Consider the scenario. Growth projections are being revised downwards too often, the government is constantly working out stimulus packages and companies continue to take a close, hard look at where they put their marketing monies.
Not an ideal time for being too optimistic, it would seem.
But there's one business - online - that's pretty hopeful of doing well this year. Living in the shadows of print and television, and still referred to as 'new media' after a decade-long existence, online advertising is better poised to ride the current slowdown than other media.
that online advertising is immune from the existing economic environment, but it may indeed be set to ratchet up its position in the advertising pecking order. This is because both India's internet penetration and the share of online in the overall advertising pie continue to grow.
As per a study commissioned by the Internet and Mobile Association of India (IAMAI) and conducted by IMRB, the number of active urban internet users in India went up from 36 million in March 2008 to 42 million in September 2008.
Another factor in favour of online advertising is that, according to GroupM estimates, it is expected to grow by about 34 per cent (from Rs 575 crore in 2008-09 to Rs 770 crore in 2009-10) - much better than the growth rates of 11.3 per cent and 7.4 per cent for TV and print advertising, respectively.
In the context of a slowdown, given the advantages of the online media - in terms of its measurability and growing influence among the youth (who are now targeted by a growing number of marketers) - it can turn the tide in its favour if it plays its cards right.
There are many in the industry who believe that when it comes to trimming ad budgets, most advertisers would go for where it hurts most rather than look to the web. Santosh EG, digital marketing director, MRM Worldwide, the interactive arm of McCann Worldgroup, for one, says, "Advertisers are already spending very little on the internet medium. They would rather cut big spends on the traditional media and save a lot than reduce puny online expenditure and hardly save anything at all."
Rise of the new advertisers
Traditionally, as much as 60 per cent of online advertising comes from the banking, financial services and insurance (BFSI) segment together with online services such as travel, jobs, real estate and matrimony. The remaining 40 per cent comes from offline real estate firms, fast moving consumer goods (FMCG), technology companies, consumer durables and mobile manufacturers, among others.
Digital agencies are optimistic that this influx of new advertisers will more than make up for lost revenue from old faithfuls. "The FMCG companies, especially the snacks and confectionery brands, are more active online than they used to be," says Prasanth Mohanachandran, executive director, digital services, Neo@Ogilvy, the interactive marketing division of O&M. And even a small spend from FMCG advertisers, which usually have large ad budgets, will make a big difference to online publishers.
According to Mohanachandran, other categories that have also begun to take the online medium seriously include telecom, consumer durables, DTH, education, automobiles and information technology.
At the same time, there are those who believe that not too many advertisers will start adopting the internet because of the slowdown. Subrat Pani, business head, Kotak Credit Cards, for instance, says that even though the online medium is more driven by return on investment (ROI), it has "its own learning curve and advertisers take time to learn and optimise their online spends".
Online advertising is mainly categorised into two types: search and display. Over time, the trend worldwide has been to put more emphasis on search marketing - and the same is percolating to India as well. While the current ratio of search to display roughly stands at 30:70, share of search is expected to increase significantly this year. In fact, it is believed that search will account for much of the shift that is likely to happen from offline advertising to online.
The Measurability Factor
With the current economic slowdown, advertising budgets across all media have been affected. However, the internet as a medium will grow close to 30 per cent in 2009, while TV and print will only see a 10 per cent increase. Measurability is internet's bane in the short term, but in the long run, it will become its biggest asset. It is only a question of volume. With the medium gaining ground, volume will come.
The internet is the most accountable medium that allows real-time monitoring, mapping and adjustment of campaigns.
The overemphasis on the measurability factor of the online space will, in fact, prove to be beneficial to the medium. With advertisers experimenting with video content, TV campaigns are now test-run on the internet before they are launched as television commercials.
- Sanjay Trehan, Chief Executive Officer, NDTV Convergence
Citing examples of such a shift, Vivek Bhargava, chief executive officer of search marketing firm Communicate2, says that Vodafone and Raymond, which used to spend the majority of their budget on traditional media, are now carrying out search marketing campaigns.
Another emerging trend is that of clients using online as a test bed for their television commercials. "In the slowdown phase, traditional advertisers may use the online medium to test their TVCs, by first posting them as video ads and getting the audience feedback on the same, and then releasing them on TV," says Kushal Sanghvi, managing director, Media Contacts, the interactive agency of Havas Digital. The idea, says Sanghvi, is to minimize their monetary risk.
