Flipkart is looking to tap big brands such as Samsung and Microsoft to rev up its fledgling advertisement business, a unit that’s expected to drive profitability for India’s largest online retailer.
It will offer to promote these brands prominently during searches by customers on its website and mobile app, besides helping them to target customers better through data analytics and tracking consumer behaviour. Brands that sign up will account for as much as 70% of the advertisement unit’s business, with the remaining expected from product listing solutions (PLA) used by thousands of merchants on the platform, according to a top executive. The etailer’s advertisement business, which hit a revenue run rate of Rs 80 crore or $12 million annually in February, is targeting two to three times growth every year, according to one person familiar with development.
Flipkart is also on the lookout for acquisitions for the unit. The move to aggressively go after brands Flipkart has already signed up 100 is in line with the strategy to open up brand stores and focus on the delivery experience of its biggest sellers, as reported by ET earlier. After Samsung Electronics launched the Galaxy J7 and Galaxy J5 devices exclusively on Flipkart earlier this month, the online retailer has been monetising the relationship with the South Korean multi-national by selling ads and launching a brand store on the etailer’s mobile application.
“Given our current strategy, I see a fair bit of traction and revenues coming from brand ads, while PLA is very strategic to our advertisement business and we continue to stay invested,” said Ravi Garikipati, senior vice-president leading the advertisement business. He confirmed the growth target for the unit. The unit’s other clients include Micromax, Intel, Intex, Qualcomm, IFB, Maharaja Whiteline and Geetanjali Jewels.
Flipkart started its advertisement unit last year, first with product listings to help sellers promote their products when customers search for them in the marketplace. About 20,000 of its 85,000 merchants have used it till now, with 10,000 active campaigns running a month. Late last year, it also launched a ‘brand story ad format’ allowing companies to target specific customers browsing for products related to their own on the online marketplace. Along with this, it launched Flipkart Shopper Audience to help advertisers target audiences outside the Flipkart mobile application.
Flipkart’s attempt at building an advertisement business is similar to Alibaba. According to research firm eMarketer, the Chinese online commerce giant’s mobile advertisement revenue will jump to $7.35 billion in 2016 from $4.75 billion in 2015. “Alibaba has a very similar approach to advertisements and it is 66% of their revenue. Over time, it will also become significant for us,” added Garikipati, although he declined to disclose specific numbers or targets for the Flipkart unit. Along with its logistics unit Ekart, Flipkart is counting on the advertisement business to generate cash flows.
Scaling the business to a significant size will take some time, said people in the know. “Their advertisement business is looking to grow two to three times year-on-year, but until it reaches $200-300 million it will not be able to add cash flows to fight Amazon,” the person said. To ramp up growth faster, the advertisement business is also eyeing acquisitions. In 2015, Flipkart bought mobile ad network AdIQuity to kick-start the business. William Gholston Authentic JerseyShare This