During 2014, India has the potential to become the world’s biggest smartphone market. Consumers want to access entertainment and other digital content through smartphones, and smart device ownership is growing at an unprecedented rate. Yet while the digital divide is diminishing, another challenge is becoming worrisome for digital content merchants: Monetization.
The growth of the Indian digital ecosystem has enabled many local companies to become successful due to being early movers in a quickly growing industry – Flipkart (e-commerce), MakeMyTrip (Travel), Naukri (Jobs), Octro (gaming), Gaana (music streaming) to name a few. Most of their audience is now accessing the content or transacting from mobile devices. So what does it mean for companies gearing up for a mobile-first approach?
Previously, most people accessing online content were doing so from non-mobile devices, e.g. desktop and laptop computers. On an average, this user group has a larger income and is socially more advanced than the average consumer. But now that you can get a smartphone for as cheap as INR 3,000, and content is increasingly becoming more accessible to a much wider demography.
The reason why income matters in this case is because of the primary monetization solution for selling anything online: digital banking. People with more wealth are able to (and permitted by their banks) to own a credit card, but lower income groups do not have access to this payment solution. So how big is the gap?
Data from the Reserve Bank of India shows there are currently approximately 19.5 million credit cards in circulation in India: a growth of just 4.8% during 10 months: nowhere near the triple-digit growth rate of smartphone ownership. This means already over 100 million smartphone owners are trying to access paid content online but failing to do so. The issue is clearly illustrated by Google Play revenue numbers: India is #3 in terms of global downloads, but disappears from the top revenue countries list.
It is unlikely that the credit card problem will go away for some time. Issues such as identity & reputation verification, debt enforcement and the prevalence of an informal, cash-based economy are not going to change in India as quickly as people are buying smartphones. What’s the solution?
The lack of accessible online payment solutions creates an opportunity for mobile operators and large-scale adoption of carrier billing as an alternative payment method for people who do not own a credit card. With carriers in the country struggling to keep up with the growth of data consumption, stepping in as a payment provider for the digital economy can alleviate the pressure put on networks.
Granted, a lot of issues (such as replacing outdated Premium SMS technologies with direct carrier billing and low revenue shares unacceptable to physical goods merchants) still need to be resolved for carrier billing to become a widespread payment method. However, implementing change on the carrier & merchant side is a much more controllable process than hoping a large amount of smartphone owners magically get access to credit cards.
Affordable smartphones have resolved the challenge of giving users access to online content in India – but now the issue of monetization needs to be resolved as well. Here the responsibility lies on the mobile operators to decide whether they want to grab the leading role in the digital economy or remain basic infrastructure providers.