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Global online firms search India for net gains

Global online firms are turning India-centric hoping to capitalise on a growing mass of Internet users, online advertising and an exploding mobile user base.
Reuters | By Janaki Krishnan & Jasudha Kirpalani, Mumbai
UPDATED ON JUL 10, 2007 08:34 PM IST

Global online firms are turning India-centric hoping to capitalise on a growing mass of Internet users, online advertising and an exploding mobile user base.

India's Internet penetration at a mere 3 per cent is among the lowest in the world, but the fourth largest in the Asia-Pacific region with more than 30 million users, according to data from comScore Inc. and Telecom Regulatory Authority of India (TRAI).

Broadband users are even lesser at 2.34 million, TRAI said.

"A lot of companies like ours tend to focus not only on penetration but also on growth rates," said Jaspreet Bindra, country manager, MSN India.

Yahoo!, Google, MSN India are aggressively going local. AOL Global Operations recently entered the race for Indian eyeballs with an India-specific site. eBay and are aggressively wooing Indian customers.


"The India online advertising market is still very small but is beginning to grow rapidly. There is tremendous opportunity for a company with AOL's expertise, network and technology," said PG Ponnapa, vice-president and head of the portal business.

A recent report by SSKI Securities forecast India's Internet advertising revenue to grow nearly 50 per cent by 2010 to 7.5 billion rupees against a global growth of 20 per cent to $47.5 billion over the same period.

"The growth rates, if you look at it from the Internet advertising market point of view, are huge," Bindra said. The drivers are classifieds in matrimonials, real estate and jobs.

"We trebled our advertising revenue last year and we will at least double it this year," said George Zacharias, managing director of Yahoo India, which has only advertisement revenues.

Auction site eBay relies on user fees for revenues. The business-to-consumer e-commerce market in India is estimated at around 23 billion rupees, and growing nearly 100 per cent annually, an Internet & Mobile Association of India report said.

eBay India has 2.5 million visitors a month and 2 million registered users across 670 cities, Rathin Lahiri, chief marketing officer, said. "It's just a question of getting a certain critical mass before one looks at monetising."


The low Internet penetration does not worry them. "The way to go about it is not to think of the obstacles alone but what is going to happen a few years later," said Zacharias.

The telecom ministry, which declared 2007 as the Year of Broadband expects 100 million Internet users with 20 million broadband connections by 2010. Huge investments are being made by local service providers Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam to upgrade broadband infrastructure.

It's not merely PC screens but delivery over mobile screens which the companies find exciting. Yahoo, in a market research report, has estimated mobile value-added services to rise to $600 million in 2010 from $210 million last year.

"Nobody has really figured out how to make a lot of money from there but they see it growing like mad. Therefore the market size is suddenly looking bigger than just the PC market," Bindra said. MSN India is increasingly focussed on the mobile market.

Of the 165 million mobile users in India barely 5 million access the Internet on their handsets. Industry players believe that 50 per cent of phones in 2-3 years will be GPRS-ready.

"The pie is very small now but it is going to grow large. For everybody it is just a question of executing to get as much share of the pie as possible," says Zacharias.

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