Thursday, November 30, 2006

Online Advertising terminology: Explained

In this post I am explaining various terms used in Online Advertising:

CPM (Cost per thousand)

The basic currency / unit of purchase of Internet ad inventory is “Thousand” impression blocks. Cost per thousand is referred as CPM. (M here stands for ‘Milli’ in Latin which means ‘Thousand’)

CPC (Cost per click)

Whenever a surfer clicks on a Banner Ad, it is recorded as a “Click”. The percentage of number of clicks from number of impressions is measured by Click Though Ratio (CTR). So for Eg if 1,000 impressions lead to 5 clicks then the CTR will be 0.5%.

CPL (Cost per Lead)

A lead is defined as a potential customer who is interested in buying the product advertised and provides his contact information like email id , contact numbers etc. Today a bulk of Online Advertising is happening for generation of leads.

I2L : Impressions to Leads ratio. Number of leads from served Impressions. If we get 1 lead from 1,000 impressions then i2l will be 0.1%.
C2L: Clicks to Leads ratio: Number of leads from clicks. If 5 clicks yield a Lead then the C2L will be 20%.

CPA (Cost per acquisition)

Generally a whole lot of Product Categories need Offline Sales teams to “close the sales loop”. Typically, in such cases the leads generated Online are passed on to the Sales organisation who close the loop by talking to / meeting the prospective customer.

However, for online organizations like a Travel Portal, acquisition will happen when the customer finishes an online transaction like say buying a ticket. Technology easily allows us to monitor the number of people coming to a site from an Online Ad campaign to ascertain how many people who clicked and reached the website actually ended up completing a transaction.

C2A : Clicks to Acquisition ratio. Number of Acquisitions from people who clicked on a particular Banner Ad. If we get 1 transacting customer lead from 100 clicks then the C2A will be 1%.

Metrics stem from objectives

The following illustrations will give a clearer picture of the terminology used and the way Online Advertising campaign objectives and Metrics are juxtaposed & viewed .

Friday, November 10, 2006

Online Travel India: Size of business

Following my earlier posts on online travel:

Crowded skies or crowded online travel space?
Action in Indian online Travel space

I have tried to calculate the size of India business of all the travel portals.

I estimate that close to 1,00,000 Air tickets are being sold every day in India. Out of this nearly 20,000 are being sold online. Online tickets are sold by Online Travel Portals / Agents & Directly by the Airlines Websites. Out of this 20,000 I believe that Online Travel portals are selling around 4-5000 tickets per day.

At an average ticket value of Rs. 3,000 the total revenue (Gross revenue) earned by Online Travel Portals from sale of Airline Tickets would be in the range of Rs 430-540 Crores. The portals would be getting a net commission ranging from 0.5% to 7.5% from various Airlines. At an average commission rate of 3-4%, the net revenue would be between Rs. 13-22 crores. has emerged as the clear leader enjoying more than 50-55% of the market share. Indiatimes travel and Yatra follow behind with close to 10-15% market share each. Other prominent players include Travelguru, Cleartrip , Xplorz etc.

The Air Tickets business would be forming almost 90% of the total revenues of the online travel portals. 10% revenues would be coming from Hotel bookings, Taxi rentals Packages etc. The margins on these products would be much higher going up to almost 20%. This would give them another Rs 10 crore in net revenues. This makes the total business size around 25-30 crores in net revenues.

What will be very interesting to see is how the market shares will pan out once the global biggies like Expedia & Travelocity come in (Both of them are going to soon launch their India business) as well as the larger brick & mortar players like SOTC/ Kuoni & Thomas Cook throw their hats into the ring.

However, one thing is very clear - the volumes of business being done by Online Travel Portals will continue growing exponentially over the next 2-3 years.

Friday, October 27, 2006

Online video rental companies in India

There has been lots of activity in the space of Online Video rental. The value proposition is of course convenience in the process of renting movies. Subscribers can order / queue the movies they want to watch and the movie rental company will despatch the movie by courier to their home. Once the movie has been watched the courier will collect back the same, saving the hassle of going to a movie rental shop and browsing through loads of photo albums with movie covers. The online library is of course searchable & browsable making the task of selecting movies easier!

