According to the last available data on Internet usage in India, there were only 18 million active Internet users. However, the recently launched I-Cube report by market research firm IMRB International and the Internet & Mobile Association of India (IAMAI) claims that the number has gone up to about 90 million, and is expected to cross a whopping 100 million very soon.
India: the third largest digital market
After reading the report, a well-known broadcaster said, “We must stop calling the digital medium new age media now. It must get its due. This medium will cross the barriers of new age media to become the mainstream media very soon.” While many claim it was always a well-known fact that Internet is the new media destination, that it will happen in just five years has taken everyone by surprise. While India is all set to become one of the largest markets in the world very soon is more than clear now, the bearings it will have on the industry is still unanticipated. It will definitely impact the Rs 266 crore advertising industry heavily. While some critiques have questioned the very definition of ‘active users’ in the I-Cube report and the real penetration figures of Internet in developing India, the fact that 60% of the small towns have active Internet penetration has made them ponder. So, has the much-awaited digital curve reached the tipping point? Some interesting figures say so. In terms of number of Internet users, India is now only behind the US and China. Projections by digital giants like Google and Facebook also stress upon the fact that India is all set to leave the US behind to become the second largest in terms of Internet users by 2015. As of September 2011, there are 112 million Internet users; 88 million from cities and 24 million from villages. Compared to last year, this medium has witnessed a growth of around 13%. The momentum is expected to hold up and by December 2011, it is expected that there will be 121 million claimed Internet users. However, in the report, ‘active users’ are defined as those who have accessed the Internet at least once a month. Considering the still growing English language literacy in small towns and rural India, the real Internet explosion is yet to occur. “The great opportunity before the new media is the untapped local language market, with Internet penetrating into smaller towns and villages; I see this as the biggest opportunity. This is also a great opportunity for traditional media to leverage digital to reach out to areas which are so far poorly reached”, says Dr Subho Ray, President of IAMAI who was involved in the study. While youth were always considered to be the most important driver of this geometric growth, school-going kids have added substantial numbers to the total number of users and it is only expected to grow in future, the report claims.
INTERNET: PRESENT AND FUTURE
There are three reasons being attributed to the inflection point of Internet. One, growing literacy coupled with accessibility of Internet in almost every part of the country. Two, usage of Internet is driven by individual consumption unlike television or print, which very often is a group or family consumption pattern. Even if the methodology of the study by IMRB is scrutinized and brought to more critical light, 79 million Internet users are active and the growth in the usage is exponentially high as compared to print and broadcast platforms. The other major component is increased mobile usage in India, which, arguably is a result of the hypercompetitive telecom market, leading to penetration of services in nooks and corners of the country. Sabeer Bhatia, founder of hotmail.com and India’s Internet giant says, “We are expecting the 3G effect to increase the number of data users on mobile phones exponentially.” Over 25% people access the Internet on their mobile phones. The number of Internet mobile users is likely to grow significantly in the near future.
However, usage on mobile phones is not as high as many claim it would be. While the growth of mobile phones in India is over 26%, not more than 20% are data enabled. Moreover, only around 26 % of data enabled users are active. The smartphone market in India is yet to reach a new high to trigger active data consumption on mobile phones.
Hence, there are two sides of the Internet growth story in India. While one encourages the industry by sheer number of users, the other is about future challenges and shortcomings the medium has. Lack of infrastructure and monetization are the most worrying, to mention a few. Currently, only 0.1% of the population has access to broadband networks, and only 15-20% of those have a high-speed connection.
Monetization at the right price is another challenge which will take a few years to find solutions. “The problem with Internet is that even if one wants to reach the whole Internet universe, the cost of it is quite low. If one wants to spend Rs 10 crore on the Internet, he doesn’t see enough options to do so,” says Punitha Arumugham, Group CEO of Madison World. The opportunity is of garnering significant revenue and incremental audience. Today, advertising on the Internet is to the tune of Rs 10 billion which accounts for only about 3.75% of the total ad spend as against 18 % and 27% in the US and the UK respectively.
As per a recent reportby KPMG on Media and Entertainment Industry, advertising on the Internet is likely to grow at a rate of over 37% as against the overall ad spend rate which is close to 11%. Therefore, the share of television and print, which accounts for 84% of the total ad share doesn’t seem to be going down any time in the near future. A similar challenge lies with Internet usage on mobile phones. Only 250 million of 550 million mobile handsets in India are WAP enabled, but only 50 million users are using the service. A universe of 250 million handsets can only take off once the price of wireless Internet access goes down.
