India is a wrong market for online, mobile entrepreneurs?
18 June, 2009
Deap Ubhi, co-founder and CEO of Burrp.com, believes India, even with a population of over one billion people, is not the right market for an online or mobile entrepreneur. This is because, “the delta (or difference) between what many consider to be India’s market size and its addressable market size is vast.”
“If there is one lesson I have learned from my 3-year-and-counting entrepreneurial stint in India, it’s that market size matters... Many of my VC buddies have told me personally that they come across some smart teams with good ideas…but in the wrong market, namely, India...” Deap Ubhi writes in his blog.
Explaining the difference between India’s market size and its addressable market size, Ubhi says, “The mobile market in India is closing in on just below half a billion. That’s almost twice the entire population of the United States. How many of those mobile subscribers are on prepaid plans? How many of them are below the poverty line? How many of them are unemployed?...”
“I often tell Anand (Anand Jain, co-founder, Burrp) that our next thing must target a more predictable and larger addressable market. We have been lucky thus far. But sometimes, you just have to put yourself in a position to get lucky. Sorry, my entrepreneurial peers; India is not that place,” Deap Ubhi concludes.
This is the right time to get into the industry.....one would want to try and get in a little early to capitalize on the same when the industry is booking.
Indian online industry is still in its Childhood stage and its aggressively growing.However online industry needs some time to settle especially in countries like India due to various factors.
As internet is slowly reaching suburb places online sales will start picking up.
We should not forget that in country like India, Online sales and promotion is entirely new and to some extent it is also going to affect indian culture.
Deap, couldn't agree more man! You've hit the nail on the head... and perhaps kicked some people under their belt too! (some of the comments are hilarious) :D
There is not enough indian audience willing to accept online/mobile services, irrespective of how value adding or time saving the service might be.
The problem is simple - "convenience" is not considered to be as important, and even if it is, hardly anyone feels it's worth paying for.
Hi Deap,
The entire service delivery of Nuakri is online...So, how is it not an online business?
Online businesses are those where complete service delivery happens on the net...but to evangalise the medium, to enable transactions and ensure proper usage one has to be realistic and common-sensical. Otherwise you'll not be able to build a business...
Out of 1.1 billion India only around 50 mill are online...just because they dont pay online does not mean it is not an addressable market. Similarly, a lot more are on mobile...just because they use pre-paid does not mean that the entire mobility user base is not addressable...my driver buys more ringtones than me!
What needs to be done is proper segmentation of one's target market and clarity on how that market can be tapped...and here realism, common-sense and innovation comes into play...
Great ideas? Great entrepreneurs?? Wrong/small market??? We should differentiate between concept aggregators and entrepreneurs...they are not the same.
Entrepreneurs identify a need-gap and than build a product/business around it...so the question of large/small addressable market does not come into play..you build a business corresponding to the need-gap, the problem you are trying to solve.
The problem of addressable comes to fore in case of concept aggregators...who try to copy what worked in USA...in India. That usually does not work. And even if it works...it rewards you only so much...
Start-up success in India...one has to be patient...it takes around 3 years to breakeven and around 5 to show what the business can be...adoption,usage,scale-up is time consuming...so one has to be prepared for the long haul.
What is said by Deap is partially correct. India Internet market have not grown as it should have, huge opportunity is seen, but when this is the question. Unless internet becomes the necessity for people, it wont grow as required to be profitable for internet businesses.
Today, Naukri.com or the Indianrailways doing well because that is the necessity. Media, Entertainment, Information is not the necessity for people, and hence businesses in these verticals are not doing well. In todays times it is tough and one has to have patience for 4-5 years (atleast) to see returns on investment in internet market.
Mobile: Its the Indian Telecom Operators monopoly which is not allowing any Data services companies to get benefit from the growth, its only telecom operators who are getting benefitted from growth. Had these numbers been in US, many businesses would have done extremely well, not just telecom operators.
To say that my product is best, but the market is not is foolish. What entrepreneurs need to find is a market opportunity and find a solution to that problem. To create product and then trying to find market has not worked.. in india or outside india.
Even with so called less internet penetration, if companies like Naukri are profitable inspite of feet on street, the point is that is most essential component of that business in india. If they would have not done that, they wouldnt have been successful as much as they are today.
And for those who believe in pureplay internet game can wait all the years till the market grows. Mr. Deap you can start the burrp after 10 years, probably you will more happy then.
I am reminded of a story that I heard as a kid. A father had 2 sons and he sent them to some remote town in Africa to explore the possibility of selling shoes. THe first one returned home and said " There 's no opportunity there because no one wears shoes". The second one came home and told his father " You know what ? We should go there immediately as no one wears shoes and there's a fantastic opportunity"!
While I tend to agree that on the numbers front, we are nowhere compared to a US or UK market, ,take a look at each us ( in the mid 30s)on our TV consuming habits. While most of us grew up watching Ramayan, the entire C&S boom in the early 90s has created a virtually non-existent revenue stream with a plethora of niche channels within just over a decade!
