The genesis of this post is the forecasts on online media spend. I tend to agree that this may be slow to grow in India but I would want to know when it took off in USA and/or China and what triggered takeoff. I remain optimistic on advertising by persons and SME to get business. This may not be cost per impression or cost per click but more like cost per order.
I am also wary of the perils of forecasting as the anecdotes below illustrate.
Tom Watson the founder of IBM stated once in the early days of mainframe computers that he saw a world market of just five mainframe computers.
When PayPal launched in Dec 1999 the total online accounts at all financial services companies in the US were 250,000 ( the leader was Wingspan Bank). By Feb 15, 2000 PayPal alone had 250,000 accounts.
- Community Platform For Ward 103 - November 22, 2012
- Municipal Elections New Delhi-16 days for rolls to close - October 15, 2011
- The next Facebook ? - September 17, 2011
I don’t think that PayPal is valid data point for this discussion . they might have got 250,000 Accounts but we should take in to the consideration the fact that they paid $5 to each and every subscriber to offset their fear of transacting money online . i am sure a lot of user were there for bounty and it doesen’t really show any adaptation . they might have exceeded the prediction but they did it by running on Steroid .
a more realistic and relevant example can be of auction web(E-Bay ) where a lot of people in their late forties or early fifties [most of them antique dealer /collection freaks / small time merchants ) learned to use computer /internet so that they can sell stuff on ebay . This was a case of exceeding forecasting by giving an unique value proposition .
My point is that prediction/forecasting are not right or wrong intrinsically . people often interpret them in a way that suit them .
What makes forecasts interesting is the time horizon. Its easy to make forecasts for tomorrow, and its easy to make forecasts for 20 years down the line. Will immersive virtual reality be a mass consumer phenomenon? tomorrow – no way! 20 years from now – most likely! What makes forecasts difficult and useful is the medium term timeframe. For entrepreneurs and VCs, that timeframe is perhaps 3-5 years (may be longer for entrepreneurs than for VCs.)
Tom Watson was right, in every way that was relevant for him at that point in time (1948). Microsoft was also right, but in a way that became useful long after Tom Watson made his statement.
Having said that, I do think that the forecast on online advertising market falls in the “interesting zone” — there could be a high degree of variability of predictions for 3-5 year timeframe.
As for US data, in 1998 the internet penetration was 15-20%, and online advertising as percentage of total ad spend was 1%. Today, the penetration is 60% and share of ad spend is 7%. In India, the penetration is around 5%, and share of ad spend is 1-2%. Doesnt really look out of line to me. So unless the penetration or the usage increases dramatically, I dont think there is a valid reason to suspect a sharp surge in advertising spends. Now this still could imply a growth rate of 30-40% CAGR over next 3-5 years, and thats not bad at all, but doesnt look like this is becoming a billion dollar market in a hurry.
Take your pick!