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E-commerce as an advertising vehicle is emerging as a strong vertical within the Indian digital advertising ecosystem. The advertising revenues of Amazon, Flipkart, and Myntra have seen a sharp jump in FY22 due to growth in their user base and the resultant increase in online sales.
According to financial data accessed by business intelligence platform Tofler, the combined advertisement revenue of these three companies has zoomed by 60% to touch Rs 6600 crore in FY22 compared to Rs 4135 crore in the previous fiscal.
Amazon India's marketplace arm Amazon Seller Services recorded 63% growth in advertisement revenue at Rs 4171.4 crore in FY22 as against Rs 2554.2 crore. Walmart-owned Flipkart India's marketplace arm Flipkart Internet saw its advertising zoom by 50.35% to Rs 2083.5 crore from Rs 1385.7 crore. Flipkart-owned Myntra Designs raked in Rs 344.6 crore in ad revenue, registering a 77% growth compared to Rs 194.9 crore in FY21.
E-commerce platforms generally recognise ad revenue on the basis of the number of clicks or impressions. Clicks are generated when users click on the ad, taking them to an advertiser’s designated website. Impressions refer to the number of times that an advertisement appears on pages viewed by users.
Mirum India Joint CEO Hareesh Tibrewala said that the continued growth in ad revenues of e-commerce platforms doesn't come as a surprise since their customer base continues to increase. He also stated that these platforms are closest to “conversion” in the traditional marketing funnel. The fact that brands are increasingly becoming e-commerce enabled is also contributing to the ad revenue growth of e-commerce platforms, he noted.
Tibrewala added that e-commerce has emerged as a category in itself within the digital advertising ecosystem, "I think the overall digital spend in brands portfolio continues to increase (perhaps at the cost of print). And within digital other channels continue to grow even as e-comm ad-ex emerges as a category by itself," he stated.
While noting that a substantial part of e-commerce AdEx will go to the biggest players, Tibrewala added that niche players will also continue to get their share of the pie. "I see a new marketing funnel where social channels are used for brand building, Google is used for understanding intent and e-comm platforms ads become the place to drive conversions."
Kiaos Marketing Chief Executive Sajal Gupta said that digital retail media is a strong intent-driven media, which is second only to search. He added that digital retail media also attracts the best quality audience who have self-declared their interest.
"Additionally, digital retail media sites also have the most authentic data of your purchase behaviour and signals of what you are shopping for. This becomes invaluable for any marketeer to do a pin-pointed reach out to. Today this data is available on Amazon’s & Flipkart’s DSPs," he said.
Elaborating further, Gupta said that digital retail media is the marketplace and the media allows brands to control their spending-to-revenue ratio, which is a critical metric for all e-commerce clients. This, he stated, also distinguishes it from Google and Facebook which are pure advertising platforms: "All this has positioned Amazon to be the third largest digital advertising platform across the globe and growing even when the first and second largest platforms (Google & Meta) are facing headwinds with their revenue growth or in some cases declining. As we have seen their Q3 results."
Gupta averred that digital retail media has approximately 15% of the digital ad pie. "This market growing with Amazon and Flipkart, which control close to 70% of the digital retail market being the largest players."
Kurate Digital Consulting Senior Partner Uday Sodhi said that the growth in ad revenue of e-commerce platforms is in line with the growth of D2C brands. "D2C brands have a digital-first strategy and the e-commerce platforms are the best way to reach out to the users and also generate revenue. E-commerce platforms are a good alternative to social media and search as the customer intent is very clear and so is purchase intent. Leads to better conversions on the platforms."
ProfitWheel Co-Founder Gautam Mehra noted that there are multiple reasons why e-commerce ad revenue continues to surge. He stated that FMCG companies are finally looking at digital as a distribution channel rather than a purely engaged channel. "Think back, just a couple of years back and the only ads were around contests and giveaways. Today, it's about sale promotions, upselling into premium products (I'm sure we have all been sold a Cadbury celebration pack in some form or the other in the past month)," Mehra said.
Mehra concluded by saying that peripheral sectors such as auto, finance, and travel are now using digital as their primary mode of communication. "These are 'transaction heavy' and hence love e-com horizontal players. I feel the pace of revenue growth for these platforms will grow further and faster in the next two years (of course, unless we hit some worldwide recession)," he said.
