ZenithOptimedia, part of the Publicis Group, forecasts that global Internet advertising spending wordwide will grow by 28.2% in 2007, at the same time ad spending in other media will grow by only 3.9%- in other words, online ad spending will grow seven times faster. These put growth in US online ad spending at 18.9% in 2007, within an entire advertising industry set to grow by only 1.4%. ZenithOptimedia also projects that the Internet's share of worldwide total ad spending will increase from 5.8% in 2006 to 8.6% in 2009.

The shift of US advertisers to the Internet is an indication of a likely trend that is set to emerge in global advertising. Worldwide, spending on Internet advertising is exceeding the amount spent on outdoor advertising this year, and will surpass even radio ad spending in 2009.

ZenithOptimedia also projects that the Internet's share of worldwide total ad spend will increase from 5.8% in 2006 to 8.6% in 2009. The current trend seems to second this prediction. Take for example the case of India. Indian online advertising spend has increased dramatically in the last couple of years with no signs of declining in the coming years. Here's why. According to reports from the Internet and Mobile Association of India, spend in online advertising stood at Rs 42 crore in 2003-04. Last fiscal, this figure shot up to Rs 107 crore and is likely to go up to Rs 162 crore at the close of the current fiscal, and to Rs 218 crore by the end of FY 2006-07.

What's Driving the Trend?
Foremost, the huge boom in online traffic. India has 38.5 mn Internet users according to a recent IMAI study in coordination with IMRB International, with Mumbai alone having 2.6 mn active Internet users. Thus, the Internet is a significant platform for marketers and advertisers to reach out to the end user.

Secondly, more and more people are taking recourse to the Internet for even regular jobs. From shopping to travel to banking to job-hunting to news to purchasing movie tickets, there's no better one-stop-shop than the Internet today.

Broadband is also playing an important role in taking Internet to smaller towns and even in the rural market. However, penetration still remains low which also speaks of the potential that can be tapped once there is adequate infrastructure to facilitate this penetration.

The Internet already attracts more than 10% of adspend in three markets (Norway, Sweden and the UK), and by 2009, the trend is likely to move into 10 markets (Australia, Canada, Israel, Japan, Norway, South Korea, Sweden, Taiwan, the UK and USA). The Internet has its highest share in the UK, where it will attract 13.5% of ad spend this year and 21.5% in 2009. And there is no reason to believe that the same would not happen in India as well.

Last but not the least is increased computer penetration and fall in PC prices. According to the MAIT, personal computers penetration in India has trebled from 6 per 1,000 people in fiscal 2000-01, to 18 per 1,000 in 2005-06.

Boom Time
Online ad revenues for portals have been rising consistently over the last couple of years.

Online revenues for Rediff for Q1 2006-07 grew by 52% to $4.06 mn over revenues from the quarter ended June 30, 2005.

Revenues from India online advertising grew 68% for the quarter ended June 30, 2006 compared to the same quarter in the previous fiscal.

The number of advertisers on the company's site for the same quarter totaled approximately 165 brands, an increase of 24% over the number of advertisers during the same period in the previous fiscal.

India Online's Q2 revenues grew by 71% to $4.71 mn compared to India Online revenues for the quarter ended September 30, 2005.

With revenues from the India Online advertising business growing by 94% for the quarter ended September 30, 2006 compared to the same quarter in the previous fiscal, online advertising remains the primary growth driver for the company.

The number of advertisers on the company's website for the quarter totaled approximately 160 brands, an increase of 20% over the number of advertisers during the same period in the previous fiscal.

By end-2006, US advertisers are expected to spend $22 bn of their marketing budgets online, half of which will be pumped via search engines. Worldwide SEM is set to cross the $25 bn mark by 2010. India is following the trend.

In 2005, total online ad expenditures in India exceeded Rs 4 bn ($88 mn), of which Rs 2.4 bn was SEM, out of which Rs 720 mn was spent by companies in India, and the rest from enterprises abroad.

About 90 Indian brands spend more than Rs 1 mn a year on search-engine ads. According to an industry study by the Internet and Mobile Association of India (IAMAI), more than 40,000 advertisers are posting ads on search engines in an attempt to grab attention.

Internet advertising in India is undoubtedly growing by leaps and bounds. What remains to be seen is if India can do a US when it comes to online advertising.

Bhaswati Chakravorty
bhaswatic@cybermedia.co.in

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