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Google’s Hope and Dreams In India

Patchy Internet, multiple languages, low smartphone penetration: But a big opportunity.

It is already dark in the New Delhi suburb of Noida on a night in December when I arrive at the home of one of the biggest YouTube stars in all of India. Yet the person who greets me at the door defies every stereotype the word YouTuber evokes. Nisha Madhulika is a 60-year-old grandmother dressed in a long robe and sandals, with her hair tied in a ponytail. After settling me in an armchair in the living room, she plies me with home-baked cookies. “You must try them,” she says, in a voice barely above a whisper, using her son to translate from Hindi.

Given the transformation unfolding in India, it seems fitting that Madhulika, with 6.5 million subscribers to her YouTube cooking channel and 200,000 more signing on each month, has hit it big late in life and with little forewarning. That, in a nutshell, could just as well describe India’s belated embrace of all things digital. Hundreds of millions of Indians have logged on to the Internet for the first time in the past two years. The surge is owing to aggressive government policies aimed at connecting Indians online and plummeting prices for data and smartphones. About 390 million Indians are now active Internet ­users, almost a third of the population and twice as many as were connected in 2016, according to industry estimates. For context, that’s more Indian Internet users than all the people who live in the United States.

A generation ago, the U.S., Europe, and then China added similarly huge numbers of people to the Internet. Yet the process in those areas was steady and gradual, moving from dial-up modems through clunky Wi-Fi to mobile tech. Contrast that with India, where hundreds of millions of people have skipped the early-stage Internet altogether; many have never even touched a computer. Instead, they have started online by downloading apps and watching mobile-phone videos at a furious rate. Since 2017, Indians have begun downloading more apps than Americans do. And last year, India became the biggest consumer of mobile data on Android phones. “We have not seen this kind of user behavior anywhere else in the world,” says Rajan Anandan, vice president for India and Southeast Asia for Google, the purveyor of Android mobile-phone software. Google also owns YouTube, which started the phenomenon of user-generated video in Silicon Valley more than a decade ago and now has 245 million Indian users. “This is perhaps the world’s first video-first digital economy,” he says.

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YouTube star Nisha Madhulika on the set of her popular cooking show.Photograph by Vivek Singh for Fortune
Photograph by Vivek Singh for Fortune

For Western companies vying to increase their slice of global markets, India’s steep digital trajectory has proved a strong draw. Perhaps no company embodies the huge hurdles of ramping up in India, and the huge payoff it might bring, as much as Google. The company’s growth depends on finding ever more users, as advertising drives more than 80% of its profits. Given that Google and other Western giants essentially are shut out of China, no other country offers a bigger opportunity to add hundreds of millions of consumers than India. “This is one of the largest populations in the world, with an income base that is a lot lower than elsewhere, so it is challenging,” says Brent Thill, an analyst in San Francisco with investment bank Jefferies. Still, he says, with more than $100 billion in cash, Google can spend years creating its India business without fretting over the cost. “They have an incredible asset base to use to go after that population,” Thill says.

India, with 245 million YouTube users, is “perhaps the world’s first video-first digital economy.”

That much was plain when I crisscrossed the country late last year, from remote villages to the vast urban sprawl of Mumbai and New Delhi, to see how Google was building its infrastructure in India, as well as how the country has become a crucial testing lab for the company. The process of scaling up Google’s India business is in full swing. But it will be both long and costly. Google declines to quantify its investment in India. “It is a lot,” says Anandan, the region’s top executive. “It is an investment we are going to make for the next 10 to 15 years, to really get people online,” he says, adding that true profitability “is long term.” Google also won’t describe the size of its business in India, but analysts peg annual revenue at $1.3 billion, a paltry portion of the company’s $136 billion in 2018 revenues.

The impact of Google’s work in India, nonetheless, is being felt not only in India but also far beyond, including more than 7,000 miles away, at the company’s headquarters in Mountain View, Calif. Increasingly, India is becoming the blueprint for Google’s eventual push into dozens of other emerging markets, where poverty, illiteracy, and costly but slow service have kept most people off the Internet. These include some of the world’s fastest-growing economies, like Indonesia, with 260 million people, and Nigeria, whose population is on track to overtake that of the U.S. by 2050. “We are thinking of products from scratch,” says Josh Woodward, director of product management for Google’s “next billion users” team, which the company formed in 2015 to focus on new markets. “If you were to build a product for Mumbai and not Mountain View, what would you build?” asks Woodward, illustrating the unit’s approach, which it expects to evolve over “generations.”

Google’s executives likely will not be around to see how that question is answered. They also know there is genuine good to be done—and a ton of money to be made—by the companies that figure out how to bring Internet service to the vast numbers who still don’t have it. “The big question is, What does it take to get them connected?” asks Google’s Anandan. “India absolutely will tell us a lot about what it really takes.”

