2013 India Internet outlook
At about 150 million Internet users, India now has 3rd largest Internet population in the world after China (at 575m) and the US (at 275m). At 150 million total Internet users, the Internet penetration in India remains at 12 per cent vs. 43 per cent in China and 80 per cent in the US. However, the low penetration means that India presents unmatchable growth opportunity for the Internet sector in coming years. In our view, India will likely see golden period of the Internet sector between 2013 to 2018 with incredible growth opportunity and secular growth adoption for E-Commerce, Internet advertising, social media, search, online content, and services relating to E-Commerce and Internet advertising.
Here is the India Internet outlook for 2013, the first year for this golden period.
#1 Internet penetration will reach 15%. We expect India to add 30 million new Internet users in 2013 and total Internet population to touch 180mm. This implies a 20% growth in the Internet population.
#2 Time spend online will rise and directionally become comparable to US and China. As per our estimates, an Internet user in India on average is spending 13 hour per week and this number will likely reach 16 hours per week. The incremental time spend online will largely be spent on social media, photo/video sharing, E-Commerce, and utilities/banking/bill payments.
#3 Mobile Internet users to touch 100M. India has nearly 950 million mobile subscribers and close to 50 million or under 6 per cent of these mobile subscribers access Internet via mobile handsets. We estimate that in 2013 the mobile Internet penetration will go up from close to 6 per cent to 10 per cent and India could double its mobile Internet population in 2013 at 100 million estimated mobile Internet users by end of 2013.
#4 Internet usage will likely grow faster for female and from home. So far India Internet usage is heavily screwed towards male gender and from work and educational establishments. We believe that in 2013, Internet usage will grow much faster for female and from home access. This acceleration will likely happen due to overall Internet adoption moving to masses.
#5 E-Commerce will likely touch $900M in 2013. As per our estimates, in 2012 India E-Commerce reached $550 million in gross revenue (exc. Online travel and online classifieds) and we expect E-Commerce to touch $900 million in gross revenue by end of 2013.
#6 Majority of E-Commerce growth will come from emerging cities. While, top 8 cities in India may remain at 45 per cent to 65 per cent of total E-Commerce for various E-Commerce companies, we believe that higher growth delta for E-Commerce in 2013 will come from emerging cities. We define emerging cities as the cities other than Top-40 cities in India e.g. Bhatinda in Punjab or Kota in Rajasthan.
#7 Internet advertising will be the fastest growing sub-sector of the India Internet. As per our estimates, India Internet advertising generated $300 million in revenue in 2012 and can double in 2013 to reach $600 million. We believe that lots of Internet advertising growth will come due to the rise in social media, mobile Internet, and non-search and content driven online ad formats such as lead generation, affiliate marketing, and email marketing etc.
#8 Funding environment for the Internet start-ups to remain challenging in 2013. We believe that funding environment for the Internet start-ups to remain challenging in 2013 in India. In last 17 years, India has created less than $5 billion in Internet market capitalization vs. $600 billion by US Internet sector and $250 billion by Chinese Internet sector. Lot many Internet companies have to become a lot bigger for the funding environment to ease off.
#9 E-Commerce will likely see emergence of disruptive business models and consolidation. While this topic is something we are very passionate about with tons of opinion and view points for obvious reasons, we believe that E-Commerce companies that are focusing on fundamental issues will likely disrupt the E-Commerce industry in 2013. On one hand, the fundamental issues are the issues that matter for improving customer experiences and the state of the ecosystem, on other hand focusing on fundamentals of business vs. throwing money at the problem will become absolutely imperative. We believe that majority of the inventory led E-Commerce business models will likely either merge with each other or take a niche vertical position.
#10 Start-up culture and ecosystem to become more widespread. In our view, the startup culture and startup ecosystem are becoming more widespread. The seed and angel rounds are no longer limited to Mumbai, Delhi or Bangalore and emergence of startup is no longer limited to IITs or big cities. While, India has long way to go vs. having a true Silicon Valley start-up culture, ecosystem and support system, we believe India is headed in that direction. Founding a start-up immediately after graduation or leaving a rewarding corporate job to join a start-up, or find or become an angel investor is no longer uncommon. While, the 2013 Internet funding environment will likely be challenging, the overall Internet start-up ecosystem will become stronger and more ubiquitous.
(Sandeep Aggarwal is the founder and CEO of "ShopClues.com". He is counted amongst leading Internet experts globally, and has regularly appeared on CNBC, Fox, ABC News and regularly quoted by Wall Street Journal, Fortune, Forbes and other prominent media outlets.)
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