Asia is the world’s hottest area of Internet growth, but the dynamics on the ground vary widely by nation.

1. September 2010
m a r k e t i n g & s a l e s p r a c t i c e
Riding Asia’s digital tiger
Vikash Daga, Nimal
Manuel, and Laxman
Narasimhan
Asia is the world’s hottest area of Internet growth, but the
dynamics on the ground vary widely by nation.
Asia’s emerging markets Malaysia
are poised for explosive digital Of the three markets we researched,
growth. The region’s two largest Malaysia is the most advanced.
economies—China and India— While the country has only around
already boast some 500 million 15 million–plus Internet users,
Internet users, and we forecast that’s close to 55 percent of the
nearly 700 million more will be added total population, and mobile Internet
by 2015 (Exhibit 1). Other emerging penetration is close to 30 per-
Asian nations have the potential to cent of it. Given the Malaysian govern-
grow at a similarly torrid pace. We ment’s push to expand high-speed
estimate that within five years, this broadband, we forecast that
billion-plus user market may gen- the country will have up to 25 million
erate revenues of more than $80 bil- Internet users by 2015, or close
lion in Internet commerce, access to 80 percent of the population. As
fees, device sales, and so forth both fixed and wireless broad-
(Exhibit 2). band grow, we project that more
than 50 percent of all users
To better understand the consumers, will choose to have both personal-
growth prospects, and problems, computer and mobile-device options
we surveyed more than 13,000 indi- for getting online.
viduals across China, India, and
Malaysia—countries at very different Malaysians consume 35 percent
stages of their digital evolution.1 more digital media than Internet
The key finding? While there were users in China and 150 percent more
some notable differences in the than users in India, particularly on
types of content consumers favor social-networking sites and instant
and the devices they use, significant messaging. That may, for example,
demand is waiting to be unlocked give handset manufacturers oppor-
in all three nations. That could tunities to build social-network
lead to growing markets for digital access into their devices. We also
content and services and to new found that Malaysians like to
opportunities around digital market- multitask across both digital and
ing, including efforts to reach con- traditional media. For advertisers,
sumers via Internet sales channels. that’s problematic, since viewers

2. Riding Asia’s digital tiger 2
are paying less attention to traditional 770 million people, or 55 percent
media content—and thus advertising. of the population. More than
70 percent will use both PCs and
China handheld devices.
China leads the world in sheer
numbers of Internet users—more China’s digital usage, which is
than 420 million people, or close similar to that of the United States,
to 30 percent of the population. Over skews toward instant messaging,
80 percent surf the Web from home, social networks, gaming, and stream-
while 230 million use mobile devices. ing video. Increasingly, Internet
We forecast that the number users in China are substituting digital
Q4 2010
of Internet users will almost double media for traditional ones, with
Asian digital over the next five years, hitting the potential for further cannibal-
Exhibit 1 of 2
Over the Internet usage growth in China, India, andmore Asians will
Projected next five years, nearly 700 million
start using the Internet.
Malaysia is dramatic, increasing to at least 1 billion
users from 480 million.
Penetration,1 millions of users
China India Malaysia
740–770
385
530–
555 330–370
PC and mobile 200 115–
phone 135
35
125
PC only 155 80 180–
15 200
85– 5 23–25 9–11
65 15
Mobile phone only 30 90 0 8 11
2 3
2009 2015 2009 2015 2009 2015
Penetration,2 % of total population
Mobile phone 58 86 30 61 110 141
Internet 29 55 7 28 56 80
Mobile Internet 18 46 1 27 27 44
1 Figures for 2015 are projected.
2Penetration above 100% indicates some users have multiple connected devices.

3. 3
ization as digital consumption grows. 350 million—28 percent of the
This development has stark population—with more than half of
implications for advertisers and those accessing the Web via
how they allocate future marketing mobile phones. To capture this
budgets. Consumers, meanwhile, opportunity, companies will
also use the Internet in their purchas- need to roll out wired and wireless
ing decisions. They are more broadband networks aggressively,
influenced by recommendations from to make smartphones and network
social-network contacts and access more affordable, and
friends than by traditional marketing to develop new content types.
messages or visits to company
Web sites. Consumer demand clearly is robust.
On average, Indians spend more
India than four hours a day consuming on-
With only 7 percent of the population line and offline content. On PCs,
connected (81 million users), India often used in cyber cafés, Indians
is Asia’s digital sleeper. Yet we spend much time e-mailing and
believe that it’s poised to become a are heavy consumers of downloaded
truly mobile-Internet society as videos and music, as well as DVD
new users leapfrog PCs altogether. movies. While Indian consumers use
We project that by 2015, the mobile phones predominantly for
Q4 2010
number of Internet users will increase voice services, they also treat them
Asian digital almost fivefold, to more than as offline personal-entertainment
Exhibit 2 of 2
Internet opportunities in emerging Asia could reach
Revenues from Internet access and the provision of
approximately $80 billion by 2015.
content and services could exceed $70 billion by 2015.
Revenues,1 $ billion
China India Malaysia
61
33
21
Content, services 8 14
28
5
Access 13 3 2 4
2 9 1 2
1 1 2
2009 2015 2009 2015 2009 2015
1 Figures for 2015 are projected.

4. Riding Asia’s digital tiger 4
devices, listening to radio stations or At the same time, companies in
to downloaded music. There is consumer-facing sectors (for
significant pent-up demand for more instance, automotive, packaged
convenient and personalized consumer goods, and retailing)
Internet access—a void the mobile will need to reconsider their marketing
Web could fill. and advertising strategies in
light of the shift away from traditional
Embracing the opportunity media. At stake is a significant
High hardware costs, inconsistent competitive advantage in a region
network quality, and limited access that already boasts more than
could check these optimistic growth half the world’s Internet users—and
prospects. But the extent of such will only continue to grow.
barriers varies by nation, and there’s
1
notable progress overcoming Field surveys were conducted across
50 cities and in-depth ethnographic profiles
them. Construction of network
developed to form a cross-device, longi-
infrastructure is proceeding apace— tudinal view of how the region’s digital con-
companies in India, for example, sumption is evolving.
just spent nearly $25 billion on tele-
communications spectrum. Mean- The authors wish to acknowledge
while, hardware and access costs the contributions of Nal Gollagunta
are declining in most markets. to this article.
The biggest challenge is to make
money while creating a variety Vikash Daga is a principal in
of low-cost content. Three issues McKinsey’s Delhi office, where
are especially important: Laxman Narasimhan is a director;
Nimal Manuel is a principal in
the Kuala Lumpur office.
Innovators and entrepreneurs
must develop content creation Copyright © 2010 McKinsey & Company.
and delivery models priced low All rights reserved. We welcome your
comments on this article. Please send them
enough to compete against the
to quarterly_comments@mckinsey.com.
pirated options currently available.
Content and Web services
providers need to foster the growth
of local and regional advertising
markets to help defray the cost of
content creation.
E-commerce platforms, includ-
ing transaction systems that
make purchases more convenient
and trusted, must be developed.