E marketer indonesia_online-a_digital_economy_emerges_fueled_by_cheap_mobile_handsets

INDONESIA
ONLINE
A Digital Economy
Emerges, Fueled by
Cheap Mobile Handsets
MARCH 2013
Rahul Chadha
Contributors:Tobi Elkin, Jennifer Jhun, Monica Peart

INDONESIA ONLINE: A DIGITAL ECONOMY EMERGES, FUELED BY CHEAP MOBILE HANDSETS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 2
EXECUTIVE SUMMARY
Among emerging markets, Indonesia often falls
into the long shadow cast by Brazil, Russia, India
and China—also known as the BRIC countries. But
Indonesia—with the fourth-largest population in the
world—is growing rapidly, as is its online population.
Indonesia’s economic engine will help create a new
and considerable digital class of consumers. eMarketer
projects about 29% of the population—or 72.7 million
people—will have access to the internet by the end of
2013.That penetration rate is expected to climb to 39.8%
by 2016, accounting for 102.8 million internet users.
Internet use remains heavily concentrated in Indonesia’s
largest cities, where people are more able to afford
both internet-enabled devices and service plans. Mobile
internet is making gains, aided by the proliferation of
cheap feature phones and smartphones manufactured in
China, along with more affordable data packages.
KEY QUESTIONS
■■ Who makes up Indonesia’s online population?
■■ Will internet users leapfrog fixed broadband in favor
of mobile internet?
■■ What is shaping Indonesia’s peer-to-peer economy?
millions, % of population and % change
Internet Users and Penetration in Indonesia, 2011-2016
2011
43.0
17.5%
40.4%
2012
59.6
24.0%
38.6%
2013
72.7
29.0%
22.1%
2014
83.6
33.0%
14.9%
2015
93.4
36.5%
11.7%
2016
102.8
39.8%
10.1%
Internet users % of population % change
Note: individuals of any age who use the internet from any location via any
device at least once per month
Source: eMarketer, Feb 2012
136985 www.eMarketer.com
CONTENTS
2 Indonesia’s Online Population
6 Internet Usage in Indonesia
8 Social Society, Social Media
11 Advertising
12 eMarketer Interviews

INDONESIA’S ONLINE POPULATION
Indonesia is sometimes overlooked as an emerging
market, with more attention paid to the BRIC
countries. But its size and economic growth are
increasing its profile.
In September 2012, McKinsey & Company estimated that
Indonesia could grow from the 16th-largest economy in
the world to the seventh largest by 2030.The International
Monetary Fund (IMF) estimated that Indonesia’s GDP
will grow 6.3% this year—well higher than the global
average (3.6%) and the average for emerging market and
developing economies (5.6%).The IMF also predicted
that Indonesia’s growth rate will increase over the next
several years and continue to outpace that of developing
markets in general.
Not surprisingly, internet usage is rapidly expanding in
the country, with growth reaching almost 20% this year.
eMarketer estimates that Indonesia’s online population
will reach 72.7 million in 2013 and 102.8 million in 2016.
Comparative Estimates: Internet Users and
Penetration in Indonesia, 2011-2016
Internet users (millions)
APJII, Dec 2012 (1)
eMarketer,
Feb 2012 (2)
IDC, June 2012
Jefferies, Sep 2012
comScore Inc.,
Nov 2012 (3)
BCG, April 2012
Frost & Sullivan,
Feb 2012
McKinsey & Company,
Dec 2012
Internet user penetration (% of population)
eMarketer,
Feb 2012 (2)
IDC, June 2012
BBG, Oct 2012 (4)
Roy Morgan Research,
June 2012 (5)
ITU, July 2012
Frost & Sullivan,
Feb 2012
2011
55.0
43.0
39.0
-
-
31.0
-
-
17.5%
15.0%
-
22.1%
18.0%
-
2012
63.0
59.6
45.0
55.0
47.0
-
-
-
24.0%
17.0%
27.0%
-
-
-
2013
82.0
72.7
50.0
-
-
-
-
-
29.0%
19.0%
-
-
-
-
2014
107.0
83.6
56.0
-
-
-
-
-
33.0%
21.0%
-
-
-
-
2015
139.0
93.4
61.0
-
-
50.0
145.2
-
36.5%
23.0%
-
-
-
37.0%
2016
-
102.8
-
-
-
-
-
100.0
39.8%
-
-
-
-
-
Note: (1) ages 12-65; use an hour per day or more; (2) individuals of any
age who use the internet from any location via any device at least once
per month; (3) ages 15+; home and work locations; (4) ages 15+; data is
for Aug; (5) ages 18+; urban population only; ever used
Source: eMarketer, Feb 2012; various, as noted, 2012
Other estimates vary due to different methodologies. For
example, some estimates do not include usage outside
of the home or office, which may discount a large number
of users accessing the internet in shared places such as
internet cafes. Accounting for variations such as this and
the age ranges studied, other firms’ figures are in line
with eMarketer’s.
August 2012 data from Gallup and the Broadcasting Board
of Governors (BBG), an independent agency of the US
government responsible for all US-sponsored nonmilitary
broadcasting conducted overseas, showed that internet
penetration was highest among those ages 15 to 24, at
51%. It then declined sharply to 25% among those ages
25 to 54, with the trend continuing as users got older.
Internet use also increased as the education levels of
respondents went up: 72% of those with a university-
level education reported going online in the week prior to
the poll.
% of respondents in each group
Demographic Proﬁle of Internet Users in Indonesia,
Aug 2012
Age
15-24 51%
25-34 25%
35-54 11%
55+ 2%
Location
Large city 30%
Small town 23%
Rural 13%
Education level
None 1%
Primary 3%
Secondary 21%
High school 40%
Vocational 46%
University 72%
Total 21%
Note: used in the past week
Source: Broadcasting Board of Governors (BBG) and Gallup, "Media Use in
Indonesia 2012," Oct 16, 2012
Internet penetration remains most prevalent in the
country’s largest cities, which include Jakarta and its
metropolitan area, often referred to as Jabodetabek;
Surabaya in the province of East Java; Bandung in West
Java; Medan in North Sumatra; and Semarang in Central
Java. Because internet use in these cities is already more
widespread, smaller cities are expected to host much
of the growth in penetration over the next few years. As
would be expected, Indonesia’s population as a whole is
shifting from rural to urban. According to Indonesia’s 2010
census, the urbanized population increased from 41.9% in
2000 to 49.8% in 2010.

