With rapid rise in internet penetration in urban India, which has grown from 9% last year to to over 12%, the number of netizens in the country has inched upto a sizeable 49-million. While this figure has made marketers look at internet as a viable advertising platform, venture capitalists have already started supportingh the new media growth story.
According to industry estimates, around Rs 400 crore has been pumped in by various private equity/venture capital firms like IDG Ventures, Sequoia Capital India, Opus Capital and Intel Capital in online advertising sector this year.
Pegged at over Rs 270 crore, the Indian online advertising is expected to touch Rs 2,500 crore in the next three years, accounting for 6.8% of the entire advertising pie. Currently, internet ad spend in India accounts for only 2.4% of the total ad market.
Looking to cash in on the growing opportunity, IDG Ventures has invested Rs 16-crore in a Bangalore based internet advertising firm Ozone Media. While Sequoia Capital has pumped in Rs 20 crore in Ideacts and Jivox, a self-servicing online video advertising platform, has managed to rope in Helion Venture Partners and Opus Capital to invest around Rs 40 crore in its latest venture.
The investors feel that the online industry in India will only grow from here and it makes perfect business sense to be a part of this growth story. And why not? Internet advertising is projected to grow by 32% year-on-year over the next five years. Further, according to a recent study by ZenithOptimedia, 75% of online users now notice ads on the internet.
Says Manik Arora, MD, IDG Ventures India; “In the past we’ve invested in similar propositions in the West and in China. We’ve developed an expertise in this sphere and firmly believe that our investments will add value to our partners.” The company in which IDG has put money, Ozone Media, has over 100 network websites as its partners in a revenue sharing basis. It claims to have more than 40 clients including HSBC, SBI, Yahoo, Lenovo, Cleartrip and Citibank.
Ozone Media intends to scale up its operations by setting up a office in Delhi and adding new technologies. Says Ozone Media CEO Kiran Gopinath: “Banner ads is the next big thing in online ad space. It is set to reach Rs 350 crore by next year. The platform is already drawing companies from sectors like auto, FMCG and education. It will certainly attract many more and we are gearing up for the boom.” An Indiatimes spokesperson said since online advertising is a small sector, the opportunities here are immense and there will be an influx of more such investments.
Other angel investors are also firming up their investment plans. Sequoia Capital, which has invested in Ideacts, is also bullish on the sector. Ideacts is a media venture that delivers ads on the desktop screens of cyber cafes across the country. The company has built a desktop client, called Clinck that can be installed on cyber cafes across the country. It will pay cyber cafes certain fixed amount of money per month. The company, so far has managed to rope in Google, Radio Mirchi, MSN and Dell as advertisers.
“With cyber cafes still being the major entry points for internet surfing it’s an interesting platform. The 1.5-lakh strong cyber cafes in India which are expected to grow to 2.6-lakh by 2010, the opportunity is huge,” a Sequoia capital official said.
Ideacts CEO Rudrajeet Desai says his company at present has an arrangement with 625 cyber cafes, which means more than 5,000 computers screens. It plans expand to around 3,000-3,500 cyber cafes. The VC firms are also looking actively at online video advertising. Recently, Zenith Optimedia estimated the growth of ad spend to be Rs 3,600-crore by 2010 in India. “It’s undeniable that the sector is lucrative, however VC firms have to realise that not all investments may turn out to be successful,” says Arora.
Source: Economic Times