India's Vernacular Internet Boom Serves As Relief For Anxious Startup Investors
The estimated market size of the vernacular content market in India is $53 Bn
Apps such as ShareChat, DailyHunt, TikTok, Khabri and Vokal have made a name in the vernacular internet market
More than $708 Mn in total funding has been raised by vernacular startups between 2014 to Q3 2019
The word 'vernacular' has never been in fashion as it is today - at least in the context of media and entertainment startups in India. Although the word was deemed derogatory due to its historical usage by Supreme Court Justice Dipak Misra in 2017, it's become a catch-all phrase for the Indian regional language internet ecosystem. But the fact that it's being used to talk about the rise of this 'vernacular internet' ecosystem might well change its connotation in the near future.
The success stories of regional language internet services, products and social networks such as ShareChat, DailyHunt, Lokal, and even China-born TikTok should come as no surprise to anyone who has been paying attention to the growth of the internet in India. In fact, the burgeoning base of regional language users can be seen as a relief for the risk-anxious Indian startup investors.
A study by KPMG on the vernacular internet users in India has estimated that out of the total 735 Mn internet users in India by the year 2021, 73%(or 536 Mn) are going to Indian language internet users. This means any tech company that's catering to this rising tide is likely to see significant growth in the near future.
Although, only time will tell how accurate these numbers turn out to be, the growing addressable base for vernacular or regional language-focussed internet companies in India is also indicated in the rural internet subscribers (TRAI) base in India. This is growing at a rate of 24% (2015-2018) compared to the 21% growth rate in urban internet subscribers. Affordable smartphones and even cheaper data costs are the two major catalysts in this boom.
And it's not just startups - the likes of Google, Facebook, Twitter and others have also focussed on Indian languages in the past year or so. These tech giants have spurred on investments in early and growth stage startups as well. The degree of capitalisation by startups in the regional language tech sector is visible in the growing annual value of funding amount into Indian vernacular startups. With a 33% growth rate and a median funding amount of $5.8 Mn between 2015 and 2018, there's no doubt that the vernacular internet ecosystem is on the rise. Another factor to consider - the entry and success of foreign players such as Bytedance, BIGO and others with vernacular-focussed social media apps justifies the effort of established players in grabbing a piece of this lucrative market in India. This brings us to the question, how big is the vernacular content market in India and how sustainable is the current boom fueled by new internet users?
The Billion Dollar Market Opportunity And The Favourable Market Factors
A large section of regional language internet users are new to the internet and a majority of these users hail from the semi-urban locations and rural India. We can estimate the addressable audience as of 2018 - out of the 892 Mn rural population in India, only 24% (or 213 Mn) people had an internet connection. In addition to this, the increasing migration from rural to urban regions is also equipping more Indian language users with stable and high-speed internet which will eventually increase the usage of vernacular internet apps and services over time.
The estimated market opportunity of the vernacular content in India is $53 Bn (2021) as per DataLabs By Inc42 estimates. Given the lucrative market opportunity along with favourable market trends, the investment into vernacular startups is picking up pace. The total funding amount into regional language startups between 2014 and Q3 2019 was approximately $708 Mn across 49 deals. The top-funded startups in this space are Sharechat ($224 Mn), DailyHunt ($124 Mn), Roposo ($38 Mn) and Pratilipi ($24.5 Mn).
If we look at the demand side of the market, social media and chat apps, digital entertainment and online news are the most successful products in the vernacular space. This can be ascertained from the fact that out of 530 minutes per week spent online by Indian language internet users, 62% (328 min/week) is on these applications, according to the KPMG report. The demand for increased vernacular online content is not only limited to mainstream formats such as text and video, even audio content is also picking up pace through podcasts and music. According to Pulkit Sharma, founder of audio content startup Khabri, the ease in content consumption which comes with audio formats compared to others is one of the key advantages for audio based content over others.
Tamil and Hindi-speaking internet users have recorded the highest adoption rate of - 42% and 39% respectively - for internet services. As per 2011 census, Tamil and Hindi speakers together make up around 49% of the total Indian population.
Curiosity Drives Consumption
Coming back to the factors that are fueling the growth of vernacular content in India, one cannot ignore human curiosity.
Given that most of the vernacular language internet users in India are new internet users, they have little knowledge of the possibilities of the internet and the various applications. The curiosity factor and the fear of missing out (FOMO) created by the network effect is quite high among this set of users, which explains why regional language content goes viral quickly - and sadly it also explains why rumours and fake news spreads so quickly.
Unlike urban India which has become so familiar with platforms like Facebook, Netflix or Twitter, new internet users are spending time on these platforms unlike ever before. Almost as if they are catching up. The combination of affordable high-speed internet along with increased smartphone penetration has fueled the internet data consumption in India. Data consumption in India is expected to surge from 3.5 GB per month (2017) to 17.5 GB per month in 2021. This is a surge of 5x in just five years.
The Way Forward And The Challenges
In order to sustain the current growth, it is essential to increase the variety of regional language content - not only publishing more content in different formats but also developing applications that can support more regional languages natively across devices.
Considering the user persona of English internet users and Indian regional language users are miles apart, in order to monetise efficiently on the revenue front, advanced customer behaviour- mapping tools need to be developed using an AI/ML framework that can handle the analysis of regional language content.
Another major challenge is limiting the susceptibility of new internet users who are using services in native Indian languages to misleading political campaigns or online scams.
As the saying goes- "all that glitters is not gold" if we look beyond the propensity to capitalise on the emerging vernacular market in India, a lot needs to be done about policy and regulations. Issue such as circulation of child pornography, signing up users for terms they don't understand, data privacy still are a major problem in this sector. When mainstream social media websites around the world are finding it difficult to put a tap on these issues, the regional social media platforms need to invest more resources going forward on these fronts.CHECKOUT DATALABS BY INC42