10 Things Which Make Online Businesses Difficult in India!

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Pushkar Gaikwad, founder, 6to10 Media
This is a quick ‘10 Pointer list’ (could have more points easily) based on what I am seeing and have seen on the Indian web space and what problems online businesses face or common mistakes they make.

1. Majority of the people who are starting the web startups in India think they can make money from anything, building anything. This just doesn’t work. The advertising model also doesn’t work (unless you are a 2-3 member team with little expenses). You can look at the 2007-08 posts review of startups of Pluggd.in, AlooTechie and StartupDunia and see how many are still surviving?

2. Too Spread Too Thin is a major problem with the Indian online space, about which nothing can be done unfortunately. The Indian online space is way too spread and is way too thin, making each startup to push extra hard to find, convince, acquire and retain customer meaning the startup has to put more resources hence higher burn ratio something which I am seeing more and more often.

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3. Another mistake which founders make (I myself did a couple of times) is to overestimate the market heavily, meaning not able to understand the volume and value of the market. Most of the figures which are projected of various Indian sectors (say media or advertising or marketing) are often fragmented and saying the market is of Rs 350 crore often does not mean that the market has full untapped potential of Rs 350 crore.

4. Entry level barrier is too low and IP (intellectual property) laws are non-existing which mean copycats pop up in matter of weeks in India. The cost of starting a web business has come down so much that anyone can start it in a matter of days without building any business plan or revenue model. Once a site starts getting some traction, 20 similar sites also pop up adding no value and just crowding the market.

5. Ignoring existing players – With online businesses, many times, when you start a business, you fail to see the overlap between already existing players or players which are there but you never see them and later find them.

6. Unlike in USA, all venture capitalists in India like to play safe so the money is only going into big players who know how to pitch themselves or have good connection, of course, we cannot blame VCs for playing safe, it is their money and India is yet to mature.

7. People in India don’t want to use credit cards which often make cost of acquiring customers very high. This hits the cost of acquisition, and retention is the reason why majority of the sites in India which start with big bang either shut down after 2 years or go into maintenance mode due to not turning enough profits.

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8. Payment Gateways – The situation of payment gateways hasn‘t improved much. Last month, when I was looking to write a post on them and reviewing most of them, many of them were not even working properly, most of them had ridiculous fees (I call it ridiculous business model) where they are charging heavily on per transaction.

9. Last Mile Connectivity – The lesser said about this, the better it is. India seriously needs a package like Reliance Monsoon Hungama which was offered by Reliance in 2000 for Rs 500 which created a revolution and people went crazy for mobiles, which now has resulted in 640 million mobile connections. Now that the mobile connections are being getting saturated, it is good time to get into the broadband war for these operators and start offering internet for free or for Rs 99. Let people get the ‘taste’ of internet, once they get it, they will automatically start using it. The reason for such long rant is, though TRAI says India has 8 crore active users online (those who use internet once per month), from whatever I have seen, I think India has about 3-4 crore active users, mostly in the range of 16 to 32 years.

10. Short sightedness of founders for long term – Though I really can’t blame founders for this, but many times I have seen founders looking to make huge profits or looking to exit in the second or third year, this is not very unlikely scenario in India. For example, Faisal Farooqui started MouthShut in 2000 and is still running it. He could have sold it for a decent price in 2006, may be in 2008 as well, but he kept it, a good lesson for others too.

I can think of few more points but will cut down the list here only.

Editor: This article first appeared in Pushkar Gaikwad’s blog Gaikwad.in and has been republished here with his permission.

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