INDONESIAONLINEA Digital EconomyEmerges, Fueled byCheap Mobile HandsetsMARCH 2013Rahul ChadhaContributors:Tobi Elkin, Jenn...
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  1. 1. INDONESIAONLINEA Digital EconomyEmerges, Fueled byCheap Mobile HandsetsMARCH 2013Rahul ChadhaContributors:Tobi Elkin, Jennifer Jhun, Monica Peart
  2. 2. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 2EXECUTIVE SUMMARYAmong emerging markets, Indonesia often fallsinto the long shadow cast by Brazil, Russia, Indiaand China—also known as the BRIC countries. ButIndonesia—with the fourth-largest population in theworld—is growing rapidly, as is its online population.Indonesia’s economic engine will help create a newand considerable digital class of consumers. eMarketerprojects about 29% of the population—or 72.7 millionpeople—will have access to the internet by the end of2013.That penetration rate is expected to climb to 39.8%by 2016, accounting for 102.8 million internet users.Internet use remains heavily concentrated in Indonesia’slargest cities, where people are more able to affordboth internet-enabled devices and service plans. Mobileinternet is making gains, aided by the proliferation ofcheap feature phones and smartphones manufactured inChina, along with more affordable data packages.KEY QUESTIONS■■ Who makes up Indonesia’s online population?■■ Will internet users leapfrog fixed broadband in favorof mobile internet?■■ What is shaping Indonesia’s peer-to-peer economy?millions, % of population and % changeInternet Users and Penetration in Indonesia, 2011-2016201143.017.5%40.4%201259.624.0%38.6%201372.729.0%22.1%201483.633.0%14.9%201593.436.5%11.7%2016102.839.8%10.1%Internet users % of population % changeNote: individuals of any age who use the internet from any location via anydevice at least once per monthSource: eMarketer, Feb 2012136985 www.eMarketer.comCONTENTS2 Indonesia’s Online Population6 Internet Usage in Indonesia8 Social Society, Social Media11 Advertising12 eMarketer Interviews
  3. 3. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 3INDONESIA’S ONLINE POPULATIONIndonesia is sometimes overlooked as an emergingmarket, with more attention paid to the BRICcountries. But its size and economic growth areincreasing its profile.In September 2012, McKinsey & Company estimated thatIndonesia could grow from the 16th-largest economy inthe world to the seventh largest by 2030.The InternationalMonetary Fund (IMF) estimated that Indonesia’s GDPwill grow 6.3% this year—well higher than the globalaverage (3.6%) and the average for emerging market anddeveloping economies (5.6%).The IMF also predictedthat Indonesia’s growth rate will increase over the nextseveral years and continue to outpace that of developingmarkets in general.Not surprisingly, internet usage is rapidly expanding inthe country, with growth reaching almost 20% this year.eMarketer estimates that Indonesia’s online populationwill reach 72.7 million in 2013 and 102.8 million in 2016.Comparative Estimates: Internet Users andPenetration in Indonesia, 2011-2016Internet users (millions)APJII, Dec 2012 (1)eMarketer,Feb 2012 (2)IDC, June 2012Jefferies, Sep 2012comScore Inc.,Nov 2012 (3)BCG, April 2012Frost & Sullivan,Feb 2012McKinsey & Company,Dec 2012Internet user penetration (% of population)eMarketer,Feb 2012 (2)IDC, June 2012BBG, Oct 2012 (4)Roy Morgan Research,June 2012 (5)ITU, July 2012Frost & Sullivan,Feb 2012201155.043.039.0--31.0--17.5%15.0%-22.1%18.0%-201263.059.645.055.047.0---24.0%17.0%27.0%---201382.072.750.0-----29.0%19.0%----2014107.083.656.0-----33.0%21.0%----2015139.093.461.0--50.0145.2-36.5%23.0%---37.0%2016-102.8-----100.039.8%-----Note: (1) ages 12-65; use an hour per day or more; (2) individuals of anyage who use the internet from any location via any device at least onceper month; (3) ages 15+; home and work locations; (4) ages 15+; data isfor Aug; (5) ages 18+; urban population only; ever usedSource: eMarketer, Feb 2012; various, as noted, 2012152511 www.eMarketer.comOther estimates vary due to different methodologies. Forexample, some estimates do not include usage outsideof the home or office, which may discount a large numberof users accessing the internet in shared places such asinternet cafes. Accounting for variations such as this andthe age ranges studied, other firms’ figures are in linewith eMarketer’s.August 2012 data from Gallup and the Broadcasting Boardof Governors (BBG), an independent agency of the USgovernment responsible for all US-sponsored nonmilitarybroadcasting conducted overseas, showed that internetpenetration was highest among those ages 15 to 24, at51%. It then declined sharply to 25% among those ages25 to 54, with the trend continuing as users got older.Internet use also increased as the education levels ofrespondents went up: 72% of those with a university-level education reported going online in the week prior tothe poll.% of respondents in each groupDemographic Profile of Internet Users in Indonesia,Aug 2012Age15-24 51%25-34 25%35-54 11%55+ 2%LocationLarge city 30%Small town 23%Rural 13%Education levelNone 1%Primary 3%Secondary 21%High school 40%Vocational 46%University 72%Total 21%Note: used in the past weekSource: Broadcasting Board of Governors (BBG) and Gallup, "Media Use inIndonesia 2012," Oct 16, 2012150271 www.eMarketer.comInternet penetration remains most prevalent in thecountry’s largest cities, which include Jakarta and itsmetropolitan area, often referred to as Jabodetabek;Surabaya in the province of East Java; Bandung in WestJava; Medan in North Sumatra; and Semarang in CentralJava. Because internet use in these cities is already morewidespread, smaller cities are expected to host muchof the growth in penetration over the next few years. Aswould be expected, Indonesia’s population as a whole isshifting from rural to urban. According to Indonesia’s 2010census, the urbanized population increased from 41.9% in2000 to 49.8% in 2010.