I have done a deeper analysis of their offerings:

Area of operation: Delhi & Bangalore
Number of Titles : 10,000+
Membership options: Rs 199/599 ; 4/ Unlimited DVDs in a month
Number of movies at a time: upto 2
Viewing Time: No limit
Registration : Rs. 499
Security Deposit: Rs. 999

Area of operation: Mumbai (selected areas)
Number of titles: Several Thousand (?!)
Membership options: Rs 399-999 / 1-2 discs out at a time/ 6-unlimited DVDs in a month
Viewing Time: 3-7 days
Security Deposit: 1500 / 3000

Area of operation: Bangalore, Hyderabad, Chennai, Delhi & NCR, Mumbai
Number of titles: Thousands (?!)
One DVD Rs 99, 2 DVDs Rs 149
Viewing Time: 3 days
Security Deposit: None

Area of operation: Delhi & NCR
Number of titles: Not specified
One DVD Rs 399, 2 DVDs Rs 499; unlimited / month
Viewing Time: Unlimited
Registration: 150-250

Area of operation: Bangalore
Number of titles: Not specified
Limited (2 DVDs) - Rs 100 / Unlimited movies Rs 400 per month
Viewing Time: Unlimited
Registration: 1500-250

Area of operation: Delhi, Gurgaon & Noida
Number of titles: Not specified
Rs. 699 pm to Rs 999 pm ; 1 movie at a time
Viewing Time: Unlimited

Related links

Excellent post by Webyatra

With so much of Video piracy in India, an interesting aspect to be seen is will these players be able to create a sustainable and profitable business model for themselves?

I am sure there will be few other players whom I would have missed out. I invite readers to help me update the list.


Another online video rental company to get funded:

Monday, October 09, 2006

Web 2.0 Companies in India

There has been a lot of interest of late in the Web 2.0 space. Of course there are global biggies like MySpace , YouTube , LinkedIn, Ryze , Hi5 , Orkut , Filckr , , Blogger, Digg etc etc.

A recent news of great interest in this space is Google’s interest in acquiring YouTube. Read Washington Post’s article

There have been loads of Indian Companies foraying into the Web 2.0 space. One of the recent more high profile joinees of the bandwagon is MIH with Ibibo (I build I bond)

I just wanted to compile a list of the Web2.0 companies, I am sure this will not still be a comprehensive list and I encourage readers to contribute to make it as exhaustive as possible. I could not resist adding Indian Search Engines to this lot though they are not Web 2.0 play. Well here it goes:

Social Bookmarking

Yahoo My Web 2.0

Photo Sharing / printing

Yahoo India Photos
Ibibo Albums
Windlows Live Spaces


Indiatimes Blogs
Rediff Blogs
Windows live Spaces
Ibibo Blogs
Expressindia Blogs
IBNLive blogs
Moneycontrol Blogs
NDTV Blogs

Social Networking

Rediff Connexions
Yahoo Groups
Indiatimes Clubs
Sixer – Social networking for cricket fans
Wah India – Social networking for bollywood fans
Yaari – Social networking for youth (Hi5 of India)

Indian Search engines

Guruji – Yet to be launched
OnYoMo – Short form for On Your Move - Local search with maps.

Even globally, the Web 2.0 companies have not yet defined a very clear revenue model and path to profitability for themselves. So it will be very interesting to see who survives and thrives amongst the clutter of the Web 2.0 companies in India.

Related links

Wednesday, August 23, 2006

When will we see a global Indian Internet consumer brand?

Yahoo India, MSN India, eBay India, Google India, Monster India – these are some of the most popular digital consumer brands in India – what do they have in common ?
Answer: None of them are Indian brands!

Not that there are no home-grown desi digital brands –,,, , Bharat, and among others have carved a space for themselves in the Indian consumers' mind. However, there is no Indian Internet brand which has either gone global or shaken the Internet world by sheer innovation.

Why is that despite having a talent pool of good technology & business professionals and despite VC/PE money chasing Indian Internet business ideas we do not have even ONE global internet brand! More so, when the playing field is really level in the digital world – after all isn't that what internet is all about?

Forget about creating a global brand, where is India's answer to China's Alibaba or Sohu, which can get a Google or Yahoo to sit up and take notice.

