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The Internet’s New Billion
 Digital Consumers in Brazil, Russia, India, China,
                 and Indonesia




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The Boston Consulting Group (BCG) is a global manage-
ment consulting firm and the world’s leading advisor on
business strategy. We partner with clients in all sectors
and regions to identify their highest-value opportunities,
address their most critical challenges, and transform their
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This ensures that our clients achieve sustainable compet-
itive advantage, build more capable organizations, and
secure lasting results. Founded in 1963, BCG is a private
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mation, please visit www.bcg.com.
The Internet’s New Billion
 Digital Consumers in Brazil, Russia, India, China,
                 and Indonesia



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                      Marcos Aguiar
                    Vladislav Boutenko
                      David Michael
                     Vaishali Rastogi
                   Arvind Subramanian
                       Yvonne Zhou


                        September 2010




                          bcg.com
© The Boston Consulting Group, Inc. 2010. All rights reserved.

For information or permission to reprint, please contact BCG at:
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         The Boston Consulting Group, Inc.
         One Beacon Street
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         Boston, MA 02108
         USA
Contents
Executive Summary                                                             4

The BRICI Digital Landscape                                                   6
Internet Usage Patterns                                                       9
Mobile Internet                                                              11
Historical, Economic, and Cultural Factors Shaping Today’s Digital Reality   11

BRICI Country Profiles                                                       13
Brazil: Robust Potential Currently Hindered by High Costs                    13
Russia: Strong Mobile-Internet Growth Potential                              15
India: A Low-Maturity, High-Growth Market for Years to Come                  17
China: Growth Scenario—Mature Beyond Expectations                            19
Indonesia: On the Brink of a Mobile-Internet Revolution?                     20

Outlook: 2015 and Beyond—and a Call to Action                                24

Appendix: Researching BRICI Digital Consumers                                26

For Further Reading                                                          27

Note to the Reader                                                           28




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T I’ N B                                                    
Executive Summary



    J
           ust as Brazil, Russia, India, China, and Indonesia     plex online needs, there will be a collossal opportunity for dig-
           are the new engines of global growth, they are also    ital companies to monetize services and products. Those com-
           the sources of the most dynamic changes in digital     panies that manage to do so will reap the tremendous benefits
           consumption in the world—a phenomenon that             of this massive digital revolution.
           will grow only more pronounced over the next five
years. Already, more than 610 million residents of these coun-    In 2009, the BRICI countries—Brazil, Russia, India,
tries—which we call the BRICI markets—use the Internet reg-       China, and Indonesia—represented about 45 percent
ularly. That number will jump to 1.2 billion by 2015.             of the world’s population and about 15 percent of
                                                                  global GDP and had some 610 million Internet users.
                                                                             ,
Online usage in the BRICI markets is quite different from that
in developed countries—and oen varies more by population         ◊ By 2015, these countries will have more than 1.2 billion
segment than by economic status. Consider an 18-year-old            Internet users—well over three times the number of In-
named Swapnil who lives in Lucknow, India. Each day, he up-         ternet users in Japan and the United States combined.
dates his Facebook page, uses instant messages to chat with
friends, and downloads music from a peer-to-peer file-sharing      ◊ Internet penetration rates in the BRICI countries will
site. In these ways, he’s much more like Hafiz, a teen in Jakar-     experience compound annual growth of 9 to 20 per-
ta, or Felipe, a young São Paulo resident, than like fellow In-     cent from year-end 2009 through 2015.
dian Sanjay, a thirty-something stock trader who uses the In-
ternet primarily for tracking markets.                            Personal computers are much less prevalent than mo-
                                                                  bile devices in the BRICI countries—and play no-
Despite similarities across user segments, however, digital       where near the role in catalyzing digital consumption
markets in Brazil and Russia are more advanced than those         that mobile devices and Internet cafés do.
in India and Indonesia, and China is far beyond its fellow
BRICI markets—Internet and mobile-phone use are deeply            ◊ There are only about 440 million PCs in the BRICI
embedded in the lives of hundreds of millions of Chinese peo-       countries at present, although that number should
ple. China offers a useful benchmark in that the unexpectedly        more than double by 2015.
rapid pace of China’s online migration is a sharp reminder of
how quickly the other BRICI markets are likely to evolve in       ◊ PC penetration in Brazil and Russia is around 32 per-
terms of Internet penetration rates, the number of hours spent      cent, while in China it is only about 20 percent. Indo-
online per day, and e-commerce adoption.                            nesia and India have PC penetration rates of only
                                                                    about 5 percent. By comparison, PC penetration in the
The importance of this shi into the digital mainstream lies        United States and Japan is about 90 percent or more.
not just in the size and speed of the transformation of online
habits but also in who the BRICI digital consumers are. Right     ◊ Growth will push these penetration rates up in the
now, 60 percent of BRICI Internet users are under the age of        coming years, but only Russia and Brazil will have PC
35. As they earn ever-higher incomes and develop more com-          penetration rates that exceed 50 percent in 2015.
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Because of the limited availability and relatively low        ◊ In Russia, about 12 percent of mobile-phone users ac-
affordability of PCs in the BRICI markets, digital con-          cess the Internet through their handsets.
sumers in those countries have developed other ways
of fulfilling their online needs.                              The affordability and availability of fixed-line and mo-
                                                              bile broadband and phone connections are key factors
◊ Internet cafés are an increasingly important venue for      shaping BRICI digital-consumption patterns. Similarly,
  digital consumption. In Indonesia, they are known as        rapid changes in modes of connection can trigger
  “warnets” and were mentioned frequently in our fo-          extremely fast adoption of new digital behaviors.
  cus-group research.
                                                              ◊ Much of the mobile growth in India has occurred in
◊ In less affluent areas of Brazil, users go to ad hoc Inter-     the last 24 to 36 months, driven by steady declines in
  net cafés called LAN (local area network) houses to ac-       tariffs. Rates for voice calls are currently as low as
  cess the Internet. And in China’s vast countryside,           $0.006 per minute, and price promotions are abun-
  more than half of digital consumers go online in Inter-       dant. Already, the growing phenomenon of multiple-
  net cafés.                                                    SIM mobile devices has emerged in India.

Mobile phones are already very popular tools for              ◊ PC affordability in China and mobile-handset afford-
communicating and seeking out entertainment.                    ability in India have been driven by the emergence of
                                                                local brands that offer a price-to-functionality equa-
◊ The BRICI countries currently have about 1.8 billion          tion far superior to that of established brands.
  mobile-phone SIM card subscriptions, compared with
  a combined total of 394 million in the United States        ◊ In Indonesia, low in-network calling rates have moti-
  and Japan.                                                    vated users to own multiple mobile devices, each as-
                                                                sociated with a different plan.
◊ Russia leads the BRICI countries in SIM penetration at
  141 percent (many Russians own more than one SIM            ◊ Throughout the BRICI countries, user habits are evolv-
  card), followed by Brazil’s 86 percent. China, India,         ing at rapid rates as new services and behaviors quick-
  and Indonesia have SIM penetration rates ranging              ly become mainstream activities.
  between 41 percent and 66 percent. By comparison,
  the United States and Japan are both at around 90           About the Authors
  percent.                                                    Marcos Aguiar is a senior partner and managing direc-
                                                              tor in the São Paulo office of The Boston Consulting
◊ By 2015, SIM penetration in China and India is expect-      Group; he can be reached by e-mail at aguiar.marcos@
  ed to reach 84 percent and 75 percent, respectively,        bcg.com. Vladislav Boutenko is a partner and managing
  while that in Brazil and Indonesia will surpass 100 per-    director in the firm’s Moscow office; he can be reached by
  cent—owing, among other factors, to users taking ad-        e-mail at boutenko.vladislav@bcg.com. David C. Michael
  vantage of prepaid plans from different operators,           is a senior partner and managing director in BCG’s
  which is already common in Russia.                          Beijing office and leads the Global Advantage practice; he
                                                              can be reached by e-mail at michael.david@bcg.com.
As sophisticated handsets become available in the             Vaishali Rastogi is a partner and managing director in
BRICI markets, more and more digital consumers are            the firm’s Singapore office; she can be reached by e-mail
turning to mobile Internet to meet their online needs,        at rastogi.vaishali@bcg.com. Arvind Subramanian is a
particularly in markets with high access costs or lim-        partner and managing director in BCG’s Mumbai office;
ited fixed-line broadband availability.                        he can be reached by e-mail at subramanian.arvind@
                                                              bcg.com. Yvonne Zhou is a principal in the firm’s Beijing
◊ In Indonesia, for example, we’ve seen users skip the        office; she can be reached by e-mail at zhou.yvonne@
  PC ownership stage common in developed markets              bcg.com.
  such as the United States and Japan and leapfrog di-
  rectly to mobile Internet.
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The BRICI Digital Landscape




T
              he BRICI countries—Brazil, Russia, India,                             net usage, with about 610 million Internet users. Howev-
              China, and Indonesia—are already an en-                               er, the aggregate Internet-penetration rate across the
              gine of global growth. At present, they are                           BRICI countries is only about 20 percent, compared with
              responsible for almost 15 percent of global                           rates in the United States and Japan of 70 percent and 74
              GDP, and between now and 2015, they will                              percent, respectively. (See Exhibit 2.)
enjoy 4 to 8 percent real annual GDP growth, on average.
(See Exhibit 1.)                                                                    The BRICI markets will be a source of tremendous growth
                                                                                    as rapid increases in disposable incomes in these coun-
More than 3 billion people—about 45 percent of the                                  tries build the means to consume. Younger BRICI resi-
world’s population—currently live in the BRICI coun-                                dents are seeing their wages grow and are altering their
tries, and they account for about one-third of global Inter-                        lifestyles accordingly—and these consumers constitute


    Exhibit 1. The BRICI Markets Represent Almost 15 Percent of the World’s GDP
    and 45 Percent of Its Population

                                                                        Real GDP, 2009 and 2015E
                            $billions
                                                                                                                         2
                            18,000
                                                                                                                          14,980
                                                                                                                    12,987
                            12,000
                                            8
                                                                                                                                         1
                                                5,601
                             6,000                          8                                                                       4,451 4,829
                                        3,458                                  5           4              6
                                                                1,783
                                                        1,127            1,020 1,349    866 1,111   355       505
                                  0
                                          China           India            Brazil        Russia     Indonesia       United States      Japan


             2009 population               1,335          1,166             194           141          240              307             127
                (millions)

           2009 real average               1,134           810             3,881          3,970        563             32,592         21,080
         disposable income ($)
             2009         2015E             Compound annual growth (%)

    Sources: Economist Intelligence Unit; BCG analysis.
    Note: GDP and average disposable income are stated in 2005 U.S. dollars.


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Exhibit 2. Internet Users in the BRICI Countries Will More Than Double to 1.2 Billion
  by 2015

                                                            Number of Internet users, 2009–2015E
                              Millions
                              750          9
                                                650


                              500    41
                                                                                                                                 1
                                          384
                                                             20                                                             2                   1
                                                                  237        15                 10                                   238
                              250
                                                                                                                20        211 223
                                                                                  155                                                        2
                                    137               18                23                 20
                                                            81                                       76    16        94                    88 93 101
                                                      49                     68
                                                                        36                26 44           20 31
                                0
                                         China             India         Brazil             Russia        Indonesia       United States      Japan


              2009                        28                 7               33                 31              12              70             74
          penetration (%)

              2015E                       47                19               74                 55              37              73             81
          penetration (%)
          2006         2009         2015E                  Compound annual growth (%)
  Sources: Ministry of Industry and Information Technology; iResearch; Internet World Stats; Economist Intelligence Unit; BCG analysis.
  Note: An Internet user is defined as someone aged 2 years or older who went online in the past 30 days; penetration is the number of Internet users
  divided by the population.



the vast majority of their countries’ online populations.                               mon with each other. Still, there are major differences in
They tend to be more open to trying new things and                                      usage habits. While disposable income and cultural or lin-
more comfortable with technology. Many of them have                                     guistic environments are key factors in influencing digital
come to rely on the Internet as a source of entertainment                               habits, the cost and availability of service are also impor-
and a platform for self-expression and communication.                                   tant elements of both the broadband and mobile stories.

Owing largely to low average disposable incomes in many                                 ◊ In India, rates for voice calls are currently as low as
parts of the BRICI countries, personal computers are much                                 $0.006 per minute, and price promotions are prevalent.
less commonly owned than mobile devices. There are only                                   These low rates, combined with the inflow of cheap but
about 440 million PCs in the BRICI countries at present,                                  advanced-technology handsets from China, are helping
although that number should more than double by 2015,                                     to drive not only the growth in mobile use but also a
surpassing 920 million. (See Exhibit 3.) Notebooks also                                   more sophisticated range of mobile activities.
have strong potential in the BRICI markets because of
their relative affordability. Meanwhile, mobile-phone SIM                                ◊ In Brazil, broadband costs are high, limiting the number
subscription levels are already quite high among the BRI-                                 of in-home Internet users. Brazil’s 3G is affordable but
CI countries. China, India, and Indonesia have mobile-                                    not widely available, with the result that mobile Web
penetration rates ranging between 41 percent and 66 per-                                  and chatting are rare.
cent, and Brazil and Russia are currently at 86 percent and
141 percent, respectively.1 (See Exhibit 4.)                                            ◊ Among Indonesian digital consumers, mobile use—
                                                                                          and, to a certain extent, mobile-Internet use—is high
In general, there is more similarity among particular user
segments across the BRICI countries than among seg-
                                                                                        1. It is quite common in Russia for mobile-phone owners to have
ments within the individual countries themselves. Young                                 more than one SIM card, which is how penetration can exceed 100
BRICI digital consumers, in particular, have a lot in com-                              percent.
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Exhibit 3. Brazil and Russia Have the Highest PC Penetration Rates


                                                                              Number of PCs in use, 2006–2015E
                               Number of PCs (millions)
                               600
                                        10
                                                        462
                                                                                                                                                               2
                               400           18                                                                                                      4
                                                                                                                                                                   313
                                                  267                     25                                                                             283                            5
                                                                                                                                                   250
                                                                               216               11                   12
                                        163                                                                                                22                                  8
                               200                                                                                                                                                       161
                                                                    33                     19        121         25                                                                123
                                                                                                                           87         25                                   97
                                                                         55                     66                    45
                                                                24                     39                    23                           38
                                                                                                                                     6 11
                                   0
                                              China                  India                  Brazil               Russia              Indonesia     United States                   Japan


               2009                               20                      4                     32                    32                5                 89                        98
           penetration (%)

               2015E                              34                     17                     58                    63                15                97                       129
           penetration (%)
           2006         2009            2015E                       Compound annual growth (%)
    Sources: Economist Intelligence Unit; CIA World Factbook; BCG analysis.
    Note: Penetration is the number of PCs divided by the population.




