The year 2012 has been crucial for the digital industry in India. With myriad of positive as well as negative developments happening, the industry discovered its survivors and weaklings. Many analysts said that a consolidation was imminent in Indian ecommerce space and there was a lot being said about the consolidation that happened in the first part of the year in ecommerce, when we saw Flipkart acquiring Letsbuy. This was followed by SnapDeal acquiring eSportsBuy; HealthKart acquiring MadeInHealth; Yebhi acquiring Stylishyou and Myntra acquiring Exclusively.in.
There was also a time when the exclusion of ecommerce from FDI in multibrand retail was questioned and we were also put to a situation where we asked whether that was a good time to be an ecommerce employee in India?
Besides ecommerce, we also saw a long list of digital agencies that got acquired by bigger advertising agencies to boost their digital footprint. It was also believed that the good times for online advertising in India are being restored now. It all started in April 2012, with Publicis Groupe acquiring Mumbai-based digital agency Indigo Consulting to make it operate as a unit within the Leo Burnett Group in India.
This was followed by WPP-owned JWT Singapore acquiring a majority stake in Hungama Digital Services, the digital and promotions marketing division of Hungama Digital Media Entertainment Private Ltd, in June 2012.
Now, will the coming year continue to see such drastic developments happening in the digital industry? To find the answer, India Digital Review spoke to industry leaders to understand, what in their opinion, were the highlights of the year gone by and what lies ahead in 2013. Over to the experts!
Deep Kalra, CEO, MakeMyTrip
Deep Kalra, CEO, MakeMyTrip said the major highlight in the digital space for 2012 has been the growth in the Mobile Internet and Apps. Elaborating on the same, he said “In my opinion, the take-off of Mobile internet and Apps, especially for browsing, searching etc was the major highlight. MakeMyTrip has Apps on all popular OS (iOS, Android, Blackberry and Windows 8), besides a mobile website. Our traffic, searches and transactions coming through the Mobile channel are booming.”
Positive and negative developments in the year for the sector
“The positives would definitely be ecommerce taking off specially driven by online payments getting more robust. Moreover, the sector has seen more choices and better success rate, although there is a long way to go. Most importantly, a reduction in the Merchant Discount Rate (MDR) for Debit Cards was a welcome move as the entire industry lobbied hard for this. The negative development would be painfully slow Broadband roll-out.”
Expectations from 2013
“I see cheaper tablets launching in the market, 4G services will get popular and an aggressive Broadband roll-out is also on my wishlist.”
Satyan Gajwani, CEO, Times Internet
Terming 2012 as a year which saw serious growth in mobile consumption, Satyan Gajwani, CEO, Times Internet said “2012 was the year that we saw the beginning of serious growth of mobile consumption. The velocity of uptake was way higher than we expected, and it caught us all off guard.”
Positive and negative developments in the year for the sector
“The biggest positive and negative of 2012 was the ecommerce sector. On one hand, it highlights the opportunities and potential of the Indian digital story, with rising consumption and growing user uptake. On the other hand, the sector was overfunded and created unrealistically high expectations for itself, which will cause difficult times to come.”
Expectations from 2013
“I believe, 2013 will witnesses crucial developments - most of which will be continuations of 2012. Ecommerce will move into "survival mode" where only the strongest will remain. Mobile consumption will grow to an even larger level than expected again. The Indian digital story will move past ecommerce to new services, especially in entertainment. Global-scale quality products may get produced in India, as domestic skills reach parity with the quality of output globally.”
Sachin Bansal, Co-founder and CEO, Flipkart
Sachin Bansal mentioned a number of developments that could be termed as major highlights. He said "The current ecommerce market in India stands at $ 1.6 billion (Forrester) and is estimated to hit $8.8 billion by 2015. The huge potential this market offers has seen a large number of players enter this space in 2012 alone. In fact, a recent Microsoft Accelerator study reveals that one-third of all new technology companies launched this year were in the ecommerce space.
Given the larger number of players, there was obviously a fight to win consumer mind space as well. 2012 was the year that saw ecommerce brands take aggressively to mainstream advertising in order to create brand recall.
