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"You Cannot Really Compare India With China At This Moment"

"You Cannot Really Compare India With China At This Moment"
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There has never been a better time for mobile businesses than now. There’s an app for basically everything and people are spending more and more time on their phones. This expansion of mobile has also made it to rural India, and with this number ever increasing, we have already beaten USA as the second largest smartphone marketplace.

Still, India has a long way to go before it comes in par with China in terms of number of mobile phones. The goal is far, however, we need not take the same road China did, says Vikas Agarwal, General Manager at OnePlus India, a Chinese smartphone manufacturer. Indulging in a small conversation at the Mobile Forum 2016 organized by NewsCorps VCCricle, Agarwal shared his view of mobile business and its future in India.

What are some of the innovations you see in mobile businesses in India

If we talk about the innovations, there are innovations happening at every level starting from distribution to app development, which brings monetisation. For instance, there is a company which allows apps developers to publish their apps and distribute it at retail stores. So, if you see, most of the people typically download apps from playstore, and these are tier 1 or metro audience.

But beyond Tier 1, if you talk about tier 2 and tier 3 cities, people do not have better connectivity to internet What these guys are doing is, they are partnering with retail stores, mobile stores, and the sales person downloads apps at the time they sell it to customers. It is a very interesting innovation which is India specific. These guys are doing more than 300,000 downloads. It is a very big market which they are covering. In terms of app advertising, which really leads to the monetization, a lot of companies are operating in very immersive ads. Like product placement within the video. Video is the main ad driver on mobile. 80% of the data consumption is on mobile and this is something which is driving the mobile growth in India at least. Lots of companies are working on interesting ad formats which allow you to place your brand or product within the ad. That’s really interesting!

And in the future, will this business dwell?

Indian market is still in a very nascent stage. Our mobile penetration is probably 15%, smartphones are just 150 million. So, we’re yet to see that explosive growth which other markets are seeing. In terms of ad revenue that’s really fraction of the overall digital revenue and very low as compared to global market.

India is also first mobile company and mobiles have already overtaken the number of desktop users. As this number grows and more people get access to internet, the consumption of data will grow, advertising will grow and the cost of mobile advertising will grow. Today it’s probably one-tenth of the US or China standard, but eventually it will come at par within 3-5 years time.

Should we follow China’s footsteps here looking at their growth?

You cannot really compare India with China at this moment. China has a much higher purchasing power and it’s already a mature market. We have seen how the growth of smart phones has started slowing down. The new addition to smart phones is much lesser now as compared to what it used to be in the last 2-3 years. The explosive year of growth has slowed down. The new growth will come from up gradation, and then with the new addition. So, I think in order to meet China’s standard, it will take up to 5 years.

What can India learn from China’s mistakes?

India’s strength has always been in the software, so, first, we should not take China as an example. We have seen how Indian companies have actually created world-class products. For example, Ola is competing very well with Uber in India. Similarly, Didi is competing with Uber in China. So, we can create companies within India with Indian context that can compete with global players. So, India should not stop thinking and take minimum inspiration just from foreign examples and see what kind of requirements and demands are there for Indian users. Tier 2 and tier 3 cities really offer a big opportunity for Indian players, which is very different from any other developed country including China. China has become relatively developed country now.

My suggestion to Indian developers is to focus on grassroot problems, specially focused on Tier 2 and Tier 3 cities. In terms of the sector, payment is still a very early stage phenomenon. Many companies are investing into Fintech and payment space. But I think there are lots of opportunities to improve on that. Second is the Biotech sector, both from hardware perspective and from new emerging sector perspective. Lots of global innovations are happening in Biotech space but not in India. So, I strongly wish to see any Indian company to come up with product which can internationally compete in Biotech space.

So, what is the best strategy to monetize mobile business in India

In terms of monetization, it again varies from which sector you are playing in. OnePlus is a hardware company and our primary focus is on developing products and then distribution. Lot of entry level smartphone players, which operate in the mass market, they are really in the price competent stage. They do not really have the pricing power to price their products high. So, they end up bundling their apps or re-installing apps to get the additional revenue.

In the premier space, there is no opportunity there. At One Plus, we do not look at pre-installation as a monetization. I wouldn’t advise other brands to do it as it creates a bad user experience. In the long run, you want the user to remember you as a good product, so next time when they upgrade, you continue to retain them. From hardware perspective or mobile smartphone device perspective, I think software services can eventually become a big revenue stream. We have already seen how iOS has been a big revenue generator for Apple. Similar thing can happen if you become a leading player in the mobile ecosystem space.

But where will the money come from?

Investment is always available if the startup is good, the team is good, unit economics is right and the timing is right. If you have these four things in place, funding should never really be a constraint. Most startups face funding crunch because they are either at a bad time, the market is not growing fast enough or they spent money too son on things which didn’t pay off.  So you should always be very conservative on spending money that you have and focus on the core business value proposition, than just plain user acquisition, which is more for vanity.

Edition: December 2016

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