Microsoft bid evokes mixed response in India

Microsoft bid evokes mixed response in India

The general sentiment across the online advertising industry is that of positive ripples for the Indian market if the deal comes through

<b>Pratima Harigunani</b>

Tuesday, February 05, 2008

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PUNE, INDIA: Microsoft's attempt to buy Yahoo with all the ammunition to fist down the growing dominance of Google Inc. in Web search and digital advertising has been dissected well through all angles – competitive, anti-trust, share market, balance sheet, technological and financial and so on.

Here's a quick vox populi of what does the deal signal for peers in the Indian online and search market.

Ripples on India

Of the $100 million online advertising space in India, where search comprises 30 to 40 per cent of the total pie, Google has been the sole ruler with a share of almost 80 to 90 per cent.

"The combined force of MS and Yahoo would help the former develop better search strengths. MSN is a small player in the online advertising space in India with no significant say yet. This would help bring the advantage of traffic that Yahoo has to the table of technology of MS. Overall the top five players are Google, MS, Yahoo, Face Book and My Space. With the last two divided between MS and Google, whosoever gets Yahoo would clearly be in a position of edge," opines Murugavel Janakiraman, chairman of Internet and Mobile Association of India IAMAI.

Another leading player from the search marketing space in India echoes the opinion. Vivek Bhargava, MD of Communicate 2, sees the proposed MS-Yahoo deal as a worthwhile acquisition for MS.

Elaborating the positive outcomes of the deal, he says that the deal can bring much-needed competition in the search market, which would be beneficial for the customers as well as the advertisers.

"Though we can't predict anything till the time the deal is done, there are other strong contenders like Newscorp and Google itself. Whatever be the outcome of the proposed merger, it would bring in competition, which is very healthy for the Indian market. The pie will grow. Market ceases to grow when there exists a monopolistic scenario," says Bhargava.

Communicate 2 has been in the business of generating online leads in association with search engines Google, MSN and Yahoo.

However, Bhargava doesn’t see a major impact for the Indian market, as it is still in its nascent stage.

"But the combined force of MS-and Yahoo would give competition in a market where Google rules the roost. There are hardly any options for advertisers so the deal would definitely have positive connotations," Bhargava reasons.

Talking of the search segment in particular, which is about 50 to 60 per cent of the total online market globally, Bhargava feels that in India the slice is higher in the range of 56 per cent because globally branding is a key factor but in India it's more about Return On Investment-based or lead-generation marketing.

Consolidation cascades here?

Interestingly, some time back, Google bought an ad firm DoubleClick for $3.1 billion in order to cater to a large network of advertisers and Web publishers and to bolster its banner advertising business.

The action is hot with Microsoft Corp.'s $6 billion deal to buy Internet marketing firm aQuantive Inc. and Yahoo's bid for Right Media.

The digital marketing size in the US is estimated to be around $15 to 18 billion with a growth projection of $120 billion by 2015.

Would the deal herald any kind of consolidation of Indian players per se? Bhargava answers affirmatively, but explains that the consolidation would take place in a different manner.

"There could be alliances between a digital agency and a paid advertiser for instance. Whatever may be the outcome, in a year the search advertising landscape would turn more contextual and dynamic. Next three to four years, it is going to be very exciting," he said.

Companies anticipate more action on Indian turfs, but not necessarily from big players.

Ybrant, which has a portfolio of search-based targeting, banner ads, email marketing and marketing tools, has for instance, showed an acquisition appetite on the other side (as a buyer) of the spectrum with areas of interest like lead generation, search marketing and co-registration.

Search travels: Internet to Mobile

As predicted by John Delaney, principal analyst at Ovum, the MS-Yahoo alliance could be potent enough to challenge Google's mobile strategy also.

On the software side, Microsoft's mobile strategy has focused on the platform, through its Windows Mobile operating system, while Yahoo has focused on applications, including both individual applications such as Flickr, and the integrated suite 'Go'.

Yahoo and Microsoft also have a substantial combined user base in the three key mobile Internet applications; in particular, a commanding lead in messaging, where Google is weakest.

The same is quite apt for India as well. As Suresh Reddy, chairman of Digital marketing firm Ybrant Technologies, explains.

“The Eastern side of the globe is different from the West. And mobiles have a lead over Internet as a medium in India compared to the US where online fever has caught up in a major way,” said Suresh.

Going forward, wireless, cell phones and new-age devices like iPhone will make the mobile market much wider and drive more media consumption and market. Right now, the market in India is still technology-oriented and not consumer-oriented, which will hopefully change as fiber optics and IPTV penetrate deeper.

The mobile space in India will become more contextual, and will morph from spam-based to more relevant, word-SMS-based business.

"The ads would become more relevant and that would prod players like us to become part of that action," agrees Bhargava.

Waiting with bated breath

Another important outcome of the of the buzz created by MS’ bid is that there is a lot of consolidation awaited in the Internet waters, feels Reddy of Ybrant Technologies.

"We are witnessing more and more activity and more people are migrating here," he said.

On the global front, as already speculated widely, MS-Yahoo combine would help thwart the Google dominance on online advertising, which is projected to grow from $40 billion to $80 billion in next few years, Murugavel Janakiraman feels.

Incidentally, Yahoo also has a stake in Consim Info Private Limited, erstwhile Bharat Matrimony group.

Murugavel, who is also the founder and CEO of the group, denies any other implications of the deal on the group.

"There will be no impact on us and we will continue to leverage Yahoo's strengths," he said.

"So far Yahoo has been intact. But in all probability, Microsoft may come to us tomorrow and in case the deal happens some new strategies can be worked with the channel network of MS," he says.

Meanwhile, what surfaces clearly is that the pie of the Indian market would definitely grow with this deal.

Citing a research, Bhargava points out that the Internet market in India has grown from Rs 210 crore to Rs 450 crore and is expected to shoot to Rs 2250 crore next year.

"Most of our clients have grown 400 to 500 per cent and I expect the trend to continue," says Bhargava.

©CyberMedia News