Indonesian Internet 2007

For a country – and population - of our size, Indonesian Internet scene has been strangely quiet these days. Nothing too exciting happened for the last few years. Current Internet population is about 12m or so and growing – many expect 2007 to be the take off year where broadband will finally be affordable (and usable), at least for those in the big cities.

I was pretty lucky to be work with many of the Internet players back in the 98-00 days, Astaga, Detik.com, Satunet, Boleh, Jatis and also some of the regional players, Yahoo, Lycos, Catcha and later also CNet and others. Most of them crashed and burned in the years afterward, with a few morphed leftover. Jatis is primarily a service provider with some mobile excitements and most of the regional players changed their mind to focus on China and India instead. That left detik.com practically in monopoly of the local internet content – and ads.

Fast forward to the Web 2.0 and not much has changed. Except now there are more people online and you’re seeing a growing trend of user generated content – blogs etc. While interesting, the economics of this segment is minuscule to the overall market, it will take a lot more than individual blogs to make a real impact on the market. Major media outlets are still pretty much clueless and barely managed to stay online.

Online advertising revenue is trivial to the overall ad spending (recent Nielsen report has no percentage of the online advertising revenue for ’06). By my own estimate, online advertising revenue is only slightly more than IDR60bn, with detik.com probably getting about 40% of that. Compared to the IDR22t total ad spending, online advertising made less than 0.4% in 2006.

If we compare this with China where online ad revenue is at 2%, Indonesia should be on its way to make IDR440bn within the next 5 years. That ought to be enough to get the attention of the bigger players, one thinks.

It is rather peculiar that the local media groups have been very slow in looking at this opportunity – particularly so, considering that most of them are struggling to grow their advertising revenue. The last three years saw total advertising revenue grow significantly but this is divided among even more players, so individual revenue are less than spectacular for even the best performing ones (consolidations are already happening with the recent acquisition of TV7 by Trans TV group). Many would suggest that you will see even more consolidation in 2007 in the traditional media platform (TV, Radio, Magazines, Newspapers).

A recent Nielsen report that shows 50% of the AB class are now already getting their news off the Internet and 16% of the upper class spend their media time on the Internet. Include the explosive growth of mobile penetration and the rapid availability of mobile data access, one could make a convincing case that the Indonesian online population is very much under served. More people are on the internet, but with fewer content providers to serve them.

It’s incomprehensible that a market of this size have almost no local content providers. During the recent quake in Taiwan, with most of the international network down, Indonesian users were forced to access only a handful few of the local players, and you’re only talking about two or three real Internet destinations. All reported almost double the traffic (particularly so with the string of local disasters and the public hunger for information) during this period.

On a peculiar side note, detik.com just launched their new ad platform where you can now purchase advertising on an impression based pricing (as opposed to the regular monthly/weekly rate card). The debuting advertisers got their money worth within the very first few days with double the impressions and their servers crashed under the load. And this is for a leading player in the market.

The new year begins with a promise and it also welcomes a new player in the market. This time, it looks serious. MNC group just very recently launched their new online venture – okezone.com. The chosen name, I think, is rather silly and the current layout looks like an HTML mockup, but still, it holds a lot under the hood.

The group is currently one of Indonesia’s largest media group with holdings in just about everything from magazines to tv stations to radio stations. The recruitment drive is super aggressive and – in a way – reminds me a lot of the euphoria with Astaga back then. This time around, however, it’s not some ambitious Silicon Valley deserter but a full blown corporate entity (the parent company reported a Q3 2006 EBITDA reaching IDR711bn) that will hopefully bring some sort of corporate accountability in their ambition.

Okezone currently have about 100 or so employees and are already busy churning out real news report online. Presumably, they’re still planning for even more content, sport, entertainment etc. Their existing media properties have stable relationships with advertisers already and the corporate credibility have a lot of leverage with the public, if executed properly, they have a good chance in grabbing a big chunk of the market rather quick (I’d still recommend that they change the domain before the silly name became a liability).

Anyhow, I’m eyeing both Kompas and the Media Indonesia group to quickly get their act together before they got beaten in their own game. Detik.com, the reigning market leader, need to behave itself and put their party dress on before they became obsolete. By any account, these guys are lucky to have managed this long.

In a market with no competition, it’s too easy to lose focus and forget what it was like to stay on the edge. By most measures, detik.com has already lost much of its grip over the newer generation of the Internet population –current events and politics is less appealing for the younger digital generation.
They need more than luck to stay relevant with fresh competitors lugging a heavy war chest. In any event though, 2007 will be a crucial year for Indonesian Internet 2.0 and a good year for most of us.