Ajit Balakrishnan On What Is Wrong With The Digital Space, What It Needs & What Lies Ahead..

Ajit Balakrishnan  – Chairman of Rediff.com gave the keynote at the IAMAI Digital Marketing Conference held at Delhi yesterday. Personally I felt it was one of the best keynotes that Ive heard at any event. Ajit traced the growth of internet right from 1995 to this day and also pointed out key pain points for the growth of Internet today and gave his insights into the road ahead.


Pain Points of Digital Media

On Internet Statistics

Ajit stated that as per his estimated the Internet audience is about 35-40 million (Contradicts Juxt  Consult Report which states 47 million). He also stated that there is no doubt in his mind that in ten years India will be the largest internet market with 300 million users. He though felt that a lot needs to change for that 10 year dream to become a reality.

On the slow growth rate of Internet

A decade ago when internet service provide licenses were being distributed about 250 licences were distributed to ISPs. But ISPs found it tough to scale as the starting gate i.e. the no landline numbers was so small that ISPs couldnt grow, At the same time mobile became cheaper and available. He stated that broadband business is like building bridges and roads and so its a 25 year game for returns. The ISP’s never got that much time or investment to build out the internet infrastructure.

On Credit cards a pain point for lack of ecommerce

Ajit stated that India’s credit card penetration was dismal and that has been the real reason of the slow growth of ecommerce in India.

On IAMAI and Its Role

Ajit criticized IAMAI on the fact that it projected bigger and bigger internet userbase numbers and growth predictions in its reports over the years. There is little use of this and infact the government feels that if the internet penetration is any which ways growing fast then there is no need of their intervention to quicken the pace.

On Investment Ecosystem

Ajit stated that according to him there was a  lack of intelligent domestic VC’s in India. The problem with them is that they are investment bankers who have been in the west and some of them would give the money to young entrepreneurs and then “screw” them over on exit startegy in board meetings.

On Why is Local VC Industry Important

This is because the American Vcs follow the american economy cycles and if the current recession is anything to go by India is far removed from the american recession impact though American VC’s aren’t as their money flows from there. There is another dying need in the Indian space and that is for Angel Investors. Ajit stated that in india we need not more than 25-75 lakhs of investment for a seed stage startup to get things up and running but there aren’t enough individuals around investing in companies. He felt what was missing was to option to write off one’s losses if the startup that the angel invested in didn’t work out.

Solution to the pain points

On Governments Role

Ajit is stated that one of the key roles is that of the government if Internet has to grow any faster. He stated that even in the west the basic infrastructure like the http protocol and the internet was developed from the defence budgets and later came into the public domain. Even the IT services Industry in India which is a multi crore giant today with several global companies became so after the government supported the industry with tax exemptions, infrastructures support etc.

Ajit felt the government needs to do the same with broadband infrastructure in India as access was the first hurdle in building the internet economy. Ajit also felt that the govt has an enormous amounts of funds via LIC and UTI and can be a funds of funds to aid startups at the seed level and drive innovation in this space.

According to Ajit moral of the story is that we need to engage the Government. Cyber cafes are important for growth and the same need to be encourage. He pointed out at the chinese industry where broadband cafes built the gaming industry. He also pointed out that the Chinese have a very liberal VAS industry where operators give 75% of the revenue share to content creators. In India operators part no more than 16-20%. The TRAI needs to intervene in this and make this % atleast upto 50% for content businesses to grow.

On IAMAI’s Role

Ajit felt that IAMAI needs to play the role of interfacing with the government inorder to get all the above done and make Internet growth story a reality.

On Possibility Of Debit Card Revolution

Ajit felt that the lacuna on the Credit card penetration could be filled by Debit card which had a penetration of over 100 million in the country. Its important to encourage the use of debit cards online because that is what can propel ecommerce and there by get more advertisers advertising on the medium

On the need for a relevant media measurement system for Internet

Ajit felt we as an industry were not speaking the language that the advertiser understands. The advertiser understand GRP which is the television rating system. We need a uniform system of measurement for the Internet which can be compared to the television and the reach of both media can be compared.

Looking ahead.. Ajit made the following predictions..

  • 3G to be active by middle of next year only fear is that the spectrum should be used for data and not for voice. DOT & TRAI need to regulate the usage of 3G.
  • Middle of next year to be the tipping point for the internet space
  • In 5 years the preferred mode of access to the internet will be the mobile

2 Responses to “Ajit Balakrishnan On What Is Wrong With The Digital Space, What It Needs & What Lies Ahead..”

  1. July 3, 2009 at 12:23 pm #

    Nice. I guess it’s better to have a realistic expectation of “when”, than get it wrong !!

  2. July 3, 2009 at 9:20 pm #

    great , i really liked the predictions he made
    it would be actually wrong to call them predictions
    its like the man can actually peep into future

    i myself attained WATblog panal this year
    there also more stress was give to mobile as the future
    for internet in India this cements that discussion

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