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Internet: Is This Really a Hot Space

Ritesh Banglani
Monday, June 29, 2009
Ritesh Banglani
In the past three years, there has been significant venture capital interest in Indian Internet companies. According to research firm Venture Intelligence, VCs have invested US $472 million in 62 Internet companies since 2006.
As per the Internet and Mobile Association of India, there were 30 million active Internet users in the country in 2006.

In light of worldwide trends, most analysts were predicting this number to grow very fast and hit 70-80 million by 2010. Current estimates, however, suggest a much more modest growth to 42 million users. The reasons for this are well-known: high cost of PC ownership, government policies prohibiting unbundling of last-mile broadband connectivity, and the relative absence of content and services relevant to the mass market. Hence it appears entrepreneurs will have to innovate within the constraints of a small user base to create great companies rather than rely on explosive growth.

Online Utility Services

This decade has been characterized by the emergence of the holy trinity of internet services in India – travel, jobs and matrimony. These three sectors have a few things in common: they are all essential “utility” services rather than discretionary entertainment services; in each case an existing offline process has been migrated online and thus made more efficient; and there have been people willing to pay for each service – end users in the case of travel and matrimony, and recruitment agents in the case of jobs. The challenge for the industry now is to find other such utility services which can be made more efficient online. And segments like real estate, education and personal finance show promise, but it may take time for the right business models to emerge.

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