Market Research India - Online Advertising Market in India 2009

Online Advertising Market ‐
Online Advertising Market India
July 2009

Executive Summary

 Estimated to be worth INR 6.8 bn in 2008 and forecast to register INR 8.5 bn in 2009
Market  Online Advertising accounts for just 4% Indian advertising industry
 Fastest growing segment in Indian advertising industry at 74% CAGR from 2004‐2008

 Online user base of 50 mn in 2008 despite low penetration rate of just 4.3%; computer literacy &
growing penetration in urban areas alone will add significantly to the user base
Factors  In addition to domestic user base, a large number of expatriate Indians, who consume Indian
influencing
influencing content, form a target audience
content form a target audience
growth  Encouraging consumption patterns including usage, frequency and response to advertising
 Low Internet‐user/literacy‐rate ratio and low availability of Indian vernacular content exhibits
immense potential since majority of users prefer accessing vernacular content

 BFSI, Online publishers and IT/Telecom are the major revenue contributors
 Niche & emerging nature of medium coupled with low barriers to entry could lead to greater
Trends competition
 Acquisitions and investments by foreign players as well as Private Equity firms is providing a
boost to this nascent industry

 Largely dominated by search engines and portals
 80% of the total revenues go to the top 8‐10 portals/portal group sites
Competition  Online Ad networks have started gaining acceptance in the Indian market in the past 2‐3 years
g g p p y
 Around 15 ad networks exist as of 2008, accounting for 15% of the total online ad spend

ONLINE ADVERTISING MARKET – INDIA.PPT 2

•Advertising Industry
•Online Advertising Industry
g y
•Factors influencing growth
•Trends
•Competition


The Indian advertising industry has witnessed a shift in spending
patterns over the past 3 years
Indian Advertising Market Segment Size & Share
•Market estimated to be worth INR 227 bn in INR bn
2008 and growing at 18% p a
p.a. 250 +18%
8% 226.8 234.0
198.4 Others
200
•Largest Segments: 165.1 Online
150 138.5
 Television: 37% share 117.7 Radio
100 Outdoor
 Print: 50% share
TV
50
•Fastest Growing Segments: Print
0
 Online: 74% 2004 2005 2006 2007 2008 2009E
 Radio media: 39%
•Like other global markets, the Indian
g , Segment Growth Rates
advertising industry is also suffering due to the % Online is Online
current economic environment fastest Radio
100
growing
•The long‐term prospects for the industry 80 Outdoor
continue to remain sound: Others
60
Print
 Strong growth rates vis‐à‐vis other markets 40
TV
 Advertising to GDP ratio for India is 0.47 compared 20
to 1.34 in the US, 0.95 in the UK and a close 0.54 in 0
China
‐20
2005 2006 2007 2008 2009E


Online Advertising Industry
•Trends
•Competition


Online medium currently accounts for just 3% of the total market but
is the fastest growing sub‐segment
Overview Online advertising – Share of total
• Although online advertising has been in India since
the dot‐com era, the market crossed the INR 1 bn
, Print
mark as recently as 2005 37% TV
• The market was worth INR 6.8 bn in 2008 by revenue 50% Outdoor
growing at 74% p.a. since 2004 Radio
1%
• Online medium’s share of total advertising market 2% Online
has risen from just 0.6% in 2004 to 3.0% in 2008 7% Others
3%
• Market is forecasted to grow at a slower rate of 27%
p.a. till 2013 primarily due to:
 Current economic environment Online Advertising – Market Size
M i
Massive reduction i advertising b d
d i in d ii budgets across major
j
client sectors INR bn Revenues
 Pressure on prices or ad rates 10
Share of Total Advertising 3.6% 4%
• However, online is growing faster than other 3.0%
8
segments due to fundamental drivers such as:
g +74% 3%
 Low input costs for advertisers 6 2.0%
2%
 Increasing awareness of online usage in India among 4 1.2% 8.5
marketers or advertisers 0.9% 6.8
0.6% 1%
 Growth in online user or audience base 2 3.9
1.2
12 2.0
0 0.8
08 0%
2004 2005 2006 2007 2008 2009F