Why is it that in Web 2.0 there is no Indian company doing anything exciting? Why can't we create a or a Simple concepts but which have become a rage.

We as Indian businesses need to really think large and place some big bets to address global markets. Our businesses need to plan more investments in Technolgy (R & D / engineering) for us to be able to complete with global Internet brands. Why Internet, even our software industry has not been able to turn around even a single global brand.

I hope in the next 4-5 years we should see some larger Indian Internet & software brands competing in the global markets with the global biggies!

Related link

Tuesday, August 08, 2006

From problem of too few to problem of plenty…

During the dot com 'golden era' between 1998- 2000, India had less than 5 million Internet users and around 50 million phone users. There were various kinds of sites looking at chasing eyeballs to selling various products. Such was optimism at that time that business plans were almost an after thought. Main objective of an Internet business was getting VC funding. Not surprisingly, most of them folded up in the infamous Dot-com bust.

Cut to 2006, the situation seems to have reversed, this is the era of Internet 2.0 in India. There are 30-40 million Internet users and more than 150 million telephone users (More than 100 million are mobile phone users). Internet firms have matured, many online business models have got established. Dotcoms seem destined for a good run in their second coming. However, multiple players have cropped up in most of the spaces. Sample partial list of players in different spaces:

With Online advertising also growing at 100% y-o-y, even eyeball chasing models besides commerce generating models have begun making sense when we compare it with the Internet 1.0 era.

Several players operating in the same spaces will surely lead to expansion and development of the market. This however triggers a key question-will all of them survive? I feel that over the next couple of years we will witness consolidation with only the top 3-4 players in each vertical surviving & more importantly thriving.

The key for survival and growth will be differentiated offering, better user experience and more importantly deep pockets leading to sustenance power.

Thursday, July 13, 2006

Moving on....

After a four year action packed stint with Indiatimes, I have decided to move on. I will be shortly joining Mediaturf as Executive Vice-President and Director. With the Online Ad space growing close to 100% yoy, I see tremendous opportunity in creating value with Mediaturf.

I will be based out of Delhi and will aim to take Mediaturf's business to the next level by getting into new businesses like mobile marketing, retail advertisement, trade advertising solutions in addition to scaling up the existing business of Banner advertising & search marketing. I will also be setting up the Northern India operations for Mediaturf.

Related links

Anurag Gupta quits Indiatimes, to join Mediaturf as EVP and Director

Anurag Gupta quits Indiatimes, to join Mediaturf

Industry Moves: Anurag Gupta Joins Mediaturf As EVP

Wednesday, June 28, 2006

3Cs of Digital Consumers - Is Content still King ?

What drives people to the Internet? Typically usage is driven by needs that are popularly labeled as falling into the either of the 3Cs – To "Connect” - To consume “Content” or to transact for “Commerce” services.

I estimate the following percentages of total quantum of usage (page views) in India:

Connect: 70-75%
Content : 20-25% (Includes Classifieds – Jobs, matrimony etc)
Commerce : 5%


One to one contact or one to many / many to one community applications like Email, Messenger , Chat , Clubs, Social & business networking, User generated content services (Blogs, Wikipedia, etc.), Picture sharing (Flickr, etc).

Almost 100% of users use Internet for one or more of “connect” services. Email is the most dominant activity. Importantly enough, community tools such as social networking and photo sharing are extremely popular with the 15-25 age group

Most of the “connect” services are being offered free to users and are being used as “gateways” to acquire users. Monetisation of these users happens through serving advertisements while they use these services or through getting them to do commercial transactions by delivering them paid content, services & product offerings.


I estimate that today only 20-25% users in India are coming to Internet for consuming content pushed by publishers. I have also taken all classifieds services into this category. A recent study done by IAMAI indicates that there are currently 6.1 million job seekers online. On a base of 38 million users this translates into 16% of internet users coming for seeking jobs online!

I have not taken into consideration porn sites.

With social web 2.0 and increasing amount of consumer generated content proliferating internet (Blogs, Wikipedia etc.) on one side and on the other side the dominant gateway for acquiring customers being Connect services. “Content being king” seems to be a little irrelevant today. Any comments ?