At a larger level, while I agree that the eco-system for the Internet has to grow- which is more PCs(low-cost?), more connections and vernacular content etc. for the volumes to come in, it's not enough to say that there is no potential in this space today !
Cheers
A nice discussion is going on and new entrepreneurs with new ideas can learn lot many things from the real users and industry people. The basic question: Is Indian a enough mature market to rip profit through an online business? The straight forward answer is "NO". Why? Lot many new ideas are coming in the Indian Online Industry and look at the list at www.hotteststartups.in.
But there is a gap between a innovative unique idea and commercial market. There are huge chances of being successful for a new and creative idea in western countries as compared to India due to the reason that the takers are higher compared to India.
I will like to ask all you people to look at these data.
>> Credit/Debit Card penetration in India is just around 3% and how many from them may be using that online is a question.
>> Mobile penetration is 30% but more than 80% people are prepaid subscribers.
>> Internet penetration in India is around 4%.
All these figures suggest that India is a growing market and there is a long way to go.
Yes, It is true that very few companies are earning profit in the Online Industry an the reason is that most of the companies are new as well as funded by VCs and have a lot pressure to perform. They have to spend a quite money in infrastructure, promotion, marketing, sales activities etc and if they can't get the break even money then there are chances that they will not survive.
Not only new companies but all major giants of Indian Online Industry are in Loss. Look at the reports:
http://contentsutra.com/article/419-rediff.com-posts-q4-net-loss-of-8.86...
http://www.business-standard.com/india/news/tv-18-reports-rs-2770-crore-...
They will be there in business due to the strong back behind those business as well as they have offline version of the same business.
According to me, all Internet Only business have to face a lot hurdles to survive in the competitive as well as market affected with recession.
If a company having offline version of the business, continue investing in their online version then there are huge chances of ripping significant profits after 4-5 years.
Yogendra Oza
http://yogendraoza.blogspot.com
This is a much-needed course correction and reality check that has been elusive in the industry for years now. The online segment itself is about a decade old now and we are still years away from converting the potential to actual. In a way it is good, at least we will now hear less of CXO-level talk of "look! a billion people! profit!" as a result.
Mind you, it is not like you can't build and run a profitable business where the addressable market size is small. Many companies do that and they do it quite successfully too. The crucial factor in making it work is cost. If you can't keep it reasonable or under control it just won't work. There is not much scale to talk about here, so large costs can't be recovered if there is a massive spend/revenue disparity, which is what plagues most online ops in India.
In the least, this should put an end to the easily bandied-about idiocy of writing off vast sums of money as a 'business expense'. Put your heads down, keep costs low, work the margins.
Someone just held a elephant's tail and assumed a shape which is so unreal.
online success stories in India (not necessarily by indian entrepreneurs, but sites that have substantial traffic coming from india) - orkut, irctc, bharatmatrimony, moneycontrol, indiamart, clickindia, komli, networkplay, and many more.
while for some ideas, addressable market in india is definitely small like online investment management tools (mint), and various "mostly urban" type of ideas, but then thats not what india is comprised of.
one has to understand the mix of population and then provide a solution. a country with multi millions below poverty line, yet people are talking billions in mobile value added services.
while the VCs in India may be infatuated with ideas emerging in west, its time they looked at ventures in india seriously and back them.
i think people are getting their feathers ruffled because this guy is just telling it how it is. he never mentions much about his own business, but is it not admirable for someone to admit their own challenges, difficulties honestly instead of just painting a false picture?
I admire Deep to admit that a whole lotta luck has gone into where they are. Probably founder Naukri.com would also admit (i think he did, read "stay hungry stay foolish").
So when people refer to Market 101, i am tempted to ask, can product launch and success be really so mechanical? If it could then Subiksha wouldn't have closed down (i know it is not online) and Indiabulls would not have struggled so long before they could yell "we have arrived" (despite the hugely benign Congress connections).
burrp should, as any other company and strategy should, recognise that serendipity and change are companions. Of these latter is in your hands. So rather than saying the addressable market is small, go ahead and stir a revolution. Online micro credit or SMS based education could be a big thing (i have this imagination, students have a scanner enabled handset, he scans a questions and sends me a MMS/SMS. Within 15 minutes he has an answer with a contextual advert. These could of course be paid services etc.). I am not sharing any idea here. I am just saying that, people with handsets means market exists. You only have to dig deeper to infer for what. Mandibhav.com on WAP? Anyone can deny the need for that? Not me. But i have my GIS maps to make.
Their company was acquired for a rumored low double-digit millions figure, you idiot.
Sour grapes !!
The two words define this.What he says that India is a wrong market-is actually his definition of not being able to make it.
These guys think entrepreneurship is a cake walk-get a fancy degree from the US,save a million dollars and come straight to India with a dotcom copy & paste model and to top it you expect this copy & paste model to make profits to !!!