  4. 4. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 4A MarkPlus Insight survey released in November 2012estimated that, out of a total internet user population of61.1 million in 2012, 56.4 million lived in urban areas.millions and % of populationUrban and Total Internet Users in Indonesia,2010-20122010 2011 2012Urban internet users 37.6 50.5 56.4Total internet users 42.2 55.2 61.1Internet users % of population 17.0% 22.4% 23.5%Source: MarkPlus Insight, "Netizen Survey 2012" as cited by DailySocial,Nov 14, 2012148986 www.eMarketer.comYahoo! andTNS Global data showed that internet useamong city dwellers was higher among males in 2012.Penetration was especially high among those ages 15to 19, at 89%.% of population in each groupInternet User Penetration in Urban Indonesia*, byDemographic, 2009-20122009 2010 2011 2012GenderMale 36% 45% 54% 63%Female 21% 30% 38% 50%Age15-19 64% 74% 87% 89%20-24 42% 57% 65% 78%25-29 28% 50% 49% 63%30-34 16% 27% 33% 54%35-39 13% 24% 38% 52%40-50 9% 9% 15% 24%Socioeconomic statusA 51% 54% 66% 75%B 32% 46% 51% 64%C 20% 25% 36% 48%Total 28% 37% 46% 57%Note: in the past month; *Bandung, Botabek, Denpasar, Jakarta, Makassar,Medan, Palembang, Semarang, Surabaya andYogyakartaSource:Yahoo! and TNS, "Net Index - Indonesia," June 27, 2012150300 www.eMarketer.comMOBILE INTERNET WINSOVER BROADBANDFixed broadband remains a rarity in Indonesia, with apenetration rate of about 1.6% households, or 800,000homes. eMarketer does not project significant growthof broadband penetration over the next four years.Fixed Broadband Households and Subscriptionsin Indonesia, 2010-2016Households (millions)—% change—Household penetrationSubscriptions (millions)—% change20100.610.5%1.3%1.69.5%20110.79.8%1.4%1.78.9%20120.89.2%1.5%1.98.3%20130.86.0%1.6%2.05.1%20140.82.5%1.6%2.02.3%20150.91.8%1.6%2.01.0%20160.91.8%1.6%2.00.9%Note: includes connections with permanent access to the internet viacable modem, DSL and wireless/satellite technologies; excludes mobileSource: eMarketer, April 2012139005 www.eMarketer.comA significant impediment to fixed broadband accessis that many people in Indonesia simply can’t afford it.An Accenture report from June 2012 found that fixedbroadband could cost almost $36 per month.Another cause of the low penetration rate is theobvious logistical problem that arises from attemptingto provide internet to a geographically fractured area.The government is in the midst of building out thePalapa Ring, a fixed broadband network consisting ofsubmerged cable laid along the coasts of the country’smajor islands. Although the latest estimates put thePalapa Ring’s completion date sometime in 2014, thismassive investment in infrastructure has been plaguedby delays. And the question of who will build “last mile”infrastructure to link local governments and rural areas tothe Palapa Ring remains unanswered.Internet cafes known as “warnets”—a portmanteau ofwarung, the Indonesian word for cafe, and internet—still play a significant role in providing rural users withinternet access. However, their popularity has wanedamong city dwellers, who are more likely than those inless-developed areas to be able to afford a PC and a fixedbroadband plan or an internet-enabled mobile phone.But warnets in urban areas have not yet completelydisappeared, and many use them as gathering spots foronline gaming.The prominence of warnets in rural areasis likely to erode as mobile phones begin to penetratethese markets.
