India is on its way in challenging China for the top spot in total Internet users.
By next month, the country is expected to reach 402 million Internet users, up 49% from Dec. 2014, according to a new report published by market-research firm IMRB International and the Internet and Mobile Association of India (IAMAI) on Tuesday. The research also says the number of India’s monthly active web users will grow to more than 426 million people by the middle of 2016. By comparison, at more than 650 million users, China still represents the world’s largest Internet-connected population. And for perspective, the U.S. has approximately 300 million Internet users.
But India’s growth suggests that the country may soon rival China’s web-connected population. It took India more than 10 years to reach 100 million Internet users. Then over the next three years, it quickly climbed 200 million users, said the IAMAI. The jump from 300 million users to 400 million took only a year. In October, India had 375 million Internet users, which suggests the country will add more than 25 million Internet users in the next two months.
Meanwhile, China only added 31 million new Internet users in 2014, according to the China Internet Network Information Center, a figure that was down from 53 million in 2013.
India’s growth is due to an increasingly tech-interested population that is only starting to get its hands on smart phones. The IAMAI reported that out of the 35 cities it surveyed for the study, mobile Internet usage across India was up 65% year-over-year in October, numbering 197 million people.
“Clearly, Internet is mainstream in India today,” the organization said in a statement. “And the large Internet users base is definitely a good news for the overall growth of the digital industry.”
Amid the world’s largest Internet companies have taken notice. In fact, Facebook (FB) and Google (GOOGL), among countless others, have been doubling down on their efforts in India. Google, for instance, has rapidly expanded its service offerings to India and focused on the country’s mobile users. Earlier this month, the company even relaxed rules on features and pricing for Android One devices designed for India and other emerging markets.
Xiaomi, the China-based handset maker that has been called the “Apple of China,” has surprised some by dedicating significant resources—and manufacturing—to India. Xiaomi has launched several smartphones in India, has plans for more, and has said that the country is a critical component in growing its business.
But Facebook has arguably been the most aggressive India-focused company, starting with its Internet.org initiative. Designed to get two-thirds of the world’s population not currently online connected to the Internet, the initiative is attracting users in India with low- or no-cost web access.
Last month, Facebook CEO Mark Zuckerberg held a town hall in India, where he touted the country’s growth opportunities. While much of his talk centered on Internet.org and his plans for connecting the nearly one billion Indian people who aren’t online, Zuckerberg said that more than 130 million Indian people use Facebook.
“Our mission is to give everyone in the world the power to share what’s important with them and to connect every person in the world,” Zuckerberg said. “And India is the world’s largest democracy; it’s one of the biggest countries…. If you really have a mission of connecting every person in the world, you can’t do that without helping to connect everyone in India.”
As altruistic as that may sound, the truth is, India’s 1.25 billion people presents a huge revenue opportunity for tech companies, including Facebook.
“[There are] lots of people there, an emerging middle class, tons of cell phone users, and a relatively well-educated population,” Wedbush Securities analyst Michael Pachter told Fortune. “[Facebook] can grow by 200 to 300 million users in India over the next few years, making it pretty exciting—it could be their largest market.”
But the issue for tech companies is that India is not yet a major moneymaker. On the hardware side, companies are often forced to sell products for less in India, to accommodate consumer price sensitivity. The country has also been hobbled by regulations, making it difficult to do business there. India’s regulators have even been accused of protecting home-grown companies, like Ola, the chief competitor to U.S.-based ride-sharing service Uber.
On the digital side, things don’t look much better for Facebook or Google, which rely on digital-advertising revenue. Debra Aho Williamson, a principal analyst with eMarketer, told Fortune last month that despite India being its second-largest market behind the U.S., Facebook will generate just $122 million in ad revenue there this year. Williamson expects Facebook to generate a total of $16.3 billion worldwide in advertising revenue. Industry-wide, eMarketer also believes $58 billion will be spent on digital advertising in the U.S. in 2015. In India, that figure will top $940 million.
That said, the Indian government has committed to loosening restrictions on business, which should help boost those numbers. In the meantime, as more people come online and India’s economy improves, tech companies are laying the foundation for what looks to be a promising opportunity for all companies.
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