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Guest Article: Will online advertising become 50 pc of all advertising? - Part 1

Guest Article: Will online advertising become 50 pc of all advertising? - Part 1

Author | Vivek Bhargava | Monday, Jun 28,2010 8:40 AM

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Guest Article:  Will online advertising become 50 pc of all advertising? - Part 1

Probably every CMO in the country has been shown these stats – Internet users in India have reached 70 million as compared to the 14 million circulations of the Times Group and the 70 million cable TV households, etc. Online users spend 30 per cent of their time online, as compared to 23 per cent on TV, etc. Yet, total online advertising spend continues to be a few percentage points of total advertising budgets in most Indian companies.

The last few years I have felt like Kalidasa – we online folks have been cutting the very branch we sit on by selling measurement as the key differentiator of online. Recently, a few of us have gained enlightenment by realising that even in online, it is difficult to measure awareness, interest and desire part of the AIDA cycle. What we can actually measure is only the action. We online guys have conferences for three whole days on improving measurement of the online advertising industry (I am guilty of speaking at one called I-COM Barcelona), while the conventional guys haven’t changed their measurement methodology for decades and continue to laugh their way to the bank.

Before we discuss why all this is set to change, we need to go a little back in time when Sergey Brin and Larry Page were trying to monetise a search engine they had created. I think the concept behind creation of search advertising may have been very simple – what are the flaws of conventional advertising! Let’s create an advertising platform that removes these flaws.

So, what were the flaws…

Rate Card Based Pricing – The entire advertising was based on a rate card. Larger advertisers would get as much as 70 per cent discount on these rate cards, thus giving them a massive competitive advantage over the small and medium scale businesses. The ad words platform was bent on an auction model of pricing. Each advertiser was given exactly the same price, and the only way they could pay lower was by making their advertising more relevant to the user. Today, 80 per cent of advertising on conventional media is by large advertisers and 80 per cent of advertising on Google is small businesses.

Measurement – Conventional media has always been difficult to measure. The measurement methods put in place in the early days of mediums seem to have lost their value. For example, how can a measurement platform built during a Single Channel-One TV per Household- Joint Family and non-DVR (Tata Sky Plus) time period be still relevant today? Do the marketing folks really believe in the fact that the consumer habits of watching TV have not changed in the last 20 years? Today, a 7-year old knows how to fast forward ads. I am told that not everyone has Tata Sky Plus. Isn’t it a matter of time everyone will? Even today, unfortunately, it is the affluent TG that controls the disposable income that may have these comforts. Truly said, “If your advertising goes unnoticed, everything else is academic” - William Bernbach. Adwords was structured to measure the impression of ads, the clicks received, as well as what happened after the click in terms of customer acquisition. Google Analytics further allowed measuring the time spent by the user on the website, the geo locations they came from, what actions they took, etc.

Ability to Target Context – “In advertising, not to be different is a virtual suicide” - William Bernbach. The ability of Google to serve ads based on intent of the user and also charge advertisers based only on the elicited action (clicks) was the key differentiator as compared all conventional mediums.

The concepts were brilliant and execution was flawless. It allowed this industry to grow to $20 billion plus in less than 10 years, making Google the largest media company in the world. (For the unaware, the market cap of Google is more than the combined market cap of the number 2, 3 and 4 media companies, namely, Time Warner AOL, Disney and Newscorp).

The key lies in identifying how this $20 billion can go to $200 billion! In order to achieve this, a next revolution of online advertising was needed, as well as other factors had to align themselves well. I believe this has now happened and that we are now on the cusp of a perfect storm of online advertising.

Due to this, I expect online advertising, as we know it, to become more than 50 per cent of total advertising in less than five years. Why and How? Part II of the article coming up!

(Vivek Bhargava is the Founder and Managing Director of Communicate2, which has evolved into one of the largest search and social media specialist organisations in India.)

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