With the launch of its next generation ad platform, Snapdeal has extended its ad platform to its entire three lakh seller community. As of now over 30,000 sellers are advertising on Snapdeal Ads. These sellers have witnessed a twofold increase in business on an average, in comparison to others.
Flipkart, which ventured into the online advertising last year with Product Listing Ads, launched Brand Story Ads in March to deliver a holistic view of the consumer’s purchase journey post ad interactions. Currently, more than 100 brands and 10,000 sellers are using its ad platform.
Flipkart is generating more than $1 million (about ` 6.7 crore) in monthly ad revenues.
Amazon India’s ad platform, launched last year in July, has already over a third of eligible sellers advertising. The number of sellers advertising has increased five times since Diwali last year.
This 2.0 version of e-commerce ad platforms is seeing a phenomenal increase in seller adoption, in addition to increased brand tie-ups. The e-commerce marketplace has turned into a media platform where consumers are spending a lot of time and brands are leveraging this to their advantage. For example, the launch of the Moto G4 Plus exclusively on
Amazon.in on May 17-18 saw many firsts for the brand involved — including a homepage takeover of Amazon.in for more than 18 hours between May 17 and 18. Prior to this, the e-commerce player had never given its gateway or homepage for any product launch in India. The site also sported product and promotional banners related to the Moto G4 Plus. The idea was to leverage Amazon.in as the core marketing channel for the campaign. Analysts say such campaigns are expected to become a regular sight on e-commerce platforms.
With unit economics in India’s B2C e-commerce continuing to pose a challenge, valuations declining and profitability still being a distant dream, e-tailers are in a dilemma. “E-commerce players need to take a hard look at the business model. The question is whether to continue with the low margin, high volume game, or bring in other elements to generate revenues,” says Hemant Joshi, partner, Deloitte Haskins & Sells.
Therefore, Indian e-tailers are looking at alternative sources of monetisation apart from transactions — an ad platform being a key one. However, this is not new. Chinese e-commerce giant Alibaba generates more than 50% of its revenues from advertising. “In the January-March quarter of 2016, Amazon US generated $100–150 million revenue from ads (broad estimates). Or close to ~$500 million on an annual run rate basis. Currently, 25% sellers are advertising on its ad platform,” says Anil Kumar, CEO, RedSeer Consulting. Clearly, as Ashish Jhalani, founder, eTailing India points out, there is a need for multiple revenue streams such as logistics or advertising for profitability.
The rise of ad platforms
Digital ad spending in India is expected to be worth `6,525 crore in 2016, growing at the rate of 40% (as per a GroupM report). E-commerce players with high online traffic and rich consumer data have the potential to build a sizeable ad business. “Currently, 2.5–3% of Flipkart’s revenue comes from advertising on its platform,” estimates Kumar of RedSeer Consulting.
Flipkart acquired AdlQuity Technologies (a mobile advertising technology firm) in March 2015 which forms the cornerstone of its ad strategy. It launched Brand Story Ads in March this year initially with 50 brands such as Intel and Microsoft. The number has touched 120 brands now. “By the end of the year, we will have at least 400–500 brands,” says
Sanjay R, marketing and network head, Flipkart Ads.
Flipkart plans to launch full funnel attribution in the next quarter, which helps brands and sellers see a real time awareness lift, purchase lift or consumer lift for every campaign. “Full funnel attribution will further enhance the ad product,” says Prakash Sikaria, business head, Flipkart Ads. “Our advertising platform is growing at 50% month on month.”
According to Flipkart, brands, especially the ones that retail with Flipkart, are increasingly shifting their digital marketing budgets to the retailer because they see immediate conversions and also improvement in brand perception.
Or consider Snapdeal, which launched its ad platform in November 2015, which works on a cost per click model. Based on the category, the pricing is done algorithmically. Snapdeal Ads largely revolves around deploying native advertisement formats for product commercials for sellers that can be showcased across its website, mobile site and app. Native advertisements are those that closely match the page content where they appear.