The number of products available online expanded in range. From books to stationery, consumer electronics and heavy appliances, lifestyle products and digital content – almost everything entered the online space this year.
As the services and offerings of ecommerce improved, so did consumer interest. Ecommerce captured the net-savvy user, fast rising in their estimate as the preferred channel of shopping. Many new consumers who were once wary of buying online tried the experience of online-shopping. Alongside, newer markets started emerging in the form of tier 2 and tier 3 cities. Customers in these markets have disposable income along with an increased exposure to quality brands. The choice and convenience offered by online players saw them reduce their dependence on offline stores this year."
Disappointments in the year
"The lack of a uniform state tax law has been hampering the growth of inter-state commerce. Supply-chain and logistics, which forms the backbone of ecommerce along with technology, is still rife with problems related to inventory management, last-mile deliveries and warehouse management. Failure of payment gateways and low card penetration is another hindrance to the growth of this sector. In 2012, the rising popularity of COD went a long way in addressing this issue but there is still a lot of work required in this area."
Expectations from 2013
"2013 will see ecommerce boom in the true sense of the word - with newer technologies, offerings and more streamlined features hitting the market. M-commerce is set to take off in a big way. Increased usage of smartphones, better speeds with 3G connections and a rising number of people accessing internet on the go will see m-commerce witness an even greater spurt in its already exponential growth. Other areas of innovation will include a better front-end experience with improvements in search and browsing, more personalized recommendations to customers not to mention adaptations of world-class practices and technologies in inventory management, warehousing and logistics. Improvements in payment systems will also provide a further boost to the industry – converting more offline shoppers to the online platform."
Rajesh Sawhney, Founder, GSF Accelerator and GSF Superangels
Rajesh Sawhney, Founder, GSF Accelerator and GSF Superangels encapsulated 2012 in three major developments saying “One of the major highlight in 2012 was rise of Mobile First Economy, driven by Smartphones, 3G data networks, and shift of power from operator to device driven eco-systems (Android, iOS, and maybe Windows). The second highlight would be Consolidation of Ecommerce space. While 2011 saw oversupply of capital with many companies with inadequate business model and mediocre talent getting funds, 2012 saw lots of mindshare and effort of the Venture community into dealing with its excesses of 2011. This consolidation, which includes some high profile businesses shutting down, will accelerate in 2013. There is also a rise of Cloud and SaaS business model wherein we are seeing explosion of start-ups addressing potential disruption of old models with SaaS and Cloud solutions.”
Positive and Negative developments in the year for the sector
“On the positive side, the Startup ecosystem is beginning to mature a bit. The number and quality of startups is becoming better. There is an evolution of angel community and ecosystem maturity with the launch of initiatives like GSF Accelerator in three cities. On the negative side, we saw overhang of ecommerce which is resulting in tightening of purses by VC community.”
Expectations from 2013
“I am cautiously optimistic. Mobile economy will pick up pace with the launch of 4G networks and there will be significant launches in tablet and smartphone space. Startup economy will see lots of action, especially in incubator and accelerator space. I also hope to see a few IPOs of digital companies and pick-up in merger and acquisition space.”
Alok Kejriwal, Co-Founder & CEO at Games2win
Alok Kejriwal dubbed explosion of app stores as major highlight of 2012. "The real highlight for me was the explosion of app stores. It proved two things that it is a very democratic and self-sustaining platform. Digital is always about democracy. The operators have always been manipulative and corruption ridden we totally got rid of them due to these WAP stores. So, now a lot of consumers using the smartphones get to consume the content that they want not what they have been proposed by the operators. The sustenance of Facebook will be another important development people thought it would have the same fate as Myspace but proving critics , it has become bigger and better.”
Disappointments of the year
“Negative would definitely be complete disappointment of Google+. There isn’t too much of entrepreneurship still happening in India. I’m also really heartbroken that creativity is not exploring and expressing itself on the web the way it is doing on the television. We celebrate our Piyush Pandey’s, why there is no celebration for an Internet creative director. Where is the Internet Creative Director?”
