India rides OTTs
A segment unheard of until a few years ago, India’s OTT ecosystem is set to touch Rs 2,000 crore by 2016. Voice & Data takes a closer look at the evolving OTT landscape that is transforming India.
A report on the evolving OTT landscape
Buying groceries, booking railway tickets or making utility payments, mobile apps are becoming an integral part of our lives today... These are not only making our lives simpler and smoother but have acquired a position so prominent that living without these is becoming unimaginable.
Dating back to the end of 20th century, mobile applications were just making a mark, and typically were small arcade games, ringtones, calendars and calculators. But with time, these apps evolved with their ease of usage and were adapted by key sectors such as finance, education, health and civic governance.
The best part about apps is that they are putting all this power in your palm available on your smartphone, making your life super convenient from just about anywhere. Data from a Yahoo report suggests that mobile browsing engagement time actually dropped by 50 percent and instead, phone owners are spending more time in their mobile apps.
In India, where OTTs were unheard of until a few years back, the app ecosystem is now estimated to be in the range of Rs 2,000 crore by 2016. Around nine billion apps will be downloaded in the country in 2015, more than five times the number of apps downloaded in 2012 (1.56 billion) at a cumulative annual growth rate (CAGR) of 75 per cent.
More so, the app economy has created about 75,000 direct jobs in India, and has the potential to reach 600,000 over a period of time. The growth is propelled by a slew of factors, driving the switch from e-commerce to m-commerce.
E-commerce, e-health, e-education… are all adapting to the new era of ‘mobile’. With smartphones prices hurtling south, the affordable smartphones in the market are creating a win-win situation for both consumers and app developers. This is in fact one of the key drivers of the app economy, consequently ‘Digital India’.
“Indian mobile apps are being driven by the increased usage of smartphones coupled with low mobile tariffs bridging the digital divide between metros, nonmetros and rural areas. Users accessing the Internet through their mobile devices have become a key driver for the growth of mobile apps,” says Ashay Padwal, Co-Founder at Vserv.
Echoing similar view, Faisal Kawoosa, General Manager, Telecom & SemiTronics, CMR India, says: “There are two factors pushing for an app development. One is the smartphone penetration coupled with data services growth. The second is that many of us are now accessing Internet for the first time through a mobile phone. In fact, such population would never access data via laptop or a PC and will continue to use data through mobile phones. To cater to them, the app becomes significant.”
However, on one hand, the rise of the app sector has put the mobile app developers, consumers, companies, start-ups, content providers on the gainers side, but at the same time has generated insecurity for the telcos, who have termed these as OTTs or over the top players as they ride on their infrastructure free of cost.
The tiff between OTTs and telcos is out in the open today but the telecom service providers have also understood that OTTs are here to stay and so the telcos are already in the process of cushioning themselves with their own innovative apps, apps store platform.
The good news for the telcos is that by 2016, average data usage per subscriber in India is expected to double and the number of smartphones is expected to cross 200 million, driving 4G services.
Currently, with more than 300 million internet users, India has the second largest internet user base in the world, which is estimated to touch 503 million by 2017.
The rise of the app ecosystem is already pushing India to have the largest number of software developers by 2017. At present, it has around 300,000 app developers and is already the second largest Android developer community in the world.
Not only apps confined to businesses are gaining momentum, but government-sponsored apps are also seeing a lot of traction. According to industry experts, NTES (National Trains Enquiry System) from the Indian Railways, with 1,000,000 downloads, is the most popular app in India.
Since the Narendra Modi-led government has been in charge, the government apps have become the talk-of-the town, with Mygov, Narendra Modi app, IRCTC Connect, MEA India, mPassport Seva, being some of the apps used by netizens fairly actively. Even though the overall adoption level of governance apps in relation to most popular apps is somewhat laggard this will likely change in the coming two years.
Talking about businesses, it’s not just start-ups but traditional businesses as well have realized the power of apps and are developing apps for their businesses to stay afloat in the hyper-competitive market.
The tiff between OTTs and telcos is out in the open today but the telecom service providers have also understood that OTTs are here to stay and so the telcos are already in the process of cushioning themselves with their own innovative apps, apps store platform.
The App Glut
The market has a plethora of apps today. These app-based platforms are expanding their reach across multiple areas attracting users to spend more time communicating, shopping as well as consuming content. But with so many apps around, the war of apps has just started off, which is in a way, compelling app developers to look beyond run-of-the-mill products and develop something out-of the box.
Talking specifically about the messaging apps, research firm Counterpoint says, “The messaging apps are creating greater amount of stickiness and using their horizontal business model to scale and with presence on the major platforms from iOS to Android to Windows to target the complete pie of smart devices users.
They are surely major threat to each other but more so to bigger mobile OS platforms/ecosystems players such as Android, iOS and Windows and even social networking giants such as Facebook, eating into the native stickiness factors such as media, communication, social networking, commerce and much more.”
Industry experts believe that with the rising number of apps, the mobile developer has an uphill task of differentiating their apps, and at the same time, monetizing the apps. They are also of the view that with the increasing penetration of 3G and 4G the user experience of apps would improve, app developers should focus on making the apps more efficient in terms of data consumption.
Discoverability of apps remains a issue though. “If you look at the Apple app store you have more than one million apps today and basically a user cannot have more than 50 apps in the phone, so consumers need to cherry pick the right app that works for them,” says Girish Trivedi, Co-Founder, Monk Consulting.
With a plethora of apps, one thing is pertinent that users’ choice to pick the regular social apps such as What’s up, Facebook would be there but when it would come to others apps , they would download need-based apps only, he adds.
