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Private & Confidential - 1 -
^ Internet and Digital Commerce Seedfund LP meet
February, 2012
Private & Confidential - 2 -
^
I Investment activity in Digital Consumer Industry 3
II Eco-system 6
III Digital Commerce 11
Agenda
Private & Confidential - 3 -
^ Investment Activity
Private & Confidential - 4 -
^ Investment activity (1/2)
42%
6% 17%
7%
15%
9% 4%
Deal Volume
E-tailing Travel Online Services MVAS Entertainment / Content / Classifieds Online and Mobile marketing Payments
High
Medium
Low
Deals by Segment Volume Value ($ Mn)
E-tailing and Deals 39 485 Travel 4 109 Online Services 14 87 MVAS 6 28 Entertainment / Content / Classifieds 14 61 Online and Mobile marketing 8 287 Payments 3 10 Total (Jan 11-Feb 12) 85 1,067
Gross margin
High Medium Low Addressable market size
Fashion - Private Label
Apparel e-tailing
Fashion- Deals
Electronics
Mass e-tailing
* Size of the bubble indicated total amt invested during Jan’11 – Feb ‘12
Baby products
E-tailing investment landscape
Segments that enjoy healthy margins have found favor with investors even if it is at the cost of slower scale-up
Mass e-tailing
Fashion -Private Label
Apparel e-tailing
Fashion- Deals
Baby Products
Deals
Digital consumer companies funded in Jan 11 – Feb 12 by categories
Travel
Others
Marketing
Private & Confidential - 5 -
^ Investment activity (2/2)
Apparel - Private Label 10%
Apparel - Flash Sales
13%
Apparel e-tailing 15%
Elec 3% Jewellery
5%
Baby Products
13% Lifestyle / Beauty
3%
Health products
5%
Home furnishing /
Bed and Bath 3%
Mass 15%
Handicrafts 3%
Deals 13%
E-Tailing – Deals Volume breakup
Jan 2011 - Feb 2012 2010
Round 1 47 16 Round 2 17 12 Round 3 13 3 Round 4 and > 8 0
Deals by Rounds
Jan 2011 - Feb 2012 2010
Round 1 4.0 4.5 Round 2 12.1 5.9 Round 3 21.3 4.8 Round 4 and > 56.9 ---
Average Deal size by Rounds ($ Mn)
With the increase in deal volume, the average deal size has increased for the investments from Round 2 onwards
Large size transactions happened in Digital Marketing, E-tailing & Travel InMobi ($200 Mn), Flipkart ($150 Mn), Ybrant ($48 Mn), Yatra ($45 Mn), Snapdeal ($40 Mn), FnY ($40 Mn) MapmyIndia ($30 Mn), HomeShop18 ($22 Mn), Myntra ($21 Mn)
Apparel as a category in E-tailing gained high traction with various categories such as Multi-label, Private label and Flash salesportals accounting for 38% of the deal volume
Despite being of the largest segments, only one deal happened in independent electronics portal (Letsbuy,com ) while a number of new Baby Products portals were funded during the period
Untapped categories like Home furnishing, Bed and Bath, Lifestyle etc. may become early stage investment avenues for this year along with growth funding of the existing models
Private & Confidential - 6 -
^ Eco-system
Private & Confidential - 7 -
^ Connectivity: Access & quality
The stakes are high..
