ONLINE ADS: Revenues Ahead?

Chances are that many still aren’t fully aware about what comprises online
advertising. Most of us tend to associate online advertising with the banner ads
we see flashing at strategic locations on Web pages. But those constitute a very
small fraction of the whole. Ever noticed the interstitials (small windows that
pop up while a Web page is downloading and disappear after a while), Web site
sponsorships, the classifieds, advertisement mail, and link ads in chat boxes?
These are among a host of advertisements that can be found on the Net.

Industry
pundits believe that online advertising is "waiting to happen". Most
of them however admit that the story so far has been shaky. As Binod Chaudhry,
VP and regional director, Rediff.com puts it, "Yes there is a problem with
online advertising today. But though the present doesn’t look so bright, the
future is absolutely mind-boggling." With the exponential growth in PC
sales–according to DQ estimates, India will have 10 million PC’s by 2003 at
a growth rate of 42%–and the expanding Internet penetration, the power of the
Net as a medium is huge. "With the boom in the IT industry and its
penetration in every part of life, with dot-coms consolidating their position
and offering various value additions, Web advertising will grow." adds
Sreenivasan K R, head, sales and marketing, Ciol.com.

The interactive edge

Perhaps the biggest advantage that online advertising has over offline
advertising is that it facilitates the advertiser to reach an absolutely
pinpointed and targeted audience. On the Net, the audience can be qualified like
no other medium, knowing their age, gender, income category, interests and
hobbies, and most important of all, browsing habits. All this can help an
advertiser decide the sites and the slots where he wants to promote his brand.
As Stu Ginsburg, spokesperson for the Internet Advertising Bureau (IAB) points
out, "The Internet is a terrific medium in that it permits all consumer
activities to happen at one place and one time–one can advertise, brand,
market, and sell all in one place using the right targeting capabilities."
Chaudhry further qualifies this, "There are users that sign up asking for
specific information, maybe regarding books, computers or music. These databases
are undoubtedly the most potent means for mail advertising."

Apart
from being economical and dynamic, what stands out is that the Internet is the
only medium where mass advertising is interactive too. "Traditional
advertising is usually a one-way mechanism, there is no way for customers to act
on the information in the ad. On the Internet, however, interested customers can
click on a banner, learn more, and actually make purchases on the spot,"
states Arti Dwarkadas, business director, Ogilvy Interactive. The interactive
power of the Internet allows the consumer to determine the extent of the
advertising message, ranging from a quick brand impression to a full-fledged
session with a brand, product or service.

The Internet as a medium knows no demographic boundaries and this gives the
advertisers a huge audience to tap and build brand image if not sell products.
Experts agree that the general trend in advertising on the Net is driven by a
brand building and brand promotion exercise and not so much by sales. As N
Muralidharan, MD and VP, JobStreet India states, "Some companies have
started using the Net for launching brand campaigns that tap the tech-smart
folks." Companies can also benefit from Internet advertising by educating
their customers about their products and technologies–the Net is immensely
capable of doing that. According to Pankaj Sethi CEO Media2India, "A recent
study conducted by Jupiter Media Metrix, suggests that advertisers are
increasingly using the online advertising medium for brand building."

What holds the growth?

In spite of all these benefits, why is it that online advertising is yet to
take off? Chaudhry believes that too much has been expected from a medium, which
has been around for only four years. "Give it some time," he says,
"Online advertising is still in its infancy. Ten years down the line you
and I will be proud that we were around when it got started." Perhaps one
problem that needs to be overcome is the mindset. Most of the corporates, who
constitute the largest chunk of advertisers on the Net, are not very sure about
what the Net can deliver. According to Charudhry, this is because they still
prefer to do things the traditional way.

One reason why Web advertising did not take off could conceivably be the
dot-com shakeout. With so many online companies closing shop, advertisers turned
apprehensive about investing in online ads. But optimists believe that this
so-called shakeout has, in fact, been a good thing to happen. As Sreenivasan
points out, "Like any other industry the dot-com industry is going through
a consolidation phase. Only those with a solid business model will
succeed." Chaudhry agrees, "The failure of dot-coms is somehow
creating the impression that it is the failure of the Internet, which is a very
narrow understanding of the difference between a medium and a business
idea."

Another genuine problem that Web advertising faces today is the
infrastructural inadequacy. According to Nasscom, the number of Internet
connections in 2000 was about 1.6 million and the Internet users were pegged at
4.8 million–a minuscule portion of the country’s one-billion-strong
population. Then there are the bandwidth issues, especially the last-mile
connectivity. Also, not being a very evolved medium like traditional
advertising, Web advertising does not have a matured pricing model. Moreover,
the returns are also highly unpredictable. Chaudhry agrees, "There are
times when you invest Rs 5 lakh in online advertising and you get returns worth
50 lakhs and there are times when huge investments go bust."

Gradually, however, Internet advertising is becoming more organized.
Advertisers are increasingly looking at ways to move beyond the much-used banner
ad, either by sponsoring a portion of a site or getting their content integrated
into it. "The future of online advertising continues to look bright.
Broadband access technologies, coupled with lower PC prices, will ensure greater
numbers of users, which in turn, will support advertising revenue models for the
medium," says Sethi.

The opportunities for interactive advertising on the Web are endless; they
just need to be tapped right. DQ