Taking stock of the trends in on-line promotion from Ernst & Young’s August edition of Newsreel
The digital advertising industry in India is growing rapidly and has caught the attention of a large number of consumers and advertisers. In 2010, the industry was at INR6.8 billion, and in 2011 it is expected to grow by 29 per cent to reach INR8.7 billion, accounting for a 3.6 per cent share of total advertising spend. In the next five years, the sector is expected to grow at a CAGR of 24.6 per cent, reaching INR26 billion in 2016 and holding a 4.6 per cent share of total advertising spend.
Increased measurability, the ability to launch targeted advertisements, innovative options to advertise, global reach, improved returns on investment (RoIs) for advertisers, a growing user base and an increase in the time spent by youth on digital media are factors driving this growth.
The popularity of the Internet as a new media channel has exploded in recent years, attributed mostly to rapid and affordable broadband connections. The total number of Internet and broadband subscribers in India was around 18.7 million in 2010 and penetration was 7.5 per cent, with 90 million active Internet users. The launch of 3G and WiMax is expected to open up myriad opportunities in the mobile value-added services (VAS) segment. This, along with increasing digital entertainment options and the growing popularity of social media networks, is prompting commercial and business advertisers to increasingly use these platforms in their marketing budgets. Following are some recent trends observed in the Indian digital advertising industry:
• Emergence of social media: Social- networking sites such as Facebook and YouTube are emerging as major platforms for digital advertising. Besides traditional display advertising, such sites use interactive ads, animation, games, polls and product tours to engage customers. Yashraj Films has collaborated with YouTube to promote its movies on the exclusive YouTube box office channel. Mediums such as Facebook also give advertisers a chance to have dedicated brand pages through which to communicate directly with their customers with the help of pictures, videos, information feeds, recommendations and comments.
Vodafone released its famous ZooZoo ads first on social-networking sites and later as a TVC, while Reebok has become increasingly popular with fans on Facebook with its “butt-campaign” videos. With 25 million Facebook users in India, it makes perfect sense for businesses to use the medium to endorse their work, especially to target the youth. It is estimated that in 2010, social networking sites accounted for around 11 per cent of the total digital advertising market, and in 2011 it is expected to grow to 18 per cent. As more advanced features are added to these sites, advertisers’ interest in the medium can be expected to further increase.
• Targeted advertising: Advertisers are leveraging the latest technologies for targeted advertisements, which help them reach appropriate customers through user IP addresses, click stream history, Internet cookies and personal information. Options to target users on behaviour, demographic and contextual relevance, including location-based advertising, are being explored. Technological advances in future can be expected to facilitate focus and customisation in advertising.
• Agencies strengthening capabilities and expanding geographically: A number of advertising companies are strengthening and acquiring capabilities in the Internet marketing space and launching separate units focused on digital advertising. Existing players are also expanding geographically to acquire more properties and work across the value chain. Hyderabad-based start-up NyooMedia has launched a cloud-based Software-as-a-Service (SaaS) platform for online advertising. It is also expanding to the US market. Meanwhile, Ybrant Digital has acquired privately owned Max Interactive, a major ad network in Australia, and mobile and online video advertising company Vdopia has entered a marketing agreement with IAS Media-Digital, a Middle Eastern media marketing group. Digital advertising agencies will increasingly need to gain the confidence of advertisers across industries by educating them about the power of digital advertisements in growing business.
• Emergence of mobile Internet: With the advent of 3G, affordable data plans and low cost mobiles, combined with an increased portfolio of mobile VAS services, users are increasingly accessing the Internet through their mobile phones. Currently, it is estimated that 25 million users access the Internet through mobile phones, and this number is increasing at a rapid pace. A wide variety of options are available in mobile marketing, including voice, text, rich media and video. This has led a number of companies to increase their mobile marketing budgets.
The growing use of the mobile to access local information has encouraged many players to enter the mobile search market. In absolute numbers, India is today among Google’s top three countries for mobile search. A number of agencies are launching units focused on providing only mobile marketing solutions. Digital OOH media company LiveMedia has launched mobile marketing company LiveDigital.
Havas Media’s flagship brand MPG has launched its mobile marketing brand Mobext in India. However, in order to increase advertiser’s reach, mobile Internet connections need to be improved in terms of connectivity and speed.
• Increasing number of advertisers using the medium: More and more companies are turning to the digital advertising medium and employing niche agencies to handle the function. According to industry research, the banking, financial services (BFSI) and insurance, automotive, online publishing, travel, technology and telecom verticals are the biggest online spenders. FMCG companies such as Hindustan Lever are also warming up to the medium. In fact, Hindustan Unilever has increased its digital budget substantially in India and is planning a major push in digital media. Further, companies are increasing their digital advertising budgets. The BFSI sector’s digital advertising spend in 2010 totaled INR1.4 billion and is expected to grow to INR1.8 billion in 2011. Maruti Suzuki India Ltd.’s spending in digital advertising has rapidly increased to INR92 million as compared to INR48 million last year. Relying heavily on digital to reach out to its audience, Reliance’s BIG CBS Spark channel has allocated 80 per cent of its spending for digital. Going forward, these budgets are likely to increase further in tandem with the increase in Internet users.
