It's a battle that has largely remained invisible. Yet, two global portal giants are fighting it out for dominance in India's fledgling internet market. One reason why the battle between msn, the portal from software giant Microsoft, and Yahoo has gone unnoticed is because of the size of the Indian internet market. With total online advertising estimated at a paltry $50 million (Rs 230 crore), the Indian market is a mere 0.4 per cent of the $12.5-billion (Rs 57,500-crore) us online advertising market. But then what matters for internet businesses is not the here and now, but the future. The number of internet users in India-37 million-may not appear big, but a million new users are added to that base every month and by 2010, an estimated 78 million Indian users are expected to be surfing the web.

That's the sort of market Yahoo and msn are targeting and to do that both players have unveiled a flurry of India-focussed products to woo users. msn, with estimated Indian ad revenues of about $4.5 million (Rs 20.7 crore), celebrated its sixth anniversary in India recently by revamping its Indian site, adding four new channels on lifestyle, sports, news and entertainment, sfx advertising (a special effects advertising package that allows contextual targeting of surfers), and the launch of the portal in five regional languages-Hindi, Tamil, Telugu, Kannada and Malayalam.

Yahoo India (estimated ad revenues around $8 million or Rs 36.8 crore), which also completed six years in the country this year, has been equally aggressive with its India strategy. Last fortnight, it introduced Yahoo! Search Marketing, which enables advertisers to bid for priority placements in web search results that are served up in response to a user's search for a product or service. In a couple of months it will launch its instant messenger (IM) service (currently offered in English) in a host of regional languages.

In May this year, on a visit to India, Yahoo's CEO Terry Semel spoke of Yahoo's commitment to India and even hinted at big-ticket acquisitions that the company could be making in the Indian market. Says Yahoo's coo Daniel Rosensweig (who was in India last fortnight): "This is a market nobody can take lightly."

Tomorrow's Market

India's attraction is its size and potential-its population of over a billion people and growing numbers of internet users. But web strategies of both these portals (and of other Indian players) haven't targeted the really big numbers. Of the urban population of 250 million people, just 75 million are English speakers. And 37 million of them are internet users. Says Murugavel Janakiram, CEO of Bharat Matrimony, one of the largest Indian online matrimonial services sites: "It is predicted that in a couple of years, the internet will have captured the entire English speaking population and saturated the market." That's precisely why both Yahoo and msn are going local and launching sites, products and services in regional languages. Like Yahoo's IM in Indian languages, msn too will soon roll out its messenger service in five Indian languages-Hindi, Tamil, Telugu, Kannada and Malayalam.

By going regional, both expect to expand the market and capture a larger share of it. "The old misnomer that internet users are only English speaking has gone out of the window. The top end of internet users, the most affluent and well-do-to in India, are the language audiences," says V. Ramani, founder & ceo of Media Turf, a leading Indian internet advertising company.

For both portal giants, not to be in India is not a choice. Of the 500 million Yahoo users in the world today, half that number are in the us (population: 300 million), with the remaining coming from the rest of the world. Clearly, future growth will come from outside the us. And the biggest potential is in-yes, you guessed right-India and China. Says Rosensweig: "We see the biggest growth coming from outside the us and we see India as one of the biggest opportunities over the next 5-20 years."

Although India is the smallest market among the BRIC (Brazil, Russia, India and China) countries, it is the fastest growing. The smallness, explains Jaspreet Bindra, Country Manager, msn India, is not in terms of subscribers; it's in terms of average revenue per user (ARPU), which stands at 50 cents (Rs 23) a year in India. "Compare this with newspapers in India which monetise their readers at $25 (Rs 1,150) a year. That means I'm a one-50th of the newspapers," explains Bindra. In China, the online advertising market is $500 million (Rs 2,300 crore) and with about 100 million internet users, the ARPU works out to a better $5 (Rs 230). Yet, internet companies are excited about India. "One of the biggest reasons why companies are excited about India is because China is a controlled market, where there is censorship on the internet," says Bindra.