Telecom and internet services providers paid nearly $23 bn to the Govt. for 3G/4G spectrum Launch of 3G services, network deployment by new operators & rollout of long distance network will drive an investment of around $55 bn over the next 5 years (Crisil Research) Govt. has launched a National Broadband plan through which it would spend ~$45 billion to build National Fiber Optic Network
4%
10%
15%
22%
2012 2013 2014 2015 8 10 12 14 15 15
9 12 13 1 4
9
0 0
1 1
2
2
11 15
20 26
32
39
0 5
10 15 20 25 30 35 40 45
2010 2011 2012 2013 2014 2015
Cable Wireless fixed 4G - PC Dongles DSL
PC broadband connections in India (mn)
Source: TRAI, Avendus estimates
7 7
6 6
6 5 5 4 4
2
4
6
11
15
20 26 32 39
- 1 2
3
7
11
15 19 21
0 2
13
51 120 196 288
2007 2008 2009 2010 2011 2012 2013 2014 2015
PC Dial-up (Mn) PC Broadband / Cable (Mn) Mobile 2.0 - 2.5G (Mn) Mobile 3G-4G (Mn)
Internet connections by Type (in Mn)
Source: TRAI,Avendus estimates
Telcos will push for monetization
Airtel has more than 7 Mn 3G subscribers out of which ~26% use data on a daily basis TATA DoCoMo – 1 out of 7 subscribers is a 3G customer Reliance claims more than 3 Mn 3G subscribers with plans starting at INR 65 and has recently launched free mobile TV service As a comparison, China’s 3G mobile subscriber base is already at 128 Mn
Internet users in India are estimated to reach 376 million by 2015 – close to 5X the current number. PC broadband penetration is estimated to reach ~16% by 2015 Mobile connectivity (3G and 4G) is expected to drive internet connectivity in the coming years and is estimated to reach 22% penetration Increasing penetration of smartphones / tablet devices, affordable 3G data plans and introduction of 4G in 2012 to drive the premium data consumption Challenge include lack of affordable and accessible broadband services and the potential risk of lack of regulatory clarity dethrottling investments in the sector
Connectivity likely to hit an inflection point in the next 12-24 months
Source: TRAI, Avendus estimates
3G Penetration in India
Private & Confidential - 8 -
^ Internet Users
60 80 120
190
273
376
5% 7% 10% 15%
22%
30%
0% 5% 10% 15% 20% 25% 30% 35%
0 50
100 150 200 250 300 350 400
2010 2011 2012 E 2013 E 2014 E 2015 E
Unique Internet Users (In Mn) Penetration (%)
7%
36% 37%
78% 78% 82%
0%
20%
40%
60%
80%
100%
India China Brazil US Japan UK
Internet Penetration - 2011
World Avg : 31% World Avg : 31%
Source: Avendus estimates Source: Internet world stats, Comscore
38% 37% 34% 34%
21% 21% 18% 18%
12% 12% 12% 11%
29% 30% 36% 37%
2007 2008 2009 2011
Top 8 metros* Other Metros 0.5 - 1 Million Less than 0.5 million
Source: IMRB I-Cube 2010-11
Internet connections in India – geographic breakup
World’s youngest internet population with >75 percent of all users under the age of 35 years
2015 376 Mn
2011 80 Mn
15-24
25-34
35-44
45-54
55+
0-15
Age group
Source: Comscore , 2011 Avendus estimates
2
4
10
25
22
17
14
34
63
104
101
60
Private & Confidential - 9 -
^ Payments: At an inflexion point, still requires a significant push
102 137
182 228
260
28 25 18 18 18
2007-08 2008-09 2009-10 2010-11 2011-12*
Debit Cards (Mn) Credit Cards (Mn)
3 4 6 9 12
13 15 14 17 21
2007-08 2008-09 2009-10 2010-11 2011-12*
Spending by cards Debit Card (USD Bn) Credit Card (USD Bn)
INR 2009-10 2010-11 2011-12*
Debit Cards 1,452 1,698 1,992
Credit Cards 33,728 41,860 52,997
Spend per card holder per annum
Credit cards haven’t grown and e-payments have largely been driven through Credit cards
Banks have given a good thrust on issuing Debit cards and there has been gradual adoption towards debit card payments
Net banking has grown seven fold in last 4 years. 7% of the account holders access Net Banking – This translates in to a user base of ~15-20 million
Spend per card holder p.a. has been increasing steadily. Spending through Debit cards has been on the rise
Market outliers: •OTAs primarily operate only on e-payments •BookmyShow will sell tickets worth Rs 190 Cr this year only through Cards
Transitioning towards emerging payment modes..
