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KnowledgePartner

Digital Media Outlook 2010

A study of the Indian Digital Marketing Scenario

In 2009, we witnessed a dramatic pace of change in the adoption of digital worldwide by consumers, marketers, publishers and agencies alike. The growth of this medium over the last decade has surpassed that of any other media, with popular social networking site Facebook boasting a larger worldwide user base than entire

population of countries put together and citizens taking charge of their nations' state of affairs by disrupting political agendas on Twitter.

As the intensity of the power that online has put into the hands of masses magnifies, advanced cutting-edge and sophisticated technologies are shrinking boundaries to enable faster, agile and seamless communications across demographics. Human-computer-interaction and social behaviour online have become deep subjects of interest and research among marketing experts and brands alike. In a post-digital environment, considering the frenzied pace at which this medium is progressing, how will brands communicate with their consumers through meaningful deliberate action?

And how are marketers gearing up for this change?

In a country where more than half of its population is below 25 years of age, how are digital communications influencing and shaping consumer preferences? The answer lies with the largest age-group of 25-35 years active online in India today who access the Internet anytime anywhere, and prefer 'functionality' over brand image.

Today, branded content must hold equal importance as free value for the marketing message to permeate and touch the lives of target audiences. One-way marketing messages will die a slow death, but the wave of change brought about by digital best practices will leave brands confounded if they don't adapt to interactive methods of engagement quickly.

We attempt to understand the current state of digital, specifically the online medium in terms of marketers approach in adopting this medium to increase brand value and keep pace with changing trends. The 2010 Digital Media Outlook Report presents a dynamic view of online ad-spends of top 1000 advertisers in India, their rationale in using this medium, and their outlook towards this medium in the next fiscal.

Sidharth RaoChief Executive OfficerWebchutney

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Ad-Spends of Top 1000 Marketers

in India

DigitialOutlook 2010

Prologue4

Contents

6

Usage, Attitude and Perception of Online Medium

12

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Prologue

Amidst strong recessionary headwinds of 2008-09 that blighted the global advertising market, a stellar 66% growth recorded in 2009-10 bears testimony to the imminent boom in India's online industry.

On the other hand, the medium remains bogged in a quagmire of paradox and irony with the lowest spend-share in the ad-pie. If we dig deeper, the advantages of the medium over traditional media have become an impediment to its growth. Specifically, the innate advantage of its 'measurability' has been stretched to 'over-measurability' which reflects in the gap between marketers understanding of the medium versus its actual potential.

With its promise of a large audience base and contextual targeting, Social Media has become a norm with every second marketer across verticals and businesses looking to advertise online today. Its growth trends are impressive (40% growth estimated in 2010-11) with 63% marketers either using or planning to use it in the near future. Yet this medium does not seem to deliver expected results for marketers and there is a sense of dissent in its effectiveness. The reason lies in the 'one size fits all' approach adopted by most advertisers. A measure of impact on brand credibility, its reputation, and number of recommendations/brand referrals add equal value in judging the 'engagement value' of this medium.

The range of options open to advertisers online have grown beyond Search and Display. Interactive online channels such as E-commerce are expected to provide the much needed momentum in India's digital economy. It is, however, one of the most underutilized channel with only 20% of top 1000 marketers who account for a substantial 73% of total ad-spends, engaged in it currently. Other online channels such as Viral Marketing/Online Video, Ingame Advertising, Virtual/Augmented reality et al witness the same fate due to lack of understanding of the value added to a brand's overall marketing strategy.

It is customary for us to applaud innovation in traditional media but marketers fail to make optimum use of innovative customer engagement methods online that yield a higher return-on-investment in long-term brand-building. This blinkered or tunneled vision also decelerates growth of online marketing in India. Higher recall value, and staying 'top of mind' are equally important and add up to a brand's effort in 'reaching' out to the masses. The Digital Media Outlook 2010 report attempts to understand the rationale behind marketers' allocation of ad-spends across media and offers deep insights to their perception of the online medium.

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Note: All ad-spend figures and responses estimated in the report represent the Top 1000 marketers only (not the entire industry), unless specified.

