Will Facebook’s Growing Clout in India Challenge Google’s Wallet Share?

Social networking giant Facebook & search giant Google are set to battle it out  in India’s Rs 2,260 cr digital advertising market. As Indian internet users start spending more and more time on Facebook, brands, especially e-commerce companies, have begun splitting their marketing budgets between the two.

Traditionally, Google used to dominate the online advertising space in India with its search-based advertising. However, Facebook seems to be gearing up to counter Google’s ad dominance having recently announced changes to its advertising tools (1, 2, 3, 4, 5).

With over 90 million users in India, Facebook is already a force to reckon with and advertisers have begun to take note of the opportunity that the platform offers.

The Numbers in India So Far

Visitors vs views

Source: comScore Media Metrix ‘India Digital Future in Focus 2013’ March 2013*

For instance, a mobile recharge company that currently splits it marketing budget in favor of the search giant, soon plans to split on a 60-40 basis between Facebook and Google. The company feels that Facebook is better for giving offers and at re-targeting or re-marketing – an area in which Google traditionally leads.

A re-marketing strategy involves targeting ads towards people who have previously visited an e-commerce portal, regardless of which page they navigate to. Facebook’s trove of varied user information from basics like age, gender, to more targeted information like relationship status, page likes and interest – all crucial to targeting the right potential client.

Tools Advertisers Use

Apart from the re-marketing strategy, there is also a lot going on in terms of the kind of channel that an advertiser chooses to pick. In a digital advertising market that is set to reach Rs 2,398 crore by March 2014, a majority of advertisers have chosen search engine marketing, or bidding on AdWords as the highest spend in the search ad budget. About 85% or Rs 723 crores is allocated for SEM. Google leads there.

However, the percentage spend on search ads witnessed a 3% drop from the 41% in FY12. Some reports suggest that this drop is due to the increase in spend on Social Media.

ad spend

Source: ‘Digital Advertising in India’ -IAMAI March 2013

Split in Online Advertising

For Google, e-commerce companies are the biggest clients in India. Automobile and brick and mortar companies who don’t have active online sale are also big advertisers on Google. The preferred ad formats on Google that garner the company most revenue are the banner ads that appear on Youtube’s homepage and through remarketing say sources.

E-commerce portals that form a major chunk of Google’s ad revenues include (in order of share of revenue contribution) Flipkart, Myntra, Fabfurnish and Jabong says a source who did not wish to be named. These portals also advertise on Facebook, but at a much smaller scale. Google did not respond to questions we sent.

“Google is more intent driven, where you have to bid for the right keywords for ads. While Facebook is more about brand-building and ‘awareness’ marketing and not about immediate conversions, but long-term conversions. The conversion trend tends to be slightly better in Google,” says Vaibhav Aggarwal, co-founder & MD, Fabfurnish.

Though he refused to comment on the exact split made by Fabfurnish, he believes in a balancing act. “As long as our RoI is maintained, we feel both are important and a fine-balance needs to be maintained,” he added. Choosing the right channel to advertise on depends on the objectives and economics that an e-commerce company wants to attain they say.

E-commerce firms Shopclues, which has smaller advertising budgets compared to others like Myntra, spends about 20% on search engine marketing, 15% of social media and 40% on in-house customer acquisition programs.

Strong ad sales boosted Facebook’s Q3 ad revenues by 66% over the previous year to $1.80 billion in the quarter. It has also slowly, but quietly unveiled a slew of measures to boost ad revenues like releasing a “tracking pixel” to allow advertisers to go to their websites using Facebook ads, specifying objectives and even choosing where their ads appear among other.

It is on this that Bangalore based e-commerce company Urban Ladder puts its faith.

“We believe in the power of social referrals. In addition, our belief is that communication of product quality, through strong visuals is more important, than having deals driven marketing. Facebook works much better for a highly visual brand relying on the power of a virtuous cycle,” says Ashish Goel, founder & CEO, Urban Ladder.

Like Aggarwal, he too feels that the choice of channel is to be subject and category specific. “If there is a category which has high search volumes, and a customer does comparison before purchase Google would probably work better. On the other hand, for a business that by its nature has virality at its core, FB should be the channel of choice,” he explains

In addition to its recent changes, Facebook is now also betting on the automotive space – currently the second largest contributor to Google’s ad revenue.

A comScore report has found that not only does Facebook help more automotive brands that are advertised, but it also significantly reduces competition. Automotive ads placed on Facebook were found to have 70% reach among in-market households.

What Ad Men Say

E-commerce companies like Myntra, Jabong and Yebhi spend Rs 10-15 lakhs on Facebook impact properties like logout banners say ad gurus, with at least 3 insertions a month.

In fact, social networking sites like Facebook, have already cornered a large portion of the money spent by brands on display advertising. According to comScore, at 39%, social networking sites in India served the maximum ad impressions, while the rest went to portals and web services.

“E-commerce brands spend on normal ads and also on retargeting on Facebook. The maximum impression in India (from September 2013 data) was also served on Facebook,” says an advertising professional.

Not a Threat Yet

However Google does not really see that as a threat, if what persons who are familiar with the matter are to go by.

“No advertiser would leave Google for Facebook. Google is much more than a social networking site. They have search, shopping, videos etc. Especially with Youtube, advertisers would get much more than what they invest in Facebook,” says the source.

For all the talk of Facebook being just a networking website, is Google feeling the heat? The search giant has recently launched the beta of Google +Post ads, a social ad format that depends on the search giant’s networking arm – Google+. The +Post ads run on Google’s Display Network which constitutes over 2 million websites and allows customers to comment and have conversations with the brands. Google+ currently has an estimated 30 million users in India.

* Also see: This Popular Site (According to Comscore) Just Doesn’t Exist