India has more startups today than ever before. And each one of them depends on Google as much as on funds for functioning. It is no exaggeration to say every new company opens its email account on Google’s Gmail, uses Google’s search engine and its video platform YouTube for marketing. Google is where a business starts.
It is 6.30 pm in the evening and the founders of Fortuna, a real estate company from Bangalore, are creating branding strategies for Google Search and YouTube. Since most of Fortuna’s buyers are from the Middle East, it wants its advertising to be based on location-specific needs. It has ad campaigns for Google Search in the Middle East and India. It has advised its ad agency and the ad technology company to bid for words like “real estate”, “apartments in north Bangalore”, “houses” and “homes”. For each tag, the company pays Rs 500 an hour and spends over Rs 1 lakh a month on Google keywords. “We spend so much on search as part of the branding activity. We do not factor in spends on Google directly on the sales,” says Naresh Kumar, managing director of Fortuna. He says spending on Google is good for new projects.
According to a report by consultancy firm PricewaterhouseCoopers, Internet advertising will soon become the largest advertising segment. The total global Internet advertising revenue is expected to grow from $135.42 billion in 2014 to $239.87 billion in 2019, a compound annual growth rate of 12.1 per cent over the period. As the segment captures an ever-larger portion of advertising budgets, it will exceed TV to become the largest single advertising category by 2019, says the report. Founder of Greyhound Research Sanchit Vir Gogia concurs, “Mobile-based advertising is the next big business. Internet advertising will become a billion-dollar business in the country soon.”
A report by the Indian Brand Equity Foundation estimates the online advertising market in India to be worth Rs 3,575 crore only. Thanks to the rise of smartphones, the market is expected to double by the end of 2016. Gartner estimates that the country will have more than 250 million smartphones sold in 2016, 80 per cent of which will be Android phones where Google will have a major role to play.
Internet analytics company comScore says around 66 per cent of the global web queries come from Google and as much as $60 billion worth of revenues come from Google websites. Except for China, Google is everywhere. The only final frontier that the company is yet to fully capture is advertising on apps. It is, however, seriously working on it to take on several startups that have cropped up in the app advertising business.
This determination and Google’s omnipresence makes it BW Businessworld’s ‘Most Respected Company’ in India and, it will continue to dominate the market in years to come.
Challenges And Opportunities
The cloud-based services of Google supports small enterprises that cannot afford corporate grade software because of their meagre cash resources and lower scale of operations. The market for cloud computing in India, according to Gartner, will be worth $1.9 billion by 2019; currently the market stands at only $700 million. Unfortunately for Google, it is yet to crack the art of selling cloud computing to enterprises. Yet, it is the most valuable company because it has connected thousands of individuals. Google is internally working on a strategy to help enterprises lessen their dependency on own data centres. According to the Synergy Research Group, cloud computing is dominated by Amazon and Microsoft. Amazon has convinced GE to junk 30 of its 34 data centres and move all applications to Amazon’s data centres. This will allow GE to work on agile applications rather than waiting for fresh investments in information technology infrastructure.
India is no doubt an entertainment starved country and YouTube is becoming a popular advertising venue for Indian brands. A source from Google says that brands only pay per customer if a customer spends time watching an advertisement. In other words, Google accepts payment only if customers browse through the entire advert. But the scope is huge here as people are now watching movies on their mobile, which carry advertising within the length of the movie.
A New Business
Ever since Google’s top management created holding company Alphabet, founders Sergey Brin and Larry Page have been busy establishing it as a company with technology that will cover everything from health, medicine, automation and productivity. There is Google Capital which has actively participated in India with investments in companies such as FreshDesk and Practo. There are global companies such as Calico, a biotechnology company, and Google X, which is a life sciences company. These research companies if successful will command billion dollar valuations for their IP alone. There is also NEST Labs, a home automation company, and Google Fiber, which provides broadband and cable services.
All these businesses will prove relevant to India. For the smartphone generation, services on apps will deliver data that will make Google relevant to Indian user behaviour. It is already planning to offer free Wi-Fi across all railway stations in India. One such venture is Android One, a low-cost operating system which recognises up to seven Indian languages and retails on devices worth Rs 6,500.
Sundar Pichai, CEO of Google, was recently in India to elucidate plans for the Indian market. He plans to provide free Internet in villages too. There is, however, a whole lot of regulatory compliances that need to be sorted out before Google makes Internet available to everyone in India.
Pichai recently announced a strategy called Project Loon, which uses high-altitude Internet-beaming balloons, a network of sorts, to connect villages where fibre cable for broadband connectivity has not been laid out. Google has even gone ahead and partnered with Intel and the Tata Trust.
“One of our programmes is ‘Internet Sathi’ where women with bicycles will educate people about the Internet,” said Pichai in a press conference when he was in India. The pilot project is currently running in over 1,000 villages. The plan is to connect more than three lakh villages.
Google is also trying to save Indian languages. It has therefore created a platform for Google’s software to understand Indian languages. The programme, called Tap to Translate, provides real-time translation of an Indian language as you type, and works across all applications on Android devices. There is also voice recognition software for areas with 2G networks.
The company realises that it has to hit big in India because it is the largest consumer market in the world. It also understands the unique challenges of the country, and is trying to tap into them.
Google’s ad business is going to get commoditised as people are going to move away from search and begin using apps directly for their needs. The company understands this and therefore has entered into a five year plan to offer IT infrastructure services to large corporates and expects this business to outpace advertising revenues. Currently, Google is using its GooglePlay services to dominate the mobile play. It is also investing heavily in technology that understands consumer behaviour in an app or on several apps, which can then be used to index and serve content. This will be the next wave of ad technology, something that the likes of InMobi are already working on in India.
Unfortunately, no one has really come to dominate the mobile world, although this year in India, search on the mobile has beaten search on other devices. But soon people will be glued to apps. Google will no doubt need a new strategy to remain a dominant technology innovator in India in years to come.
vishal@businessworld.in @vishalskrishna
(This story was published in BW | Businessworld Issue Dated 11-01-2016)
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