Digital Advertising Industry in India

Transcription

1 Digital Advertising Industry in India 2014

2 Table of Content Executive Summary... 2 Internet in India... 3 Digital Advertisement Industry Spends... 4 Industry-wise Ad Spends... 5 Digital Advertisements: Ad Avenues... 6 Digital Advertisements: Spends & Growth... 8 Display Ads: Standard Ads to Interactive Ads... 9 Social Media Advertisement: Spends as per Ad Types... 9 Video Ads: Spends as per Ad Types Mobile Ads: Spends as per Ad type Ad Spend of Device Form Factor: Ad Effectiveness Ad conversion Ratio Attitude towards Ads Digital Advertisement: Region wise split Digital Advertisement vs. Traditional Advertisement: US and Indian Context Research Methodology:

3 Executive Summary As of June 2014, there were 243 Mn claimed Internet users in India out of which 192 Mn are active Internet users who access Internet at least once a month. There has been a consistent growth in the number of Internet users over the past few years. In urban cities, the penetration of active Internet users is nearly 36% whereas in rural villages the penetration is 6%. There is a large part of the population that still needs to be included in ensuring a large-scale digital adoption in the country. The overall ad spend in India across all media is INR 38,598 Cr as of 2013 with a year on year growth rate of 12%. Ad Spend in Television is the highest with a proportion of 44% of the overall spend. With the rapid growth in penetration of Internet across Urban and Rural India, Marketers are focussing more on spending their media budget on different digital avenues. The digital advertisement spend in India was INR 2750 Cr by the end of FY 14 with a Y-o-Y growth rate of 30%. The overall CAGR for the digital Ad-spend in India is 25% from FY 2011 to FY Growth in e-commerce Industry s adspend in digital media has been the highest, contributing 18% to the total spend on digital ad followed by Telecom and FMCG & Consumer Durables. The digital ad spends by the e-commerce stakeholders has grown by 18% to reach INR 495 Cr by the end of FY Search is one of the most chosen digital ad media both in terms of ad placements as well as the share (30% of the total size). It is followed by Display Ads and Social media Ads in terms of proportion. Video ads, although contributing comparatively lower to the overall ad spend, have been growing at a very high rate of of 56% CAGR since This form of advertising is expected to grow as many marketers continue to explore multiple media formats. Further, digital Ad Spend on Mobile devices is 14% whereas on Desktop PCs, Laptop computers, it is 86%. Although traditional media still holds strong ground, digital advertising is catching up fast and is expected to overtake traditional media within the next 5-10 years. In the current report, the reporting has been done based on the categories that have been used in earlier versions these are also the categories commonly used in the industry. However, given the increasing convergence across digital platforms; in order to arrive at relevant categories combination of various formats and platforms might provide a better representation. The attempt has been made in this report to initiate a discussion in this vein so that the estimations are more relevant. 2

4 Internet in India India is currently home to 243 Mn Internet users where contribution of urban users is 65% and Rural is only 35% as of June, Internet users can be divided in two major segments: Claimed Internet users and Active Internet Users based on the frequency of Internet usage. Claimed Internet users are not so frequent users of the Internet, whereas Active Internet users access the Internet at least once a month. As of June 2014, the penetration of Claimed Internet users was 19.1% and penetration of Active Internet users was 15.1%. From the numbers given above, India provides a huge space for the marketers to pitch their products through digital marketing campaigns in which online advertisements are one of the integral parts. 3

5 Digital Advertisement Industry Spends The gradual increase in adaptation of the Internet among urban and rural population has opened the door to the marketers to go online and spend on digital advertisement. Digital advertising spend in India was INR 2,260 Cr by the end of FY 13 and it reached INR 2,750 Cr by the end of FY 14 with a CAGR of 25% y-o-y since With mobile devices becoming a predominant mode of Internet access among the users in India, this number is expected to increase by 30% to reach INR 3,575 Cr by the end of FY 15. 4

6 Industry-wise Ad Spends E-Commerce, Telecom and FMCG & Consumer durables are the top 3 verticals in terms of spending in digital advertisements till the end of FY Of these verticals, ad spends by E-Commerce companies constitutes nearly 18%. While there is overall growth in the absolute numbers in most of the industry verticals the proportion of certain verticals has dipped a little. Note: E-Commerce includes Online retail stores, online classifieds etc. Telecom include the Telecom & Internet service providers and handset manufacturers IT/ITeS comprises IT Hardware and Software Auto segment includes automotive products and auto components Travel includes Bus, Railways and Air ticket booking along with holiday packages Others include sectors like print media, manufacturing etc CAGR is calculated across 3 years data from FY 12 to FY 14. 5