Expectations for 2013
“India having 100 million active smartphone users is one and it is going to happen hopefully smarter than you think. There must be a lot more access in the internet space so I hope 2013 should have many more exits than ever seen before.”
Vishal Gondal, Managing Director – Digital, DisneyUTV
Vishal Gondal said that in 2012 many new platforms were introduced in the mobile space while social media gained momentum and interest among brands. “There are better monetization options for content developers and telecom operators showed willingness to discuss margin ratios with their content partners. Pick up in OEM stores has resulted in direct billing between the consumer and the app developers. This was a sure winner. New platforms were introduced in the mobile space. Launch of Windows 8 mobile with Nokia Lumia and rampant growth of Android devices in India made availability of smartphones at affordable prices possible to the masses with manufacturers Micromax and Samsung and more. Social Media gained momentum and interest amongst brands with innovative usage of the medium to tap the audience. Social media also gained importance amongst users to voice their opinions and bring about a positive change in the society.”
Disappointments in the year
“3G was certainly not what was expected. The data packages were expensive limiting its reception. Poor broadband infrastructure in the country is continues to be a hindrance in digital usage. Continued fragmentation in android devices remains a challenge for digital content developers.”
Expectations from 2013
Freemium - ‘Free’ is the next big thing for sure! For app developers, the freemium model is fast emerging. The term ‘freemium’ is devised using two powerful words ‘Free’ and ‘Premium’. A freemium app is offering an app free of charge while charging a premium for advanced features, functionality or related products and services. Freemium apps induce user engagement, help build communities and spread a good word around too.
Brands to increase their digital spend - The upsurge in mobile apps has already caught the attention of brands and marketers with innovative products like app jacket, app wrapper etc. which help the brands reach out to their consumers through apps. We hope for this to intensify in 2013 with in-app advertising and many such innovative products.
Content innovation - Every platform functions because of the content it has for the audience. Same will work here. With Apps gaining immense popularity and dependability, in the end it is the kind of apps and the usability that it all comes down to. We expect 2013 to witness a lot more innovative, personal and unique apps across gaming, video and audio.
4G - With introduction of 4G, consumption of video apps and other rich media on mobile phones is likely to take an upswing.
Touch devices – Touch devices have taken over the mobile phones market worldwide. It is now time to take it to the next level. There are already traces of introducing highly flexible, film-based touch sensors in the smartphone and tablet markets. Larger, lighter, sleeker, curved and edgeless designs are the next big things for handheld devices.
Personalization – The trend today is to share your experiences with your friends and vice versa. If I am searching for a restaurant through an app, I would like the app to show how many of my friends have searched for it and have visited it too. This kind of analytics will gain prominence.
Social Connectivity – We all access social networks through our laptops, PCs, mobile phones and even tablets. With social media now being such an integral part of most of our lives, we will see the social aspect extending to other devices as well. For example - Just like when you click a picture from a handheld device and have the ability to upload it to your social profile instantaneously, the same can now be done through a digital camera too.
Nitin Mathur, Senior Director and Head of Marketing, Yahoo! India and South East Asia
Nitin Mathur believes that consumers have become empowered in 2012 and 'Digital' is no longer an 'also'. “In 2012 we saw consumers in the driver’s seat. The union of mobile, social and local has fundamentally changed consumer needs and expectations. Never before has the consumer been as empowered as the present-day connected consumer. E-tailing and ecommerce has become mainstream, which according to me speaks volumes about the radical change the internet as a medium has witnessed. The volume and quality of the ideas, the innovations in the digital campaigns and the wide span of brands that we have seen this year reflect a steady share-shift in the minds of advertisers. Digital is no longer an ‘also’ – it is definitely gravitating towards the centre and picking up speed. It is far more integrated with overall brand marketing plans.”
Positive and negative developments in the year for the sector
“India is witnessing an explosive growth in Internet penetration and the use of connected devices thereby increasing the time spent by the users on the Internet dramatically. One of the most recent developments is the prevalence of online video content. Today people first want to see, then hear and then read on the Internet. We are also seeing a huge online audience in India and across the globe who are interested to be connected to local news in their own language. So this opens up a vista for increased Internet usage in the country. Brands are actively engaging with their relevant audiences and conversing with them real time through innovative formats and campaigns.”
