DIGITAL ADVERTISING IN INDIA

March 2013 EDITION

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CONTENTS

Executive Summary---------------------------------------------------------------------------------------------------------------------3 1. Indian Online Advertising Industry------------------------------------------------------------------------------------------------4 2. Market Size & Growth---------------------------------------------------------------------------------------------------------------5 3. Digital Advertising: Ad Avenues---------------------------------------------------------------------------------------------------6 4. Types of Digital Ad Avenues & Growth-------------------------------------------------------------------------------------------7 5. Industry Wise Ad Spends------------------------------------------------------------------------------------------------------------8 6. Search Ads: SEO vs. SEM Spends------------------------------------------------------------------------------------------------10 7. Display Ads: Spends as per Tech Format----------------------------------------------------------------------------------------10 8. Mobile Ads: Spends as per Ad type ---------------------------------------------------------------------------------------------11 9. Form Factor Comparison: Mobile phones vs. Personal computers--------------------------------------------------------12 10. Social Media Advertising---------------------------------------------------------------------------------------------------------13 10.1 Social Media Ads: Spends as per Ad type---------------------------------------------------------------14 11. Video Ads: Spends as per Ad type----------------------------------------------------------------------------------------------14 12. Ad Conversion Ratio--------------------------------------------------------------------------------------------- -----------------15 13. Attitudes towards Online Advertising-----------------------------------------------------------------------------------------16 14. Glossary of Terms----------------------------------------------------------------------------------------------------------------- 17 15. Research Methodology-----------------------------------------------------------------------------------------------------------18 About IMRB International & IAMAI-------------------------------------------------------------------------------------------------19

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Executive Summary
The purpose of this report is to take a deep-dive into the online advertising market in India closely tracking the way in
which the Indian online ad Industry has evolved. For more than four consecutive years now, we have continuously expanded the coverage of the report to include the newer ways of advertising through the Internet, such as social media and mobile Internet. Based on our analysis, the online advertising market in India was valued at INR 1,750 Crores in FY 2011-2012 of which, search advertising accounted for INR 718 Crores, clocking a growth of 46% y-o-y from our last year’s report. Display advertising contributed another INR 595 Crores to the overall figure, contunuing to dominate the online advertising market along with search with a combined share of 75%. The online advertising market in FY 2012-2013 has grown to reach INR 2260 crores, which represents a y-o-y growth of 29%. The share of advertising on mobile and social media is expected to go up whereas spending on display and email will decline due to this shift. The top four big spenders on online advertising for FY 2011-2012 continue to be BFSI, Auto, Telecom and Travel athough eCommerce players spent significant amounts of money on customer acquision in FY 2012-2013. Even though traditional media like television and newspapers still remain the preferred media for seeking information and entertainment and hog more than 80% of the advertising market in India, the Internet has been steadily increasing its share of the advertising pie. Spends on digital media have steadily increased from just over 1 percent of total Indian advertising spend in the year 2005 to nearly 7 % in 2012. (Source: This Year, Next year-Worldwide media & marketing forecasts, Summer 2012; GroupM)

Please Note - Financial Years are as per the following: FY 2010-2011 = 1 April 2010 to 31 March 2011 FY 2011-2012 = 1 April 2011 to 31 March 2012 FY 2012-2013 = 1 April 2012 to 31 March 2013 FY 2013-2014 = 1 April 2013 to 31 March 2014
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1. Indian Online Advertising Industry
The total online advertising market in India, comprising search, display, mobile, social media, email and video advertising was valued at INR 1,750 Crores in FY 2011-12 and has grown to INR 2,260 Crores in year FY2012-13. It is projected that by FY2013-2014, the size of the online advertising market in India will be INR 2,938 Crores. On an average, the online ad market have been growing at 40% year-on-year basis from FY 2010-2011 to FY 2013-2014.The graph below showcases the growth trend in the online advertising market in India. Figure 3: Indian Digital Advertising Market Growth

30% 29% 54% 1,140 1,750 2,260

2,938

FY2010-2011 FY2011-2012 FY2012-2013 FY2013-2014 (Estimated)
Industry Estimates in INR Crores

Source: IMRB International

Acknowledging the growing importance of social media and video advertising in online advertising, we have broken up the share of each for the first time in this edition of the report. Earlier editions of this report had market size for only Display and Text Ads. The FY 2011-2012 and the estimated numbers for 2o12-13 include spends on display, search, and mobile ads as well as spends on the new ad avenues: social media and video.

