INTERNET`S ENTRY INTO THE ADVERTISING WORLD

HAVING captured one bastion after another, the communication revolution is now all set to change the way people do business. It’s amazing how the business environment has changed dramatically in the last two decades. Who could have imagined the world would become such a small and dynamic marketplace where one can transact Business or receive information with little or no human interface? Who could have imagined that a seller’s market would soon become a well-informed buyer’s market? Who would have expected such tremendous pressure on manufacturers and suppliers to optionally balance costs, quality, price and time, and remain competitive at the same time? The world has moved from an industrial to a service economy, and now to a knowledge economy. In today’s context, information technology and business processes have a truly recursive relationship– with strategy and processes being driven more by the new possibilities that the Internet opens up on a regular basis.

Online advertising in Indian Scenario

The share of India's online advertising in world pie is almost negligible. But developing countries like India; where Internet users are growing very rapidly, it has huge potential. Indian companies are also showing keen interest in promoting their products or services online.

Currently finance sector is most dominating sector in online advertising and accounted about 40% of total online advertising in India. Some of the leading companies from this sector are HDFC, ICICI, Citibank, SBI, and UTI etc. FMCG goods have just started to come in led by companies like Hindustan Lever, Procter and Gamble etc. FMCG accounted about 20% of total online advertisement spending in India. Consumer durables companies are also coming and accounted 15% of total online advertisement. Share of media sector is about 10% and rest comes from other. In India, most popular form of online advertising is banner advertising. The reason, it is easy to create, place and use. E-mail advertising follows it.

India has to cover a lot of grounds to come up to the level of online advertising as, say, a country like U.S. There are many stumbling blocks in the growth of online advertising in India like, psychological fears of IT, high cost, low education and above all low awareness level. Still many Indian companies are hesitant, anxious and doubtful about the potential it offers. Unless these are dealt with online advertising can't really take off in India.

The survey estimated that the value of Internet Advertising has been double to Rs 450 crore in2007, and will valued at Rs 2,250 crore by the end of 2010, and thus increasing 10 times from 2006. This means it will overtake spends on radio, cinema and outdoor advertising in two years.

The report adds that of the Rs 210 crore was spent on Internet Advertising in 2006, display advertising contributed Rs 117.6 crore, classified was Rs 50.4 crore and search was Rs 42 crore. It estimates classified advertising to be the key driver of growth with a Rs 900 crore contribution (out of the total Rs 2,250 crore) by 2009, followed by search’s Rs 742.5 crore, and display advertising bringing in Rs 607.5 crore.

This is by far the most optimistic estimate of online advertising in India made by any research agency. The IAMAI estimated in 2006 that Internet Advertising would grow at 40 per cent and reach a value of Rs 750 crore by 2010. The FICCI-PWC reported in March 2007 that puts the figure at Rs 950 crore. Internet penetration in India is estimated to have grown at an average of 60 per cent between 2000 and 2006.

Yet, it is difficult to believe that online advertisers, a reluctant lot, will change their mind enough in two years to multiply their spend by 10.

Internet advertising building FMCG brands

Advertisers forecast that online will represent a growing share of their overall media budgets over the next two years, especially within the FMCG sectors.

The EIAA Marketers’ Internet Ad Barometer, commissioned by the EIAA to understand the role online advertising plays and attitudes towards the Internet amongst key advertisers across Europe, reveals that 42% of those questioned already spend over 5% of their media budgets online and 74% of all those surveyed regard the internet as a vital component of their advertising strategy. According to 80% of respondents, increasing broadband penetration is making the Internet more attractive as a branding medium and online ad spend is forecast to rise by over 65% by 2008.

FMCG Brands

FMCG brands are demonstrating strong signs that they are embracing online. The research showed that the percentage of overall media budgets devoted to online are forecast to rise from 5.6% in 2005 to 9.8% in 2008 - a massive 75% growth rate. Internet advertising expenditure will experience a boost by both the higher and lower spenders of the sector over the next two years, with the higher spenders stating that 64% of this extra spend has come from other media budgets and 57% of respondents claiming the spend has been diverted from TV advertising.

Taking Share from Traditional Media

The research reveals that online is chipping away at the heartlands of the advertising market, especially amongst the higher spenders. FMCG companies are siphoning spend from TV advertising while Entertainment and Consumer Electronics companies are reallocating budget to online primarily from TV and print. Travel is also diverting ad spend from print while Automotive advertisers are taking share from across the media board.

Maturing Attitudes: Higher vs. Lower Spenders

The survey highlighted other marked differences between those who already spend significantly online (6+% of media budget) and those who are catching up (1-5%). The lower spenders are driven primarily by increased use of the Internet while the higher spending online advertisers place greater importance on the medium’s reach and share of voice. Higher spenders are also more than twice as likely to view Internet advertising as essential to their overall advertising strategy and see online as having a greater influence on sales, intent to purchase, profitability and market share.

Key Findings

Online ad spending expected to grow substantially over the next 3 years by 2010.
FMCG and entertainment brands planning significant online spending.
Advertisers diverting spend from TV and print media to online.
Online terminology and campaign measurement no longer perceived as huge barriers.

Conclusions:

Online advertising builds brands!
When measured in isolation, online advertising has a positive impact on traditional branding metrics like awareness, message association, etc.
Branding metrics continue to increase with additional exposures
Online advertising works in FMCG – a category whose adoption of the Internet trails other Industries.
Online advertising offers potential benefits like target ability, tracking, deliverability, flexibility, etc.