Google has been operating in India for years, having opened its first non-U.S. R&D center in Bangalore in 2004. But its push to expand in the country is now exquisitely well timed. The pro-business Prime Minister Narendra Modi has made a digital revolution the centerpiece of his government. And some Indian conglomerates have been answering his call. Modi campaigned for office in 2014 on a promise of getting all Indians online. Then in 2016 he invalidated most of India’s paper currency in circulation at the time, effectively pushing millions onto digital payment systems. The government also put public services like health insurance online, and it introduced a national sales tax in 2016 that required businesses to file digital records. A national ID card now collects biometric data on every citizen.

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Passengers at the Kochi railway station, one of many at which Google installed free Wi-Fi.Photograph by Vivek Singh for Fortune
Photograph by Vivek Singh for Fortune

India’s digital policies have seemed dictatorial at times, and for many poorer Indians, they have been painful. But officials insist desperate measures are essential to improve an overwhelmingly cash economy, where most people pay no taxes. About a million Indians enter the job market every month, yet most people still live in rural villages, with few opportunities. “More than physical infrastructure, we need digital infrastructure if we are to grow at 9% or 10% a year,” says Amitabh Kant, CEO of the government’s National Institution for Transforming India, or NITI Aayog, which spearheads India’s digital strategy. “If we were to go around building physical banks and physical schools, and hiring bank managers, it would take us hundreds of years,” Kant says, sitting in his New Delhi office. Outside, the lobby features a statue of national hero Mahatma Gandhi meditating in a sarong, with rose petals at his feet—a subtle reminder that India’s digital policies are for the good of the ­nation. “China took 30 years to lift the vast segment of its population above the poverty line. America took close to 100 years,” says Kant. “The only way India can do this in the next 15 years is to digitally leapfrog.”

Read: India’s Digital Czar: ‘Rural India Is Very Digitally Savvy’

That leapfrogging might have sputtered on takeoff had it not been for a decision taken by one giant Indian company, the country’s biggest conglomerate, Reliance Industries. In 2011, Reliance, whose core business was oil and infrastructure, decided to build a vast broadband network, a business in which it had no experience but plenty of rivals. It had acquired a telecom company that owned mobile spectrum licenses, and it muscled in on its competitors. Barely 28 million Indians then owned smartphones. Reliance aimed to blanket India with broadband coverage, which was available only in big cities. After decades building pipelines and refineries, Reliance erected 220,000 mobile towers across India, often building more than 700 in a single day. In all, the project cost more than $30 billion.

In September 2016 it launched the Reliance Jio telecom network, offering people free mobile data for the first six months. Indians stampeded to grab the offer. Reliance Jio signed 100 million subscribers within six months and 250 million by its second anniversary last September. Its cheap plans set off a price war and drove down India’s data prices, from about $4.50 a gigabyte in 2016 to a rock-bottom 15¢ now, cutting deeply into competitors’ profits. For Reliance the pricing proved a masterstroke, establishing itself as a key phone and Internet service provider. Reliance Jio now sells $20 phones, and it is rolling out connected devices for cars, TV monitors, and home appliances.

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Mathew Oommen, president of Reliance Jio, which has invested aggressively in Internet infrastructure and services.Photograph by Vivek Singh for Fortune
Photograph by Vivek Singh for Fortune

For India, Reliance Jio’s impact has been seismic. The country went from being a digital backwater to being home to the world’s biggest boom in Internet usage. Last September, Fortune placed Reliance Jio in the first spot on its annual Change the World ranking of companies. “If you think about it, we saw economic disparity, language inequality, and distance inequality. And that is what we fundamentally broke,” says Reliance Jio president Mathew Oommen when we met at Reliance’s leafy campus on the edge of Mumbai. Oommen, who is from the southern Indian state of Kerala, was previously chief technology officer for the U.S. cellular company Sprint. He says he is convinced that cheap data has forever boosted Indians’ prospects, and he speaks of the results in grandiose terms. “They did not just become subscribers of connectivity. They have all become citizens of the digital economy,” he says. “This was just the vehicle to fundamentally disrupt the social and economic fabric of India.”

For Google, the disruption is a potential gold mine. Together, Reliance Jio’s network and Prime Minister Modi’s policies have cracked open markets that until now have been out of reach, or too small to be worth the investment. In 2017, shortly after Jio’s launch, Google created its first-ever digital payments app, Tez, seizing on the millions of Indians who were suddenly making digital payments. Last year, it renamed the app Google Pay. It now has about 40 million monthly active users in India, and is available in 29 countries, including the U.S., with about $60 billion in transactions in 2018, according to Google.