“In terms of the negatives the key issues would be related to bandwidth and Internet connectivity speed. While in terms of Internet population, we are a huge market, and one of the fastest growing ones – we come nowhere close to the more developed markets in terms of network speed. This impacts user behavior and the type and volume of content consumed – which in turn can limit the overall advertising dollars allocated to digital. The other challenge is the rampant increase in user ripped content which is available online today.”
Expectations from 2013
With marketers beginning to adopt strong digital strategies for their brands, some key trends that will shape the landscape are:
• Content Branded Editorial (CBE): Brands are turning publishers to keep their audience engaged. The content is specifically designed to educate consumers on the offerings, build loyalty and enhance engagement level of a particular brand with the target audience. Yahoo! recently launched Style Factor for P&G in India in partnership with Mediacom.
• Multi device experience: Today, Internet users are accessing Internet, using a slew of devices – be it the mobile, PC or a tablet. It has become important to ensure that the Internet experience follows seamlessly when the user transitions devices.
• Community building: Internet allows interactivity between like-minded people forming online communities. Brands need to integrate the community building aspect while developing their online campaigns.
Sanjay Trehan, Head, MSN India, Microsoft Online Media & Publishing
Spelling out what grabbed eyeballs in the digital space in 2012, Sanjay Trehan, Head, MSN India, Microsoft Online Media & Publishing said “2012 saw critical mass of users coming into its own and thus providing the industry with a significant audience size. The year also saw brands increasingly leveraging social media resulting in more conversations in the space. Besides, we also noticed increasing ubiquity of the mobile web; app-ification of the web and nascent beginnings of hyper localization.”
Positive and Negative developments in the year for the sector
“Social Media and the Mobile Web viz. both apps and browse were the highlights. Connected communities are the way to go in the digital space and that's a hugely positive development. Mobile monetization is yet to kick off in a significant way which is disappointing. Also, I feel, in correlation with the size of the audience, the display advertising on the web is still under leveraged. While ecommerce made giant strides in 2012, the lack of a sound business model in its me-too mushrooms checked its proliferation.”
Expectations from 2013
“More brand dollars to move to digital; hyper localization to gain currency; SMM to become a key driver of brand conversations; App-ification of the web to gain further currency and new revenue streams to emerge in the mobile space.”
K Vaitheeswaran, CEO, Indiaplaza
K Vaitheeswaran, CEO, Indiaplaza believes that 2012 has been a year of restraint in terms of investment which according to him was ‘good news’ for the digital space. “For ecommerce, 2012 was almost the opposite of 2011. Investments slowed down, investors changed their tune to driving entrepreneurs from sales at any cost to margins and profits. Anybody and everybody stopped launching ecommerce companies. Contrary to popular opinion, I believe this was good news. No industry can afford to grow purely on the myth of unlimited availability of capital but must try to build financial robustness.”
Positive and negative developments in the year for the sector
“The real bad news was that the government is investigating ecommerce companies for allegedly falling foul of Foreign Direct Investment (FDI) and Foreign Exchange and Management Act (FEMA) regulations. If true, this is really sad because a business or an industry cannot be built by cutting corners.”
Expectations from 2013
“In 2013, I expect capital availability to become harder. I also see consolidation happening in the industry. There are chances that ecommerce companies will start charging for shipping and Cash on Delivery (CoD). I hope the air around FDI gets cleared and we get to know the result of the ongoing Enforcement Directorate (ED) investigations on ecommerce industry. I also expect ecommerce growth to continue unabated and by 2013 end. More that we see today in the industry should prevail in the coming year.”
