Sanjay Sinha is the General Manager of Fortumo India
If you were to launch a mobile app or game today, what markets would you go after? Common sense would say US, Japan, China, UK, South Korea, Germany, Taiwan and Australia as these are the countries at the top of revenue charts for mobile developers. However, going by this list leaves out the elephant in the room: India.
If India is not at the top of the revenue charts, why should it matter for developers? Let’s look at the facts.
For starters, India will have more smartphone owners by the end of 2014 than there are people living in Australia, Germany, South Korea, Taiwan and UK combined. The latest estimates – admittedly, perhaps too optimistic – say India will overtake the US in smartphone ownership this year as well.
So there will be a lot of smartphone users, but if China is leading in revenue and smartphones, why not focus there instead?
China vs. India?
China still remains a big challenge for developers. The country has great limitations in entering the market – not just local regulations and publishing rules which are a grey area, but also barriers in language and culture.
Our own experience has been that obtaining a publishing license in China may take up to 12 months to complete – even if you have a dedicated team working on it. This is not to say that China should be ignored, but it’s important to understand that entering the Chinese market takes effort and time.
India, on the other hand, is a relatively Westernized country in the technological sense. A significant part of the population speaks English and there aren’t any real restrictions on launching your online services or games.
Unlike China, all global app distribution channels are available and widely used in India. There is also no competition from giants like Tencent or Baidu for China who have been able to attain a critical mass among consumers. India is therefore still a greenfield opportunity for many online and mobile content categories. But what about the revenue?
Lifetime value is key to revenue in India
According to estimates, 10 to 15 percent of monthly mobile ARPU in India is spent on content or value added services. In terms of monetary value, this is approximately 20 INR ($0.3).
Perhaps low by Western standards, but for an app with 1 million users, this would already translate into $300,000 monthly additional revenue for a relatively small effort. ARPU is expected to grow as well since the payment landscape for content is starting to slowly change in India.
So far there have been three key challenges in making revenue in India. The biggest challenge has been finding an appropriate payment mechanism. An enormous gap exists between people who are able to consume content (both smartphone and feature phone owners) and people who can pay through traditional methods (credit cards).
Going after revenue with credit cards in a market where only 1.7 percent of the people own them is a great way to set one up for failure. Working with local merchants we’ve seen how bringing operator billing into the payment mix resolves this issue.
The other key challenge is distribution, how to reach consumers. Thankfully, social media marketing, ad networks, mobile operator and OEM deals provide significant thrust. In fact, we work very closely with our developer partner in their distribution endeavor.
But even with broader payment coverage and distribution, the average user spending will still remain relatively low. That’s the third key challenge.
Our own Android in-app payment data indicates monthly average revenue per paying user of around $2. It is important therefore to get most out of customer lifetime value – retain and engage users for a reasonably long time, at least four to six months. Otherwise, the amount invested into user acquisition compared to their spending simply does not pay off.
Understanding ABC, feature phones & local OEM-s
So far the growth in mobile consumption has been driven mainly by English content, aimed at the urban population living in bigger metro areas like Mumbai, Delhi and Bangalore. However, most of the future growth will come from rural areas where large, uncaptured audiences expect localized content.
Native English speakers tend to forget that less than a fifth of the world can understand them. Localization means not just translation of your service into Hindi and other local languages (there are 30 languages spoken by more than a million native speakers in India). In some cases it also means localizing your content.
Historically any content related to ABC – astrology, Bollywood and cricket – has had the biggest success with Indian audiences. Even six of the top 10 videos on YouTube in India are Bollywood or local cinema, TV or cricket; translating your content and modifying it to fit around these culturally dominant themes gives a strong competitive advantage over other developers trying to battle for eyeballs.
It’s not just local Indians who like this content – there are an estimated 25 million people of Indian descent living outside India as well.
Another key issue to understand about the Indian market is that even though smartphones are growing at a huge rate, feature phones still dominate. So for wWb services, having feature phone friendly access to your content is essential.
Ninety percent of YouTube views, for example, come from feature phones in India. Adapting existing content to meet local needs is nothing new as it has been utilized in Africa as well by companies like Mxit and Eskimi.
Adding 700 million feature phone owners to your potential customer base should be enough of an incentive to not forget this part of the mobile user base.
Thirdly, local smartphone manufacturers and app stores are relatively popular in India. While most consumers want to buy a phone from Samsung, Apple or Nokia, local customer tastes and low income have given space to Indian OEM-s like Micromax, Karbonn and Lava to capture a third of the market.
Beside Google Play, the alternative app stores like Mobango, SlideMe and Getjar are quite popular amongst smartphone owners as well. For those merchants not familiar with India, it makes sense to work together with these local players who have a strong understanding on the local mobile market.
There are only so many countries in the world with a potential smartphone ownership of more than 1 billion. While India is currently big for Western developers in terms of downloads, the revenue challenge still remains to be solved.
The booming mobile gaming market in China has proven that such challenges can be conquered. And if India does become as huge in the next few years as China is today, would you be happy with the missed opportunity?