Much is spoken and written about the growing economic strengths of the BRIC markets, it is one reason why ExchangeWire has a growing presence in these markets. However, when it comes to ad tech, India often is left in the shadows for some reason. When commentators future gaze about the APAC market, the focus is predominantly around Japan, China, South East Asia and Australia; but India is a sleeping giant of ad tech that is about to awaken.
The opportunity in India is sizeable, with over 100 million people online and a fast-growing e-commerce industry. Whilst it is still one of the smallest e-commerce industries in APAC, its growth is predicted to increase at the fastest pace over the next five years, according to Forrester. In 2011 alone it took on an estimated $1 billion of investment, and the economy as a whole is the 10th largest in the world, with an ever-increasing GDP -- but what is the opportunity around ad tech specifically?
Parallels To The UK
A common market entry strategy employed by US companies on the hunt for international expansion inevitably begins with the UK, and then branching into France and Germany. There have been, however, countless failed attempts at executing this strategy. The French and German markets are incredibly different to the UK. Whilst there are some subtle similarities, culturally and professionally, they’re vastly diverse, and US companies have learnt the hard way how fragmented Europe is.
Could India emerge as a relatively easier market to break into? Of course, culturally, obvious differences exist, but there are strong parallels to the UK market. Firstly, India has an extremely high percentage of spend that is direct marketing focused. It is said that the UK and India, per pound spent, have the highest ratio in the world in terms of how much allocation is funnelled to KPI-focused, direct marketing efforts. For this reason alone, the promise of impression-level decisioning and the efficiencies this can drive, is likely to be overwhelmingly bought into.
Data-Driven Culture
One of the principle ways companies have been succeeding and differentiating in the ad technology space is by having a fundamental data-driven/tech culture flowing through the entire organisation. Some markets have tried building this culture. Others have bought it. India, however, has it by the boatload, and has for quite some time. For years now India, and specifically places like Bangalore, have been a hotbed of innovation around ‘big data’. Some of the most advanced adoptions of technologies such as Hadoop, and more generally cloud computing, have come from the area. The region has long been an outsource centre for this type of capability, and as a result, there is a significantly greater supply of experienced infrastructure and data-science-based candidates. Furthermore, a large number of workers previously employed by top data-driven companies around the world (banks, capital market firms, etc.) are now going back to India in response to the fast growing economy.
This culture, therefore, feeds into most organisations and across most functions. Marketing functions have been incredibly advanced around the usage of analytics and data. The advertising culture is also typically strong. A very high percentage of graduating classes go into this space and agencies are innovative and able to obtain top-tier talent.
The recent levels of venture capital investment into the burgeoning Indian e-commerce industry are also driving a need for marketing accountability. This is why it is conceivable to expect some real innovation to come from India, and not just from vendors and intermediaries but from advertisers themselves.
Opportunity For Publishers
It isn’t just ad technology vendors who should be keeping an eye on India, there is going to be a growing opportunity for English-language publishers too. Whilst local portals and news outlets are frequently used, there is also an increasing amount of traffic going to international, English-language sites, and news sites particularly.
To date, the two ways of monetising this foreign traffic for publishers are to activate a local partner site-rep business, or dump the inventory into a blind network. Of course now though, with India on the brink of ramping its adoption of RTB, publishers now have access to another sales channel, which doesn’t require local sales forces. It will also inevitably drive higher yields than outsourcing the process to Indian based ad networks/networks specialising in foreign traffic.
What’s more, with the ever-increasing e-commerce industry, publishers will soon be able to tap into performance budgets from retargeters. Criteo is likely already eying the prize, as are local companies such as Vizury.
The Growth of Mobile
Whilst having access to over 100 million internet users presents a sizeable opportunity, only a small percentage have access to broadband, which potentially limits the ways advertisers can engage with these audiences. However, mobile is likely to emerge as the predominant gateway to connectivity for the Indian population. Big sums of money are being invested in the licensing rights to 3G (and now 4G) services. There is already 2.5G with Photon (from Tata), the most well-known USB dongle in the space. Ultimately, there is going to be an even larger push in driving consumer adoption of mobile.
Companies are already offering access to high speeds for bottom rate-prices. As this continues to proliferate, it’s likely a large proportion of the population will bypass the broadband connection and simply use their phones as the predominant connector to content. The most recent Mary Meeker report indicates that mobile traffic from India surpassed desktop at some point in the middle of last year. So expect video streaming and other methods of content consumption to be piped through the phone.
With such a large focus on mobile, expect to see real thought leadership emerging from India (as well other parts of SE Asia, such as Indonesia) around the monetisation tomorrow’s mobile models.
India represents a large opportunity, it is no longer simply a cost-effective technical outsource marketplace. As the economy continues to grow (it will certainly leapfrog the UK in the coming years), as e-commerce continues to thrive, and as internet access becomes more accessible to the billion-strong population, expect India to earn its place at the highest table in the ad tech stakes. Oh, and look out for ATS Delhi, Mumbai and Bangalore in the coming years.