It is also about being aware, updated and knowledgeable of the technology shift that is resulting in the way the consumer is consuming media that is or will lead to medium disruptions. The challenge is also how fast Indian enterprises embrace digital as the centerpiece of their planning. “Dealing with forever connected and active social sharers is a reality and businesses need to accept this and ensure that digital becomes an integral part of their business and communication planning,” says Anuj Kumar, CEO of Affle.
WHAT IT MEANS TO ADVERTISERS
Growth of the digital medium will open several new frontiers for advertisers in India. However, it will come with challenges too. The numbers are delighting many, because it will open unexplored markets coupled with an opportunity of two-way interactivity. “The digital platform is the best for any marketer when you want to do a dipstick research of what is happening in a particular market. It is very interesting to use the medium to understand a market quickly. For us, 100 million is a huge number because users of smartphones are inherently data users. Therefore, I see this as an opportunity more than a challenge,” says Krishnadeep Baruah, Director, Marketing, Research in Motion India. Internet is becoming an increasingly important medium for marketers to target potential consumers, especially the youth. Social media presence has added to the advantage.
The I-Cube report claims that a surprisingly large number of users are connecting to Internet for social networking sites. This figure is as high as 87% in several parts of India. Facebook, which has already garnered attention of almost every top advertiser, has recorded a 141% year-on-year growth in India. Hence digital media will help in a lot of value generation in the long run. “The opportunity here is of value generation and that can be done through more intrusive campaigns due to the nature of the medium,” claims Anuradha Aggarwal, Vice President, Brand Communication and Insights, Vodafone India.
But most importantly, media convergence is the greatest possible opportunity for a successful and contagious brand campaign. Many believe that this platform can prove to be the best as messages can go viral overnight, if strategized well. “Targeted and effective communication could utilize the advantages of different media avenues,” believes Tarun Abhichandani, Group Business Director at IMRB International.
On the contrary, challenges for advertisers are mainly internal and systemic in nature. Advertisers will be at the helm of affairs to bring together various stakeholders, content creators, Internet platforms and telecom operators for tie-ups with each other. Internet empowers users as much as it does the disseminator. Chances that a message will spread virally or get rejected are equal, believe many. “The challenge is how the Indian consumer can switch on or switch off to advertising when it becomes the primary mode of entertainment or information. On the Internet, sometimes you can switch off the advertisement if you don’t like it. Hence, the challenge is to make more entertaining or more intrusive advertising,” says Aggarwal.
Another requisite that they could encounter is lack of a consolidated audience measurement technique for digital consumers. The sector is by and large unorganized. As convergence becomes more evident by the day, systemic loopholes may demand better data collection structures in place. With growing number of users, targeting more focused markets geographically could be difficult for advertisers due to demographic diversity of the country coupled with omnipresent and anonymous nature of the medium. “The biggest gap is independent media measurement. We have TAM for television, IRS for newspaper and magazine readership, etc. The day all the measurement systems start converging and become a one-point media study, it will become one source of media research for the industry,” asserts Arumugam.
TAPPING THE SMALL MARKETS
Mumbai followed by five Indian metros constitute a large share of Internet users in India. However, a large chunk of users (over 60%) has shifted to smaller Indian towns in the last three years. It clearly indicates that in the long run, future of digital players could be heavily dependent upon Tier II and III cities. Reasons- telecom revolution in small Indian towns, growing literacy and number of young Internet users. “India is a market of extremes where consumers are currently at both ends of the spectrum. Today the Internet is no longer confined to large cities alone. With the rise of Internet on mobile, and other connected devices, today Tier II and III cities and towns are witnessing a significant growth in Internet penetration, across different SEC segments,” says Nitin Mathur, Senior Director and Head, Marketing, Yahoo! India.
Latest data also supports this proposition. Combined usage of Internet in Tier II and III towns of India is more than the top six metro cities. Hindustan Unilever, the single largest spender in India, with an estimated advertising spend of Rs 1,000 to 1,200 crore, has shown a strong inclination towards targeting Tier II and Tier III markets, which will arguably be homes to highly potential consumers. However, lack of users’ data based on geography and demography of these towns could be a cause of concern in the long run for advertisers who want to touch the right chord with potential consumers.
