Loading ...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.
I believe that due to increase in the supply of adspots (online or offline), it will become more and more difficult for a startup to survive just on ad revenues. They’ll either need promoters with lot of cash or huge mass appeal (Rediff?) in order to survive if they don’t have a primary revenue source.
True of course - all my forecasts in the referenced post might just be another Tom Watson statement. In fact if you’d told me in 03-04 that the market would grow 5x in three years, I would have said no way. So let’s assume I shall have to eat humble pie anyhow. Doesn’t matter - I still want to see the barriers broken.
See:
http://www.iab.net/resources/adrevenue/pdf/IAB_PWC_2001Q1Q2.pdf
(pages 6 and 7)
Revenues in the US were 250MM in 1996. Grew to about 8.2 billion by 2000, dropped from there to $6b in 2002, and grew to about 16b in 2006 (multiple other sources).
Now what took it off? I think it was the cheaper internet. People already had home computers in place, and prices going even lower helped. They also had a number of offline but not-brick-and-mortar elements like mail-order, phone-order etc. very deeply established. Becoming a credit card vendor was easy (so I could build a business on the web, and therefore would advertise) Also legal systems were good so people could sue and collect if you ditched them - this was good for both vendors and customers.
These are challenges in India.
Another big diff between US/china and India in my opinion is language - US has one and China has two and if you ever want to get a huge mass of people operating in India you must have content and search in regional languages. English = elite = is up to the neck with ads already.
Is there a way we can forecast? I’d love to say “5 years and 200 million internet users” but I would rather be skeptical and say that unless we specifically break all these barriers we won’t reach much.
Let’s do it then, because honestly, it’s a way bigger challenge than filling out status reports in an IT company.
Maybe this should be a diff post, but would want to know from people who have advertised on large portals…..do they actually work 9for new companies)
iqbal
Deepak,
You don’t have to eat humble pie…not at all. Forecasts are just premonitions and not gospels. They have the luxury to be a moving target which they anyways are. I am fully with you in appreciation of the challenge (of user adoption) and devising ways to deal with it.
If we want to see Indian Media Planners seriously taking to online ads, start with -
a) bringing down cost of hardware ;
b) Freeing up broadband / Wi Fi access ;
c) Free up hot spots beyond hotels / airports to Schools / Cafes / Commercial Complexes ;
d) PDA enabled online access ;
e) facilitate free`Watcher’ access than restricting viewing to `owners’ (of laptop / PDA)
People love freebies…yet chances of a watcher becoming a customer is far greater and that’s what brands want from media. Precisely the reason why access should not be restricted to a hardware owner. This is possible if crowded places are Wi Fi enabled and when that’s free, laptop / PDA owners will surf freely and for longer durations and don’t even mind surfing for a stranger in a crowd who wants to have a peep.
Am not too sure about this comment but since we are here to discuss - a lot of the business that SMEs do in India are still in the cash economy. Online modes, which leave an audit trail and e-enablement which force you to operate through the banking channels i think will face a resistance.
While Cash on delivery (COD) modes seem to be insipred by the lack of credit card penetration, I think they are also due to the cash economy we have. ( Am not sure of China, but the OECD countries would have a lower incidence of parallel economy). So while consumers might not shift, businesses will also not shift. Its the classical network effect which gets spoken off in such businesses.
I have started seeing some Out of home modes of advertising ( in malls, super markets and cafes - in the form of TVs broadcasting ads ) and i am not sure of their effectiveness - this when u have a captive audience - compared to a TV audience with a remote - net is at the top of control for a user to avoid ads.
But Krish, while i think the idea of free access and watcher access makes sense. Although i think the number of ppl who will crowd these locations will be just too large- as u said we love freebies.
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!
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 .