State of Online Display Advertising in India

A viable Internet user base with healthy e-commerce transactions is a good sign for marketers to invest in online advertising. In India, Internet ad revenue account for only 3% of the total advertising market and is considered as younger and niche on volume basis. However, it is set to grow at a healthy pace of 32% in the next five years betting on the growth of Internet usage and e-commerce, according to PricewaterhouseCoopers (PwC).

Display advertising is a major segment of growth in the Indian Internet marketing space. The segment climbed 38 % in 2008-09 from the financial year 2007-08, according to a study by IMAI and IMRB Research. Display advertising constitutes of banner ads, images, brand logos, flash or.gif multimedia images that catch the eye of the viewers using aesthetics.

Internet and E Commerce Growth
Internet is a very useful medium for marketers to reach their specific target audience. However, it needs the support of a good number of active users, marketers, and transactions. India is continuously witnessing growth in Internet adoption. Users are not only seeing Internet as information source but also using it for communication, leisure, and shopping activities. ComScore states that India has about 35.81 million Internet users as on September 2009. It grew 17% from 30.71 million Internet users in 2008.

In 2008-09, Global online shopping growth rate is nearly 8% to 10 %. But in India, it is more than 30 % with total e-commerce market in the country estimated to be around Rs.9,500 crore, according to eBay India. With nearly 36 million Internet users and e commerce market around Rs. 10,000 crores, India is among fastest growing Internet markets in the world encouraging online ad spending.

Growth of Online Display Advertising
Internet and Mobile Association of India (IMAI) estimates that online ad revenue in 2008 was around Rs.500 crore. Of this amount, a major portion is through online display advertising. The online display advertising industry reached Rs. 325 crore in 2008-09 from Rs. 235 crore in 2007-08, according to a study by IMAI and IMRB Research.

Industries Contributing To Online Display Advertising
The Banking, Financial Services & Insurance (BFSI) sector is an active contributor to online display advertising though it fell from 25% in 2008 to 17 % in 2009. It is expected to decline further in 2010 to 15%. Online publishers are the major contributors with 26% whose share is expected to remain stable or decline marginally in the next year. Others, which include political parties, general, merchandise companies and real estate players contributed to 4% of ad spending in 2008-09. The IT/Telecom industry and FMCG sectors contributed 15 % and 10 % respectively in 2009 and are expected to increase in 2010.

Absolute Numbers Not As Big As Percentages
The growth percentages of the Internet users, e-commerce, and Internet advertising are in double digits but the actual market situation is quite different. As already stated, Internet advertising in India contributes to a mere 3% of the total advertising market and it the smallest segment of the market. If we consider display advertising specifically, it will be much smaller in the lot. Similar case is with e-commerce. It is heavily dependent on the traveling and banking sectors. And regarding Internet users, there is a lot of ambiguity about the actual number of the Internet users in India.

India is a younger and unexplored market for Internet, e-commerce, and support services. The industry experts are very much optimistic about the growth potential of the Internet advertising market quoting its continues growth streak. However, it has a long way to go to become viable for all the parties and it is too early to rejoice on the growth percentages.