How Amazon and Flipkart are fueling the growth of e-commerce advertising
The growing adoption of online shopping has been a boost for e-commerce giants like Amazon and Flipkart. Although both of these platforms are seeing strong year-over-year revenue growth, they have also become important platforms for brands and marketers to reach their customers.
With an increasing number of brands and categories branching out into e-commerce advertising, Amazon and Flipkart stand to reap rich dividends, thanks to the huge consumer bases of their respective platforms. According to financial data viewed by business intelligence platform Tofler, Amazon Seller Services and Flipkart Internet, the online marketplace arms of Amazon and Flipkart respectively, have seen huge growth in ad-generated revenue.
Collectively, the two companies hogged advertising revenue worth Rs 3,940.2 crore in FY21, compared to Rs 2,645.8 crore in FY20.
Amazon Seller Services revenue from providing other marketplace related services jumped to Rs 2554.2 crore for the fiscal year ended March 31, 2021, from Rs 1637 crore in the prior fiscal year. According to the company’s annual report, other market-related services mainly include sales of advertising services.
Flipkart Internet’s revenue from advertising services soared to Rs 1,386 crore in FY21 from Rs 1,008.8 crore in FY20. based on the number of clicks or impressions.
Clicks are generated whenever Platform Users click on advertisements to an advertiser’s designated website. Impressions refer to the number of times an advertisement appears in the pages viewed by users of Flipkart’s platforms. “We use the exit method and apply the practical expedient to recognize advertising revenue in the amount for which we are entitled to charge,” the company said in its annual report.
Mirum India co-CEO Hareesh Tibrewala said overall ad spend on e-commerce platforms would be in the region of Rs 5,000 crore as only Amazon and Flipkart account for almost Rs 4,000 crore of the total market . “Overall digital advertising in India would be around Rs 20,000 crore and I expected the e-commerce advertising market to be around 15% of that or Rs 3,000 crore. However, according to data from Flipkart and Amazon, the overall e-commerce market seems to be closer at 20-25% of digital media spend 90% of e-commerce ad spend is with Flipkart and Amazon If Flipkart and Amazon are Rs 4,000 crore, the rest of the players would be around Rs 1,000 crore,” he said.
Growth in e-commerce media spend should come as no surprise, as it drives bottom-of-funnel conversion, Tibrewala added. “If you look at the entire marketing funnel, social channels come at the top of the funnel (awareness creation), search comes in the middle (consideration) and commerce comes at the bottom (conversion), and Amazon and Flipkart are behind the conversion,” he explained.
According to Vivek Bhargava, co-founder of ProfitWheel, marketplaces have two key advantages, as they generate advertising revenue and commissions on any additional sales that might occur due to advertising on the platform. “The first benefit is that they get ad revenue, and advertising helps brands sell more on the same platform. They get a margin on the sale as well. -to Google and Facebook.” who only make money from advertising,” he explained.
E-commerce advertising is almost like a cost of sale rather than an advertising expense, Bhargava added. “For FMCG, advertising on e-commerce platforms has become a cost of sale. They can significantly increase their budgets since it is a cost of sale and not an advertising expense.”
Pointing out that Amazon’s advertising revenue is growing much faster than Google’s and Facebook’s, Bhargava said, “Amazon will be the third biggest player in the digital advertising market in India and globally. It will be a significant challenger for Google and Facebook are in the long run from an advertising perspective, Amazon is a bigger walled garden because users stay on the platform when they click on the ad.
Kurate Digital Consulting senior partner Uday Sodhi has shared more information, which claims that the e-commerce advertising market exceeds Rs 3500 crore. Many e-commerce ads occur on Google and Facebook, in addition to Amazon and Flipkart, which are the country’s largest online marketplaces, he said. “When brands advertise on Facebook, the link redirects to an e-commerce website. Besides Amazon and Flipkart, there are many other online marketplaces in the country,” Sodhi added.
Adlift CEO and co-founder Prashant Puri believes digital and e-commerce advertising is growing due to an increase in data consumption, growth in smartphone penetration and ease of online purchase. He expects the time spent on digital services to once again increase the 5G services deployed.
According to Puri, more time spent on digital will further fuel the growth of digital advertising. “About 70-75% of digital ad spend is allocated to Google and Facebook in India. The remaining 25% is spread across LinkedIn, Twitter, programmatic and influencer marketing,” he noted.
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