Group buying has taken the Indian Internet Industry by storm. A lot of websites are coming up which offer group discounts on things to do in a city like restaurants, spa’s, holidays, movies and products..
Listing out the industry players
*Data source: Google ad planner, Facebook, Twitter as of 14th August 2010. Comscore did not have all the websites.
Ever since Groupon got valuated at $1.2 billion.. every one in India wants to create the next big Indian Groupon. This rush is quite similar to Social Networking sites rush that India experienced in 2006-07 when Orkut got bought by Google everyone thought they will create the next big Indian Orkut.
One thing for sure is that the group buying space would not see similar outcome as it relies on local presence and network. So the faster you build numbers the faster you get market share. The success of the group buying sites solely will depend on the initial amount of promotion and the type of sourcing.
Right now Snapdeal has some amazing traffic which no other portal is able to match and surprisingly Taggle has the largest number of Facebook fans but the same hasnt translated into traffic for the website.
I have a lot of questions on this like where is the money in the model? How much can you scale up in India? I think it will become like the travel industry where still after years the companies in the space have not even reached the break even point.
Where is the money in group buying model?
Right now I seriously doubt the profitability of these ventures. If we go by naked stats.. on an average, a deal sells 40 coupons in a period of 2-3 days. The margin of the company is Rs. 100 max. Therefore a maximum of Rs. 4000 per deal for 3 days. So that is Rs. 40k revenue for a month. So thats not even close to the salary of a manager in a MNC. Now if I take an average of 10 top cities that would be 4 lacs a month from 10 deals from 10 cities.
The overheads for offices in those cities would be much more than 4 lacs. Then not to forget the staff salaries, Internal deal promotion (expenses for email and sms because an average mail cost 5 paise and per sms 2 paise) and also external promotion of the website.
Unless the ticket size of Rs.100 increases to Rs. 500 or the sales achieve 1000-2000 deals, the venture cannot break even in this decade.
Scaling up in India?
40-50 % of the internet audience belongs to top 10 cities so after reaching these cities where does the volume come from.
Ecommerce is still nascent and not every user has a credit card/debit card or a netbanking account. So the number of people who could buy funnels down to a very minuscle number. The reports given by IAMAI or Juxtconsult paint a rosy picture but the real facts seem to be different.
If we consider that I have 100 members so out of that atleast two will buy that deal but then if I need 2 more deals to be sold I got to have another 100 members so to sell 2 coupons I spend atleast Rs. 10-20 per member. So for earning Rs. 200 from these two people I have to spend Rs. 2000 to get the 100 members and then after buying a restaurant/spa deal the same person who has a credit card would not go for another the next time it comes for atleast a month or so.
Another problem that they can face is User burnout. i.e. After constant email updates about deals that are not interesting the user may just turn off and would not even check the emails.
The only good out come I see is that people are getting conditioned to shop online and the savings that these sites bargain for the user. I believe the day when everyone in India relies on the internet like the Americans or Europeans, it is then when the change will happen but in Indian context this is really far away. Now as usual that each veteran from the industry will say is “everything will consolidate into one or two top players in the market and the rest will have to shut shop or merge”.
I believe that in the near future the big thing is the platform which has the biggest reach i.e. “Mobile”. The potential for ideas on this platform has the scalability has well the reach. So someone somewhere must be working to get thing rolling. Location based group buying on mobile applications looks to have awesome potential. NGpay, Obopay, Atom etc can actually achieve this. Just as technology in Mobile phones evolve GPS will be as obvious as Bluetooth in the coming 3-4 years.
I am going to dissect this space a lot more in my posts ahead but if you have some other view or something I missed please feel free to share in comments.
“History of the internet” is an animated documentary explaining the inventions from time-sharing to file-sharing, from arpanet to internet. The clip shows a brief overview of this history.
Being in the industry by passion and working for the industry by choice. I have seen a lot of action in my three years. The boom period, The hiring spree, The VC fundings, The innovations, The entrepreneurial spirit and The Rush for Moolah.