Shweta Bhandari, Digital Research Analyst, Webchutney

Our survey of top 1000 marketers in India indicates a steady 15%

CAGR in overall ad spends for the period spanning 2008-2011. The

ad-market grew 16% in 2009 from the previous fiscal even as its

global counterpart remained shrouded in gloom with predictions of

negative growth. The IPL and General Elections in 2009 may have

been strong propellants of growth as expected, and the positive

trend is expected to continue with 14% growth in overall ad-spends

in 2010-11(E).

Indian Ad-Market Grew 16% in 2009(All Media)

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18,95116,289 21,523

2010-112009-102008-09

Year on Year Growth in Indian Ad-Spends

Total Ad-spends (in Rs Cr)

Ad-Spends of Top 1000 Marketers

in India

Online witnessed a significant 66% growth in 2009, ahead of any other medium, as increasing number of marketers shifted ad-spends from traditional media to online. In comparison, growth of TV and Print was sluggish at 14% and 10% respectively. Despite positive growth, it is ironic that top 1000 marketers who contributed 73% to the overall ad-pie allocated only 4% of ad-spends online. Television claimed the largest spend share of 45%, followed by Print with 38% and BTL advertising with 19%.

Online Makes Significant Gains; Still Remains a Fraction of the Pie

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Online, 603Mobile,95

Radio, 714Outdoor, 1032

Ad-Spend Share by Medium of Top 1000 Marketers, 2009 (in Rs Cr)

Print, 6183

TV, 7284

Note: Ad-Spends estimated in Digital Media Outlook 2009 were based on

Top 500 Marketers hence may differ from 2009-10 report

BTL, 3040

One of the primary reasons for online contributing lowest share to the overall pie is the 80:20 paradigm witnessed in budget allocations. We notice a repeated trend from our survey in 2008-09, as verticals with maximum overall ad-spends contribute the least online, whereas marketers with relatively smaller ad budgets spend higher online.

FMCG contributes the largest share of 42% (Rs 7,910 crore) to the total ad-pie, but shells out a frugal 9% online. BFSI with overall spend share of 7% contributes maximum to online spends with Rs 114 crore (19%). Similarly, Consumer Services sector is the second largest contributor to online spends with 18% of its overall ad-spends allocated to this medium, while its contribution to the overall ad-pie is almost half at 9%.

The 'Virtual' Paradox

42%

9%

11%

9%

9%

18%

7%

12%

7%

19%

6%

4%

4%

2%

4%

2%

3%

2%

3%

4%

2%

3%

1%

13%

1%

3%

Overall 2009-10

Online 2009-10

Retail

IT/ITES/Internet

Media/Pub/Entertainment

Real Estate

Pharma

Lifestyle Goods

Infra/Equip/Manufac

Auto

BFSI

Telecom

Consumer Services

Durable Goods

FMCG

Ad-Spend share by Verticals

A whopping 65% of online ad spends are accounted by Display, Website development and Search, and they are expected to continue to dominate the online landscape in 2010-11 too. Display has and will continue to dominate almost a quarter of online ad spends next FY.

Across verticals, BFSI, Consumer Services and IT/ITES/Internet sector which were the top contributors, accounted for 50% of online ad-spends across various executions in 2009. High growth in share of online spends is expected from FMCG, Durable Goods and Retail sectors in 2010-11.

Display has Maximum Online Spend Share

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24%

22%

18%

10%8%

6%5%

3%2%

25%24%

21%

9%7%

6%

3%2% 2%

Display Website SEM/O EDM AdNet Social Others Affiliate Viral

Ad-Spends Across Online Executions

Share 2009-10 Share 2010-11

As marketers with large ad-spends experiment with a variety of executions online to fully explore the potential of this medium, we would expect to witness an increased contribution of this medium to the overall ad-pie. FMCG and Automotive have displayed keen interest in the medium with heightened visibility in 2009 to capture the Indian masses online specifically with display advertising, but the depth of utilization has been limited to lead generation activities to a large extent. Most marketers seem to approach online with the typical mass-media mindset, overlooking its biggest strength in building organic brand engagement and experiences.

