Site Navigation

It’s that time of the year. Everyone is writing about the best of 2006. We thought it would be nice to look back at the happenings in the industry in the past year. Here is a collection of news that made the headlines in 2006.

THE News
The biggest event of the year was undoubtedly the IPO of Info-Edge (group owning Naukri, 99acres, JeevanSathi). This event has heralded a new era in the consumer Internet industry in India as it became the first Internet company ever to be listed on an Indian Stock Exchange. We hope to see some more companies to follow suit in the coming few years to keep the rally going. Some of the probable followers include the Shaadi group, BharatMatrimony group and the online travel companies.

Investments
Lot of money has poured in the market in 2006. As Venture Intelligence reports, VCs have made 53 early-stage investments in start-ups in India worth $355 million during the first nine months of 2006. That’s still nearly twice as much activity in that period than the two previous years combined. Here is a partial list of the investors and their portfolio companies.The leading sector in terms of investments has been without any doubt - Travel. Makemytrip, Yatra, TravelGuru, Cleartrip are some of the big names in this sector and all of them have already taken their second rounds of funding this year. The biggest of the VC’s from Silicon Valley including Sequoia, KPCB, Matrix, Norwest, etc. have made their presence felt in India. Some of the other companies that attracted big investments included online DVD rental company SeventyMM, leading community portal Sulekha, India specific search engine Guruji.com and online tutoring company TutorVista.

M&A
The only one that we know of is the acquisition of web2.0 companies Bixee and Pixrat by MIH networks. We hope to see more activity in this sector in order to sustain the bullish web2.0 scene and the overall ecosystem.

Web2.0
Although we raised our own concerns about the sustainability of web2.0 companies, this has been the most active sector because of obvious reasons - low barrier to entry both in terms of technology and investment. Following the trend from the West, loads of startups are trying to make a mark in social networking scene including photo sharing, video sharing, news/events sharing. Here is a partial list of companies trying to fight it out to acquire whatever small percent of users and advertising revenue that is available in the Indian market today.

Fun facts and figures

• Airline ticket customers formed 40% of online shoppers in India, followed by books comprising with 29% and music at 24% of the total purchases. 30,000 Indians buy travel tickets online everyday.
• The number of online shoppers in India rose 7% to 3.49 million in the first half of 2006 from 3.27 million a year earlier.
• High-speed connections in India more than doubled to 1.92 million at the end of October from 690,000 in the year 2005.
• Desktops account for 80 per cent of the total personal computer market as compared to 20 per cent of laptops. The latter will grow at over 100 per cent from 431,834 units sold in 2005-06 to 863,668 units in 2006-07 as compared to desktop sales growing at 22 per cent from 4,164,724 units in 2005-06 to 5,676,111 units in 2006-07.
• The number of total Internet users in India stands at 35 million currently; out of this 10 million are considered to be “power users”.

Next?
Overall, 2006 was an active year full of excitement in the industry among investors, entrepreneurs and of course the users of the Internet themselves. The year has kicked in the enthusiasm required for bootstrapping the so called “Silicon Valley in India“. 2007 is going to be very important to take these early developments to the next level towards realizing the Silicon Valley dream. At the risk of sounding obvious, increase in Internet penetration (esp. broadband) is on the top of my wish list for 2007. Without the Internet users equipped with good connection speed, industry cannot go much further. Other than that I think eCommerce really needs a boost because that is the main driver of the Internet economy. More eCommerce, more advertising dollars, more business models and more companies.

Where do you think the industry is heading from here? What’s in your wish list?

I’ve referred to this multiple times in the past. Off the top of my head, here and here. I think offline presence is very very important to build a large user base esp. if the service is targeted towards general masses (as opposed to say social networking site that is targeted towards teen and youth demographics) Every Internet usage report that comes out, we get to see the same thing coming out - Internet penetration is still limited to bigger cities, main mode of access is still not home - more than 50% of the Internet usage is seen from cyber cafes, offices, schools.

Today Jaaydaad.com announced that they will be opening 600 property shops throughout India. I think this is a very good strategy. Real estate market is not limited to 10 million active Internet users in India. So in order to reach out to real critical mass, this should be a great move. If properly executed, their target audience will be orders of magnitude more than an Internet only shop. Of course we know that the Internet usage will only rise from this point, and the offline presence will help them in building a brand which will seamlessly transfer to the online world as well. I have talked about this with a few players in the industry about their ideas on adopting this strategy and the common issue is that this strategy is a little complicated to execute right in terms of logistics as well the fact this can be quite capital intensive. Agreed, but I think this is where we will see some real innovation in the Internet industry in India - how the logistics are handled to mix the online-offline service mode, how offline presence can be made in a cost effective way (collaboration with existing retailers or even cyber cafes, adopting the franchise model, etc.)