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2. Market Size & Growth
The total online advertising spend can be subdivided among the following categories –
Figure 4: Total Online Ad Spend (FY 2011-2012) INR 1,750 Crores

The Figure 4 pie chart depicts the percentage share of online ad spends across the various ad avenues. Following the previous year’s trend, search and display advertising continue form a large portion of the overall pie in FY 2011-2012. Their percentage share has however declined somewhat in FY 2012-2013, owing to the rise in the mobile, social media and video advertising.

Source: IMRB International Figure 5: Total Estimated Online Ad Spend (FY 2012-2013) INR 2,260 Crores In FY 2012-2013, search advertising constituted about 38% of the total online advertising spend, translating to about INR 850 Crores while display advertising will form a sizeable 29% (INR 662 Crores). Advertisements on mobile phones and tablets grew from a 7% share in FY 2011-2012 to 10% of the Indian online ad market in FY 20122013, totaling to spends of around INR 230 Crores. Social media, email and video advertising constitute 13% (INR 300 Crores), 3% (INR 68 Crores) and 7% (INR 150 Crores) of the online advertising market, respectively.

Source: IMRB International

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3. Digital Advertising: Ad Avenues
SEARCH ADVERTISEMENTS: Advertisements made up of text (displayed largely as sponsored links on search engines) come under this category. These are backed by hyperlinks that when clicked on, take the potential customer to the advertiser's website. DISPLAY ADVERTISEMENTS: Advertisements that are placed at various points on a web page that typically contain logos, photographs, other images or even text. Technologically these comprise of Image, Simple flash and Rich media with & without video ads. MOBILE ADVERTISEMENTS: Advertisements that are viewed or consumed on mobile phones or tablets come under this category. These comprise of Mobile Web ads, SMS, MMS, Mobile Video & TV ads and In-App ads. SOCIAL MEDIA ADVERTISEMENTS: Advertisements of any type: text, display, stamp pads etc displayed on various social media websites like: Facebook, Twitter, LinkedIn, Pinterest, Orkut etc fall into this category. EMAIL ADVERTISEMENTS: Advertisements that involve sending across a commercial message to a group of people using email comprise of this ad type. Emails are used to engage with existing customers to get repeat business as well as to acquire new customers. VIDEO ADVERTISEMENTS: Advertisements that fall broadly under the display type but have video within them and are served before, during and/or after a video stream on the internet. This type comprises In-Video ads, Standard In-Stream ads (pre rolls, mid rolls or post rolls) and TrueView ads. Figure 6: Trends in breakup of online ad market among various ad types

Source: IMRB International

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4. Types of Digital Ad Avenues & Growth
Display and search ads are the dominant online ad types today in India. Display and search advertising continue to dominate the market but other ad types are showing explosive growth albeit on a lower base. Spends on mobile advertising have doubled from INR 115 crore in FY 2011-12 to INR 230 crore in FY 2012-13, primary reasons being the proliferation of mobile phones in India, enhanced mobile Internet connectivity and increased need for customer engagement. Spends on social media and video advertising also show 71% growth y-o-y. The graph below highlights the growth in the various online ad types over the last three financial years. Figure 7: Trends in spends on various online ad types

Source: IMRB International Since 2010, spends in Search Ads have grown from INR 493 Crores in FY 2010-2011 to INR 850 Crores in FY 2012-2013, with an average growth of 38% year on year. After experiencing almost 7% growth in FY 2011-2012, spends on display advertising have shown a comparatively modest growth rate of 11%, bringing it to about INR 662 Crores in Fy 2012-2013. As shown in Figure 7, social media advertising in India will be an estimated INR 300 Crores in FY 2012-13 posing a 71% growth from FY 2011-2012. Along the same lines, video advertising has clocked 71% growth, and is at INR 150 Crores in FY 2012-13. Email advertising continues has grown at a consistent rate and has touched about INR 68 Crores to the overall online advertising market in India in FY 2012-2013.

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5. Industry-Wise Ad Spends
Figure 8: Industry Wise Spends (FY 2010-2011 & FY 2011-2012)

Source:IMRB International Note: Spends by E-commerce companies were not measured separately in the FY 2010-2011.

Figure 9: Industry Wise Spends (FY 2011-2012 & FY 2012-2013)

Source: IMRB International

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The BFSI, travel and auto sectors continue to be the top 3 spenders in online advertising. Increased spending by ecommerce players has been one of the highlights of the online advertising industry in FY 2011-12. Their share of spends is estimated to decline in 2012-13. . The Telecom sector in the above two charts includes handset manufacturers who have also been huge spenders in FY 2012-13 with new models of smartphones and tablets being launched by players across the mobile phone market.