BFSI

Consumer Services

IT/ITES/Internet

Telecom

Durable Goods

FMCG

19%

18%

13%

12%

9%

9%

4%

4%

3%

3%

2%

2%

2%

16%

19%

13%

12%

10%

10%

4%

3%

3%

3%

2%

3%

2%

Real Estate

Auto

Retail

Media/ Publication/Entertainment

Lifestyle Goods

Infrastructure/Equipment/Manufacturing

Pharma

Online Ad-Spends by Verticals

Share 2009-10 Share 2010-11

12

Social Media Sheds the 'Beta' Tag

In 2009, Social Media usage increased with 5 in 10 marketers advertising across popular networks like Facebook, Youtube, Orkut etc. Marketing strategies of a large number of advertisers across the globe have evolved beyond the traditional 'one-way' messaging by leveraging social platforms to amplify customer-engagement and bring the brand alive through authentic, one-on-one conversations. While the effect of this phenomenon has rubbed off on Indian marketers, most of them are still at a nascent stage in identifying optimal use of the channel in promoting advocacy among the online Indian audience.

Stage of Usage Across Online Executions

85%69% 62% 55% 51% 50%

2%

8%7%

8% 11% 13%

13%24% 31% 38% 38% 38%

So

cia

l Me

dia

Pla

tfo

rms

Dis

pla

y-R

ich

/In

tera

ctiv

e

EDM

Dis

pla

y T

ext

/S

tati

c

Pro

mo

We

bsi

te

Bra

nd

We

bsi

te

Primary Executions

Ongoing/Currently Used

Planning to Use

Not too Sure When

Usage, Attitude

and Perception of

Online Medium

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Note: Executions with 50% or more usage indicated by marketers, have been considered Primary.

Mobile: Much Ado About Nothing?

2009 was touted to be the year of Mobile with over 600% growth 1expected in ad-spends on this medium , however actual growth of

mobile has only been 45% and is likely to drop to 36% in 2010-2011.

While the number of mobile users has increased exponentially in India, 2only 1 out of 25 mobile users surf online through their mobile . As

smart-phones break away from the 'niche' tag, mobile Internet penetration increases with evolution in mobile content as well as mobile ad-serving platforms, coupled with the advent of 3G technology, mass-consumption will play an influential role in the development of mobile marketing landscape in India.

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Spend Share of Mobile in Ad-Pie

Rs 65 Cr

Rs 95 Cr

Rs 129 Cr

2008-09 2009-10 2010-11

0.4%

0.6%

0.8%

At the same time, more than 50% of online marketers still engage in primary executions such as creating brand websites (85%) and display ads (62% engage in Text/Static ads). Low usage of 'Tertiary Executions' like Viral Marketing (21%) and interactive/emerging media like Branded Sponsorships (19%), E-commerce (20%), Ingame Advertising (9%) has been one of the biggest barriers in whole-hearted adoption of online marketing.

49% 43%33% 33% 32% 30% 28% 26%

8%6%

8% 7% 4% 7% 5% 11%

44% 51% 59% 60%63% 63% 67%

63%

MobileAds/Apps

BlogsPaid Inclusion

AdverblogsPaidKeywordSearch

ContextualSearch/Listing

SEO/SEMAdNetwork

Secondary Executions

21% 21% 20% 19%11% 9% 8% 7% 2%

14% 5% 6% 5%6% 10% 3% 7%

5%

66% 74% 75% 76% 84% 82% 90% 87% 93%

On

line

Vid

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om

me

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Bra

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Sp

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Re

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Vir

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ea

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Ap

p-v

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isin

gTertiary Executions

Ongoing/Currently Use Planning to Use Not too Sure When

Note: Executions with 50% to 25% usage indicated by marketers, have been considered Secondary. Executions with 25% usage or below indicated by marketers, have been considered Tertiary.

14

Vir

al

Ma

rke

tin

g

1 Webchutney Digital Media Outlook 2009 Report2 Juxt India Mobile Report 2010

Today, 9 out of 10 online search for product information on the Internet. E-commerce has the ability to bring the much needed 'differentiation' that brands struggle to obtain in an over-crowded and fiercely competitive market. Online consumers, who form a sizeable chunk of any brand's target audience with growth in Internet penetration across classes, have become a powerful resource for such brands to influence brand image, visibility and recall among their peer groups both online and offline.

