May 15, 2013

INDIA 2013 : Penetrating the Media 'Dark Areas'

By Manish Mishra, VP Business Development and Country Manager (India)

Smartphone penetration in India has reached a 'tipping point' according to many analysts – and while the number of smartphone users is certain to increase sharply over the next one to two years, advertisers would be remiss to overlook the growing feature phone market as well.

That's right. The size of India's mobile market is growing so rapidly that we expect the number of feature phone and smartphone users to both increase substantially, presenting marketers with a range of opportunities, particularly when it comes to reaching consumers who are traditionally difficult to reach.

In this article, I'd like to share with you a few of the factors fueling mobile growth in India as well as examples of companies that are already capitalising on this trend.

India by the Numbers

Every year, it seems that I am writing about how it's not possible to understate the mobile growth and the impact that this medium is having on India. This year is no exception. Take a look at the numbers:

  • 130 million: that's the current estimate of mobile internet users in India
  • 250 million: expected number of Indian mobile internet users by 2015
  • 30% : ad inventory growth on the BuzzCity Network in India over the past year
  • 45% : Nokia's share of the Indian handset market
  • 861 million: total number of mobile phones in India (second highest in the world, behind China)
  • 10% : the percentage of Indian mobile users who now have smartphones and the so-called 'Tipping Point'

The following graph shows the rise in the number of ad impressions served, comparing India with Indonesia and the US:

What is the Tipping Point?

In the three other BRIC markets - Brazil, Russia and China - once smartphone penetration hit 10%, the number of smartphone users quickly skyrocketed. As The Economic Times writes, "it's the point where a critical mass of buyers meets a pool of sellers to create the perfect storm."

In China, the share of smartphones in total phone shipments rose from 9% to 59% in two years. The surge in Russia and Brazil is not quite as strong but still very impressive: 46% and 32% respectively.

So what's fueling smartphone growth in India and should we expect to see the BRC experience repeated here?

Handset Prices

The first thing to understand is that smartphone prices are pretty cheap in India.

You can buy an entry level smartphone - like a Micromax or Lava - for 4000 rupees (about US$73). That's down from 15,000 rupees two years ago. And Google executive chairman Eric Schmidt has hinted that they may launch an Android-powered device for less than US$50.

However the majority of Indian mobile phone users - some 70% - have phones that cost less than 2000 rupees (about US$36). Many of these consumers are ready to buy a new handset, so there's a huge replacement market. Companies like Apple and Samsung are already reaching out to this group of consumers. The question is whether these users will spend a little more to buy a smartphone.

A major difference between India and other markets is that our telcos do not bundle a new phone in with a subscription package. The vast majority of mobile users have pre-paid accounts and they purchase the handset separately. Consumers need to (a) have enough disposable income to buy the higher-powered phones and (b) see the value in upgrading.

So while smartphone penetration will surely double or even triple in two years time, I wouldn't expect to see the China-style hockey stick curve.

Targeting Feature Phones

A number of big international players meanwhile are signing deals with telcos and handset makers to embed their services in feature phones. Facebook, Opera Mini, Twitter and Yahoo! have signed hundreds of these agreements over the past year or so. They clearly recognise the value of this market segment and the opportunity to win the loyalty of the next generation of smartphone users. Facebook, for example, has tied up with two of the top three operators -- Airtel and Reliance Communications, which together have more than 335 million subscribers between them -- to offer free chat or low-cost data for chat.

Penetrating the Media 'Dark Areas'

It's important to note as well that the mobile internet is enabling marketers to reach two sets of consumers who can be difficult to engage.

The first group consists of people who can not read. Despite our country's economic advances, one in four Indians is still illiterate. The illiteracy rate tops 30% in states like Bihar, Andhra Pradesh and Jammu and Kashmir.

A number of advertisers - particularly Fast Moving Consumer Goods (FMCG) companies like Hindustan Unilever - are using IVR, Interactive Voice Response, so that these consumers can hear ads over their phones. The company sends a SMS with a phone number. If the consumer clicks the number and listens to the ad, s/he receives a phone top up worth a couple rupees.

Mobile phones are also helping advertisers reach consumers in areas with frequent power outages. These brownouts actually affect all parts of the country, but they tend to be worst in the tier-three cities and rural areas, where it's not uncommon to have electricity for just a few hours a day. Power shortages affect television audiences as well as PC users. But mobile powers on! 

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