Google’s growth in India is being hampered by poor technological infrastructure that is unable to keep pace with the demands of hundreds of millions of new internet users

June 9, 2013 11:29 pm

Google highlights India bandwidth threat

By James Crabtree in Mumbai

Google’s growth in India is being hampered by poor technological infrastructure that is unable to keep pace with the demands of hundreds of millions of new internet users, says the US-based search group’s Indian head. India is the world’s third most populous online nation, with 150m net users, while the country is likely to surpass the US for second place behind China during the next two years. But a combination of sluggish bandwidth and counterproductive government policy threaten to slow India’s online economy, says Rajan Anandan, Google’s managing director in India. “The single biggest constraint to the growth of the internet in India is bandwidth. It’s patchy. You don’t have a lot of speed,” Mr Anandan says. “It is very, very important that we solve the bandwidth infrastructure problems. That is priority number one, two, three and four.”India’s vast population, extensive mobile penetration and background in industries such as software outsourcing have led many analysts to predict that the country will rank alongside China and the US, as one the world’s top digital economies.

Convergence Catalyst, a Bangalore-based research company, says a boom in internet-enabled mobile phones is kicking off a period of rapid expansion, with smartphone ownership likely to more than double this year to about 48m.

Asia’s third-largest economy is likely to grow in importance as Google seeks growth in emerging markets, not least given the problems of domestic competition and censorship that the Californian group continues to face in China.

“India has an unbelievable appetite for the internet,” says Mr Anandan, who joined Google in 2011 having previously been managing director of Microsoft in India.

This enormous appetite comes despite problems involving expensive and insufficient telecoms spectrum and limited network rollout.

“3G hasn’t lived up to its promise,” he says, referring to India’s slow uptake of faster “third-generation” mobile networks. “I think both the government and the industry, which is primarily the [telecoms] carriers, have a lot of work to do.”

Google does not provide a breakdown of revenues by country, although it says most of its major products rank as India’s most popular, including its search engine and Gmail email system.

However, Mr Anandan says, the company’s strategy, which involves making sizeable investments to bring more people online – including a programme to build free websites for about 200m small businesses during the past two years – was unlikely to see the group turn a profit in the short term.

“The investments we are making in India far exceed anything we can see for the next several years,” he says. “Everything we are doing is about how we scale the internet to a larger number of Indians, and how do we make it more useful. And then eventually monetisation will happen.”

Google hopes to earn revenue in India via the same mixture of online search advertising and commercial business services that helped it to earn $50.2bn in revenues globally during 2012.

Google has 2,000 employees across four offices in India, but says the country’s digital advertising market is only likely to be worth about $500m this year, with e-commerce earning about $10bn.

In the mobile market, where Google is a player with its Android operating system, it has focused on video, where it says Indians upload more content to its YouTube video-sharing site than any other nation outside of the US. “Online video is exploding in India. We just love movies, and 750m Indians watch movies each year, while YouTube has just crossed 50m unique users a month,” Mr Anandan says, a trend driven partly by cricket highlights and Bollywood movies hosted on the site.

“Could we imagine a world in which a billion Indians watch videos online? Sure, if we had enough bandwidth at the right price, because clearly there is enough content around entertainment, movies and music.”