7 Due to large investments by ecommerce companies in targeting new buyers from smaller towns coupled with newer players venturing into this space, there has been a surge in the digital ad spends by these companies. Mobile service providers are witnessing growth in data-related revenue and ARPU. Service providers have also started reducing prices for 3G services. Further, there are host of low-cost devices that are being introduced and advertised through digital means. According to the Industry experts, recent policies by RBI have been favourable to the BFSI Business environment live relaxing KYC norms for acquiring out stationed customers, removing the lending cap for loan against gold for non-agricultural purposes, providing flexibility to the guidelines to the banks to import gold. Also, the online transaction numbers are increasing with assurance to the security and ease of transaction; banks are finding it easier to target the customers online. Thus, the sector contribution is quite high. My customers are niche and present online. So, I would prefer emphasizing on digital ad spend Marketing communication decision maker of a Mutual Fund company. With younger population adapting the Internet faster, Marketers of FMCG companies are finding it easier to reach out to them through online. Thus, Industry experts feel that the company spending will witness more growth in the digital space than the traditional media. Thus a high contribution is expected from these in the upcoming financial year. Younger population for which the products of the organization targeted are present online, thus we are planning to increase the advertisement budget for online advertisements Marketing decision maker of a large FMCG company. Digital Advertisements: Ad Avenues Various avenues for advertisements in the digital arena considered for the report are given below: Search Advertisements: These advertisements are mostly text based and displayed mainly as sponsored links on search engines. These take the potential customers to the advertiser s website. Display Advertisements: Advertisements in the form of logos, photographs, banners, flash, rich media or text placed at various points on a web page. Mobile Advertisements: Advertisements like SMS, MMS, In-App ads, mobile webpage ads optimized for viewing on a mobile screen. Social Media Advertisements: Advertisements in the form of texts, displays, images and videos displayed on various social media websites viz. Facebook, LinkedIn, Twitter etc. 6

8 Advertisements: These advertisements are primarily commercial messages sent to a group of people through . These can be used to engage existing customers as well as potential ones. Video Advertisements: These can be broadly categorized under the display type but have the format of a video. These are usually served before, during and/or after an online video stream. While the above definitions are being followed in various articles (even in the current one), it is increasingly evident that the digital media is converging ever so rapidly. A more holistic perspective is required to define the digital advertisement market size as the digital media is converging. Considering that the technology is not a hindrance, different platforms are being used to display relevant ad formats. As a result, these definitions are changing the landscape of digital ad planning. The figure, below, illustrates the popularity of using different ad formats across platforms. The time is right to alter the old definitions and bring in newer definitions based on the figure, below. The usage of different ad formats varies across various ad platforms. While all the platforms can be technologically used, the popularity of using it differs. As of now, social networking websites and mobile apps provide the most flexibility in presenting different ad formats and their popularity is also high. 7

9 Digital Advertisements: Spends & Growth Currently, search and display constitute the major share of the total digital advertisement spends in India. Of the INR 2,750 Cr, Search ads constitute 30% of the overall ad spends followed by Display ads which contributes 23% and Social Media contributing 18% of overall Digital Advertisement spends. The proportion of spends on Search advertisements reduced and spends increased on , Video and Mobile advertisements. As of FY 2014, spends on Video ads has grown by a CAGR of 56% and contribute 12% to the overall market spends from FY The proportion of Search spends reduced to 30% of the total spends i.e. INR 825 Cr of the total INR 2,750 Cr. The ad spend on Display is going down at a CAGR of 4% from FY This can be attributed to the newer forms of digital advertisements that are emerging. Ad spends on mobile devices have grown by a CAGR of 46% and that on Social Media are at 41% since FY 2012; they amount to INR 385 Cr and INR 495 Cr respectively as of FY2014. Spend on video is growing with a CAGR of 56% and reach INR 330 Cr by

