Search Engine Marketing

IAMAI

Internet and Mobile Association of India

SEARCH ENGINE MARKETING A Report by IAMAI & eTechnology Group@IMRB

2007 - 2008

© Internet & Mobile Association of India (IAMAI), 2008All rights reserved. No part of this report may be reproduced, either in part or in full, without the prior permission of Internet & Mobile Association of India

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TABLE OF CONTENTS Executive Summary .......................................................................................................... 1 Research Methodology ..................................................................................................... 2 1.0 Search in the Indian Context:.............................................................................. 3 1.1 Search Activities .................................................................................................. 3 1.2 Purpose of using search ....................................................................................... 3 1.3 The most used search engine in India .................................................................. 4 1.4 Users opinion on online search ............................................................................ 6 2.0 Search Engine Marketing..................................................................................... 8 2.1 About Search engine marketing.......................................................................... 8 2.2 Advantages of SEM .......................................................................................... 10 3.0 SEM Industry: Global Scenario ........................................................................ 11 3.1 Growth in mature markets 3.2 SEM is stealing the show amidst various marketing channels ......................... 12 3.3 Emergence of new search opportunities in SEM.............................................. 13 4.0 Emergence of India as a preferred destination for SEM outsourcing ........... 15 4.1 SWOT of India as an SEM outsourcing destination......................................... 16 5.0 Search Engine Marketing Industry in India .................................................... 20 5.1 Current Industry size......................................................................................... 20 5.2 Growth expected ............................................................................................... 22 5.3 Manpower requirements for the industry.......................................................... 23 5.4 Clientele for the industry .................................................................................. 24 6.0

The Future of SEM ............................................................................................. 25

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EXECUTIVE SUMMARY This report outlines the SEM concepts, presents industry insights as well as charts out the future potential and demands of the industry. The report also captures the global scenario to compare the domestic developments in the SEM industry. Different research techniques were used to compute the findings of the study. Published sources were referred to map the global as well as domestic trends in the SEM industry. Qualitative inputs were gathered by conducting discussions with various SEM and SEO organizations. Several data points like industry trends and outlook, growth rates as well as organizational characteristics were assimilated. Quantitative findings from syndicated report of IMRB (I-Cube) 1 were used to provide a contextual understanding of the online search behavior. The total market revenue for SEM industry in India was estimated at around USD 112.5 million in FY 2007-08. Of this, one third is accounted by domestic clients while the rest by international clients, having local as well as global presence. India offers a global hub for SEM outsourcing with international clients from South East Asia, USA, UK, Spain and Middle East. With increased emphasis of marketers on online media for advertising and growth of specialized searches such as local business as well as information search, this industry promises high growth. The revenues have increase by 50% year-on-year and are expected to reach a mark of USD 225 million by the year 2009. India presents itself as a global hub for SEM outsourcing by attracting various clients from across the globe. However, this industry is facing a shortage of proficient manpower to carry on its operations at various levels.

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I Cube- Internet in India is an annual research conducted by IMRB International which captures Internet industry trends.

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RESEARCH METHODOLGY For undertaking the study, the research team at eTechnology Group@IMRB conducted primary as well as secondary research. The methodology shown below was followed to arrive at the major findings of the report. Qualitative Research

Quantitative module

Secondary Research

Primary research was done by conducting in-depth interviews with the organizations involved in search engine marketing (SEM) and search engine optimization (SEO). To understand the topic, an initial conversation was carried with some of the major players in the SEM industry. This was followed up with a detailed questionnaire which was designed to inquire on planned and actual expenses on SEM and SEO. This was done to arrive at an estimated industry size. The quantitative research findings were the result of the annual research carried out by eTechnology@IMRB on the Internet movements in urban India. These research findings on Internet in India are in the form of I-Cube, a syndicated annual product of IMRB. I-Cube 2007 report is based on a primary survey conducted across 30 cities amongst 65,000 individuals and 12,000 households, making it one of the largest researches in the domain. Apart from the primary research, secondary research was done using various published resources. IMRB’s paid subscriptions were also used to understand the overall industry.

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1.0

Search in the Indian Context:

1.1

Search Activities Search has radically transformed the way Internet is used. It not only influences the activities done online but also lends a helping hand to offline activities. Be it a car purchase or deciding the layout of the living room, the first step to all these activities begin with online search, in case of Internet users.

The use of online search in India is on a continuous upward move. Compared to only 35% online Internet users using search in 2004; today almost 75% of active Internet users reap the benefits of online search. Thus after email, search forms the next most popular activity of most of the active Internet users.

