E-commerce platforms and streaming services are all set to wrest a larger share of India’s digital advertising spends, giving big tech giants like Google and Meta a run for their money. Advertising industry experts said e-commerce marketplaces such as Amazon and Flipkart and over-the-top (OTT) video streaming platforms such as JioCinema and Disney+Hotstar are becoming increasingly attractive for advertisers to spend their media money on them.
In most businesses, monopolies or duopolies start losing market share if the competition is big enough and the media industry is no different, said Sujata Dwibedy, chief Investment & trading officer, Amplifi, the supply side management platform of Dentsu. “It’s not that Google and Meta are replaceable but now there is competition from large e-commerce platforms such as Amazon and Flipkart as well as from big OTT services,” Dwibedy said.
E-commerce marketplace Amazon’s ad product has expanded and matured in the last few quarters, said Siddharth Devnani director at digital agency SoCheers. “But in my view, OTT is where the big advertising shift is happening. We saw JioCinema wooing advertisers during the Indian Premier League and Disney+Hotstar pitching the Asia Cup and the World Cup for digital as well,” Devnani added.
OTT services are making huge investments in live sports and original content which is drawing advertisers to these platforms, Dwibedy pointed out. “Besides, JioCinema has made the service free and opened it up for the masses resulting in higher ad spends on OTT,” she added.
Although, so far, streaming platforms in India have more viewership than they have advertising, the future is promising as OTT services have higher engagement, more time spent, options for interactivity and are measurable, Dwibedy said. “Though Google’s YouTube is still streets ahead in terms of video viewership, there is competition from streaming platforms,” she added.
For instance, besides IPL, reality show Bigg Boss on JioCinema, that concluded in August, brought 100 million viewers to the platform and got advertisers such as Vimal Elaichi, Too Yumm, Vicco, Chings, Paytm, Silver Coin and Lenskart.
A Disney Star executive said advertisers are getting comfortable with ads on OTT. “However, Disney+Hotstar and JioCinema are not the only beneficiaries. Even others like SonyLiv or Zee5 are gaining as they, too, have an AVoD (ad-based video-on-demand) segment. AVoD segment is maturing and it’s a meaningful shift in digital spends that you are beginning to see,” the person said declining to be named.
A July PwC report on the media and entertainment sector recognized the “huge long-term potential for the OTT and connected TV (CTV) market in India, courtesy the size and diversity of the country’s population.” According to Amplifi’s Dwibedy, India is undergoing a digital revolution and consumers are steadily moving away from traditional linear TV to CTVs and OTTs. Also, since data plans are more affordable, India has become one of the biggest markets for internet users.
PwC said ad-supported streaming will become the new normal and AVoD will grow at a higher rate than subscription service revenue. By 2027, AVoD, largely from local and regional broadcasters, will account for 22.3 percent of OTT revenue, while SVoD (subscription-based video-on-demand) will have a 73.8 percent share. In 2022, SVoD accounted for 78.1 percent of the market revenue in India, while AVoD constituted 15 percent of the market revenue.
Dentsu’s digital media report 2023 earlier this year estimated India’s total digital advertising market at Rs 29,784 crore for 2022 and Rs 51,110 crore for 2024. It said digital advertising will grow at a CAGR of 31%.
To be sure, ad spends on e-commerce sites are also growing with a lion’s share accruing to Amazon and Flipkart. Amazon Ads is offering different ad formats such as online videos that appear both in-stream (before, during or after video content) and out-stream (in non-video environments between text and images) across desktop, mobile and tablet. In India, Amazon also offers a range of ad tech solutions such as Amazon DSP (Demand Side Platform) that allows advertisers to programmatically buy display and online video advertising to reach relevant audiences. The company’s recent earnings show that Amazon’s advertising services’ revenue grew by 22% year-on-year. In a letter to shareholders earlier this year its CEO Andy Jassy said its advertising business was “uniquely effective for brands.”
“Advertising both on Amazon and Flipkart is increasing with technology and mobile brands choosing Flipkart,” Dwibedy said.
Government estimates that the e-commerce market will reach $350 billion by 2030. In the last three years the country has gained 125 million online shoppers. Another 80 million will join by 2025.
