The advertising technology (ad tech) industry in India is facing a crucial need for a reimagined approach to online advertising (fist principles thinking). It seems that tailored ad tech solutions specifically designed for India are yet to emerge. While some companies gained considerable value due to anticipated web traffic, their success heavily relies on the presumption of online ad effectiveness. However, as you rightly pointed out, there are several pivotal aspects that require attention before success can be assured—such as refining ad formats suitable for Indian audiences, understanding their online behavior, and notably, the underlying technology driving these ads.
Rather than addressing these uncertainties head-on, investors seemed to pin their hopes on pouring funds into apps with large user bases, assuming it would resolve all hurdles. However, it remains unclear how platforms like ShareChat or Kutumb are tackling these critical issues. While they rapidly acquired users through engaging content or smart marketing strategies, mastering the complexities of ad tech takes time, especially considering the myriad external factors at play.
Addressing these challenges will likely demand the collective efforts of numerous startups, each focusing on different facets of the puzzle. Our Indian consumer landscape differs significantly from the West, necessitating the development of bespoke technological solutions and an ecosystem tailored specifically for India's online advertising realm.
Very very good read. Unless and until an ONDC type of audience marketplace is built, this fantastic opportunity will go waste. Cost of technology is significant higher for the OpenWeb. Walled gardens invested ahead of time and are reaping the benefits today. Technology must be decoupled from content and commerce for SMBs to benefit.
Brilliant read. My personal interpretation of why Sharechat lost out to Meta was that the need for status amongst the tier2+ audience is greater than the need for content in local languages. It almost seems like these users want to and are willing to learn how to use these foreign social platforms for the fear of being left out. Would be great to learn more about your thoughts on what consumer-tech platforms can do make their products seem more appealing/aspirational for users in India.
I agree on the aspiration part. Once their initial niche is tapped out, they need to rethink how they can go after an incremental audience. For example, youngsters are preferring Insta over FB, ShareChat today because it is the in-thing.
It's a tough problem to solve, because unfortunately we in India still have an unconscious colonial hangover - where we perceive foreign products to be better (which is why if you go to any small town, you'll see the keyword 'imported' in front of consumer goods/apparel stores). The Make in India feeling has not seeped in yet, once that happens, there is potentially a tailwind for made in india platforms.
Hey Mithun, this was a fantastic read and resonates closely with what I'm currently working on.
I'm currently working with one of the country's top regional mediahouses who are building something to try and tap into the concepts you describe - local/hyperlocal ads, trust of an existing brand and ease of advertising online for smaller players.
I would love to discuss this more with you to get your thoughts on our journey and exchange notes.
Hi Mithun, when we compare the Revenue in US vs. India, wouldn't we factor for PPP? One needs 24lac INR in India to get same value of product and services which 1lac $ can give in US. Wouldn't that mean that the value of $1.8B (INR144B) is roughly $6B when spent in India?
True. Also, from Facebook's point of view, may be revenue is not what they are looking for in India. May be India a.gives them diverse enough audience to train their platform on, b.build expensive capabilities very cheap due to low resource cost which they can deploy in markets where those capabilities are valued way more.
Fantastic read Mithun. Packed with stuff to takeaway. Do you think the numbers are a bit off though? Amazon, Flipkart alone generated $1B in Ads revenue in 2022, I am assuming the other eComm platforms like Zomato, PayTm, Swiggy, PhonePe, Nykaa, Meesho etc. are another $1B or close to. Is the $10B number underreported or just the digital ad spend per you
my source for digital ads market (linked in the article) - says 4-5b USD. Corroborated by Meta ads revenue being ~2b USD from India (linked in my latest post). Another 2b USD from Google, and e-commerce totals should be 1b USD (mostly fk/amazon.- all the others might be early).
Thank you for sharing such an insightful take on why India is still a DAU farm. Could you share some examples where businesses got higher ARPU through ads on Indian apps such Moj/ Sharechat/ Lokal etc?
from my understanding the ads ecosystem is still nascent on these apps, and mostly driven by brand advertising. Don't have any hard metrics on ARPU increase yet.
I understand why we should not write off digital ad business in India yet but would like to understand your POV on current market economics. In the print advertising world, >80% of the ad revenue goes to English newspaper despite their circulation being less than 20% of the whole market. Do you think this will change in the digital ad world?
Also, would love to discuss about live commerce in India when you write about it.
the split of revenue share is something that the CPM metric sort of covers - I've taken CPM as 20% of the current CPM, assuming advertisers will pay less to access this audience, and even then it seems to work out as a decent business.
Live commerce is in the works, maybe in a few weeks :)
Hey Mithun, great stuff as always. It would be great if you could share your thoughts/ hypothesis on what type of content works (and could be monetized) in Tier 2+. I am sure this would not be analogous to the stuff we are used to seeing
What type of content 'works' is easy to understand - open sharechat and spend an hour scrolling through it.
What can be monetised though is a different question - you can monetise the audience for this content once you have their attention - via ads, and live commerce etc (experimenting).
Direct content monetisation is at some sort of scale with text and audio original content (pratilipi, kuku/pocket fm), which makes sense - these are longer form compared to fb/insta/sharechat, and also original.
The advertising technology (ad tech) industry in India is facing a crucial need for a reimagined approach to online advertising (fist principles thinking). It seems that tailored ad tech solutions specifically designed for India are yet to emerge. While some companies gained considerable value due to anticipated web traffic, their success heavily relies on the presumption of online ad effectiveness. However, as you rightly pointed out, there are several pivotal aspects that require attention before success can be assured—such as refining ad formats suitable for Indian audiences, understanding their online behavior, and notably, the underlying technology driving these ads.