10 Display Ads: Standard Ads to Interactive Ads As observed earlier that the display ads contribute 23% to the total spends on digital ads and seems to have matured significantly over the years. The evolution is more due to a shift from standard display to a more dynamic and engaging ad unit. In order to ensure the content to be more personalized, various technologies are applied. In terms of the formats, Display ads can be classified as following: Image (GIF/JPEG) Simple Flash Rich Media without Video Rich media with Video Looking at the share of these types of Display Ads, Rich Media without videos constitute a major proportion followed by Simple flash advertisements. Rich media contributed 40% of the total display ad share. But marketers feel that the usage of Rich media with video is expected to grow significantly by the end of Shift can be happen towards putting up more content on rich media without video followed by Simple flash. Social Media Advertisement: Spends as per Ad Types According to the marketers, Social media is the place where it is easier to reach out to the consumers. While 2012 was known for marketers to plunge into the social media market space, FY is the year for increasing the investments in various avenues of Social media advertisement. In the current age of SMAC (Social Media, Mobility, Analytics, Cloud), marketers are taking the advantage of available demographic information of the consumers and generating better insights with the various social media analytics tools. Thus, this form of medium can easily provide a better platform in defining marketing strategy. Majority of social media savvy organizations prefer to post generic updates instead of brand updates on a daily or a weekly basis. They use tools for online monitoring, response management, or managing social media platforms. Thus, Social media is an integral part of their strategy formulation. The type of Social media ads that are been tracked in this report are as follows: - 9

11 Text links Display (includes Stamp Ads) Video Sponsored/ Promoted Tweets & Posts The total social media spend in India is close to INR 495 Cr by the end of FY Out of the advertisement types mentioned above, sponsored/ promoted tweets & Posts contributes the lion share of 40% followed by Displays and Text links. The share of videos seems to be less but is it expected to reach 20% of the total revenue by end of FY Developing on a sustainable and better connectivity infrastructure in terms of 3G networks may boost the usage of video content in social Media; since social media is mainly accessed through mobile devices. Video Ads: Spends as per Ad Types With the growing population watching videos online, marketers are bundling the online ads with the video content as forced view (pre-rolls, mid-rolls and post-rolls) advertisements. The video advertising market is currently divided into three main types of video ads: In-Video Ads (expandable ads and Overlays) Standard In-Stream Ads (Pre, mid and Post Rolls) True View Ads The size of the overall Video spends market has reached Rs 330 Cr. and Standard In-Stream Ads constitute the maximum proportion. The contribution of standard In-stream (Pre, mid and Post Rolls) is 75% followed by True view Ads (15%) and In-video Ads (10%). 10

12 Mobile Ads: Spends as per Ad type Mobile ads constitute INR 385 Crores which is nearly 14% of the total spends they are categorized as follows: Mobile Web Ads SMS/MMS Ads Mobile TV and Video In-App Advertisements In- App Advertisements form nearly 40% to the total spend on Mobile ads followed by Mobile Video, TV, SMS and MMS ads and Mobile Web Advertisements. 11

13 Ad Spend of Device Form Factor According to I-Cube 2013, India has 110 Million Mobile Internet users in India and it is expected to grow every year. The primary drivers for this steady rate of growth are as follows: Rapid penetration of Smartphones and Tablet PCs Increase in 3G subscriber base and Introduction of 4G Low priced smartphones aggravating the mobile Internet traffic among lower income groups Availability of mobile applications across all the standard operating systems. Increase in availability of video content, rich media. Although close to 86% of digital advertisement spend happens for Personal computers which primarily includes Desktop PCs, Laptops, Netbooks; there has also been an increase in percentage of spend on Mobile devices (Mobile Phones and Tablet PCs). Marketers while closely monitoring the digital advertisement market space, are of the opinion that the introduction of 4G and stability in 3G infrastructure will definitely improve the usage of Mobile devices in accessing digital ads across avenues like mobile standard in-stream ads and rich media ads. 12

14 Ad Effectiveness Ad conversion Ratio With the numerous avenues of advertisement discussed above, it becomes important for advertisers, content developers and publishers to measure the effectiveness of the various forms of advertisement. Below are the scores of various types of advertisements based on I-Cube Net Commerce Report Although sponsored links in search engines have the highest reach in terms of users who have seen these ads, ads in social networking sites are the ones the users have clicked the most and ultimately got influenced from. Attitude towards Ads Internet users find the online ads to be relevant and informative. Based on the broad attitudes, the reactions of the users can be bucketed into separate categories: Relevance of the information, Influenced by the digital ads, Hindrance by digital ads and Being Sceptical of the digital ads. Close to 60% of the Internet users find online ads being relevant for a particular product search. Majority of the users are of the opinion that Online Ads are informative. Most of the Internet users also feel that the Online Ads are interesting and nearly 60% click an ad if it is relevant to their purpose. It thus, indirectly stimulates the purchase online acting as an influencer. Thus, making more information available to the customers online will help the marketers to reach out to the target segment. 13