    Exhibit 4. BRICI Mobile Penetration Is Already Very High

                                                        Number of mobile-phone subscriptions, 2006–2015E
                          Number of SIM cards (millions)
                          1,400       7
                          1,200                    1,151
                                                                     11
                          1,000         13                                953

                             800             769
                                                               50
                             600       534                                                                            1                                   5
                                                                    507                         5                                       9                                           3
                                                                                                                                                    6          372
                             400                                                     20                      9                  34
                                                                                                    235            214
                                                                                                                                            274   233 279                  5
                             200                              150                          175             152 197                    166
                                                                                     101                                        69                                       100 115 140
                               0
                                         China                      India              Brazil                Russia             Indonesia         United States             Japan


             2009                             57                     41                    86                    1411                 66                 88                        92
         penetration (%)
             2015E                            84                     75                    113                   155                  107                115                    112
         penetration (%)
         2006         2009             2015E                    Compound annual growth (%)
    Sources: Economist Intelligence Unit; CIA World Factbook; BCG analysis.
    Note: Mobile-phone penetration is the number of SIM card subscriptions divided by the population.
    1
     Mobile-phone penetration in Russia is believed to be less than 100 percent; there is a tendency for users to own multiple SIM cards, a large number of
    which are inactive.

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and growing, owing to the affordability of devices and                          clock thanks to mobile-chat functions on their cell
  2.5G service.                                                                  phones, and they use the Internet to meet a wide and
                                                                                 intricate range of needs.
◊ Russian fixed-line broadband costs vary dramatically
  by region. For instance, in major cities such as Moscow,
  St. Petersburg, and Yekaterinburg, unlimited-traffic                           Internet Usage Patterns
  broadband costs about $10 to $15 per month—com-
  pared with Murmansk, where it can                                          By 2015, the BRICI countries’ Internet user
  cost as much as $120 a month.                                              base will exceed 1.2 billion—more than
                                                By 2015, the BRICI           three times the number of Internet users in
◊ Broadband in China is actually cheap-          countries’ Internet         Japan and the United States combined.
  er than dial-up, enabling the rise of                                      This growth will be driven by BRICI Inter-
  hundreds of thousands of Internet
                                               user base will exceed         net-penetration growth rates of 9 to 20 per-
  cafés throughout the country—and 2G                1.2 billion.            cent annually from year-end 2009 through
  mobile connections are also affordable                                      2015. Nonetheless, China’s Internet usage
  to a large swath of the population.                                        will remain the highest of all the BRICI
                                                               countries. (See Exhibit 5.)
◊ In rural China—where average disposable incomes are
  much lower than in China’s urban areas—digital con-          ◊ Chinese Internet users are online for an average of 2.7
  sumers already use mobile SMS (short message ser-               hours per day—longer than users in any other BRICI
  vice), social networking, online entertainment, and ba-         country—and are projected to spend an average of 3.1
  sic e-commerce. Meanwhile, urban Chinese consumers              hours online each day by 2015. This trend more close-
  exhibit the most sophisticated online behavior—many             ly resembles usage patterns in the United States and
  of those we spoke to are online almost around the               Japan (where Internet users spend an average of 2.3


  Exhibit 5. Time Spent Online per Day in India, Indonesia, and Brazil Is Less Than Half
  of That in China

                                                  Total hours spent online per day, 2006–2015E
                          Hours (millions)
                          2,500         2,348

                          2,000

                          1,500

                                      1,025
                          1,000

                                                                                                                    507
                               500   330                                 329                                                        268
                                                          168                         180              103
                                                  21 42          22 63          36 75            15 27
                                 0
                                       China         India          Brazil         Russia        Indonesia United States           Japan
          Hours spent
           online per
         person per day

                2009                       2.67      0.52            0.93            1.70           0.86            2.27            2.87


                2015E                      3.09      0.71            2.12            2.37           1.10

         2006           2009         2015E

  Sources: China Internet Network Information Center; The Nielsen Company; International Telecommunication Union; comScore; BCG analysis.


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T I’ N B                                                                                                                  
and 2.9 hours online per day, respectively) than in the                                      tent. But there are some remarkable variations among
     other BRICI countries.                                                                       the BRICI countries as well. For instance, social net-
                                                                                                  working is more popular in Indonesia and Brazil than in
◊ Brazil and Russia will approach China’s current usage                                           either the other BRICI countries or the developed mar-
  rates by 2015; India and Indonesia are growing quickly                                          kets. Meanwhile, an extremely high percentage of Indi-
  but starting from a low base.                                                                   an digital consumers use e-mail and job-hunting sites,
                                                                                                  compared with the other BRICI markets. The more ma-
There are a few commonalities in how BRICI digital                                                ture Chinese market has well-established usage of al-
consumers use the Internet. (See Exhibit 6.) For exam-                                            most all the online activities that we tracked. Apart from
ple, instant messaging is vastly more popular in all the                                          social networking, Brazil and Russia have notably simi-
BRICI countries than in the developed markets we stud-                                            lar usage patterns across the board, with search engines
ied, as are online music and games, albeit to a lesser ex-                                        and e-mail predominating.


     Exhibit 6. Internet Use in the BRICI Markets Shows Commonalities—and Differences


                                           Percentage of Internet users engaging in various online activities, 2009



                                    China               India                 Brazil              Russia              Indonesia              United              Japan
                                                                                                                                             States

       Instant messaging                       87               62                  61                      56                      58            38                 23

             Online music                      83               60                 49                   47                     34                 34                 25

             Reading news                      80               61                 47                        65                    47                  70                      90

              Online video                  76                53                   49                   41                    16                       68                 49

           Search engines                   69                50                         83                      81                 56                  89                     92

            Online gaming                 55                  54                   44                  31                      35                 35             16

                     E-mail               53                            95              77                       78                 59                  91                     88

                       Blogs          38            NA                        17                       33                      33            11                      32

        Social networking            33                  23                             69        15                                58            35                 32

             E-commerce
                            1
                                     28                 17                    17                   21                     5                            71             46

           Online banking            26             NA                       NA                   11                      5                        55        NA

 Bulletin board/forum               21              NA                        18              NA                               33             22                 13

               Job hunting          19                             73        NA               NA                              20                   51            8
                            2
                     Other      NA                            57             NA                              67       NA                 NA                  NA

                                0    50 100         0    50 100 0                 50 100      0     50 100            0        50 100    0        50 100     0       50 100

            Above average3

     Sources: BCG Digital Generations Consumer Research, 2009; Business Insider; BCG research.
     Note: NA means not available.
     1
      Includes travel booking, e-payments, and e-shopping.
     2
      “Other” in India represents sports (57 percent), e-greetings (57 percent), and dating and friendship (51 percent); in Russia it represents
     weather forecasts (67 percent).
     3
      At least 10 percent higher than the average level across all countries.

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Mobile Internet                                                               music streaming or downloading, compared with only
                                                                              one-quarter of Brazilian and Indonesian consumers (and
One of the key differences between the BRICI countries                         about one-third in Russia). Nearly 40 percent of Chinese
and developed markets lies in how digital consumers ac-                       users play games on their mobile phones, and around
cess the Internet. In developed markets, consumers have                       one-quarter use mobile video, Internet, and news servic-
tended to form their online-usage habits through PCs, us-                     es. In Russia, 3G is seven times more expensive than in
ing dial-up or broadband connections. By contrast, many                       China, driving more users there to use broadband con-
BRICI digital consumers have learned to                                                       nections to meet their digital needs.
use the Internet in large part through their          BRICI digital
mobile-phone connections. At present,
                                                    consumers have
mobile-Internet availability is still fairly                                  Historical, Economic, and
limited in most of the BRICI countries, al-     developed their online        Cultural Factors Shaping
though mobile-online behaviors are al-             habits on mobile           Today’s Digital Reality
ready emerging across those markets, sug-
gesting the tremendous potential for user       phones instead of PCs.        The BRICI countries tend to have high lit-
growth as costs come down and networks                                        eracy rates compared with other emerging
expand. (See Exhibit 7.)                                       markets—all of them have literacy rates above 90 per-
                                                               cent, apart from India with 61 percent. This means that
China’s digital consumers use their mobile devices for the     their consumers are able to use the Internet (including
most diverse range of activities, while India’s use their      international sites) to meet a variety of needs and can
mobile devices almost exclusively for phone calls and          generally learn about new platforms and services with-
short messages. (See Exhibit 8.) Nearly half of Chinese        out much difficulty. BRICI digital consumers tend to be
digital consumers use their mobile phones for multime-         young—60 percent of them are less than 35 years old—
dia messaging service (MMS), mobile photos, and mobile         and willing to try new things.


  Exhibit 7. The Mobile-Internet User Base Tripled from 2007 to 2009

                                                   BRICI mobile-Internet users, 2007 and 2009

                            Number of users (millions)
                            250
                                    260
                            200          180.0

                            150

                            100
                                                                                                   88
                                                                 211             167
                                    50.0                                                                                  300
                             50                                                                              40.6
                                                                       12.0               11.2   21.5
                                                           3.9                 4.2                                  2.3         9.0
                              0
                                       China                     India           Brazil            Russia           Indonesia


      Penetration among
         mobile-phone                      30                     2                  6                  12                 5
        users, 2009 (%)
      Penetration among
        Internet users,                    61                     15                 17                 54                29
           2009 (%)

        2007         2009             Total change from 2007 to 2009 (%)
  Sources: China Internet Network Information Center; BCG analysis.


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Exhibit 8. Chinese Digital Consumers Are the Most Active BRICI Mobile-Phone Users

                                        Percentage of mobile-phone users engaging in various activities, 2009



                              China                    India            Brazil        Russia            Indonesia               United                  Japan
                                                                                                                                States
 Mobile phone calls                         100                99                 99 NA                                99                      88                  100

                  SMS                       93           48                  57                    80            100                  51            14

        Mobile photos                  49         1                     24          NA                  NA                                60                 55
           Multimedia                  49         NA
            messaging                                                   25                    36             24                 17                  8

         Mobile music                  47         1                     24                24                 22                      36                 27

        Mobile gaming              39             NA                1                11                     15                  12                      27

             Ringtones            34              1                 NA                14                     28                 20                      28

          Mobile video            26              5                     24           8                       22                 16                  16

       Mobile Internet        24                  1                 6                12                 6                                 56                      83

          Mobile news         23                  NA                NA              NA                  NA                  2                            40

         Mobile e-mail        20                  NA                NA                   16                  26                  21                           72

 Mobile payment or           11                   NA                NA              NA                      15              5                            40
       e-commerce
                         1
         Above average
     Sources: BCG Digital Generations Consumer Research, 2009; China Internet Network Information Center; Enfodesk; Gartner; The Nielsen Company;
     Centre of Excellence in Information and Communication Technologies; IDC Asia/Pacific consumer survey; BCG research.
     Note: NA means not available.
     1
      At least 10 percent higher than the average level across all countries.



The limited enforcement of intellectual property protec-                             instant messaging regularly to discuss homework with
tion in the BRICI markets means that music and video                                 friends—and search engines are vital for conducting re-
downloads are widely available—and free. In general,                                 search on school or work projects.
BRICI Internet users are much more likely to pay for on-
line services than for content, although Indian and Indo-                            Policymakers need to be aware of how these factors will
nesian users are quite reluctant to pay at all. For instance,                        influence not just consumer behavior but also the devel-
BRICI users will pay for value-added services on social-                             opment of local innovation and businesses. They should
networking sites to customize a personal page, or they                               also consider how policies can push beyond infrastruc-
will pay small fees for online game accounts.                                        ture and pricing. For instance, e-government programs
                                                                                     can serve as anchor tenants on broadband networks, en-
A strong cultural emphasis on education in the BRICI                                 couraging the development of local content and services.
countries has spurred rapid adoption of the Internet, as                             One of the best examples of this comes from Russia: the
parents strive to give their children access to learning ma-                         Tatarstan government has gone 100 percent online—
terials and as young professionals seek to upgrade their                             even to the extent that the president of Tatarstan pub-
own knowledge base through online studies. Many of the                               lishes his policy agenda in real time.
young BRICI digital consumers with whom we spoke use
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BRICI Country Profiles




