By Rohin Dharmakumar, Forbes India
Sometime early this year, three of India’s biggest players in the space—Jabong, Myntra and Yebhi—came to a stark realisation. Nearly one-third of the Rs 1.5-2 crore each of them was spending every month on Google search ads was spent on ambushing each other’s potential customers, often with little bang for the buck.
The three had been engaged in a bruising bidding war for ads related to their own “brand searches”
—ads shown to users who searched Google for, say, “Jabong.com” or “Jabong”. But in their zeal to snatch potential customers a second or two away from clicking through to a rival’s website, and conversely to defend their own brand searches from rivals, they had all bid up the cost-per-click (CPC) rates for such ads through the roof (CPC is the money paid by an advertiser for every customer that clicks on its ad).
As they saw it, Google was the proverbial monkey pretending to settle a dispute over a cake between two cats, while ending up eating the cake.
“Google is sucking all the air from the ecosystem. No matter how good your business is at a gross margin, they just skim the cream off everyone,” says the co-founder of one of India’s leading travel portals.
With profits still a mirage and venture capital money fast running out, the companies put aside their fierce rivalry and reached out to each other informally. A decision was taken to stop bidding on each other’s brand searches. Naturally, CPC rates for brand search ads plummeted drastically, as companies were often the sole bidders for their own brand searches.
But this is where the story takes an interesting turn. According to insiders with access to what went on after this informal deal, some of the three apparel companies received calls from their sales contacts in Google.
“Why have you stopped bidding on competitive brand searches? This is very risky. The Indian ecommerce sector is still nascent, which means that even when a customer is searching for Myntra, she might be open to switching to Yebhi,” they were told.
But the companies decided they couldn’t bleed any more. Today, one of them says, it spends just about 10 percent of what it once did on brand searches.
A similar truce also exists in the travel space, where three of the biggest players, Makemytrip, Cleartrip and Yatra, are learnt to have informally agreed to not target each other’s potential customers.
But no such luck was forthcoming to Matrimony.com, the largest online matrimonial service in India. After tasting success with their Bharatmatrimony.com service, the company had rapidly created numerous offshoot websites like Tamilmatrimony.com and Bengalimatrimony.com, each of which was duly trademarked as well. In 2008, it drew $11.75 million in venture funding from Yahoo! and Canaan Partners.
Since 2009 it has been waging a dual legal battle against Google alleging the search giant willfully allows its competitors like Shaadi.com to advertise themselves to users searching for ‘Bharat Matrimony’ or many of its other trademarks.
Read the entire article here.
(c) 2013 Forbes India. Reproduced with permission from Forbes India.