The recession has changed this a lot. No boom but actually a bubble on a brink of bursting. Yes the bubble 2.0 . Leave hiring, its a workforce slashing spree.VCs are tired.. they have lost hope that any of India’s digital properties will become a orkut or a facebook of India. Innovations are now rare and the entreprenurial spirit has gone into hibernation.
There was a boom in social networking sites… So much spamming.. oops ! I mean marketing but everything was the same just with a makeover. No one offered a unique proposition..
then came the ad networks boom.. I have lost count of the number of networks in the market. Everyone is buying each other inventory and selling it off to their local advertisers.
Yes how can we forget the numerous digital agencies that sprung up overnight and also washed out over day. Even the promising lot are living on the edge.
The twitter fad is still there. Many other portals came in with their own versions of twitter but still no success.
You can’t forget mobile ad networks.. Many came and I heard from them once and then were never seen again.
The current market scenario has hit many of them. One by one they go down. the spending spree continues, the employees are left high and dry. And one of the worst things is that some companies do hire new guys with handsome packages but fail to honour their commitment.
So what an agency/publisher/company/individual do if they want to survive ?
Its always survival of the fittest.
Digital agencies are suffering but some are enjoying attention as their clients have been put on a new track. As marketing spends are te first casualty in cost cutting Marketers are finding internet as a good low cost option to reach to their audience rather than the mass campaign on print, TV and OOH media.
The digital agency should approach clients with a proposition that will offer value without spending much. Dont pitch and propose big budget spends.. or else the guy you are talking to may have to cut his own salary to pay for it.
Other good way to go is “consolidation”. Digital agencies should tie up with offline agencies to offer digital marketing mix to the conventional plan. This will help both the players i.e the offline agency as well as the online agency.
Go full blast in to the market and dont just approach agencies for business. Go directly to the client so that he would personally put you in the media plan.
Offer more value than just impressions. Give them customized plans and free inventory. Fixed spots and custom sections are one of the best ways to show value to the advertiser.
Also be flexible in approaches. Leaner times calls for more tactical and flexible approach. Money has to flow one way or the other.
Reduce spends on the conventional medium and don’t cut your marketing spends.. he he.. I mean if you are reducing the marketing spends focus on more unconventional medium like internet and mobile where you can reach your audience at a fraction of your costs and can track every rupee spent. Internet is a great medium for ROI.
Even during recession the right approach is needed to get the audience and sales numbers. Communication and strategy should be according to the current economy.
The Indian economy is not in recession mode. People have money they just need to be approached right so that you have the money. The habit of savings is passed down from generation to generation and is a part of Indian culture which has saved us from the effects of the global meltdown.
Buckle up.. You are a part of everything I said earlier. Start working harder. Be proactive. Spend responsibly. Got laid off inspite your best efforts. Use your network to your advantage and find a new job and if you have that entreprenurial spirit. Now is the best time to grow. Recession mode reduces your monthly expenses and motivates you to reach further out.
How has the supposed global recession affected you ?
Its been a long time I havent updated my blog. And I am really regretting that fact…
Its been a long and busy year… With lots of action and adventures…
I had a amazing ladakh bike trip.
Completed my year in Quasar.. (Shocking huh! )
More clients under the kitty.
Experiencing a new high in work.
Buying my first car.
Trying to sort out my future plans.
MBA and Marriage on the cards for the next year.
A new resolution to have a blog post every month.
Will start from this week.
Well lots of things to say but no time to type…. Mery christmas and a happy new year folks… Enjoy the end and expect a better beginning.
This is one was specially asked for… So writing down what I feel should be done to attract advertisers.
1. Product - Get your product ready. The website should have a clean interface and well defined navigation. The ad space should be clearly demarcated and should not be adhoc. A poorly presented site never clicks with a advertiser and will be ignored. Most of the advertisers/agency neglect such sites because of a general perception that the site may contain offensive content.