Will continue as the significant payment acceptance mode. 360Buy has >90% COD Transactions
In-store prepaid e-wallets / vouchers Will gain acceptance with trust Large merchants will push this
Multi-purpose Prepaid Cards Freedom Card: Itz Cash, DCB, Visa Can go the GreenDot route as well
Mobile wallets will gain momentum NGPay has experienced good traction UK player Wonga has ambitious plans Telcos could give this a thrust
Hybrid Kiosks / Trust Points Touch models could drive the growth in Tier II / Tier III centres
*2011-12 – Annualized data as per Nov’11 figures
Private & Confidential - 10 -
^ Online Advertising
2%
9% 7%
15%
2011 2015
Time spent (%) Ad spend (%)
410
1600
2011 2015
Online advertising market (USD Mn)
100%
29%
22%
41% 9%
Total Facebook + Google Portals Classfieds Others*
Includes: Yahoo! Rediff Web 18 Times group Cricinfo MSN HT Media
Includes: Naukri Bharatmatrimony Shaadi Jeevansathi Carwale Motorexchange Justdial Sulekha
*Available advertising pie for rest of the players
Current composition of Indian advertising market (% share of total revenues)
Online advertising is leading consumption and several leading advertisers in India are now spending 5-10% of their advertising budget on digital advertising
Major portion is occupied by Google and Facebook, and a significant portion of the remaining is through advertising networks
Some of this difference can be attributed to the extra-ordinary success of online classifieds and the visibility in evaluating digital advertising performance Other factor is the favorable demographics of the online population – most of whom are the focus target group for marketers
The dominance of these players seems to suggest that there is a significant untapped potential for advertising lead content portals to expand There continues to be opportunities for Indian advertising service providers which include advertising networks and agencies
Share of Online Advertising
Online advertising includes online classifieds which contributed $167 mn in 2011
Direct + Google Adsense
Private & Confidential - 11 -
^ Digital Commerce
Private & Confidential - 12 -
^ E-Commerce: $24 billion market opportunity by 2015
9 11 15 21
28
38
14% 14% 13%
11% 10%
10%
0%
4%
8%
12%
16%
-
10
20
30
40
2010 2011 2012 E 2013 E 2014 E 2015 E
Users transacting online (mn) % of total internet users
467 800 1,933
3,844
6,933
11,778
0.1% 0.2% 0.4%
0.6%
0.9% 1.4%
0%
1%
2%
-
5,000
10,000
15,000
2010 2011 2012 E 2013 E 2014 E 2015 E
E-tailing (USD Mn) Penetration of e-tailing (%)
5 6 9 12 17
24
90% 87% 78%
69% 60% 51%
0%
20%
40%
60%
80%
100%
-
10
20
30
2010 2011 2012 E 2013 E 2014 E 2015 E
Total Online Consumer Revenues (USD Bn) % of share of Online Travel
Source: IAMAI digital commerce 2011; Avendus estimates Source: IAMAI digital commerce 2011; Avendus estimates
India – Transacting Users
India
Correlation between broadband and e-tailing
0.1% 0.1% 0.2% 0.4%
0.6%
0.9%
1.4%
0%
1%
1%
2%
2%
0% 5% 10% 15% 20%
E-ta
iling
/ Tot
al re
tail
(%)
Broadband penetration (% of households) India
2009 2010 2011
2012
2013
2014
2015
0%
1%
2%
3%
4%
5%
0% 10% 20% 30%
E-ta
iling
/ Tot
al re
tail
(%)
Broadband penetration (% of households) China
Source: CNNIC; Worldbank;, 2011
2005
2006
2007
2008 2009
2010
Source: TRAI, Avendus Estimates Source: TRAI, Avendus Estimates
E-commerce is expected to leapfrog in India due to increasing broadband penetration leading to high number of transacting users
Increasing PC broadband and Mobile 3G and 4G penetration to enable higher e-tailing penetration
2006
Private & Confidential - 13 -
^ Evolving landscape – how the e-tailing industry will hit the $12 bn mark by 2015?
Horizontal market leaders and select vertical leaders will grow rapidly
Consolidation is on the anvil
Top 5-10 players could command a
40-50% market share
Marketplaces and e-commerce platforms will help bring a large population of mid size merchants online
Offline players / Brands will come-up in a strong way with respect to their online strategies
80% of the Top 20 US e-tailers are offline retailers
Marketplaces / platforms will hand-
hold retailers to come online
Inclusive e-commerce could potentially take-off
Non Internet users / non card holders
need to be covered
Regulatory Subsequent capital infusion Eco-system keeping pace with the growth
Key risks to the growth
Private & Confidential - 14 -
^ Information : Search, Portals, Classifieds
24%
42% 46% 57%
0%
20%
40%
60%
India Japan US UK
Share of Search websites in Online advertising - 2010
100 300 -
470
2010 2015
Market Size of online advertising on search
websites (USD Mn)
Search
110 180
2010 2015
Market Size of Portals (USD Mn)
Portals
220 510
2010 2015
Market Size of online classifieds (USD Mn)
Classifieds
100% 55%
18% 27%
Total Local Horizontal Vertical
Composition of investments in online classifieds space in India (2006-11)
Google rules the Indian search market with >90% market share leaving few opportunities for local players
