Battle intensifies for ad revenues in India’s online space

Battle intensifies for ad revenues in India’s online space

New Delhi: Are the so-called horizontal portals—websites that provide general news as well as email among a host of other services—losing out to sites that cater to more targeted audiences? Some experts seem to think they are, while promoters of such sites disagree strongly.

On one hand, India’s online advertising market continues to be in the pink of health, with some industry estimates forecasting 70% growth this year. On the other,, a leading Internet portal, has posted declining growth in ad revenues.

(MONITORING TRAFFIC) The Nasdaq-listed, one of the country’s earliest “horizontal" portals, recently posted less than satisfactory results for the quarter and financial year that ended on 31 March. The firm, which says it has cornered 27% of India’s online advertising market, said its ad revenues grew just 8% in the year, compared with 90% growth in fiscal 2007.

In contrast, Info Edge (India) Ltd, that runs online classified services such as (jobs), (matrimonials) and (real estate), sites that are also known as “verticals", saw advertising revenue grow by 42% in the three months that ended on 30 April, as compared with the same period a year ago.

Web18 Software Solutions Pvt. Ltd, the firm that runs sites such as (cricket news), (financial and equities market news), and (travel), posted a 124% jump in turnover, to Rs57.3 crore in the fiscal year that ended on 31 March, from Rs25.6 crore in the previous fiscal.

Similarly, Consim Info Pvt. Ltd, one of Info Edge’s rivals and the company behind sites such as (matrimonials), (jobs) and (real estate), says its advertising revenues are growing apace. “We are targeting an ad revenue growth of 200% this year," says Murugavel Janakiraman, founder and chief executive officer of Consim Info.

Analysts say the horizontals are losing some of their sheen to verticals as advertisers are preferring to reach numerically lower but more focused users. “This trend started around last year or so, but now it’s clear that ad money is moving away from horizontals to verticals," says Arvind Mahendru, managing partner of interaction at GroupM, who says his firm enjoys leadership in India’s online advertising practice.

“Horizontals are cluttered and these days, for most needs, the customer knows which vertical to go to," he says. “While verticals always had the targeted audience advantage, now they are also boasting of a sizeable user base. Horizontals are going to feel the pinch."

A factor contributing to the weaker growth of horizontals is that display ads—the mainstay of such sites—are losing favour against search-based advertising, which experts say is more targeted and cost effective. “Right now, mobile advertising enjoys about 7-8% of the market, while display (ads) gets 60-65%, and search gets 30-35%. This ratio is going to even out, and mobile will enjoy explosive growth. While search will post healthy growth, display is going to decline," Mahendru says.

Google Inc. controls the majority of the search advertising market in India. Sites such as Rediff and Indiatimes, the online company from the stable of media house Bennett, Coleman and Co. Ltd, also display ads through Google’s Adsense network.

Promoters of horizontal portals say it is not the end of the road for them. Rediff’s chairman Ajit Balakrishnan points out that horizontals sometime produce the most successful verticals.

“Yahoo Finance is a good example. Our own vertical Rediff Money gets higher traffic than most dedicated finance verticals," he says.

Dinesh Wadhawan, chief executive officer of Times Internet Ltd, the company behind, is quick to point out that new technologies could hurt traffic to verticals. “Take travel sites for instance. An application or a site that can do a metasearch can fetch the best prices from 10 travel sites. Would you then go to a travel site or come to a horizontal that can do a metasearch?" he asks. Metasearches are capable of searching across several search engines at the same time.

Info Edge’s chief Sanjeev Bikhchandani disputes that argument. “Metasearch can work for travel, where there are three query fields. You can’t do that with jobs. A query with several fields can’t be done across multiple databases," he says.

Unlike Rediff, Indiatimes says its ad revenues have been growing 25-35% every year for the past 3-4 years. Says Pearl Uppal, sales director at Yahoo Web Services India Pvt. Ltd, the portal’s ad revenues have grown more than 100% every year for the past five years.

“There is enough space for any number of big portals and verticals, and any other business in India’s online space, if we can realize the user base potential. Incremental growth is just not enough," says Balakrishnan.

“Verticals have certain limiting factors. How many times in your life are you going to get married or be looking for a job? In comparison, won’t you check mail every day? In fact, several times a day?" asks Wadhawan. “It’s ultimately about customer delight: whoever delivers that better, will win in the long run."

Vidhya Sivaramakrishnan in Chennai contributed to this story.

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