E
            ngaging digital consumers in the BRICI coun-     lion Brazilians have fixed-line broadband connections,
            tries will require an understanding of their     while another 9 million have dial-up. This means that
            underlying preferences and motivations.          only about one-third of PC owners currently have an In-
            Each BRICI country has a distinctive tapes-      ternet connection.
            try of digital-consumption patterns, offering
strong indicators of which online user trends are likely     Broadband costs do not appear ready to come down—
to translate into full-blown consumer phenomena. (See        rather, the trend seems to be for providers to increase
Exhibits 9 and 10.)                                          connection speed while maintaining prices. That said,
                                                             such increases are currently constrained by the infrastruc-
                                                             ture capabilities of the leading telecommunications com-
Brazil: Robust Potential Currently                           panies.
Hindered by High Costs
                                                             Mobile-phone usage is fairly popular, with 2G or 2.5G ser-
Brazil is a fairly urbanized country, and most of the pop-   vice SIM penetration of 168 million (84 percent). The av-
ulation is urban. However, many digital consumers can        erage price is hard to pinpoint because operators tend to
be found in the countryside and in small towns—and us-       offer aggressive price promotions, although monthly con-
ers of the social-networking site Orkut.com can be found     tract fees are around $0.35 per minute, while prepaid
even in remote areas. High-income young people are “al-      plans cost around $0.65 per minute.
ways on,” meaning that they use multiple media and In-
ternet sites to stay informed, entertained, and in touch.    Mobile-Internet usage is still relatively new in Brazil.
Low-income youth in both rural and urban areas go to so-     Overall, only 11 million Brazilian mobile-phone owners
called LAN (local area network) houses—informal Inter-       use mobile Internet, although mobile-Internet use has
net cafés with 10 to 20 PCs and hourly rates as low as       grown at a 167 percent compound annual rate since
$1—to use the Internet, and they therefore have a more       2007. The least expensive offer for 3G is only around
restricted range of activities, although LAN houses typi-    $0.006 per megabyte—and 3G coverage, as stated by the
cally provide other digital services such as CD/DVD burn-    two largest operators, is available to more than half the
ing and document printing. And while young people are        population. Growth will continue to be driven by Inter-
a major driver of Brazil’s digital evolution, consumers in   net users (such as Priscila, profiled in the sidebar
their forties and fiies go online to check e-mail and        “Priscila: A Typical Young Blue-Collar Brazilian”) who
news, seek entertainment, and participate in online          transfer their PC habits to their mobile devices. At pres-
social networking.                                           ent, only 17 percent of Internet users in Brazil use
                                                             mobile Internet.
A critical feature of the Brazilian market is the some-
what high cost of fixed-line broadband, which averages
                                                             2. All fixed-line broadband costs mentioned in this report refer to
around $27 a month and is available mainly in high- and      the lowest monthly tariff for 1 Mbps (megabits per second) fixed-
middle-income neighborhoods.2 Currently, only 12 mil-        line broadband with unlimited usage.
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Exhibit 9. The Digital Habits of Young BRICI Users Show Similar Patterns



                                   China                    India                    Brazil                   Russia                   Indonesia

                         ◊ 14 years old            ◊ 18-year-old           ◊ 17-year-old student     ◊ 18-year-old           ◊ 18 years old
                         ◊ Junior high               student in              in São Paulo              economics             ◊ High school
                           school student            Lucknow               ◊ Lives with his            student in              student living
      Background           in Guilin               ◊ Lives with his          parents                   Moscow                  in Jakarta with
                         ◊ Only child; lives         parents and           ◊ Likes to play futsal    ◊ Single                  his parents
                           with his parents          elder sister            (indoor soccer)         ◊ Lives with her        ◊ Spends one hour
                                                                                                       parents in an           per day online
                                                                                                       apartment

                         ◊ ~$30 monthly in         ◊ ~$500 household       ◊ ~$250 monthly           ◊ ~$60 spent on         ◊ ~$50 monthly in
        Digital            pocket money              income                  in pocket money           digital services        pocket money
       spending          ◊ ~30% spent on           ◊ ~10% spent on         ◊ ~50% spent on             monthly               ◊ ~10% spent on
                           digital services          digital services        digital services                                  digital services

                         ◊ Looking for fun and     ◊ “My PC is like an     ◊ “When I am              ◊ “Friends are very ◊ “Without a mobile
                           new friends, with         elder brother to        alone, I usually          important—and       phone, I would
       Attitudes           usage focused on          me: it guides me        go online. The            the Internet        feel like I was
     toward digital
      devices and          instant messaging,        and helps me out        Internet is part          gives me an         back in primitive
        services           games, and social         all the time.”          of my life.”              opportunity to      times—I would
                           networking sites                                                            be connected        feel so out of
                                                                                                       with them.”         touch.”

 Source: BCG research.




 Exhibit 10. Online Activities Differ According to Access Costs




                                  China                    India                    Brazil                   Russia                   Indonesia

                          ◊ Online around         ◊ Online a bit at       ◊ Mostly online           ◊ Online around          ◊ Online mostly
      Time online           the clock with          school and a            on home                   the clock with           at cybercafés
                            mobile chat             bit at home             computer                  her computer                      …mainly
                                                                                                                                       because of
                                            Overall                                                                                       high
      Mobile SMS                                                                                                                         broad-
                                           activities
                                          are limited                                                                                  band costs
                                           to basic
      Mobile Web                          entertain-          Little activity                                                            Mobile
       and chat                           ment news             owing to                                                                 online
                                          and e-mail             limited                                                                activities
                                                               availability                                                            are driven
        Social                                                                                                    Most                     by
      networking                                                                                                activities             Facebook
                                                                                                                 revolve                   use
                                                                                                                 around
         Online                                                                                                   social
     entertainment                                                                     Spends $75              networking
     (games/video)                                                                          on
                                            Pays for                                   e-commerce
                                          “premium”                                    and another
      E-commerce                          services for                                    $30 on
                                              QQ                                        downloads

 Source: BCG research.

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Priscila
  A Typical Young Blue-Collar Brazilian

                         Priscila, a 32-year-old event promot-   activity is e-mail, social networking, online games and vid-
                         er in São Paulo, falls in the urban     eo, e-commerce, and instant messaging. She researches
                         working-class segment of Brazil’s       the prices of romance novels online, and she stays current
                         digital-consumer market. She lives      on the cast of her favorite soap opera. She also uses the
                         with her mother and two brothers in     LAN house webcam to speak with friends overseas.
                         a home that has a digital camera,       Priscila exemplifies a candidate for mobile Internet—at
                         an MP3 player, and three mobile         present, she avoids using it owing to high cost, although
                         phones—her mobile phone is a            she is an avid user of both her cell phone and her Internet
  relatively low-cost ($180) local-brand model. Of the $690      connections. Like many of the young women we spoke
  that Priscila brings home each month, she spends $125          with, Priscila sees mobile devices as fashionable accesso-
  on communication and entertainment.                            ries. “Notebooks and some cell phones are really sophis-
                                                                 ticated and elegant,” she says. “They are not simply devic-
  Even though she does not have a PC at home, she still          es—they’re chic.”
  spends a lot of time online at friends’ houses or through a
  LAN house near her apartment. The focus of her online



Brazil’s Online-Usage Patterns                                    to Brazilian user habits, with search engines, social-net-
Brazil’s digital consumers spend an average of 0.9 hour           working sites, and online video sites high in the rankings.
online each day, but our projections show a jump to 2.1           For social-networking platforms, Google’s Orkut.com is
hours per day by 2015. Brazilians use the Internet for a          the clear leader, although Facebook and Twitter seem to
broad range of activities. Search engines, e-mail, and so-        be making major inroads in the higher-income brackets.
cial-networking sites are the most widely used—remark-
ably, 69 percent of Brazil’s digital consumers are active         Meanwhile, although Brazilian digital consumers use the
on social-networking sites, significantly more than in any         e-mail platforms of all the major global players, the home-
BRICI country other than Indonesia. Instant messaging is          grown site UOL is extremely popular. A classic portal that
also common among the majority of users, and MSN                  was created in the 1990s as the Brazilian version of AOL,
Messenger is particularly popular. In addition, nearly half       UOL features some exclusive content as a result of its
of Brazilian digital consumers use the Internet for online        relationship with Abril Group, which publishes, among
music, news, video, and games.                                    other things, Veja, the highest-circulation magazine in
                                                                  Brazil.
Mobile-phone usage beyond phone calls and SMS is less
developed, although a quarter of Brazilian mobile-phone           As for the other local players, Globo is a news and enter-
owners use MMS and mobile photo, music, and video.                tainment portal from Organizações Globo, the largest TV
And e-commerce (online shopping), which has been                  network in Brazil and producer of some of the country’s
adopted by 17 percent of Internet users, is an emerging           best-known soap operas. Terra and iG are classic portals
trend and is particularly common for lower-cost items.            in the mold of UOL; Terra is affiliated with Telefónica,
As we’ve seen in other BRICI markets, even those Brazil-          while iG is owned by Brazil’s largest telecom operator, Oi.
ian digital consumers who don’t make purchases online             An e-commerce site also makes the list—MercadoLivre is
use the Internet for product information and price com-           a Latin American online-auction site.
parisons.

Brazil’s Top Internet Sites                                       Russia: Strong Mobile-Internet Growth
Of the most visited sites in Brazil, the vast majority are        Potential
operated by multinationals; only a handful of compa-
nies—UOL, Globo, Terra, iG, and MercadoLivre—are lo-              In Russia, the biggest differences in digital-usage habits
cal. The usage ranking of the various sites relates closely       exist along the urban-rural divide and among regions.
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Wealth gaps are less significant in Russia than in many of        work has not yet been completed, which has dampened
the other BRICI countries. Meanwhile, widespread mo-             growth so far. Even the coverage cited by service provid-
bile-device ownership and inconsistent fixed-line avail-          ers distorts actual availability in that many frequencies
ability contribute to the emerging trend of mobile-Inter-        have not yet been opened or have only recently been
net adoption.                                                    released from exclusive use by the military. However,
                                                                 the main 3G providers already have a few thousand base-
Although Internet connections in Russia are among the            transceiver stations apiece, and the rollout should
cheapest of all the BRICI countries, rates                                       be completed by 2011. Mobile-network
differ dramatically by region—a digital di-                                       operators are already aggressively going
vide that is one of the most important nu-        Search engine use and          aer users, which should cause prices to
ances to grasp. In large and central cities       e-mail are the leading         go down.
such as Moscow, St. Petersburg, and Yekat-
erinburg, unlimited-traffic broadband con-
                                                     online activities           Russia’s Online-Usage Patterns
nections cost around $10 to $15 per month                 in Russia.             Russia’s digital consumers average about
for speeds of 2 to 8 Mbps (megabits per                                          1.7 hours online each day, which accord-
second). In smaller, more remote cities,                                         ing to our projections will increase to 2.4
however, prices are much higher—sometimes up to ten              hours by 2015. The growth in fixed-line broadband and
times higher—and connections are slower. In Novosibirsk,         mobile-Internet availability will help push the total time
a 4 Mbps connection is $30 per month, while in the east-         that Russians spend online each day from its current lev-
ernmost part of the country, 2.5 Mbps connections are in         el of 75 million hours to 180 million hours in 2015.
the $70 range—and in Murmansk, a 1 Mbps connection is
$120 per month.                                                  Search engine use and e-mail are the two leading online
                                                                 activities in Russia, at 81 percent and 78 percent, respec-
In addition, the availability of fixed-line broadband is fair-    tively. More than half of Russian digital consumers (such
ly limited, with only about 25 percent penetration. It is        as Darya, profiled in the sidebar “Darya: A Sales Manager
thus not surprising that only 8 million Russians have            in Moscow”) also use instant messaging and read news
fixed-line broadband subscriptions, although another 12           online. Also notable is that about 21 percent shop on-
million have dial-up connections. As fixed-line broadband         line—the second-highest proportion among the BRICI
becomes more widely available, of course, penetration            countries, aer China—and this sector is growing ex-
will increase. Our conservative estimate is that penetra-        tremely quickly. Online social networking is also increas-
tion will be 56 percent by 2015 and could be as high as 70       ingly popular, especially on Russian sites such as Vkon-
percent.                                                         takte.ru and Odnoklassniki.ru.

Russians are active mobile users—the SIM penetration             Russia’s Top Internet Sites
rate of 141 percent indicates a common practice of own-          Language is one of the reasons for an early presence es-
ing multiple SIM cards, in large part because consumers          tablished by local companies—only a small percentage
use different mobile plans for different needs. However,           of Russians speak English. Localized content has further
we estimate that between 75 and 80 percent of the popu-          entrenched the entry barriers for foreign companies, and
lation own mobile devices, which is quite high. While            even though all the major foreign sites have Russian-
prices vary among telecom operators, voice calls cost            language platforms, almost three-quarters of Russia’s top
around $0.05 per minute, and SMS rates are about $0.05           20 most-visited Internet sites are local, with Yandex.ru,
per message.                                                     Vkontakte.ru, and Mail.ru leading the way.

About 12 percent of Russian mobile-phone users access            Yandex.ru, the local leader in Russia, is a search engine
the Internet through their devices, the second-highest           and Internet portal with a 64 percent market share—near-
proportion among the BRICI countries aer China. Be-             ly three times that of Google. A few sites in Yandex.ru’s
sides engaging in traditional mobile-phone activities such       empire also appear in the rankings—Ya.ru is the same en-
as calling and SMS, Russian users also send multimedia           gine but performs only search operations, and Narod.ru is
messages and seek out mobile music. Russia’s 3G net-             a site-hosting platform.
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Darya
  A Sales Manager in Moscow

                       Darya, a 28-year-old sales manager       personal purchases such as a handbag or a CD. An em-
                       from Moscow, uses the Internet for       ployee of a flower delivery company, Darya uses the Inter-
                       work and entertainment, and also to      net frequently in her daily tasks, including e-mailing
                       make her life more convenient. A         clients and using the Web to conduct industry research.
                       single mom, she lives with her son       To keep in touch with her friends, Darya uses a social-
                       in an apartment; they have two mo-       networking site, Skype, e-mail, mobile short messaging,
                       bile phones, a desktop PC, a laptop,     and Yandex.ru’s blog site.
                       and a digital camera. She spends
  about $100 a month on connectivity—$15 on broadband,          For Darya, the convenience of using the Internet for com-
  $18 on 2G mobile Internet, and $70 on her mobile phone.       munication and e-commerce is paramount. “The Internet
                                                                is a convenience and gives me unlimited opportunities—
  Darya is an active user of e-commerce platforms, spend-       I couldn’t imagine my work process without it,” she says,
  ing around $650 each month on online purchases. During        noting that shopping online allows her to buy things that
  a typical day, she will buy food online to be delivered to    would otherwise require her to travel to remote parts of
  her home in the evening and browse Internet stores for        Moscow.