According to Bharath Linjan, CEO, (x) cube Labs, “Of course, the challenge is user retention how do we ensure that our users are using our app again and again and not deleting it. So, what we want to do is bring technologies that will help derive more value from the localized content. The intent is to develop technologies so that consumers can use smarter apps, better looking apps, essentially, technologies that have built-in analytics into it for helping the consumers.”
“In the war of apps, the most frictionless app will win the race. It’s a world of word-of-mouth marketing and user experience. Pushing the app downloads down the consumer throat through massive media spend won’t help,” says Abhishek Rungta, Founder and CEO, Indus Net Technologies.
Hyperlocal vs Global
The Indian app sector, however, does not see a major threat from the global players, as companies generally believe that the apps developed in India by local entrepreneurs have an upper hand because of the localized content they offer. Local companies have an edge and advantage, in the form of deeper cultural understanding of the users, which they should leverage.
The success of Flipkart and Snapdeal in India, and Alibaba in China, are testimony to the ability to adapt to local culture and condition, and the potential of local marketplaces.
Vikrant Singh, Assistant Manager, Telecom, at CMR (CyberMedia Research), says, “This is the time for homegrown apps to get into the market with new and relevant offerings, as the international players are not much aware about the local needs. There are many untapped areas, specific only to India or may be even to a state or locality in India – these opportunities can be utilized by those looking at entering the applications’ market. There is still a lot of scope for the relevant offerings. Also, the local developers have an opportunity to fill the gap which is not addressed by the global app developers.”
Rungta adds: “The local players will always have an edge. It’s like playing a league match on the home-ground. But, this lead is not permanent. The global players will continue to adapt to local conditions. Therefore, successful local players have to take a call - dig their heels deeper in their local market and maintain the lead, or go global themselves.”
Not only we will see the success of local apps across certain segments (Entertainment, Travel, Sports) but going forward we can see global players going the local way. So these ‘Glocal’ offerings will be an effort to offer differentiation tailored according to local needs and preferences. “Hence, expect some global players going the ‘Glocal’ way and these apps becoming an ecosystem in itself,” adds Tarun Pathak, Senior Telecom Analysts at CounterPoint Research.
Another point to be noted here is
The rise of the app ecosystem is already pushing India to have the largest number of software developers by 2017. At present, it has around 300,000 app developers and is already the second largest Android developer community in the world.
that the global competitors are wellestablished and cash-rich which can help them sustain for a longer period of time, whereas the local players have to struggle hard before they get any funding.
Singh of CMR warns: “The well-settled players have an advantage over the network optimization and memory optimization parameters, which takes time for the new entrants to figure out. There should be a partnership among the app developers, network providers and handset manufacturers which can help the whole ecosystem to optimize the resources.”
Global competition from smaller players like Slack and Telegram will come soon. But given that this is a new paradigm, initial competition will actually validate the concept and will hence be supportive.
“Overall, the market opportunity is huge so there is scope for collaboration rather than competition. Since a messaging platform can be seen as a natural extension of SMS and is available / common across apps, both telcos and device makers are well placed to support it,” adds Beerud Sheth, Co-Founder and CEO, Teamchat.
Secure the Apps
With so much of buzz around OTTs, the talk about security is bound to follow. With a number of enterprises into mobile apps and mobile wallets solutions, utmost importance needs to be given to the security aspects.
According to Harshit Agarwal, CoFounder and CEO, Appknox, “When we scanned 51 payment and wallet apps, we found that only six were completely secured. Out of 45 vulnerable apps most, around 80% had severe SSL issue which is very critical and can lead to threats like Men in the Middle attack.”
The above figures indicate the vu l n e rability of mobile apps, so it becomes critical for businesses to be extra- careful while developing their first app. According to industry experts, a host of back-end APIs assume that only an app will access it but the servers that an app is accessing simultaneously should have security measures in place to ward off any unauthorized users from accessing data.
To ward off any malicious attackers, all APIs should be vetted and security mechanism should be strengthened.
According to a Kable analysis, which gauges security in enterprises, “Employee and supplier-facing mobile applications were found to be currently in use by 58.8 percent of respondents, while 56.1 percent were considering investment in the next two years.”
It also adds that about 13.2 percent of total ICT budgets which is being spent on applications currently, is likely to rise to 13.9 percent next year.
While 70.5 percent already had security products in place to protect application security, 60.9 percent were considering investment in the next two years.
Security emerges as the top concern for enterprise joining the app eco system big bang. Therefore, an important aspect to be kept in mind is data security and privacy as mobile apps collect and store lots of customer data and often lack privacy policies, and such lack of transparency undermines customers’ trust in mobile apps.
“It becomes important for companies to take steps to mitigate the risks by defining clearly what data to be collected and how, making privacy policy an integral part of mobile apps, and understanding their responsibilities while sharing data with third parties,” says Sandeep Ladda, Partner and India Technology and E-commerce Sector Leader, PwC.
While big businesses like Amazon or eBay form a major chunk of the app ecosystem, small businesses, start-ups are more inclined to join the app bandwagon. For small businesses, mobile apps are the most affordable medium to reach out to huge populace.
Further growth in the app market will be driven by a strong telecom infrastructure, high smartphone penetration, skilled workforce, enabled by effectively managed regulatory environment as laws regulating digital and mobility environment in India are still evolving and lack clarity. And that is a work in progress.
Not only we will see the success of local apps across certain segments (Entertainment, Travel, Sports) but going forward we can see global players going the local way.