Vikas Tandon, Managing Director, Indigo Consulting
Vikas Tandon, Managing Director, Indigo Consulting touts 2012 as a milestone for digital industry with it getting the strategic attention and interest. “This was evidenced not only in terms of the spate of acquisitions, but also in terms of the industries that started increasing their spends. It was also a year when social media slowly morphed from a race for "likes" to some more relevant ideas. To me the stand-out was KLM's Meet & Seat programme which really leveraged what social media is about. It may not have been huge in numbers but it showed the way brands needed to think about Social.”
Positive and negative developments in the year for the sector
“The big positive development was the ad networks finally recognizing the urgency to ramp up and integrate digital capabilities. This was true not just in India, but worldwide. To my mind the negative developments were largely from the government/regulatory side. Not only did we not see any policies or action to accelerate the growth of Internet adoption, events like the 2G license fiasco, the government’s attempts to control or stifle the medium, and the overall poor economic performance potentially came in the way of growth. Once again we saw that while the depth of width of internet usage grew exponentially, the absolute growth in the number of users was far below the potential of the country.”
Expectations from 2013
“We are beginning 2013 in a new avatar as part of one of the world's leading creative communications powerhouse. We look forward to combining our complementary strengths to create truly integrated campaigns for our clients that are rooted in human insight and win awards.”
Ankur Warikoo, CEO, Groupon India
Ankur Warikoo said that a major highlight in his opinion in 2012 would be digital competencies becoming a key metric that advertisers evaluate while choosing an agency partner. “One of the key highlights for me was the fact that spends on digital will overtake radio and outdoor as per the GroupM Report. With more than 100 million Indians actively using the internet, the medium was bound to get here sooner than later. More interestingly we also saw a number of large scale advertising networks buying stakes in smaller independent digital media agencies. This is a clear indication that digital competencies are now a key metric that advertisers evaluate while choosing an agency partner.”
Positive and Negative developments in the year for the sector
“The positives certainly outweigh the negative developments. Tremendous focus on social media and social commerce has ensured that brands that never thought they needed an online store are now actively looking for digital channels to not only spread brand awareness but also sell their products.”
“The ecommerce sector has seen some consolidation, which was bound to happen given the huge number of players who entered the market without completely understanding the rules of the game. However, more than that for me the negative impact was that a lot of them actually managed to dent consumer confidence by engaging in unhealthy practices like selling counterfeit goods and offering poor customer service.”
Expectations from 2013
“Our expectation and belief is that 2013 will see the rise of local commerce alongside ecommerce that is currently limited to products only. Local commerce will bring in a whole new dimension where people will buy their meals online and even look for unique experiences that cannot be bought from a normal retail outlet. This trend is already prevalent in the major metros but it will penetrate deeper and even each tier II and III cities.”
Aloke Bajpai, CEO & Co-Founder, iXigo.com
Aloke Bajpai, CEO & Co-Founder, iXigo.com believes that 2012 has seen many developments with leveraging of social media platforms by digital marketers to rise of startup incubators. Breaking traditional moulds, online, social and mobile advertising has started taking off. “Facebook has emerged as a dominant platform on the radar screen of digital marketers. All brands that matter have started to focus to building and engaging audiences on Facebook, Pinterest, Twitter and other social platforms. The year also witnessed rise of startup incubators and accelerators. There are some really promising ones started by people with honest intentions to help the ecosystem flourish and thrive. Increase in angel/seed-funds backed by money and mentorship of successful entrepreneurs was another highlight. Raising seed/angel money has never looked easier.”
“Another major development was the death of daily deals - Anyone still talking about daily deals except Groupon India? The ecommerce space went in to the ‘reality check’ mode after all the investments made in 2010-2011; investors have started looking more closely at cashflows and P&Ls in 2012. Deal-making has gotten slower in the second half too. Online, social and mobile advertising has started taking off, slowly but surely, with brands experimenting beyond traditional media and apparently seeing some results from it too (e.g. a lot more TV ads now on YouTube). Mobile seems to have started taking off in the latter half of the year. A lot of innovative startups came in the packages, activities, tours and local experiences space but there has been no clear winner yet.”
