Another Click in the Wall

Thanks for the overwhelming response to the previous article. Back this fortnight to continue the conversation on digital and retail media.

Continuing from the last article, we’ll talk about all the monetization levers that eCommerce platforms deploy; look at some global analogues too. I previously spoke about commerce/retail media being a $2-2.5 billion industry in ‘24 in India. Let's unpack numbers in this edition and challenge some under-reportings.

Money is all around - How platforms monetize

Money - from Pink Floyd’s Dark side of the moon - was one of the first songs to feature a cash register sound, symbolizing the intersection of music and moolah.

Commerce platforms are also trying to find that convergence of customer delight and money. Besides commissions and fees, platforms typically lean in on three large buckets to enhance monetization:

1. Brand and sellers - Ad tech, Seller financing, VAS (cataloguing, insights) etc.
2. Customers - Loyalty subscriptions, fintech offerings like BNPL, NCEMI, Extended Warranty etc.
3. External stakeholders - Externalising cloud, warehousing, ads of third-party brands etc.

The streams above are not all encompassing but it should give you an idea on multiple monetization dimensions. Globally, most scaled platforms now try to exploit all three of the above routes to better their margin profile.

(The percentage might vary; the table underneath shall give you a sense on the channels’ extent of monetization.)

*Global numbers

Shine on, you crazy diamond - India digital AdEx deep dive

We are witnessing a metamorphosis in India. Thanks to Jio, UPI and the Covid-fuelled acceleration; internet now reaches over a billion users. This in turn is fuelling the growth:

1. SME business on eCommerce/through social media
2. Enabling new age brands to reach the customer directly, bypassing traditional distribution.

A lot of these businesses (both #1 and #2) get managed directly making it difficult to track spends. Concurrently, the collapse of shopping funnels, search verticalization, commerce platforms being the shortest journey to purchase etc are stoking up the rise of retail media AdEx. Add to this, the large-scale app downloads business beyond the walled gardens, and it's easy to understand why India’s digital AdEx typically gets under-pegged.

Through a combination of ROC data, expert interviews and projections, here’s a closer to reality picture:

Size of the prize: Digital adex will be $11-12Bn USD (90,000 crs) in ‘24; 56% of overall adex.

*Source - ROC filings, expert interviews, projections

Channel-wise split: On the left, there’s the stated projection of Rs 50,000 crore for ‘24. Large missing blocks - Retail media Rs 19,000-21,000 crore, Rs 7,000-8,000 crore on OTT and downloads Rs 4,000-5,000 crore + others.  Add them up and we are then looking at Rs 88,000 - 92,000 crore digital market.

*Source - Dentsu E4M report                                                                   *Source - Previous company reports & ROC filings, expert calls and industry estimates

 
Retail/Commerce double click: Commerce contributes to nearly 21% of the overall pie - unravelling numbers for it.

Flipkart and Amazon are the front runners in the retail media race. Amazon had an intrinsic advantage of importing and deploying a globally deployed and scaled ads tool kit. Despite no such edge, many homegrown platforms besides Flipkart like Blinkit, PayTm, PhonePe, Myntra, Swiggy and others have built robust ads businesses.

The retail media market can be clustered in the following broad buckets:

1. Scaled horizontals - Flipkart, Amazon
2. Fashion/BPC - Myntra, Meesho, Ajio, Nykaa etc.
3. Fintech - PhonePe, PayTm, Gpay etc. 
4. Quick commerce - Blinkit, Instamart, Zepto, Big Basket, Flipkart Minutes etc.
5. Food delivery - Swiggy, Zomato.
6. All others

Actuals might vary; but these numbers would be in the ballpark.

*Sources - MCA/ROC filings, reported in press, Ads/GMV benchmarks and some from expert calls and market insights

Encore

Ads/GDP in India continues to be severely depressed (0.3%) against US (1%+), China (0.6%) etc. The headroom to grow is immense. Coupled with enabling factors like: 

1. Strong economic growth - 2024 is projected to be 2.1 X global growth.
2. Robust and resilient local demand
3. Strong government and policy push behind digital public infrastructure

We’ll continue to see robust AdEx growth; with digital taking a lion’s share. Within digital, retail media is likely to outpace everything else.

Leaving you with another Pink Floyd factoid - The Dark Side of the Moon holds the record for being on Billboard charts for an astonishing 741 weeks - nearly 15 years! If you haven’t yet, listen in. It’s one of the greatest albums of all time. More soon.

Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com.