Emerging from the prolonged dry spell that followed the dotcom bust, Internet or online advertising is staging a comeback with industry experts projecting a growth of more than 100 per cent within a year.

Pegged approximately at Rs 45 crore (Rs 450 million) in 2004, the Indian online advertising industry is expected to grow to more than Rs 100 crore (Rs 1,000 million) within a year, thanks to the traditional advertisers such as automakers and FMCGs who have started allocating more of their marketing budgets to the Web, helping the industry move towards what analysts see as a sustainable recovery from the bubble-era peak.

"As more an more marketers are using Internet and subscribing to its various faculties, there is a potential of Rs 100 crore worth online advertising business in the next 12 months and with an increase in Internet penetration, the number can still grow by a few hundreds in the next two-three years," says Preeti Desai, president, Internet and Online Association.

"Last year, for the first time large traditional advertisers began to spend more online and now the growth of wireless Internet access and broadband is surely painting a promising picture for the industry. We are sure that advertisers will recognise that people are spending more time online and consuming more online media," Desai says, adding estimates show that Indian online ad spending will account for 2.5 per cent of total ad spending in 2007 from the current level of 0.5 per cent.

The Indian market is relatively small compared to the global market and is far behind in terms of research and growth of various verticals in the space, experts say, adding while FMCGs have only recently started putting their money on the Internet, the financial and banking sectors have taken a lead in terms of taking the first step in this direction.

The main sectors which are presently investing their money in the Internet ad market include financial services (personal loans, housing loans, banking services, utility payments, insurance, investments), personal services (matrimonial, job placement and personalised travel verticals), automobile segment, entertainment – predominantly television channels and FMCGs.

"The financial services were already on the Internet since they found an excellent synergy between the medium and their objectives. However, these days, since the audience on the Net has reached some kind of a critical mass, FMCG and other sectors which kept away from the online medium have also started embracing the online ad space," says Ratish Nair, COO, Mediaturf Worldwide, a leading Internet advertising and marketing agency.

Experts say now the marketers are realising that Internet can offer benefits which no other medium can.

Elaborating about the benefits of online advertising over other mediums, Nair says, "Internet is one medium which allows marketers to demographically target consumers in multiple ways. Besides, interactivity and personalisation are other two features which are unique to this medium."

"The Internet is not just a medium for communication but it can also be the 'marketplace'. Not only do you communicate to your audience but you can also 'sell' at the same time. The audience is further empowered in terms of getting all information as and when he needs it to make a qualified judgement. Hence, Internet covers all elements of buying or purchase. This is something which no other medium can do, Nair says.

About the potential size of Indian online ad industry, Desai says, "The size of online ad industry is directly related to Internet penetration of any country. In India, Internet penetration is less than 2 per cent of total population and the online ad market is only 0.5 per cent of the total ad spends."

"This percentage is much lower than what it is in the developed economies. For instance in the United States the current online advertising spends are at 2.5 per cent of the total ad spends with Internet penetration at a whopping double digit number of more than 69.8 per cent of the total population, she adds.

The business on Internet is increasing with each passing day, but the challenge of attracting advertisers to use Internet still proves to be a difficult task, experts say.

"The main challenge in achieving its true potential is in educating the marketers on the power of Internet as an effective medium for reaching prospective customer. The marketers must be convinced that internet is not a cheap alternative to direct marketing (DM) and rather it should work in accordance to other media's too," says Sougata Das of
indiatimes.com.

"By incorporating an online component into the marketing mix, advertisers can stay closer to the consumer throughout the marketing cycle, from initial brand awareness right up until the actual point of purchase," Das adds.

Also the perception that online audience consisted primarily of teenagers is a myth and marketers are now grasping that too.

"Today there are 25 million users in India and most of them they happen to be urban male aged between 18 to 34 years who have the power to spend money. However, if you see the evolution of Internet audience in the US and UK, the trend indicate that changes in the profile will happen to Indian audience too. Today, in US more than 50 per cent of online audience are women, even though in the beginning it was predominantly male population," Nair explains.

All said and done, while online ad industry is fast emerging out of blue, experts say the main challenge is to simplify the media buying, planning and creative processes.

"In developing the media plans, advertisers and agencies need to evaluate the online medium against traditional media's well-research history. There is need to develop guidelines and standards that will help deliver more consistent, reliable and understandable audience measurement," Desai says.

"Use of these standards and guidelines would directly organise the industry so as to foster an environment in which this interactive medium is implemented with ease, thus allowing the industry to buy more and capture value," Desai adds.