A MarkPlus Insight survey released in November 2012
estimated that, out of a total internet user population of
61.1 million in 2012, 56.4 million lived in urban areas.
millions and % of population
Urban and Total Internet Users in Indonesia,
2010-2012
2010 2011 2012
Urban internet users 37.6 50.5 56.4
Total internet users 42.2 55.2 61.1
Internet users % of population 17.0% 22.4% 23.5%
Source: MarkPlus Insight, "Netizen Survey 2012" as cited by DailySocial,
Nov 14, 2012
Yahoo! andTNS Global data showed that internet use
among city dwellers was higher among males in 2012.
Penetration was especially high among those ages 15
to 19, at 89%.
% of population in each group
Internet User Penetration in Urban Indonesia*, by
Demographic, 2009-2012
2009 2010 2011 2012
Gender
Male 36% 45% 54% 63%
Female 21% 30% 38% 50%
Age
15-19 64% 74% 87% 89%
20-24 42% 57% 65% 78%
25-29 28% 50% 49% 63%
30-34 16% 27% 33% 54%
35-39 13% 24% 38% 52%
40-50 9% 9% 15% 24%
Socioeconomic status
A 51% 54% 66% 75%
B 32% 46% 51% 64%
C 20% 25% 36% 48%
Total 28% 37% 46% 57%
Note: in the past month; *Bandung, Botabek, Denpasar, Jakarta, Makassar,
Medan, Palembang, Semarang, Surabaya andYogyakarta
Source:Yahoo! and TNS, "Net Index - Indonesia," June 27, 2012
MOBILE INTERNET WINS
OVER BROADBAND
Fixed broadband remains a rarity in Indonesia, with a
penetration rate of about 1.6% households, or 800,000
homes. eMarketer does not project significant growth
of broadband penetration over the next four years.
Fixed Broadband Households and Subscriptions
in Indonesia, 2010-2016
Households (millions)
—% change
—Household penetration
Subscriptions (millions)
—% change
2010
0.6
10.5%
1.3%
1.6
9.5%
2011
0.7
9.8%
1.4%
1.7
8.9%
2012
0.8
9.2%
1.5%
1.9
8.3%
2013
0.8
6.0%
1.6%
2.0
5.1%
2014
0.8
2.5%
1.6%
2.0
2.3%
2015
0.9
1.8%
1.6%
2.0
1.0%
2016
0.9
1.8%
1.6%
2.0
0.9%
Note: includes connections with permanent access to the internet via
cable modem, DSL and wireless/satellite technologies; excludes mobile
Source: eMarketer, April 2012
A significant impediment to fixed broadband access
is that many people in Indonesia simply can’t afford it.
An Accenture report from June 2012 found that fixed
broadband could cost almost $36 per month.
Another cause of the low penetration rate is the
obvious logistical problem that arises from attempting
to provide internet to a geographically fractured area.
The government is in the midst of building out the
Palapa Ring, a fixed broadband network consisting of
submerged cable laid along the coasts of the country’s
major islands. Although the latest estimates put the
Palapa Ring’s completion date sometime in 2014, this
massive investment in infrastructure has been plagued
by delays. And the question of who will build “last mile”
infrastructure to link local governments and rural areas to
the Palapa Ring remains unanswered.
Internet cafes known as “warnets”—a portmanteau of
warung, the Indonesian word for cafe, and internet—
still play a significant role in providing rural users with
internet access. However, their popularity has waned
among city dwellers, who are more likely than those in
less-developed areas to be able to afford a PC and a fixed
broadband plan or an internet-enabled mobile phone.
But warnets in urban areas have not yet completely
disappeared, and many use them as gathering spots for
online gaming.The prominence of warnets in rural areas
is likely to erode as mobile phones begin to penetrate
these markets.

