If you think post the economic slowdown, internet advertising is not ‘happening’, think again

Consider this: According to international projections, internet advertising will account for just about seven per cent of the total ad spend globally in 2005. But in India, online advertising constitutes about only Rs 38.5 crore of the total advertising industry figure, estimated at around Rs 8,500 crore.

An International Data Corporation (IDC) study confirms that online advertising accounts for less than 0.5 per cent of the total advertising revenue in the Asia-Pacific region, excluding Japan. So there are great expectations of a pickup in online advertising in the region, which should bring it in alignment with the rest of the world.

The initial problem with the Indian online industry was that it tripped on the business model itself. The marketing mantra was: Create that initial brand awareness with a bang, and advertising revenue will come flooding in. In retrospect, that was a far out assumption. Indian dotcom companies found that the outgo on offline advertising was rising even as the expected inflow of revenues turned out to be just wishful thinking in most cases.

With the initial hiccups over, hope is again suffusing the Indian online industry, which has just closed the year with a good 30-35 per cent growth. At this clip, the online advertising pie could be nothing less than Rs 50 crore by the end of this year and is projected to increase to between Rs 200-Rs 400 crore in three years.

If one were to believe V Ramani, chief executive officer, Mediaturf Worldwide, an online solutions company, advertisers never dropped the internet space as a medium to advertise in. “Yes, there has been a slowdown but companies never really stopped advertising on the internet. Not our clients, at least.”

The only difference today is that while the internet used to be treated as just one more advertising medium earlier, after the economic slowdown, there is a lot more consciousness built around the medium.” Backing Ramani’s insight is Rediff.com’s spokesperson, who claims that “Companies which used to advertise on Rediff.com two years ago, continue to advertise even today. If anything, they have become more realistic and are more committed to the medium today than ever before.”

This is not all. Online advertising rates have fallen almost 50 per cent over the last four years. The serious or the A-level players, as they are called, such as MSN, Rediff, Indiatimes, Yahoo, Myiris, et al, have dropped prices by 20-25 per cent each. And as a last resort, perhaps, to survive, the C-level players, such as Inmatch.com, 123india.com, Lycos India etc, are offering rates that are 70-80 per cent lower than what they were charging earlier.

Says Ramani: “Actually, in the times of the dotcom exuberance these players were charging exorbitant amounts, perhaps much more than what they should have charged. So, now when the prices have been slashed, it’s a good equilibrium.”

In fact, clients have started increasing their budgets for online advertising. Consider the case of ICICI Prudential, which is said to have raised its budget for online advertising by 440 per cent this year.

Similarly, Zodiac, which came to be an active player on the internet scene only five months ago with the launch of its ZOD brand, is currently spending more than Rs 1 crore (15 per cent of the its total advertising budget) on online advertising. Says Imran Surve, business head for ZOD at Zodiac: “We are likely to take it up to 30 per cent by the next year if we continue to get value-based deals.”

Advertising agency, FCB Ulka’s interactive division head, Kinjal Medh, also admits that his clients have started increasing budgets for online advertising. Says he: “Till some time back, there was not much growth coming in but now serious players have started spending on the internet as against only the dotcom companies that monopolised the cyber space earlier.”

Globally, the sector-wise break up of online advertising is: Thirty per cent comes in from the fast moving consumer goods (FMCG) sector; 15 per cent from finance; 11 per cent from technology; seven per cent from the communication and publications industry and other companies bring up the rest.

Compared to this, it’s a different trend in India where adspends from companies in the financial sector constitute 40 per cent of the total online advertising, followed by 20 per cent from the FMCG sector and 15 per cent from consumer durables industry, apart from 10 per cent that is spent by the media; the rest comes from others.

If you think post the economic slowdown, internet advertising is not “happening”, think again. While it may still not be the most preferred medium for branding, it is fast emerging as a medium for tactical advertising.