The convenience associated with researching for products and purchasing them online cannot be replicated at a brick and mortar outlet. Next generation digital consumers are quick to realize the efficiency of a 'click and mortar' store. This 'disruption' in the traditional purchase model will only increase in the future with greater exposure to technology and the advent of m-commerce.

In our conversation with marketers, 7 out 10 indicated they were not sure how soon they would include e-commerce in their marketing strategy and only 20% marketers have utilized this channel in 2009.

Indians

E-Commerce Demands More Attention

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21% 21% 21%

10%8%

7% 6%

3% 2% 1%

Co

nsu

me

r S

erv

ice

% Spend Share of Mobile Across Verticals 2009-10

Au

to

Du

rab

le G

oo

ds

Infr

a/

Equ

ip/

Ma

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Life

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oo

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IT/

ITES

/ In

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I

Re

al E

sta

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Ph

arm

a

SMS/Text based marketing has been the only predominant activity undertaken in Mobile sans innovative and engaging made-for-mobile interactions in 2009. App-vertising and location based advertising have garnered significant traction on engaging platforms like FourSquare, Gowalla globally, but lack of similar innovations and adoption by users in the Indian context has failed to convince marketers to subscribe to the hype created around this medium.

Only a handful of marketers (25%) claim to increase spends on this medium next FY; majority (38%) claim to decrease spends or keep it same (38%).

In an attempt to understand what drives allocations of budgets to online based on marketers' perception and awareness of various attributes and strengths of the medium, we find a majority of sectors like FMCG, Durable Goods, Pharma and Infrastructure/ Manufacturing/Equipment investing online for its ability to 'generate leads' and being a relatively 'economical' medium. Only a handful of them like Automotive and Media/Publication/Entertainment engage in online activities to spread 'brand awareness' and 'engage customers', while few sectors such BFSI and Consumer Services find value in 'utilizing it in integrated marketing campaigns'.

Perception of Online: Just Another'Lead Generation' Medium?

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It is ironic that top 1000 marketers' usage of an interactive medium like online is minimal, whereas 'driving customer engagement' is a top marketing priority. If Internet is not the most engaging medium then which medium is?

These are some of the pertinent reasons why online remains at the fringe till date. Its ability to target selective audience accurately, poses a great advantage over 'wastage' witnessed with other mediums but the number of marketers realizing this potential are few and far in between. Their 'mass media' approach towards online has rendered it just another tool to acquire leads, which may or may not deliver results as effectively as offline channels.

Marketing Objectives of Top 1000 Marketers

Increase Sales/Leads

Image Consolidation

Increase Reach

Product Differentiation Base:801

1

Brand Awareness

2

4 Customer Engagement3

56

Vertical

-- 1.51.0.50.0.51.0

-

-

-

-

-

.8

.6

.4

.2

.0

.2

.4

.6

.8

1.0

Internet is an Economical Medium

Ability of the Internet to generate leads for your brand

Awareness of your brand on the Internet

Reach of Internet in your target audience

BFSI

Auto

Pharma

Infrastructure/ Equipment/Manufacturing

FMCG

Consumer Services

Durable Goods

Ability of Internet to engage customers

Measurability of Return-on-investment on the Internet

Your brand utilizes the Internet in integrated marketing campaigns

Media/Publication/Entertainment

Att

rib

ute

s

Note: The closer a vertical is to an attribute, the stronger it associaties with that attribute vis-a-vis other attributes.

Although marketers were forthcoming in embracing Social Media in 2009, certain degree of dissatisfaction with Social Media can be attributed to lack of awareness in metrics and optimum/appropriate utilization of this medium.

Despite greater visibility of brands in the Telecom, FMCG and Automotive sectors (to name a few) across social networking sites in particular, almost 2 out of the 5 marketers who engage in social media advertising express dissatisfaction with campaign results.