September 2012 data from Roy Morgan Research
showed that the use of warnets began to decline in late
2009 as home access increased. However, it’s important
to note that the data does not specify whether those
going online at home were using mobile devices or
fixed broadband.
% of respondents
Internet Users in Indonesia, by Access Location,
Sep 2007-Sep 2012
Warnet/internet cafe
Home
Work
Educational institution
Wireless hotspot
Sep
2007
55%
7%
17%
14%
0%
Sep
2008
55%
8%
18%
14%
2%
Sep
2009
64%
13%
17%
14%
3%
Sep
2010
60%
23%
15%
9%
5%
Sep
2011
55%
32%
13%
9%
4%
Sep
2012
46%
45%
18%
10%
4%
Note: ages 14+; ever accessed the internet
Source: Roy Morgan Single Source Indonesia, Feb 1, 2013
As in most developing economies, growth in internet
access will largely come through the adoption of internet-
enabled mobile phones. eMarketer estimates that there
will be 160.5 million mobile phone users in Indonesia by
the end of the year, representing a 64% penetration rate.
millions, % of population and % change
Mobile Phone Users in Indonesia, 2010-2016
2010
106.9
44.0%
43.5%
2011
130.2
53.0%
21.8%
2012
148.9
60.0%
14.4%
2013
160.5
64.0%
7.8%
2014
169.7
67.0%
5.7%
2015
179.0
70.0%
5.5%
2016
185.9
72.0%
3.8%
Mobile phone users % of population % change
Note: mobile phone users are individuals of any age who own at least one
mobile phone and use the phone(s) at least once per month
Smartphone adoption is still in its early phase, with
eMarketer projecting that smartphone users will account
for 24% of all mobile phone users by the end of 2013.
But the mobile landscape is changing quickly; cheap
smartphones made in China have substantially lowered
entry costs for many consumers seeking regular internet
access for the first time. According to eMarketer
estimates, smartphone penetration among mobile
phone users will climb to 47% by 2016—a total of 87.4
million users.
Smartphone Users and Penetration in Indonesia,
2010-2016
2010 2011 2012 2013 2014 2015 2016
Smartphone
users (millions)
4.3 11.7 23.8 38.5 57.7 71.6 87.4
—% change 474.1% 174.0% 103.4% 61.6% 49.8% 24.1% 22.0%
—% of mobile
phone users
4.0% 9.0% 16.0% 24.0% 34.0% 40.0% 47.0%
—% of population 1.8% 4.8% 9.6% 15.4% 22.8% 28.0% 33.8%
Note: smartphone users are individuals of any age who own at least one
smartphone and use the smartphone(s) at least once per month
Using data from consulting firm Canalys, eMarketer
calculates that smartphone shipments in Indonesia will
hit 15.7 million units in 2013—a year-over-year increase
of 51.7%.
millions of units and % change
Smartphone Shipments in Select Developing Countries,
2012 & 2013
2012 2013 % change
China 185.7 239.8 29.1%
India 16.4 26.5 61.4%
Russia 14.4 18.8 30.7%
Brazil 12.3 17.2 40.0%
Indonesia 10.3 15.7 51.7%
Source: Canalys as cited in press release; eMarketer calculations, Jan 17,
2013
These devices are already more commonly owned by
those in younger age groups. An August 2012 survey
conducted by BBG and Gallup found that more than
one-quarter of consumers ages 15 to 24 owned a
smartphone.The ownership rate fell to 16% for those
ages 25 to 34 and was only 7% among those ages 35
to 54.
% of respondents in each group
Smartphone Ownership Among Consumers in
Indonesia, by Age, Aug 2012
15-24 26%
25-34 16%
35-54 7%
55+ 2%
Total 13%

