Flipkart to rely on brand ads to increase revenue, profitability

After ‘Brand Stores’, Flipkart is counting on ‘brand ads’ to drive its company’s growth. The etailer will feature big brands such as Microsoft and Samsung dominantly on its website as well as on mobile app. Besides giving prominence in search results, the etailer will also use data analytics and consumer behaviour reports to increase brand engagement with target consumers.

According to an executive, Flipkart aims to generate 70% of the advertising revenue from brands and the remaining 30% through Product Listing Ads (PLAs).

Focus on Advertising Unit

In March, it was reported that Flipkart clocked $1 million monthly revenue from paid ads in less than a year. CEO Binny Bansal had affirmed that its independent advertising arm is one of the important revenue pillars of the company.

Considering the high-growth trajectory of its advertising unit, the etailer plans to invest more funds and acquire companies to strengthen it.

Ravi Garikipati, Head of Advertising Platform – Flipkart stated,

“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.”

Besides Samsung and Microsoft, the marketplace leader has also tied up with other brands including Intex, Micromax, Maharaja Whiteline, Intel, Qualcomm, IFB, and Geetanjali Jewels.

Replicating Alibaba’s strategy     

Chinese ecommerce leader Alibaba has inspired many Indian etailers like Paytm,Snapdeal and Flipkart.

Flipkart strategy to focus on ad revenue is inspired from Alibaba’s similar business approach. Confirming the same, Garikipati said,

“Alibaba has a very similar approach to advertisements and it is 66% of their revenue. Over time, it will also become significant for us.”

But will the advertising revenue be enough to beat its rival Amazon andSnapdeal? Not until its ad business doubles or triples on a yearly basis, according to industry experts. An industry watcher asserted,

“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.”