Holy grails in the tech and startup ecosystem are in a constant state of flux and evolution. Mobile, in contrast, has been the holy grail of Indian entrepreneurs and investors for many years. The biggest reason for that is a population of 1.2 billion-plus that offers infinite opportunities. This article is the first in a series that will attempt to evaluate the forces shaping up the Indian mobile ecosystem.
Opportunity
Desktop/PC usage in India was always going to have a short ceiling given the fundamental factors inhibiting its growth – price of hardware, internet infrastructure, broadband costs, etc. Mobile has taken the baton from PCs and should (hopefully) take India to the next level for both consumers and enterprises. A lot of recent anecdotal evidence suggests the green shoots can be seen:
- Somewhere between 120-145 million total mobile internet users (as of March 2013)
- Between 25-35 million smartphones will be sold in 2013 (not including tablets)
- Carriers promoting free mobile internet access for Facebook, Twitter etc
- BYOD trend too catching on and enabling superior salesforce and supply-chain management
These macro factors ensure that the explosiveness in the mobile industry is there for the taking. However, there are fundamental reasons why we have witnessed several false starts in the past and why there will be hiccups before the rocket takes off!
Challenges
There are challenges aplenty that are roadblocks to the pace of growth, and each of these will be discussed subsequently. However, the key challenges that will decide how the segment pans out are highlighted below:
- Is there ample and suitable spectrum for 3G mobile internet access and when will it be given by the government?
- Regulatory risk overhang –will policy and regulations be an impediment or an impetus?
- Pace of adoption of the 1 billion potential mobile internet/data/apps users? (As reference, the voice industry took 6-8 years to explode)
- Are Indian consumers willing to pay enough for apps/data, or will it go the way of voice (1p per second)?
- Is there domestic innovation in mobile to cater to the demand, or will foreign platforms dominate as in the PC era?
- Will there be ample risk capital and patience to encourage entrepreneurs?
Another China (again?)
This was the hope a few years back in the PC internet era and then again at the start of the e-commerce wave. People everywhere are back to asking the same question, and comparing us with the elephant (dragon in this case) in the room. Fundamentally, I believe our course will be charted differently (both in terms of milestones and time). The reasons for this are simple – their market landscape is completely different. Be it government policies, carrier dynamics, localisation of services, existing base of 500 million internet users who do not need to familiarise themselves with the digital medium, etc.
However, the one thing we have in common is the population of over 1 billion. By that measure, we should aim to capture at least 70% of their mobile market value in some reasonable period of time.
Carriers – What’s their role?
The carriers know that they need to get it right. Vodafone blazed the trail with the favorable revenue share structure to encourage innovation by startups in mobile (Jonathan Bill will forever by owed a debt of gratitude). Airtel has gone in a different direction and done the JV with the godfather of mobile internet – SoftBank. Others have their own initiatives at different stages. Our portfolio company, Vserv.mobi, is working with several carriers to push the initiative on the mobile advertising front. The desire to do something is there – the hockey-stick effect at the industry-level cannot happen without the participation of the carriers.
Domestic or international
Mobile is a ubiquitous medium, and for the English language, mobile is completely universal. That’s what I tell mobile entrepreneurs if ever asked “Which market should I be addressing?” (with the exception of highly localised uses). Look, its simple – the Indian market today is still trying to figure out what it can become for consumers and enterprises. No one really knows when the nitrous oxide be injected into the system to propel growth at 300 miles/hour. Address the global audience and keep the bar that high at all times. Look at the innovation in the US and see what specific problem in India can be solved without becoming the next Square or LinkedIn. There is access to the US-based funding and mentoring sources today for mobile companies – leverage this unique asset that most other emerging markets don’t have.
India’s time in mobile is approaching and I see enough activity in the trenches to offer hope of an extremely bright future. I would encourage entrepreneurs to take a long and hard look at what they want to create in mobile and why. As an investor, I believe Indian mobile startups can become global hubs of excellence and propel the overall industry forward.