• Low Internet penetration: Despite the proliferation of the Internet and the advent of 3G, Internet penetration in India remains very low (7.5 per cent), when compared with countries such as Brazil (31 per cent), Russia (41 per cent), and China (34 per cent). The number of broadband subscribers in India amounts to 11 million, i.e., 0.8 per cent of the population. Urban India, which accounts for around 28 per cent of the total population, has witnessed the bulk of this growth. Rural India, on the other hand, lags behind, home to only 12.1 million active Internet users, i.e., just 2 per cent of the rural population. This is likely to be a major roadblock and could cap the growth prospects of digital advertisements.
The awareness and infrastructure for Internet facilities needs to be enhanced in rural areas for the growth of this medium.
• Lack of regional content: Currently, the majority of the content available on the Internet is in English, which is not a commonly used language by a large portion of the Indian population. Only around 9 per cent of the population knows English, while the rest speaks Hindi and other regional languages.
The availability of online content in the local vernacular language, which is preferred by the majority of Indian online users, is scarce. While local and global search engines, Khoj and Google, do provide search content in vernacular languages such as Tamil, Telugu, Punjabi, Malayalam, they constitute a very small proportion of the market. Language barriers limit the target audience for digital advertising. In order to expand their reach in India, agencies need to develop more online content in local languages.
Less awareness among advertisers:
Digital advertising agencies face challenges with the concept selling of digital advertising to advertisers more accustomed to traditional methods of advertising. Even as large companies seriously develop broader multi-channel advertising strategies than before, mobile Internet advertising remains an afterthought. This is primarily due to the low levels of understanding of the wide variety of options available in mobile and Internet marketing. Many advertisers are still unaware of how large the number of Internet users are. Educating advertisers on the increasing number of consumers using digital media today and how they can strengthen their online presence to leverage this potential is the need of the hour.
• Focus on improved methods of mobile advertising: Mobile is well-poised to gain prominence, with a host of interesting devices from Samsung, HTC, and video advertising formats such as iAds and operating systems such as Android. In 2010, mobile subscriber penetration in the country totalled 63 per cent with 752 million subscribers, and the mobile market is expanding continuously at 40 per cent annually.
Mobiles have a high presence in rural India as well. This presents a significant opportunity for advertisers to target more customers through mobile advertising, which will give them an outstanding platform.
One of the challenges of advertising on mobile phones is spam. Even genuine messages are associated with spam due to the overuse of the medium to send messages, which are often not relevant for the audience. Marketers should validate the source of the database and also the genuine interest of the user receiving this message. Mobile broadband will also be seen as an opportunity for screen-specific advertising, helping brands. Apart from text-based content, advertisers can include innovative methods such as full motion video transfer or live streaming on the move. The emergence of new technology formats such as Vdopia’s, VDO format — which enables advertisers to seamlessly run video-enabled ads on the mobile web platform without Flash or plug-ins — are expected to lead the way.
• Focus on SMBs:
Small and medium businesses (SMBs) in India are likely to contribute majorly to digital advertising. India is an interesting market, where the entire advertising industry amounts to only USD5.4 billion despite the country’s vast population; this is very small compared with other countries such as Brazil, where the advertising industry stands at USD12.1 billion, even with a much smaller population. One of the reasons for this difference is that less than 100,000 businesses in India actually advertise. The reason for this is that, Indian entrepreneurs tend to be extremely focused on the RoI. This implies a significant opportunity to make India an ”online and mobile first” ad market, as advertising or listing on local web directories help local businesses enhance audience reach cost effectively. Marketers should focus on ways to reach small businesses and market products that make sense for such businesses.
• Need for industry research validation:
The digital advertising industry in India needs industry research validation through agencies such as TAM, RAM and IRS, the nodal audience measurement agencies for the country’s television, radio and print industry, respectively. The digital advertising industry is still evolving and only recently saw the emergence of the IMRB’s Web Audience Measurement (WAM) system.
The WAM tracks the number of people accessing the Internet, along with their profiles. There is a need to evolve mechanisms such as WAM to streamline the industry and fully realise the potential of the Internet as an advertising and marketing medium. This will help measure the effectiveness of the medium in terms of reach and frequency. Most importantly, it can be expected to provide advertisers with clarity by giving them a parameter on which to determine the success of online campaigns and enhance advertiser confidence.
Bharat Rajamani is a Senior Manager with Ernst & Young’s Risk Advisory Practice