Although the mobile device trend is clearly shifting toward
smartphones, internet-capable feature phones remain an
incredibly popular means of getting online. WhenYahoo!
andTNS Global asked mobile internet users in urban
Indonesia which devices they used to go online, 86%
said they used feature phones, compared with 20% who
used a smartphone and 7% who used a tablet. (The total
exceeds 100% because respondents were able to choose
more than one answer.)
% of respondents
Mobile Devices Used to Access the Internet
According to Mobile Internet Users in Urban
Indonesia*, Q1 2012
Feature phones 86%
Smartphones 20%
Tablets7%
Handheld gaming devices2%
Portable media players1%
Note: ages 15-50; *Bandung, Botabek, Denpasar, Jakarta, Makassar, Medan,
Palembang, Semarang, Surabaya andYogyakarta
Source:Yahoo! and TNS, "Net Index - Indonesia," June 27, 2012
Deregulation has led to increased competition among
mobile service providers, resulting in lower costs for
both data and voice plans. A January 2013 report from
Credit Suisse found that the average monthly bill for
mobile phones had decreased to about $8.22 per month,
down from roughly $8.54 the previous year. “There are
packages for surfing the web on mobile that are semi-
unlimited or so-called unlimited, all-you-can-eat packages
on mobile networks for less than $5 a month.These are
fueling internet usage in Indonesia,” said Nanda Ivens,
COO at digital agency XM Gravity. “I think in the battle
between feature phones and smartphones, the feature
phones are losing because you can pay almost the same
amount of money for a smartphone, and that is a massive
shift in rural areas. Chinese-made smartphones rule.
They’re selling so many units it’s unreal,” he added.
Cheaper devices and plans will have a disproportionate
impact in rural areas, which have historically been
underserved by access to both fixed broadband
infrastructure and power grids.The reduction of entry
costs is especially important in Indonesia since, unlike
in the US, carriers don’t subsidize devices and then
recoup their initial outlays over the life of a service
contract. Instead, consumers usually pay the full cost of
the phones up front and then acquire service through a
prepaid model.
Although competition has increased, the provision of
mobile services is still concentrated in a handful of
companies that control most of the market:Telkomsel, a
subsidiary of the majority state-ownedTelkom Indonesia;
XL Axiata, commonly referred to as XL; and Indosat.
According to Credit Suisse’s report,Telkomsel remained
the dominant service provider with a 43% market share
in 2012, a slight decline from 2011. Meanwhile, Indosat
controlled 23% of the market, and XL had 12%; however,
Credit Suisse reported that both companies had slightly
increased their market share over the past year.
But providing consumers with access to mobile
broadband remains somewhat of a challenge. In
December 2012, the government’s Ministry of
Communications and InformationTechnology announced
that it would auction off more spectrum as part of efforts
to improve 3G services. However, the government has
not made significant investments in mobile infrastructure,
leaving telecoms and other third parties to foot the bill.
Although Google’s Android has quickly become the
operating system (OS) of choice for smartphone owners,
Indonesia’s mobile market is somewhat unusual in that
it is one of the few left in which BlackBerry remains a
significant player. Projections from International Data
Corp. (IDC), published byThe Jakarta Post in January
2013, expected Android to lead OS market share in 2013
with 53% of smartphones running the software. IDC
projected that BlackBerry would control a respectable
35% market share, and that the Windows Phone OS
would have a 9% share—a significant increase from 2%
in 2012.
% of total
Smartphone OS Market Share in Indonesia,
2012 & 2013
Source: International Data Corporation (IDC) Indonesia as cited in The
Jakarta Post, Jan 5, 2013
2012 2013
Symbian
2%
Windows
2%
iOS
3%
Android
56%
BlackBerry
37%
Windows
9%
iOS
3%
Android
53%
BlackBerry
35%

Part of BlackBerry’s appeal among device users in
Indonesia results from cheaper handsets and low-cost
service packages. BlackBerry Messenger (BBM) also has
a strong user base, but new messaging services running
on Android, such as WhatsApp, have begun to erode
BlackBerry’s appeal. At the same time, some higher-end
users have come to consider the brand a discount option.
Perhaps in a tacit acknowledgement of the loss of market
share elsewhere, BlackBerry in late 2012 signaled the
continued importance of the Indonesian market when
it announced that the country would be the first place it
would roll out a new peer-to-peer mobile payment system
built into BBM, known as BBM Money. In late February
2013, the company announced that it had started testing
the program in Indonesia.
INTERNET USAGE IN INDONESIA
Internet use in Indonesia is still in the early phase of
usage—communication and information gathering—
with social media figuring strongly into the online
behavior of internet users.
In a February 2013 poll, Roy Morgan Research found that
the most popular online activity among internet users
was socializing/entertainment, named by more than
eight in 10 respondents.That was followed by accessing
general information (57%), email (48%) and website
browsing (37%). Online shopping and bill payments
barely registered, with only 8% of respondents listing
those activities.
% of respondents
Online Activities of Internet Users in Indonesia,
Sep 2012
Socializing/entertainment 82%
General information 57%
Email 48%
Visiting websites 37%
Academic/business research18%
Promotion/publishing11%
Shopping/paying bills8%
Note: ages 14+ who accessed the internet in the past four weeks
Source: Roy Morgan Single Source Indonesia, Feb 1, 2013
BBG and Gallup’s similar August 2012 survey of internet
users underscored just how important social media was
to the online activities of those in Indonesia. Ninety-six
percent of respondents said they used social networking
services when online.The next most common activity
was accessing the news, named by 72% of respondents.
(The next section of this report will take a closer look at
social media’s place in Indonesia.)

