APAC advertisers warm to online ads

Kamlesh Kalwar/Frost & Sullivan
10 Feb 2009

Traditional advertising media (television, radio, newspapers, magazine and periodicals) have always touted their success in terms of reach, which seems passŽ in this digital age. Today, with online advertisements, advertisers have access to tools and techniques to reach customers with highly targeted and customized campaigns. Advertisers now want to measure each and every aspect of an advertisement and tailor their advertising budgets to get maximum return on investment.

The methods that the industry has applied for audience measurement have always been deficient. However, digital media environments have effectively solved this measurement puzzle, with next-generation marketing strategies providing all the metrics needed to evaluate effectiveness. As the internet becomes a mainstream channel for distributing and accessing 'infotainment' content, the market for all segments of the online advertisement industry (paid search, display advertisement, classifieds and directories) are expected to grow.

Most blue-chip companies have increasingly been including online media as a key part of their marketing efforts, and SMEs in Asia Pacific are following suit. The key factors driving or likely to drive the future growth of online ads are rising broadband adoption in APAC households, and the increasing number of large advertisers embracing online advertising models and increasing availability of ad-supported downloadable and subscription-type content services. There is also the influence of major newspapers in the region moving online and offering online ad inventory to advertisers, increased collaboration of traditional ad companies with online ad companies, and the growing desire of SMEs to source and sell across boundaries.

The broadband subscriber base in the region has been growing steadily in recent years, with 13.3% of households using broadband to access the internet. In the next five years, the online advertisement industry's growth rate is expected to outpace that of broadband subscriber base, which is 20.7% CAGR.

As faster internet speeds improve the overall online experience, users are likely to spend more time searching for information and entertainment.

Though the online ad market in APAC is poised for steady growth, stakeholders in the market still face many challenges such as low levels of English language adoption and multilingual Asian geographies that create a fragmented market, and low SME awareness of online promotion, benefits and the power of the internet. There are also the issues of increased discrepancies in online transactions and rampant rise of click fraud, shortage of digital media skills and a lack of industry standards for ad formats, pricing and reporting in line with the major international guidelines as well as a lack of profitable business models in some niche online directory segments.

In countries like the UK and Germany, online advertisement expenditure (ADEX) as a percentage of the total ADEX has already crossed the 15% mark. Advertisers have shown an increased confidence in the online medium for advertising mainly due to its performance-based nature. Most of the governments in APAC countries are trying to bridge the digital divide through national broadband projects or by setting aggressive internet penetration targets. This would work in favor of creating an ecosystem where the online ad industry can continue to grow.

High-growth segment

A number of online ad networks and search engine marketing (SEM) companies have emerged in the region, leading to high growth of the APAC online ad industry. The advertising networks have grown to become important market participants as they are able to offer a combination of lower average cost per thousand impressions, niche audiences and dedicated digital media focus.

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