Internet blues for media

The fall in internet growth has consequences for both advertisers and digital businesses. For one thing, life will remain uncertain for them till the numbers start rising

Is the drop in online news consumption a sign of things to come? Many of the top 20 online news destinations in India — Times Network, Jagran — saw their numbers on reach and time spent fall in 2022. Overall, the number of Indians consuming news online fell marginally from 457 million in May last year to 451 million by September. The time spent fell by 9 per cent over the same period, according to Comscore data.

A big reason, which this newspaper was the first to report, could be the flattening of internet growth. From double-digit growth rates through 2016 to 2020, it slumped to about 4 per cent in 2021, going by the Telecom Regulatory Authority of India (Trai) data. In the quarter ending in June of 2022, the growth in internet subscribers was less than 1 per cent compared to the same quarter in 2021.

The reason? Smartphone prices. The sweet spot for people in the middle and lower end of the market to upgrade from an ordinary phone to a smartphone was Rs 8,000. Thanks to the chip shortage triggered by the pandemic and the resulting supply constraints, there are no smartphones available in that range. The average selling price is Rs 16,000-Rs 20,000, say analysts.

This has sounded the death-knell for internet growth in India. For millions of Indians a smartphone is their first port of entry into the internet and primary device to go online. Of the 800 million that use broadband, 600-630 million, or just under 80 per cent, use smartphones. These are capable of processing bandwidth that allows you to watch a movie, listen to music or have a meeting online. As their prices went down, the internet grew in India, making it one of the most exciting media markets. These little devices are what have made Google, Meta (Facebook, WhatsApp, Instagram), Netflix and MX Player dominant media players.

Now IDC data shows that the Indian smartphone market declined 10 per cent year-on-year in the third quarter of 2022 (July-September). This was the lowest third-quarter figure since 2019. This has meant that people who use ordinary phones and want to upgrade to one that could help them access all the goodies on the internet just didn’t move up the value chain — so there have been very few additions to the internet.

Telecom analysts say the first major addition to chip capacity will kick in the second half of 2023. This will ease the demand-supply situation making chips accessible for entry-level smartphones.

Meanwhile, what happens to a media market where the next round of the internet’s growth was going to come from beyond the top 100 cities? The ripple effects of this stagnation in the reach of a fast-growing medium will be felt across sectors, including education and banking. This column focuses on the Rs 1.6 trillion media and entertainment business.

The first, immediate impact has been that the number of people using broadband has remained at the same level for two years now. Which means the reach of social media, video and entertainment have stalled at about 485 million, according to Comscore. News, possibly one of the first genres that people access online, has actually fallen.

You could argue, rightly, that it is not just the internet’s reach but other factors like the quality of content or time that could be affecting news consumption. Comscore data shows that though reach remains stuck, time spent on entertainment rose by 2 per cent, while that on social media rose 7 per cent from May 2022 to September 2022.

Every media has a natural ceiling for growth. TV reaches 210 million homes or about 892 million people. But it has been more or less stagnant for a couple of years now. Newspapers reach over 421 million people and have remained at that number for roughly five years. Traditionally, electricity and literacy were some of the natural barriers to how deep into India these media could penetrate.

That changed with smartphones. The videos for everything from financial information and cooking to films and news, the low cost of devices and the ability to charge from anywhere freed the internet-carrying phone from these barriers. The growth of online consumption was limited only by how much time a consumer was willing to spend on it.

That changed with the pandemic. It showed that users could spend hours on it. It is where we hang out, think, query, work, study, relax or talk to family. Time spent, therefore, will keep going up for now. However, this will be from the existing 600-630 million smartphone users and peak at some point as it happened for newspapers and television.

Advertising, the largest revenue generator for online, needs not just more time spent but also more audience in different languages and from different parts of the country. Until the number of broadband users and, therefore, those who could be watching video or listening to music online start going up, life will be uncertain for both advertisers and digital businesses.

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