Monday, August 10, 2009

D-I-Y Advertising

"Papa, papa, why does the moon advertise ?"
- a quote I heard many years ago (probably has no deep significance, I just like it :-)

Here's a look at advertising. Advertising is the lifeblood of the two industries tracked on this blog viz. consumer industries (advertising here generates the demand) and consumer Internet (advertising here also generates the revenue) :

When people first advertised, and one doesn’t know when that was, it is but axiomatic that they did it all – strategy, creative, media planning, placement, whatever ! - themselves. Then, nearly a 150 years ago, aided by the industrial revolution and newspapers as a mass medium*, came the advertising industry and the ad agencies. Today, if one is a corporation and wants to advertise, one usually employs an ad agency and spends a fair bit of money.

In India, there are about 80 odd accredited agencies (84 as per the AAAI and 79 listed in Business World’s The Marketing Whitebook 2009-2010). Each agency typically services a few dozen clients. Thus this ecosystem supports say, just a couple of thousand players. The largest ad monitoring service, TAM, monitors just 600 brands on print and TV. These are the regular advertisers.

The number of organizations in India who have ever advertised is several times larger. These number an estimated 38,000 odd for TV and over 314,000 odd for print (both from the latest weekly TAM report ).

These organizations, I am informed by friends in advertising, usually do not get serviced by agencies. Instead they go direct with the respective newspaper / TV channel. For ad creative, they use freelancers or the publication itself. It is the only a few thousand odd companies who have a full-time ad agency.

Separately, there are 13 million plus small enterprises (really small actually, on an average they employ just 3 people each) in India. In addition, I hazard that a large % of households have at least one self-employed or would-be self-employed person. These self-employed are on the constant lookout for opportunity e.g. a teacher looking for students for tution classes.

Each of these small enterprises and individuals is a potential advertiser. The current advertising option available to these enterprises and individuals is to run classifieds and occasionally run display advertising in the local newspaper.

Online is taking a good ‘share of wallet’ of these small advertisers and of the local advertising market. Data on India is not available, and I take a look at some US ad and global ad market trends instead and extrapolate:

Facebook: Facebook’s been quoted as saying that their revenue for the current year will exceed $500 million. This is believed to include over $300 million ad revenue. And the lion’s share of this advertising, by one estimate 74%, is actually local. This means that Facebook is turning out to be a local ad platform. This is unlike My Space, which was skewed towards large advertisers.

Considering that Facebook launched their ad platform only in Nov 2007, this is good progress. The local ad market in the U.S. is $150 billion, so there is a good upside possible here.

Now, advertising on Facebook is simple. One needs a credit or debit card and little else. There are value-additions possible in terms of audience targeting, pricing options and performance tracking, similar to what is generally available elsewhere online. Further, in some locations, the classifieds service (local newspaper) has a cheque pickup facility; often, in other locations, it does not. No such concern or delay when you pay online.

Thus, online advertising has several benefits over classified advertising in the local newspaper.

This is Do-It-Yourself advertising; it works well for very small and for neophyte advertisers. Here, the Internet has added real value.

In addition to paid advertising, Facebook allows and encourages the creation of pages, these then can be promoted free (virally) or by paid advertising.

Google: Google Adwords has over a million and a half advertisers ; they spend on an average about $16K a year each. Once again, the vast majority are small advertisers who can get started with a credit card or other payment options.

In addition to text ads, one can use Adwords’ 'display builder' tool to create display ads. Or,one can put up one’s own display ads.

Craigslist: Craigslist runs over 30 million ads a month . These are mostly free. This is a really simple, possibly the simplest possible local advertising option.

What’s caused the above DIY ad services to succeed? Facebook and Craigslist benefit by having a community, the user has comfort in placing the ad. Google of course benefits thanks to it's pioneering search service.

To sum up, Do-It-Yourself advertising is something that is uniquely Web. It serves to expand the number of advertisers (long tail).And more advertisers instrinsically mean more stable revenue for the sites.

All sites do not have this self-serve option. Yahoo India does not have a DIY advertising option, Rediff’s Local Ads (earlier P4C ads) product has not quite scaled, there seem to be some bugs here. Having a successful DIY advertising product may be key to building a stable revenue base.

* as narrated in the book 'Adland : A Global History of Advertising' by Mark Tungate, Kogan Page Publishers, 2008.

1 comment:

  1. Stumbleupon is also a good place to market your products, services and even diamonds