Amazon & Flipkart collectively garnered ad rev of Rs 3900 crore in FY21
The two e-commerce giants are expected to reap rich dividends due to an increasing number of brands and categories taking to advertising in this space and the huge consumer base of these platforms
Published - Jan 20, 2022 8:15 AM Updated- Jan 20, 2022 12:04 PM | 4 min read
The growing adoption of online shopping has come as a shot in the arm for e-commerce giants like Amazon and Flipkart. While both these platforms are logging strong growth in revenue year-on-year, they have also emerged as important platforms for brands and marketers to reach out to their customers.
With an increasing number of brands and categories taking to e-commerce advertising, Amazon and Flipkart are expected to reap rich dividends, thanks to the huge consumer base of their respective platforms. According to financial data accessed by business intelligence platform Tofler, Amazon Seller Services and Flipkart Internet, the online marketplace arms of Amazon and Flipkart respectively, have seen a huge growth in revenue earned through advertisements.
Collectively, the two companies cornered advertising revenue worth Rs 3940.2 crore in FY21 compared to Rs 2645.8 crore in FY20.
Amazon Seller Services' revenue from the rendering of other marketplace-related services jumped to Rs 2554.2 crore for the year ended 31st March, 2021, from Rs 1637 crore in the previous fiscal. According to the company's annual report, other marketplace-related services primarily include sales of advertising services.
Flipkart Internet's income from advertisement services climbed to Rs 1386 crore in FY21 from Rs 1008.8 crore in FY20. The company noted that the income from advertisement services is recognised based on the number of clicks or impressions.
Clicks are generated each time users on the platform click-through advertisements to an advertiser’s designated website. Impressions denote the number of times that an advertisement appears in pages viewed by users of Flipkart's platforms. "We use the output method and apply the practical expedient to recognise advertising revenue in the amount to which we have a right to invoice," the company said in its annual report.
Mirum India Joint CEO Hareesh Tibrewala says the overall ad spends on e-commerce platforms will be in the region of Rs 5,000 crore as just Amazon and Flipkart account for almost Rs 4,000 crore of the total market. "Overall digital advertising in India would be about Rs 20,000 crore and I would have expected the ecommerce ad market at about 15% of this or Rs 3,000 crore. However, as per data from Flipkart and Amazon, the overall ecommerce market seems to be closer to 20-25% of the digital media spends. 90% of ecommerce ad spends are with Flipkart and Amazon. If Flipkart and Amazon are accounting for Rs 4,000 crore, the rest of the players would be around Rs 1,000 crore," he stated.
The growth in e-commerce media spends should not come as a surprise since they are driving conversion at the bottom of the funnel, Tibrewala added. "If you look at the entire marketing funnel, social channels come at the top of the funnel (creating awareness), the search comes in the middle (consideration) and commerce comes at bottom (conversion), and Amazon and Flipkart are driving the conversion," he explained.
According to ProfitWheel Co-Founder Vivek Bhargava, the marketplaces have two key benefits as they earn ad revenue and commission from extra sales that might happen due to advertising on the platform. "The first benefit is that they get advertising revenues, and advertising helps brands to sell more on the same platform. They get a margin on the sale also. So, it is a double benefit for the marketplaces vis-à-vis Google and Facebook who only make money through advertising," he elaborated.
Advertising on e-commerce is almost like a cost of sale rather than an advertising expenditure, Bhargava further added. "For FMCG, advertising on e-commerce platforms has become a cost of sale. They can increase their budgets significantly since it is cost of sale and not ad expenditure."
Pointing out that Amazon's ad revenue is growing much faster than that of Google and Facebook, Bhargava said: "Amazon will be the third big player in the digital advertising market in India and globally. It will be a significant challenger to both Google and Facebook in the long run from an advertising point of view. Amazon is a larger walled garden as users stay on the platform when they click on the ad."
Sharing more insights was Kurate Digital Consulting Senior Partner Uday Sodhi who says the e-commerce advertising market is bigger than Rs 3500 crore. A lot of e-commerce advertising happens on Google and Facebook besides Amazon and Flipkart which are the biggest online marketplaces in the country, he stated. "When brands advertise on Facebook the link goes to an e-commerce website. Besides Amazon and Flipkart, there are many other online marketplaces in the country," Sodhi added.
AdLift CEO and Co-Founder Prashant Puri believes digital and e-commerce advertising are growing due to an increase in data consumption, growth in smartphone penetration, and the ease of buying online. He is expecting that the time spent on digital services will go up further once 5G services are rolled out.
According to Puri, more time spent on digital will further fuel digital advertising growth. "About 70-75% of digital ad spends is allocated for Google and Facebook in India. The remaining 25% is distributed across LinkedIn, Twitter, programmatic and influencer marketing," he noted.
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