Rather than addressing these uncertainties head-on, investors seemed to pin their hopes on pouring funds into apps with large user bases, assuming it would resolve all hurdles. However, it remains unclear how platforms like ShareChat or Kutumb are tackling these critical issues. While they rapidly acquired users through engaging content or smart marketing strategies, mastering the complexities of ad tech takes time, especially considering the myriad external factors at play.
Addressing these challenges will likely demand the collective efforts of numerous startups, each focusing on different facets of the puzzle. Our Indian consumer landscape differs significantly from the West, necessitating the development of bespoke technological solutions and an ecosystem tailored specifically for India's online advertising realm.
Very very good read. Unless and until an ONDC type of audience marketplace is built, this fantastic opportunity will go waste. Cost of technology is significant higher for the OpenWeb. Walled gardens invested ahead of time and are reaping the benefits today. Technology must be decoupled from content and commerce for SMBs to benefit.
Brilliant read. My personal interpretation of why Sharechat lost out to Meta was that the need for status amongst the tier2+ audience is greater than the need for content in local languages. It almost seems like these users want to and are willing to learn how to use these foreign social platforms for the fear of being left out. Would be great to learn more about your thoughts on what consumer-tech platforms can do make their products seem more appealing/aspirational for users in India.
I agree on the aspiration part. Once their initial niche is tapped out, they need to rethink how they can go after an incremental audience. For example, youngsters are preferring Insta over FB, ShareChat today because it is the in-thing.
It's a tough problem to solve, because unfortunately we in India still have an unconscious colonial hangover - where we perceive foreign products to be better (which is why if you go to any small town, you'll see the keyword 'imported' in front of consumer goods/apparel stores). The Make in India feeling has not seeped in yet, once that happens, there is potentially a tailwind for made in india platforms.
Hey Mithun, this was a fantastic read and resonates closely with what I'm currently working on.
I'm currently working with one of the country's top regional mediahouses who are building something to try and tap into the concepts you describe - local/hyperlocal ads, trust of an existing brand and ease of advertising online for smaller players.
I would love to discuss this more with you to get your thoughts on our journey and exchange notes.
Hey Tarun, thanks for the feedback! happy to chat - can you email me at myth.12887 at gmail.com and we can find a time.
Hi Mithun, when we compare the Revenue in US vs. India, wouldn't we factor for PPP? One needs 24lac INR in India to get same value of product and services which 1lac $ can give in US. Wouldn't that mean that the value of $1.8B (INR144B) is roughly $6B when spent in India?
yes thats another way to look at it. but even PPP adjusted revenues are not close here.
True. Also, from Facebook's point of view, may be revenue is not what they are looking for in India. May be India a.gives them diverse enough audience to train their platform on, b.build expensive capabilities very cheap due to low resource cost which they can deploy in markets where those capabilities are valued way more.
Fantastic read Mithun. Packed with stuff to takeaway. Do you think the numbers are a bit off though? Amazon, Flipkart alone generated $1B in Ads revenue in 2022, I am assuming the other eComm platforms like Zomato, PayTm, Swiggy, PhonePe, Nykaa, Meesho etc. are another $1B or close to. Is the $10B number underreported or just the digital ad spend per you
https://economictimes.indiatimes.com/industry/services/advertising/advertising-spends-on-ecomm-platforms-crossed-1b-in-2022/articleshow/97747542.cms
Likely a mismatch in sources/dates.
my source for digital ads market (linked in the article) - says 4-5b USD. Corroborated by Meta ads revenue being ~2b USD from India (linked in my latest post). Another 2b USD from Google, and e-commerce totals should be 1b USD (mostly fk/amazon.- all the others might be early).
This article says digital ads is 5b USD ~ 48000 cr INR, of ~15b USD total ad spend. https://economictimes.indiatimes.com/industry/services/advertising/ad-spends-in-india-set-to-zoom-past-1-lakh-crore-mark-in-2022/articleshow/89600455.cms
So numbers broadly track
Hi Mithun,
Thank you for sharing such an insightful take on why India is still a DAU farm. Could you share some examples where businesses got higher ARPU through ads on Indian apps such Moj/ Sharechat/ Lokal etc?
from my understanding the ads ecosystem is still nascent on these apps, and mostly driven by brand advertising. Don't have any hard metrics on ARPU increase yet.
An interesting read Mithun.
I understand why we should not write off digital ad business in India yet but would like to understand your POV on current market economics. In the print advertising world, >80% of the ad revenue goes to English newspaper despite their circulation being less than 20% of the whole market. Do you think this will change in the digital ad world?
Also, would love to discuss about live commerce in India when you write about it.
the split of revenue share is something that the CPM metric sort of covers - I've taken CPM as 20% of the current CPM, assuming advertisers will pay less to access this audience, and even then it seems to work out as a decent business.
Live commerce is in the works, maybe in a few weeks :)
Hey Mithun, great stuff as always. It would be great if you could share your thoughts/ hypothesis on what type of content works (and could be monetized) in Tier 2+. I am sure this would not be analogous to the stuff we are used to seeing
What type of content 'works' is easy to understand - open sharechat and spend an hour scrolling through it.
What can be monetised though is a different question - you can monetise the audience for this content once you have their attention - via ads, and live commerce etc (experimenting).
Direct content monetisation is at some sort of scale with text and audio original content (pratilipi, kuku/pocket fm), which makes sense - these are longer form compared to fb/insta/sharechat, and also original.