Some observations on India’s tech scene

I visited Bombay last month and was intrigued to see how things are playing out in India’s technology sector. Below are some of my major observations:

Transportation wars

One of the major technological battles taking places was between Uber and Ola. Ola is the incumbent in India with about 50% of the market share, though Uber was up to 35% and gaining ground. Uber tends to be cheaper and was providing a number of driver incentives to grow the supply side [1].

Uber has adapted to the Indian market in a number of ways, such as taking cash payments discussed below, partnerships with Airtel to offer free in-cab internet, etc. One thing that they Uber doesn’t have in India (or anywhere as far as I’m aware) is the ability to pre-book rides, which Ola has. Though it’s not as important if there is enough liquidity, it will be interesting if Uber has to add this as they expand into smaller cities [2]

Airtel is an example of the partnerships Uber is striking in India

E-commerce wars

Definitely the biggest tech battle taking place in India is the “e-commerce war” between Amazon, Flipkart, Snapdeal and to a lesser extent Paytm. Flipkart, the market leader, has raised $3.1B in funding, Snapdeal has raised $1.4B in funding and Amazon has invested at least $2B with all signs suggesting that Jeff Bezos is prepared to spend whatever is needed to win, as reported by Fortune:

To signal just how much money Amazon was prepared to plow into India, in September last year Bezos flew to Bengaluru in a visit filled with Bollywood-style bling, arriving one day after Flipkart had closed a $1 billion round of financing. He posed on an ornately painted delivery truck outside Amazon’s Bengaluru headquarters dressed in a white Indian wedding suit and handed a $2 billion mock check to Agarwal. The message was clear: He would spend whatever it took to win.

Like transportation, though the local players have first mover advantage and greater market share in India, Amazon is trying to catch up and tends to have more and better deals.

Logistics is and will continue to be very difficult for both the established local players and Amazon, owing to the size and lack of infrastructure in especially rural parts of India, but it’s something Amazon is looking at a possible advantage given its experience internationally [3]

Source: Fortune

Prevalence of cash payments

One of the unique aspects of India especially compared to the U.S., is the extremely low penetration of credit cards (~2%). This means that even as transactions have moved online or onto apps, the payment for the transactions inevitably ends up being through cash. Therefore, all the major apps and online services, from Flipkart to Uber to even Dominoes accept cash payments (also known as cash on delivery in the case of goods delivered to households).

This poses a number of additional challenges for these services with high rates of return or “fraudulent” transactions where an individual orders an item and refuses to pay. To combat this, Dominoes for example requires you to enter a phone number and confirm you meant to place the order if you order online (a two-factor authentication of sorts). Flipkart has instituted a cash-on-delivery maximum order limit of ~$1000.

The ubiquity of WhatsApp

Another quite interesting phenomenon in India is the ubiquity of WhatsApp in personal and even business communications. This is probably worth of a piece in itself but some highlights of some interesting WhatsApp use cases:

Most families/groups of friends have multiple WhatsApp groups of 20+ people where they share status updates, jokes, news articles and so on with each other (basically using it in the same way people use Facebook in the US)

Fruit vendors, jewelers, tailors and so on use WhatsApp as a form of communication with their customers, using it to send images of items, take orders and so on.

Farmers are using WhatsApp as a support group/community to exchange information and advice and also to list and sell the fruits and vegetables they’ve grown, thereby serving as a marketplace of sorts

Many of the leading telcos in India such as Airtel, Vodafone have separate packages where you pay a fixed amount per month for only unlimited WhatsApp usage (and some also include it in the basic plan). In my observation, a very high proportion of users have this, whereas data plan penetration is still relatively low.

Debate over Free basics

In the few weeks I was there (before the ruling had taken place), Mark Zuckerberg wrote an op-ed in the leading national newspaper about his view on why India needed free basics, and there were front page ads in major national newspapers and billboards all over Bombay urging citizens to voice their opinion in support of it.

Recently, The Telecom Regulatory Authority of India ruled against differential and discriminatory pricing of mobile data on the basis of content, which dealt a big blow to Facebook’s Free Basics program, but it wasn’t for a lack of trying on Facebook’s part.