Market Insight

Google makes play for India’s mobile market

September 28, 2016


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Google unveiled a range of new products and services aimed at the Indian market:

  • YouTube Go: a light or ‘lite’ version of the video service that optimises the experience for users on 2G connections and lower spec handsets. It will also enable sharing of content between users in the same location without requiring a data network.
  • Optimised Google Play and Chrome: that preloads parts of the store on Wi-Fi to enable faster browsing and allows users to delay downloads until they are on a Wi-Fi connection. Chrome now supports a Data Saver mode.
  •  “Lite” Google apps: optimised News and Weather apps that consume one-third less data when on low bandwidth connections.
  • Google Station: free public Wi-Fi hotspots at India’s rail stations.
  • Google Play Music: a local version of the retail music store (it has not launched an on-demand “all access” service).
  • Localised Allo assistant: Google’s recently launched smart messaging app offers responses in Hindi.

Our Analysis:

Google is in a strong position in India where Android smartphones make up more than 95% of the smartphone market. The vast majority of these run Google Mobile Services and IHS forecasts that the smartphone installed base in India will grow from around 300m in 2016 to over 800m by 2020. However, these new services show that there are still significant barriers to growth. India’s limited mobile infrastructure, not just networks but also devices, advertising and billing, means that mobile content and advertising revenues are still very low.

In a report published earlier in 2016, How to take advantage of India’s mobile growth, IHS identified five major challenges facing India’s mobile content and services market:

  1. Limited smartphone and mobile data access
  2. Localising services for a such a geographically, culturally and linguistically diverse market
  3. Regulation
  4. Payments and billing infrastructure
  5. Advertising technology

Google’s strategy goes some way to addressing the first two of these challenges. Enabling greater accesses to content and services is a necessary first step, but there is further work to be done to help grow India’s mobile app and service revenues. Investments in advertising technology and further support for local payment and billing services for apps will be crucial to driving revenues.

India’s music market may also present a challenge for Google. Local music and entertainment apps Saavn, Gaana, and Hungama claim a combined audience of around 100m users and have secured partnerships with device makers, operators and payment companies. Google is also following the existing practices of some local apps. Its new YouTube that provides offline content sharing between users in a particular location is similar to local messaging app Hike’s Hike Direct service that enables offline chat to users within a 100m radius.

The high profile launch of the new national LTE operator Reliance Jio has also significantly changed the Indian mobile ecosystem. Aggressively priced commercial tariffs released at the start of September offer large bundles of LTE and WiFi data - and free LTE data downloads at night times. Jio connectivity is also completely free until the end of the year and the range of apps - including music, video, chat and payments- are free to subscribers until the end of 2017. 

Alongside a range of low cost ‘Lyf’ branded Jio smartphones lowering the barriers to entry, initial reports indicate that this is effectively acquiring subscribers, despite the high demand on the network causing dropped calls and an ongoing dispute with competitors on interconnection points. Account management app My Jio has surpassed ten million downloads, suggesting Jio’s target of 100 million subscriptions - the level of scale that is required for sustainability in the competitive Indian market - may be achievable in relatively short order.  However, while cutting data costs significantly (and including free voice), Jio’s tariffs are positioned to start at the average ARPU for the country, and therefore target higher spending subscribers. Google Station and the optimisations described here will target the large mass market not reached by Jio or the price war that has been set off among competitors.

International companies and investors are increasingly focused on the Indian market: Chinese companies Tencent and Foxconn invested $175m in Hike Messenger in August 2016; Apple opened a Bangalore iOS developer centre in May 2016; and India ranked second behind the US in terms of the number of mobile related funding deals in IHS Technology’s Q2 Mobile Funding and M&A Market Monitor. International companies have also faced challenges in India. Facebook partnered with Indian mobile operators to provide its “Free Basics” app that offered zero-rate data access to a limited number of apps, sites and Facebook services. The Indian telecoms regulator TRAI ruled that such services went against net neutrality regulations following a challenge earlier in 2016.

 

Geography
Asia Pacific India
Organization
Google Inc. Google Play
Research by Market
Mobile & Telecom
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