Wednesday, September 9, 2015

The Future of the Internet Belongs to India

By Zak Muscovitch

On my recent trip to India for the DomainX conference, I found that the excitement and anticipation among Indians was palpable. India stands on the precipice of becoming the single most powerful force on the Internet. Peering over the shoulder of the USA and China in terms of current volume of Internet users, the numbers tell much of the tale. But the current volume of users alone does not reveal the entire story.

In order to fully appreciate India’s future place on the Internet, one must first appreciate its remarkable past. Many Westerners would be surprised to learn, that but for a veritable blip of history comprising the last few centuries of human progress, India has been at the center of the economic world. As shown on the below map prepared by the McKinsey Global Institute, in the year 1000 AD, the world’s economic center of gravity was in fact, in Asia, just north of current-day India, and west of China.




By 2025, a mere 10 years from now, the center will have remarkably shifted back nearly all the way to how it was over 1000 years ago. What is equally remarkable, is that the last 1000 years of human civilization is but a fraction of India’s economic history. It does not encompass the entire length of Indian civilization, which can be traced back to between 3000 and 1900 BC. As masterfully documented by historian Michael Wood, in his landmark documentary, The Story of India, the greater Indus region was home to the largest of the four ancient urban civilizations of Egypt, Mesoptamia, South Asia, and China, and comprised the planned cities of Harappa and Mohenjo-daro, which were trade and craft production centers. As early as 3000 BC, writings and carvings indicate that India had established itself self as a major spice trade route centered in Kerala, the “Spice Garden of India”, marking the beginning of the spice trade, which was to become the largest and most important business in the entire world for centuries to come. Let us also not lose sight of the fact that it was Spain’s Christopher Columbus himself, who was trying to find a route to India’s spices, when he stumbled upon America by mistake.

Aside from its financial importance, India of course must be recognized for its vast and rich cultural and religious history. India is the birthplace not just of Hinduism, but also of Buddhism, Jainism, and Sikhism. There are 2000 ethnic groups in India and there are 122 languages spoken with nearly 2000 dialects. In India today, there are 1.3 billion people in 36 states, and it is projected to be the world’s most populous country by 2025. An estimated 80.5% of Indians are Hindu, and 13.4% or 177 million, are Muslim, making it the third largest Muslim population in the world, after Bangladesh (formerly part of India), and Indonesia. Many aspects of Indian cultural life which have existed for centuries, are only now catching on in western countries. For example, the popularity of yoga in the United States has increased dramatically, with almost twice as many adults practicing yoga as in 2002. Vegetarianism, practiced by Hindus and other Indians since ancient times, is now practiced by 5% of Americans, doubling from 2.5% in 2009.

Moreover, today’s Indian populace is remarkably young, with a median age of 28, which is significantly lower than China (37.6), and Japan (44.4), with its workforce expanding as China contracts, resulting in a labor shortfall by 2050. As quoted in CNBC, Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse, "India has close to ideal demographics. It's in a sweet spot…As the population's working age expands, savings increase — and that turns into a source of funding for investment. This will be beneficial for the country's competitiveness as other countries age". Also, according to Sunil Devmurari, country manager for India at Euromonitor, "Two hundred and fifty million people are set to join India's workforce by 2030. As a big chunk of the population shifts into the working age group, the offshoot of that is an increase in disposable incomes and conspicuous consumption. This is the most exciting aspect of India's demographic dividend".
India’s place in the world and its immense potential, has not been lost on new Indian Prime Minister, Narendra Modi, who proclaimed that, “the 21st century will be that of India”, with plans to upgrade India from a $2 trillion economy, to a $20 trillion one, while recognizing that India was transitioning from “a winter of subdued achievement” to a “new spring”.

Now, when it comes to the Internet and the future of India, the numbers are equally remarkable. Currently, the first-ranked country by number of Internet Users is China, at 641,601,070, followed by the United States in second place at 279,834,232. India ranks just behind the United States in third place, at 243,198,922 Internet Users. However, the most impressive aspect of India’s volume of Internet usage ranking, is not that it is in third place, just behind the US, but rather, that those 243 million Internet Users represents a mere 19% penetration of India’s total population of nearly 1.3 Billion people. In comparison, the US’s 279,934,232 Internet Users represents nearly 87% of its populace. In other words, once India ramps up to 87% penetration amongst its massive populace, it would amount to nearly 900 million people, or close to 3 times the population of the entire United States. Accordingly, currently, at the low penetration rate of 19%, India’s share of the world’s Internet Users is 8.33%, whereas at 87% penetration, it could conceivably rank at close to a quarter of all Internet Users, worldwide. China too presents a massive demographic potential for increased Internet Users as it rises from 46% penetration, however currently India  is outpacing China in terms of year-over-year Internet User growth, at a rate of 14% growth to China’s 4%. What also stands out about India, is its high proportion of mobile Internet users. On a percentage basis, India already has more mobile Internet users than any other country in the world, according to Google India Managing Director, Ranjan Anadan.