% of respondents
Online Activities of Internet Users in Indonesia,
Aug 2012
Social network services
96%
Latest news
72%
Find information about a speciﬁc topic
50%
Send or receive email
44%
Read a blog
38%
Share videos or photos online
35%
Watch online videos
32%
Listen to online audio
29%
Post a comment to a blog
28%
Download or watch podcasts
27%
Note: in the past week; n=433 ages 15+
Thus far, internet users in Indonesia have strongly favored
Western websites for online activities. comScore data
from August 2012 found that the top four websites
ranked by unique visitors were all foreign-owned. Google
sites—among them Google.com, Google.co.in, Blogger.
com andYouTube—were at the top of the list, attracting
12.5 million unique visitors and recording a 91.6% reach.
Facebook was in second, with 11.1 million visitors and
a reach of 81.6%, followed byYahoo! sites in third. It
should be noted, however, that many of these sites
are offered and often used in the Indonesian language.
Media conglomerate Kompas Gramedia, which operates
a number of newspapers and magazines, was in fifth,
ranking as the site in Indonesia with the highest number
of unique visitors and a reach of 32.6%.The online forum
Kaskus came in at 11th place. Students from Indonesia
studying abroad created Kaskus in 1999 for fellow
expatriates, but users living in Indonesia have come to
embrace the site, which claims to be the largest online
community for the country.
thousands and % reach
Top 20 Sites Among Internet Users in Indonesia,
Ranked by Unique Visitors, Jan 2013
Unique
visitors
% reach
1. Google sites 12,487 91.6%
2. Facebook 11,127 81.6%
3. Yahoo! sites 8,518 62.5%
4. WordPress 5,646 41.4%
5. Kompas Gramedia 4,446 32.6%
6. Twitter 3,724 27.3%
7. Microsoft sites 3,702 27.2%
8. 4shared.com 3,637 26.7%
9. Wikimedia Foundation sites 3,579 26.3%
10. Detik.com 3,421 25.1%
11. Kaskus.us 2,837 20.8%
12. Tokobagus.com 2,718 19.9%
13. Portal VIVA 2,436 17.9%
14. Kapanlagi.com sites 2,395 17.6%
15. Ask Network 2,381 17.5%
16. Glam Media 2,368 17.4%
17. AOL 2,238 16.4%
18. Berniaga.com 2,172 15.9%
19. CBS Interactive 1,908 14.0%
20. Zynga 1,837 13.5%
Source: comScore Inc., Feb 28, 2013
The number of languages and ethnic groups found in
Indonesia complicates the country’s online landscape.
While English has served as something of a common
language for the internet in Indonesia, growth in internet
use will be sped along by the creation of content in
Indonesian, the country’s official language, as well
as languages such as Javanese. “Without localized
content creation—in the form of tweets,YouTube
videos, blog posts and other social content—Indonesia’s
internet use probably wouldn’t have grown so fast,”
said PanduTruhandito, president of GrowMint, a digital
marketing agency.

SOCIAL SOCIETY, SOCIAL MEDIA
If there’s one lesson to learn about the behavior of
internet users in Indonesia, it’s that they love social
media. Social networks are an indelible element of
the online world in Indonesia and a reflection of the
social nature of the country’s culture.
Internet users in Indonesia are leapfrogging PCs and
going straight to mobile devices for access, and the
smartphones and internet-enabled feature phones
they’re snapping up often come with social media apps
pre-installed. On feature phones, these apps have been
simplified in order to work within the limitations of both
feature phone screens and slower 2G networks.
eMarketer estimates that social networks had an 87.5%
penetration rate among internet users in Indonesia
in 2012.
% of internet users
Comparative Estimates: Social Network User
Penetration in Indonesia, 2012
BBG, Oct 2012
comScore Inc.*,
June 2012
eMarketer,
Aug 2012
Ipsos**,
March 2012
2012
96.0%
92.6%
87.5%
83.0%
Age
15+
15+
All ages
16-64
Usage
Used in the past week
Unique visitors
Use via any device at
least once per month
Visited in past 3 months
Note: *data is for April; **visitors to social network sites, forums or blogs
Source: eMarketer, Aug 2012; various, as noted, 2012
eMarketer’s figure falls comfortably between estimates
provided by comScore and Ipsos. While comScore did
not define a social network user in its report, its figure
relied on data culled from only one month. Meanwhile,
Ipsos’ number considered only those ages 16 to 64 who
visited a network over the past three months. BBG’s
data pulled from respondents older than 15 and included
those who had used a social network in the past week. In
comparison, eMarketer assessed users of all ages who
accessed their account by any device.
eMarketer projects that social network use in Indonesia
will continue to speed up in 2013 and 2014.
Social Network Users and Penetration in Indonesia,
2010-2014
Social network users (millions)
—% change
—% of internet users
—% of population
2010
22.7
54.8%
74.2%
9.3%
2011
34.4
51.4%
80.0%
14.0%
2012
52.1
51.6%
87.5%
21.0%
2013
67.1
28.8%
92.3%
26.8%
2014
79.2
18.0%
94.8%
31.3%
Note: internet users who use a social network site via any device at least
once per month
Source: eMarketer, Aug 2012
Similar to website browsing behavior, social media users
in Indonesia are turning to Western platforms in large
numbers. According to Socialbakers.com, there were 47.2
million Facebook users in the country as of mid-February,
making it the social network’s fourth-largest user base
behind only the US, Brazil and India. BBG and Gallup’s poll
found that 95.7% of social network users in Indonesia
were on Facebook, compared with 47.6% forYouTube,
37.6% for Google+ and 29.4% forTwitter.
% of respondents
Social Networks Used by Social Network Users in
Indonesia, Aug 2012
Facebook 95.7%
YouTube 47.6%
Google+ 37.6%
Twitter 29.4%
Note: in the past week
However, anecdotal evidence suggests that Facebook’s
popularity may be declining, at least among the digitally
savvy users in the country’s larger cities who are turning
toTwitter and Path, a US-based network. Part of Path’s
strong appeal in Indonesia may lie in the fact that it
was originally designed as a mobile app and not as a
counterpart or evolution to an older iteration created for
use on a PC. Its rise neatly coincides with mobile’s rise as
the default platform for internet use.

