Betting on Digital

Growing Internet penetration and smartphone adoption is driving marketers towards digital advertising

Younger audience spends 180 minutes on their smartphone compared to 120 minutes on TV every day. So as an advertiser, will you choose TV or mobile,” asks Nitin Bawankule, industry director, e-commerce & media, Google India. The rationale notwithstanding, Indian marketers are still to embrace digital advertising like their western counterparts, where a massive shift is underway. Online advertising in the US is estimated to surpass television spends this year. In contrast, back home, structural challenges like limited Internet penetration and illiteracy spring up when one utters the word ‘digital’. But companies are slowly adopting the idea, driven by increased smartphone penetration and improving connectivity. 

There are 350 million Internet users today, up from 200 million in October 2013. Consequently, digital ad spends have grown from Rs.3,402 crore in 2014 to Rs.4,950 crore in 2015. They are expected to reach Rs.7,300 crore in 2016, according to a GroupM report. Growth in digital ad spends, as per the report, was the highest at over 35% across categories in 2014, and is expected to be over 45% in 2015. 

“Over the last two years, the biggest change has been the shift from desktop to mobiles. In 2013, less than 30% of Google search queries came from mobiles, now it’s over 60%,” says Bawankule. The massive shift makes sense as Internet adoption in the country is being driven by smartphones. In fact, Bawankule says, Internet user base wouldn’t have trebled from 100 million users in 2011 if desktop had remained the pre-dominant medium. 

Shubhajit Sen, marketing head, Micromax, credits this digital takeoff to adoption of smartphones in smaller cities. “What was an upper middle class urban phenomenon is now trickling down to tier 2 and 3 towns.” Accordingly, Micromax has been rebalancing its investments between traditional and digital media. “In 2014, for every Rs.100 spent on traditional, we were spending Rs.15-17 on digital. In 2015, we spent Rs.34,” says Sen. According to media reports, Micromax spends about 2% of sales on advertising and marketing and in FY15 posted sales of about Rs.10,000 crore.  

For home-grown Micromax, the decision to double online spends wasn’t just driven by the fact that consumers are spending more time online, it was also to do with the way online is interacting with offline. “45% of people watching TV will be simultaneously searching or posting on social media or texting. So you can take your marketing message further by showing a traditional ad and providing more information online,” explains Sen. The company’s growing digital focus also has to do with the success of its affordable Android brand Yu, which sold two million units in 2015. “Yu is an example of how we created a brand without any traditional marketing,” says Sen. Flipkart’s vice president, marketing, Shoumyan Biswas lays out other examples that have clicked without using traditional media. “Think Mi, Airbnb, Uber, Snapchat — they have all become marquee brands.” While not skewing its media mix much, India’s largest e-commerce player has been launching digital-only campaigns to drive its brand message. “We have started to craft digital-only advertising campaigns that not just drive higher share of the wallet but also adoption of e-commerce. Digital advertising allows us to tell stories like never before as campaign duration is not a constraint,” explains  Biswas. 

In fact, Tanvi Jain, senior VP, Dentsu India, says that in case of loyalty start-up Payback and Flipkart, videos created for online consumption have been repurposed for TV. Or in some cases, digital artwork is later being used as print ads. Consequently, digital agencies are now striding in step with traditional agencies. “Two-three years ago, we were on the periphery, almost an afterthought for majority of the clients. But in quite a few places, companies are not afraid to make digital their lead medium over TV and print, so we have come into the boardrooms and are discussing annual plans with clients,” shares Jain. 

Measurable, so better
Another reason driving the shift to digital is its precise measurability. Unlike other media, with digital, there are clear objectives, expected outcomes and metrics involved. “Objectives could be the number of conversations you are able to generate, going right up to sales. Some brands just want to create buzz,” explains Jain. “Some say get people to my site, some judge on final conversions, some say get me test rides. The range is now massive.”

This means more advertisers are coming into the fold. Earlier, lead generation as an activity was confined to BFSI, but now automobile and FMCG companies are exploiting the digital medium. As are educational institutions, driven by growing internet adoption amongst kids. “Three years ago if you came to me and asked whether HUL advertises with us, I would have said — on and off. But today they are online 24x7. Another vertical is auto; they too were heavily reliant on TV and print. But that’s changing,” says Bawankule.

Among the automobile pack, Maruti Suzuki, the country’s largest car seller, has been using digital to accelerate its reach and engagement. “With Ciaz, the medium not only helped us reach out to 7 million unique users but also increased test drives,” says Sanjeev Handa, VP, marketing, Maruti Suzuki. The model may not have logged good sales numbers, but Handa claims their digital campaign helped generate over 1,000 test-drives for the car. But where Maruti is happy with increased awareness and reach, others are using the medium to take on their adversaries. The counter offensive launched by handset major Samsung against Apple through its ad agency Cheil is an example. 

Sanjeev Jasani, head, digital, Cheil India explains: “People go mad searching for Apple every time they launch a new product. During this time, the search volumes go up. We tried to counter that in a smart way by creating some disruption. We threw up Samsung S6 ads every time someone searched for Apple 6S. People loved it, the media loved it and our search volumes grew as well,” claims Jasani. How did Samsung hoodwink users? It was a three-pronged approach, shares Jasani. Creative writing made the online audience feel like they may have searched for the Samsung phone by mistake; aggressive bidding on competitor keywords and contextual targeting, he says, worked for the brand.