Expectations from 2013
"Travel research, planning and recommendations will be an exciting space to watch with multiple companies working on innovative offerings. Pressure on margins from the air side of the business will remain with Kingfisher continuing to remain defunct, higher airfares, and a tough peak season (lower passengers than last year). Mobile transactions should continue their growth from a small but viable base. Hotels continue to be a growth driver, but supply-side issues remain unsolved. Meta-search will remain an exciting space to be, with deal-activity heating up in the sector (Kayak-Priceline followed by Expedia-Trivago).
“2013 will be the defining year for mobile internet growth in India. Android's exponential growth on the back of cheap devices should mean that the entire Indian middle class (250 million) people will become internet-ready. Expect an explosion in devices, mobile startups, apps and mobile-traffic. I also expect increase in online, mobile and social marketing spend by traditional brands (with slower growth in print, TV and outdoor).
Ecommerce consolidation and/or liquidation will be inevitable. Some mid-sized ecommerce companies won’t survive. The lucky ones will be able to merge into larger competitors but the others will have to either reduce burn (and investor heartburn) or go home.
2013 will be a critical year for venture capital. It's the "report card" year since a lot of funds will complete 5-6 years in India and there will be increasing pressure to make some exits.
With a critical mass of incubator/accelerator backed startups and/or angel-funded startups in 2012, there will be some companies that don't make it to Series A threshold but yet have team/product that is valuable for larger well-funded players. Large media-houses and corporates have started looking at startups more seriously, so I expect an increase in acq-hire / early exits in the Indian ecosystem, and won't be surprised if there are quite a few such deals sub-$5M.
Big Exits - 2-3 large (>$500 M) IPOs in the online / mobile space can be expected if the markets remain buoyant. More entrepreneurs, more mentors, more angels, smarter/smaller VC funds and a stronger ecosystem.
Pradeep Chopra, CEO, Digital Vidya
Pradeep Chopra, CEO, Digital Vidya sums up 2012 as a year that witnessed notable growth of social media and ecommerce becoming big and real. “India crossing 60 million users on Facebook marked real growth of social media in India. Businesses such as Kaya Skin clinic generating as high as 20% of their revenue attributable to Facebook is a testimony of the same. Internet access through mobile and ecommerce became big and real for consumers. Acquisitions of Digital Marketing agencies (e.g. Communicate 2, Interactive Avenues, Resultrix, iStrat). Interesting social campaigns dominated the online space with digital fueling Social Campaigns (e.g. Anna's campaign) also integrated campaigns like MTV's Nano Drive.”
Disappointments of the year
“Google+ failing to make its presence. The value of facebook pages diminishing significantly. Ecommerce companies still to solve key challenges especially about reducing cost of customer acquisition, Crisis due to Social Media. Few are covered here were the main disappointments.”
Expectations for 2013
“2013 will be an eventful year in which social media will continue to show growth. Mobile will drive true growth including through Apps and SoLoMo (Social + Local + Mobile). Digital campaigns will be integrated with offline. I’m expecting further consolidation among agency space as well as in ecommerce. Twitter to unlock its true potential for itself (IPO/acquisition) and for brands. Online Reputation Management (ORM) will get its deserved importance. Content Marketing will be embraced across sectors. Social Media ROI puzzle will be in control through data and tools.”
Pankaj Chaddah, Co-Founder and COO, Zomato
Pankaj Chaddah said that Facebook IPO and the launch of Windows 8 were major highlight of 2012. “In my opinion the Facebook IPO, Facebook's Instagram acquisition and launches of Windows Phone 8 and Windows 8 were the highlights of the year.”
Positive and Negative developments in the year for the sector
“In addition to Nokia getting really serious about smartphones, the growth in the smartphone space and mobile-data space in the developing economies was the biggest positive development in the year. The seemingly vindictive PR outrage against Flipkart was a big disappointment; the suffering Facebook stock, the online FDI issue in India and the wrap up of a lot of mid-stage startups globally (including a bunch of Rocket Internet ventures) were the other negatives.”
Expectations from 2013
“I expect 2013 to see a lot of innovation in mobile monetization. Globally, no one has been able to monetize mobile apps and the small mobile screen properly - we should expect some innovation here as this is the future of the digital world."
