Google Is Growing In India, But Competition Is Not Far Away – Forbes

As it focuses on local initiatives, Alphabet’s (NASDAQ:GOOG, GOOGL) subsidiary Google is generating revenues in India that are growing significantly. The company reported a 44% increase in annual revenues in India for the fiscal year ending March 2016. Digital ad spending in India is growing significantly, with a projected CAGR for 2016 being 35%. And search and display advertisements account for nearly 50% of this spend. With Google enjoying a near monopoly in the country in the search business, it is the reaping the benefits of this growth. Most marketers in India spend more than two thirds of their digital budgets on Google. However, competition for Google in India is likely to intensify with Baidu. Considered China’s Google, this company is looking to enter the Indian market in a big way. The latter set up an office in the region in September 2015 and is looking to launch a localized product to capture the market. As digital advertising in India experiences exponential growth, Baidu and Google could be the two key players fighting for a significant share in this market, in our view.

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Local Customizations Key To Grab Higher Market Share

According to eMarketer, digital ad spending in India is likely to reach $ 2.3 billion by 2020, significantly higher than the $ 730 million figure for 2015. Digital ad spending is likely to grow by more than 25% each year in the next few years and account for 20% of the total media spending by 2020. Google is looking to capture a significant share in this growth. Indian companies are spending more on search and display ads, relative to social media, and Googlehas a monopoly in this segment. However, Baidu is slowly looking to establish itself in this market. Baidu’s approach is different from Google and it is looking at providing a better ad platform compared to what exists in the Indian market today. Its target is the small and medium enterprises that usually do not get good deals from large companies such as Google and Facebook. The company has already partnered with the top 20 mobile apps in the country to get better access to the market. India being a “mobile first” economy, Baidu is looking focus on apps to penetrate into this market. Also, given the unique nature of the Indian market, both Baidu and Google are looking at several ways to adapt to this market and introduce more “local” products which suit Indian businesses. For instance, Google introduced YouTube Go a version of YouTube tailored for Indian audiences. It also engineered faster browsing features to accommodate slow Indian connections. And it is providing its search engine in several Indian languages to meet user requirements.

We believe Google has a very strong position in India with very little competition from other players. A significant portion of India’s digital ad spending comes to Google driving its revenues in the region. However competition in this space is likely to get intense as Baidu gets serious about the Indian market.

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