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6. Search Ads: SEO vs. SEM Spends
Figure 10: Search Ad Spends (FY2012-13) Search advertising constitutes about 40% of the online advertising market and is an important component of marketing campaigns aimed at customer acquisition. Companies belonging to various verticals continue to invest in search advertising owing to its cost effectiveness. As seen in the adjacent graph, SEM i.e. buying or bidding for Adwords forms the majority of Search ad budget. About 85% of search spend is in terms of SEM which is about INR 723 Crores, as compared to INR 128 Crores for SEO.
INR 850 Crores

15%
SEO SEM

85%

Source: IMRB International

7. Display Ads: Spends as per Tech Format
Online Display advertising has matured considerably with the creatives increasingly becoming more sophisticated and engaging. Long a staple of brand advertising campaigns, various technologies are used to develop display ads in the form of web banners containing images, flash objects or interactive media using audio or video. The images can be static or dynamic. In terms of Technology Formats, Display Ads are categorized as follows     Image (GIF/JPEG) Simple Flash Rich media without video Rich media with video
Image (GIF/JPEG) Simple Flash Rich media without video Rich media with video

Figure 11: Display Ad Spends (FY2012-13)
INR 662 Crores

20%

20%

30%

30%

As seen in Figure 11, display ads using Simple Flash and Rich Media without video form a major chunk online display advertisements, each of them contributing 30% to the total online display advertising spend. Standard Images (JPEG & GIF) and Rich Media with video contribute to another 40% of the pie. Usage of rich media with video is expected to grow as we progress through 2013.

Source: IMRB International

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8. Mobile Ads: Spends as per Ad type
Fun, exciting and a newest interactive advertising medium, mobile advertising is a form of advertising on mobile (wireless) phones or other mobile devices. The Internet has been reinvented on mobile devices becoming smaller, more personal, customizable, and accessible anywhere on the go. Traditional forms of interactive advertising are therefore now in the process of evolving as they migrate from computers to mobile devices. Mobile advertising includes a broad range of opportunities such as search, banner displays, messaging, multimedia messaging, video and advertising within apps. Mobile web advertising through banners and in-app advertising constitute about 80% of the mobile advertising market. Currently, the most trending form of mobile advertising is display, with standard JPEG & GIF images, Simple Flash and Rich media without video. Rich media with video is gradually ramping up in the mobile advertising industry, allowing advertisers to run videos on a mobile web page or within a mobile application – referred to as in-app. Other forms of advertising include MMS (multimedia messaging) i.e. mobile advertising that involves audio visuals, advertising within mobile gaming apps, videos and mobile TV. MMS mobile advertising is commonly used when consumers use tele-booking facilities. A trending form of mobile display is to include the use of rich media within the banner ads. This includes banners that have the capabilities to expand, offering advertisers a larger space to communicate their message. Games can also be placed within a banner to make the user’s experience more interactive and engaging. According to this edition of IMRB International’s primary survey findings, the mobile advertising market is distributed among the following types of mobile advertisements      Mobile Web Advertising SMS Advertising Figure 12: Mobile Ad Spends (FY2012-13) INR 230 Crores MMS Advertising Mobile Video & TV Advertising In-App Advertising
Mobile Web Adv

As seen in Figure 12, the advertising viewed on mobile browsers or WAP forms 40% of the total mobile ad spends and mobile video & TV together with SMS and MMS advertising form another 20%. The remaining 40%, which is INR 92 Crores, is estimated to be spent on In-App Advertising, which is a premium form of mobile advertising especially on high-end devices like Apple’s iPad. All mobile advertising spends add up to of INR 230 Crores in FY 2012-2013.

40%

40%
Mobile Video & TV, SMS, MMS Adv In-App Adv

20%

Source: IMRB International

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9. Form Factor Comparison: Mobile phones vs. Personal computers
Figure 13: Internet Traffic from Devices (FY 2012-13) Interestingly, mobile traffic is growing so fast globally that it is expected to surpass the desktop traffic in just a couple of years. From our outlook the primary drivers for such a ramped up growth are: continued surge in mobile Internet-ready devices such as smart phones, feature rich phones, and tablets; mobile devices with smarter technology, high mobile network speed, increased video-content consumption and last but not least, the high availability of rich media and more engaging apps in the marketplace.

16%

Mobile Phones

84%

Personal Computers (Laptops, Netbooks & Desktops)

Source: IMRB International

Figure 13 above shows the proportion of the Internet Traffic coming from the two different form factors in FY 2012-13. A majority of the stakeholders of the Digital Advertising Industry are now closely tracking their online traffic for the device it’s originating from. Although a major chunk i.e. 84% of the internet traffic still comes from the personal computers laptops, net books & desktops, the percentage of traffic coming from mobile phones and tablets is increasing steadily. Traffic from mobile devices grew from being 10% of the total Internet traffic in FY 2011-12 to 16 % in FY 2012-2013.