When applied to growth in Internet commerce sales, India’s massive growth in Internet usage demonstrated an equally massive yet unrealized growth in online sales. There are about 35 million Indians who currently buy products online, but by 2016 that will more than double to 100 million Internet Users who make purchases online. The potential growth in the Indian online commerce marketplace is simply staggering. Mr. Anandan cleverly refers to the immense potential of the massive Indian marketplace, as “the billion user opportunity in India”.

The growth of the Indian Internet marketplace is being led to a substantial degree, by businessmen of Indian origin, who are leading the world’s largest technology companies. Google’s Chief Executive Officer is Sundar Pichai. Microsoft’s CEO is Satya Nadella. SanDisk’s CEO is Danjay Mehrotra. Nokia’s CEP is Rajeev Suri. Adobe’s CEO is Shantanu Narayen. It is truly remarkable, and these are only a handful of the success stories.

But it is not only established companies which are being led by Indians and people of Indian origin, but also start-ups. Indian Prime Minister Narendra Modi, has appealed to the people to work towards making India a “Start Up Nation”. Israel, the original “Start-Up Nation”, has served as a model for the entrepreneurship that is being fostered in India, with assistance and cooperation in many technological and academic endeavors. India has made incredible progress in homegrown in entrepreneurship.  Its Indian Institute of Technology (IIT) is ranked fourth (just ahead of Harvard) out of 50 universities, in producing venture capital backed founders.

Even outside of India itself, Indians start more companies than any other immigrant group in California (26%) and many other states, and overall, 33.2 of all companies founded by immigrants in the United States are founded by Indians. which is amazing considering that Indians only represent between 0.7% and 3.4% of the population of these states, as mentioned by Neesha Bapat in Forbes.

One reason that India has become a hotbed for entrepreneurship is that so many international companies, particularly in the tech field, have offices in India, as pointed out by Andy White, lead research analyst for Pitchbook, as quoted by Nelson Vinod Moses.  “Large corporations such as Microsoft and Google hire a larger number of employees from India. After building a resume at one of these major companies, employees are connected enough to make a foray into the world of startups,” says White.

That is exactly the situation that I personally found when I visited Bengaluru (formerly known as Bangalore), which is considered the center of the “Indian Silicone Valley”, in August, 2015. There, while attending and speaking at the DomainX domain name conference in my capacity as a domain name lawyer, I met many young Indian engineers who were working at major international technology companies in a variety of capacities. Many of them had completed graduate work abroad, and many spent time in the United States where they were working at their company’s head offices. Nearly all had an interest in starting their own company, and more importantly, all had the technological ability to do so. Moreover, by locating themselves in India where experienced qualified tech guys are in abundance and far less expensive than in California, they have increased their financial ability to execute. 

The future is bright for Indian entrepreneurs, with the number of Indian billionaires set to double within the next 10 years.  You may be interested to know that at one point, the richest person in the entire world, was Osman Ali Khan, the 7th Nizam of Hyderabad (today known as “Cyberbad” due to it being a center for technology companies, along with Bengaluru). 



When the 7th Nizam was deposed in 1948, he was adjudged the richest man in the world. He had a diamond the size of a grapefruit that he reportedly used as a doorstop, and in 2008, Forbes magazine placed him fifth on its “all-time wealthiest” list, with a personal fortune in inflation-adjusted dollars of $210.8 billion. Furthermore, as the story goes, on a visit to London, he was pissed off by a Rolls Royce salesman who didn’t think he, being an Indian, had enough money to buy one. Well, he bought six, and used them to sweep the roads in Hyderabad. You can visit his former home as I did, in Hyderabad, as it is now an incredible hotel called the Taj Falaknuma PalaceHowever, the richest man in India these days is a Mumbai businessman, who built his own 27 floor home – I mean the entire building is for him and his staff! It is the world’s second most expensive residential property after Buckingham Palace. 

