Over the past few years, India’s digital landscape witnessed the beginning of a new era, driven by the uptake of massive amounts of data and video content, and a proliferation of various smart technologies and devices. These trends have led to the emergence of several new segments such as short-form video, mobile advertising, over-the-top (OTT) content market, super apps and augmented reality (AR) and virtual reality (VR) devices. These new segments have opened up a plethora of opportunities for stakeholders across the digital ecosystem, triggered by the onset of the Covid-19 pandemic.
A look at how various digital segments picked up pace in the Indian market during 2021…
Short-form video market witnesses a creative renaissance
The tech milieu in India has led to the launch of numerous new content apps over the past three to four years. Further, cheaper internet services have made entertainment accessible to everyone via smartphones or similar devices. While prior to the pandemic, the Indian content creator segment was majorly centred around YouTube, post the pandemic, creators promptly started to move to short-form video apps, purely because they were easy to use, saved time and had high engagement rates.
In fact, India’s high global ranking in short-form video consumption can be attributed to its content creation velocity, which means the country creates a continuous stream of content in various formats, particularly on OTT and short-form video platforms. The ease of usage is another factor that has led to more and more people joining these platforms. Short-form video apps offer a simple interface with all the editing options required and allow the creator to make multiple videos in a day.
In addition, one of the most important aspects of the success of short-form videos is the realisation by brands and marketers of the potential these platforms possess. Short-form video content has more acceptance in Tier-2 and Tier-3 cities and this gives brands a chance to make their way into regional markets. With social media marketing through these apps, creators have found a way to monetise their content, and brands have explored different ways to directly reach their potential customers.
Going forward, user-created videos in the country will continue to be a part of the social media landscape, especially for organic marketing, influencer marketing and paid advertising. Various advertisers, including for both fast moving consumer goods and digital consumer services, have expressed interest in getting more eyeballs for their brands by using this medium. In financial year 2021, over half the digital advertising spend in the Indian economy ($2.37 billion) was on social media and online videos, making it one of the fastest growing advertising channels in the country.
Mobile advertising sees an aggressive interest among brands
Of late, mobile ad spends by companies have seen a massive surge. With e-commerce gaining significant traction, there is an increased realisation that mobile advertising can bring in far more effective and measurable returns on spends. Mobile advertising enables brands to carry out targeted marketing, whereby brands are able to discover users based on parameters such as demographics, devices, location, income groups and past digital behaviour.
Owing to the ongoing pandemic and the ensuing lockdown restricting people indoors, their interaction with the virtual world has increased and brands have started to restrategise their marketing mix, with an increased focus on mobile marketing. Widespread and large-scale adoption of smartphones is one of the primary factors that has contributed to the growth of mobile ad spend. This, coupled with the decreasing cost of data, has resulted in longer durations of time being spent by people on their mobile phones. From shopping, watching movies to paying bills, almost all day-to-day activities are now carried out through smartphones. India is gradually becoming a mobile-first market and over the next couple of years, it is expected to transform into a mobile-only market. Given this context, investment in mobile advertising will see an upward trend in times to come.
Although the proportion of money spent by brands on mobile advertising has increased considerably and is expected to grow further, some bottlenecks are holding them back from leveraging mobile advertising to the fullest. Ad fraud is a major challenge, which basically involves corrupting an advertisement by placing a fake link. In addition, various factors such as ad load speed, outdated ad serving technology and a lack of global measurement standards contribute to the problem of ad viewability.
However, challenges notwithstanding, opportunities in the mobile advertising space will grow by leaps and bounds in the future, especially with the rise in smartphone adoption. Today, most marketers do not differentiate between digital and mobile marketing while allocating budgets. Further, recent trends such as increased digital spends by brands, provision of quicker and targeted return on investments, expanding 4G networks and the coming of 5G will only accelerate the growth of the mobile advertising industry.
Apps transform into super apps for ease of use
A super app is an omnichannel digital platform that offers a variety of services and goods through a single interface. The super app ecosystem in India is being led by Paytm, a home-grown mobile wallet service and heavily backed by Alibaba, the e-commerce behemoth. The app plans to launch its super app that will allow users to text merchants; book movies, flight and train tickets; and buy shoes, books and just about anything from its e-commerce arm, Paytm Mall. A super app’s advantage lies in its ability to provide comprehensive solutions for different consumer needs, as opposed to a single app that offers just one function in a convenient and intuitive manner. For companies, super apps ensure an increased revenue due to the consolidation of services at one place.