In For The Long Haul

Their bullishness notwithstanding, the two portal giants aren't the biggest players in India, at least not for now. According to industry ad revenue estimates, Yahoo is #4 and msn India #5. In the top two spots are Indian internet company, rediff.com with estimated ad revenues of $13.21 million (Rs 60.76 crore) and search giant Google with an estimated $10.44 million (Rs 48 crore). Indiatimes is a close third with an estimated $8.88 million or Rs 40.85 crore (see Click for Cash). Yet, their sheer global size enables them to pump resources that will put home-grown rivals in the shade. Yahoo's global revenues topped $5.25 billion (Rs 23,625 crore then) last year, while msn with $2.2 billion (Rs 9,900 crore then) in revenues, accounts for 5 per cent of Microsoft's sales of $44 billion (Rs 1,98,000 crore). In fact, it wouldn't come as a big surprise if either of these players made a play for some of the prominent Indian internet companies, provided they got them at a good price.

For both Yahoo and msn, the biggest share of revenues on the internet comes from advertising and the us with online ad spend valued at $12.5 billion (Rs 57,500 crore) in 2005 is the largest market for such advertising. In contrast, India's online advertising market is estimated at $50 million (Rs 230 crore). Why then are the two portal giants fighting over small beer? Says Ramani: "Business today is fragmented and only one-nth of what it can be in a couple of years. Monetisation per user is miniscule, but over a period of time, all investments will be justified." The Internet and Mobile Association of India estimates that the online advertising market will grow 35 per cent in the next year.

Besides launching products in regional languages, the two portals have also tied up with local players. While msn has tied up with shaadi.com, in August Yahoo, along with Canaan Partners, a global venture investor, announced a $8.65-million (Rs 39.79-crore) investment in Bharat Matrimony. "Yahoo's business model has always been to build, buy or partner the businesses we see potential in," says Rosensweig explaining the deal.

Increasingly, the two companies are launching products in India before they do so in the US. "There will be products we will launch only in India. You will see us very aggressive and very busy," says Rosensweig. MSN's Bindra too follows the same principle. "If I were talking to you a year back," he says, "I might have told you about various products and the fact that they are likely to come to India maybe three, two or one year down the line. Today, I can tell you that almost all our products are launched in India as soon as they are elsewhere, if not earlier. In fact, there are products being developed specifically for the Indian audience," he says, citing the example of user bots such as Munnabhai that have become a rage in India.

Challenges Galore

With India's mobile phone subscriber base slated to grow to 278 million (or nearly 24 per cent of the population) by 2010, Yahoo and msn are eyeing the wireless market. MSN is in talks with cellular service providers and handset manufacturers to provide its services in India on the mobile. Yahoo has already entered that market as have Indian players like Rediff and Indiatimes.

"The top end of internet users, the most affluent and well-to-do in India, are the language audiences" V. Ramani Media Turf

Neither Yahoo nor msn disclose revenue data or other financial information about their Indian operations, yet executives at both companies say they are satisfied with the progress of their businesses here. Only six years into the market, each claims to have garnered a sizeable slice of the pie. Industry estimates suggest Yahoo has about 15 per cent of the ad market, while msn has an 8.5 per cent share. Things aren't going to be easy, though. For one, ARPU is still low in India. Then, broadband costs are high and penetration is low. As is the usage of data on mobile phones. Says Rosensweig: "These are speed bumps rather than roadblocks."

With deep pockets and a long-term approach to the Indian market, Yahoo and msn could make life difficult for portals like Rediff, Sify and the newly re-launched Indya.com. Particularly because some of these home-grown players still depend on revenues from other sources. Sify, for instance, with an estimated market share of 3.3 per cent, continues to depend on services such as access, enterprise services and data centres, which account for nearly 90 per cent of its revenues. Rediff, on the other hand, won't be a pushover for the portal giants. The company launched the new 'Lightning Fast Rediffmail' in 11 languages in July, ahead of the competition, and recently, its instant messenger, Rediff Bol, in Hindi. With 45 million registered users, Rediff targets Indians worldwide and closed last year with revenues of around $18.70 million (Rs 84.15 crore) for 2005-06, when it also posted a small profit ($1.21 million or Rs 5.4 crore) for the first time in its 10-year history. Says Manish Agarwal, Vice President (Marketing), Rediff: "Providing innovative services that are easy to use, have a high utility value and are able to solve a real world problem or substitute a real world need is a challenge for all online companies." That, incidentally, holds good even if you are the two largest internet portals in the world.