MxM Mondays: Why do marketers not spend enough on digital media?

13 Aug,2012

 

By Ananya Saha and Robin Thomas

 

According to the latest IAMAI-IMRB report on Digital Advertising, as of March 2012, the total advertising spends, including classifieds, was valued at Rs2,850 crore. It is expected that by FY2013 the digital advertisement spends will be Rs4,391 crore.

 

Search advertising constitutes about 20 per cent of the total online advertising spend or about Rs570 crore. Display advertisement, which has many components, forms a sizeable portion of advertising spends. Advertisements on portals and vortals form 13 per cent of the overall pie (Rs369 Crores). Advertisements on Social Media, Email and Videos over the Internet form 3 per cent (Rs94 Crores), 5 per cent (Rs144 Crores) and 2 per cent (Rs59 Crores) respectively. Mobile ads form nearly 4 per cent (Rs90 Crores). A major proportion – around 53 per cent of the overall digital advertising spends – are classifieds listings (Rs1,496 Crores).

 

These numbers seem impressive, but there has been some concern that marketers are not spending enough on Digital Media. The theme for this week’s MxM Mondays is ‘Why do marketers still not spend enough on digital?’ While marketing spends may be shifting to the digital media globally, in India, television and print still rule. Is it because digital still doesn’t reach the masses, and homemakers, in particular? Or is that the bucks (hence commissions) are still big in TVCs? MxM spoke to some players in the industry to find out:

 

Ambika Sharma

Ambika Sharma, MD and CEO, Pulp Strategy

The shift to digital media is not happening as fast as the industry would like it to be. However, we are witnessing an increase in aptitude and attitude with regards to usage of digital media. Marketers are not using the media aggressively as they prefer to wait-and-watch. Even then, they are aggressive on ‘search marketing’, but not other aspects of digital media.

 

There is hardly any youth brand which is currently not on digital platform. Education is one prominent category that has been using digital media. The cents for digital, however, remain restricted. But as the impact of digital media grows, the impact of mobile advertising has seen a decrease as most people now do not prefer to click on banner ads on mobile screens. Some studies show that in the past one-and-a-half-year, the user has been ignoring banner ads.

 

The digital spends depend on ROI, search and impressions, which needs robust backend engine. E-commerce websites have been the heavy users of digital advertising to create impressions. But there is little or no response mechanism on impressions and the visibility is highly fragmented. The numbers, like there is TAM for television, are not available for digital media. If a marketer advertisers on three digital platforms, every platform gives their own numbers. So, there is no comprehensive measurable strategy.

 

Going forward, digital media will grow, but it will be a long while before it catches up with other media vehicles. Lotof factors such as measurability, reach, people not preferring to buy online are affecting the growth.

 

Gyan Gupta

Gyan Gupta, CEO, I Media Corp Limited (IMCL), Dainik Bhaskar

In the US, the online spend is 29 per cent of the total advertising pie; in UK, it is 26 per cent. Now if you see the figures in India, it is not even 5 per cent. The trend shows that there will be 50 per cent increase.

 

But I will not say that marketers in India are spending enough yet. The typical spender (who spends on television) is yet not on-board. Till the main spenders come on-board, the growth will be limited. FMCG’s have a deep share of the pocket, and it is necessary that they spend on digital media. Auto companies, e-commerce companies, financial companies have been heavy spenders on this medium.

 

What are the marketers spending on, and how they spend also becomes important. What needs to be analysed is if the cost of acquisition is happening, if the leads are getting generated, how much a brand is spending on digital activation vis-a-vis on brand promotion. Trending is happening. This year will actually showcase the brands spending on digital media.

 

Harneet Singh Rajpal

Harneet Singh Rajpal, Vice President-Marketing, Domino’s Pizza India

The use of digital media is picking up in India. For any marketer present in India, the digital media is beginning to become a part of their media plan. It is on radar for everyone, especially in the categories where youth is the target.

 

For Domino’s, digital media has been important ever since we began our online ordering platform. Currently, it helps us drive traction. Hence, our media spends for digital medium have increased over the last two years. For us the return-on-investment is visible for every buck we spend on this media, since it results from direct conversion from inventory to revenue generation.

 

We now spend close to 4-5 per cent of our total advertising budget on digital marketing, from almost nothing in the last two years. We work with leading publishers in the domain to create applications for Google search, Facebook and social media. I must say that on Facebook, we have the largest number of fans in the food category, and also followers on Twitter.

 

Social Media management needs time and investment. It is important that the brand keeps the target in mind when planning the digital activations. Going forward, marketers will have to evaluate the prospects digital media brings. Of course, that depends on category to category. Digital media is still limited because of its reach, whereas traditional media garners higher reach. Also, the confidence about using the media is not too high among the marketers since there are no hard numbers to prove its success. The penetration of internet and the efficacy of the media will be tested over time.