Apart from Paytm, app giants such as PhonePe and telcos such as Jio are making efforts to build a super app ecosystem. The payment app PhonePe has over 150 million users and hosts a variety of mini-apps, including the hotel booking service Oyo and the travel booking service MakeMyTrip. Meanwhile, Microsoft has updated SMS Organiser, an app developed under its Microsoft Garage programme in India, with a host of new capabilities.
Ola is yet another app which intends to make the transition in to a super app. The app plans to introduce financial services such as credit on its platform. The firm positioned Ola Money as a super app, extended its functionality through acquisition and collaboration with other players and provided discounts and rebates. Following the trend, Reliance Jio is aiming to launch a super app with multiple functionalities. Besides, MX Player, a video playback app with over 175 million users in India, launched a video streaming service to help the app expand beyond its original purpose of being a repository. It has already ordered the creation of a number of original shows. The company has also integrated Gaana on its platform.
However, the super app revolution is still in its early stages. As more and more Indians go online, the super app trend is expected to catch up.
OTT players and telcos collaborate for content delivery
In recent years, OTT content services have gained substantial popularity in the Indian market. Telecom operators and video-streaming platforms have started exhibiting a symbiotic relationship. The former has the pipe for delivering content to the end user, while the latter has the content that fuels data consumption. Together, telcos and OTT platforms have made India one of the biggest video streaming markets globally.
OTT services started gaining popularity in India in 2018 and have since been witnessing a growth in adoption. The Covid-19-related lockdowns further accelerated the growth of OTT players in India as consumers turned to streaming services for entertainment. The association with telcos is a win-win for OTT platforms and telcos alike. It helps OTT players gain market share by increasing their advertising video-on-demand and subscription video-on-demand numbers, while telcos gain revenue per user by consuming more data. Meanwhile, OTT services have benefited operators through reduced churn and higher ARPU due to increased viewership of the paid content. Another reason is that mobile phones provide the easiest access to OTT content among all smart devices. Just by connecting other smart devices to the same service, such as smartphones, smart TVs and gaming consoles, users can easily continue streaming content from one device to another.
Going forward, OTT-telco partnerships in India should move from simple bundling to a strategy that enables deeper collaboration in order to grow sustainably. These strategies can involve joint product development and delivery of co-branded products as OTT players relying only on their telecom partners for distribution and new user segments are becoming increasingly unsustainable. Further, OTT players can benefit from the influx of new audiences from Tier 2 and Tier 3 cities as well as older adults, which can allow them to reach a broader audience.
AR/VR market sees rapid growth
AR and VR hardware solutions have been witnessing increased adoption in the country. The rise in the adoption of these solutions has been driven by the increasing availability of new-age, technologically advanced solutions at affordable prices; increase in their application areas among end-use industries; the booming gaming industry; and a surge in the penetration of smartphones in emerging economies.
In India, the AR/VR market reached a valuation of $1.83 billion in financial year 2020 and is expected to witness a compound annual growth rate of 38.29 per cent up to financial year 2027, mainly on account of accelerated digital transformation of the country. In terms of offerings, the hardware segment dominated the Indian AR/VR market, with the largest market share of 71.28 per cent in financial year 2020. This growth is due to a significant dip in the prices of AR/VR devices, owing to the large demand from the gaming industry and easy availability of headsets across the country.
In terms of region, south India dominated the Indian AR/VR market, with a market share of 34.38 per cent in 2020, owing to rapid urbanisation and digital transformation in the area. VR devices with head-mounted displays (HMDs) are one of the most common gadgets that one can find in the market today. Recently, the Ministry of Tourism partnered with OutsiteVR, a travel technology start-up, to enable people to virtually travel to India and to further enhance “Incredible India” campaigns.
While the demand for AR/VR devices is increasing at an unprecedented rate, there are several factors, including a lack of awareness in underdeveloped economies and high equipment costs, coupled with their harmful effect on the eyes, that are hampering the growth of the market.
However, despite these challenges, India’s AR/VR market is expected to grow substantially in the next five years, owing to the adoption of technology by diverse portfolio sectors, including content creation, engineering and technology development, and the development of virtual applications for electronic devices to create customisable content. Further, the continuous growth in the country’s gaming and console industry is expected to boost demand for HMDs in the coming years. Moreover, lightweight, portable and affordable HMD devices, offering opportunities in a variety of fields such as healthcare and rehabilitation, are expected to boost the AR/VR market in the country.
