Digital advertising has reached the tipping point in India, and its growth shall be mammoth in the next few years. Here are some factors behind this.
The year 2008 will be remembered as a year when digital marketing in India reached the tipping point.
All the previous years (including 2008) have played their role in creating the perfect internet advertising storm, which is going to result in exponential growth of internet advertising in the next couple of years.
Let's analyze the factors that are leading to the tipping point of internet advertising in India.
Internet users reaching 80 million
Unlike most developed countries where even socio-economically less affluent people also have internet access, in India, the 8 percent of the population who have internet access may be controlling the majority of the disposable income of the country, especially for sectors such as travel, financial services, education, automobile, and lifestyle. In my opinion, these internet users may control almost all of the disposable income in the country.
Government organizations begin active usage of ecommerce
A few months ago, a roadside tea vendor below my office asked me whether I was in the computer business. I thought admitting that I was would be easier than explaining the definition of "search advertising" to him. He asked me a simple favor, he said he would give me US$50 as an advance if I could help him buy some train tickets using my credit card.
While my PA helped him buy the tickets, I thought to myself -- with a simple service like buying tickets online, Indian Railways has helped sell the concept of the internet, ecommerce, and credit cards to a simple, uneducated, small business owner in India. 25 per cent of India is self-employed, and if even a small fraction of them start using the internet for commerce, the exponential growth of internet advertising shall be inevitable.
Shift from activation budgets to advertising budgets
In the insatiable measurement quest of digital advertising, most digital agencies have ended up selling internet advertising as an activation medium.
Instead of paying selling agents a fee for activation, marketers started treating internet advertising expense as an activation fee. Most marketers are now realizing the potential of the internet as a marketing medium and this shall help internet advertising capture a percentage of the US$4 billion advertising pie of India.
Entry of digital video recorders
Television advertising is nearly 50 per cent of all advertising in India. The year 2009 shall be a tough year for TV advertising and many factors shall contribute towards making it less attractive.
The growth of channels and households having more than one TV (making channel surfing common) are two of the reasons. However, the most important reason may become the entry of digital video recorders (DVR) such as Tata Sky Plus.
Unlike developed markets where Tivo-like companies are independent of the satellite TV operator, in India the satellite TV company itself has launched a DVR, enabling quick adoption of DVRs and fast forwarding of advertising. One of our clients shifted their budgets from TV to the internet, and although they shifted only 10 percent of the TV budget, it meant a four fold increase over the normal internet budget for us.
Financial environment
Most marketers have realised the importance of digital advertising, however due to lack of compulsion, the adoption was taking its own sweet time.
The financial climate is acting like a catalyst in adoption of digital advertising. We initiated working with clients like Raymond and Vodafone, who had not used search advertising earlier. I believe that the marketers are being forced to focus on mediums that deliver better ROI and those that are more measurable, thus accelerating the adoption of internet advertising.
The reasons given above are for everyone to see, however there are many other events unfolding in India that may result in growth that is in multiples of ten rather than in percentage terms, some of which may be termed as a black swan event ("The Black Swan" is book I am currently reading, a must for anyone who wants to understand the internet economy of India better). Let me give you an example of such an event that may happen.
BSNL is India's largest telecom operator. They have 950,000 public call offices (phone booths aka PCOs) in India.
Someone mans most of these phone booths. I have heard that BSNL has begun to convert these phone booths into internet booths. However this would not be a cyber café, these internet booths would be used to provide services and products to users in the neighboring areas. Thus users who are not educated and don't have computing expertise may still be able to buy railway tickets and ecommerce products online.
The booth owners may take an advance for a product ordered and then deliver the product, receiving the rest of the money. If one assumes that 100 people would end up using these internet booths every month, it would mean adding 100 million active ecommerce/internet users in the country. This would not take 10 years, but can happen in less than a year! Similar initiatives are being taken by Unilever and ITC, which would all result in an exponential increase in the internet population of India.
The mobile users in India have already crossed 300 million and are expanding at the rate of 10 million per month. Mobile searches on Google are growing at 50 percent every month. Mobile advertising shall eventually give marketers the reach of TV, along with the measurement and ROI of internet advertising.
In a nutshell, digital advertising has reached the tipping point in India, even a few of the above factors is going to cause it to tip, and thereafter the growth shall be mammoth for the next few years.
Vivek Bhargava is managing director and CEO of Communicate 2.