That is not the only instance in which Google unexpectedly has found a global market for apps it designed or tweaked specifically for India’s particular challenges: Patchy Internet connections, new users who speak only indigenous languages, and a high rate of illiteracy. Another is Google Maps, which launched in the U.S. in 2005. Its limitations in India were profound. Thousands of Indian roads have no official street names, and if they do have names, locals do not know them. “We literally had to draw up the maps ourselves,” says Caesar Sengupta, who is based in Singa­pore and runs Google’s “next billion users” team. Sengupta says Google decided to map India in the way people speak. Now, if you walk around New Delhi, Google Maps might give you directions like “Turn left at the first pillar, right at the hospital, then right again at the school.” (That innovation, too, has been ported to the developed world, where Google Maps makes references to landmarks, like the corner drugstore.) Indian drivers also know that directions depend on which kind of vehicle you are in. So Google engineers tweaked Maps for the country’s three-wheeler scooter taxis known as auto-rickshaws, offering them routes that would not work for cars.

To get millions of Indians using Google Maps on their often erratic Internet connections, engineers tweaked the app to allow users to download directions and follow them off-line. Now you can use Maps off-line anywhere in the world. (Google also offered the first off-line version of YouTube in India, in 2015, an option now available in 80 countries.) “There was a time when people had paper maps,” Sengupta says. “Today you walk around India and see everyone using Google Maps because they work off-line.”

Google Maps in India gives directions the way people speak, like “Turn left at the first pillar.”

There is another reason for the popularity of Google Maps in India: It gives directions in 10 of India’s 50 or so local languages. So, too, do Google Search and other apps. That required Google engineers in Silicon Valley to design keyboards from scratch, since several Indian languages had never before been typed on any computer or phone. “There were no databases at all for these languages,” says Daan van Esch of Google’s speech technology unit in California. Google dispatched its staff to remote corners of India to record 120,000 phrases in local languages and then feed the recordings into algorithms, using machine-learning technology to turn voice into text. The feature caused a sensation in India and has since launched in other countries. Van Esch says many people’s responses are deeply emotional, after years of feeling that the Internet was something for others but not for them. “I went to India in 2017 and demonstrated a keyboard in Manipuri,” the dominant language in northeast India, he says. “People hugged me afterward and said, ‘At last, my language is online.’”

Google also has designed solutions to problems that originate from competitors. One example is Google’s Files app, which allows users to clean out unread or repetitive emails and messages. Launched in 2017 in India, Files now has about 30 million users globally. But Files originally was created to tackle a uniquely Indian headache: the millions of good-morning messages sent daily on WhatsApp, which is owned by Facebook and has about 200 million active users in India. Countless thousands of Indians send WhatsApp messages to all their contacts at dawn every day, reading “Good morning!” and embellished with flowers and inspirational phrases. Google scientists trying to understand why smartphones kept freezing in India finally traced the problem to the good-morning blitz. Apparently unaware of people’s irritation, Prime Minister Modi complained to lawmakers in 2017 that almost none of them responded to his daily good-morning greetings. Instead, a more decisive response came from Google engineers, who designed the Files app. Now people can delete the messages with one swipe. Sorry, Mr. Prime Minister.

Even with this profusion of new products, Google will need to wait years for its India operations to be profitable. Despite the rocketing numbers of Indian Internet users, reaching that pot of gold will be difficult and will need a sizable expansion of India’s middle class. “Everyone recognizes that India is where the next billion users are coming from,” says Nikhil Pahwa, founder of the MediaNama tech-news portal in New Delhi. “But India is not where substantial revenue will come from,” at least not yet. “Companies are looking at it from a 20-, 30-year horizon, not 10 years.”

In a way, Google is fortunate its India strategy so far has downplayed profits. Prime Minister Modi is pushing a “national champion” e-commerce directive that already has stymied Amazon and Walmart. What’s more, by focusing at least implicitly on helping rather than on commercializing, Google is trying to spread goodwill, both among the Indian populace and within its own ranks. Among executives on the ground, there is a palpable sense that they are doing good.

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Rajan Anandan, Google vice president for India and Southeast Asia.Photograph by Vivek Singh for Fortune
Photograph by Vivek Singh for Fortune

Elsewhere in the world, Google is increasingly at odds with various antagonists, from human rights organizations peeved that Google might censor its search engine in China to European regulators who have fined Google billions of dollars over antitrust concerns. Google isn’t immune from scrutiny in India, either. In mid-February, Reuters reported that Indian antitrust authorities are investigating Google for alleged abuses on its Android mobile operating system.

Even so, executives in India still bubble over with “Googley” enthusiasm. “The power of the Internet is you suddenly get ideas about what you can do,” says Anandan, the regional chief, sounding like a voice from a time before the word “techlash” became fashionable in Silicon Valley. He tells anecdotes about Indian villagers selling their crafts online and families in remote areas logging on to education sites. “We are in day zero of what the Internet can do in the world in a very positive way,” he says.