The I-Cube report reveals that small town users are actively using online photos, video and music-related content. These towns have also witnessed a sharp increase in usage of Internet for educational and social interactivity. “One way of targeting the rural markets is simply by information dissemination and secondly, approaching the rural markets through SMSes as it is one of the most convenient ways of reaching them,” says Bhatia who recently launched a mobile phone SMS application.
COMPETITION OR COLLABORATION?
Are different media platforms slated to be at loggerheads in the near future or will they complement and collaborate with each other to make the best of the business? The same argument cropped up when television usage reached a tipping point in the late-1990s. Today, television accounts for Rs 103 billion share in the total ad spend as against print which still leads with Rs 126 billion. A close tie between cable and satellite homes in India (around 104 million households) versus total Internet users (121 million individuals) has forced the industry to believe that digital omnipresence will soon be a reality. If the latest Internet usage pattern is to be believed, then digital media is all set to surpass the total number of cable and satellite homes in about seven years from now. The Internet stands at a position where television was a few years back. However, while television continues to remain a household appliance, arguably a box of family entertainment, Internet crosses the social boundary to reach out to individuals. But does this offer more diverse opportunities to the industry or poses more of a challenge? Will an increase in ad expenditure on digital platforms eat into the pie of other media which are on a growth curve too? Many refute this argument. “Not in the very near future. Digital advertising share is just 4%, while that of TV & Print put together is 84%,” says Pratap Bose, COO, Mudra Group and CEO, MudraMax/Ignite Mudra. Advertisers also believe that while the medium has reached a tipping point, for it to grab a major chunk of the ad pie will take a few years, by when the total ad spend would also reach a new high. “I think overall media investments will grow and the challenge is to be objective about what your TG does and wants,” says Srikanth Srinivasamadhavan, Head, Marketing, HSBC India. The comparison is not even close between TV and digital spends. According to an IMRB research, digital ad revenues were a little more than Rs 1000 crore in FY 2011. TV spends are multiple magnitudes higher than this.
In India, the Rs 266 crore ad industry is spending less than 10% of the total sum on digital media. “Options are only a few as the medium is still growing, however I think different media will work in collaboration more than against each other,” says Arumugam. “I foresee that the traditional media will continue to grow in India for some time as there is still scope for further penetration of the traditional media. But the new media will easily continue to outpace the growth of traditional media,” asserts Anurag Gupta, MD, DGM India Internet Marketing. As the ad spend continues to remain on a growing curve, overall ad spend will increase and a substantial chunk of it will be shared by the digital media. Sanjay Gupta, COO of Star India comments, “I believe the media pie will increase as time spent and engagement goes up with multiple platforms to consume content. Digital platforms are an opportunity, not a threat.”
SOCIAL MEDIA: EMERGING INDIAN LANDSCAPE
One of the key growth drivers of Internet in India is exponential growth of social media usage among the youth. According to recent studies, 71% Internet users, especially in the cities, are strongly inclined towards social networking sites. This turnaround has come in just five years. Interestingly, users mention social media on top of their priority card as against job search, education and entertainment web sites. As youth and working men and women spend more time on social media platforms, online shopping is also witnessing a surge. Narasimha Jayakumar, COO, E-commerce Business, HomeShop18 says, “By 2015, online shopping is expected to be a $8 billion venture; hence we see huge opportunities in this area. Digital and electronic appliances account for 45% of the overall online marketing.”
Active social media users in urban India are becoming a prospective consumer base for many advertisers. Advertisers are also targeting social networking sites exclusively to reach their consumers. After launching a Facebook dedicated phone, Kumar Ramanathan, Chief Marketing Officer of Vodafone India had told IMPACT, “We are confident that Facebook, the largest social networking site and Vodafone with its global experience in understanding its consumers will continue to create an extraordinary digital campaign.”
However, usage of social media requires a careful and non-conventional approach to advertising to constantly engage consumers in dialogue. “Advertisers can actually leverage the social media to get consumers to endorse the brands to their friends and networks. Such endorsement is far more powerful than a regular advertisement,” explains Anurag Gupta. As the reach of technology and adoption increases by people of all ages, a whole new audience is able to be reached by anyone. Sanjay Behl, CEO, Reliance Digital TV and Group Head, Marketing and Branding, Reliance Communications Limited says, “For businesses especially, social networking has changed the way they communicate with their customers and find new ones. It also gives us the opportunity to share a variety of information”. Another argument that goes against the viral spread of social media is dilution of content and its unorganized nature. Just like the medium can make a message popular, the momentum can fizzle out too soon, if not well strategized. “In its current form social media is largely a broadcast media. It’s one of many platforms, often with people in the network who one doesn’t even know. This is diluting social media’s charm,” says Mathur. He says that social media will be far more effective if it is organized around interest. Social networks are best when they have certain character to it, bound by interests that one would like to share with others who share the passion for the same. Thus, there is emergence of one to few social circles as an important next step in the evolution of social media.