Although advertising through search engines is dominant, other
options include portals, online ad networks and websites
Advertising Options
= Ad space sold directly to advertiser

Portals = Ad space sold through intermediary
Ad space sold through intermediary

Search
Websites
Engine
g

Advertiser
Website
Online Online Website
Ad Ad
Network Network
Website
Website
• Sells aggregated ad space to advertisers
Website Website • Ad inventory sold in return for a fee or
d ld f f
Contributes commission
online ad • Offers affiliated services or solution to both
space to the parties – advertisers & publishers
network

Online ad networks effectively act as a one‐stop interface between multiple advertisers and publishers


The online medium promotes various metric systems, allowing the
advertisers to optimize their return on investments
Nature of the medium
• Cost effective: Online advertising is cost effective & lower priced as compared to TV, radio, or print
• Measurability: The advantage of measuring the number of responses to advertising, lets the advertiser measure RoI
and strategize better for future campaigns
• Global reach: Amongst all media, online medium has the easiest global reach making it an optimal choice for targeting
a global audience
• Flexible medium: Flexibility of the medium in terms of inventory volume, advertisement type, and targeted advertising
options are unparalleled
• Consumer engagement: Online advertising is a two‐way communication platform enabling companies to directly
engage with current and potential customers for feedback & lead generation.

Metric Systems
y
CPC CPA CPM CPV
Cost per Click Cost per action Cost per 1000 impressions Cost per visitor
• Advertisers pay when a •Advertiser pays for every • Advertiser pays for every • This payment model
user clicks on an ad to visit action (sale/registration)
user clicks on an ad to visit action (sale/registration) 1000 impressions of their
1000 impressions of their involves showing the ad to
involves showing the ad to
the advertisers' websites completed as a result of a advertisement targeted visitors, as well as
• Mostly used by search visitor clicking on their • Preferred usage by portals leading them to the
engines advertisement advertiser's website
•Mostly used by ad
networks
t k


Sustainable development due to continuous technological advances,
makes the online medium a long‐term growth story
Technological advancements

Banner Ads 1st Advertising ad on the Internet; Appears at various locations on the page, but mostly on top. The
concept is equivalent to buying ad space in a magazine
concept is equivalent to buying ad space in a magazine

Pop‐up Ads On opening the web page, a new browser window opens up containing the ad. These have become
irrelevant over time as most browsers have pop‐up blockers installed

Floating Ads This type of ad is hard to go unnoticed as it "floats" over the page for 5‐30 seconds and disables the rest of
the webpage activities, till the ad is not clicked or closed

These ads appear between web pages that the user requests. They come as full page ads between two pages
Interstitial Ads which the user wants to view
which the user wants to view

These ads run as a TV commercial in the browser window. When the user opens the page, the ad streams
Unicast Ads and starts on its own, directing the user’s attention through the audio‐visual effects

These ads appear in the form of a large ad initially, and are then reiterated throughout the website in the
Takeover Ads form of small ads appearing at different locations

These ads appear on websites with content similar to that of the ad. The software searches for
Contextual Ads
C t t l Ad websites with relevant keywords and places the ad at strategic locations for easy noticing


Online Advertising Industry
•Trends
•Competition


Domestic Internet User Base
• Large online user base of 50 mn despite
penetration of just 4.3%
• Increasing penetration to significantly
widen user base

Literacy & Language Barrier
Li &L B i Large Expatriate Population
L E i P l i
• Despite high literacy English usage is low • Additional target audience of large and
Factors
• Minimal availability of vernacular content typically wealthier Indian expatriates
influencing
despite majority preferring to surf • More access and consumption of online
vernacular medium
growth medium, including Indian content

Positive Consumption Patterns
Positive Consumption Patterns
• Higher speed of Internet connections
• More frequency and longer duration
• Increase in response to online advertising