15 Nearly 40% of the Internet users feel that the online ads are a nuisance mainly due to the fact that it distracts the users from the content of the webpage. Also they are sceptical about going to the redirected webpage. Thus, marketers should step up to make online ads more reliable, authentic and ensure proper content so as to ensure that users feel safe and enthusiastic to access online ads. 14

16 Digital Advertisement: Region wise split Worldwide ad spend is INR 626,853 Cr out of which major contribution is expectedly from North America, followed by APAC. The Y-o-Y Growth spending is anticipated to be at a quite higher proportion for Middle, East and Africa. The overall pattern towards the contribution remains the same. Although being an underdog in total ad spends, ad spend in the digital avenues has gone up by 71% from 2013 to Japan has shown a decline in digital ad spend (by around 7%). China is the largest spender in the digital ads with 45% of the overall ad spend in APAC in 2013 Digital Ad spend Y-o-Y growth in India is quite similar to that of Brazil. Although ad spend is quite low, the rate of growth in digital ad spend in Indonesia is among the highest. 15

17 Taking into account the top 3 digital ad spending geographies, the ad spends Y-o-Y growth proportions show a percentage point increase in the growth for North America while in APAC it is depicting marginal decline. Digital Advertisement vs. Traditional Advertisement: US and Indian Context Looking at the Media consumption in the US which has predominantly been Television and other traditional media, close to INR 398 Thousand Cr is spent on advertisements in the Television media. The ad expenditure in Television will grow by around 3% to reach around INR 411 Thousand Cr by the end of With advancement of technology and faster adaptation of technology, Industry spends in digital advertisement avenues have reached a figure nearly INR Thousand Cr with an overall growth rate close to 17%. The market size of digital spending is expected reach to INR Thousand Cr by the end of The Ad expenditure in India, compared to that in the developed economies like US, is still at a very early stage with majority of the spend on advertisements still being made on Television. Ad spends on Television stood at INR 16.9 Thousand Cr in 2013 and is expected to grow by around 12% to reach INR 18.9 Thousand Cr by the end of The growth spends in this medium is slowing down over the years. On the other hand, ad 16

18 expenditure in Digital Media is growing at a very rapid pace of 30% and will reach INR 3.6 Thousand Cr by the end of this year. Due to the increasing adoption of Internet in India and high ceiling for growth, there is an immense potential for growth for ads in digital media in the country. With the right impetus on increasing the awareness and improving the infrastructure for Internet in India, digital media will surely be the media of choice for marketers and advertisers in India in the next 5 to 10 years. Challenges with Digital Advertisements Although there has been a rapid growth in the digital forms of advertisements across product categories, according to the marketers and industry experts, it is facing quite a few challenges which are impacting its growth significantly. Even with a high penetration of Internet or digital users in urban cities, the magnitude of investments in ad spending do not justify when compared to the other media avenues. Investments in digital media is still an afterthought in the overall media spends. Spends per digital user is significantly lower when compared to spends made per television viewer, specifically considering the context in urban cities. Due to limited spends in digital avenues for advertisement, operational issues such as training and imparting skills, as well as strategic spending on digital avenues post significant challenges. A possible solution is to formulate a measurement platform that offers substantive insights into user behaviour in interacting with digital media that is converging quite rapidly, as illustrated in previous sections. The results from this measurement platform, that measures the multi-faceted interaction across various digital devices presenting disparate content, if communicated effectively could help in furthering the spends by the large stakeholders in various industry verticals. 17

