On Tuesday, Google, Temasek (an investment company) and Bain & Co. (a management consulting company) released a joint report about India’s internet economy or ‘e-Conomy’ as they called it. They believe we’re going to become a $1 trillion ‘internet’ economy by 2030.
After all, we have 700 million internet users who spend an average of 6.5 hours online every day. And the kicker? We engage in 65 real-time digital payment transactions per capita per year. This is 2.5 times higher than the global average.
So in today’s Finshots, we cherry-pick 3 insights from the 100-page report which we think you’ll find quite interesting.
#1 The Bharat Opportunity — the rise of small towns
Everyone wants to build for ‘Bharat’ these days.
And by that, we mean that they want to target 86% of India’s population who live in Tier 2+ cities. They want to show a bigger total addressable market (TAM) so that they can raise bigger cheques from venture capitalists.
Okay, it’s not just about the cheque size, but, foraying into smaller towns might make quite a bit of business sense too.
You see, the estimates are that the growth in rural India’s per capita income will outpace urban India. It’ll grow 4.3x between 2019 and 2030 whereas the urban pockets will see a growth of 3.5x. And that could improve the consumption patterns in these areas by quite a fair bit.
There’s another thing. Out of the 700 million internet users in India, 500 million of them are what the report calls non-English literate. These are people that haven’t probably experienced the full might of the digital world. And that’s what companies can capitalize on — the chance to capture this space by offering support and content in regional languages.
And there are plenty of folks who’re already trying this. There’s KukuFM which has podcasts in 7 Indian languages. There’s Meesho, the e-commerce platform, which has a strong presence in Tier 2+ towns probably because it offers its platform in 8 languages. And there’s Apna, which started off as a LinkedIn for blue-collar workers, that offers its services in 11 languages.
Also, it seems that people from smaller towns are more open to trying new brands and products. They’re not set in their ways. Maybe it’s because the digital world is still new to them and they’re still experimenting. But they want ‘Made in India’ products. And this opens the door for smaller brands to try and take on big incumbents in unfamiliar territory.
Also, they may not even have to spend big money on celebrity endorsements to reach this target audience. Because folks living in Tier 2+ cities actually trust local influencers a lot more. In fact, 84% of the people surveyed preferred hearing from small-time YouTube Vloggers. In Metros, this figure drops to 65%.
So yeah, thanks to Tier 2+ cities, the creator economy is booming too.
#2 India’s content creators are having their moment in the sun
There are 7,000 YouTube channels with over 1 million subscribers now in India.
On the face of it, that may not seem like much. After all, we do have 80 million content creators in the country.
But the fact is that the numbers are rising rapidly. In 2021, we had just 3,500 YouTube channels which could boast of 1 million subscribers. So not only is the pool 2 times larger now but we’re also the fast growing in the world.
And one reason for that is the insanely low data cost we enjoy. India pays $0.68 for every GB of data as opposed to the global average of $4.21. So we’ve taken to scrolling for long hours on social media for our dopamine hit. And as we scroll, we tend to follow and subscribe to people that we resonate with. In fact, two-thirds of India’s digitally active population actually follows an influencer online now.
That means, it’s literally boom time for the influencer economy. Companies are using influencers to market their products like never before. And the influencer market has already jumped by over 40% to $150 million in 2022. The prediction is that by 2030, these influencer marketing spends could balloon to a staggering $3 billion. And 70% of the money is also estimated to go to non-celebrity influencers.
You know, the ones that people actually relate to.
And how will this impact the economy, you ask?
Well, just look at YouTube. The company publishes a report every year highlighting just this. It says that in 2021, its creator ecosystem contributed over ₹10,000 crores to the Indian GDP and helped create more than 750,000 full-time equivalent jobs too.
If you’re wondering how that’s possible, well, an example we’ve used earlier is the startup known as Physics Wallah (PW) which is first and foremost a YouTube channel.
A quick LinkedIn search says that it has over 6,500 employees now. Probably to teach, build apps, and market its products. These folks get paid their salaries, and like all of us, they probably saved some and spent the rest — perhaps bought a new phone, spent it on a nice meal, or watched a movie. Their spending in turn creates more jobs and aids economic activity.
PW also leases office space, rents and buys equipment, and spends on IT services…all this creates indirect jobs too.
All this is the trickle-down effect of the creator economy. And yeah, this can propel India to that $1 trillion digital economy mark.
#3 India’s new gateway to the world is SaaS
For a long time, if you used India and technology in the same sentence, everyone would assume you were talking about IT firms like Infosys or Wipro.
But not anymore. Today, India and technology in the same breath conjure up images of young Software-as-a-Service (SaaS) companies. While Indian SaaS companies have just a 5% share of global revenues in 2022, by 2030, the good folks behind the report believe that we could hit the 10–12% mark.
But wait…what’s SaaS, anyway?
Okay, back in the day, if you wanted a messaging application to help improve workplace communication, you’d have to install a clunky piece of software on every computer in the office. It was cumbersome. But then, the cloud emerged. You just needed access to the internet and you could easily use the messaging app without it taking truckloads of space in the computer. Crudely put, that’s SaaS or Software-as-a-service.
And over 30% of the software sold in the market today takes this form.
Indian companies have capitalized on this trend. We have over 1,500 funded companies building all kinds of SaaS products — from simple helpdesks that help with customer support to HR management tools that can manage the recruitment and payroll process to sales lead management systems. We’re talking about companies like Freshworks, Browserstack, Postman, and Leadsquared, of course.
And yeah, we’re selling this software to the world. In fact, 75% of the revenues of Indian SaaS companies now come from global customers.
The pandemic might have helped our cause too. Everyone was busy buying cloud software to meet their needs of going remote. And most transactions were signed, sealed, and delivered virtually. We didn’t need fancy global offices to convince the world of our software prowess.
The end result of this?
We’ve grown from just 2 SaaS unicorns (valued at over $1 billion) in 2018 to over 20 of them in 2022.
And you can be sure there are more on the anvil. Because when investors were asked which sector they’d bet their money on in the next couple of years, 77% of them picked SaaS. Yup, fintech which was once the darling of investors came second with 59%.
So yeah, there are lots of cool insights like this in the report. But that’s all we could pack in for now. What do you think of the prospects for India’s ‘e-Conomy?’