India next frontier for tech companies

Digital toehold sought in largely untapped market

BANGALORE, India -- U.S. technology companies desperately want to win over people like Rakesh Padachuri and his family.

Padachuri, who runs a construction business in Bangalore, the center of India's technology industry, uses his smartphone to reserve movie seats through BookMyShow and to order pizzas from Domino's. His wife, Vasavi, orders clothes from Myntra and Amazon.com, and downloads videos and games from YouTube and the Google Play store to entertain their 4-year-old daughter.

They all stay in touch via a group chat they have set up on WhatsApp, a free messaging service owned by Facebook. "There's no need to call each other," Rakesh Padachuri said last month during an interview at his home, which is next to a Best Western hotel.

The Padachuri family's love of technology helps explain why India and its 1.25 billion people have become the hottest growth opportunity -- the new China -- for U.S. Internet companies. Blocked from China itself or frustrated by the onerous demands of its government, companies like Facebook, Google and Twitter, as well as startups and investors, see India as the next best thing.

"They are looking at India, and they are thinking, 'Five years ago, it was China, and I probably missed the boat there. Now I have a chance to actually do this,'" said Punit Soni, a former Google executive who was lured back to India recently to become the chief product officer of Flipkart, a Bangalore e-commerce startup similar to Amazon.

The increasing appeal of India, now the world's fastest-growing major economy, was underscored in recent days.

During a meeting in Seattle last week with U.S. technology executives, China's president, Xi Jinping, was unwavering on his government's tough Internet policies.

India's prime minister, Narendra Modi, on the other hand, was on a charm offensive during his own U.S. tour.

After a stop in New York City, he headed to Silicon Valley, where he visited Tesla and attended a dinner with tech chieftains including Satya Nadella of Microsoft and Sundar Pichai of Google.

Modi participated in a discussion with Mark Zuckerberg, Facebook's chief executive. He dropped by Google and Stanford University, mingled with entrepreneurs and address a sold-out arena of 18,000 people in San Jose, Calif. before heading back to New York to meet with President Barack Obama.

"For India to keep making progress, it needs to be a leader online," Modi said during the Facebook event. He acknowledged that tech companies like Facebook were not connecting people out of pure altruism, but he told Zuckerberg, "I hope this will not just be something to enhance your company's bank balance."

The overall message to Silicon Valley from Modi, who posts regularly on Twitter and Facebook: Help India become an Internet powerhouse.

Two years ago, India's rise as a digital nation was hard to imagine. Internet penetration was modest, mobile phone networks were glacially slow, and smartphones were a blip in a sea of basic phones.

Since 2013, however, the number of smartphone users in India has ballooned and will reach 168 million this year, the research firm eMarketer predicts.

India already conducts more mobile searches on Google than any country besides the United States. Yet "we are barely scratching the surface of availability of Internet to the masses," said Amit Singhal, Google's senior vice president in charge of search, who immigrated from India to the United States 25 years ago.

Indians have long loved to connect with one another online, accounting for much of the growth of early social networks like Friendster. So it's not surprising that Facebook already has 132 million Indian users, trailing only the United States.

WhatsApp, the messaging service that Facebook bought last year for nearly $22 billion, has become the most popular app in the country, offering free texting and free phone calls in a place where many people earn just a few dollars a day. Facebook's Messenger app is No. 2, according to the analytics firm App Annie.

And that only touches on Facebook's ambitions in India. "We need to focus on the billion people who are not connected," said Kevin D'Souza, head of growth and mobile partnerships for Facebook India.

To reach them, Facebook is offering basic versions of its service that work on simple phones and slow networks. Under an umbrella initiative called Internet.org, Facebook also is working with a cellphone operator to offer a package of free services, including news, job listings and text-only versions of Messenger and its social network aimed at those who can't afford a data plan.

The immaturity of India's Internet market allows companies like Twitter, which has just 20 million users in the country, to treat it as a laboratory.

"If you are starting from a clean slate, what should Twitter look like?" asked Valerie Wagoner, Twitter's senior director for growth, who joined the company after it acquired her India-based startup, ZipDial.

Hundreds of millions of Indians still use basic phones that cannot run apps, but they can receive text messages free. Using technology pioneered by ZipDial, Twitter allows people to view the tweets of cricket stars, politicians or brands by calling a special phone number, then immediately hanging up. The subsequent tweets are delivered as texts.

Last month, Twitter began testing a new idea in India -- a tab of tweets made up entirely of news stories. The idea is to reposition Twitter as a real-time news service, instead of a collection of random items from random accounts.

"This is a market where we can do tests," said Amiya Pathak, a founder of ZipDial and a director of product management at Twitter. "Prove it out in India first, and as you prove it out, take it to other markets."

SundayMonday Business on 10/05/2015

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