Mobile wins as e-retailers shift ad spend strategy

Even as analysts predicted e-retailers to tighten advertising purse strings this year on the back of investor scrutiny, increasing losses and stricter government policies, mobile ad spends by e-retailers will continue to remain strong, suggest experts.

Last month, the Pitch Madison Advertising Outlook downgraded its adex projection for 2016. One of the reasons given for this was lower TV ad spending with e-commerce players particularly shying from big spends.

“The drop in growth rates in TV is led by a lower contribution of e-commerce which is a category known to pick and choose high priced inventory / impact programmes and substituted by FMCG users who resort to everyday advertising and seek high value for money,” Vikram Sakhuja, CEO, Madison Media & OOH had commented at that time.

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In our 2016 Mobile Ad Spend report at exchange4media's annual mobile advertising awards - The Maddies, we predict a growth rate of 78 per cent for mobile advertising. At this rate, total ad spends on mobile should reach Rs 1,280 crore this year. This segment is expected to keep growing in the range of 70-80 per cent into 2017 to reach around Rs 2200 crore.

Most analysts we spoke with earlier this year generally agreed that we would see a reduction in ad spends by the major e-commerce players to a more sensible amount rather than the blitz of big money campaigns that have been the staple over the past couple of years. However, while speaking with mobile experts for the Mobile Ad Spend report, the general consensus seems to be that mobile ad spends by e-commerce will not be affected.

“The reduction of e-commerce contribution to overall adex is nothing but a natural phenomenon as e-commerce companies are now moving from the growth phase of launch campaigns to now focussing on sustenance campaigns. With consumers today looking for value for money, advertisers have also realized this and will now only invest where they see high potential for customer conversions. We are now seeing the adex pie having a healthy mix of traditional brands across auto, FMCG and consumer electronics adopt the mobile medium to reach out to their target audience. This will compensate for the decline in e-commerce spends on mobile,” said Nadeesh Ramachandran, VP (Sales) at Vserv.

E-commerce is still expected to be among the highest ad spender this year with the GroupM TYNY report predicting that this segment will constitute 8.1 per cent of the ad revenue pie in 2016.

One reason for this is that entry of newer and smaller players who are still bullish about growth and not hesitant to spend. One platform that seems to have benefited from a more rational approach towards ad spends is mobile, which is seen as a high-impact and performance-led medium by marketers.

“Though spends by top e-commerce players might have trimmed down, but overall spend in e-commerce space has seen a rise with us. This is due to new entrants in the market, especially with verticals targeting fashion, teenagers etc., launched by top business houses and retailers,” informed Amit Gupta, Managing Partner, Httpool.

It is also a thought echoed by Vinod Thadani, Sr Business Director at GroupM Media India. “It depends on what kind of spends. It cannot be performance-based campaigns because it is their bread and butter. Maybe they will trim in terms of large campaigns, otherwise all e-commerce players are continuing to spend on mobile,” said Thadani, when we asked him whether mobile ad spends have taken a hit.

Subrat Kar, Co-founder of Vidooly also agreed that brands from other verticals are filling any lacunae left by lower e-commerce spending. We are seeing a shift in momentum with tech product companies, automobile brands and even quite a few tech startups. The impact (of lesser e-commerce spending) won't be that evident since brands from other verticals are filling that void. Even startups like Walnut, Byju’s, etc. are spending quite a lot on advertising,” he told us.

Malik Gilani, CEO of Knightsad, was of the opinion that e-retailers have now started adopting a more strategic approach. “The Indian markets have evolved rather quickly towards accepting the trend of e commerce in the recent years, considering the stats of the biggest players in e-commerce it clearly signifies that the race to the top is very much alive.  We don't have a ‘hero’ here as yet, like Bisleri in mineral water segment or Parle G in biscuits, so to further market their drive to the undisputed level the spends have become timely and seasonal rather than distributed throughout the year on a daily basis,” he said.

Arun Pattabhiraman VP & Global Head of Marketing at InMobi disagreed that e-commerce spends have gone down, calling it a “misconception”, though he agreed they might be wary of traditional media.

“They are focusing more on ROI-driven channels like mobile. All e-commerce companies working with us have increased their marketing spends. Leading up to the festive season, we have major players placing bets on video advertising and other rich media formats. The period between September to November is an auspicious time for shopping in India and marketers will be spending aggressively to win big. In a broader scenario, with the change in FDI norms and the concept of deep discounts being hindered, e-commerce players will be looking to advertising as an important medium to drive sales. Even sellers on platforms will be looking at advertising to increase sales,” he added.

Tripti Lochan, CEO, South East Asia & India at VML, told us that e-commerce segment accounts for 50 per cent of mobile ad spends in India.

“The trimming down of e-commerce is mostly due to the rise of m-commerce. So, in a way, the reduced spending from e-commerce will be counter-balanced by the increased spending from m-commerce,” she informed.

Chirag Shah, Co-founder of Seventynine, a mobile ad network and a part of the SVG Group, was also of the opinion that there has been no trimming of mobile ad spends on the part of e-commerce. He, however, agreed that marketing heads are going to be more firm and effective in changing their KPIs. “They want measurable results from campaigns,” he said.

Speaking about the major industry spenders on mobile in 2016, Shah said, “2016 will see higher share of total ad dollars towards Digital (desktop & Mobile) irrespective of the industry. However, given the fact that India is the hot bed of digital only/digital first businesses currently we will see more contribution from sectors like e-commerce, services commerce (on-demand economy), OTT Content & streaming services and FMCG.”

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