Table 1: Activities Searched Activity % Users Email 93% Search 73% Messaging/ Chatting 58% (Source: I-Cube reports) 1.2

Purpose of using search Be it finance, education or entertainment, search has left its footprints on every online activity. One of the most useful contributions of online search is its influence on offline conduct, in addition to guiding online activities.

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Figure 2: Purpose of using search

Source: I cube 2007 Base: 30 Cities Users: 11.5 Mn

Descriptions of the searches illustrated above are presented in the Table 2, below. Table 2: Various types of search Purpose of search

General

Financial

Educational Entertainment

Purchase of products

Travel and Ticketing

1.3

Description General Information Search includes search related to any query resolution which cannot be categorized into financial, educational, entertainment, product or travel search. E.g. job search, news search Financial and Business Information includes search related to shares, mutual fund, economy, banking etc Education related Information Search includes search related to exams update, mock tests, academic projects, etc Entertainment related Information Search includes search related to movies, music etc. Products for home and personal purchase includes search on shopping sites like eBay, future bazaar, etc. on product pricing, brands , features, etc. Travel packages and tickets information includes search related to ticket availability, PNR status checking, etc.

The most used search engine in India The growth of online search in India is driven by the fact that people have realized that Internet presents a vast pool of data and to extract that data, search engines act as the best & easiest navigator. Imagine a state, without search engine, and the searcher had to remember the URL for each desired information service.

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Figure 3: Most used search engine

Source: I Cube 2007 Base: 30 Cities Users: 11.5 Mn

Though search engines have been in vogue before the emergence of Google, yet Google has revamped the whole online search industry. It has become first choice in terms of search engines for more than 60% of the users in India

Figure 3: Primary Search Engine Options 64%

Source: I- Cube 2007 Base: 30 Cities Users: 11.5 Mn

20% 7%

Google

Yahoo!

Rediff

3%

3%

2%

1%

Indiatimes

Sify

MSN

Others

. Within India, after Google, Yahoo! is the second most used search engine. Some of the other search engines that are used include MSN, Rediff, Indiatimes and Sify. Below is the usage of various search engines:

Table 3: All search engines used Search engines Google Yahoo MSN Rediff Indiatimes Sify

% Users 88% 55% 37% 14% 6% 5%

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Source: I cube 2007 Base: 30 Cities Users: 11.5 Mn

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1.4

Users opinion on online search Figure 4: Attitude towards search engines

Source: I cube 2007 Base: 30 Cities Users: 11.5 Mn

As illustrated in Figure 4, more than half of the search engine users consider search engine to be one stop destination for all information on Internet. Be it educational or financial, they turn up to search engines for most of their information requirement. However, one third of the users also believe that search results always do not match the information searched. They have also indicated that the information from the sponsored links in the search engines is not more trustworthy than the search engine’s natural search. 1.5

Demographics of online searchers Looking at the demographics of search in India, it seems that it is almost uniformly used by all demographic segments. Although as expected young men and college going students seem to account for more than 50%. It can be safely concluded that search is not restricted to any particular category.

Table 4: Demographics of online searchers By Demographics % Users

School going kids College going students Young Men Older Men Working Women Non Working Women

16% 26% 27% 14% 10% 7% Source: I cube 2007 Base: 30 Cities Users: 11.5 Mn

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1.6

Geographical distribution of online searchers More than 70% of the searchers landing on a search engine are from top 8 metros. Users in smaller towns and cities are yet to experience the power of search engines. Going by the socio economic classification (SEC), SEC A and B are reaping the benefits of a search engine. Lower SECs are yet not turning to the Internet to satiate their thirst of knowledge. Though the Internet is growing at a whooping 124% in smaller towns and cities, yet search as an online activity has yet not percolated enough into these towns

Table 5: Town class distribution of online searchers By Town class % Users

Top 4 Metros Other 4 Metros Small Metros Cities with 5-10 lakh population Cities with Less than 5 lakh population

40% 31% 21% 5% 3% Source: I cube 2007 Base: 30 Cities Users: 11.5 Mn

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2.0

Search Engine Marketing World Wide Web opens a doorway to colossal data. When a searches require any information, they need to enter search parameters in the query box and results from thousands of pages appear. According to I-Cube 2006, 60% of the users do not read beyond the first two pages to look for the required information. Thus it is very important for a marketer to mark its presence in the first few results itself to attract the target audience.

