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.
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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.
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.
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
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.
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.