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Don’t get carried away by advertisements

columns Updated: May 27, 2016 09:21 IST
Suveen Sinha
E-commerce sites

Snapdeal this month launched an updated version of its advertising platform, the very-imaginatively-named Snapdeal Ads.(REUTERS File Photo)

What gets advertising? Eyeballs. That is why news media outfits — newspapers, magazines, television — get advertising. They aggregate eyeballs for advertisers to tap.

There are others that get advertising: non-news television, YouTube, Facebook, roadside hoardings. People look at those.

Another group has emerged in recent years that gets a lot of eyeballs: e-commerce sites. According to a Flipkart communication of March 3 this year, the country’s largest e-commerce player, with 50 million registered customers, gets 10 million visits a day.

That will translate into a huge readership for a newspaper, a huge viewership for a television show, and a huge population for a city. Logically, it should also translate into huge advertising.

Naturally, Flipkart wants this number to do something for it, maybe earn some more money. So, in March, it launched its own advertising platform, Brand Story Ads, with more than 50 brands on board. The brands included Yes Bank, L’Oreal, Micromax, Gillette, Datsun, and Sony.

The same day, Mint newspaper reported that Flipkart was making $1 million every month from selling advertising space. Ravi Garikipati, head of its advertising business, did not confirm the number, but told Mint about his plan to make Flipkart the largest digital advertising platform in the country in three to five years. Digital advertising in India is projected to cross Rs 6,500 this year, a 40% increase. The lion’s share of it goes to Google and Facebook.

Flipkart will use data about its customers to help brands target whom they want. That makes its advertising platform more dynamic than the traditional media, which is more like starting a giant shower in a stadium, and pray that a lot of people get wet. Flipkart will target the jets of water to whomever the advertisers want to drench.

It is dynamic in more ways than that. The Economic Times reported that in April Flipkart sued Western Digital, a United States-based data storage company, in the Delhi high court for not paying up for its advertisements on the e-commerce site. The newspaper also reported that Flipkart was going to sue 20 others, which had unpaid bills running into crores of rupees.

Now, wherever Flipkart goes, Snapdeal follows (no, not the Delhi High Court). Snapdeal this month launched an updated version of its advertising platform, the very-imaginatively-named Snapdeal Ads.

The company, according to reports, says 10% of the 300,000 sellers on its online market place use Snapdeal Ads, and these have seen their business double. If ever there was a subtle pitch to attractive advertising, this is one.

Both Flipkart and Snapdeal can easily find a role model in this context. Alibaba, China’s largest e-commerce company, which holds a chunk of equity in Snapdeal, earns a large portion of its revenue from advertising. On May 5, Alibaba reported higher revenue than analysts expected for the three months to March mainly by selling more advertising space to the merchants on its platform.

Of course, Indian e-commerce companies, to become one of the largest digital advertising platforms, will also need to get advertising from brands that are not necessarily their sellers. Flipkart’s and Snapdeal’s restructuring may be designed to get them.

Paytm, too, is in the midst of an upgrade. “Online retailers are structuring as market place, so they are getting third-party merchants who, in turn, will pay for ads,” says Vijay Shekhar Sharma, Paytm’s founder and CEO. “We always had third-party merchants and our ads platform is now upgrading to accommodate ‘preferred merchants’ and ‘promoted products’ kinds of features.”

The online market places can surely do with a bit of additional revenue from advertising. They have built themselves up through deep discounts – that’s never good for the bank balance. Of late there has been pressure on them to show higher revenues, and maybe a bit of profit, too. Besides, funding has not been coming as easily as it used to.

But Sanjay Sethi, a founder of ShopClues, and its CEO, has a word of caution: advertising must not be done at the cost of the core business. “There has to be a balance,” he says. “Advertising cannot be allowed to cannibalise the core business. It is important to be clear which is the cart and which the horse.”

Putting the wrong one in front will cause damage. Sethi worries about ShopClues sellers, most of whom are small- and medium-sized businesses. They are not very savvy with advertising, may be at a loss to figure out where to advertise and how much, and how to calculate the return on advertising expenses. “We have to take care of our sellers. For every Rs 100 they spend on advertising, they must earn Rs 300.”

Now, if only traditional media, like newspapers, could convince advertisers they get that kind of returns on their advertisements.