Computer literacy & penetration in rural areas would add significantly
to the online medium’s usage
Reach of the Internet – Domestic Internet user base (in mn)
Claimed Internet User base mn
• The user base1 has been constantly increasing and mn
Internet Subscriber base 13.50 15
touched 50 mn in 2008 from 46 mn in 2007 11.10
11 10
60
• The subscribers2 have also seen continuous rise, and 9.30
10
increased to 13.5 mn in 2009 from 11.1 mn in 2008 40

• The prevalence of cyber cafes have helped internet 46 50 5
20
32
penetration in small towns and villages, skewing the N/A
0 0
users‐to‐subscribers number to more than 4 times
Mar-06 Mar-07 Mar-08 Mar-09
• In a population of 1.15 bn, it accounts to just 4% of
the total, which offers immense growth potential Urban‐Rural population divide
• Future Scope: In mature Asian Internet markets,
internet penetration has saturated with 68% Urban Rural
Total
• An assumption on penetration levels in India (current 28% 72% 1.15 bn
Population
penetration of 4.3%) yields the following:
Urban Rural Total Increase in Total
Penetration p
penetration Penetration User Base3
30% 10% 15% 130 mn
Population
40% 15% 22% 200 mn
4%
50% 20% 28% 280 mn
Internet Users
Internet
1 User base: Total number of individuals (Urban) with Internet access
U b T t l b f i di id l (U b ) ith I t t 82% 18% 0.05
0 05 bn
Users
(Source: I‐Cube 2008)
2 Subscribers: Total number of broadband and dial‐up connection owners Urban Rural
3 Growth in Population not accounted for


Apart from the domestic market, a good number of expatriate Indians
surf Indian content regularly
Indian Expatriates – Online characteristics Expatriate population – by geography
• The Indian expatriate population is more than 30 mn Country Indian Expatriate
 West including US, UK etc. is over 6 mn
g , Nepal
p 4,000,000
 Gulf‐based countries is ~4 mn Malaysia 2,400,000
• The typical profile is a relatively wealthier individual Burma 2,000,000
with higher purchasing power
United Kingdom 1,600,000
• High availability of telecom infrastructure in these
regions increases the probability of Internet access The Netherlands
Th N th l d 217,000
217 000

• Moreover, a major share of this community maintains France 75,000
strong links with the homeland and accesses content USA 2,765,815
of Indian interest Canada 960,000
 49% of NRI use the online medium f this purpose,
f NRIs h li di for hi
compared to 35% for electronic media and 16% for print Australia 235,000
 Figure in western countries is higher at 64% Saudi Arabia 1,500,000
 52% surf Indian websites at least once a day and 26% surf UAE 1,300,000
at least once a week
Trinidad & Tobago 525,000
525 000
• Inclination to maintain strong linkages arises from:
 Assets: 67% have bank accounts and houses in India South Africa 1,300,000
 Personal: Indian matrimonial and entertainment websites Mauritius 855,000

Online advertising is an effective medium to target a significant Indian expatriate population.
O li d ti i i ff ti di t t t i ifi t I di ti t l ti

Note: All numbers stated are approximate in nature


A sizeable online population, low penetration rate and increasing
usage offers a long‐term value proposition
Consumption of online media Broadband Penetration
• Speed: The ratio of Broadband to Dial‐up has grown 1.0
Broadband to Dial‐up Penetration 0.85
significantly over the years, ensuring rise of efficient
g y y , g 0.8
08
internet connections in the country 0.54
0.6
• Frequency: 67% of the active Internet users log on
more than 2‐3 times a week 0.34
0.4
0.24
• Duration: Average hours spent per week has 0
0.2
drastically increased from 6.9 hrs in 2007 to 9.3 hrs in 0.00 0.00 0.03
2008 0.0
 Dial‐up connection usage has also increased over the past 2003 2004 2005 2006 2007 2008 2009
2 years by a substantial 13%
Duration of Usage ‐ Average Hours/Week
• Key Demographic: Age group of 18‐35 years accounts
for 79% of the total user base Source: I-Cube 2008
Dial-up Usage Source: TRAI
13‐17 18‐25 25‐35 35 above
Av. Hrs/Week +14% Hrs/Month/Subs
% of Total
7% 45% 34% 14% 10 9.3 4.0
Internet Users
Internet Users 82
8.2
8 6.9 3.8
3.7
6 4.8
• Response to online advertising: More than 50% of
4 3.0 3.0
Internet subscribers respond to online marketing, an
2
increase compared to 2006‐07
2006 07 N/A
0
2003 2006 2007 2008 2009