The slowdown is also putting a sharper focus on ad networks, which aggregate content from several online publishers to serve up a larger but more focussed audience to their clients. This is in contrast to the big portals - who currently sell their inventories directly to advertisers and account for a big chunk of display advertising. Now ad networks aim to change the way online media is bought, by using advanced behavioural targeting and by combining the reach and relevance of several online destinations.
"Ad networks can reach out to more people through their tie-ups with sites. They possess the technology to target consumers based on their behaviour, context and demography. To top it all, they are offering ad inventory at cost-effective rates," says Mohanchandran. Ad networks are also considered more capable in offering rich-media advertising to engage consumers and in better measuring the impact of online campaigns.
Akshay Garg, business head, Komli Media, an ad network, believes that the demand for such networks will increase because some of the facilities or technologies like behavioural targeting are "not even available" to some of the major portals in India.
Behavioural targeting enables an ad network to identify and track the consumption pattern of a surfer even as he or she keeps moving on from one site to another. This is largely done by positing a cookie (a short computer program) on the user's computer. (Explaining how it works, Garg says that if a brand, say, Coke, serves an ad on any site, then the behavioural targeting technology of the ad network enables it to tag a cookie to the user's computer or, in other words, identify the user whenever he clicks on the Coke ad on the website. Now onwards, whenever the same user visits other sites that have a tie-up with the ad network, the Coke ad or other promos can be shown to him if the brand so desires.)
Focus on measurability
Currently, it is estimated that about 70 per cent of the display advertising purchase deals are performance-based, which include deals done on the basis of - in increasing order of cost - cost-per-click (CPC), cost-per-lead (CPL) and cost-per acquisition (CPA). Much of the rest comes from cost-per-thousand-impressions or CPM deals, mostly meant for brand-building activities.
With growing topline pressure on several portals and increasing propensity of clients to go for performance-based advertising, the CPM rate on the home page of a typical large portal almost halved from Rs 80-85 in August 2008 to only Rs 40 in November 2008. As a result, even the portals have started to offer deals on a CPL basis.
|Cracking the Consumer|
IAMAI and IMRB International released some data in September 2008 on the usage of internet in India. It was based on a primary survey conducted across 30 cities amongst more than 90,000 respondents. Some key findings:
Measurability is nothing new to internet advertising. But with the slowdown, when advertisers demand some accountability and exercise caution even in their above-the-line spends, it will play a more critical role in expanding the online advertising pie.
Earlier, many advertisers did not pay much heed to the analytical aspects of online and were not ready to focus on the parameters used to measure campaigns, but now they are beginning to take the analytics bit quite seriously. "We have observed a ten-fold increase in the interest of advertisers towards analytics," says Bhargava.
Advertisers are likely to go for more stringent controls in running and monitoring internet campaigns. "It is expected that many of the advertisers will not only analyse their campaigns at the end, they will now also do some real-time check even as the campaign is running live - so that they can optimise it well in time and get higher ROI," says Santosh.
Not everyone is rooting strongly for measurability, though. Divya Radhakrishnan, president, The Media Edge (TME, which is affiliated with Rediffusion Y&R) believes that it is unfair to expect measurability only from the online media. "Since the internet also offers a wide reach, it should also be treated as another medium like TV, print and radio. Measurability should be treated as a value-added service of the medium and it should not be considered as its core USP."
Radhakrishnan's views may be reflective of many in the online industry who say that the players have oversold the concept of measurability to their prospects in their eagerness to sign them up. And while many companies were converted, the money spent online remained disproportionately small compared to the effort put in by digital agencies in running and tracking the campaigns. It's as if once they have quoted low prices for highly measurable campaigns - and got many clients hooked - it's difficult for them to get premium pricing along the lines of other media.
On the whole, digital agencies do not think that there is a need to change their value proposition, which remains accountability and higher ROI. "But we are ready to add services such as social media marketing, which add exceptional value to clients at little or no media spends," says Leroy Alvares, head, Tribal DDB India, the interactive arm of Mudra.
But the ball, which had been set rolling on ROI by online agencies, is now in the advertisers' court. According to Santosh, "Advertisers will not bother much about CTR anymore; they will concentrate on the parameter of action taken by the consumer after viewing the ad as a measure to judge the success of their online advertising campaign." So, if earlier the advertisers' objective was to generate leads, says Mohanachandran, now they will only accept a higher quality of leads (though what constitutes 'quality' remains contentious). If the objective was to generate traffic, they will now want more clicks on the banners. And if they wanted to use video ads for promotion, they will want to know the time spent on the video rather than be content with how many people click on it. The slowdown can turn out to be an opportunity in disguise for the online medium to prove its worth in the eyes of advertisers, who are in the mood for measurability.