ECOMMERCE: BUILDING A PEER-TO-
PEER ECONOMY
Ecommerce has not taken root in Indonesia yet.The
country suffers from the same problems as many
emerging economies: a lack of delivery infrastructure
(exacerbated by the fact that the country is spread
across multiple, often distant, islands), as well as
internet users’ unfamiliarity with online payment
methods, worries about security and widespread
inability to make online payments at all.
Still, eMarketer estimates that business-to-consumer
ecommerce sales in the country will total $1.79 billion
in 2013 and reach $4.49 billion in 2016. Annual growth is
hardly eye-popping for such an early stage market.
billions and % change
B2C Ecommerce Sales in Indonesia, 2011-2016
2011
$0.56
15.4%
2012
$1.04
13.3%
2013
$1.79
9.8%
2014
$2.60
7.1%
2015
$3.56
6.7%
2016
$4.49
5.6%
B2C ecommerce sales % change
Note: includes travel, digital downloads and event tickets purchased via
any digital channel (including online, mobile and tablet); excludes gambling;
converted at the exchange rate of US$1=IDR9,364.91
Source: eMarketer, Jan 2013
eMarketer projects that there will be 4.6 million digital
buyers in Indonesia by the end of 2013 and 8.7 million by
2016, a figure equal to only 10.6% of internet users.
Digital Buyers in Indonesia, 2011-2016
Digital buyers (millions)
—% change
—% of internet users
—% of population
2011
2.0
69.7%
6.0%
1.1%
2012
3.1
54.8%
6.7%
1.7%
2013
4.6
47.5%
8.0%
2.4%
2014
5.9
30.1%
9.0%
3.1%
2015
7.4
24.8%
10.0%
3.8%
2016
8.7
17.4%
10.6%
4.4%
Note: ages 14+; internet users who have made at least one purchase via
any digital channel within the past year, including online, mobile and tablet
purchases
Source: eMarketer, Jan 2013
A poll conducted in July 2012 by Asosiasi Penyelenggara
Jasa Internet Indonesia (APJII), an association of internet
service providers, cited a fear of fraud as the top concern
internet users had about making a purchase online. But
respondents also expressed trepidation about the inability
to see and touch online products firsthand in order to
gauge their quality and to make sure they were getting
what they paid for. High prices also concerned shoppers,
an indication that ecommerce has not yet developed to
the point where consumers see it as a valuable tool for
price comparison shopping.
% of respondents
Reasons that Internet Users in Indonesia Do Not Buy
Online, July 2012
Fear of fraud
34.6%
Items cannot be seen directly
21.5%
High prices
13.8%
Not interested/not needed
12.7%
Quality of items not guaranteed
9.3%
Don't know how
6.0%
Not practical
5.2%
Items don't match the offer
4.7%
Items are not in accordance to anyone's liking
4.1%
Items don't match the picture
4.0%
Process is long
2.4%
Source: Asosiasi Penyelenggara Jasa Internet Indonesia (APJII), "Indonesia
Internet Proﬁles 2012," Dec 12, 2012
Hesitant to embrace a more traditional ecommerce
model, online shoppers in Indonesia have instead
developed a peer-to-peer model aided by the popularity
of both mobile devices and social networks, which
effectively serve as marketplaces for consumers seeking
to sell goods to other consumers. April 2012 data from
online payment processor Veritrans and tech media and
research blog DailySocial found that Facebook was the
most popular site for ecommerce, used by half of buyers
making an online purchase in Indonesia.

