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Social networking in India: Ad spends remain low, but future looks promising

03-December-2007
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Social networking in India: Ad spends remain low, but future looks promising

Social networking in India is growing and how. According to a report by IAMAI, of the total Internet user base of over 23 million in India, 8-9 per cent of users were active on social networking sites, with Orkut (having significant user base from India) making it to the Top 10 most recalled brands among Internet users in the world.

According to a report released by eMarketer on the 2007 ad spending on social networking sites, non-US spending was $335 million and by 2010 this figure is expected to rise to $970 million. There is no definite figure forthcoming on India’s contribution to this non-US spending figure. Industry experts felt there were several constraints in terms of usage deterring the influx of ad revenues in the social networking domain.

On the competition side, some Indian sites like Fropper.com, Desimartini.com, Yo4ya.com, and others are already vying to grab a larger share of the online user base in India. These sites are likely to give the likes of Orkut, Youtube, Facebook, Myspace and other popular international websites a run for their money in years to come.

Given the nascent stage of this new medium, a few Indian websites are focusing on providing user-friendly applications. Fropper.com features ‘easy blogs’ to attract new users and build communities around them, while for advertising, Microsoft recently launched Sponsored Spaces on Windows Live Spaces as one of their new ad platforms. The company boasts of an ‘easy-to-buy, easy-to-sell’ approach that it brings to its advertising solutions.

However, the general belief among advertisers in the online business is that the Web is just a new medium with a lot of buzz, and that it has no such potential to replace or affect the existence of any of the traditional media like the television, radio and print.

Roadblocks to advertising on social networking
Rajnish, Head of Sales and Marketing, MSN India, said that the stability aspect of the users was a major hurdle. He added, “Currently, users are moving from site to site, and there is not much stickiness seen in their usage pattern. Until the user base becomes more stable and mature, it will be harder for advertisers to target a specific audience and thus, monetisation of content for the bloggers will take some time to kick off.”

Navin Mittal, Head, Fropper.com, pointed out that advertisers were averse to investing on social networks as Internet in India was still low in usage. Another problem deterring ads on social networking sites is that there are very few professional bloggers who blog for a living in India. It also becomes difficult for Indian bloggers to earn over the Net as the foundation has to be set in terms of creating a fan following via whatever work they do on the social networking sites.

Rehan Khan, Founder, Yo4ya.com, said that in the initial stages of the business, most websites concentrated on quality content by getting more users, engaging and binding them together in a community so that they could produce far better content on the Internet. “Advertising is secondary because until you have quality content that gets in more readership, there is no question of advertisers knocking at your door,” he added.

Split-up ratio among users and service providers
The general ratio of users and services providers is 50:50. There have been a few entrants in the market such as Weblo.com, which deals in selling profiles and cities for real cash. The company plans to give 66 cents for every 10,000 impressions, and $10 for every 1,000 impressions once one crosses the 10,000 barrier.

However, Rajnish has a different view on this. He said, “It’s hard to say what the ratio would be in terms of revenue generation right now as we are yet to reach that level of functioning.”

Effect on existing models
Experts believe that existing models of advertising in India are undergoing a change with growth of the online medium. Moreover, with the introduction of newer online technologies and services, the trend, which is spotted by the industry players, is that traditional models of advertising are slowly and gradually diminishing in terms of value proposition.

The fact remains that advertising on social networks is more or less aligned with online advertising, and with most online advertising offering greater degree of personalisation, future looks only bright and promising for advertisers and also for the bloggers who can earn and gain popularity at the same time.

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