Indian Startups Go for Web 2.0 Gold

Global networking sites like Orkut are benefiting from India's huge number of young people, but many local ventures want to claim the clicks

by Nandini Lakshman

For the past year, global networking sites have been growing in popularity among young Indians. According to JuxtConsult, a New Delhi-based online research and advisory company, 44% of Indian online traffic uses the Internet just for social networking. Google's (GOOG) Orkut is the most popular social networking site in India, with a 64% market share. Facebook is also winning many Indian fans, especially students.

But in the last six months, a plethora of local sites has emerged to compete with the Americans. Today, there are more than a dozen India-based and focused social networking sites with colorful Hindi names that are synonyms for community (bigadda.com) and friends (yaari.com). "I guess it's a cool thing to do," says Praveen Gandhi, managing partner of Seed Fund India, an early stage Mumbai venture capital fund. He claims in the last year he's had fund requests from over 50 entrepreneurs wanting to set up social networking sites locally.

India is as hooked on social networking as any other country. Part of the reason is easier broadband connectivity. A 2007 report by the software industry association group Nasscom estimates broadband subscribers—currently 1 million—will hit 20 million in three years. By 2010, the total number of Internet users in India will grow to 100 million, from 40 million now. This will surely enhance virtual hangout plays like the social networking sites.

Another big reason for the rise of social networking sites is simply the size of India's younger generation—54% of India is under the age of 20. That's nearly 540 million, the largest such community in the world, according to the National Council for Applied Economic Research, India. And they all want to connect to each other.

Big Players Enter the Ring

Some of the new Indian networking sites that have cropped up in the last nine months include Desimartini.com, Minglebox.com, Indyarocks.com, and Bigadda.com. Their promoters vary from first-time entrepreneurs to large corporations. Some are self-funded, while others have professional venture capital investment. Minglebox connects students and others in schools, universities, and the workplace while Bigadda is a product of Anil Ambani's Reliance Entertainment, a subsidiary of Reliance Communications. As for their appeal, most of the sites are quite similar—offering music, video, photos, blogs, and chats. Says Seed Fund's Gandhi: "The Indian sites have nothing unique which will take people away from Orkut or Facebook."

But what has Indian entrepreneurs enthusiastic is the recent entry of big players. Last year, when Vivek Pahwa, 26, a graduate of the prestigious Indian Business School in Hyderabad, decided to "do something" in the Internet consumer space, he borrowed $76,000 from his dad to set up Desimartini.com (Indian Martini), with the idea of making it like Orkut. Ten months later, when he missed his target of 1 million registered subscribers, he sold it.

On Nov. 20, one of India's largest publishing houses—Hindustan Times Media—purchased Desimartini for an estimated $10 million, even though Desimartini has just 2.5 million monthly hits and 250,000 subscribers. Now Hindustan Times plans to use it to enter the growing online gaming business and sell classified ads for jobs, real estate, personals, and auto sales, an area currently dominated by newspapers and magazines.

Minglebox on Campus

Pahwa, meanwhile, is investing his jackpot in other sites. In June, he set up Secondshaadi.com (second marriage), a matrimonial site for second marriages because, he says, "divorce rates are increasing in India." He's also funding a soon-to-be-launched India-focused search engine, Antya.com (the end).