IAMAI in one of their studies conducted in April 2005 have estimated following:

Internet users in India : 25 million
Number of B2C transactions in Year 2005-06 : 0.8 million.

If we were to take on an average 2 transactions per customer in a year, we will get 0.45 million unique transacting users. Translating into less than 2% share of 25 million total internet users. I think that they have not taken stock broking into account. If we take stock broking, then I estimate that currently, just about 5% of total Internet users are getting into paid relationships with portals, there of course needs to be a larger set of merchants, merchandise and services that need to be offered to the consumers. I have written about this in an earlier post as well.

As Indians get more used to getting their daily news fix online and get more comfortable using their credit card, there would be a quantum leap in terms of users and pageviews. However, over the next few years services that allow users to “Connect” will continue to remain the dominant tool for acquisition of new customers to the Internet. The portals that are able to gather more such customers will be winners in the long term.

Sunday, May 28, 2006

Crowded skies or crowded online travel space?

Following up on my earlier post on online travel space , here is an updated compilation of the travel players who have either launched their offerings or have announced the same.

Operational sites

Indiatimes Travel
Xplorz : (Promoted by Tulip Travels)
Thomas Cook
Mobissimo : Fare search & redirect to airline for booking fulfilment
Rediff Fare Search : Fare search & redirect
Traveljini : Tavel content

Launch announced

Ezeego1 – Cox and Kings, read more
Travelocity India : read more
Sify's acquisition of Globe travels : read more (Updated : 6th June 2006)

This makes it more than a dozen sites already and counting ! Any wagers on who will survive ?

Wednesday, May 24, 2006

Online education: A big opportunity

A business is likely to do well in the online space when

  1. It meets a need that offline businesses cannot provide or is able to provide a more efficient and convenient experience to the consumer
  2. The demand and supply of a product or a service is very disorganized, fragmented and geographically scattered.

With majority of India’s population below the age of 25, education is a huge business. It also fits very well in the online space by clearly scoring over offline education in terms of:


- Very easy for a student to reach out to a good teacher from within confines of his/her home
- Provides help on a 24/7 basis.

Disorganised & Scattered Demand (students) – Supply(teachers)

On one side good quality teachers are concentrated in few geographical areas / institutes / colleges & schools. On the other side there are students from all over the country who want to get into a good school / college / institute.

Kota in Rajasthan is a very good example where the entire eco-system of the town has been built around thousands of students staying in the town for almost a year to prepare for engineering examinations by enrolling in one of the numerous engineering entrance coaching institutes of the likes of Bansals etc.

As we will see the internet connectivity expand to smaller towns and speeds improve, online education should grow extremely rapidly. Currently there are very few players concentrating on online education

I have recently led Indiatimes’ foray into education by launching testing services for all competitive examinations under the brand Indiatimes Mindscape Test Centre. We would like to eventually offer a full services education portal, with a whole range of content and service offerings, right from school to post graduation.

Related links

Saturday, April 29, 2006

Online Stock broking on way to becoming billion dollar business

Annual results of India Infoline have left me pleasantly surprised. The earnings reported have tripled from Rs.75 crores in last fiscal 2004-05 to a whopping Rs.218 crores in the current year ending March 31st 2006.

India Infoline’s CFO Ravi Krishnan, in an interview to CNBC-TV18 has stated that 2/3rd of the entire income comes from Brokerage business! This translates to almost Rs.150 crores from brokerage income for the year.

There are only 2 listed online stock broking companies in India, India Infoline & Indiabulls, this makes estimating the market size a little difficult. However, I would estimate India Infoline’s market share at around 7-8% of the total online stock broking business. This translates to a total market size of around Rs.2,000 crores ($450 m). I had in my previous post estimated the last year market size to be around 500 crores. This makes online stock broking business clearly the largest and fastest growing Internet business in India. This business should be crossing billion $ mark in the next 12-18 months.

ICICI Direct, HDFC Securities & Sharekhan are the leaders in this space.

Related links

The details of the press release of India Infoline are available on the NSE website ( under: Corporates > Latest Announcements.

Friday, March 31, 2006

Online Listings / Classifieds businesses in India

This business is a personal favourite. I believe that the achievement of scale in this segment has led various stakeholders to reaffirm their belief in the Indian Internet space !