The low Internet‐user to literacy‐rate ratio & under utilization of
Indian Vernacular languages, suggest immense growth potential
Literacy & language as a barrier Language profile – Internet User Base
• Online medium’s prerequisite of literacy poses a
growth barrier in comparison to Television or Radio, Total Population of India
as the target group is restricted to the literate 1.15 bn
1 15 b
population only 65%
• Currently, for every 15 literates in the country, just 1 Literate population in India
has used the internet 747.5 mn
• 21% of th t t l I di
f the total Indian population are E li h
l ti English
literates, while 44% can read & write in Vernacular 21% 44%
languages
33%
• However, the Indian Vernacular languages account
English Literate Non‐English Literate
for just 1300 websites (including Hindi) on the world 67%
247 mn 500.5 mn
wide web, which is 0.02% of the total
• In Print media, Hindi newspapers comprise 40%,
English only 15% and Vernacular Languages fill up
35% of the Indian market English
g
• This strengthens the fact that there exists a 500 mn
Preference
probable user base for Indian Vernacular content on Internet Users in India of language 28%
the Internet
50 mn
• In addition, from the total number of Internet users 72%
in India,
i I di 72% users would prefer t b
ld f to browse I tInternett
Vernaculars
content in Indian Vernacular languages


g y
•Trends
•Competition


BFSI, Online publishers and IT/Telecom are the major revenue contributors for
the online advertising industry in India

`
Niche & emerging nature coupled with low barriers to entry in this industry
Trends could lead to rise in competition

Acquisitions and investments by foreign players as well as Private equity firms
is providing a boost to this nascent industry
is providing a boost to this nascent industry


BFSI, Online publishers and IT/Telecom are the major revenue
contributors for the online advertising industry in India
Break up of the market by verticals Online Ad spends ‐ by vertical
25%
• Ad revenues in the online medium come from two BFSI 26%
sources ‐ the customary offline advertiser and other
y 17%
online companies like job, matrimonial, travel sites Online 25%
23%
• These online companies have their own advertising Publishers 21%
space, but they themselves advertise on targeted 13%
IT/Telecom 13%
portals to increase traffic on their websites 23%
• Other than these online companies, the major 10%
Auto 9%
contributors to ad revenues are Banking, Financial 10%
Services and Insurance (BFSI), IT/Telecom and 8%
Consumer Durables FMCG 8%
6%
• Analysts predict sustainable growth in online Consumer 8%
8%
advertising as many Indian businesses ranging from Durables 10%
small exporters and SMEs to large enterprises have 4%
started allocating budgets to online ads on account of Education 7%
7% 2007‐08
cost effective & global advertising 2008 09F
2008‐09F
7%
 35% rise in online ad budget of Auto companies in 2009 Others 6%
6% 2008‐09A
 30% rise in the number of education sector companies
advertising on the Internet in 2009
The market share of BFSI and Online Publishers has
 A typical SME engaged in e‐commerce derives 4% of its
revenues from online sales, expected to grow by an decreased drastically in 2008‐09 due to the economic
additional 600 basis points over the coming months meltdown


Niche & emerging nature coupled with low barriers to entry in this
industry could lead to rise in competition