  5. 5. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 5September 2012 data from Roy Morgan Researchshowed that the use of warnets began to decline in late2009 as home access increased. However, it’s importantto note that the data does not specify whether thosegoing online at home were using mobile devices orfixed broadband.% of respondentsInternet Users in Indonesia, by Access Location,Sep 2007-Sep 2012Warnet/internet cafeHomeWorkEducational institutionWireless hotspotSep200755%7%17%14%0%Sep200855%8%18%14%2%Sep200964%13%17%14%3%Sep201060%23%15%9%5%Sep201155%32%13%9%4%Sep201246%45%18%10%4%Note: ages 14+; ever accessed the internetSource: Roy Morgan Single Source Indonesia, Feb 1, 2013151468 www.eMarketer.comAs in most developing economies, growth in internetaccess will largely come through the adoption of internet-enabled mobile phones. eMarketer estimates that therewill be 160.5 million mobile phone users in Indonesia bythe end of the year, representing a 64% penetration rate.millions, % of population and % changeMobile Phone Users in Indonesia, 2010-20162010106.944.0%43.5%2011130.253.0%21.8%2012148.960.0%14.4%2013160.564.0%7.8%2014169.767.0%5.7%2015179.070.0%5.5%2016185.972.0%3.8%Mobile phone users % of population % changeNote: mobile phone users are individuals of any age who own at least onemobile phone and use the phone(s) at least once per monthSource: eMarketer, April 2012139308 www.eMarketer.comSmartphone adoption is still in its early phase, witheMarketer projecting that smartphone users will accountfor 24% of all mobile phone users by the end of 2013.But the mobile landscape is changing quickly; cheapsmartphones made in China have substantially loweredentry costs for many consumers seeking regular internetaccess for the first time. According to eMarketerestimates, smartphone penetration among mobilephone users will climb to 47% by 2016—a total of 87.4million users.Smartphone Users and Penetration in Indonesia,2010-20162010 2011 2012 2013 2014 2015 2016Smartphoneusers (millions)4.3 11.7 23.8 38.5 57.7 71.6 87.4—% change 474.1% 174.0% 103.4% 61.6% 49.8% 24.1% 22.0%—% of mobilephone users4.0% 9.0% 16.0% 24.0% 34.0% 40.0% 47.0%—% of population 1.8% 4.8% 9.6% 15.4% 22.8% 28.0% 33.8%Note: smartphone users are individuals of any age who own at least onesmartphone and use the smartphone(s) at least once per monthSource: eMarketer, April 2012139339 www.eMarketer.comUsing data from consulting firm Canalys, eMarketercalculates that smartphone shipments in Indonesia willhit 15.7 million units in 2013—a year-over-year increaseof 51.7%.millions of units and % changeSmartphone Shipments in Select Developing Countries,2012 & 20132012 2013 % changeChina 185.7 239.8 29.1%India 16.4 26.5 61.4%Russia 14.4 18.8 30.7%Brazil 12.3 17.2 40.0%Indonesia 10.3 15.7 51.7%Source: Canalys as cited in press release; eMarketer calculations, Jan 17,2013150413 www.eMarketer.comThese devices are already more commonly owned bythose in younger age groups. An August 2012 surveyconducted by BBG and Gallup found that more thanone-quarter of consumers ages 15 to 24 owned asmartphone.The ownership rate fell to 16% for thoseages 25 to 34 and was only 7% among those ages 35to 54.% of respondents in each groupSmartphone Ownership Among Consumers inIndonesia, by Age, Aug 201215-24 26%25-34 16%35-54 7%55+ 2%Total 13%Source: Broadcasting Board of Governors (BBG) and Gallup, "Media Use inIndonesia 2012," Oct 16, 2012150269
  6. 6. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 6Although the mobile device trend is clearly shifting towardsmartphones, internet-capable feature phones remain anincredibly popular means of getting online. WhenYahoo!andTNS Global asked mobile internet users in urbanIndonesia which devices they used to go online, 86%said they used feature phones, compared with 20% whoused a smartphone and 7% who used a tablet. (The totalexceeds 100% because respondents were able to choosemore than one answer.)% of respondentsMobile Devices Used to Access the InternetAccording to Mobile Internet Users in UrbanIndonesia*, Q1 2012Feature phones 86%Smartphones 20%Tablets7%Handheld gaming devices2%Portable media players1%Note: ages 15-50; *Bandung, Botabek, Denpasar, Jakarta, Makassar, Medan,Palembang, Semarang, Surabaya andYogyakartaSource:Yahoo! and TNS, "Net Index - Indonesia," June 27, 2012150303 www.eMarketer.comDeregulation has led to increased competition amongmobile service providers, resulting in lower costs forboth data and voice plans. A January 2013 report fromCredit Suisse found that the average monthly bill formobile phones had decreased to about $8.22 per month,down from roughly $8.54 the previous year. “There arepackages for surfing the web on mobile that are semi-unlimited or so-called unlimited, all-you-can-eat packageson mobile networks for less than $5 a month.These arefueling internet usage in