The estimated size of online classifieds business is around US$ 55 million (INR 250 crores). It today is one of the larger online business segments in India and is growing at more than 100% y-o-y. In fact it is already started posing grave threat to the growth of the print business which is growing at a more sedate pace of 10-15%.

I am putting some of my estimated numbers:

Jobs / Recruitment
Print : Rs. 100 crores
Online: Rs. 200 crores

Total Classifieds business
Print: Rs. 500 crores
Online: Rs. 250 crores

Advertising revenues
All media: Rs. 12,000 crores
Online: Rs. 400 crores (including online classifieds)

Key takes from the above:

  • Online classifieds business (Rs 250 crores) is larger than online advertising business wihtout classifieds (Rs. 150 crore)
  • Online ad industry is just 3.3% of total ad industry. Whereas online classifieds are already 33% of the total classifieds business.
  • Online classifieds as percentage to total online advertising at 62.5% is disproportionately large when we compare it with classifieds as percentage of total media advertising volumes which is at just 4.3%.
  • Online jobs as a category is double the size of print already!

What is making online classifieds grow this fast? Two main reasons - firstly online medium helps fulfils the need better in classifieds space than the offline medium. Secondly, and more important is the aggressive sales approach taken by the online classifieds players. They have put a humongous number of feet-on-street to solicit listings from all kind of recruiters starting from large companies down to small businesses. Currently there will be more than 1,000 people selling listings of various jobs portals across the country.

It will remain interesting to observe the growth rates over the next 1-2 years of both print as well as online classifieds.

Update : 10th April 2006

TV18 acquires 50% in JobStreet India For $2 Million : Content Sutra

Related Link

Monday, March 06, 2006

Internet 2.0 in India - heightened activity

Past 3-4 weeks has seen a spate of activity in terms of investments by funds into existing as well as new portals focusing on different business models. This comes on the heels of anouncements of investments in three new travel portals

Karodpati Gets $2 Million From Draper fisher Jurvetson and DFJ ePlanet Ventures / launches online movie rental service , March 03, 2006 : Venture funding of Rs 100 million from Draper Fisher Jurvetson.

Mauj Telecom Gets $10 Million From WestBridge, Intel And Sequoia February 23, 2006

Kleiner Perkins And Ram Shriram At It Again In India; Pick Up Stake In, Februrary 03, 2006

I am sure in times to come, we shall see more such businesses being launched and some of them will surely go on to beoming successful and will create value for their stakeholders.

One thing is certain that all the new portals will give the Indian internet users more options and more compelling offerings. This will lead to growth of the overall "internet" pie in India.

Update: March 9th, 2006

WestBridge Capital invests $8 Million Into, March 8th 2006

Thursday, March 02, 2006

Online advertising in India: How to make the big leap

The Indian online advertising market size is estimated between 150-175 crores and is growing at more than 50% year-on-year. Almost 70-80% of online advertising is happening on a handful of large sites like Indiatimes, Rediff, Yahoo India , Google India, Sify, Moneycontrol and MSN India. Compared to print and television the number of players and market size is still very small. To exponentially grow the online advertising business, I feel that the Indian Internet portals can do better by focusing on the following:

Selling accountability

Search advertising globally is already as large as banner / display advertising. What makes search advertising so special? Well two main reasons, firstly search advertising is contextual so it leads to better response and secondly and more important the entire cost is based on performance (clicks) i.e. an advertiser only pays when someone clicks on his ad.

The Internet portals who depend on banner advertising will increasingly have to face this challenge – they will made to be more and more accountable by their advertisers who use the medium to advertise and increasingly start using tracking tools to evaluate the performance of their campaigns (in terms of number of clicks/ leads etc). One needs to remember that Internet is the only truly accountable medium for advertisers and further it is so easy to track performance of an internet advertising campaign.

The Internet portals will like the advertising deals to be on impressions (Cost per thousand or CPM basis) rather than on performance (Cost per click or CPC basis). I do not understand this logic, as the advertisers in due course of time will calculate down to the last paisa the cost per unit of performance (per lead or per click) even in the CPM deals. Accordingly the cost of CPM itself may drive down in case of low performance delivery! A manifestation of this can also be happening in form of advertisers insisting on larger banners as they will naturally tend to give better response!

