Mobile advertising network BuzzCity had entered the Indian market in May, 2007. The company had previously raised $10 million of growth capital from Naspers, the South African parent of MIH, but last year, it bought back stake from Naspers. BuzzCity, CEO and Co-founder Dr Lai Kok Fung and Manish Mishra, VP Business & Country Manager – India spoke with MediaNama on the company’s plans for India, and the mobile advertising market at large.
Mobile Advertising in Developing Markets Vs Developed Markets
MediaNama: Why is Buzzcity concentrating more on developing markets as compared to developed markets? Is the mobile advertising market in developed market stagnating?
Dr Lai Kok Fung: Buzzcity is focused on developing markets and the three biggest markets for us among developing countries are India, South East Asia and Africa. The competition level and the skills needed to manage developing and developed markets are different. In developed market like US or China which are big markets, you have big advertisers and big publishers. In order to succeed in the developed markets, you need big team and also have to advertise your services very well. The business model is different and lot of money is involved. There are also lots of players like Google Admob, Millenium media, etc already present in these markets. Besides, Japan and China have isolated ecosystem. You have to develop different skills to be good in China and Japan and these skills cannot be applied to other markets.
India is a different market and there is a lot of fragmentation in the market. The skills required to operate in this market are very different. Players from developed markets find it very difficult to operate in this environment. That’s why we try to fit in here.
MediaNama: How profitable is it for you to be operating in developing markets?
Dr Lai Kok Fung: That’s where I think our real skills come in. Today, we are the only profitable mobile advertising company in the world that operates out of developing market. Our Indian operations is very profitable. We have 6 staff members in India and we are doing sales of about $2-3 million a year.
MediaNama: According to the numbers listed on your website, the number of ads served in India are quite large as compared to other countries. What is India’s contribution to your revenue?
Dr Lai Kok Fung: India contributes about quarter of our revenue. If you look at the table on the website, we serve I think 1/10th of the number of ads in South Africa compared to India, but we make the same amount of money in SA compared to India. That is because the click through price is different. The average click through price in India is 2-3 cents and in South Africa, it can be 10 times more. India is profitable, but it also has a stronger growth potential. Because the per click price is lower, lot more advertisers can find it more profitable to enter this market.
In India, the entry barrier is low. So the reason Indian volume is high is because India is much bigger country than rest and also the price of mobile handsets are low because of Micromax. So big volume in India signifies that supply is huge but the ad dollars haven’t followed yet. India however is still in the top three markets for us.
Partnership with Telecom Operators
MediaNama: Have you partnered with any Indian telecom operators? Do you provide click-to-subscribe ads?
Dr Lai Kok Fung: We are telecom operator agnostic and we typically view the telecom operators as internet service providers. Also markets like India and Indonesia, where there are lots of telecom operators competing each other, is usually good news for us because they drive the cost of mobile service down.
Manish Mishra: Click to subscribe ads are not possible without the operators letting it happen. Secondly, we do not operate such ads which are click to subscribe as such. It’s been a policy decision to not accept such ads.
Effect of Regulations in India
MediaNama: Are there any regulatory problems that you face in India?
Dr Lai Kok Fung: When the regulators have more strict regulation on VAS players, it has short term dampening effect on us. The barrier for advertisers have gone higher. For the last 2-3 years regulators have done couple of things that has positive effect for us. First, they banned the IVR and the SMS spamming. With respect to brands and agencies, there are no regulators to regulate. I haven’t seen any regulations at all except for 1-2 that I have seen in US. These regulations say that if you advertise for pharmaceutical products even on mobile, the disclaimer rules still hold good. But one wonders how to put those disclaimers on a mobile screen.
Mishra: We did a couple of Mutual Funds campaigns where one fold of the ad holds the MF ad, second holds the disclaimer. As for brands, there are no regulations.
MediaNama: How quickly have you grown in terms of percentage since the ban?
Dr Lai Kok Fung: I think we have grown at 200-300 percent last year in Q1-Q2. Compared to the last year, we are seeing 100% growth YoY in these first three months . It’s a bit more challenging to sustain the 100%, it is still a huge number.
MediaNama: Do you also serve ads on video platforms? What are the issues with serving ads inside Video Platform?
Dr Lai Kok Fung:: We do not serve ads inside the video but we serve ads on listings of video portals. The bandwidth requirements are high but the internet bandwidth is slow and user wants to watch the video and doesn’t wants to be interrupted. There are three components for mobile ads – SMS, display ads which we have, and search. In the the most optimistic view, video takes 4 percent of mobile advertising in the US it may be 5 percent.