Thursday, November 30, 2006

Online Advertising terminology: Explained

In this post I am explaining various terms used in Online Advertising:

CPM (Cost per thousand)

The basic currency / unit of purchase of Internet ad inventory is “Thousand” impression blocks. Cost per thousand is referred as CPM. (M here stands for ‘Milli’ in Latin which means ‘Thousand’)

CPC (Cost per click)

Whenever a surfer clicks on a Banner Ad, it is recorded as a “Click”. The percentage of number of clicks from number of impressions is measured by Click Though Ratio (CTR). So for Eg if 1,000 impressions lead to 5 clicks then the CTR will be 0.5%.

CPL (Cost per Lead)

A lead is defined as a potential customer who is interested in buying the product advertised and provides his contact information like email id , contact numbers etc. Today a bulk of Online Advertising is happening for generation of leads.

I2L : Impressions to Leads ratio. Number of leads from served Impressions. If we get 1 lead from 1,000 impressions then i2l will be 0.1%.
C2L: Clicks to Leads ratio: Number of leads from clicks. If 5 clicks yield a Lead then the C2L will be 20%.

CPA (Cost per acquisition)

Generally a whole lot of Product Categories need Offline Sales teams to “close the sales loop”. Typically, in such cases the leads generated Online are passed on to the Sales organisation who close the loop by talking to / meeting the prospective customer.

However, for online organizations like a Travel Portal, acquisition will happen when the customer finishes an online transaction like say buying a ticket. Technology easily allows us to monitor the number of people coming to a site from an Online Ad campaign to ascertain how many people who clicked and reached the website actually ended up completing a transaction.

C2A : Clicks to Acquisition ratio. Number of Acquisitions from people who clicked on a particular Banner Ad. If we get 1 transacting customer lead from 100 clicks then the C2A will be 1%.

Metrics stem from objectives

The following illustrations will give a clearer picture of the terminology used and the way Online Advertising campaign objectives and Metrics are juxtaposed & viewed .

Friday, November 10, 2006

Online Travel India: Size of business

Following my earlier posts on online travel:

Crowded skies or crowded online travel space?
Action in Indian online Travel space

I have tried to calculate the size of India business of all the travel portals.

I estimate that close to 1,00,000 Air tickets are being sold every day in India. Out of this nearly 20,000 are being sold online. Online tickets are sold by Online Travel Portals / Agents & Directly by the Airlines Websites. Out of this 20,000 I believe that Online Travel portals are selling around 4-5000 tickets per day.

At an average ticket value of Rs. 3,000 the total revenue (Gross revenue) earned by Online Travel Portals from sale of Airline Tickets would be in the range of Rs 430-540 Crores. The portals would be getting a net commission ranging from 0.5% to 7.5% from various Airlines. At an average commission rate of 3-4%, the net revenue would be between Rs. 13-22 crores. has emerged as the clear leader enjoying more than 50-55% of the market share. Indiatimes travel and Yatra follow behind with close to 10-15% market share each. Other prominent players include Travelguru, Cleartrip , Xplorz etc.

The Air Tickets business would be forming almost 90% of the total revenues of the online travel portals. 10% revenues would be coming from Hotel bookings, Taxi rentals Packages etc. The margins on these products would be much higher going up to almost 20%. This would give them another Rs 10 crore in net revenues. This makes the total business size around 25-30 crores in net revenues.

What will be very interesting to see is how the market shares will pan out once the global biggies like Expedia & Travelocity come in (Both of them are going to soon launch their India business) as well as the larger brick & mortar players like SOTC/ Kuoni & Thomas Cook throw their hats into the ring.

However, one thing is very clear - the volumes of business being done by Online Travel Portals will continue growing exponentially over the next 2-3 years.