Thanks for all the comments guys. Let me further clarify what I really meant in that article: firstly, I wasn't at all referring to the situation at burrp! In fact, I never like to toot our own horn, but we're doing quite well, and I attribute most of that to the quality of our team and whole lotta luck. Secondly, I only 'crib' because we get enough of the rosy scenarios from guys like Rajesh Jain - I'm just exposing you to a reality as I perceive it, so many will disagree with me, and that's OK. Lastly, people name-dropped a few companies within their comments as beacons of success: ibibo (you're kidding, right?), naukri (600-700 collections feet on the street; hardly an online business); justdial (amazing brand, but here's the reality; they've been in business over a decade, and are doing $18MM in revenues, of which one-third is their print yellow pages business; net profits of $1MM - it took them 12 years to make a net profit of $1MM dollars - and all of 2010, justdial will be focusing on the AMERICAN market! Think about that).
I'm not raining on anyone's parade - I couldn't be, I've spent three long, hard years here! But at the same time, we need to learn to be real as opposed to rosy. Again, thanks for everyone's thoughts!
Marketing 101 does indeed say that one should evaluate the market and potential for the proposed product / service set.
To dismiss India simply because one product set does not fit - does not necessarily mean that the market is inappropriate for an entire industry!
A list of services - that in respect of user base have been successful include Orkut, facebook... and those that have generated revenue include a number in the travel sector, recruiting... on the mobile and telephony front, well the list is extensive.
I find Deep to be cribbing about something or other about India. I have heard him crib about startup hirings in India earlier.
Burrp was never made to take off so it didn't. Who doesn't know what the acquisition was like !
I agree with Deap. Marketing 101 says you have to have an addressable market of customers who want your product. secondly the market needs to be developed enough to understand the product and see the need for it (utility) and thirdly the customers need to be able to afford what you want to sell them and often this is an issue of share of wallet. Those Internet and MVAS businesses in India that have been successful in India so far have been things that are of high utility to their customers eg train/bus ticket sales, have been low cost eg ringtones or provide entertainment. Whilst the total population size in India is large once you apply the affordability factor the addressable market size becomes much smaller. Think market segments and whether they are addressable rather than be captured by the potential total market size.
Well I feel one will have to hang on in the online business a little longer to see the profits...
with all due respect, i do not agree with the esteemed entrepreneurs. There are a lot of great ideas and quite a few of them are generated significant revenue and profit.
look at makemytrip and even the new kid on block selling bus tickets - travelyaari.com
I am not very satisfied with comments from Deap Ubhi.It all depend on target market.Burp is totally focused on Internet users who have ample purchasing power and who like to socialize.For ex A college student from a small town of Bihar who is perusing his B.Tech will not be interested in Burp now.He might be interested in ibibo,naukri,bharatstudent,pagalguy etc.Although he is a internet user and visit website of his interest.The same guy after getting a job with decent paycheck will not visit bharatstudent.com He might visit burp.
I dont entirely agree with Deep for the following reaons :
1. Not many things have been tried.
2. You need to come up with ideas that gell with the majority of our masses and not just the urban lot. There is a HUGE potential once you know what the average man wants ( be in rural or urban )
deap has a point.
after all i can't think of even 3 internet companies in India which are making profit?
getting vc funding is one thing and making profit is quite another.
much has been said about naukri and its successful ipo but that's hardly an online company. don't forget that they have hired more than 1000 sales guys who are active in the field and not in front of their laptop!
and it's not about lack of innovation or great ideas.
india just doesn't have enough internet users.
i think it would be really difficult for any online company in india to make profit as long as we don't have at least 100 million active internet users who use the net at least once a week.
Looking in the recent past and present scenarios, I certainly agree with Deep, but than there seems to be a difference in the upcoming future. India will be one of the biggest online market in World like China. Online buying and subscription based models will certainly evolve and we will definitely see a lot of VC activities in the startups.
If you are pioneer of a new concept even if it replicates role models from western countries, it would surely be hit in coming times.
well i think deep ubhi has his won ideas and thoguhts nd thinkiing theough only one perspective jsut becuasue burrp is not get attraction doesnt mean other websites or softwares wil fail in india,i feel we are getting discouraged and no motiviation or encouragemnt is given aand being an indian are not getting respect wht we deserve.recession has struck all countries so its no big deal recession is tiem for new opportunities the age of thiking sharing and collaboating such negativity created is creating a bad name for indians and for india for world dominance
Well I agree with most of the thoughts but Mr Deep you must admit not many good ideas have been tried in India in the past. Consider your own company burrp.com. Dont you think you its US influenced few html pages. Most of the Indian internet and mobile entrepreneurs can only exist in India because India allows you liberty of launching copied ideas and products. Most of the indian internet and mobile entrepreneurs would never be able to launch their product in US because they would be caught in legal lawsuits.
If you think of understanding indian consumers and indian businesses then i m sure something can be worked out.
So just first de-Americanize your ideas. Simple things like justdial did so well in india.
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