Lead

Online advertising: early days yet

In the backdrop of India’s tiny Internet user base, online advertising has its work cut out to present itself as a viable alternative to print and TV. By Vinita Gupta

Online advertising, currently the smallest component of the total advertising spend in India, will experience the highest growth over the next five years, growing at a compound rate of 32%, as per a recent PwC report. As a consequence, its share of the overall advertising spend in the country will rise to 5.5% in 2013 up from 2.3% in 2008.

Indian consumers have the purchasing power, especially in urban areas where Internet and mobile penetration is the highest. For a majority of online companies, India is one of the primary areas for growth internationally.

Online marketing is growing as the advertiser can communicate more about the product online than through any other medium be it electronic (TV commercial) or print, said Diptarup Chakraborti, Principal Research Analyst, Gartner. More features of the product can be provided on the Net. For instance, a mobile phone’s features such as the screen display, camera, platforms supported, etc can arguably be highlighted in greater detail. Also ads placed in niche sites are doing well as a company can directly reach its target audience, for example a mobile product on a telco’s site.

Chakraborti added, “TV is the largest mode of advertising in India and online advertising is still at a nascent stage. The slowdown has consequently affected television advertising, but not online advertising. I believe that in the coming months, the latter segment will boom as the number of people using the Internet is growing.”

Reasons for growth

Online marketing firms have witnessed good business despite the slowdown with advertisers being attracted by the concept of performance-based marketing or Cost Per Action (CPA). Parminder Singh, Business Head, Google India, said, “During the slowdown, companies looked at the ROI, and the Internet is precise in this particular aspect as one can find out how many people had clicked or viewed an ad. They can even target the exact customer base and hence many advertisers are looking at this medium.” Many organizations have started putting video commercials online. Both online and offline media can complement each other and advertisers are realizing this and they are consequently integrating both the mediums together with a single marketing campaign.

PG Ponnapa, Vice President, AOL India Portal, asserted that, in a tough economy, advertisers will look for the maximum returns on their investment to justify their marketing spend. In such an environment, online advertising is emerging as an efficient and effective option because advertisers are able to focus more specifically on target markets and audiences—something they cannot do with television or newspaper advertising.

Suresh Reddy, CMD, Ybrant Digital believed that three factors—cost, impact and targeting—play major roles in online advertising. The cost involved in traditional media companies is considerably higher when compared to the online medium. Something like distribution costs involved with e-mail marketing is negligible when compared to the cost of mailing promotional literature or distributing flyers. Changes to designs or information can be implemented easily and made available almost immediately. Visitor action is immediate and therefore the conversions are more likely to happen—or so say the folks selling online ads. Finally, the people who come to the Web site after being specifically directed there are already interested in the goods and services and are more likely to buy.

“The youth are interested in self-validating the promises made by media campaigns and they know that the Internet has the resources for them to do their homework before reaching a decision,” pointed out Sudhir Panda, Web Consultant, Solution Point.

He added that in today’s world, corporate barriers control customer experiences rendered through various departments—from product marketing to customer service. Giving all stakeholders a real voice in that process—via phones, e-mail, snail mail, participation and online media—has been the antithesis of many corporate cultures for decades. Firms should craft a strategy and understand what their business objectives are.

Future scope

[While the US has seen advertising follow the readers from print and TV to online, the same is yet to happen in any significant fashion in India largely because of the poor Internet penetration. India had 45.3 million active Internet users nine months back as per the I-Cube (Internet in India) Study released by IMRB International and Internet and Mobile Association of India (IAMAI). That’s about a tenth of the number of mobile phone users. Until that situation changes, and changes dramatically, online advertising is going to remain a drop in the proverbial ocean. – Editor]

While companies can also use the power of the Internet to know their customers better, people have to use the Net in the first place.

Google Trends can enable organizations to find out what exactly people are looking for, e.g. in a particular city people might want a car to be more spacious rather than providing quick acceleration.

Singh mentioned that different verticals that have started using the medium to reach their target customers are—telecom, finance, automobiles education, etc. Many organizations are following the Research Online Purchase Offline (ROPO) model. In this model the research regarding a product is done online, but the product is bought offline. Some social media sites have also started attracting advertisements. Singh added, “We at Google visit the advertiser’s premises to look at their advertising model and help them go online. We also work with advertising agencies to ask their clients to place their ads online.”

“The success of online advertising is undeniable. A lot of research has been done in India and across the globe which proves that ad campaigns have better recall, deliver the required sales lift and get a larger reach when the Internet is included strategically in their media mix,” pointed out Ponnapa.

Reddy said, “India’s online user base is around 60 million. The vast majority of the online users—57 million, live in urban areas. This year, India’s digital advertising market is expected to generate Rs. 750 crores.”

Online advertising can help small businesses as they generally operate within a niche segment and a limited geography. It appeals to a diverse demography—ranging from premium global brands to small, local companies.

[Online advertising’s success is linked to that of the Net which has been a slow-mover in India. It will be at least a decade from now before online advertising gets into double digits. – Editor]

vinita.gupta@expressindia.com