Social Media seems to have become a popular 'fad', but marketers haven't really understood how to navigate and steer brand advocacy among online communities to their distinct advantage. Expressions such as 'Consumers are the new social currency' are afloat, but haven't been absorbed at the heart of online campaigns to target influencers who 'humanize' brand messages and build positive experiences/brand image.

Dissatisfaction with Social Media ExecutionRelatively Higher. Cool "Tools" LikeAugmented Reality, Podcasts Fail to Live up to the Hype

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20

Primary Executions

Secondary Executions

It is obvious to note a high level of satisfaction with online executions where ad-spends are maximum notably with Website Development, Display and Search, while maximum dissatisfaction is witnessed with Tertiary Executions like Virtual/Augmented Reality, Podcasts, In-Game Advertising, Branded Sponsorships and E-commerce which have not been able to find a strong footing in online marketing efforts.

0%

20%

40%

60%

80%

100%

BrandWebsite

PromoWebsite

DisplayText/Static

EDM Display Rich/Interactive

SocialMedia

Platforms

Tertiary Executions

Vir

al

Ma

rke

tin

g

On

line

Vid

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Po

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Re

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0%

20%

40%

60%

80%

100%

Dissatisfied Neutral Satisfied

Dissatisfied Neutral Satisfied

Ad

Ne

two

rk

SEO

/S

EM

Co

nte

xtu

al

Se

arc

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List

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Pa

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Pa

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Incl

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Mo

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ds/

Ap

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0%

20%

40%

60%

80%

100%

No Yes

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CPM-Impressions

CPC/CTR/CPA-Clicks/Conversions

Page Views/Site Visits-Impressions

Number of LeadsGeerated-Conversion

Reponse to Mail/User/Inquiries-Conversion

Audience Measurement System (Paid)

Share of Voice (SoV)

Not Analyzed/Doesn’t Work

Reputation Metrics for Social Media

Audience MeasurementSystem (Free)

33% 67%

30% 70%

27% 73%

47% 53%

54% 46%

77% 23%

80% 20%

85% 15%

84% 16%

84% 16%

7 out of 10 marketers use impressions, clicks and page views, which are pro lead-generation to evaluate effectiveness of online marketing activities. If we dig deeper, the advantages of the medium over traditional media have become an impediment to its growth. Specifically, the innate advantage of its 'measurability' has been stretched to 'over-measurability' which reflects in the gap between marketers understanding of the medium versus its actual potential. Metrics such as clicks/views/impressions provide 'Quantitative' guidance only, not a long term approach to 'Brand Building'.

None of the marketers are looking at measuring consumer behaviour post exposure through other, equally important factors such as brand searches or view-through conversions amongst control groups. While marketers have been bullish in promoting brand-awareness through social media, most attempts at measuring effectiveness of such campaigns remain limited to the number of 'fans/likes' generated from the group/page/community. Cross channel synergies require bespoke evaluation, and the measure of effectiveness of a social community also translates into impact on brand credibility, its reputation, and number of recommendations/brand referrals which add equal depth in judging the 'engagement value' of this medium.

Marketers Need to Find Value Beyond Clicks

The pace at which digital marketing has evolved worldwide in just the last decade is evident in the rampant disruption caused in traditional marketing methods. How has the Indian advertising market responded to this change? When questioned about the relative effectiveness of online vis-a-vis traditional media in our discussion with decision makers who hold the power to drive this change, a few things emerged clearly.

53% marketers still believe online is 'Less Effective' in creating brand awareness compared to traditional media.

Only 4 out of 10 marketers consider Online as an effective medium in engaging customers. Which other medium do the rest 6/10 marketers consider for driving customer engagement effectively?

28% consider it effective in generating leads while under-utilizing the medium as a lead-generation tool. Lack of awareness and poor understanding of interactive executions such as Social Media have triggered such mis-perceptions about this medium.

Online scores as an effective medium only for obvious reasons such as driving traffic to a website and creating top-of-mind recall among users.

It is ironic that marketers consider online less effective in generating leads which is the biggest reason driving its usage. This contradiction and ineffective utilization of online as a 'direct marketing tool' blinds marketer's perception and attitude towards it.

