Bangalore: Esmeralda Davis, who runs a Montessori school in east Bangalore, received a mail last month from Google Inc.—not online, but through post.
The world’s largest Internet firm had invited Davis, who opened The Earth School eight months ago along with a friend, to advertise her academy online and offered a free voucher of Rs2,500 to make a start.
The school allows students to choose their activities and “make discoveries” about language, art, mathematics, music and culture in non-graded classes of mixed ages.
Davis did not take up Google’s offer as she missed the 31 December deadline. But sending snail mails—along with putting more salespeople on the street and using call centre agents—to help small firms get online and use its advertising platform is part of a new experiment for Google.
India will be the laboratory where this “offline” model will be tested out, before being replicated in other emerging markets, Shailesh Rao, managing director of Google India, said recently.
The reason? As Google expands into new markets, where computer and Internet penetration is lower than in the US and Europe, the concept of small companies advertising their goods and services online is yet to catch on.
India focus: Shailesh Rao, managing director of Google India. Google is growing in double digits annually and is profitable in the country. Jagadeesh NV/Mint
India, for instance, has 60-80 million Internet users, according to Google. In contrast, there are at least 500 million mobile users in the country.
“We recognize that the Indian small business needs something slightly different. We may have to approach them differently,” Rao said in an interview.
Until now, the Internet firm has been earning the bulk of its global revenue from Adwords—the small text-based ads of around 50 words that it throws up with search results.
A majority of these ads come from small firms such as restaurants and toy shops that pay a small fee to Google every time someone clicks on the ad.
But Rao said: “The same model of come online, sign up online, put in credit card number and use Adwords, is not going to be a model that addresses the bulk of the small business needs in India.”
So it is following in the footsteps of smaller Indian online firms such as Asklaila.com, run by Bangalore-based Four Interactive Pvt. Ltd, and Tradeindia.com, owned by Delhi-based Infocom Network Ltd. Like them, it is adopting the so-called “click-and-mortar model”, a term for an online business that extends into the physical domain to attract new users.
According to research firm Access Market International Partners Inc., India has around four million small and medium enterprises, or firms with a workforce between 10 and 1,000. They are expected to spend $18.6 billion (Rs85,000 crore) in 2010 to buy computers, build websites and connect to the Internet.
But this does not include outlets such as florists and catering units that feature in Google’s small business list.
In the West, for small firms used to advertising on yellow pages, the business directories published by telephone firms, hopping online was a natural progression.
In the US, 25-40% of the small and medium businesses advertise in these directories, whereas in India, it is less than 5%, said Siddharth Gupta, chief executive of Getit Infoservices Ltd, a business directory firm. “Obviously, Google’s effort would just expand the market in India. There will be more companies online and they will benefit from advertising,” said Gupta.
Agreed Sanjay Tiwari, chief executive of JuxtConsult Research and Consulting Pvt. Ltd, an online research and advisory firm.
“Not many small firms are technology savvy and many of them have very informal businesses; they are pretty happy transacting over phone,” Tiwari said. “Google needs to do lot of convincing to get them on board. If that is done, it would definitely help the (Indian) industry.”
JuxtConsult, based in New Delhi, counts Google and its smaller rival Yahoo Inc. as customers, but has not consulted with them in the past year.
Google, which employs at least 2,000 people in India, or around 10% of its global workforce, is growing in double digits annually and is profitable in the country, Rao said.
The company’s sophistication in monitoring new registrations of websites and blogs and marketing its services gives it an edge in adding more firms online, said Sunil Abraham, executive director at the Centre for Internet and Society, a non-profit body that promotes Internet usage.
Google has built most of its business online, indexing information on the Internet so it can be searched easily. Only now has it digressed from this model to build products, including a mobile phone named Nexus One.
Rao added the firm was investing in India, Latin America, Eastern Europe, West Asia, Africa and China, collectively the fastest growing markets for the company. Google earns 53% of its revenue outside the US, according to its third quarter results, but does not split revenues from other regions.
“Currently, the revenue contribution, in terms of percentage, it is less, (but) in terms of absolute (consumer) base, it is not less,” Rao said. “What I can say is that it has enough (potential for) money (making) that everybody pays attention to (it).”