SOCIAL MEDIA GIANTS EYE INDIA
A Nielsen report reveals that social media is growing by 100% annually and is likely to touch 4.5 crore users by next year. Today, India has become the destination for e-commerce because of the huge consumer base and scores a third position in the world in terms of usage of social media. 2011 couldn’t have been a better year for the social networking giant Facebook. Mark Zuckerberg, who has already claimed to have made Facebook a virtual planet, has many reasons to believe that it could soon be a galaxy of million such planets. He is convinced that India will soon become the largest Facebook market surpassing the US, UK, Turkey and Indonesian markets. Facebook’s user count in India soared by 85% to 34 million as of June this year as against 18 million users last year. With the potential led by growing literacy and reach of technology, social media giants like Google, Facebook and Twitter are eyeing Indian consumers. Like Facebook, Google is also highly optimistic about the Indian scenario. As per a recent report released by Google India, Internet usage on smartphones is only 5%, but with the growing sale, Google India is planning to target small-medium enterprises and the growing smartphone users’ market by providing websites at cheaper rates and sometimes for free. As per India Media Entertainment and Media Outlook 2011 report by PwC, in India social networking sites have shown a remarkable growth of 43% in total unique visitors over 2009.
Yet another piece of evidence of the impact of social media sites in India is the growth in advertising on social media. Advertising on social media has shown a growth of 54% in 2010-11. Product promotions on social networking sites are on the rise. Some are even willing to provide discounts to customers if they ’like’ their product on a website or join a community started by a company.
MOBILE AND TABLETS: MORE THAN JUST HANDSETS
India is one of the world’s largest markets of mobile phone users in India, but is lagging behind many countries when it comes to Internet access on mobile phones. Current figures of WAP enabled devices and growth of smartphone users is also not very encouraging. High cost of high-speed Internet usage on mobile phones is believed to be a reason for this slow growth. It is coupled with the hindrance created by data incompatible mobile phones which account for more than 80% of the mobile universe. This means that not more than 20% handhelds are data-enabled. However, growing usage of Internet on mobile phones clearly reveals that very soon 200 million new Internet users will be mobile-first users. Number of Internet users on mobile phones in urban India is only 26.3 million, but not all are active users. “Mobile Internet is not our target for e-commerce activities, but such users will be important once the usage grows,” says Jayakumar of HomeShop18. The smartphone market, which many believe is yet to become a common man’s handheld device, is growing only at a 5% rate as against growth of overall mobile phones which is over 26%. This will discourage a possible digital explosion on mobile devices that many are anticipating in the immediate future.
The growing Indian tablet market largely remains unexplored. However, tablets are increasingly becoming an important device for broadcasters and advertisers, as the decision of a consumer to buy a tablet is invariably a decision to go online. Tablet users are active on Internet and have strong online presence which may not be true of mobile users. Mobile users can go offline very often. “The decision to buy a tablet is the decision to go online. In that sense, it is the most important medium for digital economy,” says Dr Ray. Industry experts believe that owning a tablet is akin to having a personal TV screen, at the lowest price possible. Pricing is an important factor in influencing consumer trends. But India is a price sensitive market and is a fast adopter of technology when the price is right. “With tablets available at Rs 11,000 (vs laptops that are still at Rs 25,000), it will be a game changer for digital content consumption & interactivity,” says Sanjay Gupta of Star India which has initiated active tabletcompatible content for its viewers.
For tablets to reach an affordable price, it will take time. Alternative television viewing pattern will however evolve through usage of tablet devices and broadcasters are extremely optimistic about its growth. “We see a major growth in adoption of mobile TV, driven by content which is customized for the small screen and driven by growth in the smartphone/tablet penetration in India,” says Behl. There is a steady increase in adoption of mobile TV viewing, but the pace of adoption is yet to find the right momentum. Industry expectations are also high after the 3G spectrum auctioning, which will add massive numbers to wireless Internet users in the coming years, making video streaming an experience which was only a dream earlier.