Mobile phones have provided advertisers a novel way to target affluent consumers, mainly through in-app advertising on expensive brands of smart phones. Since it’s possible to capture data points such as device type, brand and model as well as location of the user combined with the time of day, mobile advertising is emerging as the preferred performance marketing channel.

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10. Social Media Advertising
Judging by the spike in spends on social media advertising from FY 2011-12 to FY 2012-13, it can be safely concluded that 2012 will be remembered as the year companies in India officially took the social media plunge, embracing Twitter, Facebook and advertising on social networking sites as an integral and crucial part of their marketing plans.

In 2013, these companies are expected to look forward and expand their investment in social media as understanding of the medium deepens and functionality extends beyond just marketing and community building. One of the major benefits of advertising on a social networking site (e.g. Facebook, Myspace, Friendster, Bebo, Orkut, etc.) is that advertisers can take advantage of the users demographic information and target their ads appropriately.

Social media has been the topic of many marketing conversations of late, and there’s no doubt that its popularity will continue to soar in 2013 and in subsequent years. Social networking has changed the balance of power between customers and businesses and forces more accountability and transparency into the relationship. Just a few negative comments posted on a social media website about a particualr brand influences consumers negatively about the brand and makes them uncertain about buying that brand.

Businesses today are increasingly aware of the fact that just monitoring their social media profiles and communities is no longer enough; instead they need to embrace it and make it an integral part of their strategy. Only then they would be able to truly establish a connect with the customer. Social media provides brands the unique opportunity to embed themseleves into the lives of the consumers, deeply understanding their buying behaviour and preferences and thereby, influencing their buying decisions.

The four main categories of social media advertising tracked in our report are:

   

Text Links Display (includes Stamp Ads) Video Sponsered/Promoted Tweets & posts

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10.1 Social Media Ads: Spends as per Ad type
Figure 14: Social Media Ad spends (FY2012-13) INR 300 Crores We estimate the total social media spend in India to be an estimated INR 300 Crores in FY 2012-13. Display advertising captures a huge 75% of the pie, followed by text links, sponsored/promoted tweets & posts and video constituting 5%, 12% and 8%, respectively. Social media spend has nearly doubled in last 2 years. Youtube/video sharing sites are growth areas where advertisers would further increase their spends in FY 20132014. They would do this by developing video content for various social media websites.

Source: IMRB International

11. Video Ads: Spends as per Ad type
One of the main reasons of online advertising revenues soaring high is because more and more people are watching videos online and the people who provide this video content are increasingly bundling it with ‘forced view’ (pre-rolls, mid-rolls and post-rolls) advertisements. Interestingly, this forced viewing has worked and it has also made viewers accustomed to the fact that if they want to view content for free, viewing ads is the price they have to pay for it, much like television. Figure 15: Video Ad spends (FY2012-13) INR 150 Crores The video advertising market is currently divided into three main types of video ads:    In-Video Ads (expandables and overlays) Standard In-Stream Ads (pre, mid & post rolls) True View Ads by Google*

As shown Figure 15, the overall video ad spends in India in FY 2012-2013 was about INR 150 Crores, of which 64% went to in-stream ads while 24% went into in-video overlays. The share of True View ads by Google is expected to increase largely owing to dominant position of You Tube in the video space. Source: IMRB International *TrueView video ads give viewers choice and control over which ad they watch so advertisers are charged only when a viewer has chosen to watch their ad. (http://www.google.co.in/ads/innovations/trueview.html)

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12. Ad Conversion Ratio
With greater bandwidth availability, advertisers today are trying to make advertisements that are interactive and engaging in an effort to drive clicks and conversions. Since the entire industry is becoming more performance and ROI driven, it becomes mandatory for businesses to measure the conversion rates and analyze the consumer behavior better. Below shown are the conversion ratios of various ad types according to the findings of IMRB International’s syndicated study: I-Cube 2012. Figure 16 below shows the post ad viewing behavior. Emails, mobile and social media ads show very high view to click ratio (more than 60%). Figure 16: Ad Conversion Ratio (FY2012)

Source: IMRB International

As per the findings, 67% of individuals that saw an email ad, clicked on it and 66% of those who saw an ad on a social media website clicked on it. The Click to Seen ratio for In-Streaming Video ads have increased from 38% in last year to 43% in FY 2012. Post click behavior also tells an interesting story, with emails and social media advertising showing the highest conversion from click to look for information online (81% in both cases). Mobile ads have the highest Search to Bought ratio (75%), although it is difficult to say so conclusively owing to small base. This is followed by the social media ads where 64% of people who looked for specific information on a product have in the end bought that product.