Some of the other players who are already doing this is Shaadi.com with their Shaadi Point and BharatMatrimony with their offline centers. I’ve been informed that Madhouse.in (DVD rentals) is planning something similar, although I haven’t seen them doing that just yet (they do have other means such as phone, SMS, though). If I have to take a guess, I think we might see some of the online ticketing sites adopting this strategy considering how competitive this space is getting and the fact that there are already so many offline travel shops/agents (hence opportunity for consolidation).

Last week, had a talk with the founders of two players in the online photo printing service - MeraSnap and PicSquare. While I think that this service is useful and has much clearer business model compared to some of the Web2.0 ideas, this market is already getting overcrowded. The list of companies (eYaadein, RangeelaPhotos, PhotoMasti, 123shots, iTasveer, add more here) is getting bigger every day due to the inherent nature of this business - low barrier to entry for companies and no switching cost for customers.

So the natural question is what can these sites do to gain an edge over others, esp. considering the specifics of operating in the Indian market? I posed this question to both the companies, but didn’t get a convincing answer. (although I do understand that they may not want to reveal whats in the works) Obviously, providing top notch customer service goes without saying and both the companies mentioned this point as their main strength. More and more of these companies are now providing options for personalized gifts such as mugs, tshirts, etc. with your photos. These are good features, but it is clear that the winner has to really provide something that will keep users coming back to use their service, and not switch to another serivce easily (to avail that Re. 1 difference). So here is my attempt at thinking up some features that could differentiate one from the rest of the crowd:

1. Internet penetration is still small, so go offline: I think the offline angle should be there in any Indian consumer Internet startup if they plan to build a large user base today. People in smaller towns also own digital camera. Imagine if they could drop off their memory card into any of the local offline centers (maybe self-owned or tie up with cybercafes, etc.) and pick up their photos without having to even use their credit card for payment. I think that can really give them a big upper hand in acquiring customers who do not have Internet access or have slow access where the upload speed sucks.

2. Mobile penetration is huge, so go mobile: If I could download any of my stored photos from their server on my mobile (with GPRS or Picture messaging), wouldn’t I love to show them off to my friends and share them. This can really help spread the word about the company in a viral way.

3. Web2.0 features: Yes you can share the pictures with friends with these services, but none of these sites provide the tagging/sharing/browsing features of photo sharing sites like Flickr or Webshots. Isn’t it a pain to upload to Flickr for sharing and using some other service for printing?

4. Basic editing features: Would be nice if they can even provide one simple “Feeling Lucky” feature from Picasa for correcting the photo before printing. If you don’t know about this feature, what that does is with one click of a button, it removes the red-eye, adjusts brightness/contrast thus making the picture much more nicer to look at. This type of feature is esp. useful since since people have intentions of printing the photo, when they are using one of these sites.

Invite your comments/ideas.

I wrote about Guruji.com on the very first day of their press release and then followed up with another post clarifying on what they are doing. My initial response was skeptic as I didn’t quite get what their value proposition was. Local search definitely sounded like an opportunity but that clearly wasn’t their main (or only) focus. In the Indian content search area, Google.co.in already seemed to be doing a good enough job. I am sure some of you would have got similar doubts, but hey, they are backed by Sequoia and generated quite a bit of buzz in the media. I had a chat with Anurag Dod, their CEO and asked a few questions to clarify some of the doubts (Update: added conclusion at the end - due to some technical snag, missed adding this when first posted the article)

What is your biggest value proposition?
We want to be the one stop shop for anyone search anything related to India. Be it India related content or Indian city specific data. “Think India - Think Guruji”. This access to any type of information from one search box will provide a significant value add for the users.

On the web, where do you find the most relevant “India” specific content? Does this mean data from sites hosted in India or sites with .in or .co.in extension or something else?
We have a technology that classifies Indian content as it looks a web pages. Based on this technology we decide if the page is Indian or not (in which case we do not include them in our index). Our web crawl is focused to get only Indian content and the premise is that any good Indian content anywhere will be linked from the initial set that we start with (and this set keeps on changing as our team keeps modifying that). As a result we are able to index the most relevant Indian content from the web with less resources and refresh the data frequently.