2. Ad serving – Choose a good ad server and ad serving script… Most of the publishers loose money due to faulty ad serving and delays in ad display. Google ad manager and Openads are good options and are free. If going for a paid option you can opt for atlas, realmedia, doubleclick etc. The ad serving should also have a good reporting system built in. An advertiser/agency would love to get in depth details about the performance of his ads.. Like clicks, creative, day wise and mixmatch daywise creative performance etc….
3. Analytics -Use a good analytics software. You need to know your traffic before you start adserving.. A number of analytics services are availble. You can opt for a free open source or the google analytics (Google analytics may not represent a true picture of your traffic).
4. Contact – Provide a link in every page of the footer… “Advertise with us” This makes it convenient for the advertiser/agency to contact you. Make sure the contact number and email always work and are updated. A number of publishers just place email ids on their contact us form.. Due to that a number of advertisers/agency are turned away.
5. Presentation -Make a presentation or pdf based on your website with a download link on the “Advertise with us” page stating the Traffic numbers, Type of audience, Properties and placement, Screenshots, Innovations, Case studies, Clients, Rate card, Contact info and anything else that a advertiser needs to know about your site. Use charts wherever possible it gives the advertisers/agency a holistic view about the site. Send the presentation via email whenever a advertiser/agency contacts you.
6. Marketing – Every single site needs to reach media planners and advertisers…. Market your website on the industry related sites through banners, mailers. Exchange4media and Agencyfaqs are few of the trade sites for the internet industry. Sponsoring a industry related event is also a great way to gain mileage. give out some freebies (Pens, Card holders, Notepad etc) too so that atleast the advertisers/agency will remember you whenever they use the freebie. . Be an active member of a Industry related association it always helps. Take part in Industry related seminars, meets so that you can grow your network. Keep business cards handy (A good business card. Spend some money on it). You can also give your sales presentation in Business card kind of small CD’s
7. Team – No site can sell itself if they dont have a proper sales/servicing team in place or a sales guy or the owner himself etc. Always prioritise and give the advertiser/agency much needed attention to fulfill his requirement. The servicing people should be always pro – active like sending screenshots, reports etc. Hire a smart team (heavy on Logic) not dumb. They should know each and every part of the website and the stats regarding the site should be on the tip of their tongue. Smart Girls preferred (makes business sense).. It motivates the advertiser/agency to stay in touch. Keep your sales team updated about everything regarding the site. No dumb questions please !
8. Listings – Get yourself listed properly in every search engine or a business listing site. Google ad system categorises your site according to your site description etc.. So an ad network should be placed in a news category or a Horizontal should not be placed in a vertical category. (I found this problem in a number of site when I used the Google ad planner).
9. Creative support – Provide creative support to the advertisers to make banners, emailers etc. You can charge for it too… This can attract lots of unconventional advertisers/agency.
10. Value adds – If an advertiser is not satisfied with the performance of the campaign. Provide him with some value adds… (Make it a point to include text links in your ad inventory as they can be given away as value adds) This will make him happy even if it doesnt match up to the expectations of the performance. Atleast this will gain you a brownie point in the advertisers/agency mind and will help you to get back on board.
11. Personal contact - Keep bugging the advertiser/agency (Dnt take it literally). Keep following up with the advertiser/agency for new campaigns and keep sending screenshots of latest innovations or latest clients on the website or start of a new property. Go and meet the client/agency whenever there is a campaign coming up. This will help get the website a place in the media planning. Dropping a simple email will also do. . Take them out for casual dinner or drinks (Helps a lot).
1 more important point….
12. Pitching - Whenever you pitch for an advertiser/agency business always know about the product you are going to advertise. Get to know about the budget, the requirement etc.. In short a brief by email or over the phone. Send them a customized plan according to the need of the product. Give them a plan that suits the requirement of the product including properties, placements and innovations. And show them in a sample screenshot how their ads will look in different placements and properties on the website.
Go get some business !! I know this will have very serious repercussions.
If I have missed anything let me know !