Retailers need Zomato’s Walmart moment

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On to today’s story. We’re discussing billboards. 

The next time you leave your cab or the metro/rail station, head to your office lift, and look at the window while at your desk, count the number of bright (digital) billboards flashing ads at you. Chances are you saw several on the way home too, maybe even in the lift of your gated apartment complex. 

Yes, advertising is dominated by technology companies (aka the Google-Meta duopoly) while television, the former ad king, steadily declines. Yet, the shift of power to tech companies hasn’t completely killed legacy advertising yet. In previous editions of The Impression, we’ve discussed the resurgence of Indian radio companies (read more here) and the resurgence of local advertisers in cinemas (read more here). 

Another traditional advertising medium is looking ripe for recovery: outdoor ads. 

Why retailers need new ad networks

In 2022, food delivery firm Zomato made two investments in one go (pdf). One was software company UrbanPiper, which helps restaurants manage their online orders from across food ordering platforms. The other, more interesting bet was on advertising firm AdOnMo. 

The Hyderabad-based company, founded in 2016, is a relatively new entrant in the very old business of outdoor advertising. Its competitors include The Times Group’s billboards business (founded in 2005) and Selvel Media (founded in the 1940s). 

AdOnMo runs a network of ‘screens’ or digital billboards, the kind found on top of taxis, in office lift lobbies, and inside malls. Just like any other billboard company, the firm helps real estate owners install screens for ads and brings them advertisers interested in the space. For instance, in 2022, it signed a contract with Schindler to manage a network of screens in and around lifts operated by the elevator maker-operator in India. 

Zomato led AdOnMo’s Series A funding round in 2022, becoming its largest non-promoter shareholder with just over 17% stake in the company. Zomato invested more than Rs 112 crore for its stake, per its FY22 annual report (pdf). 

Three weeks ago, its bet was validated: AdOnMo raised nearly Rs 58 crore in a Series B from individual investors along with Qatar Insurance Company and Z Nation Lab.

The billboards business is a fraction of the Indian advertising market. Yet in 2022, it was worth Rs 3,690 crore, according to a report by consulting firm EY (pdf). A year later, it was up more than 12% to cross Rs 4,100 crore in revenue. More importantly, digital advertising is now about 9% of the total billboards advertising revenue. Digital out-of-home advertising, also called DOOH, relies on screens rather than plain vanilla hoardings to play ads that target people seeing the ad better and measure their attention more accurately. In India, these screens grew 67% to 150,000 nationwide, largely in gated residential communities and shopping complexes and malls in metro cities. 

That is where the big opportunity for Indian retail media really lies.

Searching for eyeballs

Retail advertising—aka ads on shopping apps—is one category that is eating into the duopoly that Google and Meta enjoy over India’s advertising business. Flipkart, Swiggy, Zomato, Nykaa, Zepto, and other e-commerce (and quick commerce) companies are racing to offer ad inventory to brands. None of the Indian retailers have been able to build a self-serve platform to rival Google’s and Meta’s in India so far, leaving the leadership position clear for Amazon. 

Yet, ad income is crucial for e-commerce companies because, with little upfront investment required, their ad earnings go straight to the bottomline. Food delivery companies, for instance, are now earning about 10-12% of their revenue from advertising. Besides, as Zomato and Amazon increase their platform fees and commissions, they are running out of new levers of revenue growth. Advertising is that high margin lever that can boost revenue and generate new business. 

However, food delivery and quick commerce companies are far more hyperlocal than Amazon. It makes sense for a company like Zomato to want a stake in not just national-level digital advertising but more targeted, localised ad networks such as billboards. Besides, billboards tend to be favoured by other hyperlocal businesses such as restaurants and local retailers, creating a clear fit for a company in the business of delivering goods neighbourhood-by-neighbourhood.

Digital billboards aren’t just a means of advertising on their own. Brands reuse billboard campaigns for online advertising campaigns. Consider the number of viral posts featuring advertisements from New York City’s Times Square, or frequent social media references to ‘banter’ between brands via billboards (such as this recent one between Boldcare and Zepto). 

Yet, no major Indian retailer, except Zomato, has invested directly in the outdoor advertising business. 

“The challenge with ad networks, especially digital out-of-home advertising, is the problem of scale,” Kabir Kochhar, founder of media-focused fund Audacity VC, told The Impression. “If I’m a P&G or an HUL, I will want exposure across, say, the top eight cities of the country. DOOH needs a lot of capital expenditure to achieve scale.”

The majority of Indian billboards businesses continue to be independent family-owned ventures or run by large news and media conglomerates such as The Times Group and Jagran Prakashan. Since the pandemic, these businesses are scaling up rapidly. Take market leader Times Group’s billboard business, housed in Times Innovative Media Ltd. In FY21, a pandemic year, the company made Rs 186.8 crore in revenue from operations with a slim net profit margin of just over Rs 1 crore. The next year, the company slipped into losses, although revenue from operations doubled. In FY23, the company doubled its revenue from operations again, along with nearly Rs 49 crore in net profit. 

