Ajit Balakrishnan’s Blog

     It was in August 1995 that VSNL, then a state enterprise, started an ISP service in Bombay. By the end of that year India had 25,000 users I started rediff.com around the same time, so its been an interesting journey.
     Today, India has 35-40 million users, defined as unique individuals who visit any internet site at least once in the last 30 days a glass-half-full-or- half empty depending on how you look at things, as I will describe shortly
     This user base grew 20% or so and looks set to grow about the same this year that makes us the fastest growing market in the world
     We also have 300+ million mobile phone users; estimates of how many of these access the internet in any given 30 day period vary but 10m looks right
     By comparison, satellite TV reaches 250m and all of Print gets to 220m. So, internet reaches an audience just 20% of TV or Print but delivers a disproportionate reach among SEC A&B groups
The Internet and Mobile Association of India estimates that Online ad revenue in 2008 was around Rs 500 crores or $ 100m. That makes it just 3% of total advertising in India. So, things are at a very early stage.
     The online ad ecosystem is by now reasonable well developed: all major ad agencies now have digital divisions and have started recommending online media routinely in their media plans; besides these, there are at least a dozen, well staffed Interactive Ad Agencies in each of the major metros. During the last year dedicated ad sales networks have sprung up: at least 6 in the general online space, 3 or 4 in mobile ad sales and at least 2 in selling video ads.
     I started by saying that the Indian Online scene is capable of being viewed as either half full or half empty. 40 m users puts India among the top 5 internet markets in the world, and the 20% y/y growth rates makes us the fastest growing. But 40m is small compared to the size of country we are. And this low number means that a generation of young people is coming of age digitally challenged.
     What could make us achieve the true potential of this market which many of us believe can be as much as 300m+ users?
     Universal availability of reasonably priced broadband is probably the topmost driver. This has lagged in the last few years because our telecom companies have , in the immediate past, seen it much more worthwhile to invest in mobile phone growth. Capital markets reward higher mobile subscriber numbers much more than broadband numbers; solving the last mile access problem requires capex and getting right of way permissions requires both money and time. However the last few months have seen a flurry of activity in broadband launches both in ADSL wired as well as wireless broadband.
     Availability of Indian language content is probably the next driver. The absence of standardized unicode based fonts across our 22 languages, lack of Indian language keyboards, absence of unicode language rendering engines in mobile phones sold in India are all contributory factors.
     The  third driver is higher credit card penetration. There is a strong link between higher credit card penetration, a flourishing ecommerce system and a vibrant online advertising industry. Online ecommerce players are the ones who get immediate and direct value from online advertising and anything other than the most basic ecommerce requires a user based equipped with credit cards. India has just 10 m unique credit card users- rightfully that number ought to have been 100m + by now. What is holding things up is the absence of a common credit rating system that all credit card issuers have access to. Incumbents drag their feet in joining such shared systems- only firm government mandated action can help here.
     There are good things happening as well.
     After a four year effort,  a new version of the Information Technology Act got passed in December 09 in which online players are granted the status of "intermediaries"  along the same lines as the Digital Millennium Act in the US and EC Directives on eCommerce. This brings a modern regulatory framework allocating the right balance of liability among all the players in the digital chain.
     Venture capital activity has reached a new high level with companies like Sequioa, Matrix, Draper Fisher and others setting up strong Indian offices. These firms not only bring capital but also insight into what business designs work or not work as well as patience in working with our young entrepreneurs. I only wish we'd have more, many more angel investors who would provide the first Rs 20- 50 lacs to get young enterprises started.
     There is frantic government activity on the eGovernance front. Major government initiatives are under way in digital geo maps, online filing of income tax returns, and the bringing of digital era efficiencies to government departments such as Sales Tax and Land Records. Our massive public sector banks are pushing hard now with ATMs, Credit and Debit cards and online banking. Each of these efforts is important because they demonstrate to the lay public the efficiencies of a digital system and make them familiar with the digital world.
     3G mobile phone licensing activity is under way, and we should see launches by the end of this year. With the arrival of smart phones and 3G there is a possibility that India may leapfrog the PC era as we leapfrogged the mainframe era and went directly to PCs.
     In the balance, maybe the glass is after all half-full!
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