How Telecom Companies are Trying To Capture The Advertisement Industry

13 Jun 2022  Read 798 Views

Let’s Offend: Telecom companies are the biggest dealers. They started by giving us FREE & CHEAP data services. When we became addicted they raised the prices and we got played! 

Was it not enough when Reliance entered the retail industry of India? Reliance is already blessed with its refining oil business, all-time high share price, $100 billion revenue in a fiscal year, Reliance Power, Reliance Capital and Jio’s domination in the telecom industry. I am pretty much sure they are into the defence business too. And now it has entered into the advertising business.

There it is. This is how Mumbai Indians got its slogan - ‘Duniya hila denge hum, ab duniya hila de hum’

Reliance, Airtel and Vodafone have arrived inside the advertising industry’s fortress. It is envisaged that the next business venture of these telecom giants is the advertising industry. The top telecom companies are eyeing the Rs 74,600 crore advertising market. During an interview, Airtel’s Chief Product Officer and Airtel Digital’s CEO Adarsh Nair claimed that its ad-tech business Airtel Ads which operates in the rapidly growing digital advertising market in India, experienced a huge 200% revenue growth in its first operating year. 

Telecom companies are strengthening their arsenal. But it's not an easy fortress to conquer. Let's find out what it takes to be victorious. 

The advertising industry

The Indian advertising industry in 2021 represented  ₹70,715 crores in value, up 18.6% over 2020. The report published by advertising agency Dentsu India also sheds light on the growth of the digital advertising market size from ₹15,782 crores in 2020 to ₹21,353 crores in 2021, growing at 35.3% CAGR. Digital media is expected to grow at 29.5% CAGR by 2023. In the online realm, in 2021, 75% of digital advertising expenditure was recorded on smartphones. This is large because of the covid - 19 pandemic, which gave rise to opportunities on social media platforms and other applications. The FMCG sector is the highest contributor to advertising. The FMCG sector contributes 42%, ₹8,928 crores of expenditures. 

There are multiple segments of revenue for advertising.

  1. Digital - Rising penetration of affordable and speedy internet are the reasons for robust growth in the digital ad business. Along with this, industries are exploring various online platforms to deliver their products and connect with the users.

  2. Print - In the financial year 2021-22, print advertising earned a revenue of more than $3 billion. 

  3. Television 

  4. Radio

  5. Others

Covid impact

Before the pandemic, a big part of shopping was an on-field experience. Eating samples at the roadside vendors, trying out clothes, getting confused, and much more have changed due to covid. Americans spent $791.7 billion during 2020 on e-commerce, up 32.4% from 2019, according to data published by the U.S. Census Bureau in February. This certainly curtailed the habit of consumers buying products offline for some time. Companies that had a digital presence in the retail industry benefited the most. This led to an increase in demand for AdSense (click and earn by hosting targetted ads). Due to lockdowns, more digital content was published on the internet. Online streaming and content consumption was the main battlefield for companies trying to advertise their product. Thousands of dollars were spent to run a 5-10 seconds Ad. Companies paid big money to ensure people clicked on their product or website. 

The psychology of effective Advertisement

Advertising companies try to create a proposition of the product or service inside the mind of their targeted audience. Their main purpose is to create an image of the product so that whenever you hear or see that brand, an image gets created inside your mind. What gets emanated when you hear the brand name - ‘Rolls Royce’? The image created inside your mind is roughly a mixture of a car with features like luxury, high quality and high costs. This also forms a distinctive characteristic or image which segregates you from your competitors. As advertisements entice people, sales start to rise, and people start to know about your product. Companies having a solid digital presence can easily benefit extra from digital advertising. A sizeable public base who visits the company's platform frequently can positively impact the advertising revenue. As more traffic flows through these websites, the Revenue Per Click (CPC), Revenue Per Mile (CPM), Revenue Per Action (CPA), and Revenue Per Complete View (CPCV) will increase. 

Reliance JioAds

As per reports, JioAds will run ads on its own digital properties like JioChat, MyJio, JioMoney, Jio4GVoice, JioNet, JioHealthHub, JioCloud, JioSecurity, JioMags, JioGames, JioNewspaper, JioVideoCall, JioCinema, JioXpressNews, JioTV, and JioSaavn. It plans to expand its business by attracting companies to run their Ads on its Jio platform. With a 200 million+ reach, Jio TV has advertising opportunities to grab. Jio TV has a huge audience reach of about +200m. This establishes an upper hand on its competitors and the advertising market. By displaying ads between intervals, half-screen notifications, messages etc JioAds has a long list of opportunities to grab. JioSaavn is also a major platform where huge traffic flows. Ad revenue from JioSaavn could increase drastically.

Vodafone Idea

Very recently, Vodafone has entered the advertising industry of India. Vodafone Idea has launched its ad-tech platform called Vi Ads, marking its entry into the advertising technology industry in the country. Driven by artificial intelligence (AI) and machine learning (ML), Vi Ads aims at giving marketers a programmatic media buying platform. As reported by Economics Times, Vi Ads will enable marketers to engage with the operator’s over 243 million subscribers through multiple channels like Vi-owned digital media- Vi App, Vi Movies & TV App, and traditional channels like SMS, IVR calls.

Bharti Airtel

As already Airtel has seen a massive 200% growth in revenue from its digital Ad business, the company projects to sustain the positive growth in the upcoming years of operations. The company is also working towards the protection of the customer’s privacy while displaying ads and also providing an equal and rational opportunity for brands to display their ads. Airtel Ads utilizes the company’s digital assets to deliver specific ads to its customers which today has a digital MAU (monthly active users) of 184+ million. The company's direct-to-home (DTH) business Airtel Digital TV has become the number 2 player in the market. Airtel-owned applications like Wynk Music, Xtream and Airtel Thanks are widely used by its customers to listen to music, watch movies and pay bills regularly. Airtel Ads then offers brands the ability to reach relevant consumers through several channels and create a more personalized advertising experience. 

But there are always speed breakers in the journey, right? 

  • The advertising market is copious with the competition. Google and Facebook capture 85%of India's digital ad market. Due to high competition, companies are splurging money to create their mark in the industry. 

  • It is also quite difficult to satisfy customers' satisfaction digitally. Due to the frequent rise in consumers’ changing tastes and preferences, the digital advertising market becomes a challenge for companies. 

  • Companies also need to deal with complying with privacy and data-sharing regulations. Problems like tackling fraud and distrust for digital ads, the companies are having a  hard time-solving.

  • Low internet availability in rural areas.

Conclusion 

Well, the race is on. The top telecom companies have started to capture the digital advertising market. With the strong emerging tailwinds, the advertising industry and digital ad business could experience massive growth in the coming decade. The Indian internet industry is going to be worth $160 billion by 2025, according to a Goldman Sachs report, which is thrice the current value. The growth in mobile ad revenue is expected to be 74.4% of the total internet advertising revenue of INR 30471 Cr by 2025. With the help of the Government's Digital India programme, internet availability and digitisation are increasing rapidly. As the majority of the Indian population is young, the growth of digital content consumption will increase with time. As more internet and digital access is provided to the people of India, the growth of digital advertising will also soar in value.

About the Author: Akshat Yadav | 4 Post(s)

Akshat is a finance enthusiast. Loves to read and write about it. From companies and industries to individual stocks, he shares his thoughts on finance, stocks, and investing.

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