Indonesia,” said Nanda Ivens,COO at digital agency XM Gravity. “I think in the battlebetween feature phones and smartphones, the featurephones are losing because you can pay almost the sameamount of money for a smartphone, and that is a massiveshift in rural areas. Chinese-made smartphones rule.They’re selling so many units it’s unreal,” he added.Cheaper devices and plans will have a disproportionateimpact in rural areas, which have historically beenunderserved by access to both fixed broadbandinfrastructure and power grids.The reduction of entrycosts is especially important in Indonesia since, unlikein the US, carriers don’t subsidize devices and thenrecoup their initial outlays over the life of a servicecontract. Instead, consumers usually pay the full cost ofthe phones up front and then acquire service through aprepaid model.Although competition has increased, the provision ofmobile services is still concentrated in a handful ofcompanies that control most of the market:Telkomsel, asubsidiary of the majority state-ownedTelkom Indonesia;XL Axiata, commonly referred to as XL; and Indosat.According to Credit Suisse’s report,Telkomsel remainedthe dominant service provider with a 43% market sharein 2012, a slight decline from 2011. Meanwhile, Indosatcontrolled 23% of the market, and XL had 12%; however,Credit Suisse reported that both companies had slightlyincreased their market share over the past year.But providing consumers with access to mobilebroadband remains somewhat of a challenge. InDecember 2012, the government’s Ministry ofCommunications and InformationTechnology announcedthat it would auction off more spectrum as part of effortsto improve 3G services. However, the government hasnot made significant investments in mobile infrastructure,leaving telecoms and other third parties to foot the bill.Although Google’s Android has quickly become theoperating system (OS) of choice for smartphone owners,Indonesia’s mobile market is somewhat unusual in thatit is one of the few left in which BlackBerry remains asignificant player. Projections from International DataCorp. (IDC), published byThe Jakarta Post in January2013, expected Android to lead OS market share in 2013with 53% of smartphones running the software. IDCprojected that BlackBerry would control a respectable35% market share, and that the Windows Phone OSwould have a 9% share—a significant increase from 2%in 2012.% of totalSmartphone OS Market Share in Indonesia,2012 & 2013Source: International Data Corporation (IDC) Indonesia as cited in TheJakarta Post, Jan 5, 2013149852 www.eMarketer.com2012 2013Symbian2%Windows2%iOS3%Android56%BlackBerry37%Windows9%iOS3%Android53%BlackBerry35%
  7. 7. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 7Part of BlackBerry’s appeal among device users inIndonesia results from cheaper handsets and low-costservice packages. BlackBerry Messenger (BBM) also hasa strong user base, but new messaging services runningon Android, such as WhatsApp, have begun to erodeBlackBerry’s appeal. At the same time, some higher-endusers have come to consider the brand a discount option.Perhaps in a tacit acknowledgement of the loss of marketshare elsewhere, BlackBerry in late 2012 signaled thecontinued importance of the Indonesian market whenit announced that the country would be the first place itwould roll out a new peer-to-peer mobile payment systembuilt into BBM, known as BBM Money. In late February2013, the company announced that it had started testingthe program in Indonesia.INTERNET USAGE IN INDONESIAInternet use in Indonesia is still in the early phase ofusage—communication and information gathering—with social media figuring strongly into the onlinebehavior of internet users.In a February 2013 poll, Roy Morgan Research found thatthe most popular online activity among internet userswas socializing/entertainment, named by more thaneight in 10 respondents.That was followed by accessinggeneral information (57%), email (48%) and websitebrowsing (37%). Online shopping and bill paymentsbarely registered, with only 8% of respondents listingthose activities.% of respondentsOnline Activities of Internet Users in Indonesia,Sep 2012Socializing/entertainment 82%General information 57%Email 48%Visiting websites 37%Academic/business research18%Promotion/publishing11%Shopping/paying bills8%Note: ages 14+ who accessed the internet in the past four weeksSource: Roy Morgan Single Source Indonesia, Feb 1, 2013151469 www.eMarketer.comBBG and Gallup’s similar August 2012 survey of internetusers underscored just how important social media wasto the online activities of those in Indonesia. Ninety-sixpercent of respondents said they used social networkingservices when online.The next most common activitywas accessing the news, named by 72% of respondents.(The next section of this report will take a closer look atsocial media’s place in Indonesia.)
