Will e-commerce ad spends cross Rs 1,000-crore mark in 2015?

Will e-commerce ad spends cross Rs 1,000-crore mark in 2015?

Author | Abhinn Shreshtha | Friday, Jun 05,2015 8:07 AM

Will e-commerce ad spends cross Rs 1,000-crore mark in 2015?

In 2014, the e-commerce sector spent between Rs 900-1,200 crore, according to various estimates. The PITCH-Madison Advertising Outlook for 2015 stated that e-retail contributed 3.6 per cent to the overall growth of the Indian advertising sector, which grew 16.4 per cent on the back of the Lok Sabha elections and aggressive brand building by e-retailers.

Will 2015 see a repeat of this? There are two schools of thought with equally convincing arguments. Firstly, there are those that believe that the aggressive spends will continue and, in fact, we did see that during the Cricket World Cup. For example, Ashish Bhasin, Chairman and CEO (South Asia) Dentsu Aegis Network said incremental growth in spends would be around Rs 400 crore this year. “The increase in spending is because of the money being poured in by VCs and the rapid pace at which all e-commerce players are looking to build their brand,” he said.

There is no doubt that VC money continues to flow to e-commerce players. Some reports put the total investment in e-commerce in 2014 to be around $4 billion. The trend has continued into 2015, but it is now the turn of the more niche players. Messaging app Lookup recently received $382,000 in seed funding from Twitter co-founder Biz Stone. Another player; UrbanPro, which provides localized services, has also raised $2 million from Nirvana Ventures in May and we are hardly 6 months into the year.

However, most of the big players who had spend the most money last year have already gotten their finances in place and it does not look like they will be raising more money this year; though this could change. This is something proponents of the second school of thought point out to when saying that ad spends might not be as high as 2014.

According to them, most of the big players like Amazon, Flipkart, Snapdeal, etc. have already spent a lot of money in brand building and marketing. They do not need to spend the same amount of money for customer acquisition this year. The categories that have not invested till now will definitely spend and we have seen that with the likes of UrbanLadder, Housing.com, Freecharge, Pepperfry, etc. this year, but this will not be of the same scale as that done by the biggies.

“I think we can safely see a 15 per cent drop in ad revenue from e-commerce this year as compared to last year. The spending will mainly come from the newer categories which have been quieter till now but I do not expect them to spend as much as an Amazon or a Flipkart,” says Dinesh Vyas, GM of OMD India. When we pointed out the case of Housing.com, which launched one of the most large scale campaigns seen recently, Vyas called it an exception.

Another media planner said that e-commerce players will continue to spend big in 2015. However, he also added that some of the bigger players have not spent that much so far.

A reason for this could also be that some of the big spenders of last year, namely, Flipkart and Myntra, have been more focused on promoting their application. Last year, it was more a case of getting the most mind share but now the business objective has changed, which might cause them to be more strategic in their investment.

The e-commerce industry is at a crossroads. To the neutral observer it is a time of upheavals and; hence, interesting, but still something to watch out for. Policy changes are in the offing. The brick and mortar players are up in arms. The  media and consumer landscape is changing. It is time to roll the dice.

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