Bengaluru: Flipkart, which generates the third highest revenue from online ads in India, plans to double its annualized sales from digital advertising to roughly $200 million by March, aiming to close the considerable gap with market leaders Google Inc. and Facebook Inc. The annualized revenue implies that Flipkart will generate sales of $16-17 million in March, a top company executive said.
To achieve that, Flipkart plans to woo advertisers from sectors such as banking and financial services, areas where the online retailer does not have a presence, said Prakash Sikaria, senior director and head of monetization and growth at Flipkart.
Flipkart wants to compete with Google, Facebook in online ads space
“Over the next few months, we will be forging some interesting partnerships with a number of brands from different sectors, as we start opening up our platform,” said Sikaria.
Flipkart’s ad business reached $100 million in annualized revenue for the year ended March 2018, he said, adding that the company would double down on the video ads space, the fastest growing sector in the overall digital ads business, which will drive growth in the near future.
While Flipkart’s ad sales are large, especially for an e-commerce firm, the company had previously lagged its own projections. Inspired by the business model of China’s Alibaba Group, in 2015, then Flipkart CEO Sachin Bansal, who was forced out of the company in May, had tried to restructure the company to make it an online marketplace that would generate billions of dollars in ad revenue from sellers and brands. That did not materialize.
Flipkart has become a significant player in the ads business, though Google and Facebook continue to attract a majority of the digital ad spending that is estimated to grow at an annual average rate of 32% to touch ₹ 18,986 crore by 2020, according to a report earlier this year from Dentsu Aegis Network.
Over the past few years, digital ad spending has started to shift to mobile from the desktop, amid a boom in smartphone sales—and according to experts tracking the advertising business in India, that shift is expected to continue over the next 3-5 years.
For the likes of Flipkart and Amazon, the boom in digital advertising spending has presented a significant business opportunity, one that they have been quick to capitalize on. Through ads, top e-commerce firms are hoping to create an alternative revenue stream that would reduce their reliance on categories such as apparels and smartphones, which generate a majority of e-commerce sales in India.
With a base of nearly 100 million registered users, a majority of whom shop on Flipkart’s mobile app, Flipkart is betting that digital ads can become a massive business in the future.
Apart from ads from sellers on its platform, Flipkart also generates revenue through paid content from brands and by connecting advertisers with its shoppers.