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Internet penetration in India set to surge, big opportunity for firms: Omidyar report

Livemint:  December 26, 2017

Mumbai: Increasing mobile-phone penetration and declining data costs will add 500 million new internet users in India over the five years, creating opportunities for new businesses to serve this demography, private equity and venture capital firm Omidyar Network said in report.

“Over the next five years, half a billion Internet users will come online using their smartphones, and therefore, it creates an opportunity for businesses and entrepreneurs that serve these segments. We are expecting a whole new breed of entrepreneurs who will cater to these new segments of people that will come online through their mobile phones,” said Roopa Kudva, partner and managing director, India, at Omidyar Network in an interview.

This “next half a billion” population will face barriers such as lower purchasing power, high data service costs, women’s reticence in using the internet, lack of confidence to transact online and paucity of local language content, the report said. According to Kudva, these barriers present an opportunity to create new businesses specific to this population segment.

“This is a frugal population that will require highly affordable data services and innovative approaches to building businesses that can both earn their trust and address their needs in a cost-effective way,” said Kudva.

The initial wave of opportunity is in providing access to internet, providing new local social and communication apps and local language content which moves away from pure entertainment, she said.

Financial and healthcare services are other major opportunities. “Fintech clearly has completely opened up because of low cost payment infrastructure and availability of data. So a lot of fintech is coming up around use of alternate data for providing access to credit to poor,” said Kudva.

Kudva added that the market in fintech is now going beyond payments into newer areas such as insurance and savings and investment products.

“Digital health is another area that will see a lot of action, whether it is remote diagnosis, or medical devices with IoT (Internet of things), analytics based businesses,” she said.

The massive size of this new Internet user market is attracting not just impact investors but also traditional venture capital (VC) investors.

“The boundaries are blurring, because it is a large number and because there is potential to expand the market. Impact investors naturally have an inclination towards this consumer segment, and so, initially you will see them investing more,” she said.

However, she added that in the last two years, the traditional VCs have also been looking at this market, as far as going down the income pyramid is concerned, particularly for urban population. “It is not the exclusive domain of impact investors,” Kudva added.

Monetization of these opportunities, however, is still some time away.

“I think these applications are a long way off from monetization at this point, especially the social and communication applications. At this point, entrepreneurs are focusing on getting customers online and making them comfortable to use these apps. Today, a lot of these businesses are value-based on the number of customers they have,” said Kudva.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.