So, rather than lamenting about Internet being over accountable, the Internet portals should actively start selling and positioning Internet on its true strength of accountability. They should also learn from listing models like Naukri etc where the only criteria for advertising is performance!

Self help model : Target small advertisers

How do we grow the advertising pie? One of the ways is obviously to get more and more new advertisers to start advertising online. Currently all Indian portals are grappling with getting the offline big / national advertisers to start spending online. This is proving to be a daunting task itself, however, no one is focusing yet on the smaller advertisers. One of the problems with approaching these people will be the small ticket / order value. The cost of servicing these clients will become very high. This is where Internet technology can come into play. It can allow an advertiser to set up and manage his own campaign on a site. I have not yet seen any such offerings from Indian portals. Maybe we should learn from Google who have thousands of advertisers using self enablement / help model and advertising on their sites.

Of course one can argue that Google’s self enablement model works on text based ads, but I am sure we can extend the same logic to self-enable display / banner advertisement campaigns.

Friday, February 24, 2006

Will small towns be the growth engine for internet in India?

Internet seems to be on a move in the metros of India, but can it be the buzzword for small towns too?

Well if we look at the stats, it sure looks tough but quite possible. Today almost 70% of the total Internet users in India are coming in from the top 7 cities – Mumbai, Delhi, Bangalore, Hyderabad, Chennai, Kolkata & Pune. Only 30% access is happening from all other cities put together.

Much of this can be attributed to the agonizingly erratic connectivity and pitiable bandwidth. No wonder, more than 2/3rds of the 30% from other cities are hooked on to the internet from cyber cafes.

If we look at logically, then a person in Gorakhpur should be a more willing buyer on the Internet as he can have more choices and lot of products / brands that may not be available in the local markets. A reliable e-commerce site would be like a Gurgaon mall for him.

When Indiatimes launched a branded 1.5 ton A/c offer at Rs. 12,000 around year and a half back, I know at least 5 people in Kanpur, my home town who bought air conditioners from Indiatimes shopping!

This can be a reason why e-commerce portals are already seeing almost 50% of their sales coming from the B & C class towns. eBay CEO Meg Whitman on her recent visit to India along with India Country Head - Gautam Thakar remarked about this as well

Categories like online travel & education also have a huge potential in these towns as there isn’t enough information / support on the ground providing information and options.

However, for people to plug into Internet in the smaller so called B & C class towns of India lot of work and focus is required from various stakeholders:

  • ISPs / Telecos to give good connectivity at reasonable rates (I hope we have some low cost mass access technology like Indian Wi-max coming in soon)

  • Hardware companies to provide low cost computers at easy installment schemes. (A 500 rupees per month scheme where you get a computer and internet access!)

  • Publishers to provide compelling & local content in local / regional languages

I place my bets strongly on the small and mofussil towns of India being THE growth engine of Internet over the next 2-3 years.

Thursday, February 16, 2006

Online Shopping in India

If online shopping has to become big in India, we would need scale both on the transacting buyers as well as on the sellers’ side. Currently, there are less than 1,000 merchants in the country who are doing business online. Large chunk of these merchants are SMEs. Most of them do not even have their own websites but are just plugging in as vendors / suppliers to the major online shopping portals.

The number of buyers who are buying stuff online also remains low. Major reasons are low internet penetration (around 25 million total internet users), low credit card population (less than 15 million credit card population with unique credit card owners even lower than 10 million), non-willingness of people to use credit cards for online purchases, adverse taxation rules etc.

No wonder, online shopping still remains a small activity. If we were to exclude Travel & online stock broking then the total size of online shopping in India will be in the region of US$ 60-70 million annually (Gross Merchandising Value basis). On the net commission basis it will be as low as US$ 15-17 million.

The current proposition online shopping portals are giving to their customers are “convenience” and scattered “deals” they are able to get from the vendors / brands. This is not compelling enough. The proposition needs to move away to aggregation & comparison. This can only happen when more merchants (SMEs), brand owners and retailers have their own online stores and strategies in place.

