Depending on who you ask, you will get a lot of cool sounding definitions full of buzz words for Web 2.0. In simple terms it is a combination of two things:
1. It is about user generated content. Majority of the content on these sites is not from publishers but from users themselves using wikis, blogs, profiles, etc.
Turns out that in India we have a bunch of Web 2.0 sites related to social networking, social bookmarking and such. You can find a partial list here. So when you have a Web 2.0 service focused for consumers, where does the money come from? It is all about advertisements. Look at any of the signature Web 2.0 companies in the US like MySpace, YouTube, Digg, flickr, etc, for most of them there is no other source of money other than ads. And how do you maximize revenues from ads? Get more eyeballs. So the bottomline is try to attract huge number of users visiting your site for long long times, serve ads on the side and embedded in the content (the more relevant ads, the better) and make money. Clearly this model works when the user base is large and online ad market is as big to support it.
Now let’s take a look at some of the market statistics in India
Internet usage numbers:
We still have very less number of Internet users compared to say US and even China. The latest report from IAMAI says that 38% of the users are “heavy” (usage of around 8.5 hours per week) users of Internet in India. If you take the total user base of 35 million, this translates to around 13.5 million users. Now most Web 2.0 sites (esp. social networking, social bookmarking, media sharing) are targeted towards college going students and youth which comprises of 60% of the total number of Internet users according to the report, which reduces the target customers to around 8 million users.
Total available online ad dollars:
Another report from IAMAI says that the online ad market will cross $57 million in 2006-07 and will be around $150 million in 2010. Compare this with the current number of the US market that is $12.5 billion and Chinese market that is $500 million today.
There is a good number of existing well established players of the Indian online industry who are already behind these dollars. Just to quote some figures from a recent issue of Business Today magazine, here are the ad revenues of the top 5 players.
1. Rediff = $13.21 million
2. Google = $10.44 million
3. Indiatimes = $8.88 million
4. Yahoo = $7 million
5. MSN = $4 million
Its not even worth calculating how much money is left over if you subtract these dollars from available dollars. Of course I do not mean to say that small players cannot come up and give the big players a run for their money (the perfect example is YouTube and Google in video market and in general that’s how companies evolve), but this is just to give a picture of the current market.
How much people care?
The latest report from AC Nielsen survey says that in India Internet advertising is still not as effective as other parts of the world. They have found various reasons for that and you can read the details here, but the point is that this is not a good report from the point of view of promoting online advertising to new players.
So if you put the above pieces together in today’s situation, you have at least 20 players in a market of 8 million users, who are using Internet for less than 10 hours per week vying for a few million dollars of revenues? You can extrapolate the above numbers to 2010 and still the picture won’t look any prettier. I would love to hear any catches in the above analysis, but given this data I would not invest or start something that relies completely on ad for revenues from Indian markets, unless there is a killer app in mind that will acquire a really massive number of users quickly and probably get acquired by a big company. I think in India it still makes more sense to start web services with alternative sources of revenues – more like traditional ecommerce services . Not surprising that most of the VC money is going to such services. Of course there is need for sites where youth generation hangs out or where people share bookmarks or latest stories, but the market is small and it will be very interesting who emerges out as the winner. More interesting to see will be what innovations come out considering these facts about the Indian market, both in terms of type/quality of service and in terms of business models.
Entry Filed under: web2.0