The Next Mobile Internet Wave (Part 1)
India has millions of mobile internet users and soon will have many millions more. We believe it’s a great time to start up and build products for the next generation of mobile internet users in India. We’re constantly learning about emerging mobile internet trends through the eyes and actions of our portfolio companies. Here are a few thoughts that we hope will be useful for founders building a business/product for the next generation of internet users in India.
In the last three years, most of us have either seen or presented a slide showing India’s path to 400–500M mobile internet customers. The growth trajectory projected was awe inspiring.
Surprisingly, the data from the last twelve months doesn’t support this optimism.
Here is a snapshot of the monthly active users from App Annie for some of the top downloaded apps in India from Jan 2014 to June 2016. User growth seems to have plateaued over the last 12 months and new internet user growth has been tough to come by.
This is surprising since India now buys ~100M new smartphones a year, with device cost having dropped over the years. This figure includes replacement as well as new devices but, even with this, you would still expect India’s nascent mobile Internet market to be growing by leaps and bounds. So why is it flattening instead?
Next, we looked at the mobile data revenue growth of some leading telecom operators in India
Mobile data revenues for Airtel grew 12% in the last four quarters (compared to ~37% in the previous four quarters) and that for Idea grew 11% (compared to ~29% in the previous four quarters). So, clearly data revenue growth for top telcos also slowed down during this period. Hmmm…what’s happening here?
It is our hypothesis that a bunch of early adopters of mobile internet jumped onto the bandwagon and continued to drive growth via increased usage but the expected tsunami of new users never showed up. Why? The data below suggests that the high cost of mobile data could be one of the main show stoppers.
Thankfully things have begun to change. JIO (and the other operators) have started to bring down data costs dramatically. Decreasing data costs coupled with reduced smartphone prices could be the catalyst for reigniting mobile internet user growth across India.
It’s been a few weeks but we’ve been positively surprised to see the impact of JIO at some of Sequoia India’s portfolio companies already. It’s interesting to note that downloads from other operators are not shrinking even while downloads from JIO are increasing steeply, suggesting that most of these might actually be first time internet users (reason to smile again!).
The graph below shows the impact of the first thirty days following Jio’s launch at some Sequoia India companies (names hidden, no prizes for guessing). Clearly, not only has growth gotten supercharged but, more importantly, after studying the underlying data we believe these are first time Internet customers.
So, are we out of the woods and back to sustainable growth curves? While we are cautiously optimistic, it is critical that new internet users find apps and services that are of relevance to them, else they will quickly churn away. Also without deep engagement on their part, it will be hard to monetise them. So now the responsibility for new user growth squarely shifts to apps and services that have mass appeal and can ride on the rails of affordability in both handsets and data plans.
Net net, we believe this a great time to start up and exploit the next wave of opportunity.
The big question that comes to our minds is whether the next set of users will love the same apps that are currently popular or will there be a new generation of apps built for the next 300–400M users? Stay tuned for the second half of this post where we present a few thoughts that maybe useful while building a business/product for the next generation of users..
Written by:
Virendra Gupta (Founder, Dailyhunt); Mohit Bhatnagar & Shraeyansh Thakur (Sequoia Capital India Advisors)
November 2016
