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India Sachin Gupta

Sector Review – Local Search

Engine

(91) [email protected]

20 April 2013

Please see important notice on last page of 5

Sector Overview

India, with 1.27 billion people is the second most populous country in the

world, while China is on the top with over 1.36 billion people. The figures show

that India represents almost 17.31% of the world's population. India is all set

to take the Numero Uno position by 2030.

Over some last few years India has also shown some strong economic growth.

As per CIA World Fact book and International Monetary Fund India’s GDP,

on a purchasing power parity basis has reached at $4.06 trillion in 2012,

making it the fourth largest economy in the world after the European Union, the

United States, China.

Figure 1 comparison b/w India, china and world GDP

Source: McKinsey & Company report

Having a huge population and strong market scenario Internet penetration in India

reached at 12 per cent vs. 43 per cent in China and 80 per cent in the US. With 150

million Internet users, India now has 3rd largest Internet population in the world.

Figure 2: Rise in contribution in India’s GDP

Source: McKinsey & Company report

Real GDP GrowthRate

Net services willcontribute $100 bnto GDP by 2015

Internet toContribute up to

3.3% to India’s GDP



India Sector Review 09 May 2011


Favourable Demographics in India

As per the McKinsey’s report – “The ‘Bird of Gold’, India’s Middle levelhouseholds expected to grow by over eleven times from 50 million people in the

year 2005 to 583 million people by 2025. Hence this will bring

growth in consumption of goods and services and

Higher demand for convenience solutions like local search engines.

Hence, usage of search services has huge potential to grow.

Small and Medium Enterprises (SMEs) in India: The Ministry of MSME estimates

that, in terms of value, the SME industry accounts for about 45% of India’s

manufacturing output and 40% of the total exports of the country, and to

reached at the product produced by these SMEs local search engines play a

vital role. More the SMEs more will be the business for local search engines.

_________________________________________________________________________Figure 3

Source: Ministry of MSME Annual Report 2011

High telecom penetration, growth in internet and 3G subscribers to aid searches

engines Telecom: Search engines are also get benefited by growth in telecom,

internet and 3g services on mobiles. As per TRAI

The wireless subscribers in India was 919.2 million as on march

31,2012, with an overall Teledensity rate of 78.7%.

Figure 4

Source :TRAI

7094

7908

8808

9829

10958

0 2000 4000 6000 8000 10000 12000

2006-07

2007-08

2008-09

2009-10

2010-11

MSME production in Terms of Gross Output (INR Billion)

37.0% 43.5%52.7%

61.0%70.9% 75.5% 78.7%

M a r - 0 9

M

a y - 0

9

J u l - 0 9

S e p - 0

9

N o v - 0

9

J a n - 1

0

M a r - 1 0

M

a y - 1

0

J u l - 1 0

S e p - 1

0

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M a r - 1 1

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a y - 1

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J u l - 1 1

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N o v - 1

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J a n - 1

2

M a r - 1 2

Overall (Wireless and Wireline) teledensity in india

Increase inHousehold Income

Increasing in SMEsproduction by 11.5%

CAGR

Telecom Industry is

in the favour of localSearch Engines.

Growing TeledensityRate





As on 31 dec,2 Internet penetration was at 10.2% (or approximately

121 million users) in India, making India the world’s third largest

population of internet users after China and the United States.

Figure: 5

Source : internet world state

Figure :6

USA(2000) China(2004) India(2011)

Internet User 124 million 94 million 121 million

Internet

Penetration

44.0% 7.0% 10.0%

Source :Internet World Stats

3G subscribers to grow to 236 million in FY16 from 3 million in FY11.

So we can say that this way telecom industry is also is in the favor of high growth

in the business of local search engines.

Indian advertisement market: According to the Netscribes’ Report: “Online

Advertising Market in India 2011”, FICCI-KPMG report and IAMAI the Indian

advertising market generated approximately 300 billion in 2011 and expected

to grow to 462 billion by 2012.

Figure 7 Growth in advertisement revenue

Source : Netscribes’ Report: “Online Advertising Market in India 2011” and FICCI-KPMG report and IAMAI

10.2%

38.4% 39.0% 44.3%

78.3%

India China Brazil Russia US

Internet Penetration

145

177

277

187

236255.9

370

0

50

100

150

200

250

300

350

400

2006 2007 2008 2009 2010 2011 2015(E)

Indian expected

revenue throughadvertisement

expected to grow to

INR 370 billion in2012

InternetPenetrationComparison

among Different

Countries

Comparison of

Internet market of India at 2011 with

USA and China atsimilar stage





Figure 8

* Due to restriction of no. of SMS from one number and applicability of ‘do not call’ regulation

Source: CRISIL Research

If we compare all the median of advertisement; local search engine come out to bebetter than rest all.

Cost of an advertisement is much less than other median such as:

Television, magazine etc.

With the help of local search engine we can target a particular segment of market.

This report also shows that the probability of measuring ROI is higher inlocal search engine segment.

Figure: 9

Source : Netscribes

Revenue through Internet exhibition is expected to grow by 51% between 2011

and 2012. This high growth is due to the growing penetration of internet among

individuals as well as the rising usage of internet on mobile phones.

110

103.4

8.715.1

117.7

1.210.5

110

13.1 15.9

129.5

Cinema Radio Press Internet Outdoor TV

Classifieds Market Size (INR Billion) and Growth

2011

2012e

Comparison across

AdvertisementMediums for local

Advertisements

Segment GrowthRate




of 5

Competition among the Indian local Search

Engine Industry

Figure: 10

Search engines may have different geographic classification methodologies, thus their reach to c ities/

Town may not be fully comparable.

Source: CRISIL report on JUST DIAL IPO

Figure: 11

Data in Colum 3,4 and 5 are for the past three months as on 13-Dec-2011; and also provides blog space

and specific content related to jobs/careers, movie reviews amongst others.

Source: CRISIL report on JUST DIAL IPO

Key to EDUCORPORATEBRIDGE investment rankings: BUY = Expected to outperform the local market by >10%; O-PF = Expected tooutperform the local market by 0-10%; U-PF = Expected to underperforms the local market by 0-10%; SELL = Expected to underperforms the

local market by >10%. Performance is defined as 12-month total return (including dividends).

©2011 EDUCORPORATEBRIDGE, India. Note: In the interests of timeliness, this document has not been edited.

Other disclosures will come

xXXXXXXXXXXXXXXXXXXXXXXXXX

Major competitor in

local Search EngineIndustry

Major local SearchEngine Performance

on the Web

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