Market Alert No. 2/2011 by MATRADE Jakarta

1. Market Alert No. 2/2011
Internet Market in Indonesia
Indonesia is the 5th largest Internet market in Asia (after China, Japan,
India, and South Korea). The number of Internet users in Indonesia is
growing really fast, actually the highest growth among Asia countries after
China. From 2000 to 2010, Internet users have grown from 2 million to
more than 31 million users in 2010, an increase of about 1,400%.
Currently, these figures represent slightly more than 12% of the population
getting Internet access.
Experts predicted that Indonesia will soon become number three in internet
penetration in Asia. Potential growth is still very high because the Internet
penetration is still relatively small compared to the population and
government policies that promote a program to provide Internet access
services to the district known as "Internet USO Kecamatan."
The number of Internet users, especially those who access the Internet
using their mobile phone, is projected to grow at an even faster rate in the
future. The cost to access the Internet has dropped significantly for
Indonesians in the last two years, especially mobile phone internet. Thus,
most Indonesians can now have access to the Internet using their mobile
phone. By 2014, the number of Internet users in Indonesia is projected to
reach 150 million.
Similar to other emerging online markets, Internet in Indonesia has younger
audiences. According to comScore, about 73% of Internet population in
Indonesia is between 15 – 34 years old. In addition, only 36% of Internet

2. users in Indonesia are women. The recent trend shows that there are
increasing female internet users and they are much more productive than
the male users. Female internet users also blogged more frequently. The
internet user were mainly highly educated and belonged to the middle class
and 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 for
Warung Internet), as an alternative to owning a personal computer. The
Warnet functions like an internet café. With the increasing number of
Warnets and internet service providers, the number of internet users in
Indonesia is also increasing at a faster rate. As the Warnets offer a cheaper
rate due to their operation from cable instead of a dial-up connection, it is
often 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 Telkom
is about US$72 per month with a connection speed only up to 1Mbps. PT
First Media offers unlimited Internet access service with connection speed
varies 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 to
its expensive price, there is still a limited number of broadband wired
internet subscribers in Indonesia.
Unlike wired internet infrastructure, mobile infrastructure is much more
developed in Indonesia. The infrastructure covers 90% of Indonesia’s
population and offers fast connection through 3G networks. As of 2010,
there are more than 160 million mobile cellular subscriptions in Indonesia,

3. 15 million of them are mobile cellular subscriptions with broadband access.
An overwhelming 63 percent of Indonesian Internet users have adopted
mobile Internet, placing at the top of Southeast Asia's mobile Internet
penetration. Compared to March 2011, mobile Internet use among
Indonesians increased by 158.32 percent in April 2011. In less than five
years, 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 mobile
phone ownership in the region, at 80% penetration. Indonesia also ranks
among the highest in the world for mobile browsing intensity (633 pages
per month/person). There are three primary reasons why mobile is really
big in Indonesia: price, infrastructure, and culture. Wireless/mobile Internet
service is much cheaper compared to wired broadband. Subscribers can
get a Blackberry Internet service for as low as US$7.7 per month. In
addition, bad traffic condition is a daily routine for most Indonesian workers,
forcing them to spend a significant amount of their time on the road. Mobile
Internet access is becoming a must to have, not a nice to have anymore.
According to comScore, internet users in Indonesia spend about 17.2 hours
online per month. From a recent survey on internet usage in Indonesia,
most Indonesians use the Internet for checking email (42%), reading
newspaper (39%), searching for information about products or services
(29%), reading magazines (27%), and chatting (23%). A study by
comScore shows only 50% of Indonesian Internet users do online shopping
and they spend only 1% on their online time for shopping. In addition, 35
million Indonesians have account(s) with Facebook, making them the 2nd

4. largest Facebook users in the world. As of June 2010, Indonesians also
produced the 3rd highest number of tweets in the world.
Considering its high economic and Internet user growths, Indonesia has a
great potential for Internet business. Moreover, the internet business is still
in the early stage with a limited number of local players and
products/services offered. However, it would not be easy to win in this
industry. Unsophisticated payment infrastructure and conventional mind-set
of its people will become the biggest challenges for entrepreneurs and
investors who want to explore Indonesia’s untapped potential in internet
business. There is also growing demand for mobile phone-related
applications/contents, and for niche/creative solutions including banking
and finance IT. The increased activity seen on mobile Internet also
provides an opportunity for businesses to target the Indonesian market and
establish mobile-friendly interfaces to strengthen an online presence.
MATRADE Jakarta
June 2011