  8. 8. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 8% of respondentsOnline Activities of Internet Users in Indonesia,Aug 2012Social network services96%Latest news72%Find information about a specific topic50%Send or receive email44%Read a blog38%Share videos or photos online35%Watch online videos32%Listen to online audio29%Post a comment to a blog28%Download or watch podcasts27%Note: in the past week; n=433 ages 15+Source: Broadcasting Board of Governors (BBG) and Gallup, "Media Use inIndonesia 2012," Oct 16, 2012150272 www.eMarketer.comThus far, internet users in Indonesia have strongly favoredWestern websites for online activities. comScore datafrom August 2012 found that the top four websitesranked by unique visitors were all foreign-owned. Googlesites—among them,, andYouTube—were at the top of the list, attracting12.5 million unique visitors and recording a 91.6% reach.Facebook was in second, with 11.1 million visitors anda reach of 81.6%, followed byYahoo! sites in third. Itshould be noted, however, that many of these sitesare offered and often used in the Indonesian language.Media conglomerate Kompas Gramedia, which operatesa number of newspapers and magazines, was in fifth,ranking as the site in Indonesia with the highest numberof unique visitors and a reach of 32.6%.The online forumKaskus came in at 11th place. Students from Indonesiastudying abroad created Kaskus in 1999 for fellowexpatriates, but users living in Indonesia have come toembrace the site, which claims to be the largest onlinecommunity for the country.thousands and % reachTop 20 Sites Among Internet Users in Indonesia,Ranked by Unique Visitors, Jan 2013Uniquevisitors% reach1. Google sites 12,487 91.6%2. Facebook 11,127 81.6%3. Yahoo! sites 8,518 62.5%4. WordPress 5,646 41.4%5. Kompas Gramedia 4,446 32.6%6. Twitter 3,724 27.3%7. Microsoft sites 3,702 27.2%8. 3,637 26.7%9. Wikimedia Foundation sites 3,579 26.3%10. 3,421 25.1%11. 2,837 20.8%12. 2,718 19.9%13. Portal VIVA 2,436 17.9%14. sites 2,395 17.6%15. Ask Network 2,381 17.5%16. Glam Media 2,368 17.4%17. AOL 2,238 16.4%18. 2,172 15.9%19. CBS Interactive 1,908 14.0%20. Zynga 1,837 13.5%Source: comScore Inc., Feb 28, 2013152871 www.eMarketer.comThe number of languages and ethnic groups found inIndonesia complicates the country’s online landscape.While English has served as something of a commonlanguage for the internet in Indonesia, growth in internetuse will be sped along by the creation of content inIndonesian, the country’s official language, as wellas languages such as Javanese. “Without localizedcontent creation—in the form of tweets,YouTubevideos, blog posts and other social content—Indonesia’sinternet use probably wouldn’t have grown so fast,”said PanduTruhandito, president of GrowMint, a digitalmarketing agency.
  9. 9. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 9SOCIAL SOCIETY, SOCIAL MEDIAIf there’s one lesson to learn about the behavior ofinternet users in Indonesia, it’s that they love socialmedia. Social networks are an indelible element ofthe online world in Indonesia and a reflection of thesocial nature of the country’s culture.Internet users in Indonesia are leapfrogging PCs andgoing straight to mobile devices for access, and thesmartphones and internet-enabled feature phonesthey’re snapping up often come with social media appspre-installed. On feature phones, these apps have beensimplified in order to work within the limitations of bothfeature phone screens and slower 2G networks.eMarketer estimates that social networks had an 87.5%penetration rate among internet users in Indonesiain 2012.% of internet usersComparative Estimates: Social Network UserPenetration in Indonesia, 2012BBG, Oct 2012comScore Inc.*,June 2012eMarketer,Aug 2012Ipsos**,March 2012201296.0%92.6%87.5%83.0%Age15+15+All ages16-64UsageUsed in the past weekUnique visitorsUse via any device atleast once per monthVisited in past 3 monthsNote: *data is for April; **visitors to social network sites, forums or blogsSource: eMarketer, Aug 2012; various, as noted, 2012152551 www.eMarketer.comeMarketer’s figure falls comfortably between estimatesprovided by comScore and Ipsos. While comScore didnot define a social network user in its report, its figurerelied on data culled from only one month. Meanwhile,Ipsos’ number considered only those ages 16 to 64 whovisited a network over the past three months. BBG’sdata pulled from respondents older than 15 and includedthose who had used a social network in the past week. Incomparison, eMarketer assessed users of all ages whoaccessed their account by any device.eMarketer projects that social network use in Indonesiawill continue to speed up in 2013 and 2014.Social Network Users and Penetration in Indonesia,2010-2014Social network users (millions)—% change—% of internet users—% of population201022.754.8%74.2%9.3%201134.451.4%80.0%14.0%201252.151.6%87.5%21.0%201367.128.8%92.3%26.8%201479.218.0%94.8%31.3%Note: internet users who use a social network site via any device at leastonce per monthSource: eMarketer, Aug 2012143778 www.eMarketer.comSimilar to website browsing behavior, social media usersin Indonesia are turning to Western platforms in largenumbers. According to, there were 47.2million Facebook users in the country as of mid-February,making it the social network’s fourth-largest user basebehind only the US, Brazil and India. BBG and Gallup’s pollfound that 95.7% of social network users in Indonesiawere on Facebook, compared with 47.6% forYouTube,37.6% for Google+ and 29.4% forTwitter.% of respondentsSocial Networks Used by Social Network Users inIndonesia, Aug 2012Facebook 95.7%YouTube 47.6%Google+ 37.6%Twitter 29.4%Note: in the past weekSource: Broadcasting Board of Governors (BBG) and Gallup, "Media Use inIndonesia 2012," Oct 16, 2012150275 www.eMarketer.comHowever, anecdotal evidence suggests that Facebook’spopularity may be declining, at least among the digitallysavvy users in the country’s larger cities who are turningtoTwitter and Path, a US-based network. Part of Path’sstrong appeal in Indonesia may lie in the fact that itwas originally designed as a mobile app and not as acounterpart or evolution to an older iteration created foruse on a PC. Its rise neatly coincides with mobile’s rise asthe default platform for internet use.