The rise of social networking in Russia is clear in the traf-    India: A Low-Maturity, High-Growth
fic rankings. Vkontakte.ru is a social-networking site mod-       Market for Years to Come
eled closely on Facebook; as of April 2010, it had more
than 75 million registered users. (Vk.com is the same net-       India’s digital-consumption marketplace has clear divi-
work but with no Russian-language interface.) Odnoklass-         sions along urban-rural, rich-poor, and old-young lines.
niki.ru, meanwhile, is geared more toward connecting             Online content is accessible predominantly to India’s
current and former classmates. Facebook.com has been             young, wealthy urban populations. But rock-bottom pric-
rapidly gaining market share as well and already ranks in        es in mobile services have eroded the rich-poor distinc-
the top 20.                                                      tion in India’s telecom market, and the vast majority of
                                                                 the population in urban areas—irrespective of income—
While the government has reiterated its commitment to            has access to mobile services.
stepping up its efforts regarding intellectual property
protection, the preponderance of free content in Russia          The Internet penetration rate in India is only 7 percent,
means that many users are unwilling to pay for content.          although it is expected to reach 19 percent by 2015. In-
“I don’t understand people who are buying films on discs          dia has among the highest PC costs and lowest PC avail-
or paying for online films,” says Egor, an 18-year-old who        ability of all the BRICI countries. Low rates of PC owner-
lives in Yekaterinburg. “Usually two weeks aer the of-          ship mean that Internet cafés are major venues for
ficial film release, you can download a [high-quality ver-         online access. As India’s mobile market matures, how-
sion] from Torrents.ru.” This reluctance to pay for con-         ever, attention will turn to the Internet, and a rapid fall
tent helps explain the popularity of peer-to-peer                in prices and an increase in availability will occur quite
file-sharing sites.                                               quickly. This is likely to be especially true for wireless
                                                                 broadband.
However, Russians have more disposable income on av-
erage than consumers in any other BRICI market, and              In fact, rapidly improving access to wireless broadband is
many are willing to pay for services such as online games.       already driving down fixed-line prices. For instance,
“I usually pay $5 to $10 per month for a gaming site ac-         MTNL (Mahanagar Nigam Telephone) now offers an en-
count,” says Roman, another teenager from Yekaterin-             try DSL package at $1 per month, and it costs $2 to $5 per
burg. “It’s not much money for me and it gives me the            gigabyte for limited-usage plans, which are available at a
chance to play games with many other people simultane-           base rate of $15 per month depending on the speed de-
ously.”                                                          sired. Start-up kits for both wired and wireless connec-
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tions begin at around $30 per month. Packaging of rates          sumer segments, particularly the 18-to-24-year-old and
is also becoming increasingly flexible. For instance, tele-       25-to-34-year-old segments.
coms have recently started offering prepaid fixed-line
broadband.                                                       India’s Online-Usage Habits
                                                                  Indian Internet users spend only half an hour online each
As for 2G and 2.5G rates, mobile tariffs have fallen dra-          day, on average—the lowest rate among all the BRICI
matically in the last 24 to 36 months. Voice calls current-       countries. This average will increase to only 0.7 hour per
ly cost about $0.006 to $0.009 per minute,                                       day by 2015, leaving India still bringing up
and coverage is available to about 92 per-                                       the rear among BRICI users in terms of dai-
cent of Indians. What’s more, operators                In India, mobile          ly time spent online. It is worth noting,
tend to offer plenty of promotional deals,            Internet has grown          however, that this is a conservative projec-
such as free minutes, free evening calling,                                      tion and that there could be some major
or extremely low in-network rates. Some            even faster than fixed-       surprises depending on how quickly pric-
providers have introduced a per-second              line broadband has.          ing comes down and availability increases.
billing policy that works out to about
$0.013 per minute. Standard SMS rates are                                        There are currently about 81 million Inter-
around $0.01, although most providers offer vouchers               net users in India—a number that will nearly triple by
that allow users to send 100 short messages per day for           2015 to 237 million. India’s Internet use is concentrated
$0.04. These developments are the result of a heated tar-         mainly in the larger cities, where many users are mi-
iff war among Indian telecom companies that began in               grants from smaller towns. This group tends to have had
late 2009 and that continues to push down voice call,             limited exposure to the Internet and therefore typically
roaming, and long-distance rates. Meanwhile, auctions for         has a narrower range of online needs than more experi-
3G and broadband wireless access (BWA) spectrum con-              enced users. Offsetting this situation is the prevalence of
cluded in 2010. At present, 3G rates are about $0.11 per          younger Indian users (such as Swapnil, profiled in the
megabyte.                                                         sidebar “Swapnil: An 18-year-old student in India”),
                                                                  among whom common uses for the Internet include en-
In general, most mobile devices in India are low-end              tertainment and education. As we’ve seen in other BRICI
models compared with the other BRICI countries—and                countries, these digital consumers develop familiarity
the purchase of secondhand mobile devices is common,              with digital products at a young age and tend to be more
which has the effect of restricting users’ mobile activities       open to online consumption as their needs mature.
because of the technical limitations of older mobile de-
vices. Since 2009, however, there has been major growth           Almost all Indian digital consumers (95 percent) use e-
in imported Chinese handsets that offer good functional-           mail—a higher percentage than in any other BRICI mar-
ity at a fraction of the cost of established brands. As this      ket. E-mail is popular for several reasons, the simplest
trend continues, India should develop a broad base of po-         one being that it was the first online application to which
tential mobile-Internet users. In fact, mobile Internet has       most Indian users were exposed. In fact, e-mail was the
grown even faster than fixed-line broadband has, and the           trigger for many current users to purchase PCs and sub-
success of data-card offerings from mobile operators over          scribe to Internet services.
the last 12 to 18 months far outstrips that of fixed-line
broadband.                                                        A consistent majority of India’s online population uses
                                                                  entertainment- or communication-oriented functions,
The next big growth opportunity should emerge from the            such as instant messaging (62 percent), online music (60
rural Indian market. The penetration of mobile phones             percent), news (61 percent), and video (53 percent). India
in rural markets is far less than in urban markets, which         also has one of the highest online-gaming rates of all
have already begun to show signs of saturation. The big-          the BRICI countries at 54 percent, just behind China’s 55
gest gap in rural areas has been network coverage and             percent.
distribution channels—a divide that most companies are
currently trying to bridge. That said, there is an untapped       Meanwhile, a relatively impressive 23 percent use social
opportunity for improving data usage in all of India’s con-       networking. Google’s Orkut was the breakout social-
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Swapnil
  An 18-Year-Old Student in India

  An 18-year-old student who lives in the tier 2 city of       songs from peer-to-peer file-sharing sites. Upon returning
  Lucknow, Swapnil is a typical middle-class Indian teen. In   home, Swapnil loads cricinfo.com to view the most recent
  his home, which he shares with his elder sister and their    cricket news, then checks personal e-mail and chats with
  parents, one can find a PC ($600), a mobile phone ($150)      friends on an instant-messaging platform. He sends text
  with two SIM cards, and a digital camera ($250). Swapnil     messages to friends to coordinate an evening get-together
  receives about $40 in pocket money each month and            and to make plans for the next day’s classes. These ex-
  spends a quarter of it on his phone and SMS use. “My         changes can be fairly complicated—by his own reckoning,
  mobile is always by my side—like a best friend,” says        Swapnil sends between 100 and 200 text messages a day.
  Swapnil, who uses two SIM cards to take advantage of dif-    At home before bed, he returns to the computer to chat
  ferent operator rates.                                       with friends on Facebook, surf the Web, and finish re-
                                                               searching his homework.
  Throughout the day, Swapnil uses SMS to coordinate
  classes and homework with friends. While he gives a pre-
  sentation at school that he saved on his pen-mounted
  jump drive, his PC at home is downloading movies and



networking platform in India, although as in Brazil, its        site traffic. Another notable site is Shaadi.com, a matrimo-
popularity is gradually giving way to Facebook and Twit-        nial website that is rapidly gaining popularity in India.
ter. Among professionals, LinkedIn is a particularly com-
mon way of maintaining one’s network and is gaining in
popularity. For Indian digital consumers using online vid-      China: Growth Scenario—Mature Beyond
eo, YouTube is among the most popular sites by traffic            Expectations
volume.
                                                                China’s 90 percent level of broadband availability—and
Indians’ mobile-phone activity is limited almost exclusive-     broadband’s affordability relative to local wages—have
ly to phone calls and SMS, although only about half of In-      laid the foundation for a blistering pace of digital con-
dia’s 507 million mobile-phone owners use the latter. Just      sumption. Over the three-year period covering 2007
5 percent use mobile video, and few other mobile activi-        through 2009, Internet penetration increased at a 41 per-
ties rate at all. Again, this could change when 3G and oth-     cent annual growth rate. But however astonishing this
er forms of wireless broadband are launched in earnest.         pace of growth, what’s even more impressive is that Chi-
                                                                na’s current 384 million Internet users represent only 28
India’s Top Internet Sites                                      percent of China’s population.
Three-quarters of India’s most popular sites are interna-
tional—more than in any other BRICI country—most                The main pathway to the Internet at present is through
likely due to the prevalence of English, which is one of In-    PC connections. Only an estimated 20 percent of the pop-
dia’s official languages. Of the Indian sites, Rediff.com is       ulation own PCs, but many tens of millions more are able
very popular for India-specific content, such as news and        to access the Internet at Internet cafés or through PCs
movie reviews, and it used to be common for e-mail as           that are shared by a household or at work. Meanwhile,
well. Since its inception in 1997, Naukri.com has been the      769 million people, or 57 percent of the population, own
most commonly used job-hunting website in India, lead-          mobile phones. Nonetheless, mobile-Internet use remains
ing a pack that includes Monster.com and the Times of In-       fairly undeveloped in China.
dia job portal. Although many foreign sites are popular,
some of the most popular platforms in India are those           China’s outstanding growth in digital consumption over-
that appeal to Indian needs and tastes. For instance,           shadows a crucial fact: although Internet penetration in
Cricinfo.com is India’s most popular cricket website, and       China is expected to increase by 2015 to more than 650
its live score updates are especially important in driving      million users, this will still be less than 50 percent of the
                   FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010
T I’ N B                                                                                                
total population.3 Much of the increase will come from          largely to their ability to tailor their offerings to Chinese
rural China. In these areas, annual income per capita is        preferences. These companies have a deep consumer un-
closer to levels in India and Indonesia. As their incomes       derstanding, localized product offerings, and an ability to
rise and the Internet becomes more widely accessible, ru-       work more flexibly within the Chinese government’s reg-
ral users will account for the next wave of growth. Annu-       ulatory environment. The top ten sites include search en-
al incomes in rural areas increased from $407 per capita        gines, news portals, Web video, business-to-business e-
in 2005 to $845 in 2009, a 20 percent compound annual           commerce, and instant messaging or value-added service
growth rate. And while only 34 percent of                                       sites, showing the broad spectrum of Chi-
the rural population earned more than              China’s 384 million          nese digital consumption.
$882 per year in 2009, that proportion will
                                                      Internet users
reach 54 percent by 2015.                                                       China’s digital market was valued at $402
                                                    represent only 28           billion in 2008, having grown 20 percent
In fact, China’s vast countryside is already            percent of              annually since 2004. A handful of Chinese
a major pocket of growth, which will con-                                       digital companies have led this stupen-
tinue as broadband and mobile connectiv-             the population.            dous rate of growth. Companies like Ten-
ity penetrate deeper into rural areas. In                                       cent and Alibaba have come to dominate
tandem with infrastructure development, Chinese rural           the Chinese market and are now some of the biggest dig-
users are absorbing sophisticated Internet-usage habits         ital companies in the world. Many of these “digital gi-
from their wealthier compatriots. For many Chinese digi-        ants” have also built a significant presence overseas. Ali-
tal consumers (such as Jianhong, profiled in the sidebar         baba.com has 50 million users from 240 countries around
“Jianhong: Chinese Teen’s Digital Experience Focuses on         the world, and Tencent—a provider of the instant-mes-
Fun, Friends, and Studies”), Internet use is now a fixture       saging platform QQ and Internet value-added services
in their daily lives. Chinese Internet users spend an aver-     such as online games and social networking—recently in-
age of 2.7 hours a day online, up from 2.4 hours a day in       vested in DST (Digital Sky Technologies), a Russian com-
2006—and 0.4 hour a day more than U.S. users. As a              pany that owns various prominent Russian online desti-
country, China spent 1 billion hours online per day in          nations and that also has significant stakes in Facebook
2009—double the number of hours in the United States.           and other global online platforms.
That number will surpass 2 billion by 2015.

Chinese Internet users exhibit distinctive online-behavior       Indonesia: On the Brink of a Mobile-
patterns compared with those in other BRICI markets.             Internet Revolution?
Specifically, they use their Internet connections to enter-
tain themselves and communicate with others to a much            If we look strictly at the total market capitalization of all
greater extent and in many more ways. One of the most            listed digital companies, Indonesia, at $25 billion, is the
distinctive online habits among Chinese consumers is the         least developed of all the BRICI countries. However, the
tendency to prefer instant messaging over e-mail: 87 per-        distinctive and dynamic online-user behavior that we’ve
cent of Chinese digital consumers use the Internet for in-       seen in the last year or so suggests that Indonesian digital
stant messaging, compared with only 53 percent for e-mail.       consumers adapt quickly to technology upgrades and are
China also has the highest usage rates for online music, on-     active in using the Internet to meet social and practical
line video, online gaming, and news reading. As in the oth-      needs—some 12 percent of Indonesians are Internet us-
er BRICI countries, availability is a major factor in online     ers, and penetration is expected to triple by 2015.
entertainment activity—the wealth of media available on-
line owing to China’s loose intellectual-property laws           One of the most prominent characteristics of the Indo-
makes video-streaming, e-book, and music sites key enter-        nesian market, compared with the other BRICI coun-
tainment destinations.                                           tries, is the unusually high activity rates of mobile phone
                                                                 and mobile Internet usage. Mobile connectivity is driven
China’s Top Internet Sites
Of China’s most popular sites, only four are owned by            3. See China’s Digital Generations 2.0: Digital Media and Commerce Go
multinationals. The dominance of local companies is due          Mainstream, BCG report, May 2010.
                    FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010
                                                                                                T B C G
Jianhong
  Chinese Teen’s Digital Experience Focuses on Fun, Friends, and Studies

                         Jianhong is a middle-schooler in        instant messages to friends on his mobile; he uses social-
                         Guilin, one of China’s tier 3 cities.   networking sites at lunch (stealing friends’ cabbages on
                         Like most children of his genera-       the popular Chinese site QQ Farm) and his desktop in-
                         tion, Jianhong is an only child. He     stant-messaging platform to discuss homework aer din-
                         lives with his parents in an apart-     ner, ending his day by playing an online game before bed.
                         ment with an unbranded desktop          Jianhong says he sends instant messages, plays games,
                         PC that cost around $550, and he        and goes on social-networking sites for fun and to build
                         owns a mobile phone and an MP3          and maintain friendships.
  player. His parents give him $30 a month in pocket money.
  He spends $10 a month on communication and entertain-
  ment—$3 on his instant-messaging platform account, $3
  to $4 on online games, and $3 to $4 on his mobile phone.