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Effectiveness of Online vs. Traditional Media

DigitalOutlook 2010

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Note: The closer an attribute is to the degree of effectiveness, the stronger it associates with that degree of effectiveness

Positive Outlook for Digital in 2010With increase in overall ad spends to Rs 21,523 crore in 2010-11, growth in online ad spends are expected to witness sustained momentum with 45% increase making it a Rs 876 crore worth market. 51% marketers indicated increase in Online spends in 2010-11 which is the highest among all mediums.

At the same time, the comparative spend share of mediums is expected to remain skewed towards offline in 2010-11 as well.

While it is disappointing to note that only 3% marketers are increasing online spends due to its engagement value compared to other mediums, 26% look forward to increasing online spends for its ability to reach target audience and 24% cite its ability to increase brand awareness.

Effectiveness of Online vs. Traditional Media

6%

14%

38%

7%

19%

TV Print BTI Outdoor MobileOnlineRadio

39%34%

5%0.8%

45%

23%

41%

50%

6%

3%5%

4% 4%2% 0.6%

0.4%

Share 2008-09

Share 2009-10

Share 2010-11(E)*

Comparison of Ad-Spends byType of Execution in 2008-09 vs. 2009-10

Degree of Effectiveness

.8.6.4.2-.0-.2-.4-.6

Att

rib

ute

.6

.4

.2

-.0

-.2

-.4

-.6

Engaging customers

Creating top-of-mind recall

Selling products or services offline

Increasing consideration/preference

Generating leads

Driving traffic to a website

Driving trafficto a store

Creating brand awareness

Less Effective

More Effective

Delivering promotions to customers

About the Same

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The need for brands to engage their audience online is more than ever before. It is time for marketers to discard the obscurity in their blinkered perception of how online functions, and open their vision to the rise of a new breed consumers online, who are discerning brand advocates and yearn exposure to cutting-edge, breakthrough viral engagement.

Marketers who remain oblivious to this change in consumer behaviour will be left far behind, while those who accept this change will need to stay ahead of new technologies and trends that will constantly transform how audiences connect, consume and engage with brands. Future digital generations will become less sensitive to staid, interruptive marketing messages and will demand what they want at the click of a mouse.

Meeting those demands will not be the prerogative of any one medium in isolation, but will require strategic planning of synergies drawn across channels. Online plays a vital role connecting brands to their consumers' social repertoires where they create a world of convenience, drive community sharing and immerse themselves whole-heartedly in creating and exchanging relevant content/knowledge.

What this means for brands is an equal representation of media that best suits the nature of their message, and extends the value of that message beyond typical direct marketing executions. Marketers must take stock of the rapid change that technology and content serving platforms are bringing into the lives of their consumers, and give them something meaningful to think about or act on by inviting them to participate and build unique experiences for them to become self-serving brand evangelists.

Cross Channel Synergies will Provide Compelling Hooks for Brand Engagement

28

24%

44%

32%

18%

36%

47%

14%

44%

41%

19%

40%

41%

51%

25%

24%

27%

44%

29%

16%

44%

40%

15%

46%

39%

30%

40%

30%

25%

38%

38%

25%

54%

22%

% Response to Spend Allocation in 2010-11

Increase Same Decrease

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Lead Generation/Sales

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Engagement

24%

8%

3%

11%

27%

26%

Increase Awareness

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In 2009, Online witnessed a surge in growth worldwide as a result of the recession. This year, we decided to expand the scope of our study and identify the impact of global trends on marketers in India, if any, and therefore spoke to double the number of decision-makers and influencers vis-a-vis last year.

The 2010 Digital Media Outlook presents opinions and views of Chief Marketing Officers and Marketing Heads of India's Top 1000 advertisers. We spoke to decision makers across 13 verticals pan India, and conducted in-depth face-to-face interviews.

The primary objective of the report was to study the nature of allocation of ad-spends by top marketers across various mediums. In the process we also analyzed the reason/rationale that drives these allocations, specifically towards online. As we dug deeper, we also faced their current understanding of the medium, whether marketers have kept pace with digital trends that influence their consumers and their overall usage, attitude, perception and satisfaction with the Internet.

The study was conducted over a period of four months spanning April to July 2010.

Methodology