Monday 30 November 2015

Can Flipkart, Snapdeal make money via ad revenues like Alibaba?

Online marketplace Snapdeal has launched a new platform called ‘Snapdeal Ads’ to enable its 2,00,000 sellers get their products discovered and thereby sales through targeted advertising tools. 

The tool developed in-house will allow the seller community to reach customers through product advertisements, enabling faster discovery across web, mobile web and apps, the company said in a statement. 

"The advertising tools will help our over-two lakh strong seller community simplify their business journey and boost overall revenue as more users discover their products," Anand Chandrasekaran, chief product officer, Snapdeal said.

Snapdeal will unveil the programme in phases. In the 1st phase, which was launched yesterday, sellers would be able to buy native advertisement formats for product commercials. This will help the sellers to increase the visibility of their products on the platform on its website, mobile site and app. In the second phase, which is expected to take between three to six months, ads of other formats such as banner ads will be made available to the sellers.

Along with support and visibility to sellers, the advertisement tool will lead to an additional revenue for the company. Currently, ad- revenues are largely driven and earned by Google and Facebook with almost everyone using their platforms for advertisements.

The initiative is reportedly being led by Asif Ali, founder of Silicon Valley based advertising platform Reduce Data, which Snapdeal acqui-hired in September this year. The company assists brands and advertisers to optimize their advertising campaigns through leveraging artificial intelligence, real-time data and other tools. 

Snapdeal's announcement comes more than six months after rival Flipkart acquired a mobile advertising firm, Adquity Technologies, to develop similar advertisement solutions for its platform, and to make ads one of their core-revenue streams in near future.

Evidently both firms are looking to generate an additional revenue route via advertisement revenues, walking on the path mapped by China's Alibaba Group. 

According to estimates by iResearch, advertising accounts for more than half of Alibaba’s revenue. 

Alibaba Group not only dominates China’s e-commerce, but also runs one of the biggest online advertising businesses in the country. Alibaba’s Taobao marketplace is equipped with a search engine that allows shoppers to look for products by entering keywords. Many merchants selling their products on Taobao participate in auctions of search keywords — much like how businesses spend money on Google's search-linked ads.

The mechanism is quite similar to Google’s AdWords, the engine that Google uses to place keyword-targeted ads alongside main search results.

It would be interesting to see how ad-revenues will help sellers and eventually the e-commerce majors to generate actual profits as against the GMV the company's boost about which is based on the maximum retail price (MRP) of products sold on the website and does not factor in discounts, or even cancellation or return of products.

Also Read: Can the e-commerce model ever turn profitable?
Meanwhile, Snapdeal has launched a series of sellers specific initiatives this year. In September, the company launched a SD Advisor program, which essentially provided its sellers with a personal adviser to assist them in business management. These personal advisers provide sellers with market insights, but also help them establish their brand and grow their e-commerce business on Snapdeal. Earlier this month, the company also unveiled Snaptrends – an online future-defining, fashion trends forecasting service for its sellers.

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