19 Research Methodology: The findings presented in the current edition of the report have been derived by conducting both primary as well as secondary research. This report tracks data for the Indian Financial Year, showcasing the information captured from various data sources for FY (April 2010-March 2011) and FY (April 2011-March 2012). Estimations for FY (April 2012-March 2013) have also been provided. Primary Research: Interviews were conducted with Internet users and online ad industry players and information collected on Internet usage in case of the former and volume of online advertising business managed by the latter. CITIES BY STRATA Top 4 Metros Other 4 Metros Small Metros (More than 1 Mn population) Non Metros (Between 0.5 to 1 Mn population) Small towns (Less than 0.5 Mn population) Delhi, Mumbai, Chennai and Kolkata Bangalore, Hyderabad, Ahmedabad and Pune Coimbatore, Jaipur, Lucknow, Ludhiana, Visakhapatnam, Patna, Guwahati, Kochi, Vadodara, Indore, Surat, Nagpur Aurangabad, Belgaum, Aligarh, Bhubaneswar, Raipur Alappuzha (Alleppey), Ujjain, Sambalpur, Faizabad, Panipat, Kolaghat, Baleshwar, Philbit, Amreli, Chickmagalur Internet Users: Structured Face to Face (F2F) interviews were conducted with 81,000 individuals among 21,000 households spread across 35 Cities during I-CUBE-2013, a syndicated product of E- Tech, IMRB International. Industry Experts: In-depth interviews were conducted with stakeholders of the online advertising industry in India, including ad agencies, media agencies, online publishers, ad networks, mobile ad networks as well as advertisers. Secondary Research: Secondary research was done to understand the structure and dynamics of the digital advertising market in India. Information from various published sources was used to perform data validation check. Information collected from both secondary and primary research was thoroughly analyzed to prepare this report. 18

20 About Internet and Mobile Association of India (IAMAI) The Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers, but in the last ten years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce and mobile & digital payments among others. Ten years after its establishment, the association is still the only professional industry body representing the online and mobile VAS industry in India. The association is registered under the Societies Act and is a recognized charity in Maharashtra. With a membership of over 160 Indian and MNC companies, and offices with in Delhi, Mumbai and Bangalore, the association is well placed to work towards charting a growth path for the digital industry in India. Contact Details Nilotpal Chakravarti C-36, Basement, East Of Kailash, New Delhi Tel: Fax: Published By Dr. Subho Ray, President, on behalf of Internet and Mobile Association of India About IMRB International etech Group IMRB International (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space. Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present market environment and a roadmap for the future. Contact Details etech Group IMRB BIRD - IMRB International B Wing, Mhatre Pen Building Senapati Bapat Marg, Mumbai Research Team for this Report Tarun Abhichandani, Group Business Director (tarun.abhichandani@imrbint.com) Abheek Biswas, Insights Director (abheek.biswas@imrbint.com) Abhishek Mukherjee, Research Manager (abhishek.mukherjee@imrbint.com) ```````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````` 19

21 COPYRIGHT All material contained in these Inter-Research Journals, including without limitation text, logos, icons, photographs and all other artwork, is the absolute and exclusive property of the Internet and Mobile Association of India ( IAMAI ) and all rights, including any and all intellectual property rights and without limitation all copyright, vests absolutely and exclusively in IAMAI, unless otherwise specifically stated. No use shall be made of this material without the prior express permission in writing from IAMAI as the copyright holder thereof. Any and all use of this material is expressly prohibited and shall be an offence under the Copyright Act, 1957, unless specifically authorized previously in writing by IAMAI. Without prejudice to the forgoing any material provided by any third party to IAMAI, including any non-proprietary material of IAMAI, obtained through links to other sites, which is a part of the Inter- Research Journals, or is displayed on IAMAI s web pages, is the property of the original author (as may be disclosed in such material), or such third party, as the case may be, and a prior written permission for the use such material in any manner, must be obtained from the author or such third party, as the case may be. DISCLAIMER Internet and Mobile Association of India ( IAMAI ) has, to the best of its commercial ability, taken care to compile the information and material contained in this research work. Provided however, IAMAI does not warrant that the information and material contained in the research work, or any part thereof, is designed to, or will meet any person s requirements, or that it will be error free or free from any inadequacies, incorrectness, incompleteness, inaccuracies, or bug free. IAMAI hereby disclaims any warranty, express or implied, including, without limitation, any warranty of noninfringement, merchantability or fitness for a particular purpose, in respect of any information and / or material contained in the research work. IAMAI will not be held responsible for any loss, damage or inconvenience caused to any person as a result of any inadequacies, incorrectness, incompleteness, inaccuracies, or errors contained in these research reports. IAMAI holds and processes personal data, if any, in accordance with applicable law in force. All times, all know-how and any Intellectual Property Rights of whatsoever nature in and to any techniques, principles and formats and in all proprietary materials, software, programs, macros, algorithms, modules, methodologies and anything else used by or created by IMRB International in the course of providing the service/ deliverables to IAMAI which are of a generic nature or otherwise not produced exclusively for the Client shall at all times remain the exclusive property of IMRB International. 20