Bloom, gloom, boom

Mumbai: In India, Internet advertising (or online advertising, as it is commonly known) first came to the domain in late 1999. The market exploded in mid-2000 and consequently, along with the dotcom crash, it crashed in early 2001. Since then it has been quite a struggle to survive, forget expand, in the ambiguous market.

As per the projections made during mid-2000, the industry today should have been over Rs 100 crore (even Rs 500-600 crore, according to some leading analysts of that ''golden era''). But today, the market stands anywhere between Rs 25 crore and Rs 80 crore, depending on the person you talk to. Certainly, well short of the 800lb gorilla it was made out to be by many.

The reasons for this anomaly are several, and they can be traced over a ''five-stage Internet advertising growth lifecycle''.

The boom
It all started with huge promises in terms of deliveries at a very high cost. The sales and marketing people from websites and portals promised advertisers that anything was possible — right from micro-level targeting of individual users to offering overall marketing solutions for brands. Which was in reality not possible given the penetration levels of the PC and the Internet at that point of time.

It certainly had not accumulated the requisite critical mass needed to justify even the micro-level targeting and hence the cost per contact was simply not viable or was not practical to offer a complete holistic marketing solution. The problem was that there was a complete lack of understanding at both ends — the clients (advertisers and particularly the new-age ad agencies) as well as the media (websites and portals).

Most of the representatives from the websites and ad agencies were professionals from the traditional media who had moved into the new media for more lucrative remuneration or to kick-start their otherwise moribund careers without a keen desire or understanding in the medium itself. They failed to realise that this was quite a different ballgame all together.

On the other hand a whole host of clients and advertisers jumped on to the bandwagon just to see their ''brand on the net'', rather than understanding the media, though the idea was to fine-tune the brand communication to optimise its effect. To make matters worse all these came at a very high cost if evaluated in terms of cost per reach. Leading portals had been known to charge Rs 800-1,200 CPM (cost per thousand impressions) for basic banner advertising, which is probably 10-12 times that of today''s industry average. All in all, lots of grist for the Page 3 mill.

The bust
The market did a complete U-turn with the dotcom crash in early 2001. The clients who had had a bad experience with the Net immediately pulled out and joined the then bandwagon of ''dotcom bashing''. They completely closed themselves to anything to do with the Internet and even today, major advertisers cite these experiences as the reason for them not considering the Net as a medium for communication.

From the websites'' perspective, suddenly from asking for a premium, it became a question of survival. The problem was further compounded by the fact that lots of online advertisers themselves were Internet companies and they slowly began disbanding one site after the other. Like all other markets in a similar situation of oversupply the websites reacted by slashing prices.

From then on it became a complete price war and the prices touched the rock bottom, even as low as Rs 30 CPM on many a leading portal. Little did the sellers realise that they were not only undercutting their own value, but the value of the entire industry as a whole.

In their desperation to get business two new concepts started gaining popularity — cost per lead (CPL) and cost per acquisition (CPA). The media started making deals with clients based on the fact that only if the users signed up for a particular thing or if the sale got closed at the clients end, only then does the media get paid.

Suddenly the role of the medium changed completely, unlike the traditional media, for Internet the media vehicles (websites) had to not only reach out to their users and ensure that the user had seen it (measured through clicks on ads) but also ensure that a part of the sale process (CPL) or the entire sale process (CPA) had closed.

Lots of clients, who were into branding exercise, were offered such deals and they grabbed it with both their hands. From their perspective they had nothing to lose; they got the branding through the ad tools used to promote CPL/CPA but when it came down to payments it was based only on whether the lead had been generated or the acquisition had been made.

The leading portals that had excess inventory with them particularly offered this and hence they saw this as a way to not only utilise that but also to acquire clients. Most financial clients advertising on the Net today are operating only through this kind of CPL/CPA mode.

Adjustment
Today the market has moved towards another interesting concept: bundling. Leading portals offer a bundled value to the clients. One portal effectively uses its well-known parent publication. Most of their deals consist of a substantial part of the promotion being carried out in the parent print-based product and hence the clients get an assured visibility in print as a part of the entire deal.

Another well-known standalone portal uses its ''dialler impressions'' (where the users are connected to the Internet using their Internet start-up packs, where they are shown a 30-second commercial ''ad'' clip), and added visibility at their branded cyber café chain.

The other high-growth area for the industry has been an advertiser trying to reach out to the savvy non-resident Indians. But the problem in this case is that either the type of communication is still very rudimentary (just basic fixed panels for a particular period of time) or its is sale-based (CPL/CPA). So, probably the full potential of the market is still not getting exploited.

The leading ''verticals'' have repositioned themselves from being just a dotcom to more holistic companies. CricInfo, for one, is not only the largest cricket website in the world but also offers advertisers a ''holistic marketing solution'', revolving around cricket through their initiatives in mobile content, print publications, merchandise, cricket club, cricketing events, you name it.

Other such ''holistic'' companies have repositioned themselves as events, entertainment, mobile, integrated marketing solutions and virtual marketing companies. One even created a successful print ad campaign for a large retail oil major.

Existing bugs
A major problem faced by the Internet industry is the lack of a consistent third-party data. The advertisers are completely used to justification of any campaign on the traditional media through the support from the third-party data. All the leading research agencies in India at one point or the other have come up with research on the Internet, but none of them have been consistent and did not offer regular data like print readership or TV viewing research results published by the same people.

Agencies like AC Nielson, which publishes the worldwide Nielson Net Report and PC Meter as a continuous third-party data source, unfortunately are yet to come up with something of that format and quality in India. Till then all the figures in the market are the claimed figures by the websites and hence the clients look at it with a certain amount of apprehension and confusion. Therefore, there is a dire need for a consortium or a monitoring body to keep track of the industry and probably even set basic pricing guidelines to ensure that the value of the industry doesn''t get further eroded.

The key issue currently dogging the industry is the decreasing or stagnated spends by major advertisers as they slash and burn their advertising and promotions (A&P) budgets to maintain their margins. Some advertisers have cut down spends drastically up to 50 per cent. Others have not quite taken to the Net as their next ''800lb gorilla marketing medium''.

The reason for the above may be because of the fact that most advertisers today look at the spends on the Internet as ''leftover spends''. Post the mass media and below-the-line (BTL) budgets, they put the remaining money (if left over) on the Internet. Up until they look at the Internet as one of the priority media and start viewing it as a standalone media capable of delivering value on its own, it''s unlikely that the absolute value of the market will become substantial in the near future.

Looking ahead
Given the fast increase in the supply of bandwidth (both wireless and fixed line), along with the decreasing accessibility costs all around, it is expected that in the next couple of years there will be a spurt in the number of Internet-cum-mobile users. Hence it becomes imperative that the industry approaches it in a much more planned and careful manner of proper value enhancement for existing as well as new clients. The industry needs not only vertical expansion of same clients spending more money but also horizontal expansion by getting newer categories and clients on board for newer mediums and formats.

There has been a distinct lack of individual leadership qualities displayed by the major players to be able to grow their market proactively in the last five years. The only way the market will expand is for visionary leadership at an individual level — credibility to evangelise the potential, opportunities, caveats and the way forward. It is clear that it is important to communicate that this ''industry'' is legitimate and is here to stay and grow, rather than a being a fly-be-night inward-focused ''industry'' looking out for its own short-term survival.

But who has the intellectual and leadership capability within this fragmented and nano-industry to play this role? You tell me.