Emerging Trends, Areas & Opportunities in the Online World (Alok Mittal, Canaan Partners) at OMCAR 2009

Emerging Trends, Areas & Opportunities in the Emerging Trends, Areas & Opportunities in the Online WorldOnline World

May, 2009May, 2009

© Copyright 2008 Canaan Partners 2

2

Increasing Internet Penetration

• Internet reach is expanding rapidly

• Internet penetration goes beyond top 8 metros

* In millions

Source:: IAMAI

Active Users CAGR =

48%

Internet and PC Penetration

Geographical Diversification

55%38%

20%

21%

6%

12%

19%29%

0%

20%

40%

60%

80%

100%

2004 2007

Top 8 Metros Other Metros

5-10 Lakh Population Cities 2-5 Lakh Population Cities

0

10

20

30

40

50

60

70

2000 2002 2004 2006 2007

PC Users Ever User Active Users


3

5

25

55

70

70

110

0 20 40 60 80 100 120

Real Estate

Gaming

Matrimony

Travel

Advertising

Search

Jobs

3

Encouraging Trends and Indicators

• People are spending more time on internet and across diverse applications

• Cheaper and faster access to internet will further proliferate it

• Growing comfort with internet transactions helping eCommerce

* Net Revenues in $ millions

Source:: IAMAI, Canaan Estimates

Successful Internet Businesses

Internet Usage

64%51%

10%

11%

20%

20%

5%13%

5%1%

0%

20%

40%

60%

80%

100%

2001 2007

Email Chat Information Entertainment E-Commerce


Low Cost Internet Start Ups

» 1-2 MN unique visitors

» Free SEO traffic

» Founder’s skill set

» Initial traction at low cost help the start ups achieve funding Source: Alexa


5

Sectors US Players Indian PlayersSearch/Portal Yahoo , Google Yahoo, Google, SifyEcommerce eBay, Shopping.com fabmall, FlipkartTravel Expedia , Travelocity MakemyTrip, Yatra, TravelGuruOnline Trusted Clearinghouse Verisign VerisignOnline Financial Services Bankrate , checkfree ?Advertising ValueClick, DoubleClick MediaturfISP Earthlink, United Online VSNL, BhartiEducation Leapforg, eCollege.com ?Web 2.0 YouTube, Metacafe, Facebook Facebook, Orkut, YouTube

Opportunities – Concept Arbitrage

• Interesting Areas like Ecommerce , Advertising , Education , Financial Services

• Significant localization is needed even in concept arbitrage

• Quality of execution is the key success factor

Internet Sectors by Market Cap in US


6

Opportunities – What’s different about India?

• Mobile penetration is far higher than internet penetration

• Internet growth coincides with the consumption growth

• Demographic curve is tilted towards young population

• Cheap labor costs

• Deregulation


7

Opportunities – Specific Examples

Financial Services

• Deregulation• Increase in disposable income and savings• Product and Pricing fragmentation

Education

• Young and career oriented population

• Strong long term employment market

eCommerce

• Increase in disposable income

• Increasing comfort with online transaction

Social Media

• Broadband penetration• Cheaper internet access• Distinct entertainment categories for Indians• Growth of mobile internet


8

Investment Climate

Source:: Business Today (June 2007)

Internet Investments

• Availability of capital likely to shrink over 2009

• Investors backing experienced entrepreneurs and valid business models

Deals SectorsBharatmatrimony ClassifiedsYatra TravelMakeMyTrip TravelSulekha.com ClassifiedsTravelGuru TravelTutorVista EducationSeventymm Video RentalGuruji Local SearchWeb 18 eCommerceCleartrip TravelMapMyIndia InformationApnaLoan Financial Services

Examples of Deals Done

2

2220

28

13

85

180

137

0

5

10

15

20

25

30

2005 2006 2007 2008

# o

f D

eals

0

50

100

150

200

$MN

Number of Deals Amount


Canaan Investment Focus

» Consumer Internet› Internet usage and transactions growing at 40%+

annually

» Mobile› Existing 400m wireless subs growing at 10M a month

» Enterprise & Managed Services› Increasing enterprise automation in emerging markets

› Continuing labor cost arbitrage

Thank You