Web2.0 vs Mobile2.0 : The Indian Context

Web2.0 or Mobile2.0?

Which is more relevant to Indian domestic market? Which will succeed and Which companies will attract VCs? You may be trying to pick up a paper and start scribbling a checklist for a successful startup. But take a moment to read some insights from TiECON, Delhi by Basab Pradhan Founder &CEO of Gridstone Research:

- Unlike in the Valley, Web 2.0 has no relevance to the Indian domestic market. Internet penetration is low (5.4%), broadband is lower (<0.5%). Even if you include use at work, account sharing and internet cafes, the consumer internet is a tiny market. It may be interesting for some compelling ideas or if someone wants to bet on growth. But in my opinion, it is not going to attract much investment unless there is a broader "global Indian" or a "click and mortar" play.

- Mobile however is hugely interesting. Mobile penetration in India is twice that of the internet and is growing at rates close to 50%. There are opportunities to develop mobile applications that the developed world never needed because of high internet penetration. Booking a cinema ticket in the US is probably done 95% of the times over an internet connection and 5% on a cell phone screen. In India it may be totally different. This also holds out the opportunity that Indian startups may develop mobile applications for the Indian market and then take them to Europe and other developed markets.

I totally agree with his comments about web2.0. Leaving aside chatting, web browsing and emails, and these days a little bit of blogging, internet is not really impacted lives of many of us. Its a good start that some of us started using internet for shopping and other activities but that number is so low, that it can be just ignored.  

When it comes to Mobiles, there is more good news in terms of penetration. But GPRS subscriptions are still quite minimal. And there is no clear word on 3G yet. Only SMS based applications can really reach a wider audience, but do we have any SMS based applications? Many entrepreneurs are taking a hint from Europe and America to create applications on Mobile that are essentially extensions of web2.0 applications and applications that need internet to operate. Can they reach out and unleash the mobile market in India? Odds are not in favour, in my opinion.

And here are a few hints on what would be much more relevant to Indian domestic markets from his post:

- Most people agree that plain outsourcing is no longer a great investment idea. There is a lot of competition and you have to get everything right to build a defensible business. However, managed services - services combined with a software platform - can be very competitive.

- The big opportunity, and one that doesn’t get talked about much, is in non-tech consumer oriented products and services. The Indian middle class is growing and so is its buying power. Every category is growing at a rate that should interest any VC. The discerning Indian consumer wants quality products and services that meet her very unique needs. Food, recreation, entertainment, leisure travel and retail are huge and growing markets. Seeking funding for startups in these areas is also going to be tricky if the entrepreneur wants expertise. Most of the VC expertise in the Indian market is technology and services related, reflecting the expertise in the US market where technology and healthcare are the two largest areas of venture investing.

Many of us think, developing a product and moving away from pure software services is a great idea and the only way to prove India's economic mettle. But I still believe services are going to be the key to sustain the growth that we have seen in the last decade. Services that directly impact the domestic Indian market, is one of the key areas. As he mentioned, managed services are incresingly becoming more sought after.

Like Real Estate boom we witnessed in most parts of India, there will be a boom for travel, entertainment, sports and healthcare and fitness in the next few years. I bet my few cents on healthcare and fitness than technology.

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