  10. 10. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 10ECOMMERCE: BUILDING A PEER-TO-PEER ECONOMYEcommerce has not taken root in Indonesia yet.Thecountry suffers from the same problems as manyemerging economies: a lack of delivery infrastructure(exacerbated by the fact that the country is spreadacross multiple, often distant, islands), as well asinternet users’ unfamiliarity with online paymentmethods, worries about security and widespreadinability to make online payments at all.Still, eMarketer estimates that business-to-consumerecommerce sales in the country will total $1.79 billionin 2013 and reach $4.49 billion in 2016. Annual growth ishardly eye-popping for such an early stage market.billions and % changeB2C Ecommerce Sales in Indonesia, 2011-20162011$0.5615.4%2012$1.0413.3%2013$1.799.8%2014$2.607.1%2015$3.566.7%2016$4.495.6%B2C ecommerce sales % changeNote: includes travel, digital downloads and event tickets purchased viaany digital channel (including online, mobile and tablet); excludes gambling;converted at the exchange rate of US$1=IDR9,364.91Source: eMarketer, Jan 2013150108 www.eMarketer.comeMarketer projects that there will be 4.6 million digitalbuyers in Indonesia by the end of 2013 and 8.7 million by2016, a figure equal to only 10.6% of internet users.Digital Buyers in Indonesia, 2011-2016Digital buyers (millions)—% change—% of internet users—% of population20112.069.7%6.0%1.1%20123.154.8%6.7%1.7%20134.647.5%8.0%2.4%20145.930.1%9.0%3.1%20157.424.8%10.0%3.8%20168.717.4%10.6%4.4%Note: ages 14+; internet users who have made at least one purchase viaany digital channel within the past year, including online, mobile and tabletpurchasesSource: eMarketer, Jan 2013150109 www.eMarketer.comA poll conducted in July 2012 by Asosiasi PenyelenggaraJasa Internet Indonesia (APJII), an association of internetservice providers, cited a fear of fraud as the top concerninternet users had about making a purchase online. Butrespondents also expressed trepidation about the inabilityto see and touch online products firsthand in order togauge their quality and to make sure they were gettingwhat they paid for. High prices also concerned shoppers,an indication that ecommerce has not yet developed tothe point where consumers see it as a valuable tool forprice comparison shopping.% of respondentsReasons that Internet Users in Indonesia Do Not BuyOnline, July 2012Fear of fraud34.6%Items cannot be seen directly21.5%High prices13.8%Not interested/not needed12.7%Quality of items not guaranteed9.3%Dont know how6.0%Not practical5.2%Items dont match the offer4.7%Items are not in accordance to anyones liking4.1%Items dont match the picture4.0%Process is long2.4%Source: Asosiasi Penyelenggara Jasa Internet Indonesia (APJII), "IndonesiaInternet Profiles 2012," Dec 12, 2012151157 www.eMarketer.comHesitant to embrace a more traditional ecommercemodel, online shoppers in Indonesia have insteaddeveloped a peer-to-peer model aided by the popularityof both mobile devices and social networks, whicheffectively serve as marketplaces for consumers seekingto sell goods to other consumers. April 2012 data fromonline payment processor Veritrans and tech media andresearch blog DailySocial found that Facebook was themost popular site for ecommerce, used by half of buyersmaking an online purchase in Indonesia.
