Internet Penetration in India

With more than 3.6 billion people, Asia is home to approximately 54% of the world's population. But only about 10% of them are online, according to Internet World Stats. Just to give you an idea on how small a number that actually is, about 25% of the rest of the world is online.

However, Asia's Internet penetration is growing by leaps and bounds. The number of Chinese online increased by about one-third during 2006 to 132 million people. Overall, China's online population has increased 486% since 2000.

But that's nothing compared to India.

The growth rate for Internet penetration in India is staggering. The country's Internet population has grown 700% since 2000. And there's still plenty of room for it to expand. Let's look at the numbers...  

More than 1.1 billion people live in India. But only 40 million are online -- only 3.5% of the total population. In mature Asian Internet markets, such as Hong Kong, Japan and South Korea, there is a saturation rate of about 68%. Even if India reaches only 50% saturation over the next several years, this will mean more than 500 million new Internet customers.

Compare this to the 210 million Internet users in the U.S., and you can see the gigantic potential.

The government is even helping things along by reducing barriers for telecom providers. Also, Internet access is surprisingly affordable. According to the Internet & Mobile Association of India, a monthly broadband subscription can cost as little as 199 rupees, or about $4.50.

On top of this, there are three other factors that are paramount to the success of online growth in India.

The first is cheaper computers. India's IT and Telecom Ministry is heading an initiative to cut the cost of PCs, which would, in turn, help more of India's emerging middle class find their way to the Web. According to Internet & Mobile Association of India (IAMAI), the initiative is set to make computers available for less than 10,000 rupees -- or $226.

Next is the increase in website registrations under the ".in" domain. According to the IAMAI, these registrations surpass 150,000. This shows that more local content is being created. And more relevant content will attract more Internet users. This is also a bonus for savvy investors, who will have a whole new sea of foreign online businesses to research.

The third success factor is a bit unusual, but it's a trend that can't be easily ignored. While a majority of Indians log on for e-mail, chat and job searches, matrimonial sites are rapidly increasing in popularity. Statistics show that 15% of Indians go online for matrimonial searches.

In fact, matrimonial sites are so popular that even some major players are placing bets on their success. According to the India news site ZeeNews.com, Yahoo! and Canaan Partners invested $8.65 million in BharatMatrimony.com, one of India's largest dating websites. Execs at BharatMatrimony told ZeeNews that they expect to register 2.5 million users in 2006-07, as compared to 1.5 million that we registered in 2005-06.

So while the online trends in India are obvious, the best ways to properly invest in the country's coming Internet age are hazy at best. I'll sort out some of the strongest companies in future posts.

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