Google’s efforts to do good also hold the potential for it to do extremely well. In 2014 it launched Google Station, in a partnership with India’s national railway service, to install Wi-Fi hotspots for the 23 million or so people who ride trains every day. It has since installed hotspots in 400 Indian train stations. Recently, Google launched a similar service at bus stops in Mexico and public squares in Lagos. The beneficence has benefits. When users log into a Google Station hotspot, a portal sucks up their data and allows Google to post ads on a dedicated web page. Google executives nevertheless describe the project in borderline philanthropic terms. “It is a fantastic way to connect,” Sengupta says.

Some of India’s poorer workers take advantage of the free, fast Wi-Fi. One afternoon in the crowded train station of Kochi, the main city in India’s southern state of Kerala, M.R. Manikandan, a 40-year-old porter who has worked there for 10 years, tells me he recently used Google Station to download sample exams for his wife’s civil service test. “She passed,” he says happily.

Google’s yearning for new users fortuitously overlaps with its charitable efforts. Indeed, it has become famous in India for its program of Saathis—the Hindi word for friend—which it launched in 2015 to help draw more women online. Women make up a small percentage of Internet users in the country.

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Parveen Begum, a Google Internet “Saathi,” or friend, in the eastern village of Thotlavalluru.Photograph by Vivek Singh for Fortune
Photograph by Vivek Singh for Fortune

Google partnered with Tata Trusts, the philanthropic arm of India’s manufacturing and retail conglomerate, and recruited about 60,000 so-called Saathis, all women, in more than 200,000 villages across India, to teach other women how to get online. Google trained the Saathis and gave them each a smartphone, while Tata pays them a stipend of about $40 a month, according to one ­Saathi I spoke to in the tiny village of Thotlavalluru in Andhra Pradesh state in eastern India, near the Bay of Bengal. Google claims the Saathis have so far trained about 22 million people, mostly women, in basic skills like how to make WhatsApp calls and pay bills online. It aims to reach about 300,000 villages by the end of this year. Several Saathis and their trainees have seized the chance to start cottage industries with their new Internet skills, downloading instructional videos on YouTube on how to make homemade honey or embroider shirts, for example. One afternoon in Thotlavalluru, several women gathered outside the Hindu temple of the village to show me their wares. “I learned how to decorate bangles with thread and stones on YouTube,” says Parveen Begum, 32, whose husband, a devout Muslim, did not permit her to work outside the house. She now sells her bangles to local clients. “Women come to my house to learn the Internet,” she says. “I will train about 1,200 people in the end.”

Whether or not Google makes one rupee of profit in India, it is in villages like Thotlavalluru, deep in rural India, that the Internet is most transforming lives—and in the process, India itself, as the outside world finally begins to pierce remote, isolated areas. At dawn one morning, in the tiny village of Pamula Lanka, a few miles from Thotlavalluru, I stand amid fields of sugarcane, with buffalo loping by, when Asha Seelam, 13, and Sole Vuha, 15, come pedaling down the dirt path on their way to school, braids bobbing behind them, and skid to a halt in front of me. “Are you American?” they ask with wide eyes, hopping off their bikes in wonder at the sight of a foreigner in their tiny village.

The conversation quickly turns to an exciting new event: The arrival of the Internet at Asha’s home the previous month, with the family’s purchase of its first smartphone. “I like to chat with my friends on WhatsApp,” Asha says, explaining that she knows enough English to use the messaging app, but that her parents, who speak only the local Telugu language, need her help to communicate online. Since her parents had first logged on to the Internet a few weeks earlier, “they know some information about villages and cities, even in America,” she says with amazement. “They use Google to find information.”

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Sole Vuha and Asha Seelam in Pamula Lanka village. Asha’s family recently acquired Internet access at home with the purchase of a smartphone.Photograph by Vivek Singh
Photograph by Vivek Singh

When I visit her small home that afternoon, her mother, Seelam Venkateswaramma, 36, who teaches in the one-room village schoolhouse, tells me she uses Google Maps to check distances to Hindu pilgrimage sites. Her greatest thrill since getting connected in November has been watching an Indian movie on YouTube, in Telugu, starring local heartthrob Vijay Deverakonda.

Forget the fact that Asha’s father, a farmer, and her mother together earn $800 a year and present no commercial value to Google. For now—and perhaps for years to come—the family is logging on to free sites, not shopping for vacations or clothes. But to Google and other tech companies, families like Asha’s are living proof of a phenomenon that they believe is so unique and so big that it merits trying all means possible to seize its potential.

A version of this article appears in the March 2019 issue of Fortune with the headline “Google’s Hopes and Dreams in India.”

Correction: The article originally stated that Google Pay has 40 million active users globally. This figure represents usage in India only.