  11. 11. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 11% of respondentsEcommerce Sites Used to Make an Online Purchaseby Online Buyers in Indonesia, April 2012Facebook50.0%Kaskus49.2%Disdus*19.5%Tokobagus13.6%Dealkeren*11.9%Amazon8.9%eBay8.5%Bhinneka5.5%Multiply4.7%Blibli.com4.7%Tokopedia3.8%Other22.5%Note: ages 15+; *numbers may be inflated for these group buying sites asDisdus assisted with survey distributionSource: veritrans and DailySocial, "eCommerce in Indonesia," Aug 16, 2012148992 www.eMarketer.comWhile sites founded in Indonesia figure prominently onthe list, many of them are now foreign-owned. Grouponacquired group-buying site Disdus, and LivingSocialabsorbed DealKeren and rebranded it as LivingSocialIndonesia. DailySocial and Veritrans also noted that theresponse rates for group-buying sites might be inflatedbecause they distributed their survey through Disdus’mailing list.The homegrown Kaskus, used by 49.2% of online buyersin Indonesia according to Veritrans and DailySocial’s study,operates a popular peer-to-peer marketplace known asForum Jual Beli, or FJB, which simply translates to “buyingand selling forum.” Rahmat Harlyadie, vice president ofmarketing for DailySocial, said that estimates for thedaily volume of transactions on Kaskus were around$54,000. But sellers use any number of networks to alertprospective customers that they have goods available forpurchase, including Facebook, BBM and WhatsApp groupsandTwitter. Inventory can include just about anything—from a car to a pair of shoes. Buyers and sellers connectvia SMS or phone call to negotiate prices, and paymentsoften take place offline through bank transfers.The April 2012 study conducted by Veritrans andDailySocial showed that 70% of online buyers surveyedused bank transfers, making it the most popular paymentsystem.That method was followed by a proprietaryelectronic payment system provided by the bank Klik BCA(41%), credit cards (30%), cash ondelivery (24%) and a payment service provided byBank Mandiri (15%).% of respondentsPayment Methods Used for Online PurchasesAccording to Online Buyers in Indonesia, April 2012Bank transfer* 70%Klik BCA** 41%Credit card 30%CoD 24%Mandiri internet**15%Note: ages 15+; *includes ATM payments, cashier payments or transfer offunds electronically to a specified bank account; **transfer of money usingthe banks proprietary electronic payment networkSource: veritrans and DailySocial, "eCommerce in Indonesia," Aug 16, 2012148993 www.eMarketer.comClearly customers still feel uneasy about makingpayments online, instead preferring to use bank transfersand other methods to complete their purchases. “As acustomer, even if I don’t know you, I’m more comfortablesending you money through transfer than I am usinga payment gateway to pay for something,” said XMGravity’s Ivens. But he sees that practice changing in thenear future as various players compete to provide newshoppers with online payment services. “There are alot of local companies in Indonesia that are starting uppayment gateways. It’s gaining trust and traction in termsof usage,” he noted.Those efforts to develop online and mobile paymentmethods are also taking place among foreign firms, withBlackBerry’s new BBM Money payment system servingas an example of this trend.
  12. 12. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 12ADVERTISINGAdvertising spending in Indonesia still remainswedded to traditional forms of mass media.Television,especially, commands a large share of advertisingbudgets, but digital spending is beginning to ramp upas media buyers adjust to the online world.A December 2012 study by GroupM projected thatTV ad spending would total $1.6 billion in 2013, withnewspapers commanding the second-highest ad budget($501 million). At $147 million, internet ad spendingwas expected to exceed magazines, outdoor, radio andcinema advertising.millions and % changeAd Spending in Indonesia, by Media, 2011-20132011 2012 2013TV $1,172 $1,413% change 22.0% 20.5%Newspapers $411 $462% change 21.2% 12.5%Internet $47 $97% change 200.0% 105.0%Magazines $77 $84% change 6.6% 8.4%Outdoor $61 $68% change 10.0% 11.4%Radio $54 $59% change 7.5% 9.1%Cinema $9 $9% change 5.0% 10.7%Total $1,832 $2,192% change 21.9% 19.7%$1,62815.2%$5018.5%$14751.5%$907.8%$7814.8%$659.6%$1112.5%$2,52014.9%Note: numbers may not add up to total due to rounding; converted at anexchange rate of US$1=9,631 Indonesian rupiahsSource: GroupM, "ThisYear, NextYear: December 2012," Dec 17, 2012149342 www.eMarketer.comeMarketer estimates that total ad spending growth willjump from 12% in 