  On a typical school day, Jianhong uses his mobile connec-
  tions to be online around the clock. During class, he sends



by affordability—and voice costs can be as low as $0.01            home PC use and become a key growth pocket as 3G be-
per minute, with BlackBerry subscriptions costing about           comes more affordable and available.
$16 per month. Mobile broadband via data cards is
priced at a flat rate of $17 to $33 per month. And at              Indonesia’s Internet-Usage Patterns
$0.013 per megabyte, Indonesia’s 3G costs are higher              On average, Indonesian Internet users spend only about
than in China or Brazil but much lower than in India and          0.9 hour online each day, an amount that will increase
Russia.                                                           to only about 1.1 hours by 2015. Due to Indonesia’s
                                                                  low user base compared with that of the other BRICI
The affordability of mobile connectivity in Indonesia has          countries, this amounts to only 27 million hours online
driven mobile penetration to 66 percent—higher than in            per day, although that number will jump to 103 million
China or India. Take 22-year-old Bisri, who lives in Jakar-       by 2015.
ta. “My life revolves around my cell phone,” he says. “A
lot of my activities, both work and personal, need its sup-       Indonesia has among the most active online social net-
port. I can’t imagine living without it for more than a few       workers of the BRICI countries, with more than half of
hours.” Penetration of 3G is the highest among all the            Internet users (such as Hafiz, profiled in the sidebar
BRICI countries, with 26 million users—almost twice Chi-          “Hafiz: A High-School Student in Jakarta”) participating
na’s 15 million, and many times more than in the other            in social-networking sites. One remarkable aspect of the
BRICI countries.                                                  social-networking phenomenon is its mobile dimen-
                                                                  sion—some of the more avid users with whom we spoke
By contrast, only 5 percent of Indonesians own a PC, al-          had purchased mobile devices with mobile-Internet func-
though this should hit 15 percent by 2015. PC costs rela-         tionality specifically in order to be able to update their
tive to Indonesia’s low disposable incomes are, of course,        Facebook page on the go. It is also important to note that
a major factor. And fixed-line broadband costs are also            the mass adoption of social networking in Indonesia is
high, at around $35 per month. Half of those with Inter-          by no means restricted to youth as it is in other mar-
net access at home subscribe to dial-up instead. Many of          kets—we spoke with 50-year-olds who were using Face-
those without a home broadband connection head to In-             book as a way to stay updated with their network of
ternet cafés, called “warnets”—or use their mobile                friends.
phones. Given the prevalence of mobile-phone use in
general among Indonesians, and their adoption of 3G,              Although Facebook’s popularity is primarily due to the
mobile Internet could well emerge as an alternative to            social-networking function, the instant-messaging fea-
                   FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010
T I’ N B                                                                                                
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia
Internet users statistics & trends: Brazil, Russia, India, China, Indonesia

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Internet users statistics & trends: Brazil, Russia, India, China, Indonesia