 

Jonathan Bill, Senior Vice President and Business Development, Vodafone India

Digital Advertising is a growing medium in India. It will be everything we are hoping it to be and that too quicker than we think, so I think the business is starting to get in a healthy shape. The advertisers are starting to embrace digital more openly and they should do so, because India has the third largest internet population on the planet.

 

On TV and Print bagging bigger ad share, I think that is a legacy issue among advertisers, but I do get a sense that it is fast changing. In the West, however, TV and Print advertising have declined in favour of online advertising. Print, therefore, has very less revenue share from advertisers as compared to online advertising and now online is beginning to even threaten television as a medium.

 

I think we just need to continue on the path we are going. The quality of sales and, to a certain extent, the market needs to be made. The West took nearly two or three years to be made as far as the start of digital advertising market is concerned and in India we are only about a year ready. So, I am very bullish on digital advertising in India, particularly on mobile on three to five years timeline.

 

Narayanan SP

Narayanan SP, Senior Vice President, and Head VAS Mobile Commerce and Long Distance, Idea Cellular

Compared to the global benchmark, certainly advertisers in India are not spending as much money on digital or mobile, but this is something which will change over a period of time. Marketers are experimenting to see if it makes sense for them to connect digitally for certain set of products/features and whether digital is the right medium to communicate or engage their brands. Thus, lot of experiments are happening.

 

On the internet front, we are already seeing a significant traction which may not be as big as the international market because of the low internet penetration in India. So if you are looking at a certain type of product wherein the target audience are already digitally connected, then it makes immense sense to go digital. Digital, I believe, will evolve as more and more customer profiling is done and advertisers are able to target their customers precisely. When advertisers are able to measure the ROI (Return on Investment), then we definitely believe that a lot more investment will come into digital.

 

The fact that TV and Print still bag more advertising share will definitely change over a period of time in terms of mobile being one of the vibrant channels. This does not mean print and television advertising disappear but, you will see an increase in spends on digital advertising and mobile advertising in particular over a period of time. This is because mobile is able to give the advertiser not only a more precise profile of the customer which makes it a lot easier for the advertiser to reach out to its consumers effectively, but it also allows the advertiser to interact with customers and measure the results of their campaigns effectively.

 

Mobile industry, for instance, has a wealth of data in terms of customer usage, but there has not been much mining of the data which can be heavily leveraged by the advertisers. However over a period of time, you will see a lot more advertisers leveraging this data.

 

Rakesh Rao

Rakesh Rao, National Sales Head, Zapak Digital Entertainment

The digital media has been growing exponentially. The year-on-year growth of this media vehicle is close to Rs2,800 crore, and is supposed to reach close to Rs4,000 crore in a year. So to say that it is not a preferred media would not be the right statement. Of course, it is not a dramatic growth, but given the growth of internet and smart phones, digital media is becoming a part of our daily life. The marketers are also following the trend.

 

The ROI, when compared to TV and radio, is much more measurable. Cost per lead and cost per click measure actual conversions. This is the only interactive platform too, while rest of the media only give reach.

 

Education, travel, finance are becoming the biggest spenders on digital because of conversion aspect. E-commerce, and categories like travel that look at selling inventory believe in digital media.

 

The challenges that this media is encountering is getting TV-centric brands such as FMCG onboard because of reach. It is a given that while TV is cost-effective when it comes to reach, digital media will catch up in some years. About 60 per cent of these brands are on digital, but 40 per cent need coaxing. There is no hindrance apart from the fact that broadband numbers need to grow. Digital media is here to stay and grow.

 

Sandip Tarkas

Sandip Tarkas, President (Customer Strategy) and CEO, Future Media and T24

As far as Future Media is concerned, our advertising spends on digital have been increasing year-on-year. Despite a lot of digital activities done by marketers specifically on social media, it does not reflect in spends. The problem with digital is not a lack of a credible or universal measurement system, but the fact that it is too measurable as people try to measure every little thing. Although there are so many metrics which evaluate the digital medium, I don’t think it is a lack of measurability at all, as in digital we are clearly able to measure our CPM’s (Cost per Thousands) and so on. Digital is something we use for more engagement rather than reach because it does not offer reach.

 

We look at advertising based on two things – reach and cost efficiency. And then you look at everything else – whether the medium is interactive and so on. So, it is primarily about reach and cost efficiency. Digital media spend in India is a reflective of India’s internet penetration, whereas in a lot of markets digital penetration is very high. In those markets both print and television advertising have declined and digital advertising has been growing.

 

In India too, digital is growing much faster than the traditional media, and the growth of the media certainly shows the growing importance of digital. The current size of the digital advertising pie is reflective of the kind of inroads it has made in the country.

 

On digital being a 360-degree medium in itself and the role of online video and social media advertising, the biggest gain happening in digital at present is the fact that it is changing quite rapidly. Since the late 90s when we first started using digital advertising until now, the role of the medium has changed quite drastically.