How do you differentiate from Google/Yahoo/MSN India search?
One clear difference is that none of them provide local city data. Another thing is that when you search for Indian content on Google.co.in, you get some relevant results on “web search” and some relevant results on “pages from India”. Also you get different and maybe relevant results when you search from Google.com by appending your search with “india” keyword. As a result, users are confused as to what is the best way to search for Indian content and this where Guruji is different. You can search for anything India related from one search box without any confusion.

Don’t you think Google can realize this problem and take actions to fix this confusing experience of searching Indian content?
We definitely cannot discount Google as they are big and smart, but we will have the early mover advantage which will keep users coming back to our site.

How will you start building user base considering that Google already has a strong foothold in search in India?
As we keep on adding more features for India specific searches, there will be more and more reasons for people to switch. Also another major point is that currently the Indian Internet population stands at roughly 30 million and is expected to increase to 100+ million in the coming few years. We plan to go after these new users who are going to come online as well, which is going to be very important for increasing the search share.

Do you plan to support searching for regional language content on the web?
Yes, as the number of Internet users increase there will be more and more regional language content and more users wanting to search for that. We plan to introduce support for searching regional language in the coming few months. This is another area where lot of the other big search engines do not have a presence.

What will be your main business model?
We plan to roll out our own Google Adword’s like sponsored listings program in the next couple of months. One of the advantages for advertisers using our advertising program will be that their ads will get exposure to Indians who are searching for India related content (like “gifts to India”) from outside India as well. This advantage is not there for advertisers using Google.co.in for advertising as people performing Indian related search from outside of India may be using Google.com or their own country’s Google version.

What do you think of competition from other players in local search area?
We realize that there will be more and more competition from local players like Onyomo (local city specific data search) and others. A lot of these startups in local search today lack comprehensiveness. They have good depth but less breadth. Guruji will keep improving web search for Indian content as this is our core focus, but we will also add features like maps and make the city specific data more and more comprehensive to compete in the local search market. Also at Guruji, we have integrated results for web search and local search, so users get all their India specific search results at one place.

How has been the uptake of Guruji.com so far?
We have received a good amount of traffic since launch. It has clearly met our expectations. We have observed a very good number of users coming back to the site after their first visit. We will continue to focus on making our technology better to provide good user experience, which will help in getting more users through word of mouth marketing. We also plan to launch more marketing activities to create buzz for attracting new users.

iLeher Bottomline
I think they have the right ideas, but beating Google in the search game will be a Herculean task, esp. if/when they become serious about search in India. I have discussed quite a bit in the previous posts that getting the most ‘relevant’ Indian content could be tricky. For e.g. when searching for “Taj Mahal” I do want to see article from Wikipedia as a top result, which I do not on Guruji right now, but do on Google (granted it may be in their plan and may take some time for these type of technological issues to be ironed out).

They do have an advantage that market is still in the nascent stages as a result of which relevant, more targeted and comprehensive search results (including local and regional content) coupled with clever marketing (for e.g. deals with local PC manufacturers to make Guruji as homepage, campaigns targeted towards new Internet users) can definitely help them in making some inroads. Also here is an opportunity for players in local search (onyomo, makemyindia, etc.) to be comprehensive and win traffic in the local search vertical to give Guruji a run for their money and become potential candidates for takeovers (by Google/Yahoo/MSN or Guruji itself!)

Related posts:
Guruji.com: Baidu of India?
Guruji.com: Web search or local search?

Search engines seem to be the flavor of this festive season in India. There has been quite a bit of discussion on local search engines in the last couple of weeks with the launch of Guruji.com. We covered that in enough details here and here. Two important things came out of the discussions:

1. Search engines will start indexing and providing ways to search local languages content as they become more and more popular on the web.
2. To get mass users to adopt their service in the shorter term, search engines will need to provide alternate interface such as mobile access.

In this post, I bring to light a few services that have taken the first step in doing the above. Note that I am NOT doing a complete review of these services here, I am just highlighting interesting things keeping in mind the above two points.

Vernacular search engines
Raftaar
This is a search engine that indexes Hindi content on the web and provides a way to query Hindi words. It provides two modes of input for entering Hindi words. One way is to enter English characters of how that word would be spelled if it was an English word. Although this is a nice feature to have, not sure how useful it will be in reality because if someone can figure out the English spelling for a word, they most probably will know enough English to understand the content in English itself, unless they are specifically looking for Hindi content. The other way to enter Hindi queries is using the Hindi typepad that is provided on the homepage. These modes may be slow to work with right now, but when Hindi content on the web really increases that much, Hindi keyboards will be more popular after which mode of input will not be a problem. Other than regular web search features, one of the useful things that I think they can do to really improve the search experience is smartly include nearby words in search (words that are spelled very similar, because in Hindi spellings can be tricky). Interesting to know that they are already getting about 5000 hits per day, more details here.