  • 1. R The Internet’s New Billion Digital Consumers in Brazil, Russia, India, China, and Indonesia FOR MEDIA USE ONLY—EMBARGOED UNTIL
  • 2. The Boston Consulting Group (BCG) is a global manage- ment consulting firm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep in- sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet- itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 69 offices in 40 countries. For more infor- mation, please visit www.bcg.com.
  • 3. The Internet’s New Billion Digital Consumers in Brazil, Russia, India, China, and Indonesia FOR MEDIA USE ONLY—EMBARGOED UNTIL Marcos Aguiar Vladislav Boutenko David Michael Vaishali Rastogi Arvind Subramanian Yvonne Zhou September 2010 bcg.com
  • 4. © The Boston Consulting Group, Inc. 2010. All rights reserved. For information or permission to reprint, please contact BCG at: E-mail: bcg-info@bcg.com Fax: +1 617 850 3901, attention BCG/Permissions Mail: BCG/Permissions The Boston Consulting Group, Inc. One Beacon Street FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 Boston, MA 02108 USA
  • 5. Contents Executive Summary 4 The BRICI Digital Landscape 6 Internet Usage Patterns 9 Mobile Internet 11 Historical, Economic, and Cultural Factors Shaping Today’s Digital Reality 11 BRICI Country Profiles 13 Brazil: Robust Potential Currently Hindered by High Costs 13 Russia: Strong Mobile-Internet Growth Potential 15 India: A Low-Maturity, High-Growth Market for Years to Come 17 China: Growth Scenario—Mature Beyond Expectations 19 Indonesia: On the Brink of a Mobile-Internet Revolution? 20 Outlook: 2015 and Beyond—and a Call to Action 24 Appendix: Researching BRICI Digital Consumers 26 For Further Reading 27 Note to the Reader 28 FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 6. Executive Summary J ust as Brazil, Russia, India, China, and Indonesia plex online needs, there will be a collossal opportunity for dig- are the new engines of global growth, they are also ital companies to monetize services and products. Those com- the sources of the most dynamic changes in digital panies that manage to do so will reap the tremendous benefits consumption in the world—a phenomenon that of this massive digital revolution. will grow only more pronounced over the next five years. Already, more than 610 million residents of these coun- In 2009, the BRICI countries—Brazil, Russia, India, tries—which we call the BRICI markets—use the Internet reg- China, and Indonesia—represented about 45 percent ularly. That number will jump to 1.2 billion by 2015. of the world’s population and about 15 percent of global GDP and had some 610 million Internet users. , Online usage in the BRICI markets is quite different from that in developed countries—and oen varies more by population ◊ By 2015, these countries will have more than 1.2 billion segment than by economic status. Consider an 18-year-old Internet users—well over three times the number of In- named Swapnil who lives in Lucknow, India. Each day, he up- ternet users in Japan and the United States combined. dates his Facebook page, uses instant messages to chat with friends, and downloads music from a peer-to-peer file-sharing ◊ Internet penetration rates in the BRICI countries will site. In these ways, he’s much more like Hafiz, a teen in Jakar- experience compound annual growth of 9 to 20 per- ta, or Felipe, a young São Paulo resident, than like fellow In- cent from year-end 2009 through 2015. dian Sanjay, a thirty-something stock trader who uses the In- ternet primarily for tracking markets. Personal computers are much less prevalent than mo- bile devices in the BRICI countries—and play no- Despite similarities across user segments, however, digital where near the role in catalyzing digital consumption markets in Brazil and Russia are more advanced than those that mobile devices and Internet cafés do. in India and Indonesia, and China is far beyond its fellow BRICI markets—Internet and mobile-phone use are deeply ◊ There are only about 440 million PCs in the BRICI embedded in the lives of hundreds of millions of Chinese peo- countries at present, although that number should ple. China offers a useful benchmark in that the unexpectedly more than double by 2015. rapid pace of China’s online migration is a sharp reminder of how quickly the other BRICI markets are likely to evolve in ◊ PC penetration in Brazil and Russia is around 32 per- terms of Internet penetration rates, the number of hours spent cent, while in China it is only about 20 percent. Indo- online per day, and e-commerce adoption. nesia and India have PC penetration rates of only about 5 percent. By comparison, PC penetration in the The importance of this shi into the digital mainstream lies United States and Japan is about 90 percent or more. not just in the size and speed of the transformation of online habits but also in who the BRICI digital consumers are. Right ◊ Growth will push these penetration rates up in the now, 60 percent of BRICI Internet users are under the age of coming years, but only Russia and Brazil will have PC 35. As they earn ever-higher incomes and develop more com- penetration rates that exceed 50 percent in 2015. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 7. Because of the limited availability and relatively low ◊ In Russia, about 12 percent of mobile-phone users ac- affordability of PCs in the BRICI markets, digital con- cess the Internet through their handsets. sumers in those countries have developed other ways of fulfilling their online needs. The affordability and availability of fixed-line and mo- bile broadband and phone connections are key factors ◊ Internet cafés are an increasingly important venue for shaping BRICI digital-consumption patterns. Similarly, digital consumption. In Indonesia, they are known as rapid changes in modes of connection can trigger “warnets” and were mentioned frequently in our fo- extremely fast adoption of new digital behaviors. cus-group research. ◊ Much of the mobile growth in India has occurred in ◊ In less affluent areas of Brazil, users go to ad hoc Inter- the last 24 to 36 months, driven by steady declines in net cafés called LAN (local area network) houses to ac- tariffs. Rates for voice calls are currently as low as cess the Internet. And in China’s vast countryside, $0.006 per minute, and price promotions are abun- more than half of digital consumers go online in Inter- dant. Already, the growing phenomenon of multiple- net cafés. SIM mobile devices has emerged in India. Mobile phones are already very popular tools for ◊ PC affordability in China and mobile-handset afford- communicating and seeking out entertainment. ability in India have been driven by the emergence of local brands that offer a price-to-functionality equa- ◊ The BRICI countries currently have about 1.8 billion tion far superior to that of established brands. mobile-phone SIM card subscriptions, compared with a combined total of 394 million in the United States ◊ In Indonesia, low in-network calling rates have moti- and Japan. vated users to own multiple mobile devices, each as- sociated with a different plan. ◊ Russia leads the BRICI countries in SIM penetration at 141 percent (many Russians own more than one SIM ◊ Throughout the BRICI countries, user habits are evolv- card), followed by Brazil’s 86 percent. China, India, ing at rapid rates as new services and behaviors quick- and Indonesia have SIM penetration rates ranging ly become mainstream activities. between 41 percent and 66 percent. By comparison, the United States and Japan are both at around 90 About the Authors percent. Marcos Aguiar is a senior partner and managing direc- tor in the São Paulo office of The Boston Consulting ◊ By 2015, SIM penetration in China and India is expect- Group; he can be reached by e-mail at aguiar.marcos@ ed to reach 84 percent and 75 percent, respectively, bcg.com. Vladislav Boutenko is a partner and managing while that in Brazil and Indonesia will surpass 100 per- director in the firm’s Moscow office; he can be reached by cent—owing, among other factors, to users taking ad- e-mail at boutenko.vladislav@bcg.com. David C. Michael vantage of prepaid plans from different operators, is a senior partner and managing director in BCG’s which is already common in Russia. Beijing office and leads the Global Advantage practice; he can be reached by e-mail at michael.david@bcg.com. As sophisticated handsets become available in the Vaishali Rastogi is a partner and managing director in BRICI markets, more and more digital consumers are the firm’s Singapore office; she can be reached by e-mail turning to mobile Internet to meet their online needs, at rastogi.vaishali@bcg.com. Arvind Subramanian is a particularly in markets with high access costs or lim- partner and managing director in BCG’s Mumbai office; ited fixed-line broadband availability. he can be reached by e-mail at subramanian.arvind@ bcg.com. Yvonne Zhou is a principal in the firm’s Beijing ◊ In Indonesia, for example, we’ve seen users skip the office; she can be reached by e-mail at zhou.yvonne@ PC ownership stage common in developed markets bcg.com. such as the United States and Japan and leapfrog di- rectly to mobile Internet. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 8. The BRICI Digital Landscape T he BRICI countries—Brazil, Russia, India, net usage, with about 610 million Internet users. Howev- China, and Indonesia—are already an en- er, the aggregate Internet-penetration rate across the gine of global growth. At present, they are BRICI countries is only about 20 percent, compared with responsible for almost 15 percent of global rates in the United States and Japan of 70 percent and 74 GDP, and between now and 2015, they will percent, respectively. (See Exhibit 2.) enjoy 4 to 8 percent real annual GDP growth, on average. (See Exhibit 1.) The BRICI markets will be a source of tremendous growth as rapid increases in disposable incomes in these coun- More than 3 billion people—about 45 percent of the tries build the means to consume. Younger BRICI resi- world’s population—currently live in the BRICI coun- dents are seeing their wages grow and are altering their tries, and they account for about one-third of global Inter- lifestyles accordingly—and these consumers constitute Exhibit 1. The BRICI Markets Represent Almost 15 Percent of the World’s GDP and 45 Percent of Its Population Real GDP, 2009 and 2015E $billions 2 18,000 14,980 12,987 12,000 8 1 5,601 6,000 8 4,451 4,829 3,458 5 4 6 1,783 1,127 1,020 1,349 866 1,111 355 505 0 China India Brazil Russia Indonesia United States Japan 2009 population 1,335 1,166 194 141 240 307 127 (millions) 2009 real average 1,134 810 3,881 3,970 563 32,592 21,080 disposable income ($) 2009 2015E Compound annual growth (%) Sources: Economist Intelligence Unit; BCG analysis. Note: GDP and average disposable income are stated in 2005 U.S. dollars. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 9. Exhibit 2. Internet Users in the BRICI Countries Will More Than Double to 1.2 Billion by 2015 Number of Internet users, 2009–2015E Millions 750 9 650 500 41 1 384 20 2 1 237 15 10 238 250 20 211 223 155 2 137 18 23 20 81 76 16 94 88 93 101 49 68 36 26 44 20 31 0 China India Brazil Russia Indonesia United States Japan 2009 28 7 33 31 12 70 74 penetration (%) 2015E 47 19 74 55 37 73 81 penetration (%) 2006 2009 2015E Compound annual growth (%) Sources: Ministry of Industry and Information Technology; iResearch; Internet World Stats; Economist Intelligence Unit; BCG analysis. Note: An Internet user is defined as someone aged 2 years or older who went online in the past 30 days; penetration is the number of Internet users divided by the population. the vast majority of their countries’ online populations. mon with each other. Still, there are major differences in They tend to be more open to trying new things and usage habits. While disposable income and cultural or lin- more comfortable with technology. Many of them have guistic environments are key factors in influencing digital come to rely on the Internet as a source of entertainment habits, the cost and availability of service are also impor- and a platform for self-expression and communication. tant elements of both the broadband and mobile stories. Owing largely to low average disposable incomes in many ◊ In India, rates for voice calls are currently as low as parts of the BRICI countries, personal computers are much $0.006 per minute, and price promotions are prevalent. less commonly owned than mobile devices. There are only These low rates, combined with the inflow of cheap but about 440 million PCs in the BRICI countries at present, advanced-technology handsets from China, are helping although that number should more than double by 2015, to drive not only the growth in mobile use but also a surpassing 920 million. (See Exhibit 3.) Notebooks also more sophisticated range of mobile activities. have strong potential in the BRICI markets because of their relative affordability. Meanwhile, mobile-phone SIM ◊ In Brazil, broadband costs are high, limiting the number subscription levels are already quite high among the BRI- of in-home Internet users. Brazil’s 3G is affordable but CI countries. China, India, and Indonesia have mobile- not widely available, with the result that mobile Web penetration rates ranging between 41 percent and 66 per- and chatting are rare. cent, and Brazil and Russia are currently at 86 percent and 141 percent, respectively.1 (See Exhibit 4.) ◊ Among Indonesian digital consumers, mobile use— and, to a certain extent, mobile-Internet use—is high In general, there is more similarity among particular user segments across the BRICI countries than among seg- 1. It is quite common in Russia for mobile-phone owners to have ments within the individual countries themselves. Young more than one SIM card, which is how penetration can exceed 100 BRICI digital consumers, in particular, have a lot in com- percent. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 10. Exhibit 3. Brazil and Russia Have the Highest PC Penetration Rates Number of PCs in use, 2006–2015E Number of PCs (millions) 600 10 462 2 400 18 4 313 267 25 283 5 250 216 11 12 163 22 8 200 161 33 19 121 25 123 87 25 97 55 66 45 24 39 23 38 6 11 0 China India Brazil Russia Indonesia United States Japan 2009 20 4 32 32 5 89 98 penetration (%) 2015E 34 17 58 63 15 97 129 penetration (%) 2006 2009 2015E Compound annual growth (%) Sources: Economist Intelligence Unit; CIA World Factbook; BCG analysis. Note: Penetration is the number of PCs divided by the population. Exhibit 4. BRICI Mobile Penetration Is Already Very High Number of mobile-phone subscriptions, 2006–2015E Number of SIM cards (millions) 1,400 7 1,200 1,151 11 1,000 13 953 800 769 50 600 534 1 5 507 5 9 3 6 372 400 20 9 34 235 214 274 233 279 5 200 150 175 152 197 166 101 69 100 115 140 0 China India Brazil Russia Indonesia United States Japan 2009 57 41 86 1411 66 88 92 penetration (%) 2015E 84 75 113 155 107 115 112 penetration (%) 2006 2009 2015E Compound annual growth (%) Sources: Economist Intelligence Unit; CIA World Factbook; BCG analysis. Note: Mobile-phone penetration is the number of SIM card subscriptions divided by the population. 1 Mobile-phone penetration in Russia is believed to be less than 100 percent; there is a tendency for users to own multiple SIM cards, a large number of which are inactive. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 11. and growing, owing to the affordability of devices and clock thanks to mobile-chat functions on their cell 2.5G service. phones, and they use the Internet to meet a wide and intricate range of needs. ◊ Russian fixed-line broadband costs vary dramatically by region. For instance, in major cities such as Moscow, St. Petersburg, and Yekaterinburg, unlimited-traffic Internet Usage Patterns broadband costs about $10 to $15 per month—com- pared with Murmansk, where it can By 2015, the BRICI countries’ Internet user cost as much as $120 a month. base will exceed 1.2 billion—more than By 2015, the BRICI three times the number of Internet users in ◊ Broadband in China is actually cheap- countries’ Internet Japan and the United States combined. er than dial-up, enabling the rise of This growth will be driven by BRICI Inter- hundreds of thousands of Internet user base will exceed net-penetration growth rates of 9 to 20 per- cafés throughout the country—and 2G 1.2 billion. cent annually from year-end 2009 through mobile connections are also affordable 2015. Nonetheless, China’s Internet usage to a large swath of the population. will remain the highest of all the BRICI countries. (See Exhibit 5.) ◊ In rural China—where average disposable incomes are much lower than in China’s urban areas—digital con- ◊ Chinese Internet users are online for an average of 2.7 sumers already use mobile SMS (short message ser- hours per day—longer than users in any other BRICI vice), social networking, online entertainment, and ba- country—and are projected to spend an average of 3.1 sic e-commerce. Meanwhile, urban Chinese consumers hours online each day by 2015. This trend more close- exhibit the most sophisticated online behavior—many ly resembles usage patterns in the United States and of those we spoke to are online almost around the Japan (where Internet users spend an average of 2.3 Exhibit 5. Time Spent Online per Day in India, Indonesia, and Brazil Is Less Than Half of That in China Total hours spent online per day, 2006–2015E Hours (millions) 2,500 2,348 2,000 1,500 1,025 1,000 507 500 330 329 268 168 180 103 21 42 22 63 36 75 15 27 0 China India Brazil Russia Indonesia United States Japan Hours spent online per person per day 2009 2.67 0.52 0.93 1.70 0.86 2.27 2.87 2015E 3.09 0.71 2.12 2.37 1.10 2006 2009 2015E Sources: China Internet Network Information Center; The Nielsen Company; International Telecommunication Union; comScore; BCG analysis. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 12. and 2.9 hours online per day, respectively) than in the tent. But there are some remarkable variations among other BRICI countries. the BRICI countries as well. For instance, social net- working is more popular in Indonesia and Brazil than in ◊ Brazil and Russia will approach China’s current usage either the other BRICI countries or the developed mar- rates by 2015; India and Indonesia are growing quickly kets. Meanwhile, an extremely high percentage of Indi- but starting from a low base. an digital consumers use e-mail and job-hunting sites, compared with the other BRICI markets. The more ma- There are a few commonalities in how BRICI digital ture Chinese market has well-established usage of al- consumers use the Internet. (See Exhibit 6.) For exam- most all the online activities that we tracked. Apart from ple, instant messaging is vastly more popular in all the social networking, Brazil and Russia have notably simi- BRICI countries than in the developed markets we stud- lar usage patterns across the board, with search engines ied, as are online music and games, albeit to a lesser ex- and e-mail predominating. Exhibit 6. Internet Use in the BRICI Markets Shows Commonalities—and Differences Percentage of Internet users engaging in various online activities, 2009 China India Brazil Russia Indonesia United Japan States Instant messaging 87 62 61 56 58 38 23 Online music 83 60 49 47 34 34 25 Reading news 80 61 47 65 47 70 90 Online video 76 53 49 41 16 68 49 Search engines 69 50 83 81 56 89 92 Online gaming 55 54 44 31 35 35 16 E-mail 53 95 77 78 59 91 88 Blogs 38 NA 17 33 33 11 32 Social networking 33 23 69 15 58 35 32 E-commerce 1 28 17 17 21 5 71 46 Online banking 26 NA NA 11 5 55 NA Bulletin board/forum 21 NA 18 NA 33 22 13 Job hunting 19 73 NA NA 20 51 8 2 Other NA 57 NA 67 NA NA NA 0 50 100 0 50 100 0 50 100 0 50 100 0 50 100 0 50 100 0 50 100 Above average3 Sources: BCG Digital Generations Consumer Research, 2009; Business Insider; BCG research. Note: NA means not available. 1 Includes travel booking, e-payments, and e-shopping. 2 “Other” in India represents sports (57 percent), e-greetings (57 percent), and dating and friendship (51 percent); in Russia it represents weather forecasts (67 percent). 3 At least 10 percent higher than the average level across all countries. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 13. Mobile Internet music streaming or downloading, compared with only one-quarter of Brazilian and Indonesian consumers (and One of the key differences between the BRICI countries about one-third in Russia). Nearly 40 percent of Chinese and developed markets lies in how digital consumers ac- users play games on their mobile phones, and around cess the Internet. In developed markets, consumers have one-quarter use mobile video, Internet, and news servic- tended to form their online-usage habits through PCs, us- es. In Russia, 3G is seven times more expensive than in ing dial-up or broadband connections. By contrast, many China, driving more users there to use broadband con- BRICI digital consumers have learned to nections to meet their digital needs. use the Internet in large part through their BRICI digital mobile-phone connections. At present, consumers have mobile-Internet availability is still fairly Historical, Economic, and limited in most of the BRICI countries, al- developed their online Cultural Factors Shaping though mobile-online behaviors are al- habits on mobile Today’s Digital Reality ready emerging across those markets, sug- gesting the tremendous potential for user phones instead of PCs. The BRICI countries tend to have high lit- growth as costs come down and networks eracy rates compared with other emerging expand. (See Exhibit 7.) markets—all of them have literacy rates above 90 per- cent, apart from India with 61 percent. This means that China’s digital consumers use their mobile devices for the their consumers are able to use the Internet (including most diverse range of activities, while India’s use their international sites) to meet a variety of needs and can mobile devices almost exclusively for phone calls and generally learn about new platforms and services with- short messages. (See Exhibit 8.) Nearly half of Chinese out much difficulty. BRICI digital consumers tend to be digital consumers use their mobile phones for multime- young—60 percent of them are less than 35 years old— dia messaging service (MMS), mobile photos, and mobile and willing to try new things. Exhibit 7. The Mobile-Internet User Base Tripled from 2007 to 2009 BRICI mobile-Internet users, 2007 and 2009 Number of users (millions) 250 260 200 180.0 150 100 88 211 167 50.0 300 50 40.6 12.0 11.2 21.5 3.9 4.2 2.3 9.0 0 China India Brazil Russia Indonesia Penetration among mobile-phone 30 2 6 12 5 users, 2009 (%) Penetration among Internet users, 61 15 17 54 29 2009 (%) 2007 2009 Total change from 2007 to 2009 (%) Sources: China Internet Network Information Center; BCG analysis. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 14. Exhibit 8. Chinese Digital Consumers Are the Most Active BRICI Mobile-Phone Users Percentage of mobile-phone users engaging in various activities, 2009 China India Brazil Russia Indonesia United Japan States Mobile phone calls 100 99 99 NA 99 88 100 SMS 93 48 57 80 100 51 14 Mobile photos 49 1 24 NA NA 60 55 Multimedia 49 NA messaging 25 36 24 17 8 Mobile music 47 1 24 24 22 36 27 Mobile gaming 39 NA 1 11 15 12 27 Ringtones 34 1 NA 14 28 20 28 Mobile video 26 5 24 8 22 16 16 Mobile Internet 24 1 6 12 6 56 83 Mobile news 23 NA NA NA NA 2 40 Mobile e-mail 20 NA NA 16 26 21 72 Mobile payment or 11 NA NA NA 15 5 40 e-commerce 1 Above average Sources: BCG Digital Generations Consumer Research, 2009; China Internet Network Information Center; Enfodesk; Gartner; The Nielsen Company; Centre of Excellence in Information and Communication Technologies; IDC Asia/Pacific consumer survey; BCG research. Note: NA means not available. 1 At least 10 percent higher than the average level across all countries. The limited enforcement of intellectual property protec- instant messaging regularly to discuss homework with tion in the BRICI markets means that music and video friends—and search engines are vital for conducting re- downloads are widely available—and free. In general, search on school or work projects. BRICI Internet users are much more likely to pay for on- line services than for content, although Indian and Indo- Policymakers need to be aware of how these factors will nesian users are quite reluctant to pay at all. For instance, influence not just consumer behavior but also the devel- BRICI users will pay for value-added services on social- opment of local innovation and businesses. They should networking sites to customize a personal page, or they also consider how policies can push beyond infrastruc- will pay small fees for online game accounts. ture and pricing. For instance, e-government programs can serve as anchor tenants on broadband networks, en- A strong cultural emphasis on education in the BRICI couraging the development of local content and services. countries has spurred rapid adoption of the Internet, as One of the best examples of this comes from Russia: the parents strive to give their children access to learning ma- Tatarstan government has gone 100 percent online— terials and as young professionals seek to upgrade their even to the extent that the president of Tatarstan pub- own knowledge base through online studies. Many of the lishes his policy agenda in real time. young BRICI digital consumers with whom we spoke use FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 15. BRICI Country Profiles E ngaging digital consumers in the BRICI coun- lion Brazilians have fixed-line broadband connections, tries will require an understanding of their while another 9 million have dial-up. This means that underlying preferences and motivations. only about one-third of PC owners currently have an In- Each BRICI country has a distinctive tapes- ternet connection. try of digital-consumption patterns, offering strong indicators of which online user trends are likely Broadband costs do not appear ready to come down— to translate into full-blown consumer phenomena. (See rather, the trend seems to be for providers to increase Exhibits 9 and 10.) connection speed while maintaining prices. That said, such increases are currently constrained by the infrastruc- ture capabilities of the leading telecommunications com- Brazil: Robust Potential Currently panies. Hindered by High Costs Mobile-phone usage is fairly popular, with 2G or 2.5G ser- Brazil is a fairly urbanized country, and most of the pop- vice SIM penetration of 168 million (84 percent). The av- ulation is urban. However, many digital consumers can erage price is hard to pinpoint because operators tend to be found in the countryside and in small towns—and us- offer aggressive price promotions, although monthly con- ers of the social-networking site Orkut.com can be found tract fees are around $0.35 per minute, while prepaid even in remote areas. High-income young people are “al- plans cost around $0.65 per minute. ways on,” meaning that they use multiple media and In- ternet sites to stay informed, entertained, and in touch. Mobile-Internet usage is still relatively new in Brazil. Low-income youth in both rural and urban areas go to so- Overall, only 11 million Brazilian mobile-phone owners called LAN (local area network) houses—informal Inter- use mobile Internet, although mobile-Internet use has net cafés with 10 to 20 PCs and hourly rates as low as grown at a 167 percent compound annual rate since $1—to use the Internet, and they therefore have a more 2007. The least expensive offer for 3G is only around restricted range of activities, although LAN houses typi- $0.006 per megabyte—and 3G coverage, as stated by the cally provide other digital services such as CD/DVD burn- two largest operators, is available to more than half the ing and document printing. And while young people are population. Growth will continue to be driven by Inter- a major driver of Brazil’s digital evolution, consumers in net users (such as Priscila, profiled in the sidebar their forties and fiies go online to check e-mail and “Priscila: A Typical Young Blue-Collar Brazilian”) who news, seek entertainment, and participate in online transfer their PC habits to their mobile devices. At pres- social networking. ent, only 17 percent of Internet users in Brazil use mobile Internet. A critical feature of the Brazilian market is the some- what high cost of fixed-line broadband, which averages 2. All fixed-line broadband costs mentioned in this report refer to around $27 a month and is available mainly in high- and the lowest monthly tariff for 1 Mbps (megabits per second) fixed- middle-income neighborhoods.2 Currently, only 12 mil- line broadband with unlimited usage. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 16. Exhibit 9. The Digital Habits of Young BRICI Users Show Similar Patterns China India Brazil Russia Indonesia ◊ 14 years old ◊ 18-year-old ◊ 17-year-old student ◊ 18-year-old ◊ 18 years old ◊ Junior high student in in São Paulo economics ◊ High school school student Lucknow ◊ Lives with his student in student living Background in Guilin ◊ Lives with his parents Moscow in Jakarta with ◊ Only child; lives parents and ◊ Likes to play futsal ◊ Single his parents with his parents elder sister (indoor soccer) ◊ Lives with her ◊ Spends one hour parents in an per day online apartment ◊ ~$30 monthly in ◊ ~$500 household ◊ ~$250 monthly ◊ ~$60 spent on ◊ ~$50 monthly in Digital pocket money income in pocket money digital services pocket money spending ◊ ~30% spent on ◊ ~10% spent on ◊ ~50% spent on monthly ◊ ~10% spent on digital services digital services digital services digital services ◊ Looking for fun and ◊ “My PC is like an ◊ “When I am ◊ “Friends are very ◊ “Without a mobile new friends, with elder brother to alone, I usually important—and phone, I would Attitudes usage focused on me: it guides me go online. The the Internet feel like I was toward digital devices and instant messaging, and helps me out Internet is part gives me an back in primitive services games, and social all the time.” of my life.” opportunity to times—I would networking sites be connected feel so out of with them.” touch.” Source: BCG research. Exhibit 10. Online Activities Differ According to Access Costs China India Brazil Russia Indonesia ◊ Online around ◊ Online a bit at ◊ Mostly online ◊ Online around ◊ Online mostly Time online the clock with school and a on home the clock with at cybercafés mobile chat bit at home computer her computer …mainly because of Overall high Mobile SMS broad- activities are limited band costs to basic Mobile Web entertain- Little activity Mobile and chat ment news owing to online and e-mail limited activities availability are driven Social Most by networking activities Facebook revolve use around Online social entertainment Spends $75 networking (games/video) on Pays for e-commerce “premium” and another E-commerce services for $30 on QQ downloads Source: BCG research. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 17. Priscila A Typical Young Blue-Collar Brazilian Priscila, a 32-year-old event promot- activity is e-mail, social networking, online games and vid- er in São Paulo, falls in the urban eo, e-commerce, and instant messaging. She researches working-class segment of Brazil’s the prices of romance novels online, and she stays current digital-consumer market. She lives on the cast of her favorite soap opera. She also uses the with her mother and two brothers in LAN house webcam to speak with friends overseas. a home that has a digital camera, Priscila exemplifies a candidate for mobile Internet—at an MP3 player, and three mobile present, she avoids using it owing to high cost, although phones—her mobile phone is a she is an avid user of both her cell phone and her Internet relatively low-cost ($180) local-brand model. Of the $690 connections. Like many of the young women we spoke that Priscila brings home each month, she spends $125 with, Priscila sees mobile devices as fashionable accesso- on communication and entertainment. ries. “Notebooks and some cell phones are really sophis- ticated and elegant,” she says. “They are not simply devic- Even though she does not have a PC at home, she still es—they’re chic.” spends a lot of time online at friends’ houses or through a LAN house near her apartment. The focus of her online Brazil’s Online-Usage Patterns to Brazilian user habits, with search engines, social-net- Brazil’s digital consumers spend an average of 0.9 hour working sites, and online video sites high in the rankings. online each day, but our projections show a jump to 2.1 For social-networking platforms, Google’s Orkut.com is hours per day by 2015. Brazilians use the Internet for a the clear leader, although Facebook and Twitter seem to broad range of activities. Search engines, e-mail, and so- be making major inroads in the higher-income brackets. cial-networking sites are the most widely used—remark- ably, 69 percent of Brazil’s digital consumers are active Meanwhile, although Brazilian digital consumers use the on social-networking sites, significantly more than in any e-mail platforms of all the major global players, the home- BRICI country other than Indonesia. Instant messaging is grown site UOL is extremely popular. A classic portal that also common among the majority of users, and MSN was created in the 1990s as the Brazilian version of AOL, Messenger is particularly popular. In addition, nearly half UOL features some exclusive content as a result of its of Brazilian digital consumers use the Internet for online relationship with Abril Group, which publishes, among music, news, video, and games. other things, Veja, the highest-circulation magazine in Brazil. Mobile-phone usage beyond phone calls and SMS is less developed, although a quarter of Brazilian mobile-phone As for the other local players, Globo is a news and enter- owners use MMS and mobile photo, music, and video. tainment portal from Organizações Globo, the largest TV And e-commerce (online shopping), which has been network in Brazil and producer of some of the country’s adopted by 17 percent of Internet users, is an emerging best-known soap operas. Terra and iG are classic portals trend and is particularly common for lower-cost items. in the mold of UOL; Terra is affiliated with Telefónica, As we’ve seen in other BRICI markets, even those Brazil- while iG is owned by Brazil’s largest telecom operator, Oi. ian digital consumers who don’t make purchases online An e-commerce site also makes the list—MercadoLivre is use the Internet for product information and price com- a Latin American online-auction site. parisons. Brazil’s Top Internet Sites Russia: Strong Mobile-Internet Growth Of the most visited sites in Brazil, the vast majority are Potential operated by multinationals; only a handful of compa- nies—UOL, Globo, Terra, iG, and MercadoLivre—are lo- In Russia, the biggest differences in digital-usage habits cal. The usage ranking of the various sites relates closely exist along the urban-rural divide and among regions. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 18. Wealth gaps are less significant in Russia than in many of work has not yet been completed, which has dampened the other BRICI countries. Meanwhile, widespread mo- growth so far. Even the coverage cited by service provid- bile-device ownership and inconsistent fixed-line avail- ers distorts actual availability in that many frequencies ability contribute to the emerging trend of mobile-Inter- have not yet been opened or have only recently been net adoption. released from exclusive use by the military. However, the main 3G providers already have a few thousand base- Although Internet connections in Russia are among the transceiver stations apiece, and the rollout should cheapest of all the BRICI countries, rates be completed by 2011. Mobile-network differ dramatically by region—a digital di- operators are already aggressively going vide that is one of the most important nu- Search engine use and aer users, which should cause prices to ances to grasp. In large and central cities e-mail are the leading go down. such as Moscow, St. Petersburg, and Yekat- erinburg, unlimited-traffic broadband con- online activities Russia’s Online-Usage Patterns nections cost around $10 to $15 per month in Russia. Russia’s digital consumers average about for speeds of 2 to 8 Mbps (megabits per 1.7 hours online each day, which accord- second). In smaller, more remote cities, ing to our projections will increase to 2.4 however, prices are much higher—sometimes up to ten hours by 2015. The growth in fixed-line broadband and times higher—and connections are slower. In Novosibirsk, mobile-Internet availability will help push the total time a 4 Mbps connection is $30 per month, while in the east- that Russians spend online each day from its current lev- ernmost part of the country, 2.5 Mbps connections are in el of 75 million hours to 180 million hours in 2015. the $70 range—and in Murmansk, a 1 Mbps connection is $120 per month. Search engine use and e-mail are the two leading online activities in Russia, at 81 percent and 78 percent, respec- In addition, the availability of fixed-line broadband is fair- tively. More than half of Russian digital consumers (such ly limited, with only about 25 percent penetration. It is as Darya, profiled in the sidebar “Darya: A Sales Manager thus not surprising that only 8 million Russians have in Moscow”) also use instant messaging and read news fixed-line broadband subscriptions, although another 12 online. Also notable is that about 21 percent shop on- million have dial-up connections. As fixed-line broadband line—the second-highest proportion among the BRICI becomes more widely available, of course, penetration countries, aer China—and this sector is growing ex- will increase. Our conservative estimate is that penetra- tremely quickly. Online social networking is also increas- tion will be 56 percent by 2015 and could be as high as 70 ingly popular, especially on Russian sites such as Vkon- percent. takte.ru and Odnoklassniki.ru. Russians are active mobile users—the SIM penetration Russia’s Top Internet Sites rate of 141 percent indicates a common practice of own- Language is one of the reasons for an early presence es- ing multiple SIM cards, in large part because consumers tablished by local companies—only a small percentage use different mobile plans for different needs. However, of Russians speak English. Localized content has further we estimate that between 75 and 80 percent of the popu- entrenched the entry barriers for foreign companies, and lation own mobile devices, which is quite high. While even though all the major foreign sites have Russian- prices vary among telecom operators, voice calls cost language platforms, almost three-quarters of Russia’s top around $0.05 per minute, and SMS rates are about $0.05 20 most-visited Internet sites are local, with Yandex.ru, per message. Vkontakte.ru, and Mail.ru leading the way. About 12 percent of Russian mobile-phone users access Yandex.ru, the local leader in Russia, is a search engine the Internet through their devices, the second-highest and Internet portal with a 64 percent market share—near- proportion among the BRICI countries aer China. Be- ly three times that of Google. A few sites in Yandex.ru’s sides engaging in traditional mobile-phone activities such empire also appear in the rankings—Ya.ru is the same en- as calling and SMS, Russian users also send multimedia gine but performs only search operations, and Narod.ru is messages and seek out mobile music. Russia’s 3G net- a site-hosting platform. