50% of the official number but still places India ahead of countries like the UK and France.    Further, the general conception on the street in India is that most online usage is related to travel, jobs and matrimonial searches.   The data seems to indicate that India’s usage mirrors other large markets and is concentrated first in search and social media and then on transactional activities like travel, jobs, dating and banking.  So the 35M users should be able to support similar revenue models.

Although a paradox exists in traditional channels wherein despite volumes, very little shareholder  value gets created in Indian media, the online world should be different.   Penetration is coming top-down from the tip of the pyramid where significant purchasing power exists.

Given the fatigue in year-2000-era startups, I think the major online properties in India are being launched or coming of age right now.    I will be working on quantifying this opportunity further in terms of dollars and sense.  Any and all inputs are welcome!

Update 1:  Post today (Jun 1, 2009) at MediaNama provides fresh data but doesn’t change my views much.

Broadband Growth in 2008-09 Falls Compared to 2007-08

There are 6.28 million Broadband connections as of April 09. It is discomforting to see that the number of internet connections being added in the country is falling compared to last year. Between April 07 and April 08, it grew by 65.02% from 2.43 million to 4.01 million but this has plateaued to 56.61% growth between April 08 and 09. The connections added per month have fallen drastically this year – 0.06 million were added in April 2009 compared to just 0.11 million in the same month last year.

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  1. Shyam Kamadolli
    June 4, 2009 at 12:27 am

    According to a recent IDC study released last week:
    “The total installed base of PCs in India surged past the 36 million units mark. The country now has one personal computer for every 30 Indians. This represents a significant improvement over March 2007 installed when the country boosted of one computer for every 50 Indians.”

    http://www.cybermedia.co.in/press/pressrelease125.html

  1. December 1, 2009 at 1:18 am

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