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13. Attitudes towards Online Advertising
In terms of the attitudes of Internet users to online advertisements, there emerge some interesting points. 50% of respondents felt that online ads were informative., while 46% said that they clicked on ads that were relevant to them, and 46% felt that online ads helped them find the right product that they were searching for. Figure 17: Attitude of Internet Users towards Online Advertising

Source: IMRB International

Quite interestingly, 41% of respondents agreed that online ads had an impact on their buying decisions, while nearly 50% found online ads interesting. This goes to show that if advertisers are present compelling ad content that the online audience finds relevant to them, there is a sizeable chance of positively influencing buying behaviour and even driving a sales conversion.

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14. Glossary of Terms
ACTIVE USER: CLAIMED INTERNET USER: An individual who has used the Internet at least once in the last 1 month. An individual who has used the Internet at any point in time in the past. This gives us a clear indication as to how many Indians have experienced Internet at least once in their lifetime. Online advertising is a form of promotion that uses the Internet and World Wide Web to deliver marketing messages. Digital advertising is marketing that makes use of electronic devices such as computers, tablets, smartphones, and mobile phones to engage with consumers and other business partners.

ONLINE ADVERTISING: DIGITAL ADVERTISING:

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15. Research Methodology
The findings presented in the current edition of the report have been derived by conducting both primary as well as secondary research. This report tracks data for the Indian Financial Year, showcasing the information captured from various data sources for FY 2010-11 (April 2010-March 2011) and FY 2011-12 (April 2011-March 2012). Estimations for FY 2012-13 (April 2012-March 2013) have also been provided.

PRIMARY RESEARCH : Interviews were conducted with Internet users and online ad industry players and information collected on Internet usage in case of the former and volume of online advertising business managed by the latter. Figure 18 : List of Cities by Population Strata CITIES BY STRATA Top 4 Metros Other 4 Metros Small Metros (More than 1 Mn population) Non Metros Delhi, Mumbai, Chennai and Kolkata Bangalore, Hyderabad, Ahmedabad and Pune Coimbatore, Jaipur, Lucknow, Ludhiana, Visakhapatnam, Patna, Guwahati, Kochi, Vadodara, Indore, Surat, Nagpur Internet Users: Structured Face to Face (F2F) interviews were conducted with 81,000 individuals among 21,000 households spread across 35 Cities during ICUBE2012, a syndicated product of ETech, IMRB International. Industry Experts: In-depth interviews were conducted with stakeholders of the online advertising industry in India, including ad agencies, media agencies, online publishers, ad networks, mobile ad networks as well as advertisers.

Aurangabad, Belgaum, Aligarh, Bhubaneswar, (Between 0.5 to 1 Mn population) Raipur Small towns (Less than 0.5 Mn population) Alappuzha (Alleppey), Ujjain, Sambalpur, Faizabad, Panipat, Kolaghat, Baleshwar, Philbit, Amreli, Chickmagalur

SECONDARY RESEARCH : Secondary research was done to understand the structure and dynamics of the digital advertising market in India. Information from various published sources was used to perform data validation check. Information collected from both secondary and primary research was thoroughly analyzed to prepare this report.

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About IMRB International and IAMAI
eTech Group | IMRB International (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space. Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present market environment and a roadmap for the future.
Contact Details eTech Group | IMRB BIRD - IMRB International ‘A’ Wing, Mhatre Pen Building Senapati Bapat Marg, Mumbai www.imrbint.com Research Team for this Report Tarun Abhichandani, Group Business Director (Tarun.Abhichandani@imrbint.com) Durga Ray, Insights Director (Durga.Ray@imrbint.com) Priyam Joshi, Research Manager (Priyam.Joshi@imrbint.com)

About Internet and Mobile Association of India (IAMAI)
The Internet and Mobile Association of India [IAMAI] is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was established in 2004 by the leading online publishers, but in the last eight years has come to effectively address the challenges facing the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising, ecommerce and mobile & digital payments among others. Eight years after its establishment, the association is still the only professional industry body representing the online and mobile VAS industry in India. The association is registered under the Societies Act and is a recognized charity in Maharashtra. With a membership of 125 Indian and MNC companies, and offices in Delhi and Mumbai, are well placed to work towards charting a growth path for the digital industry in India.

Contact Details
Nilotpal Chakravarti
406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018 Tel: +91-22-24954574 | Fax: +91-22-24935945 | http://www.iamai.in Published By – Dr. Subho Ray, President, on behalf of Internet and Mobile Association of India ````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````` ``````````````````````