Thursday, March 02, 2006

Online advertising in India: How to make the big leap

The Indian online advertising market size is estimated between 150-175 crores and is growing at more than 50% year-on-year. Almost 70-80% of online advertising is happening on a handful of large sites like Indiatimes, Rediff, Yahoo India , Google India, Sify, Moneycontrol and MSN India. Compared to print and television the number of players and market size is still very small. To exponentially grow the online advertising business, I feel that the Indian Internet portals can do better by focusing on the following:

Selling accountability

Search advertising globally is already as large as banner / display advertising. What makes search advertising so special? Well two main reasons, firstly search advertising is contextual so it leads to better response and secondly and more important the entire cost is based on performance (clicks) i.e. an advertiser only pays when someone clicks on his ad.

The Internet portals who depend on banner advertising will increasingly have to face this challenge – they will made to be more and more accountable by their advertisers who use the medium to advertise and increasingly start using tracking tools to evaluate the performance of their campaigns (in terms of number of clicks/ leads etc). One needs to remember that Internet is the only truly accountable medium for advertisers and further it is so easy to track performance of an internet advertising campaign.

The Internet portals will like the advertising deals to be on impressions (Cost per thousand or CPM basis) rather than on performance (Cost per click or CPC basis). I do not understand this logic, as the advertisers in due course of time will calculate down to the last paisa the cost per unit of performance (per lead or per click) even in the CPM deals. Accordingly the cost of CPM itself may drive down in case of low performance delivery! A manifestation of this can also be happening in form of advertisers insisting on larger banners as they will naturally tend to give better response!

So, rather than lamenting about Internet being over accountable, the Internet portals should actively start selling and positioning Internet on its true strength of accountability. They should also learn from listing models like Naukri etc where the only criteria for advertising is performance!

Self help model : Target small advertisers

How do we grow the advertising pie? One of the ways is obviously to get more and more new advertisers to start advertising online. Currently all Indian portals are grappling with getting the offline big / national advertisers to start spending online. This is proving to be a daunting task itself, however, no one is focusing yet on the smaller advertisers. One of the problems with approaching these people will be the small ticket / order value. The cost of servicing these clients will become very high. This is where Internet technology can come into play. It can allow an advertiser to set up and manage his own campaign on a site. I have not yet seen any such offerings from Indian portals. Maybe we should learn from Google who have thousands of advertisers using self enablement / help model and advertising on their sites.

Of course one can argue that Google’s self enablement model works on text based ads, but I am sure we can extend the same logic to self-enable display / banner advertisement campaigns.


Ravi Venkatraman said...

Thanks for the insight on Online advertising in India.
Regarding, Self service offerings from Indian portals,
Rediff does offer this feature through their pay4clicks feature.
I do not see other Indian portals offering self service model, primarily due to the cost associated with infrastructure setup and clickfraud.
(One exception maybe classifieds section, where the portals may charge for premium listing).
I feel Yahoo and MSN, in addition to Google will offer the contextual ads (text, image and flash) in the Indian market.
Some of them may even offer CPA model (Cost per Acquisition).
Most Indian portal will use these self help model, in addition to their current advertisers.

The small advertisers will start using these channels to get entry/placement into the bigger portals.
In addition the existing advertisers may demand CPA model, instead of CPM model.

Ravi Vekatraman

Anonymous said...

Good points raised by you here. As per your information revenues from online classifieds business are more than advertising revenues.. what are your observations on this ?

follower said...

You have chosen the right topic that creates interest and the information you have posted is very informative. I have noticed that you have missed out the recent story on the Yahoo CEO's visit to India and Yahoo going aggressive on the Search syndication. Also Players like Microsoft entering into online Advertising. Wish to see more of your views.

Anonymous said...

Onine has moved on from being a advertising medium to being a sales channel the world over... and so will it in India.

The affliate marketing in the US is a $400 million category. In India as well the CPA model will take over, though there will be a lot of resistance from the portal and advertising community but that is where the future will lies...

Anurag Gupta said...

Thanks Follower, search is definitely hotting up it is growing much faster than the banner advertising.

Yahoo and Microsoft, of course see the battlelines drawn in this field. I am sure we will see strong competition to Google in times to come from both these players in India.

Anonymous - Transactional business is definitely a huge business globally and I agree with you completely that it will only be a matter of time that we will see more merchants and models like affiliate marketing etc happening. I did talk about this in one of my earlier posts as well.

However, you cannot nullify the opportunity in revenues from advertisements and the success of Google proves this beyond doubt!

Keep the comments coming in.

Anonymous said...

agree with you anurag, there is going me be a mixed market.

Rich Media Banners will drive the advertising side of the online world while search will drive the tranactional side of this medium .

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srikar said...

dear Anurag

The article really good,it gives lot of information.I still beleive internet martketing is high,but we another sector which will be handy and easy method is Mobile phones.

can you think of that

Anonymous said...

Can some one tell me how to go about monetizing my site which i intend to build with telugu content ...

google terms do not accept sites with telugu or any other indian language content.

PPC or CPM how to go about finding an organisation that delivers ads to the telugu content site


Anonymous said...

>>The Internet portals will like the advertising deals to be on impressions (Cost per thousand or CPM basis) rather than on performance (Cost per click or CPC basis). I do not understand this logic, as the advertisers in due course of time will calculate down to the last paisa the cost per unit of performance (per lead or per click) even in the CPM deals.

[me] With this twisted logic, may you also suggest that televisions now start coming with inbuilt cameras that monitor who is viewing a certain advertisement (and not running to the restroom, kitchen, etc.) and then use computer vision techniques to garner interest level of the user by studying his expressions. Only if the viewer appears to have medium-high interest level, should the advertiser pay for the slot???

Wow dude, advertising has always been about impressions. Why treat new media any differently that traditional media. If anything, online advertising should be more expensive that what is perceived today.

Sunny said...

Got to see this article on Web 2.0 & thought of penning down some thoughts on my mind.

I personally think that Web 2.0 has tremendous potential in India. This statement is not a over-dose of boasting as i strongly believe that there a lot of potential in making our systems go web.

Be it anything from jobs to house search everything is easy when you have internet. In fact, i got across which seems to be doing the job really well. I am pretty confident that WEb 2.0 will make its mark in India.

Anonymous said...

hey anurag,
ur article was really enlightening but wud like a bit more enlightment on d aspect that: y FMCG sector should advertise on internet???
if possible do reply me at

Prateek N kumar said...

Intresting is truly moving towards digital and web space....I have seen the paradigm shift in the industry for last 10 years......keep posting....

Synergy Informatics said...

hi anurag,

nice insightful posting...

I think India is the next big destination for online marketing.. as with each day.. internet panetration is increasing & this will definitely lead to rise in advertising expenditure in India.. Moreover, I also see advertising in mediums like you tube, and social community site like orkut.. there are vast potentials...

look forward to hear more from you..

keep it up

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