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Why Google dumping China is good for India

By Leslie D''Monte
January 15, 2010 03:51 IST
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Google may or may not exit from China. However, if it does so, observers and analysts say that the senior management of the $22-billion search giant will increase the company's focus on other digital powerhouses in the Asia-Pacific region. India will emerge as a huge beneficiary, they believe.

The country has comparatively fewer Internet connections but is the second-largest mobile market in the world after China. And, the Internet is being increasingly accessed on mobiles. India and China together account for over 1.2 billion mobiles of the 4.6 billion global mobile users. The US and Russia follow with just around 500 million cellphones.

Moreover, the Asia-Pacific region, according to a recent ComScore report, has seen significant growth in 2009 -- increasing 22 per cent to nearly 500 million unique visitors to Internet sites, with most individual countries in the region experiencing double-digit growth rates. China, Japan and India are fuelling growth in the region, states the report.

"India obviously stands very high in terms of priority for global services companies, including Google and Microsoft. A strong and vibrant democracy, ease of doing business and robust legal systems will continue to offer India an edge over China for a long time. India will continue to be a destination of choice for global businesses, especially on knowledge proliferation and copyright protection dimension," says Kapil Dev Singh, country manager, IDC India.

He, however, adds: "Google's decision to move out of China, if and when it happens and what final form it takes, will not be an easy call, at least, from the demand point of view."

Cyber expert Vijay Mukhi says the Indian government also has strong IT laws (especially the amendments to the IT Act, 2000, after the 26/11 terrorist attacks. "It surely does not have hackers on its payroll. Besides, though we do not have many internet users, our mobile user strength is good enough and falls short only when compared with that of China," he adds.

A Google India spokesperson declined to comment on the issue. "We can't comment on anything now. It's too premature to talk about the issue. Anything can happen," the spokesperson said.

But there's a huge gap, too

Meanwhile, experts and reports simultaneously note that the gulf between Internet users in India and China is still very huge. "China is too big a market to ignore for a company like Google," says Diptarup Chakraborti, principal research analyst, Gartner. India, he points out, has many mobiles (506.04 million, according to Trai November 2009 figures), but very few internet users (around 80 million users, of which just 35-40 million are active users).

Google makes nearly 95 per cent of its revenue from search advertising. Only about two million people, however, heavily rely on mobile Internet services in India, reveals a recent study conducted by the Internet & Mobile Association of India (IAMAI). These are known as 'active' users, or those who access the Internet at least once a month.

IAMAI data also reveal that about 27 per cent of all mobile phones -- which translates into 136 million people -- have an internet-ready mobile device. Further, out of this number, only 9.4 per cent (around 13 million users) have used the Internet over their mobile phones ever in this year. Finally, the number goes down to the mentioned two million, or 17 per cent, when it comes to active users. IAMAI, however, believes there will be 50 million mobile Internet users in India by 2014.

In terms of demographics, 70 per cent of the mobile Internet active users are in the 18-35 year group. People mostly rely on chatting and social networking (60 per cent), and conduct information search (23 per cent).

On the other hand, China's Internet user number reached 338 million by the end of June 2009 (much over 350 million at present), according to the China Internet Network Information Center (CNNIC). Much of the traffic has been driven by 3G services (auctions are yet to take place in India).

The report reveals that most Chinese mobile Internet users are 10- to 29-year-old youth. These young people use mobile Internet primarily for messaging, which ranks No 1 among all mobile Internet services. Next to it are mobile searching and music downloads. Usage ratio for mobile Internet games, mobile e-mails and mobile community networks are still quite low in China.

Broadband coverage not broad enough

Broadband is another sore area. Over the past five years, according to the International Telecommunication Union (ITU), the total number of fixed broadband subscribers has grown more than threefold -- from about 150 million in 2004 to almost 500 million by the end of 2009. In 2008, China overtook the US as the largest fixed broadband market in the world.

At the end of 2008, China's fixed broadband penetration was 6.2 subscribers per 100 inhabitants -- the highest of any low- or lower-middle-income economy in Asia and the Pacific. In contrast, India has around 7.6 million broadband users till date.

Search remains the cornerstone of Google's top line in India too, and online ads, which are displayed alongside the keyword searches by individual users, continue to account for a bulk of its revenues. However, the search giant has tweaked its strategy to work in India.

For instance, it has three broad target segments in the country -- individual users, advertisers and enterprises -- with a mix of online, offline and mobile offerings, as the situation demands.

Moreover, realising that its play in India cannot be complete without a mobile strategy, Google went about making search available on mobile phones, too. And, realising that the number of internet-enabled mobile phones is still small, Google launched an SMS-based search, which can give users information on various topics, including local business listing, the status of flight and train bookings, stock quotes and horoscopes.

Last, but not the least, for those who rely only on voice, Google has devised a phone search that involves an interactive voice response facility that throws up the results accordingly.

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Leslie D''Monte in Mumbai
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