What also makes digital advertising powerful is the numerous ways you can target people, courtesy Google and Facebook. It is no secret that Google knows where you have parked your car, your flight details, search preferences whereas Facebook knows where you went for your holiday, what kind of clothes you like and your dinner preferences. These ever-growing online conversations have given advertisers eyes and ears into users’ lives, helping them mould campaigns accordingly. “We can target people who are going to get married, who are travelling, who are pregnant and those having babies. It’s endless,” Jain explains. 

Google, in fact, has taken a step further with what Bawankule calls affinity marketing. “If we know, for example, the type of customers going to Myntra, on the basis of their purchase history, advertisers can identify people having similar profiles and advertise to them.”

The Samsung J series launch and the introduction of UDS (ultra data saving) mode in this series of phones is a case in point. “We figured that discussions around 4G were skewed towards telcos and not handset manufacturers. In addition, we found that although people were interested in 4G, they were concerned about the data bill going up. That created an opportunity for us to push UDS mode on the phones. The ‘Johnny mat ban’ campaign is an example of using social intelligence to solve consumer problems,” says Jasani.

With growing emphasis on digital, the strategy employed by brands has also evolved. For instance, Micromax has revisited its digital strategy in the last 18 months. “Our approach to digital was traditional, wherein we would spend a lot of money in creating some content like an anthem and then spend a lot of money promoting it. At the end, we were not clear whether it was leading to any business. What we changed in 2015 was we started focusing more on performance marketing. For example, we targeted people who were searching for smartphones,” says Sen. Precise targeting means that RoI on digital advertising is better though it can’t provide the same coverage as print and TV yet. But as digital is two-way engagement, the company gets instant consumer response and can take corrective action 

Video world 
Within the digital realm, marketers see the next wave of growth being fuelled by videos. “There is huge appetite for videos. It cuts across languages, and will likely drive the next wave with mobile,” says Manav Sethi, CMO, Askme.

After seeing multiple TVCs of Askme and Askmebazaar starring Ranbir Kapoor, one would think they spend most of their advertising budget on TVCs. But that’s not true. “About 70% of our ad budget goes online,” says Sethi. Askme recently made a video with AIB and ran a campaign against fake goods. “Our four videos received 6-7 million views and the cost of running them was one tenth that of TV,” he adds. 

Even for a giant like Google, videos have helped plug the social network gap. “YouTube has done extremely well. Two years back, we had just 40-50 million unique views monthly, now the number goes up to 85 million, and 60% of these views are coming from mobiles. Despite all the bandwidth challenges, our watch times are the best in the world. More importantly, to take on limitations like low speeds and buffering, we launched YouTube offline,” says Bawankule. And there are more changes in the offing, with the company looking to tap the Indian frenzy associated with Bollywood, entertainment and cricket. “Lot of brand money has come in. Users have doubled, number of brands have increased 4x,”he adds. Google’s India revenue increased from 3,050 crore in FY14 to 4,108 crore in FY15. 

Mobile frontier
With money flowing in and the growing clout of mobiles, the next enigma for advertisers is to create mobile-specific content and formats. “I understand digital, now I am trying to figure out what to do with mobile. Because mobile is space constrained,” says Jain.

According to Internet and Mobile Association of India (IAMAI), about 60% of surfing takes place on mobiles. Besides, an estimated 90% of people access Facebook on their devices. And while WhatsApp – now owned by Facebook – is not open to advertisers yet, it is a gateway to the Internet for most first-time users. Facebook has been selling more mobile ads on its app, closing the gap with Google quickly. Its global fourth-quarter revenue from advertisements on smartphones and tablets increased 81% over the previous year, accounting for most of the quarter’s $5.8 billion in topline.

Does that worry Google, especially when both are chasing the same pie? Bawankule says, “Everyone plays to their strengths. Five years ago, the entire ad industry was $6 billion, last year it was $9 billion. It is estimated to be $15 billion in the next five years. So it’s not a fight between us and Facebook. The advertiser will have to choose the right medium; both platforms have their own advantage.”

What the future holds
The increasing appetite for online advertising implies that ad rates will go up. Ads are auction-based, which means for every search on Google, AdWords runs an auction to determine the ads that show on the results page. A bidding strategy for placing an ad depends on the objective – clicks, impressions or conversations. Increasing number of bidders means rates will go up. “For example, if someone had put in a query to buy Nike shoes in 2010, there would have been just one or two advertisers. Today, there are at least 12. Neither Facebook nor Google have raised rates but competitive pressure has increased,” says Bawankule. 

Besides ad rates, there is another development that advertisers are eyeing in this space — the Reliance Jio launch. “It can increase footprint as the well the depth of digital India,” says Braj Kishore, brand head, SBI Life Insurance. For an entity that still relies largely on intermediaries and SBI branches for leads, rising Internet penetration could provide access to potential policy buyers from smaller cities. “HDFC, ICICI have a distinctive urban skew, but at SBI Life our focus spans across tier 1 to tier 4 cities.” 

Bawankule is also bullish about the future. “If Jio is able to do what it is promising, i.e. multiple GB of data at Rs.200, it will improve the experience for millions of consumers. In the first two years, benefit will go to the existing 350 million users, but eventually it will trickle down to the  next 400-500 million.” That sounds like good news for everyone. But one has to wait and see how this digital wave pans out. Till then keep surfing.