Internet advertising still forms a small segment, about 3%, of the total advertising pie in India. The figure is forecasted to grow to 5% by 2012. It faces challenges like slow internet connections and general reluctance of Indian consumers towards online purchases. But with broadband becoming cheaper and 3G coming in, the change could be rapid.
The Internet advertising market will grow to Rs 9930 million in the financial year 2010-2011 from Rs 7850 mil in the financial year 2009-2010, according a recent survey conducted by the Internet and Mobile Association of India (IAMAI).
The total online display advertising market is expected to grow by 28% to touch Rs 5340 mil in 2010-2011 from Rs 4170 mil in 2009-2010. BFSI emerges as the leader in both text and display ad spend with 24% in each category. Travel is close behind, accounting for 20% ad spend in both display and text ad spend.
The survey also highlighted that relatively new advertisers like FMCG and education sector are shelling out more on display advertisements than traditional text ads. FMCG sector which is one of the highest spenders on television advertising is one of the lowest spenders on the Internet
Advertisers are increasingly relying on web analytics tools of online marketing companies to judge the relevance of a website publisher's keywords, traffic, content etc. Publishers rely on them for selling their inventory to the appropriate advertiser and for understanding the profile of website visitors.
Several online marketing companies also act as networks or intermediaries between advertisers and publisher websites to match demand and supply for online ads.
VCs are showing rising interest in online advertising and marketing firms. According to Venture Intelligence, online marketing companies received funds worth $71 million in 2010. This was up from the $58 million in 2009.