In US all major retailers – Walmart, Target etc have their own online portals. All the big brands too have their own online presence. However, in India barring LG who were early movers, I cannot even recollect any other Indian brand being available online! Amongst retailers, I know of only Pantaloon who are now in the process of setting up their online shopping portal. In 2005, ComScore Networks estimated to be the third most visited online shopping site after eBay and . Also, in 2005 online shopping in USA contributed more than 5% of all non-travel retail sales: Shopper’s stop, Pyramid, Lifestyle, Westside.. are you listening?

I am sure over the next 18-24 months we would see several national brands / retailers having their online shopping offerings. In the same timeframe, I estimate that the total number of merchants online would reach 50,000 and the total internet users around 50 million. Once this happens, I estimate that the B2C online shopping will scale up to US $ 500 million.

Friday, February 10, 2006

Flurry of top management movement in Indian online space

We are witnessing a change at the top management amongst the major online players in India. What is interesting to note is that most of these changes are from within the new media / technology space.

MSN India: Jaspreet Bindra appointed as MSN India Country Manager February 08, 06

Indiatimes: Dinesh Wadhawan of Microsoft joining Times Internet as CEO Feb 07, 06

Yahoo India: George Zacharias Logs Out of Sify To Join Yahoo! India As Managing Director Wed 18 Jan 2006

We now are seeing a renewed focus of the existing and new global players on their Indian operations / India strategy. Google recently has also formally launched their Indian sales operations . Online players in India are also gearing their organisations to face up to the challenge of realizing the potential of a growing internet business.

It will be interesting to see if any of these guys can have the same kind of impact that Terry Semel, the former executive of Warner Bros studio has had on Yahoo. Semel joined Yahoo as CEO in 2001 when Yahoo was trying to redefine itself after the dotcom bust. He has led a successful transition of Yahoo by focusing on marketing and consumer services. Semel not only rejuvenated Yahoo's ad business but he also instilled what Businessweek refers to as a “theme-park mentality” – Yahoo's various Internet services, from e-mail account to travel, interact increasingly with one another ensuring that the customer stays within Yahoo.

As the Internet space explodes in India, there will be a need to get talent from outside the industry to fill in the leadership roles. I am sure we will see this happening in the near future.
Let us hope that at least some of them turn out to be Terry Semels.

Friday, February 03, 2006

Action in Indian online Travel space

After SoftBank’s funding of $ 10 million in makemytrip in may '05, past 2-3 weeks has seen a spate of investments into various travel start-ups.

Related Links

Online Travel Company Gets $10 Million Funding
Kleiner Perkins Debuts In India With $2.7-3 Million Investment In
Kleiner Perkins Makes First Investment In India; Invests $2.7-3 Million In
WestBridge Capital Invests In Travelguru
Travel sites make hot investment option
E-Travel Company Yatra Online Gets Funding From Reliance Capital, Norwest Venture Partners And TV 18
Yatra Online Gets $5 Million; Indian Travel Mart To Attract VC Attention

Once all these and maybe few more online travel portals start their operations in India, will they be able to grow the online travel space and more importantly create differentiators for themselves to survive? Any wagers?

Update : March 10, 2006

Sahara has also anounced their intentions to launch a travel portal. Read this story on

Thursday, February 02, 2006

Users & market size estimations: Internet in India


Various estimates put Internet users in India between 15-50 million. I estimate the total number of Internet users at 25 million.

Let us put this in conjunction with figures for television and telephones.

There are 108 million TV homes in India out of which 61 million have Cable & Satellite access. This makes the estimated TV viewers in India between 500-600 million.

Mobile phones have vaulted to 75 million and Landline users are estimated to be 48 million making the total telephone users to 123 million.

Key growth drivers for number of Internet users:

Growth of Internet users has been sluggish in India. The following will be the key growth drivers for Internet usage.

Connectivity from home: Almost 60-70% Indians connect to Internet from Cyber cafes. The connectivity from homes need to go up significantly. At current rates the bottleneck is the cost of a PC. If the hardware players are able to provide a PC bundled with Internet connectivity at say Rs 500 per month EMI it can provide an impetus to people for getting PCs + Internet in their homes. This is similar to the reliance offer of monsoon hangama that catapulted the number of mobile users to a different orbit.