Bhramara
This search engine indexes local language content in Hindi and Kannada. The website mentions that documents that it indexes are manually reviewed to provide the best “seek” experience if you want to browse pages from India. I think while this is a good proof of concept, it will be difficult to scale to a full fledged web search (which is not their plan according to the About section of their site)

PDSText provides a wrapper over Google which I think is fun just to try out. It is interesting to see that Google already has local languages in their index. Although providing search results for real world queries requires much more work than that.

Search engine with alternate interfaces
Onyomo is a local search engine. You can search for places to eat, restaurants, hotels, florists, etc. More about the search later, but they have recently introduced SMS search where you can sms your query and they sms back the search results. This is definetely a great start for providing service on mobile interface.

JustDial is a service where the users can dial in a number and ask their query and get answers to that for for free. They recently raised funding from SAIF parterners, you can read more here. Their approach of building a strong user base is quite interesting. As of today when Internet penetration hasn’t reached mass population (only 10 million power users and around 2 million broadband connections), they are acquiring users with access to phone/mobile. Hopefully a large part of their phone user base will convert to web interface also in the future if their brand becomes associated with local search.

I first wrote about Guruji.com the day of the press release on Oct 12th. As expected, there has been a lot of news all over the media and quite a lot of comments/discussions here on iLeher because:
1. It drew comparisons with the media and investors’ darling Google
2. Search is hot (all Internet users today search because of the information overload on the web, and every searcher is unknowingly a potential customer)
3. They are funded by Sequoia - one of the most successful VC firms in Silicon Valley
4. They have a smart and experienced team on board

I myself being a software professional working in the field of search, have special interest in the technology and so I have been actively following and participating in various discussions about what could it mean for Indian internet industry. Obviously there has been a lot of speculation whether it will replace Google in India, or just add to the list of previous attempts like byindia.com, khoj.com etc, or they will rule Local search. In this post I summarize what they are doing and what direction they could possibly go. The timing could not be better as just today there was an interview with Anurag Dod (the CEO of Guruji.com) on Podtech India, where he talks a bit about their plans that confirms what I wrote in the first post about Guruji.com about indexing local languages.

• I do NOT think they compete head to head with Google India in WEB search. Their homepage has only two tabs “India” and “Local”. They are optimized to support search for Indian content, which is not always what Indian searchers are looking for. For example, there may be a student who wants to search for the latest trends in their research area and in that case a localized search engine will be of little benefit.

• I like to think of them more as “Local” search engine, which I think is a big opportunity. Local search in two ways:
• Local search at India level: If you wanted to find out about the latest happenings about Bollywood or research projects happening in Indian Universities, etc. Search results rankings can be tweaked to improve the relevance based on various factors like whether the result is coming from a site containing mostly Indian content, what people in India generally like etc. One interesting scenario is for a query like “Taj Mahal”, you may not necessarily get the best result from an Indian or India related site. You may find the best info on Taj Mahal from wikipedia (which is predominantly not an Indian or Indian content related site), so should the India specific search engine include that result or not?
• Local search at individual city level: If you wanted to find out what are the local Thai restaurants in your area, the max you could find today is the yellow page listings from different sites. This is where Guruji.com can help by providing the information in a much richer format. It can provide listings (like it does currently), maps, the restaurant websites, sites talking about reviews, etc. One notable player in this area is Onyomo (more on this later)

• Probably more important feature is support for searching local language content. I wrote about this on my earlier post and Anurag confirms this in the interview. India has at least 5-6 major languages used by a non-trivial number of people (there is no English newspaper in the list of top 10 daily newspapers in India) and it is only a matter of time that there will be more and more sites hosting content in these languages. Currently Google/Yahoo do not support that and having this will position Guruji in a unique position, so they can search all Indian content regardless of the language.

The bottomline is that it will take some time for the verdict to be out. There is no doubt that there is a lot of potential and work to be done in the Local search area. I also think now that local search is becoming common in India, Google/Yahoo/MSN will try to make an entry and that’s when things will really start getting heated up. Love to hear your comments/thoughts here.

