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Internet Advertising in India

Tuesday, March 29th, 2011

One of the best channels for promoting brands, products and businesses is Internet advertising and it has evolved into one of the most explored new mediums available today.

The popularity of the Internet as a new media channel has exploded in recent years, attributed mostly to faster, more reliable and more affordable broadband connections. More and more advertisers are shifting from traditional advertising channels and going online in order to maximize audience exposure and capture a bigger share of this growing market.

In economies such as India which are not regulated or dominated by monopolies, the market is open to fierce competition among several players who would use all the latest advertising tools available and have whatever advantage they can get over their competitors. However, conventional tri-media advertising channels are expensive and affordable only to large corporations.

Internet advertising provides a versatile, effective and more affordable advertising medium that many businesses in India can utilize. The following takes a brief look at the immense potential of this online advertising medium that is all set to bring businesses in India to the next level.

Factors Influencing Internet Advertising in India

The Internet has come a long way in terms of advancements in technologies since it was first introduced. It opened countries to global communication which had hardly been heard of or experienced before, practically making the world a whole lot smaller and more accessible. It is for this reason that the Internet offers a perfect vehicle for businesses across the globe, including India, to launch and distribute products and services to a more massive potential clientele.

According to the Indian Revenue Service, the Internet has outperformed all other diverse media channels in terms of compound annual growth rate (CAGR), with figures reaching up to 37.3 percent. This is much higher than the registered growth rate for terrestrial television, at 7.1 percent CAGR, print media at 3.7%, CAGR and cinema at only 3.1% growth rate.

The growth in popularity of Internet advertising in India can be attributed to several factors, some of which are discussed below:

The number of online users in the country is steadily growing. As of 2010, there are 81 million Internet users in India out of the 1.17 billion total population, for a 6.9% penetration rate according to statistics from the International Telecommunication Union (ITU). These figures will continue to grow rapidly in the coming years as more operational Internet providers will open up shop and gain more subscribers.

Aside from the existing local Internet users, there is a very large number of Indian expatriates at various locations across the globe who are all consuming content targeted for Indian audiences. These Indian expatriates have better access to online media, have higher rates of consumption, and the paying capacity to make online purchases.

India has a high literacy rate, and yet the use of the English language is low and there is a lack of available online content in the local vernacular, which is preferred by a majority of Indian online users. This gives Internet advertisers more focus in marketing to targeted audiences with ads and Internet campaigns specially designed for Indian consumers.

60% of online users in India regularly access the Internet, mostly through dial-up connections or through the various cyber cafes in the country. As of 2009, the ITU reported that there are more than 5,280,000 broadband subscribers in the country with access to more diverse Internet content and services.

In India, the same as everywhere else, the cost for marketing in traditional forms of mass communication like television, radio and print are very cost-prohibitive in terms of the ratio of cost against market reach. Internet marketing is much more cost-efficient as it does not cost businesses that much to create websites, maintain opt-in lists, and other online advertising techniques.

Traditional advertising media uses a shotgun hit-and-miss approach, while Internet marketing tools are aimed towards more targeted audiences. Internet marketing methods such as pay-per-click, pay-per-action and pay-per-play advertising can solicit response only from targeted audiences giving advertisers more cost effective advertising displays to market their products.

Internet marketing uses more inter active tools that engage consumers in a more in-depth manner than traditional passive media. Potential customers can readily provide their comments and feedback, giving companies real-time analysis as to what customers need in order to better align their marketing strategies. On top of that, Internet marketing tools have better and faster ways of measuring marketing statistics, giving them insights as to what would be more appealing to their targeted customers.

Internet marketing is made more effective due to word-of-mouth or viral marketing, with much Internet marketing content easily shareable through various popular social networking sites in India such as Orkut, Facebook and Bharatstudent. Such online content can also be shared through blogs and video sharing sites, giving the potential of reaching a wider audience even more.

Latest Trends in the Internet Advertising Market in India

Interest in the Internet is continually growing in India despite limitations in the ISP market, where only 10% of operational ISPs carry 90% of subscribers in the country, particularly the state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) telecommunication companies. Aside from broadband subscription, the growing number of cyber cafes in the country has also contributed greatly to the popularity of the Internet.

In a report published by the Internet and Mobile Association of India, the average Indian user spends approximately 3.5 hours a week, or 26 minutes a day, on the Internet and would spend 12% less time during the weekends. The study also reported that Indian women spend less time on the Internet than men and less so during the weekends. The report also indicates that activities on social networking sites peak by 12% on Fridays.

Information like this and other data that indicate the behavior patterns of Indian online users has contributed much to the growth of Internet advertising in the country. In the fiscal year 2008 to 2009, the growth rate for online advertising displays reached figures of up to 38 percent, or the equivalent of INR 3250 million. This figure jumped to INR 4300 million during the fiscal year 2009 to 2010.

The biggest spenders for Internet advertising in India include the biggest industries in the country; namely, Banking, Financial Services and Insurance (BFSI); Fast Moving Consumer Goods (FMCG); and the retail industry. Other industries include education, telecommunication, travel and the auto industries.

Outlook for Internet Advertising in India

A recent survey conducted by research companies in the advertising industry led to estimates that will place internet advertising revenues close to $428 billion in 2011, a big jump from last year’s $220 billion revenues. 21 percent of global Internet users now consider online advertising to be more relevant than traditional media such as radio, television, newspapers and magazines. According to a report from eMarketer, spending for online advertising in the United States rose by 13.9 percent last year.

This global trend is now sweeping across India and has become one of the more accepted and preferred advertising mediums by businesses and corporations. In an online performance study conducted by Ozone Media, internet advertising jumped 70 percent in performance in 2010. Many companies are also considering using online digital media for display advertising, as they are now seeing the potential of tapping into India’s Internet community as a viable market for products and services.

According to Technology for Marketing and Advertising India, the advertising industry in the country will continue to grow by 12% and will reach figures of up to INR 246.9 billion. Internet advertising will take a major part in this, with the fastest CAGR of 29.6% within the next five years, and is expected to reach $220 million in 2011, as indicated in the report published by the Internet and Mobile Association of India.

In 2011, the biggest contributor and investor to internet advertising is still expected to be the Banking, Financial Servicesand Insurance industry, which is projected to take up to 39 percent of the total market share. Print Media as well as the Education industries is expected to experience the highest growth rate of 76 percent, followed by the automobile industry at 46 percent. It is expected that the public will experience more product launches online.

The popularity of social media will also play a significant role in the growth of Internet advertising in India, getting 17% of the share over other online marketing tools such as email marketing and other online marketing mediums, including search engine optimization, search engine marketing, and website banner ads. Advertisers will also be focusing more on online display ads than text advertisements.

Indian companies are now putting more confidence in internet advertising and many are ready to commit advertising dollars in this marketing channel for this year and in years to come. The rapid growth of the Internet in the nation as well as the growing popularity of social media networks are prompting commercial and business advertisers to expand their marketing initiatives to include Internet advertising – and take Indian businesses to a whole new level.

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