Internet Market in Indonesia June 2011


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Market Alert No. 2/2011 by MATRADE Jakarta

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Internet Market in Indonesia June 2011

  1. 1. Market Alert No. 2/2011 Internet Market in IndonesiaIndonesia is the 5th largest Internet market in Asia (after China, Japan,India, and South Korea). The number of Internet users in Indonesia isgrowing really fast, actually the highest growth among Asia countries afterChina. From 2000 to 2010, Internet users have grown from 2 million tomore than 31 million users in 2010, an increase of about 1,400%.Currently, these figures represent slightly more than 12% of the populationgetting Internet access.Experts predicted that Indonesia will soon become number three in internetpenetration in Asia. Potential growth is still very high because the Internetpenetration is still relatively small compared to the population andgovernment policies that promote a program to provide Internet accessservices to the district known as "Internet USO Kecamatan."The number of Internet users, especially those who access the Internetusing their mobile phone, is projected to grow at an even faster rate in thefuture. The cost to access the Internet has dropped significantly forIndonesians in the last two years, especially mobile phone internet. Thus,most Indonesians can now have access to the Internet using their mobilephone. By 2014, the number of Internet users in Indonesia is projected toreach 150 million.Similar to other emerging online markets, Internet in Indonesia has youngeraudiences. According to comScore, about 73% of Internet population inIndonesia is between 15 – 34 years old. In addition, only 36% of Internet
  2. 2. users in Indonesia are women. The recent trend shows that there areincreasing female internet users and they are much more productive thanthe male users. Female internet users also blogged more frequently. Theinternet user were mainly highly educated and belonged to the middle classand upwards. However, the internet users are still concentrated in Jakarta,the capital city, and other big cities.Majority of the Indonesians also turn to the Warnet, (a short form forWarung Internet), as an alternative to owning a personal computer. TheWarnet functions like an internet café. With the increasing number ofWarnets and internet service providers, the number of internet users inIndonesia is also increasing at a faster rate. As the Warnets offer a cheaperrate due to their operation from cable instead of a dial-up connection, it isoften popular with the lower income people.Broadband wired Internet connection is still pricey for most Indonesians.The cheapest unlimited Internet access service available from PT Telkomis about US$72 per month with a connection speed only up to 1Mbps. PTFirst Media offers unlimited Internet access service with connection speedvaries from 1.5Mbps (US$37 per month) to 10 Mbps (US$226 per month),however, these services are only available for users in Jakarta area. Due toits expensive price, there is still a limited number of broadband wiredinternet subscribers in Indonesia.Unlike wired internet infrastructure, mobile infrastructure is much moredeveloped in Indonesia. The infrastructure covers 90% of Indonesia’spopulation and offers fast connection through 3G networks. As of 2010,there are more than 160 million mobile cellular subscriptions in Indonesia,
  3. 3. 15 million of them are mobile cellular subscriptions with broadband access.An overwhelming 63 percent of Indonesian Internet users have adoptedmobile Internet, placing at the top of Southeast Asias mobile Internetpenetration. Compared to March 2011, mobile Internet use amongIndonesians increased by 158.32 percent in April 2011. In less than fiveyears, it is estimated that about half of Indonesia population (120 million)will use Internet from mobile access.Young Indonesians, aged 8 – 24 years old, have the highest level of mobilephone ownership in the region, at 80% penetration. Indonesia also ranksamong the highest in the world for mobile browsing intensity (633 pagesper month/person). There are three primary reasons why mobile is reallybig in Indonesia: price, infrastructure, and culture. Wireless/mobile Internetservice is much cheaper compared to wired broadband. Subscribers canget a Blackberry Internet service for as low as US$7.7 per month. Inaddition, bad traffic condition is a daily routine for most Indonesian workers,forcing them to spend a significant amount of their time on the road. MobileInternet access is becoming a must to have, not a nice to have anymore.According to comScore, internet users in Indonesia spend about 17.2 hoursonline per month. From a recent survey on internet usage in Indonesia,most Indonesians use the Internet for checking email (42%), readingnewspaper (39%), searching for information about products or services(29%), reading magazines (27%), and chatting (23%). A study bycomScore shows only 50% of Indonesian Internet users do online shoppingand they spend only 1% on their online time for shopping. In addition, 35million Indonesians have account(s) with Facebook, making them the 2nd
  4. 4. largest Facebook users in the world. As of June 2010, Indonesians alsoproduced the 3rd highest number of tweets in the world.Considering its high economic and Internet user growths, Indonesia has agreat potential for Internet business. Moreover, the internet business is stillin the early stage with a limited number of local players andproducts/services offered. However, it would not be easy to win in thisindustry. Unsophisticated payment infrastructure and conventional mind-setof its people will become the biggest challenges for entrepreneurs andinvestors who want to explore Indonesia’s untapped potential in internetbusiness. There is also growing demand for mobile phone-relatedapplications/contents, and for niche/creative solutions including bankingand finance IT. The increased activity seen on mobile Internet alsoprovides an opportunity for businesses to target the Indonesian market andestablish mobile-friendly interfaces to strengthen an online presence.MATRADE JakartaJune 2011