Online Advertising Market - India

July 2009

Executive Summary
Estimated to be worth INR XX bn in 20- - and forecast to register INR YY bn in 20-Online Advertising accounts for just a% Indian advertising industry Fastest growing segment in Indian advertising industry at b% CAGR from 20- - -20-Online user base of ZZ mn in 20-- despite low penetration rate of just c%; computer literacy & growing penetration in urban areas alone will add significantly to the user base In addition to domestic user base, a large number of expatriate Indians, who consume Indian content, form a target audience 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 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

Market

Factors influencing growth

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Trends

Competition

d% of the total revenues go to the top 8-10 portals/portal group sites

Online Ad networks have started gaining acceptance in the Indian market in the past 2-3 years
Around X ad networks exist as of 20 -- , accounting for e% of the total online ad spend

ONLINE ADVERTISING MARKET INDIA.PPT

Advertising Industry Online Advertising Industry Factors influencing growth Trends Competition

ONLINE ADVERTISING MARKET INDIA.PPT

Online medium currently accounts for just a% of the total market but is the fastest growing sub-segment
Overview
Although online advertising has been in India since the dot-com era, the market crossed the INR XX bn mark as recently as 20- The market was worth INR YY bn in 20-- by revenue growing at a% p.a. since 2004 Online mediums share of total advertising market has risen from just b% in 20-- to c% in 20- Market is forecasted to grow at a slower rate of c% p.a. till 20-- primarily due to:
Current economic environment Massive reduction in advertising budgets across major client sectors Pressure on prices or ad rates

Online advertising Share of total

Print d% e% 1% a% c% b% TV Outdoor Radio Online Others

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INR bn
10 8 6 4 2 0

Online Advertising Market Size

Revenues Share of Total Advertising

f% e%

4% 3%

However, online is growing faster than other segments due to fundamental drivers such as:
Low input costs for advertisers Increasing awareness of online usage in India among marketers or advertisers Growth in online user or audience base

t% d% a% u 2004 b% v 2005 c% w 2006 x 2007 2008 2009F y z

2% 1% 0%

Sources: ONLINE ADVERTISING MARKET INDIA.PPT

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

Search Engine
Website

Online Ad Network
Website

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Advertiser
Website Website Contributes online ad space to the network

Portals

= Ad space sold through intermediary

Websites

Online Ad Network

Website

Website

-- -- ---

Online ad networks effectively act as a one-stop interface between multiple advertisers and publishers Online ad networks effectively act as a one-stop interface between multiple advertisers and publishers
5

ONLINE ADVERTISING MARKET INDIA.PPT

Domestic Internet User Base

Large online user base of X mn despite penetration of just a% Increasing penetration to significantly widen user base

Literacy & Language Barrier

Despite high literacy English usage is low Minimal availability of vernacular content despite majority preferring to surf vernacular medium

Large Expatriate Population

Factors influencing growth
Additional target audience of large and typically wealthier Indian expatriates More access and consumption of online medium, including Indian content

Positive Consumption Patterns

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

ONLINE ADVERTISING MARKET INDIA.PPT

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

Trends

Niche & emerging nature coupled with low barriers to entry in this industry 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

ONLINE ADVERTISING MARKET INDIA.PPT

The developing online advertising market in India is already witnessing stiff competition among domestic as well as international players
Competition
Online advertising industry in India is largely dominated by search engines and portals In spite of the online industrys long tail, u% of the total revenues go to the top 8-10 portals/portal group sites Search accounts for almost v% of the total online ad market by revenues Company 1 dominates the search advertising market while Yahoo India has a hold on display and banner advertising Company 2, an Indian based search engine and services portal, managed w% of the total online ad revenues in fiscal year ended March 31st, 2008 From the past 2-3 years, ad networks have started gaining acceptance in the Indian market Currently, India has close to X online ad networks In 20--, x% of total online ad spends were on ad networks which is expected to increase by Y basis points over the next year
Source: ONLINE ADVERTISING MARKET INDIA.PPT

Most used search engine

Company 2 b% Company 3 c% Company 4 d% Company 5 3% Company 6 e% f% Others

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a% Company 1

Online ad networks in India

A B C D E F G H I J