In the first part of this article, we examined why global internet giants almost all hail from US and China. In this second installment, we will examine the potential and challenges of India to achieve the same, and what is left for the others.
No one can afford to lose India
You would have surely noticed the ‘maybe India’ in the title. The ‘maybe’ is why Alibaba, Tencent and Amazon are betting heavily on India. They can’t afford to lose this market.
The lessons of Amazon losing the market of China, despite being an earlier player there, are quite telling. By losing to Alibaba & JD.com, Amazon not only lost a market of 1.4 billion with rapid rising consumption power, but also bred strong competitors on the global stage.
Now Alibaba is competing against Amazon in Southeast Asia and India, and perhaps more regions, if they manage to set their international priorities right.
The same can be said for Facebook and Google, though their losing of Chinese market was for an entirely different reason (read: the Wall). They are, fortunately, in a better position than Amazon in this regard, as their products have a better defensive barrier.
Under the shadows
For the same reason, Alibaba and Amazon are both trying to take control of the Indian market: Alibaba by investing (and taking significant shares of the investee companies), and Amazon by joining the battle itself.
Facebook’s strength in social and Google’s dominance in Android ecosystem make it really hard for any local player to emerge strong challenger to these global giants.
The factor of timing is crucial here. Amazon lost China before and they now are applying the lessons on the Indian market.
Is India an inherent breeding ground for internet giant?
Is India a natural fertile ground for internet giants, like it was for BPO years ago?
There are factors suggesting this might happen:
- India is also a large market with rapidly growing consumer base and consumption power;
- rapidly and steadily growing economy;
- (finally) a (relatively) strong central government;
- Aspiring, hardworking and innovative talent pool (that is larger than almost any other country)
- Excellent connections to the Silicon Valley and Seattle (you know what I mean)
But at the same time, there are also factors against it:
- Language – although Hindi and English are widely spoken, the country’s myriad of languages is still a prohibiting factor. We have worked with a few Chinese internet companies operating in Indian market and we know the pains.
- Lack of single market – Modi’s GST is trying to solve this problem. But there are other reforms needed to make it a single market
- Small middle case – Modi’s industrialization drive will eventually create a large middle class, if he succeeds. Simple chain here: industrialization -> jobs -> stable income -> disposable income -> consumption.
- Urbanisation – while hundreds of millions of Chinese have moved to the cities in the past ten years; the majority of the population of Uttar Pradesh (India’s, and world’s, largest sub-national administrative unit, with a population comparable to that of Indonesia) still live in the villages.
- Infrastructure – ranging from education, healthcare and mobile penetration. I personally love Reliance’s bold Jio drive. Regardless of economics and other factors, it at least gives mobile internet coverage to hundreds of millions, such that smartphones are not just camera phones anymore.
None of these hurdles is unsurpassable – but addressing these is not easy, especially in a democratic system, where decision making is inherently slow.
Also, if Indian government can say ‘no’ to global pharmaceutical companies, why not to global internet giants? Anyway, they already vetoed Facebook’s internet for all initiative.
Nonetheless, to create a barrier for domestic internet companies to evolve without predatory acts by international giants requires not only strong political will, but also very, very smart design – it is all too easy to backfire.
Is that it?
While we believe that it is harder, if possible at all, for other regions to produce global internet giants, there are some bright spots here.
One company that is worth watching is Yandex. Although its home consumer market does not enjoy the same scale as China or the US, it has successfully created a multi-facet internet conglomerate in the former Soviet Union.
It even managed to create an Uber rival, which merged with Uber, with Yandex taking controls.