India

Sector Review Local Search Engine

Sachin Gupta
(91) 9464779295 Gupta_sachin5@yahoo.com

20 April 2013

Sector Overview
India, with 1.27 billion people is the second most populous country in the world, while China is on the top with over 1.36 billion people. The figures show that India represents almost 17.31% of the world's population. India is all set to take the Numero Uno position by 2030. Over some last few years India has also shown some strong economic growth. As per CIA World Fact book and International Monetary Fund Indias GDP, on a purchasing power parity basis has reached at $4.06 trillion in 2012, making it the fourth largest economy in the world after the European Union, the United States, China.
Figure 1 comparison b/w India, china and world GDP

Real GDP Growth Rate

Source: McKinsey & Company report

Having a huge population and strong market scenario Internet penetration in India reached at 12 per cent vs. 43 per cent in China and 80 per cent in the US. With 150 million Internet users, India now has 3rd largest Internet population in the world.
Figure 2: Rise in contribution in Indias GDP

Internet to Contribute up to 3.3% to Indias GDP

Net services will contribute $100 bn to GDP by 2015

Source: McKinsey & Company report

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India

Sector Review

09 May 2011

Favourable Demographics in India

Increase in Household Income

As per the McKinseys report The Bird of Gold, Indias Middle level households expected to grow by over eleven times from 50 million people in the year 2005 to 583 million people by 2025. Hence this will bring growth in consumption of goods and services and Higher demand for convenience solutions like local search engines. Hence, usage of search services has huge potential to grow.

Small and Medium Enterprises (SMEs) in India: The Ministry of MSME estimates that, in terms of value, the SME industry accounts for about 45% of Indias manufacturing output and 40% of the total exports of the country, and to reached at the product produced by these SMEs local search engines play a vital role. More the SMEs more will be the business for local search engines.

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Increasing in SMEs production by 11.5% CAGR

Figure 3

MSME production in Terms of Gross Output (INR Billion)

2010-11 2009-10 2008-09 2007-08 2006-07 8808 7908 7094 9829 10958

0 Telecom Industry is in the favour of local Search Engines.

2000

4000

6000

8000

10000

12000

Source: Ministry of MSME Annual Report 2011

High telecom penetration, growth in internet and 3G subscribers to aid searches engines Telecom: Search engines are also get benefited by growth in telecom, internet and 3g services on mobiles. As per TRAI The wireless subscribers in India was 919.2 million as on march 31,2012, with an overall Teledensity rate of 78.7%.

Figure 4

Growing Teledensity Rate 37.0%

Overall (Wireless and Wireline) teledensity in india 52.7% 61.0% 70.9% 75.5% 78.7%

43.5%

May-09

May-10

May-11

Mar-09

Mar-10

Nov-10

Mar-11

Source :TRAI

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India

Sector Review

09 May 2011

As on 31 dec,2 Internet penetration was at 10.2% (or approximately 121 million users) in India, making India the worlds third largest population of internet users after China and the United States.

Figure: 5

Internet Penetration Comparison among Different Countries 10.2% India

Source : internet world state Figure :6

Internet Penetration

78.3% 38.4% 39.0% 44.3%

China

Brazil

Russia

US

Comparison of Internet market of India at 2011 with USA and China at similar stage

USA(2000) Internet User Internet Penetration

Source :Internet World Stats

China(2004) 94 million 7.0%

India(2011) 121 million 10.0%

124 million 44.0%

3G subscribers to grow to 236 million in FY16 from 3 million in FY11.

So we can say that this way telecom industry is also is in the favor of high growth in the business of local search engines. Indian advertisement market: According to the Netscribes Report: Online Advertising Market in India 2011, FICCI-KPMG report and IAMAI the Indian advertising market generated approximately 300 billion in 2011 and expected to grow to 462 billion by 2012.
Figure 7 Growth

Indian expected revenue through advertisement expected to grow to INR 370 billion in 2012

in advertisement revenue

400

370

350
300 250 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2015(E) 177 187 277 236 255.9

145

Source : Netscribes Report: Online Advertising Market in India 2011 and FICCI -KPMG report and IAMAI

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India

Sector Review

09 May 2011

Figure 8

Comparison across Advertisement Mediums for local Advertisements

* Due to restriction of no. of SMS from one number and applicability of do not call regulation Source: CRISIL Research

If we compare all the median of advertisement; local search engine come out to be better than rest all. Cost of an advertisement is much less than other median such as: Television, magazine etc. With the help of local search engine we can target a particular segment of market. This report also shows that the probability of measuring ROI is higher in local search engine segment.
Figure: 9

Segment Growth Rate

Classifieds Market Size (INR Billion) and Growth

110 103.4

129.5 117.7

2011 2012e

1 1.2
Cinema
Source : Netscribes

10 10.5
Radio Press

8.713.1
Internet

15.9 15.1
Outdoor TV

Revenue through Internet exhibition is expected to grow by 51% between 2011 and 2012. This high growth is due to the growing penetration of internet among individuals as well as the rising usage of internet on mobile phones.

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India

Sector Review

09 May 2011

Competition among the Indian local Search Engine Industry

Figure: 10

Major competitor in local Search Engine Industry

Search engines may have different geographic classification methodologies, thus their reach to cities/ Town may not be fully comparable. Source: CRISIL report on JUST DIAL IPO

Figure: 11

Major local Search Engine Performance on the Web

Data in Colum 3,4 and 5 are for the past three months as on 13-Dec-2011; and also provides blog space and specific content related to jobs/careers, movie reviews amongst others. Source: CRISIL report on JUST DIAL IPO

Key to EDUCORPORATEBRIDGE investment rankings: BUY = Expected to outperform the local market by >10%; O-PF = Expected to outperform the local market by 0-10%; U-PF = Expected to underperforms the local market by 0-10%; SELL = Expected to underperforms the local market by >10%. Performance is defined as 12-month total return (including dividends). 2011 EDUCORPORATEBRIDGE, India. Note: In the interests of timeliness, this document has not been edited. Other disclosures will come xXXXXXXXXXXXXXXXXXXXXXXXXX

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