When it comes to domain names, which is my particular area of expertise, India is also experiencing tremendous growth. India’s national domain name suffix, or “Top Level Domain”, “.in”, crossed the 1.7 million mark this April, 2015. And that is with only 20% Internet penetration. In comparison, Canada, who has nearly 93% Internet penetration with a population of a mere 35 million, has just under 2 million “.ca” domain name registrations. If Indians continue to adopt the .in domain name TLD in proportion to the growth of Indian Internet penetration generally, then it could experience a dramatic growth, while Canada’s .ca registrations, for example, are slowing down. That being said, from the people that I spoke with, “.com” continues to be “King”, as it bears a more established prestige, and international attraction for many Indians. As reported in TheDomains, according to FirstPost.com, average monthly domain name registrations in India has more than doubled, so that it now accounts for 4% of global registrations. That is still a far cry from the 20-22% for China, but as we saw above, it is India that is poised to overtake China as a result of its staggering growth in Internet Users.

I see tremendous opportunity in India both for Indians, and for non-Indians who do business in and with India. In the Internet sector in particular, India is poised to become a world power, second to none. Given its dramatic year over year growth in Internet penetration, combined with its 1.3 billion person populace, young and educated workforce, and entrepreneurial spirit, I envision an Internet that will shortly be, to a substantial degree, run by and used by, Indians. That is why the future of the Internet belongs to India.

13 comments:

Mr Abc said...

Regarding domain names, the problem with India is that their native alphabet transliteration is not as commonly used as Pinyin is in and outside of China. So, in your opinion, which of these have the strongest potential to grow in India:

1. .in domains written in latin (english or transliteration)
2. in. domains written in devanagari
3. .com domains written in latin (english or transliteration)
4. .com written in devanagari

?

DomainMedia said...

Great information and well presented, must have taken some time to put that article together. The numbers are impressive for future internet growth in India. I hope they start buying more domains too!

Unknown said...

Very engaging and thorough. India has fascinating potential where the internet is concerned, and much of that potential is already being realized.

1 factor that bodes well for India's ascendancy – as opposed to China's – is the preponderance of English. While Chinese remains foreign to most people outside China, in India the lingua franca precisely matches the world's lingua franca: English. That has made, does make, and will make a huge difference.

Unknown said...

P.S. "Unknown" = Joseph Peterson. Couldn't find a way to sign in with Blogger.

Zak Muscovitch said...

@DomainMedia, Many thanks for reading and for your comments! I think that there is a good chance that one day in the not too distant future, Indian domain name buyers will be spending money like Chinese domain name buyers are now.

@Unknown, thank you so much for your comments! I agree - that is an excellent point! The prevalence of English language education and use of English in business is a huge advantage over China. I also found it interesting that many very British turns of phrase were commonly used in India, such as my favorite, "One fine day..."

Zak Muscovitch said...

Thanks you Joseph Peterson. :) Great point!

Ankur Raheja said...

Wonderful article... you seem to have done a great amount of research. Cheers !
Hope to see the internet growth on these lines in near future.
May work wonders for internet lawyers too :)

Krishna Nalamothu said...

One of the best ever posts on my country by a domain industry person.

Thank you

Zak Muscovitch said...

Thank you so much for reading, Ankur! It was a pleasure meeting Ankur, one of India's leading Internet lawyers, on my recent trip to India.

Krishna, thank you so much! I loved writing this article, and may even follow up with another.

Zak Muscovitch said...

@Mr abc, Thank you for your comment. In my opinion, .in, in English / transliteration, have the most potential. Although it was clear to me that amongst many Indians, ".com" was the preferred TLD, I think that with the passage of time, India will embrace its ccTLD in the same was as Canada has done. In Canada, .ca is a trusted extension and is attractive to Canadians as it denotes a "local" business. I think the same is possible in India, and even if Indians only embrace .in to a very modest level, that could still represent a dramatic increase in .in registrations.

Samit Madan said...

Startups in India prefer the .IN if they're focusing on a local market and .COM if they have global ambitions.

Excellent article Zac, look forward to reading many more.

Zak Muscovitch said...

Hi Samit, thanks so much for reading. Excellent point that makes perfect sense. Indians do of course have global ambitions for many businesses and as such the .com makes more sense. Surely Indians will continue to show increased interest in the .com TLD, thereby increasing demand for registrations, pushing up total Indian-based registrations from 4% to much higher. But it is also the .in market which also presents particular interest for me, because it is so underdeveloped in relation to India's population and capacity, and the domestic Indian market is incredibly massive.

Paul Singh said...

I wish this article was brought to my attention earlier...could have used some of the stats for the most recent India Masterclass at Namescon:
http://namescon.com/news/india-masterclass-namescon-2017#

Its been a gradual process but speaking strictly from a domainer perspective, over the past 2-3 years definitely an increase in not only inquiries on .in names but the quality of the offers.

It was a pleasure meeting you at DomainX in India as well as Namescon 2017 BTW.