)
I think what’s important to understand is how the internet works. In the internet, everyday, the user decides where to go. It is the most competitive, innovative and dynamic industry, by magnitude, too. We can’t always decide what people think, but we are innovating products that users really want to have.
When it comes to our leadership in India, some people forget internet is a very, very large space. Let me take you through very successful places on the internet. One is travel: Which are the top three companies in India? Makemytrip, Yatra and Cleartrip. What country are they from? India. Look at e-commerce. The top companies there —Flipkart, Myntra and Snapdeal — are also from India. Jobs — Naukri and Shine. Matrimony — a category that never existed around the world except for India — Bharat Matrimony and Shaadi. Why is it that a company such as Expedia, despite having been here for five years, is still not the number one? Because it is all about innovation. Despite being number one, we believe we compete in a very small part of the internet. Who do you think is the market leader in local search? Another Indian company, JustDial. So, search is a very broad space.
What is very important for India, and Google, is there is a fertile and massive environment for innovation, and the most innovative companies should win. So, I am not a subscriber to the theory you just mentioned, as the internet is always about choice.
How does one define Google’s India focus?
At Google, we have this deep belief that technology can make this world a better place. This governs everything we do — building products, scaling them for millions of users for search, YouTube, email or empowering businesses to leverage the power of the internet. When you bring that to India, there is massive opportunity for technology to impact every aspect of life, business, society and politics.
When I joined Google (in early 2011), there were two million smartphone users in India. By the end of this year, there would be 70 million connected smartphone users in India. India has become the mobile-first in the internet economy.
For small businesses, we took away the barriers (to get online). Another initiative is about helping women entrepreneurs leverage the internet. India has 10 million women entrepreneurs, a staggering number.
As more Indians go online, how is the usage changing?
On an average, a smartphone user spends 72 minutes on the internet every day. People are consuming enormous amount of Facebook and YouTube. Till around 2008, outside of travel, e-commerce virtually didn’t exist. That was the time Flipkart took off. In 2012, India saw $2 billion worth of product commerce.
What is the India strategy in terms of monetising your products and services?
Our India strategy is to connect more and more Indians (to the internet). We believe every Indian who is not on the internet today is going to get connected through the mobile device. So mobile is a huge priority for us. We will drive Android penetration in India as we believe Android has reached the inflection point. We also make sure that all our products work seamlessly on the mobile devices. Around 38% of YouTube views come from mobile devices.
The PC industry talked about sub-Rs 10,000-PC, but then tablets happened. Tablets will be the PC for India. And it is already happening. In the Q4 of last year there were more tablets shipped than consumer notebooks. By Q4 of this year there will be more tablets shipped than all notebooks. And by Q2 of next year there will be more tablets shipped than all PCs.
We believe more people will consume video than TV in five years. Here is an interesting fact.
Around 500 million people watch TV, while there are 1.2 billion people in India. So, most of India is media-dark. In fact, 750 million Indians watch movies in a theatre. We believe that internet combined with mobile and video will give every Indian their personal media consumption and personal entertainment device.
If you look at YouTube today, there are 10,000 full-length movies, 95% of Indian music catalogues – both regional and Bollywood – is on YouTube, you can watch any television show you want three hours after live-streaming from top six TV networks, apart from live cast of sporting events. That’s only premium content. We are now encouraging a web-only content creation. YouTube was 12 million users when I joined Google, we just crossed 50 million users a month.
So, what kind of monetisation models work best for Google here?
You can monetize the internet in three ways, there are ads, which are Google’s primary monetisation model, there is e-commerce or subscription model like say NetFlix. Today, our primary monetisation model is advertising. We do have our business-to-business model which is Google Enterprise that is growing incredibly fast. In this, enterprises pay us to use Gmail, Google Docs, maps etc.
But, consumer services are monetized through advertising. Our business here is growing very fast. In India, the total advertisement spend will be $7.2 billion, digital excluding online classified and including search and display will be $500-550 million (around Rs.3,000 crore). That number has gone up from around Rs.1,000 crore two and a half years ago to Rs.3,000 crore now. If you add online matrimony, it is another $300 million. Next year the total digital advertising industry could be a billion dollar industry. Overall ad spend will grow by 10-12%, while digital will grow by 40-50%.
Considering that more people are accessing the Internet through the mobile, do you see this as a challenge from a monetisation point of view?
Mobile monetisation will be harder than that of desktop for some period to come. But everyone believes that in next 3-5 years mobile monetisation will not only catch up with desktop but will also surpass it. Today, mobile monetisation is much lower than desktop monetisation globally, and the same is true in India. But having said that, for several e-commerce companies 10-15% of transactions are coming from mobile. So mobile advertising does work as 10-15% is a decent number for a small form factor. This is the ultimate targeting device. Also, tablet revenue per 1,000 impressions is as good as if not better than desktop. So tablets bring it back. It is a bigger form factor but it is personal, highly targeted etc. So tablet growth offsets some of the smaller form factor (loss).
So, as India move towards a tablet based country will the realizations go up?
I think, India is at a very different stage of evolution right now. So, out of the $7.2 billion of the total advertising spend only 10%, including online classified, is online today. In the UK its 25%, and in the US, it is 19-20%. The overall digital penetration is going up but we are not at the stage of the UK where overall digital is at 25-28%. China is also at 25% by the way. So, the entire digital landscape will continue to grow at the rate of 45-50% for the next 4-5 years until we get to about 25% of the media mix. Now, if you fast forward 5-6 years and when we are 25% of the media mix, mobile will be as big as desktop. Mobile’s per unit realization may not be as high as desktop but look in India but other leaders who run big digital business, we don’t worry about mobile right now. The focus is right now on saying India has 12% penetration, we have to get the next 300 million, the next 500 million, etc.
Do you think video will drive that?
Online video is growing very rapidly. If you look at 5-7 year timeframe, more people will watch online video on the Internet, than they watch TV. The question is when that will happen. The reason why Youtube has 50 million users - and not 150 million - is the bandwidth. To watch video you need a 3G plan and we know there are lots of structural problems with 3G in India. If you ask me what are the things that can accelerate the digitization of India is really broadband. Broadband is the number one, number two and number three constraints that the internet ecosystem in India has today. The appetite for video consumption is unbelievable.
As more and more Indians join the Internet, there are going to be serious challenges to balance the need for privacy and state surveillance at the same time. What are your views on this?
We take privacy very, very seriously. As our co-founder and chief executive Larry has clearly stated that there was this big question about PRISM (a US-government supported mass electronic surveillance programme) that we don’t have a backdoor Google service. And we have the same processes of how governments can get access to data in every country, including India. That’s all available on the transparency report.
What about data sharing?
So, we have a process in place. The government makes official requests. If for instance, there is a content that is a violation of law, any request that we get, we evaluate it based on the terms of service and local law. Let’s say there is some email that they want access to because of some high-security issue. We evaluate that and if there is a court order, we immediately comply. So we are very, very clear, so what’s important is those set of processes are in place. It is also very important that they are used for the right reasons.