It recently unveiled its next generation advertising platform which enables sharper targeting for sellers based on customers’ browsing behaviour, geo-location and purchase history. Snapdeal sellers will now be able to curate ad campaigns for specific customer groups through targeted advertising. Sellers can even participate in auction based buying of ad inventory, view detailed reports and simultaneously promote products through a range of different ad campaigns.
“In the new avatar, there are changes in terms of targeting and data aspects,” says Tony Navin, senior vice president, partnerships and strategic initiatives, Snapdeal. “There are two parts of our ad strategy: sellers and brands. For the brand, we have brand stores, which are one of the levers through which the brand can have its own identity, in addition to brand ads. The objective is monetisation but currently, the focus is on adoption.”
At Amazon India, advertising is a core part of the business strategy. “We do not see advertising as only a margin booster but as a service that we offer to our sellers and brands to help improve their product discoverability and aid brand creation,” says an Amazon India spokesperson.
Amazon India has launched a host of advertising solutions since last year across mobile and desktop. Its advertising solutions include sponsored products, a keyword-bidding advertising programme based on cost per click (CPC) and sellers pay only when their ads receive customer clicks; sponsored search (priced on CPC determined by an online auction mechanism, it allows advertisers to get a prominent placement on customer searches); display ads, priced at CPM (cost per 1,000 impressions), which allow brands to launch advertising campaigns to reach millions of potential shoppers; and Amazon Marketing Services, a self-service advertising solution for any brand whose products are currently are sold at Amazon.in.
If the advertiser’s objective is RoI, Amazon offers ‘performance’ advertising solutions which are typically charged on CPC. If the objective is building brand awareness, then ‘brand’ advertisement solutions are offered, which are charged on CPM. Amazon.in also has also its global bid-based auction mechanism in India where advertisers do real-time bidding for ads.
A focus on adoption
As the rush for profitability in the market grows, e-commerce players are moving beyond commissions to other revenue streams and advertising is a proven step in that direction. “Advertising is only a linear extension of services to the sellers and brands. Further, it’s more profitable as it involves owned media,” says Rohit Verma, CEO, iPredictt Data Labs. E-commerce companies own the entire experience through their portals or media, where they capture data on browsing, cart, purchases etc. This can be used to predict buying behaviour using big data tools. But are most sellers buying it?
“The biggest challenge is adoption among sellers. Our research shows a majority of sellers are looking for low cost, easy-to-use advertising models and do not want to spend more than ~5% of monthly sales on advertising on an e-commerce platform. Currently most of the sellers are paying upto `6 per click,” says Mrigank Gutgutia, engagement manager, RedSeer Consulting.
As per a recent RedSeer research, e-commerce sellers prefer to use advertising only if the following improvements could be made by e-commerce players: first, improving the user interface of the seller panel for better ease of posting ads; second, lowering the prices for ads to ensure better RoI; and third, increasing seller awareness with respect to how they can utilise the ad platforms better. Most e-tailers first start with keyword-based monetisation. It is affordable and costs around `10,000-15,000 per month. But solutions like homepage banners, email marketing, category page banner etc can run into lakhs of rupees. E-commerce players need to make the model more affordable for the majority of the sellers.
Yes, advertising is lucrative as in most cases the same or slightly upgraded infrastructure can start generating ad revenue. But it may take years for it to become the primary reason for profitability,
say analysts. It took Amazon.com several years to transform advertising into a core business and the same will apply here. But in the near future, it may remain an ancillary revenue stream.
Our advertising platform is seeing about 50% growth month on month and we think we are among the largest publishers already: Prakash Sikaria, Business head, Flipkart Ads
There are two parts of our ad strategy: sellers and brands. The objective is monetisation but currently, the focus is on adoption: Tony Navin, Senior VP, partnerships and strategic initiatives, Snapdeal
@rankita— With inputs from Chandni Mathur