2013 to 15% in 2014—and then slowto 9% by 2016.Total ad spending will reach $7 billion thisyear and climb to $9.6 billion in 2016.Comparative Estimates: Total Media Ad Spendingin Indonesia, 2011-2016Total ad spending (millions)PPPI, Jan 2013 (1)PwC, June 2012 (2)ZenithOptimedia, June 2012 (3)eMarketer, Dec 2012 (4)GroupM, Dec 2012 (5)SPS, Jan 2012 (4)Total ad spending growth (% change)ZenithOptimedia, June 2012PPPI, Jan 2013GroupM, Dec 2012eMarketer, Dec 2012MAGNAGLOBAL, June 2012Media Partners Asia, April 2012SPS, Jan 2013Nielsen, April 20122011-$7.1$5.3$5.5$1.8$9.118.9%-21.9%10.0%---25.2%2012$9.8$8.3$6.3$6.2$2.2$10.519.6%-19.7%13.0%16.8%15.0%14.7%-2013$12.1$9.7$7.5$7.0$2.5-19.1%18.0%14.9%12.0%----2014-$10.9$9.3$8.0--22.6%--15.0%----2015-$12.0-$8.8-----10.0%----2016-$13.2-$9.6-----9.0%----Note: (1) converted at the exchange rate of US$1=IDR9,364.91; (2)converted at the exchange rate of US$1=IDR8,779.0; (3) converted at theexchange rate of US$1=IDR8,770.40; (4) converted at the exchange rate ofUS$1=IDR8,767.81; (5) converted at the exchange rate of US$1=IDR9,631.0Source: eMarketer, Dec 2012; various, as noted, 2012 & 2013150296 www.eMarketer.comDigital ad spending, unlike overall ad spending, will seesignificantly higher growth rates over the next two yearsas advertisers move to establish themselves online forthe first time. eMarketer projects that digital ad spendingwill hit $231.8 million in 2013 and grow to $1.2 billionby 2016.Comparative Estimates: Digital Ad Spendingin Indonesia, 2011-2016Digital ad spending (millions)eMarketer,Dec 2012 (1)GroupM, Dec 2012 (2) (3)PwC, June 2012 (4)ZenithOptimedia,June 2012 (3) (5)SPS, Jan 2012 (6)BCG, March 2012 -Digital ad spending growth (% change)eMarketer, Dec 2012GroupM, Dec 2012 (3)PwC, June 20122011$88.0$47.0$4.0$1.0--50.0%200.0%0.0%2012$136.4$97.0$5.0$2.0$114.155.0%105.0%25.0%2013$231.8$147.0$5.0$2.0--70.0%51.5%0.0%2014$405.7-$6.0$2.0--75.0%-20.0%2015$697.8-$7.0$2.0--72.0%-16.7%2016$1,158.3-$9.0--$200.066.0%-28.6%Note: (1) converted at the exchange rate of US$1=IDR9,614.14; (2)converted at the exchange rate of US$1=IDR9,631.0; (3) excludes mobile;(4) converted at the exchange rate of US$1=IDR8,779.0; (5) converted atthe exchange rate of US$1=IDR8,770.40; (6) converted at the exchange rateof US$1=IDR8,767.81Source: eMarketer, Dec 2012; various, as noted, 2012150800
  13. 13. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 13Many global research firms have difficulty measuringad spending—especially in emerging markets—withouta local office in the country or region. For example,PricewaterhouseCoopers relies heavily on figures fromthe Interactive Advertising Bureau, which doesn’t havean office in Indonesia. eMarketer believes that such firmsunderestimate ad spending by accounting only for thelocal advertising market and failing to take into accountoverseas marketers who spend more heavily than localplayers do.The local sources that eMarketer uses, suchas Serikat Perusahaan Pers (SPS), tally the spending ofboth domestic and international advertisers.EMARKETER INTERVIEWSMarketing in Indonesia: Nation Enamored by SocialNetworks Reaches Internet via MobileNanda Ivens COOXM GravityInterview conducted on January 30, 2013Rahmat HarlyadieVice President, MarketingDailySocialInterview conducted on January 31, 2013Tuhu Nugraha COOPingfansInterview conducted on January 31, 2013Debnath Guharoy Regional Director, AsiaRoy Morgan ResearchInterview conducted on February 8, 2013PanduTruhandito Co-FounderGrowMintInterview conducted on February 2, 2013
  14. 14. INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 14RELATED LINKSAsosiasi Penyelenggara Jasa Internet Indonesia(APJII)BlackBerryBoston Consulting Group (BCG)Broadcasting Board of Governors (BBG)CanalyscomScoreCredit SuisseDailySocialDisdusFacebookFrost & SullivanGallupGoogle IndonesiaGroupMGrowMintIpsosIndosatInternational Data Corporation (IDC)InternationalTelecommunication Union (ITU)JefferiesKaskusLivingSocial IndonesiaMAGNAGLOBALMarkPlus InsightMcKinsey & CompanyMedia Partners AsiaMinistry of Communications andInformationTechnologyNielsen IndonesiaPathPersatuan Perusahaan Periklanan Indonesia (PPPI)PricewaterhouseCoopersRoy Morgan ResearchSerikat Perusahaan Pers (SPS)Socialbakers.comTelkomselTNS GlobalTwitterVeritrans IndonesiaXL AxiataXM GravityYahoo!ZenithOptimediaEDITORIAL ANDPRODUCTION CONTRIBUTORSCliff Annicelli Senior EditorKaitlin Carlin Copy EditorJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistDana Hill Director of ProductionNicole Perrin Associate Editorial DirectorAllie Smith Director of Charts