A great new study by eMarketer on the Indian online market lays to rest some of the burning questions in my (and your) mind on the size of the Indian Internet marketing. In one word, its SMALL! It’s small today and even as per their projections, it will remain small in the foreseeable future. Well it’s small when talking in relative terms to other countries. See chart below:

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What is exciting for me however is the fact that the number of internet users in India is going to be more than 5 times that in Australia, and almost double of those in South Korea! Yes the size of this market is growing at a scorching pace. The Internet and Mobile Association of India (IAMAI) predicts a 100 million internet users in India by 2007, slightly higher than eMarketer’s predictions. Either way you look at it there is going to be a huge amount of users accessing the internet in India in the next few years. And we have’nt even included the potential of mobile internet into these figures yet!

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And, they are going to be buying. Once again IAMAI, predicts that these users are going to generate over US $ 500 million in revenues by 2006-2007. A mere drop in the bucket when compared to online retail revenues in more developed countries, estimates of this figure in the US are upwards of a US$100 billion. But pretty substantial all the same when thought of in the Indian context. What is this $500 million going kitty going to hold, by the looks of it currently – my guess is online gifts & travel. But who knows what else … what is exciting is some of the categories are not even defined yet, one thing is for sure, there is clearly going to be a market waiting to be served here.

Jeffrey Grau writing through eMarketer comments on the economics behind the growth of the onine travel market in India. Refers to the same report that I blogged about previously on Online travel India posed to grow to 2 billion by 2008. The original study is done by PhoCusWright.
What is more interesting is the subsequent details on sources used by online buyers in India to find retail ecommerce sites. With Search Engines coming at a firm 56%. See the full chart on the link below, courtsey of eMarketer.

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This chart suggests that search engines are continuing to play an important role as the gateway for online services in India. But even beyond the obvious market role, Search engines are going to play an important role in bridging the reputational misgivings that consumer may have about online commerce, especially in a country like India with a fragmented offline market, like in travel. Search Engine’s can offer the users a certain sense of security that those websites that are offering their wares online and are “good enough” (sic!) to appear high on the organic side, would be of at least a certain reputable quality.

It was reported by Exchange4media that the Indian Ministry of Tourism would spend $3 million on online marketing and web marketing. This is a pretty small amount. When compared to the amount that some of the online only travel websites are planning to spend only in the next year, this amounts looks considerably smaller. I wrote about the online tourism industry in India only yesterday.

I am conjecturing but I imagine this includes hefty fees usually associated with agencies. Lintas being one of the more established advertising agencies, the actual amount spent of the $3 million on actual branding or customer acquisition would be even smaller.Interesting to see what channels they employ and whether the media buying would target the domestic or the international traveler. If its the latter the $3 million would probably run out faster than Lintas can imagine !

Couple of good figures have been released recently, for the online travel sector in India. Though not directly,this article on online travel in India by the Economic Times, estimates that the size of this industry in India would grow to $ 2 billion in India by the year 2008. There are already some early leaders in this game – Cleartrip.com, Travelguru.com and Indiatimes travel.

What’s interesting is that while travel portals are facing various pressures in other parts of the world (they are being squeezed out on one end, by airlines and hotel sites selling directly to the customer and on the other end are facing pressures from the search portals of the world, where most travelers start their travel searches), similar travel portals are hoping to make a killing in India. I think this is what is unique about the Indian situation. With so much of the services sector in India being largely disorganized, the Internet has a huge potential to serve as an efficient market place in India. So does the industry hope to get everyone who wants to travel, to log on to the net to make their purchases online?

Probably not, if they are smarter, they will probably bet on enough direct consumers and some middle men, such as online travel agents to log on and make reservations for consumers. This would be one example of the Internet enabling services in India, which I first talked about in my post this morning, on the Indian Internet Market opportunity. Why is this better than the already existing system of travel agents? Because there is more transparency in the system, the online agent, knows that his quote can be checked by the consumer going directly online. I believe the internet will morph into its own Indianized format, just as several other industries and markets have been Indianized since the opening of the Indian economy. The exciting thing is online travel is only the beginning, as was the case in the more developed internet economies of the world, travel is only the first frontier, there are many more to come.

India and Internet marketing are two things that get me excited, the only thing thats more exciting is Internet marketing in India ! I really believe that India is one country that will be truly transformed as Internet spreads over the country’s population. At the very least the Great Indian middle class will present at least as big an internet population as the United States’ current Internet population. Besides, there would be business scope for internet enabling services – that is services that bridge the Indians that are not online – with the online India, but that probably is the subject of another post altogether.

For now lets see where we are and what is the scope of growth. In this article on Rediff.com, according to a new survey by Juxt Consult, an online research firm, internet usage in India has expanded to 30 million users in 2006, from 17.7 million in 2005. While impressive growth from any perspective, this is still a far cry from the over 220 million internet users online in the US (here is one such source – claims 77% of the population is online). So what does all this mean – Well here is the deal, once again anecdotal data suggests that the total middle class population in India is at least 250 million, and therefore we can expect at least 250 million people to go online in India over the next 10-15 years. And these by the way are all English speaking internet users. Can you imagine the opportunity there? I believe its huge, inevitable and coming fast. If you are here reading my blog, you are probably interested in India and at least somewhat interested in the Internet. Are you going to take advantage of this opportunity ? Or is some one else?