2012 was a great year for technology and the internet in India. We witnessed the rise (and fall) of many e-commerce companies. Many of us made our first true e-commerce purchase (and no, not airline tickets) with cash on delivery, and many more will make theirs in 2013. A big congratulations to Flipkart, which has clearly established itself as India’s dominant e-commerce company and become a household name, not only within India, but even with NRIs all over the world. Another key breakthrough was the advent of lower-cost smartphones with adoption finally starting to take off. So what’s in store for 2013?
I reached out to several friends at our ‘favourite’ Indian venture capital firms to get their predictions and see how they matched up against mine. Most of the people I spoke with preferred to remain anonymous and not be quoted, so they won’t be specifically mentioned.
Unanimously, and not surprisingly, everybody agreed there would be consolidation within the e-commerce space. I think it is safe to say that the ‘great e-commerce bubble of 2011 and 2012’ has now officially burst! This is signalling a more conservative approach from the larger venture capital firms this year.
Except for one VC who felt that we will actually see more foreign angels investing in Indian startups, all other VCs I spoke with agreed that angel funding will also become harder to get and we will see an ‘angel crunch.’ Overall, I definitely think it is safe to say that funding will become much harder to come by this upcoming year than it has been in the past two years.
One venture partner insisted that we will see Microsoft and Windows 8 starting to make some real adoption in India on the tablet platform. With all the upgrading of devices that has happened over the past year and will continue to happen in 2013, one venture capitalist was excited about a business that buys back old electronics. I personally don’t think much of such a business endeavour but wanted to share with you what the industry was thinking.
Another partner felt that e-learning will start to take off this year. While I do think e-learning will grow, I do not believe that we will see any breakout companies emerge. It is a very difficult segment to monetise, and with large companies already present in the education space in India, I think there will be an aversion to funding in this space.
Finally, there was a prediction that we will start to see more ‘global’ product companies emerge. This is something that I agree with and is something which I have spoken about in the past. Indian companies must start to think global from day zero.
Overall, things are going to become much harder for the startup ecosystem in India. We are going to see a lot of companies shut down and entrepreneurship will not be as fashionable a career choice as it has been over the past two years. Only the strong will survive through this phase and those that will survive and emerge will be the real winners. For most who are not really cut out for entrepreneurship, the glamour and allure of traditional and established companies will make a comeback on campuses and recruiting is going to get very competititve.
So, here goes my list of technology predictions for 2013:
The question on everyone’s mind is: What’s going to happen to e-commerce in 2013? E-commerce will continue to grow in India, in terms of revenue, but not all firms will achieve profitability. The companies that have deep financing and investors for the long term will survive but the others… well, they won’t. We will see a lot of the smaller angel-invested e-commerce companies either becoming lifestyle businesses or simply shutting shop this year. Angel investors are going to have a lot of money “stuck” in these businesses with minimal liquidity.
There won’t be as many entrepreneurs starting e-commerce companies and raising large financing rounds like the good old days. The legends of those starting an online fashion company and raising millions in financing may give false hope to the few who will still insist on the opportunity. However, there will be demand from many businesses who want to complement their physical presence with an online presence. This bodes well for companies who are building e-commerce marketplaces.
Will the government pass a bill to regulate e-commerce companies in India? Despite the ambiguity regarding the legality of the e-commerce corporate structures and Indian ownership structures, I don’t think this issue will be addressed in 2013, adding to further confusion.
Smartphone penetration will continue to increase. Obviously, iPhones will still have a presence and will continue to be the envy of many, but with the high price point, I don’t see much penetration occurring. It will be interesting to see if Apple introduces a low-cost phone this year and then it could be a different story. While BlackBerry still continues to have a presence in India, it will increasingly become insignificant by the end of the year. Those carrying a BlackBerry in their pocket will be embarrassed to even own one – but then again, it might be considered a ‘retro’ trend.
India is going to emerge as the first true ‘mobile first’ market. For many, the first exposure to the Internet will be through their phone, rather than through a computer. However, there is still a lack of India-specific applications in the market and we will start to see several mobile app companies emerge to address these Indian ‘mobile first’ consumers. Even so, application developers will still struggle with monetising the content.
Mobile internet growth
I know many people who have smartphones but don’t turn on data. Sounds strange, doesn’t it? Although this seems counter-intuitive, many find mobile internet to be too expensive or they have got that one surprise high bill for too much data consumption after which they have sworn off getting data. In 2013, mobile internet costs will continue to drop significantly and we will see many carriers bundling phones with free data.
Mobile data cards, which have become so commonplace, will continue to grow but the real emerging trend in 2013 will be MiFi devices. These nifty devices that create virtual hotspots will start to become ubiquitous and those owning them will become instantly popular with those around when an internet connection cannot be found.
Rise & fall of tablets
There will be a flurry of cheap tablets that will be released this year and everybody will be running to get one. And why wouldn’t you, especially when they will be cheaper than a nice mobile phone. However, I see this trend lasting about a year; afterwards, many will discover that these low-cost tablets don’t work so well and will either give them to their kids to play games with or to their parents to watch videos on. If you are going to buy a tablet, make sure it is one of quality.
Online video will begin to challenge traditional television in India
Online video is one application that is consistently used across all types of devices, whether they are mobile phones, tablets, laptops or desktops. The beauty of video is that it crosses language barriers and computer literacy hurdles. I have personally witnessed villagers watching their favourite soap operas online and navigating English menus. Yet, they could not read a word of English.
With the growing consumption of online video, viewing habits will trend; rather than movies, more people will begin to watch television shows on the internet. With this increased demand, 2013 will be the year when online video advertising will finally take off.
Spending on online advertising will increase
Overall, the online advertising market in India is still relatively nascent, compared to the traditional advertising market. This year, advertising campaigns will start to become integrated across different media: TV, newspaper, radio and online will become essential components to a holistic ad campaign.
Social activism – rise of the Netizens
Twitter and Facebook will continue to grow and will become a significant force in organising people, especially here in India, for social and political causes. Although we have not had major censorship issues till date, we did have some arrests for ‘improper’ Facebook posts.
In 2013, we will have an incident where the Indian government will censor and/or ban social media for a certain time. I predict this will start a trend where internet regulation will begin. Politically, you will begin to see political parties to be aggressively using the internet for campaigning. With the national elections in 2014, might we see our next Prime Minister on Twitter?
Messaging applications and SMS will continue to grow and will become a preferred ‘hotline’ of communication, even over e-mail. The heavy SMS interconnect charges that were levied in the past will be dropped by end of the year. However, TRAI will become stricter in enforcing the DND list and regulating spam SMSes. WhatsApp will emerge as a clear winner for messaging apps and will become the de facto way to communicate and share pictures on a smartphone.
Internet fraud will start to become a real nuisance and although you will not hear about it much, it’s going to be something everybody is discussing behind closed doors. E-commerce companies, banks, payment gateways and others in the ecosystem will be clear casualties. Despite the increase in cybercrime, we won’t be seeing or hearing of any major arrest.
And here comes my crazy prediction for 2013: Flipkart will file to go public this year on the NASDAQ stock market.
Next week, I will share what trends we won’t be seeing in 2013.
(Gautam Gandhi heads New Business Development in Google India. He splits his time between San Francisco and Gurgaon. He tweets at @gkgandhi.)
Disclaimer: Views expressed are personal. They do not represent the view of the organisation he represents.
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