% of respondents
Ecommerce Sites Used to Make an Online Purchase
by Online Buyers in Indonesia, April 2012
Facebook
50.0%
Kaskus
49.2%
Disdus*
19.5%
Tokobagus
13.6%
Dealkeren*
11.9%
Amazon
8.9%
eBay
8.5%
Bhinneka
5.5%
Multiply
4.7%
Blibli.com
4.7%
Tokopedia
3.8%
Other
22.5%
Note: ages 15+; *numbers may be inﬂated for these group buying sites as
Disdus assisted with survey distribution
Source: veritrans and DailySocial, "eCommerce in Indonesia," Aug 16, 2012
While sites founded in Indonesia figure prominently on
the list, many of them are now foreign-owned. Groupon
acquired group-buying site Disdus, and LivingSocial
absorbed DealKeren and rebranded it as LivingSocial
Indonesia. DailySocial and Veritrans also noted that the
response rates for group-buying sites might be inflated
because they distributed their survey through Disdus’
mailing list.
The homegrown Kaskus, used by 49.2% of online buyers
in Indonesia according to Veritrans and DailySocial’s study,
operates a popular peer-to-peer marketplace known as
Forum Jual Beli, or FJB, which simply translates to “buying
and selling forum.” Rahmat Harlyadie, vice president of
marketing for DailySocial, said that estimates for the
daily volume of transactions on Kaskus were around
$54,000. But sellers use any number of networks to alert
prospective customers that they have goods available for
purchase, including Facebook, BBM and WhatsApp groups
andTwitter. Inventory can include just about anything—
from a car to a pair of shoes. Buyers and sellers connect
via SMS or phone call to negotiate prices, and payments
often take place offline through bank transfers.
The April 2012 study conducted by Veritrans and
DailySocial showed that 70% of online buyers surveyed
used bank transfers, making it the most popular payment
system.That method was followed by a proprietary
electronic payment system provided by the bank Klik BCA
(41%), credit cards (30%), cash on
delivery (24%) and a payment service provided by
Bank Mandiri (15%).
% of respondents
Payment Methods Used for Online Purchases
According to Online Buyers in Indonesia, April 2012
Bank transfer* 70%
Klik BCA** 41%
Credit card 30%
CoD 24%
Mandiri internet**15%
Note: ages 15+; *includes ATM payments, cashier payments or transfer of
funds electronically to a speciﬁed bank account; **transfer of money using
the bank's proprietary electronic payment network
Source: veritrans and DailySocial, "eCommerce in Indonesia," Aug 16, 2012
Clearly customers still feel uneasy about making
payments online, instead preferring to use bank transfers
and other methods to complete their purchases. “As a
customer, even if I don’t know you, I’m more comfortable
sending you money through transfer than I am using
a payment gateway to pay for something,” said XM
Gravity’s Ivens. But he sees that practice changing in the
near future as various players compete to provide new
shoppers with online payment services. “There are a
lot of local companies in Indonesia that are starting up
payment gateways. It’s gaining trust and traction in terms
of usage,” he noted.
Those efforts to develop online and mobile payment
methods are also taking place among foreign firms, with
BlackBerry’s new BBM Money payment system serving
as an example of this trend.

ADVERTISING
Advertising spending in Indonesia still remains
wedded to traditional forms of mass media.Television,
especially, commands a large share of advertising
budgets, but digital spending is beginning to ramp up
as media buyers adjust to the online world.
A December 2012 study by GroupM projected that
TV ad spending would total $1.6 billion in 2013, with
newspapers commanding the second-highest ad budget
($501 million). At $147 million, internet ad spending
was expected to exceed magazines, outdoor, radio and
cinema advertising.
millions and % change
Ad Spending in Indonesia, by Media, 2011-2013
2011 2012 2013
TV $1,172 $1,413
% change 22.0% 20.5%
Newspapers $411 $462
% change 21.2% 12.5%
Internet $47 $97
% change 200.0% 105.0%
Magazines $77 $84
% change 6.6% 8.4%
Outdoor $61 $68
% change 10.0% 11.4%
Radio $54 $59
% change 7.5% 9.1%
Cinema $9 $9
% change 5.0% 10.7%
Total $1,832 $2,192
% change 21.9% 19.7%
$1,628
15.2%
$501
8.5%
$147
51.5%
$90
7.8%
$78
14.8%
$65
9.6%
$11
12.5%
$2,520
14.9%
Note: numbers may not add up to total due to rounding; converted at an
exchange rate of US$1=9,631 Indonesian rupiahs
Source: GroupM, "ThisYear, NextYear: December 2012," Dec 17, 2012
eMarketer estimates that total ad spending growth will
jump from 12% in 2013 to 15% in 2014—and then slow
to 9% by 2016.Total ad spending will reach $7 billion this
year and climb to $9.6 billion in 2016.
Comparative Estimates: Total Media Ad Spending
Total ad spending (millions)
PPPI, Jan 2013 (1)
PwC, June 2012 (2)
ZenithOptimedia, June 2012 (3)
eMarketer, Dec 2012 (4)
GroupM, Dec 2012 (5)
SPS, Jan 2012 (4)
Total ad spending growth (% change)
ZenithOptimedia, June 2012
PPPI, Jan 2013
GroupM, Dec 2012
eMarketer, Dec 2012
MAGNAGLOBAL, June 2012
Media Partners Asia, April 2012
SPS, Jan 2013
Nielsen, April 2012
2011
-
$7.1
$5.3
$5.5
$1.8
$9.1
18.9%
-
21.9%
10.0%
-
-
-
25.2%
2012
$9.8
$8.3
$6.3
$6.2
$2.2
$10.5
19.6%
-
19.7%
13.0%
16.8%
15.0%
14.7%
-
2013
$12.1
$9.7
$7.5
$7.0
$2.5
-
19.1%
18.0%
14.9%
12.0%
-
-
-
-
2014
-
$10.9
$9.3
$8.0
-
-
22.6%
-
-
15.0%
-
-
-
-
2015
-
$12.0
-
$8.8
-
-
-
-
-
10.0%
-
-
-
-
2016
-
$13.2
-
$9.6
-
-
-
-
-
9.0%
-
-
-
-
Note: (1) converted at the exchange rate of US$1=IDR9,364.91; (2)
converted at the exchange rate of US$1=IDR8,779.0; (3) converted at the
exchange rate of US$1=IDR8,770.40; (4) converted at the exchange rate of
US$1=IDR8,767.81; (5) converted at the exchange rate of US$1=IDR9,631.0
Source: eMarketer, Dec 2012; various, as noted, 2012 & 2013
Digital ad spending, unlike overall ad spending, will see
significantly higher growth rates over the next two years
as advertisers move to establish themselves online for
the first time. eMarketer projects that digital ad spending
will hit $231.8 million in 2013 and grow to $1.2 billion
by 2016.
Comparative Estimates: Digital Ad Spending
Digital ad spending (millions)
eMarketer,
Dec 2012 (1)
GroupM, Dec 2012 (2) (3)
PwC, June 2012 (4)
ZenithOptimedia,
June 2012 (3) (5)
SPS, Jan 2012 (6)
BCG, March 2012 -
Digital ad spending growth (% change)
eMarketer, Dec 2012
GroupM, Dec 2012 (3)
PwC, June 2012
2011
$88.0
$47.0
$4.0
$1.0
-
-
50.0%
200.0%
0.0%
2012
$136.4
$97.0
$5.0
$2.0
$114.1
55.0%
105.0%
25.0%
2013
$231.8
$147.0
$5.0
$2.0
-
-
70.0%
51.5%
0.0%
2014
$405.7
-
$6.0
$2.0
-
-
75.0%
-
20.0%
2015
$697.8
-
$7.0
$2.0
-
-
72.0%
-
16.7%
2016
$1,158.3
-
$9.0
-
-
$200.0
66.0%
-
28.6%
Note: (1) converted at the exchange rate of US$1=IDR9,614.14; (2)
converted at the exchange rate of US$1=IDR9,631.0; (3) excludes mobile;
(4) converted at the exchange rate of US$1=IDR8,779.0; (5) converted at
the exchange rate of US$1=IDR8,770.40; (6) converted at the exchange rate
of US$1=IDR8,767.81
Source: eMarketer, Dec 2012; various, as noted, 2012

