India@Digital. Bharat

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India@Digital. Bharat India@Digital. bharat CREATING A $200 BILLION INTERNET ECONOMY The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com. The Boston Consulting Group’s Center for Consumer and Customer Insight (CCCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG’s various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCCI is sponsored by BCG’s Marketing and Sales and Global Advantage practices. For more information, please visit www.bcg.com/expertise_impact/capabilities/center_consumer_ customer_insight. The Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers, but in the last 10 years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce and mobile & digital payments among others. Ten years after its establishment, the association is still the only professional industry body representing the online and mobile VAS industry in India. The association is registered under the Societies Act and is a recognized charity in Maharashtra. With a membership of 160 plus Indian and MNC companies, offices in Delhi, Mumbai and Bengaluru, the association is well placed to work towards charting a growth path for the digital industry in India. [email protected] CREATING A $200 BILLION INTERNET ECONOMY ALPESH SHAH NIMISHA JAIN SHWETA BAJPAI January 2015 | The Boston Consulting Group CONTENTS 3 EXECUTIVE SUMMARY 6 THE RISE AND CHANGING FACE OF THE INDIAN INTERNET USER Drivers of Internet User Growth The Rise of the Indian Internet User Base to Over 550 Million by 2018 The Changing Face of the Indian Internet User 12 INTERNET ECONOMY TO BE 5 PERCENT OF GDP (USD 200 BILLION) WITH AN EVEN LARGER IMPACT ON SOCIETY GDP Contribution Related to the Internet Internet-Enabled Transactions Benefits to Users The Broader Benefits 17 SEGMENTING INTERNET USERS Active Aspirers Social Shoppers Entertainment Enthusiasts Novel Networkers Late Learners Data Discoverers Professional Pros Charting the Evolution of User Segments 22 THE INTERNET WILL FUNDAMENTALLY IMPACT EVERY DIMENSION OF HUMAN LIFE Inform / Improve Decision-Making Replacing an Offline Activity Reaching Out Making the World a Better Place 27 UNLOCKING THE POTENTIAL Access: Reach and Affordability Facilitating Digital Transactions and Easing Payments Developing the Regulatory Framework Internet-Related Governance A Need for Enablement 35 CALL TO ACTION! Implications for Corporates 37 APPENDIX: GAME CHANGING EXAMPLES 39 FOR FURTHER READING 40 NOTE TO THE READER 2 | [email protected] EXECUTIVE SUMMARY n 2001, there were approximately 7 million Internet users in IIndia. This number has grown by 25 times in the last 12 years at a compounded rate of over 30 percent y-o-y. Today, ~40 million Indians are online every day, spending ~40-45 hours over the Internet per month. India is the second largest market for social networking giants such as Facebook and LinkedIn; 58,000 new users get connected on to a social network every day. E-commerce is shifting users from shop- ping in stores to shopping on the go—Chinese smartphone manufac- turer Xiaomi recently sold 75,000 of its Mi3 models exclusively online in five rounds of flash sales on Flipkart, with most of the sales lasting for less than 10 seconds. India has one of the largest and fastest growing populations of Inter- net users in the world—190 million as of June 2014 and growing rap- idly. India already has the third largest Internet population in the world today, after China with 620 million and the US with 275 million. In addition, India already has 100 million active Facebook users to- day, the second largest number after the US and Canada with 152 mil- lion. As one fast forwards, it is estimated that there will be over 500 million Internet users in India by 2018—making India the second largest population of Internet users in the world. The growth in the Internet base in India has been exponential. It took 20 years from the introduction of the Internet to reach 100 million users. The second 100 million will likely be reached within three years, and the third in less than a year. In fact, the next four years will see nearly 350 million additional Internet users. The primary drivers of this exponential growth have been expansion to small town / rural India, increased af- fordability due to lower cost data-enabled handsets, and the ever in- creasing awareness of, and need for, the Internet. What is perhaps most fascinating in this explosion is the shift in the profile of Internet users. The last 100 million users will be drastically different from the first 100 million on multiple dimensions: they will be older, more rural, more female, more mobile-led, and more vernac- ular. The group will shift from over 60 percent being below 25 years of age to almost 55 percent being 25 years of age or above; from about 30 percent rural to over 50 percent rural; from 60 percent mo- bile-led to over 80 percent mobile-led; from nearly 28 percent women to nearly 35 percent women; and lastly, from about 45 percent using vernacular content to more than 60 percent using vernacular content. The impact of this explosion of Internet users will be staggering. The Internet is already economically powerful: in 2013 alone, it contribut- ed to USD 60 billion or 2.7 percent of India’s GDP. This means that The Boston Consulting Group • Internet and Mobile Association of India | 3 the Internet is already one of the larger sectors in the Indian econo- my, larger than sectors like healthcare (2.5 percent) and military (2.5 percent), but still smaller than agriculture (14 percent). It is estimated that the Internet economy will grow to over 4 percent of GDP by 2020, comparable to developed markets like the US, EU and Japan. The In- ternet economy is also an employment generation engine. The ‘Inter- net’ sector already employs ~4-5 lakh people and is expected to create nearly 15-20 lakh jobs by 2018. The Internet’s benefit is not fully captured by the GDP numbers— there are wider ‘ripple’ effects on the economy and society at a broad- er level. The Internet has the power to impact every aspect of life fun- damentally, be it at the level of consumption, access to financial services and education, connectivity at work, interactions with friends and family, etc. And the Internet can impact each of these aspects in different ways: informing and enhancing the physical experience, sub- stituting the physical experience, enabling broader reach of the physi- cal offering by lowering the cost of delivery, and completely trans- forming the element—clearly a game changer. Consumers are increasingly using the Internet as their first port of call in framing and driving their purchase decisions. BCG’s Centre for Consumer and Customer Insight (CCCI), through a survey of 25 cities, has determined that over 50 percent of consumers who have access to the Internet go online to make informed purchase deci- sions. While this number is different for different categories of prod- ucts / services, one thing is clear: this number is constantly on the rise. It is evident that the learning curve on the Internet is exponen- tial. As consumers get more comfortable with the Internet, their us- age pattern exhibits exponential growth that belies age and other demographic variables. In addition, the Internet enhances productiv- ity and efficiency and allows organizations to reach segments hither- to deprived of access to these products / services. For example, Pira- mal’s e-Swasthya programme uses Internet-enabled diagnosis and prescription for individuals who do not have access to quality healthcare facilities due to their location or affordability. Additional- ly, it is impacting society more broadly—improving livelihood and quality of life; driving increased engagement (for example Internet and social media-driven voter outreach and en- gagement during the 2014 general elections); and contributing to im- proved security through mobile apps like VithU that can send alerts to a pre-identified list of contacts along with one’s location by the push of a button, thus ensuring speedy and timely assistance. However, the Indian economy has not yet fully realised the potential of the Internet. Industries have not yet seized the full commercial po- tential that the Internet can deliver to their businesses—for example, within sectors such as entertainment, only 5 percent of the audience is impacted by digital, whereas in the travel industry, the impact is higher at 8 percent. Small and medium enterprises do not take full advantage of the Internet, which offers tremendous opportunities to SMEs for targeted, cost effective customer acquisition and to tap into new markets.
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