Is the internet headed the same way as other media in India?
For over two decades Mary Meeker has tracked the internet and businesses around it, first at Morgan Stanley and lately as a partner with venture capital firm Kleiner Perkins Caufield Byers. Her latest 'Internet Trends 2015' report shows that internet users have grown from 35 million people in 1995 to 2.8 billion in 2014.
According to the report, much of the incremental growth (beyond developed markets) is coming from first-time users of smartphones in 16 developing markets - India, Brazil, China among others. At 232 million internet users, India is the third-largest after the US and China and it is the highest in terms of the number of users added in 2014 (63 million). About 65 per cent of the internet traffic in India comes from the mobile phone - the second-most 'mobilised' internet market after Nigeria.
For almost every major online brand, India is critical. WhatsApp has the largest number of monthly average users in India. It is the second-largest market for LinkedIn and Facebook and the fastest growing one for Twitter. Among the top 10 Android-based apps in India are Facebook, Truecaller and Candy Crush (yes!).
What this tells you is what any one of us would have observed - that millions of Indians are spending loads of time surfing on their mobile or iPad, playing games, watching a video or listening to music. Meeker doesn't say it but India is also one of the largest consumers of video online, globally.
Put it all together and internet advertising and subscriptions to streaming services should add up to a stunning number. It doesn't. Online subscription revenues have never been significant in a market that believes in free content. And at Rs 4,350 crore digital advertising is a small, albeit fast-growing, slice of the ad pie. The average ad rates paid to reach online consumers are a fraction of those on TV or in print - not surprising given that TV reaches almost four times as many people and print reaches 30 per cent more.
India is the second-largest market in the world for television and newspapers - by numbers of people reached. Yet Indian broadcasting remains less profitable than most comparable markets. Its ad rates are nowhere commensurate to the audience size and pay TV rates are among the lowest in the world at roughly Rs 200 per home per month. It is an average that has remained the same for over 10 years.
In print, the margins are good but the industry remains dependent on the fluctuations of newsprint prices for a good year rather than increase in ad rates based on the rising circulation and readership numbers. Advertising brings in 80 per cent of the revenues for print; pay revenues hardly matter.
India makes the largest number of films, but remains a small, not-so-profitable market largely because there aren't enough screens to feed the hunger for films.
There is a litany of reasons - from poor industry structure to ad-hoc regulation - for much of this. But the fact remains that the Indian media and entertainment market is littered with examples of huge audience numbers and poor monetisation.
You could argue, rightly, that the internet is not just about media and entertainment. The sheer traction in e-commerce, social media and other applications go way beyond listening to a song or watching a film. True, but in most markets it is media and entertainment that kick-starts the growth of the medium. And if it sets a poor context, the rest of the growth could easily follow that pattern.
Can the internet in India break the monetisation jinx?
Twitter: @vanitakohlik