From Random Advertising to Precise Marketing
What is Ad Tech: Commonly referring to technologies, softwares and solutions used for delivering, controlling and targeting online ads. Ad tech involves more than simple digital ad banners, but it comprises back-end systems and algorithms that will support advertisers to deliver the right messages, to the right customers.

What is Ad Tech

About the advertising Industry: projected to be the second fastest growing advertising market in Asia after China. It is estimated that by 2018, the share of ad spend in India’s Gross Domestic Product (GDP) will be around 0.45 per cent. With substantial shifts occurring from on ground advertising to online this sector is a one to be on the radars of the analysts.

Advertising expenditure in India
Advertising expenditure in India

Image Courtesy: Live Mint

Market Size in India:

  • India’s digital advertising market is expected to grow at a compound annual growth rate of 33.5 per cent to cross the Rs 25,500 crore (US$ 3.8 billion) mark by 2020. In 2016 ad spend in India was expected to grow to 15.5% to 57486 crore with digital advertising expanding at fastest rate at 47.5%.
  • Online advertising, which was estimated at Rs 2,900 crore (US$ 435 million) in 2013, could jump threefold to Rs 10,000 crore (US$ 1.5 billion) in five years, increasing at a compound annual rate of 28 per cent.
  • The Internet’s share in total advertising revenue is anticipated to grow two fold from eight per cent in 2013 to 16 per cent in 2018.
  • In the present scenario(2016) the expenditure by various industries in digital advertising are: E-commerce(INR 1040 cr), telecom(INR 780 cr), banking, financial services and insurance (Rs 728 crore) and FMCG (Rs 676 crore).
  • A report by CII and KPMG India revealed that India is one of the fastest growing advertising markets globally with an estimated growth of 15.5 per cent in 2016, driven by a large consumer base and a growing e-commerce industry.
  • Companies have started to target video streaming as one of the major formats for advertising. While mobile has the greatest potential to be used as the medium for the video advertisements. Video will account for 41% of total desktop display-related spending in 2020, up from a 26% share in 2015. Facebook has its own algorithm that promotes ads in the form of videos. The recent craze of video stories in different apps like Fb. Snapchat, Whatsapp, etc are a proof of this.
Market Size in India
Image Courtesy: Business Insider

Out Of Home Advertising: The sign boards and the large hoardings are surely a good way to publicize your product to the customers. These form a part of the Out Of Home (OOH) advertising industry and are made into use by the FMCG, media and entertainment and automotive industry majorly. The revenues from the OOH industry in the year 2016 were around INR 26.1 Billion and is expected to reach to INR 29 Billion with a CAGR of ~11%. This sector is largely unorganized due to the ownership of different sites across the country by different agencies and absence of any authority over them.

Digital OOH is a thing of near future where the traditional static signboards and hoardings will replaced by digital ones. The digital OOH industry is expected to grow at a CAGR of 25% in India till 2019. Digital advertising sites coupled with technology are on their way to revolutionize the OOH industry. Technology will be able to provide efficient analysis which is a major drawback of the current OOH industry in India. This however requires a lot of initial investment.

Some important Key Performance Indexes for an Ad Tech Company:

  • Cost per Customer
  • New traffic per month
  • Click Through Rate
  • Marketing/ Revenue
  • Average Revenue per Customer
  • Market Penetration
  • Efficiency and No. of different formats of advertising available
  • Variety of audiences being catered
  • Organic and Inorganic searches
  • Consumer Acquisition Cost

Facebook and Google Duopoly:
Google and Facebook together accounted for 75% of the worldwide online ad spending. Approximately 85 cents for every dollar spent on online advertising in US goes to Google and Facebook. Google thrives on its power for efficient searching while Facebook on its power to reach the customers directly.

Thus although the industry is and will be on a rise on the future but it has been dominated by major companies like Google and Facebook. The two virtually have a duopoly in the sector and hence this has resulted in disinterest of Investors in investing in the newcomers in the industry.

Google heavily “sells” its users to the advertisers so that we can see those ads. Facebook on the other hand is trying to establish its monopoly in the sector. It has taken over Whatsapp and Instagram and modified them in such a way that has left Snapchat(another player) almost redundant. Facebook is also planning to make its office working platform Workspace free to corporate firms which is a direct challenge to the use of gmail and google drive. Both of them together are trying their best to eliminate new competition at a very early level. Google buys one AdTech startup every year surely proves this.

Facebook and Google Duopoly
Image Courtesy: digitalcontentnext.org

How the newcomers should approach:
In this highly competitive yet ever growing sector it is mandatory for the new startups to have their own unique ways to reach a particular type of audience and keep them engaged. The two giants have most of the audience under their influence and hence it has become very important to have a uniqueness in the idea to lure them towards your company. Major focus should be on trying to get maximum possible audiences. Unique ways of advertising will surely attract customers and hence keeping the rates a bit low initially would be an add on. Details in the analysis of the campaigns is an important thing that the clients look for to which should also be taken care of. Personalized advertisement is the thing of the day. Corporates spend a hefty amount to get their brand in the eyes of the people. Personalized offline advertisement is something which has not been targeted much and has considerable scope of improvement.Digital OOH is something to look out for in the future.  Improvements in online advertising can be done when coupled with detailed data analytics which will improve the targeting of the audiences by the brands.

The sector is initially averse to funding as any efforts to make it big are suppressed by the big players. They will not try to close you but will accommodate you within them and use your ideas to promote themselves. However determination and self confidence is what you need to take it to that level.

About the Author: Karan Mehta (https://www.linkedin.com/in/karannmehta/) is an Analyst at Idein Ventures, a Global VC/PE firm. He is someone who constantly tries his hands on new things. Always fond of playing with numbers. An avid reader about the latest happenings in the startup world. He loves reading about influential personalities.