More local language content and offerings: Most of the current Indian Internet content and offering is largely in English. Estimates put the total circulation of all English publications in India at 8 million with an estimated readership of around 20 million. Can we conclude that by and large Internet has reached almost all English conversant population of India?

More compelling content & services: With compelling services like filing of statutory dues like challans, payment of taxes etc, school / college admission process getting online will boost the Internet usage. We can learn from the success stories of players like IRCTC & Air Deccan who have driven a lot of non internet users to start transacting !

Market size:

I estimate the current Indian Internet industry size between Rs 2700-3000 crore. This is not including B2B or access business.

The Indian Internet market is still small but is growing at a fairly fast pace. Everyone in the Indian Internet industry is waiting for the inflection point to be reached. This will obviously need more and more users to be connected through various devices leading to a larger revenue size of the Industry.

My take is over the next 18-24 months we will see a 50 million Internet user base, up from current 25 million. Doubling of the user base would lead the Internet market to grow to around Rs 10,000 crore.

Here is a split of the market size:

Advertising: 150-175 crores.

IAMAI estimates it at 162 crores

B2C Ecommerce: Transactions at gross value 1,500 crores.

This includes transactions on IRCTC & Air Deccan sites. Of course, one can argue that these are not pure-play Internet businesses, however I have decided in taking these numbers in my market size analysis. I estimate the travel business contribution to the total B2C commerce market at around 75%. This number is at best around 30-35% in the developed Internet markets. Travel has moved online because players such as IRCTC and Air Deccan have given good value proposition and convenience to the users.

If we were to remove IRCTC and Deccan from the business then the total B2C ecommerce market would be in the region of around 450 crores with travel contributing to around 125 -150 crores. This number would be in line with the global trends.

Online Stock broking: 500 crores

The 500 crore market size is of the “brokerage” earned. If we were to convert into gross value aka e commerce this will translate into a total value of between 1,50,000 – 2,00,000 crores. This is a segment that is the largest and growing very fast. I would not be surprised if this doubles in next 12 months.

Listing / Information / paid content : 300 crores.

I have included all revenue streams of players like Naukri, Shaadi, Bharat Matrimony etc. This revenue category is a personal favourite of mine. I feel this segment has grown largely due to tremendous work done by players like Naukri, Shaadi etc. They have put a humungous number of feet-on-street and are influencing even the small businesses to advertise on their portal. My wife who runs a small Interiors business has advertised twice on Naukri and has got a very good response!

Not surprising that this segment is larger than the advertising business. More about this segment on my future posts.

Mobile VAS players: 200-300 crores. All telecom brands of leading internet portals like Indiatimes 8888, Yahoo etc.

Caution: The numbers I have quoted here are my estimates and I request the readers not to take these as “definitive”.

Tuesday, January 31, 2006

Introduction : Internet booms in India

Internet seems to have emerged stronger from the dot-com bust of 2000 and is now creating substantial value for various stakeholders. Over the last 10 years we have seen emergence of robust, sustainable business models and global brands such as Google, Yahoo, eBay and Amazon.Undoubtedly the biggest success story is search engine giant Google. For a company that has been in existence for only 7 years it’s current valuation of close to $120 billion takes it way ahead of media giant Time Warner and makes it most valuable media company in the world!India has been a slow starter but has its share of successes in the Internet space in Indiatimes, Naukri, Shaadi, Bharat matrimony, Rediff and Yahoo India among others.

As the market has picked up, India has seen some major acquisitions in the last couple of years:·

Monster’s acquisition of Jobsahead in mid 2004 for 40 crores ,·

eBays’ acquisition of Baazee for around 225 crores in June 2004

In the recent months, India has emerged as “the” hot destination and more investment is likely. Participation in the India story is on the agenda of Financial Institutions / Investors / Companies. However, I have not come across a comprehensive business view of the Indian Internet Industry and through this blog, I am aiming at aggregating my Business perspective, thoughts and understanding of the “space”. I encourage my readers to contribute and take this dialogue forward. Together we can create a powerful resource on Internet in India.I estimate the current annual B2C Internet industry size to be around Rs. 3,000 crores. The B2B market size would be easily be 8-10 times this number.

Over the next few posts I will like to focus on various Internet businesses / revenue models and would like to talk about trends / success stories in India. I hope you will be part of the journey.