Mobile and Vernacular Search may emerge as next growth opportunities but Google is well covered on these fronts as well
Portals continue to attract high traffic, ~46% of total internet users access the top portals with concentration of users in top 5
With over 200 million mobile-only Internet users in India in 2015, there will be several opportunities for mobile based portals
Jobs sites with $90 Mn in revenues and Matrimonial sites with $55 Mn revenues in 2010 accounted for 65% of overall classifieds market
Horizontal classifieds are growing and seeing the entry of foreign players Local search presents a sizeable opportunity and is dominated by local
players Mobile classifieds, currently at $45 Mn market size are growing rapidly
Private & Confidential - 15 -
^ Online Services : Financial Services, Education, Healthcare
Financial Services
Education
Healthcare
170 410 44
244 310
580
2010 2015 E
Online Insurance Personal Loan Home Loan
42%
22% 11%
25% 35%
18% 11%
37%
Top 8 Metros
Other Big Cities
5-10 lac towns
Less than 5 lac towns
Urban Online Insurance Demand (Demand v/s Internet Density)
Online Enquiries Claimed Internet users
Source: Insuring India Report
There is potential for movement of simpler products like credit cards, personal loans and term insurance to the online medium
Utility payments including online payments for home utilities and online mobile recharge sites have seen a good traction over the last 6 months
Banks, Financial Institutions and third party sites are all making a run for the online insurance market. This market is expected to double by 2015
Supplementary education segments - tutoring, test preparation and distance education are the ones that have gained the most traction in the B2C e-learning segment so far
Early stage models (lead generation and hybrid teaching) are doing well, but pure online models are still struggling for scale
At this stage, having an offline presence seems to be an important factor to facilitate adoption of e-learning. Some players have integrated e-learning with physical mediums such as tablets
Top health portals in India are dominated by international players
Telemedicine remains the Holy Grail. Several policy initiatives in this area including the establishment of the National Telemedicine task force have aided in the development of the private players
Hospital management and Electronic Medical Records (EMR) space has been seeing some action as well
32 50
2010 2015
Global E-learning market (USD Bn)
254 271
624 689
763 1,326
Your Total health Caring.com Alliance
About.com Health Everyday Health
Livestrong WebMD Health
Top health portals in India by unique visitors - September 2011 (in‘000)
In (USD Mn)
Source: Comscore ,
Private & Confidential - 16 -
^ Entertainment : Gaming, Music
118 158 211 284 380
509
29 36
44 56
71
89
2010 2011 2012 E 2013 E 2014 E 2015 E
Mobile Games Online Games
Gaming
92 115 161
202 262
328
2010 2011 2012 2013 2014 2015
Size of Digital Music industry in India (USD Mn) Music
With the growth of mobile Internet and the popularity of casual games, mobile gaming is expected to lead the growth of the gaming market in India
Online games with localized content such as Cricket and Bollywood are being offered along with premium content licensed from EA, Mircosoft etc.
Online gaming is affected by the micro-payments problem. This has meant that companies have had to depend on advertising as the primary revenue stream. Some of this problem is now being addressed by the top players through COD and mobile based subscription
Digital music’s share in the overall music market in India is expected to grow from the current 49% to 79% by 2015
MVAS products such as Caller Ring Back tones and Mobile Radio contributed more than 90% of the Digital Music revenues in 2010
In (USD Mn)
Private & Confidential - 17 -
Avendus Capital Pvt. Ltd.
www.avendus.com
Bangalore # 1 & 2, The Millenia Tower A, 10th Fl, Murphy Road, Ulsoor, Bangalore, India 560001 Phone: +91-80-4115 0000 Fax: +91-80-2555 0868
Mumbai IL& FS Financial Centre B Quad, 5th fl, Bandra Kurla Complex Bandra East, Mumbai, India 400051 Phone: +91-22-6648 0050 / 0950 Fax: +91-22-6648 0040 / 0940
New York 100 Park Avenue, 16th fl. New York NY 10017 Phone: +1-212-351 5066 Fax: +1-484-231 2343
New Delhi Suite 22A/B, The Aman Lodhi Road New Delhi – 110003 Phone: +91-11-4535 7500
London 32 Brook Street London W1K 5DL, UK Phone: +44 20 7647 7700 Fax: +44 20 7647 7710
^ Contact Information
KANCHAN MISHRA Associate Email: [email protected] Mobile: +91 77381 56368 Landline: +91 22 6648 0030
SANCHIT SUNEJA
AASHISH BHINDE KARAN SHARMA
ANSHUL AGARWAL Associate Email: [email protected] Mobile: +91 77381 56367 Landline: +91 22 6648 0040
Executive Director Email: [email protected] Mobile: +91 98200 45814 Landline: +91 22 6648 0901
Associate Vice President Email: [email protected] Mobile: +91 77380 92973, +91 98677 37779 Landline: +91 22 6648 0967
Analyst Email: [email protected] Mobile: +91 98670 30991 Landline: +91 22 6648 0995