Successful Entrepreneurial ventures
• Low barriers to entry in the online medium as
compared to other advertising medias could Naukri.com Komli
encourage entrepreneurial growth in this industry
• The current upsurge of Ad networks and search • Indian digital advertising &
•Leading provider of online
technology company
engines in India would promote high competition recruitment in India
•Founded by Amar Goel in
•Founded by Sanjeev
2006
Bikhchandani in 1997
Surge in the number of •Recognised among the
•Listed company under the
•Listed company under the
online ad networks can world’s “Fifty Best
name of Info edge on BSE
be attributed to growth Technology Start‐ups” by
5 and NSE
of online advertising in BusinessWeek & YouNoodle
the past 3 years
Website
Entrepreneurial Entrepreneurial
websites
Search Engine Ad networks
3 3
•An Indian online ad network
•India’s first crawler based •Founded by Harish Bhal in
search engine developed 2006
completely in India •Listed as “10 Most
1 1 1 1
•Founded by Anurag Dod in Interesting Start‐Ups” in
2006 January 2008 by business
daily, HT Mint
1998 1999 2000 2005 2006 2007 2008
Founding year of online ad networks in India Guruji.com Tyroo


Acquisitions and investments by foreign players as well as Private
equity firms is providing a boost to this nascent industry
Foreign Ad Networks in Indian Market

• Fox Interactive, the digital arm of • Microsoft Advertising soft‐launched • AOL is in the process of launching its
News Corp, rolled out its digital
N C ll d i di i l its international online ad
l l d ad‐network Advertising.com in India
d k d d
advertising services in India with the network DrivePM (Performance • The network will essentially
launch of its online ad network, Media) in India aggregate India‐specific inventory
called .FoxNetworks • It carries out online campaigns from a large number of international
based on pay‐for‐performance basis sites

PE/VC Firm Investments/Transactions Date
Helion Venture Partners, Opus Capital Invested INR 400 mn in a self‐servicing online video advertising platform, Jivox June, 2008

Capital 18, Goosefish Media Ventures
p , Invested an undisclosed amount in NetworkPlay.in
y October, 2008
,

Nexus India Capital, Draper Fisher
Invested INR 280 mn in Komli January, 2008
Jurvetson, Helion Ventures

Sequioa Capital Invested INR 200 mn in Ideacts July, 2008

IDG Ventures Invested INR 160 mn in Ozone Media July, 2008

Yahoo! India Bought between 35% to 50% stake in Tyroo Media July, 2007

Around INR 4 bn was invested by private equity/venture capital firms in online advertising sector recently
A d INR 4 b i t db i t it / t it l fi i li d ti i t tl

Note: Above list may not be exhaustive


g y
•Trends
•Competition


The developing online advertising market in India is already witnessing
stiff competition among domestic as well as international players
Competition Most used search engine
Yahoo
• Online advertising industry in India is largely
20% Rediff
dominated by search engines and portals
y g p
7% Indiatimes
• In spite of the online industry’s long tail, 80% of the
total revenues go to the top 8‐10 portals/portal group 3% Sify
3% MSN
sites 2% 1% Others
• Search accounts for almost 25% of the total online ad
market by revenues
• Google dominates the search advertising market
while Yahoo India has a hold on display and banner 64%
advertising Google
• Rediff.com, an Indian b d search engine and
d ff d based h d
services portal, managed 13% of the total online ad Online ad networks in India
revenues in fiscal year ended March 31st, 2008 Komli/PubMatic NetworkPlay
• From the past 2‐3 years, ad networks have started
Tyroo IDG Technetwork
gaining acceptance in the Indian market
• Currently, India has close to 15 online ad networks DGM India Google Adsense
• In 2008, 15% of total online ad spends were on ad
Ozone Media Adwinks
networks which is expected to increase by 3700 basis
p
points over the next year
y PayPod Sulekha


The upcoming ad networks offer numerous types of services to cater
to their advertisers and publishers across the globe
Komli Tyroo DGM India Ozone Media PayPod NetworkPlay

Publisher’s Base
P bli h ’ B

Indian      
International    
Services for Advertisers

Lead Generation     
Target Advertising      
Rich Media Text     
Click Fraud Management     
Ad Campaign Optimization     
E‐mail marketing     
Search Engine Optimization     
Payment Metric System CPM CPM CPA CPM, CPA CPM,CPC,CPA N/A

 
Offered Not offered Data not available

Note: Above list may not be exhaustive; profiles of all market participants is not included


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Market Research India - Online Advertising Market in India 2009

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