 

Digital today not only offers more opportunities for engaging the consumers, but the vehicles used in digital have also been changing with time. For instance, in the early days television ads would continue for quite a lot of time, but today with more options, even the television channels have begun to announce that the programme will be back in say a minute or two. So as consumers have more choices, the way the medium gets utilized also changes. Digital, I believe, be it in any form – video, social, mobile – if it is not going to be interactive, it will not be very successful.

 

For anybody targeting the youth, digital is an inescapable medium. I believe the biggest change in digital advertising will take place through mobile, particularly mobile VAS and the data cost. Growth spurt in digital advertising will also come through the increase in smart phone usage and the lowering of data cost will revolutionize digital advertising.

 

This is because India has a very high tele-density and today mobile phones have reached the lower-most strata. I believe digital advertising in India will explode once mobile advertising comes of age but, right now it is still in its infancy.

 

Eventually digital advertising will impact television and print ads as marketers will have to allocate their budgets for digital advertising, once it comes of age. It may probably hit print advertising first and then television but for that to happen there is still some time.

 

Sanjay Tripathi

Sanjay Tripathy, Executive Vice President – Head Marketing and Direct Channels at HDFC Life

There is still limited spend on digital due to lack of knowledge about the medium and utilizing it effectively as a part of marketing plan; reach/penetration of the medium; and its ability to create impact in the short term. Digital still reaches about 10 per cent of the Indian population and there hasn’t been much of a development in building infrastructure to support the growth of internet. TV continues to be the mass medium which gets the maximum eyeballs and reach.

 

While the ROI variables will drive spends to digital, marketing needs a serious mind shift to look at the additional advantages which digital brings along –  a medium which allows two-way dialogue  and measurability to the last mile.

 

Thirty per cent of our budgets are dedicated to digital this year – a big move from the fact that we spent a negligible amount last year. As BFSI marketing and advertising becomes more ROI focused, digital media will play an important role. Digital budgets will have a healthy growth each year and will also account for a significant part of the marketing budget.

 

While marketing spends may be shifting to the digital media globally, in India, television and print still rule. This is because reach plays an important role. Penetration of Internet in India is still low compared to international markets. The consumption of non-traditional online media is still low and 360 degree integrated communication planning in India has not evolved to have online as an integral part of marketing plans. Also, online medium do not works in sync with other media.

 

While there has been a tremendous amount of growth in the usage of internet among SEC A, SEC B audience, internet is yet to gain as big an audience in tier 2 or tier 3 cities. TV continues to be the mass medium due to lack of digital infrastructure. It is the reach and channel affinity which mainly drives the spending and this is where a traditional channel like TV gets one up over digital. There is also a problem of lack of content on digital. Either the content has not been customized to cater to the audience or often the language becomes a hindrance in consuming the content.

 

But digital media will make a huge impact. Level of engagement, interactivity and ROI afforded by the medium means it has big role to play. For brands which don’t engage their users online will tend to lose their relevance. As reach increases, the importance and level of competition will also increase –  YouTube already affords a higher reach compared to most of the TV channels and is increasingly becoming an important part of the traditional media mix.

 

Digital offers tremendous potential for business – whether it’s about spreading awareness or generating business even in the face of a slowdown. In fact, as people tighten up their purse strings, they will want to do more research before they arrive at a purchase making decision and internet remains the primary medium of product research.

 

I see the spends going up because the whole media pie has been asymmetric- if you look at the reach-frequency formula and compare it to TV, print, radio and then digital. There are more people spending time on digital in comparison to other traditional media touchpoints. I see the digital percentage increasing in the overall pie.

 

Youtube and pre-roll videos have become a mainstay when it comes to hosting TVCs on digital and these unique ad formats are as effective in reaching out to audience as a TVC. For print QR codes help bridge the gap between offline and online world.

 

Saugata Bagchi

Saugata Bagchi, Senior VP, Tribal DDB India

The primary challenge is the need of cracking an ROI metric, which is acceptable by advertisers across the board.  The media spends are happening, but is it delivering enough clickthrough rate goes unanswered. Digital media cannot ensure high reach like television, but with 12 per cent penetration among various categories it can definitely give high frequency. Currently, only 25-30 per cent of population is online; hence, the spending on this medium will remain lower than other mediums.

 

The point of advantage is that there is a big influx of youth, and they are ready to spend. While the marketers would want to catch the youth online, they (marketers) get no justification in form of numbers to spend much on media. Hence, they prefer doing mall activation to spending on digital platform. The agency and publishing community need to be more forthcoming to speak to the marketers, and in their language.

 

Digital media is currently registering 15-18 per cent year-on-year growth, but it is important to note the gap between digital and television media.

 

Since the offices of MxMIndia are closed on Monday, August 20, there will be no MxM Mondays next week. We will announce the theme for the next edition on Tuesday, August 21.

 

 

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One response to “MxM Mondays: Why do marketers not spend enough on digital media?”

  1. Pulpy says:

    Ambika need to learn more about ComScore & other Online Metrics Tools

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