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 19. Darya A Sales Manager in Moscow Darya, a 28-year-old sales manager personal purchases such as a handbag or a CD. An em- from Moscow, uses the Internet for ployee of a flower delivery company, Darya uses the Inter- work and entertainment, and also to net frequently in her daily tasks, including e-mailing make her life more convenient. A clients and using the Web to conduct industry research. single mom, she lives with her son To keep in touch with her friends, Darya uses a social- in an apartment; they have two mo- networking site, Skype, e-mail, mobile short messaging, bile phones, a desktop PC, a laptop, and Yandex.ru’s blog site. and a digital camera. She spends about $100 a month on connectivity—$15 on broadband, For Darya, the convenience of using the Internet for com- $18 on 2G mobile Internet, and $70 on her mobile phone. munication and e-commerce is paramount. “The Internet is a convenience and gives me unlimited opportunities— Darya is an active user of e-commerce platforms, spend- I couldn’t imagine my work process without it,” she says, ing around $650 each month on online purchases. During noting that shopping online allows her to buy things that a typical day, she will buy food online to be delivered to would otherwise require her to travel to remote parts of her home in the evening and browse Internet stores for Moscow. The rise of social networking in Russia is clear in the traf- India: A Low-Maturity, High-Growth fic rankings. Vkontakte.ru is a social-networking site mod- Market for Years to Come eled closely on Facebook; as of April 2010, it had more than 75 million registered users. (Vk.com is the same net- India’s digital-consumption marketplace has clear divi- work but with no Russian-language interface.) Odnoklass- sions along urban-rural, rich-poor, and old-young lines. niki.ru, meanwhile, is geared more toward connecting Online content is accessible predominantly to India’s current and former classmates. Facebook.com has been young, wealthy urban populations. But rock-bottom pric- rapidly gaining market share as well and already ranks in es in mobile services have eroded the rich-poor distinc- the top 20. tion in India’s telecom market, and the vast majority of the population in urban areas—irrespective of income— While the government has reiterated its commitment to has access to mobile services. stepping up its efforts regarding intellectual property protection, the preponderance of free content in Russia The Internet penetration rate in India is only 7 percent, means that many users are unwilling to pay for content. although it is expected to reach 19 percent by 2015. In- “I don’t understand people who are buying films on discs dia has among the highest PC costs and lowest PC avail- or paying for online films,” says Egor, an 18-year-old who ability of all the BRICI countries. Low rates of PC owner- lives in Yekaterinburg. “Usually two weeks aer the of- ship mean that Internet cafés are major venues for ficial film release, you can download a [high-quality ver- online access. As India’s mobile market matures, how- sion] from Torrents.ru.” This reluctance to pay for con- ever, attention will turn to the Internet, and a rapid fall tent helps explain the popularity of peer-to-peer in prices and an increase in availability will occur quite file-sharing sites. quickly. This is likely to be especially true for wireless broadband. However, Russians have more disposable income on av- erage than consumers in any other BRICI market, and In fact, rapidly improving access to wireless broadband is many are willing to pay for services such as online games. already driving down fixed-line prices. For instance, “I usually pay $5 to $10 per month for a gaming site ac- MTNL (Mahanagar Nigam Telephone) now offers an en- count,” says Roman, another teenager from Yekaterin- try DSL package at $1 per month, and it costs $2 to $5 per burg. “It’s not much money for me and it gives me the gigabyte for limited-usage plans, which are available at a chance to play games with many other people simultane- base rate of $15 per month depending on the speed de- ously.” sired. Start-up kits for both wired and wireless connec- FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 20. tions begin at around $30 per month. Packaging of rates sumer segments, particularly the 18-to-24-year-old and is also becoming increasingly flexible. For instance, tele- 25-to-34-year-old segments. coms have recently started offering prepaid fixed-line broadband. India’s Online-Usage Habits Indian Internet users spend only half an hour online each As for 2G and 2.5G rates, mobile tariffs have fallen dra- day, on average—the lowest rate among all the BRICI matically in the last 24 to 36 months. Voice calls current- countries. This average will increase to only 0.7 hour per ly cost about $0.006 to $0.009 per minute, day by 2015, leaving India still bringing up and coverage is available to about 92 per- the rear among BRICI users in terms of dai- cent of Indians. What’s more, operators In India, mobile ly time spent online. It is worth noting, tend to offer plenty of promotional deals, Internet has grown however, that this is a conservative projec- such as free minutes, free evening calling, tion and that there could be some major or extremely low in-network rates. Some even faster than fixed- surprises depending on how quickly pric- providers have introduced a per-second line broadband has. ing comes down and availability increases. billing policy that works out to about $0.013 per minute. Standard SMS rates are There are currently about 81 million Inter- around $0.01, although most providers offer vouchers net users in India—a number that will nearly triple by that allow users to send 100 short messages per day for 2015 to 237 million. India’s Internet use is concentrated $0.04. These developments are the result of a heated tar- mainly in the larger cities, where many users are mi- iff war among Indian telecom companies that began in grants from smaller towns. This group tends to have had late 2009 and that continues to push down voice call, limited exposure to the Internet and therefore typically roaming, and long-distance rates. Meanwhile, auctions for has a narrower range of online needs than more experi- 3G and broadband wireless access (BWA) spectrum con- enced users. Offsetting this situation is the prevalence of cluded in 2010. At present, 3G rates are about $0.11 per younger Indian users (such as Swapnil, profiled in the megabyte. sidebar “Swapnil: An 18-year-old student in India”), among whom common uses for the Internet include en- In general, most mobile devices in India are low-end tertainment and education. As we’ve seen in other BRICI models compared with the other BRICI countries—and countries, these digital consumers develop familiarity the purchase of secondhand mobile devices is common, with digital products at a young age and tend to be more which has the effect of restricting users’ mobile activities open to online consumption as their needs mature. because of the technical limitations of older mobile de- vices. Since 2009, however, there has been major growth Almost all Indian digital consumers (95 percent) use e- in imported Chinese handsets that offer good functional- mail—a higher percentage than in any other BRICI mar- ity at a fraction of the cost of established brands. As this ket. E-mail is popular for several reasons, the simplest trend continues, India should develop a broad base of po- one being that it was the first online application to which tential mobile-Internet users. In fact, mobile Internet has most Indian users were exposed. In fact, e-mail was the grown even faster than fixed-line broadband has, and the trigger for many current users to purchase PCs and sub- success of data-card offerings from mobile operators over scribe to Internet services. the last 12 to 18 months far outstrips that of fixed-line broadband. A consistent majority of India’s online population uses entertainment- or communication-oriented functions, The next big growth opportunity should emerge from the such as instant messaging (62 percent), online music (60 rural Indian market. The penetration of mobile phones percent), news (61 percent), and video (53 percent). India in rural markets is far less than in urban markets, which also has one of the highest online-gaming rates of all have already begun to show signs of saturation. The big- the BRICI countries at 54 percent, just behind China’s 55 gest gap in rural areas has been network coverage and percent. distribution channels—a divide that most companies are currently trying to bridge. That said, there is an untapped Meanwhile, a relatively impressive 23 percent use social opportunity for improving data usage in all of India’s con- networking. Google’s Orkut was the breakout social- FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 21. Swapnil An 18-Year-Old Student in India An 18-year-old student who lives in the tier 2 city of songs from peer-to-peer file-sharing sites. Upon returning Lucknow, Swapnil is a typical middle-class Indian teen. In home, Swapnil loads cricinfo.com to view the most recent his home, which he shares with his elder sister and their cricket news, then checks personal e-mail and chats with parents, one can find a PC ($600), a mobile phone ($150) friends on an instant-messaging platform. He sends text with two SIM cards, and a digital camera ($250). Swapnil messages to friends to coordinate an evening get-together receives about $40 in pocket money each month and and to make plans for the next day’s classes. These ex- spends a quarter of it on his phone and SMS use. “My changes can be fairly complicated—by his own reckoning, mobile is always by my side—like a best friend,” says Swapnil sends between 100 and 200 text messages a day. Swapnil, who uses two SIM cards to take advantage of dif- At home before bed, he returns to the computer to chat ferent operator rates. with friends on Facebook, surf the Web, and finish re- searching his homework. Throughout the day, Swapnil uses SMS to coordinate classes and homework with friends. While he gives a pre- sentation at school that he saved on his pen-mounted jump drive, his PC at home is downloading movies and networking platform in India, although as in Brazil, its site traffic. Another notable site is Shaadi.com, a matrimo- popularity is gradually giving way to Facebook and Twit- nial website that is rapidly gaining popularity in India. ter. Among professionals, LinkedIn is a particularly com- mon way of maintaining one’s network and is gaining in popularity. For Indian digital consumers using online vid- China: Growth Scenario—Mature Beyond eo, YouTube is among the most popular sites by traffic Expectations volume. China’s 90 percent level of broadband availability—and Indians’ mobile-phone activity is limited almost exclusive- broadband’s affordability relative to local wages—have ly to phone calls and SMS, although only about half of In- laid the foundation for a blistering pace of digital con- dia’s 507 million mobile-phone owners use the latter. Just sumption. Over the three-year period covering 2007 5 percent use mobile video, and few other mobile activi- through 2009, Internet penetration increased at a 41 per- ties rate at all. Again, this could change when 3G and oth- cent annual growth rate. But however astonishing this er forms of wireless broadband are launched in earnest. pace of growth, what’s even more impressive is that Chi- na’s current 384 million Internet users represent only 28 India’s Top Internet Sites percent of China’s population. Three-quarters of India’s most popular sites are interna- tional—more than in any other BRICI country—most The main pathway to the Internet at present is through likely due to the prevalence of English, which is one of In- PC connections. Only an estimated 20 percent of the pop- dia’s official languages. Of the Indian sites, Rediff.com is ulation own PCs, but many tens of millions more are able very popular for India-specific content, such as news and to access the Internet at Internet cafés or through PCs movie reviews, and it used to be common for e-mail as that are shared by a household or at work. Meanwhile, well. Since its inception in 1997, Naukri.com has been the 769 million people, or 57 percent of the population, own most commonly used job-hunting website in India, lead- mobile phones. Nonetheless, mobile-Internet use remains ing a pack that includes Monster.com and the Times of In- fairly undeveloped in China. dia job portal. Although many foreign sites are popular, some of the most popular platforms in India are those China’s outstanding growth in digital consumption over- that appeal to Indian needs and tastes. For instance, shadows a crucial fact: although Internet penetration in Cricinfo.com is India’s most popular cricket website, and China is expected to increase by 2015 to more than 650 its live score updates are especially important in driving million users, this will still be less than 50 percent of the FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 
  • 22. total population.3 Much of the increase will come from largely to their ability to tailor their offerings to Chinese rural China. In these areas, annual income per capita is preferences. These companies have a deep consumer un- closer to levels in India and Indonesia. As their incomes derstanding, localized product offerings, and an ability to rise and the Internet becomes more widely accessible, ru- work more flexibly within the Chinese government’s reg- ral users will account for the next wave of growth. Annu- ulatory environment. The top ten sites include search en- al incomes in rural areas increased from $407 per capita gines, news portals, Web video, business-to-business e- in 2005 to $845 in 2009, a 20 percent compound annual commerce, and instant messaging or value-added service growth rate. And while only 34 percent of sites, showing the broad spectrum of Chi- the rural population earned more than China’s 384 million nese digital consumption. $882 per year in 2009, that proportion will Internet users reach 54 percent by 2015. China’s digital market was valued at $402 represent only 28 billion in 2008, having grown 20 percent In fact, China’s vast countryside is already percent of annually since 2004. A handful of Chinese a major pocket of growth, which will con- digital companies have led this stupen- tinue as broadband and mobile connectiv- the population. dous rate of growth. Companies like Ten- ity penetrate deeper into rural areas. In cent and Alibaba have come to dominate tandem with infrastructure development, Chinese rural the Chinese market and are now some of the biggest dig- users are absorbing sophisticated Internet-usage habits ital companies in the world. Many of these “digital gi- from their wealthier compatriots. For many Chinese digi- ants” have also built a significant presence overseas. Ali- tal consumers (such as Jianhong, profiled in the sidebar baba.com has 50 million users from 240 countries around “Jianhong: Chinese Teen’s Digital Experience Focuses on the world, and Tencent—a provider of the instant-mes- Fun, Friends, and Studies”), Internet use is now a fixture saging platform QQ and Internet value-added services in their daily lives. Chinese Internet users spend an aver- such as online games and social networking—recently in- age of 2.7 hours a day online, up from 2.4 hours a day in vested in DST (Digital Sky Technologies), a Russian com- 2006—and 0.4 hour a day more than U.S. users. As a pany that owns various prominent Russian online desti- country, China spent 1 billion hours online per day in nations and that also has significant stakes in Facebook 2009—double the number of hours in the United States. and other global online platforms. That number will surpass 2 billion by 2015. Chinese Internet users exhibit distinctive online-behavior Indonesia: On the Brink of a Mobile- patterns compared with those in other BRICI markets. Internet Revolution? Specifically, they use their Internet connections to enter- tain themselves and communicate with others to a much If we look strictly at the total market capitalization of all greater extent and in many more ways. One of the most listed digital companies, Indonesia, at $25 billion, is the distinctive online habits among Chinese consumers is the least developed of all the BRICI countries. However, the tendency to prefer instant messaging over e-mail: 87 per- distinctive and dynamic online-user behavior that we’ve cent of Chinese digital consumers use the Internet for in- seen in the last year or so suggests that Indonesian digital stant messaging, compared with only 53 percent for e-mail. consumers adapt quickly to technology upgrades and are China also has the highest usage rates for online music, on- active in using the Internet to meet social and practical line video, online gaming, and news reading. As in the oth- needs—some 12 percent of Indonesians are Internet us- er BRICI countries, availability is a major factor in online ers, and penetration is expected to triple by 2015. entertainment activity—the wealth of media available on- line owing to China’s loose intellectual-property laws One of the most prominent characteristics of the Indo- makes video-streaming, e-book, and music sites key enter- nesian market, compared with the other BRICI coun- tainment destinations. tries, is the unusually high activity rates of mobile phone and mobile Internet usage. Mobile connectivity is driven China’s Top Internet Sites Of China’s most popular sites, only four are owned by 3. See China’s Digital Generations 2.0: Digital Media and Commerce Go multinationals. The dominance of local companies is due Mainstream, BCG report, May 2010. FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010  T B C G
  • 23. Jianhong Chinese Teen’s Digital Experience Focuses on Fun, Friends, and Studies Jianhong is a middle-schooler in instant messages to friends on his mobile; he uses social- Guilin, one of China’s tier 3 cities. networking sites at lunch (stealing friends’ cabbages on Like most children of his genera- the popular Chinese site QQ Farm) and his desktop in- tion, Jianhong is an only child. He stant-messaging platform to discuss homework aer din- lives with his parents in an apart- ner, ending his day by playing an online game before bed. ment with an unbranded desktop Jianhong says he sends instant messages, plays games, PC that cost around $550, and he and goes on social-networking sites for fun and to build owns a mobile phone and an MP3 and maintain friendships. player. His parents give him $30 a month in pocket money. He spends $10 a month on communication and entertain- ment—$3 on his instant-messaging platform account, $3 to $4 on online games, and $3 to $4 on his mobile phone. On a typical school day, Jianhong uses his mobile connec- tions to be online around the clock. During class, he sends by affordability—and voice costs can be as low as $0.01 home PC use and become a key growth pocket as 3G be- per minute, with BlackBerry subscriptions costing about comes more affordable and available. $16 per month. Mobile broadband via data cards is priced at a flat rate of $17 to $33 per month. And at Indonesia’s Internet-Usage Patterns $0.013 per megabyte, Indonesia’s 3G costs are higher On average, Indonesian Internet users spend only about than in China or Brazil but much lower than in India and 0.9 hour online each day, an amount that will increase Russia. to only about 1.1 hours by 2015. Due to Indonesia’s low user base compared with that of the other BRICI The affordability of mobile connectivity in Indonesia has countries, this amounts to only 27 million hours online driven mobile penetration to 66 percent—higher than in per day, although that number will jump to 103 million China or India. Take 22-year-old Bisri, who lives in Jakar- by 2015. ta. “My life revolves around my cell phone,” he says. “A lot of my activities, both work and personal, need its sup- Indonesia has among the most active online social net- port. I can’t imagine living without it for more than a few workers of the BRICI countries, with more than half of hours.” Penetration of 3G is the highest among all the Internet users (such as Hafiz, profiled in the sidebar BRICI countries, with 26 million users—almost twice Chi- “Hafiz: A High-School Student in Jakarta”) participating na’s 15 million, and many times more than in the other in social-networking sites. One remarkable aspect of the BRICI countries. social-networking phenomenon is its mobile dimen- sion—some of the more avid users with whom we spoke By contrast, only 5 percent of Indonesians own a PC, al- had purchased mobile devices with mobile-Internet func- though this should hit 15 percent by 2015. PC costs rela- tionality specifically in order to be able to update their tive to Indonesia’s low disposable incomes are, of course, Facebook page on the go. It is also important to note that a major factor. And fixed-line broadband costs are also the mass adoption of social networking in Indonesia is high, at around $35 per month. Half of those with Inter- by no means restricted to youth as it is in other mar- net access at home subscribe to dial-up instead. Many of kets—we spoke with 50-year-olds who were using Face- those without a home broadband connection head to In- book as a way to stay updated with their network of ternet cafés, called “warnets”—or use their mobile friends. phones. Given the prevalence of mobile-phone use in general among Indonesians, and their adoption of 3G, Although Facebook’s popularity is primarily due to the mobile Internet could well emerge as an alternative to social-networking function, the instant-messaging fea- FOR MEDIA USE ONLY—EMBARGOED UNTIL 00:01 EDT 9/1/2010 T I’ N B 