Retailers in the US have understood how important it is to not just build their own ads network but also buy into someone else’s. In February this year, the US’ biggest retailer, Walmart, acquired smart TV maker Vizio for $2.3 billion. The deal’s value to Walmart isn’t in the sale of Vizio TVs but in the ads network that runs on these connected TVs. Walmart earned $3.4 billion globally from its ads business (pdf), up 28% year-on-year. In the December 2023 quarter alone, Walmart’s international advertising business (which includes Flipkart) grew 76% year-on-year. 

Connected TVs are still growing in India, led by manufacturers such as Samsung that have displaced Amazon’s Fire Stick business, but India still has only 35 million connected TVs in the country, per the EY report quoted above. 

Connected, digital billboards also offer a network for retailers to tap into. Two years after its investment, Zomato still holds the first mover advantage. 

But, while e-commerce companies and retailers need advertising revenue to keep the cash registers ringing, they also need smart strategic investments to effectively make money from what is not their core business. 

“It is highly complex to run an ad network,” Audacity’s Kochhar says. “It has taken companies like Flipkart nearly a decade to build their ads network and still, Amazon is the shining beacon in this business.”

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Scan the big media headlines from the week gone by

Cookie’s safe: Google has delayed phasing out third-party cookies from its Chrome browser yet again, this time to early-2025. Google failed to secure approval from the UK’s privacy regulator which criticised its replacement ‘Privacy Sandbox’ and other measures to reduce tracking its users as insufficient. The original deadline for killing cookies was 2022. Advertisers are still planning their switch to first-party data. 

Good bad numbers: Netflix gained a record 9.3 million subscribers worldwide in the March 2024 quarter as revenue grew 14% and profits were up nearly 80% to $2.3 billion (pdf). But, the platform will no longer report its subscriber numbers starting next year.

Meanwhile, Spotify shares surged as the platform swung back to profits and active users grew 19%, led by a hike in subscription prices. 

New(s) pivot: News aggregator platform DailyHunt acquired magazine subscriptions aggregator Magzter for an undisclosed amount last week. Meanwhile, rival InShorts is reportedly pivoting from news aggregation to platform top influencers handpicked from LinkedIn, Twitter, and YouTube. 

AI boost: Election season is all about maximising reach across national divides. AI is helping. YouTuber Dhruv Rathee and news anchor Ravish Kumar, now also on YouTube, are using AI tools to translate their videos on the ongoing elections into multiple Indian languages. 

Out the door: The US Senate passed a bill that will ban social media platform TikTok in the country if its Chinese parent ByteDance does not sell the company within a year. The bill now needs the US President’s approval. TikTok is also facing an inquiry in the EU over its ‘addictive’ features.

Trumpet 🎺

Dissecting this week’s viral ‘thing’

How much can one apologise for past mistakes? In the opinion of the Supreme Court, it should at least be as large as the mistake, literally. This week, Baba Ramdev and Acharya Balkrishna’s Patanjali Ayurved ran (tiny) advertisements in newspapers apologising for holding a press conference to address allegations of misleading advertising against them even as the case was being heard in the Supreme Court. 

Baba Ramdev is not legally an owner of Patanjali Ayurved but is the face of the firm; he apologised in person two weeks ago in an ongoing case of contempt of court, filed because the company continued to publish misleading ads for its products despite promising in court not to do so in November last year. 

But the in-person apology and newspaper clippings don’t seem to be enough. Yesterday, the Supreme Court asked why the company’s apology ads are only a fraction of the size of its misleading ads for products such as Coronil, a purported cure for Covid-19. The Court now wants to see copies of all the apology ads the company has run by the end of this month. It also added the Indian Medical Association and the Ministry of I&B to the case, adding that the court will pursue other instances of misleading ads by FMCG companies. 

Will this turn into a longer, Supreme Court-led clean up drive? It’s already been a terrible few weeks for Indian FMCG firms and their tall claims. Some spices made by MDH had so much pesticide in them that they’re banned in Singapore and Hong Kong (whatever happened to “asli masale sach sach”?). Nestle is being investigated for adding sugar to its baby food brand Cerelac in India for years, something it doesn’t do in the West. And the government told Bournvita and other malt food drink brands that they cannot call themselves health drinks anymore. What does this mean for us, who grew up being told one glass a day will make us “taller, stronger, sharper”? 

Perhaps the newspapers will soon be awash with apology ads. A big one from Patanjali already debuted just this morning.

That’s all this week. If you enjoyed reading The Impression, please share it with your friends, family, and colleagues. And please write to me anytime at [email protected] with thoughts, feedback, criticism or anything you’d like to see discussed in this space. I'd love to hear from you. 

Thanks for reading, and see you again next Wednesday!