Online ticketing is big. It’s clearly leading the ecommerce industry in India. IRCTC (online railway ticketing) is the biggest player followed by air tickets. Not surprising that there are so many travel portals funded by the biggest VC’s in India. A quick look on Google Trends proves that search volume for tickets is quite significant in India (relative to other countries)

Search volume for railway tickets
Search volume for air tickets
Search volume for bus tickets

We had a chat with the three co-founders (Phanindra Sama, Charan Padmaraju and Sudhakar Pasupunuri) of India’s first vertical for online bus tickets called redBus.in. They launched the site just a couple of months back in August 2006 and have already partnered with 30 bus operators in India and are doing great in terms of sales. Below we share their experiences, insights and our thoughts on their business, industry and consumer trends.

1. What inspired you to start this venture?
This venture has come out as a result of a necessity. Last Diwali one of the co-founders was looking for bus tickets to travel home and missed the bus because of getting too late in buying the ticket. Thats when the idea struck that it would be really useful to have a service where people can buy bus tickets online.

iLeher: May sound clichéd but is still very true: “Necessity is the mother of invention”

2. Overview about how the company evolved from idea to “live” state?
Started off with talking to travel operators to understand how the industry works. Surveyed the bus operators and travel agents to figure out the logistics. Convinced the bus operators about advantages of online tickets sales. Provided the software needed to maintain their tickets inventory. While some operators signed up for real time tickets inventory update to redBus, most of them agreed for providing tickets to redBus on a quota basis.

iLeher: Market research, partnerships, logistics. Most important factors in ecommerce.

3. How does your team look like?
3 business dev and marketing people, 2 software people and 3 customer support agents. All currently based in Bangalore.

iLeher: Proves that writing code is easy, but evangelizing, selling and keeping customers happy is more challenging, especially in emerging markets. Makes sense to invest in resources that will help in changing the mentality of the people about ecommerce in India.

4. How is your company funded so for? Any plans of raise more funding?
Pitched the idea at a TIE Bangalore event and got $25,000 seed funding and mentoring from 3 TIE members.

iLeher: Just as important as money is networking and good mentoring to stay focused in the right direction.

5. What is your business model?
Commission from booking tickets and ads on the site.

iLeher: Easy question for an ecommerce site. Try asking this to the latest Web2.0 Social media startup.

6. How is redBus doing so far? Any feedback from customers?
There has been a growth rate of 100% every month since inception. Ticket sales for this month as of today (Oct 17) is already more than double the sales from the complete month of September. Customers have given very positive feedback and they have questions mostly around security of credit card payments over the web.

iLeher: Reassures the fact that people in India are really getting more and more comfortable with doing online transactions.

7. What are some of the key challenges in your business?
Making sure that assigned seat (during e-booking) remains when passengers board the bus. There is a lot of travel on weekends, but on other days occupancy is less.

iLeher: Shows that tech savvy are buying more tickets (since they tend to travel more on weekends). Need for more distribution channels for the people without Internet access?

8. What are the marketing strategies that you have been using?
Email distribution lists, pamphlets on bus stations, posters inside the busses. Google adwords (surprisingly number of clicks resulting from that is not very significant)

iLeher: Although Search Engine Marketing is small right now, its coming.

9. What do you have to say about competitors like Yatra Bus ticket service?
redBus has a big early mover advantage. Yatra started their bus ticketing service only recently. redBus already has partnership with 30 bus operators and are expanding fast. Yatra has very less partners compared to redBus.

iLeher: Big player doesn’t necessarily has big advantage. I don’t particularly like comparisons, but still just to illustrate: Google video v/s YouTube.

10. What is the payment method most used by users?
There is a 50-50 split between credit and debit card. Plan to introduce mobile payment soon.

iLeher: Good to see more usage of credit cards. Mobile interface can work wonders in India, considering the subscriber base.

11. What are the challenges of running a business in India?
Other than the obvious issues of Internet penetration and customers being hesitant of doing credit card transactions online, evangelizing and educating the customers is a big task. Working with different service providers such as lawyers, CA’s is not always a breeze. Things do not always get done as fast as you would like. Coding gets done fast, but there are lot of other variables and things can get delayed to them.

iLeher: We hope that as the markets become mature, other processes to support online business will start getting more and more streamlined in India.

12. How has TIE-EAP program helped you?
TIE was really helpful from day one. It was a source of continuous mentorship and direction. It provides a great network of relevant and useful people in the industry.

iLeher: Network, network, network