Many global research firms have difficulty measuring
ad spending—especially in emerging markets—without
a local office in the country or region. For example,
PricewaterhouseCoopers relies heavily on figures from
the Interactive Advertising Bureau, which doesn’t have
an office in Indonesia. eMarketer believes that such firms
underestimate ad spending by accounting only for the
local advertising market and failing to take into account
overseas marketers who spend more heavily than local
players do.The local sources that eMarketer uses, such
as Serikat Perusahaan Pers (SPS), tally the spending of
both domestic and international advertisers.
EMARKETER INTERVIEWS
Marketing in Indonesia: Nation Enamored by Social
Networks Reaches Internet via Mobile
Nanda Ivens
COO
XM Gravity
Interview conducted on January 30, 2013
Rahmat Harlyadie
Vice President, Marketing
DailySocial
Tuhu Nugraha
COO
Pingfans
Debnath Guharoy
Regional Director, Asia
Roy Morgan Research
Interview conducted on February 8, 2013
PanduTruhandito
Co-Founder
GrowMint
Interview conducted on February 2, 2013

RELATED LINKS
Asosiasi Penyelenggara Jasa Internet Indonesia
(APJII)
BlackBerry
Boston Consulting Group (BCG)
Broadcasting Board of Governors (BBG)
Canalys
comScore
Credit Suisse
DailySocial
Disdus
Facebook
Frost & Sullivan
Gallup
Google Indonesia
GroupM
GrowMint
Ipsos
Indosat
International Data Corporation (IDC)
InternationalTelecommunication Union (ITU)
Jefferies
Kaskus
LivingSocial Indonesia
MAGNAGLOBAL
MarkPlus Insight
McKinsey & Company
Media Partners Asia
Ministry of Communications and
InformationTechnology
Nielsen Indonesia
Path
Persatuan Perusahaan Periklanan Indonesia (PPPI)
PricewaterhouseCoopers
Roy Morgan Research
Serikat Perusahaan Pers (SPS)
Socialbakers.com
Telkomsel
TNS Global
Twitter
Veritrans Indonesia
XL Axiata
XM Gravity
Yahoo!
ZenithOptimedia
EDITORIAL AND
PRODUCTION CONTRIBUTORS
Cliff Annicelli Senior Editor
Kaitlin Carlin Copy Editor
Joanne DiCamillo Senior Production Artist
Stephanie Gehrsitz Senior Production Artist
Dana Hill Director of Production
Nicole Perrin Associate Editorial Director
Allie Smith Director of Charts

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