The Kaufman Bros Equity Research report on the “State of the Indian Internet Market” seems skeptical, at best. You may download the report here (pdf, 1.09mb)
It concludes that the Internet advertising and ecommerce industry in India is still small. India has approx. 45mn Internet users; only around 10mn are power users (for research and ecommerce). There’s a long way to go before a critical mass is reached and the industry needs government and corporate support, and a killer app that drives people to buy a broadband connection. India is a good investment oportunity, but there could be bottlenecks; growth could take time. Some observations:
Online Advertising
– To grow at a CAGR of 50% from 2005 to 2010; $57 million for current fiscal year.
– Investments from global powerhouses is driving growth; Google has a team for helping businesses transition to advertising online
– Growth in airline ticketing online will drive Internet adoption and hence advertising
– VC funding for Indian startups, who will look to advertise online
– Traffic to move from larger portals with premium ad space to regional sites and niche content
– CPM is flattening, and Google’s CPC business will grow. Ads per page will increase
– Growth in paid search will be largely incremental to online advertising in India
Ecommerce
– To grow at a CAGR of 72% from 2005 to 2010; $300 million for current fiscal year.
– Vertical specific services (jobs, travel, matrimonial etc) are fuelling growth
– Lack of credible/efficient ecommerce companies slowed adoption. Indians like to touch and feel products before buying.
– Lack of credit card penetration hampers growth, but alternate modes of payment are emerging. Sify plans to convert cybercafes as ecommerce centers with each cybercafe having its own co-branded credit card.
– Ecommerce has to compete with offline shopping malls, where shopping is almost a mode of entertainment
– Non-standardized ecommerce products will take time to gain traction
– According to Indian Railways, 31% of online tickets booked are from non-metros and about 47% are for non-A/C coaches.
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