Pratik Gupta, co-founder, Zoo Media Network, said that every marketplace today offers advertising options and it is a big source of revenue for them. However, Amazon Ads is technically superior to most platforms, he added.
But market share changes should be seen in context since the media money is distributed according to the objective of the spend, Gupta said. “Today, every brand has an SKU (stock keeping unit) especially for e-commerce which wasn’t the case earlier. On e-commerce, brands are looking for higher ROAS or return on ad spend. For instance, if they spend Rs 100 they are looking for sales worth Rs 400. So the diversification of digital investment is happening on the basis of people who need awareness, people who need consideration and people who want to buy,” Gupta said.
Predictably, e-commerce platforms are seizing a share of digital ad spends. But Gupta said since the total digital advertising universe is expanding, platforms may not be eating into one another’s market share. For instance, a chocolate brand which launches an SKU especially for e-commerce sites, will probably spend Rs 40 on Amazon Ads for sales but will still spend Rs 60 on Google and Meta for awareness marketing. “That doesn’t automatically mean that it is sharing its media money with Amazon. It could mean that it may have increased its budget and changed the media mix,” Gupta said.
He added that brands (such as automobile or insurance) with no e-commerce play may not spend on Amazon or Flipkart but go with Facebook and Google.
To be sure, a recent report by Redseer Strategy Consultants showed that Google’s parent Alphabet and Meta were still the top two digital media companies in India by overall revenue (not ad revenue only). However, it said that Indian digital gaming firms and OTT services like Disney+Hotstar and Netflix were also among the top 10 in 2023.
According to media buyer estimates, Google, which owns YouTube, and Meta (the owner of Instagram, Facebook and WhatsApp), enjoyed almost 90% share of digital media ad spends 7 to 8 years ago. Today, their share may be closer to 65%-70% of total digital ad spends in India. Although the two tech platforms will continue to corner the bulk of digital spends for the next few years, their market share may be challenged by the massive proliferation of digital media platforms leading to considerable fragmentation of viewership and advertising.
“It’s similar to what happened with television. We started with one private satellite channel Zee and, today, India has 900 TV channels leading to inevitable fragmentation in viewership and advertising,” Dwibedy said. Digital media options have multiplied too.
In the next two years, India’s digital ad expenditure is expected to grow almost 1.5 times and likely account for 50-55% of the total ad market, Dwibedy said. Rise in digital consumption, increase in time spent online, emergence of strong direct-to-consumer (D2C) platforms, growth of OTT services, connected TVs, gaming, social media and social commerce will be the key growth drivers. “These will fuel the next phase of growth and increase digital penetration in tier II cities, creating new markets and opportunities”, Dwibedy said.
The trend will be accelerated by millennials and GenZ who end up discovering products on social and other commerce platforms. There is a paradigm shift in digital advertising with newer platforms and strategies being favoured over regular channels and platforms, she added. “Some brands have launched on social commerce and never spent a penny on mainline media,” Dwibedy said.
Among digital platforms that have seen a significant spike in usage and advertising are the short form video apps. User-generated content across Instagram Reels, YouTube Shorts, and other similar platforms has been seeing good RoI and has excellent recall. The integrations need improvement but the format is here to stay, Dwibedy said.
She also dismisses the view that people spend less time on YouTube videos than they spend on OTT platforms. “You will be surprised. People spend hours on short video formats like YouTube Shorts or Instagram Reels. These are addictive and many brands have built themselves up through Reels,” Dwibedy said.
Dentsu’s digital media report also acknowledged the role that Extended Reality (XR) could play in marketing. XR is a combination of Virtual Reality, Augmented Reality and other forms of immersive technologies. “With the advent of 5G in India, consumers are inching closer to a mixed reality experience very soon in the form of the metaverse,” it said. Zoo Media’s Gupta said that while OTTs and e-commerce are here to stay, XR will be the new wave in the digital landscape. “I don’t know how platforms will evolve into Extended Reality. Also, who knows whether the same platforms that are currently popular or gaining traction will be as relevant for consumers and advertisers five years from now. Maybe those platforms are not yet born,” he said.