2.1

About Search engine marketing The Internet marketing techniques used by marketers to promote their website amidst millions of websites is known as Search Engine Marketing (SEM). These techniques are used to enhance the visibility of websites through the medium of online search engine. If optimally implemented, SEM techniques enable websites to appear in the select top few in a search result. Failure to do so, however, will cause a website to be displayed among other websites which are listed lower in the order of a search result. It is imperative to use SEM techniques judiciously. Appropriate use of SEM results in an increase in the return on investments of the marketers by attracting a larger traffic of potential customers. At the same time, sub-optimal use of the SEM techniques might hamper the number of visitors to the website dramatically. SEM is done using various methods. These could be Search engine optimization (SEO), paid inclusion or paid placement. Each of these methods is further explained.

Figure 5: SEM Methods SEM Methods

Search Engine optimization

Paid placement (Pay per click)

Natural results

Sponsored links

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Paid inclusion

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2.1.1

Search Engine optimization (SEO) Search engine optimization is a technique for improving a website’s visibility amidst the search engine results via natural or organic search. This includes changing or modifying the website’s programming code. Due to such alteration a website is fully crawled by a search engine’s spider to index the website’s pages so that it could be included in the top ranking of the search engine. Altering code involves adding visible or invisible content to the website. Changing the source code of a website to ensure a higher place in any search engine’s result can prove a boon for a marketer, if ethical coding techniques are employed. Use of unlawful techniques to ensure visibility in a search engine may lead to banning of the website from the search engine’s results as well as unfulfilled customers. .

2.1.2

Paid placement Paid placement is popularly referred to as Pay–Per–Click (PPC). In this method the marketers pay only when their advertisements are clicked by users to land up on their website. These advertisements appear on top or adjacent to the natural search results. These advertisements are known as sponsored links in Google. These are shown below.

Figure 6: Search Engine Optimization

In this method, the marketers bid for various keywords. These keywords are the terms that a searcher types in the query box of a search engine to search for the desired product or service. When searcher types in any term in the query box that match with

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the marketer’s keywords, their ads appear as sponsored links. The marketer pays only when the searcher clicks on the advertisement to enter the company’s website.

2.1.3

Paid inclusion In this method, the marketers pay an amount to the search engines as fees to include its website in the search index. All of the search engines do not employ all the SEM models discussed above. They may or may not follow any particular model, for e.g., Google does not follow paid inclusion mode. It works on the basis of SEO and paid placement.

2.2

Advantages of SEM Search engine marketing has proved to be a very powerful tool for generating revenues for the marketer. Reasons why a marketer employs search engine marketing techniques can be listed below: 1. Visibility: Search engine marketing helps in creating awareness and enhancing visibility of the marketer amongst competitors and alternators of the marketer. This visibility is not restricted to domestic market only but extends to international market as well. It is, therefore especially suited to SMEs. 2. Quicker turnaround time: An online Internet user will click on an advertisement usually when he/she is looking out for that particular service/ product. Thus the marketer can get better leads from here, which can be converted into customers if dealt with a good sales pitch. 3. Effective outreach: Search engine marketing helps in reaching out the target audience in a more effective manner. The advertisement appears only when the user types in a query for the desired product/service. Thus the reach of the advertisement is more concentrated and more confined to the people who have a need for it in the near future. 4. High ROI: A marketer is charged only for the advertisements, which are clicked. They have to buy out the keywords and it is upto them what number of keywords are bought by him, thus reducing their marketing expenses, which in turn increases the ROI.

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3.0 SEM Industry: Global Scenario Search Engine marketing has shown tremendous growth globally. It is estimated that, SEM expenditures in North America including US and Canada will reach $25.2 billion in 2011 which stood at $12.7 billion in 2007. Figure 7: Search Engine Marketing Projections, North America 2007-2011 $ 25.2 $ 22.4 $ 18.8 $ 15.7

(In billio ns US Dolla

$ 12.7

2007

2008

2009

2010

2011

Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, December 2007. Global Results

This growth is driven by various factors such as: 1) Increased emphasis on branding value of search: The evident advantages of SEM have attracted the advertisers to online advertising. The rapid growth in the advertising expenditure for SEM has impelled the search engines to adopt aggressive marketing strategies. In pursuit of acquiring larger revenues from the advertisers, these search engines have initiated extensive branding exercises luring the advertisers and similarly the Internet users to their websites. 2) SME focus on search: Use of the Internet is not confined merely to large enterprises; lots of small and medium enterprises are now turning up to this media. This enables them to gain visibility amidst their competitors. 3) Growth of niche and local search: Search has revolutionized over the years and now search engines cater to local needs as well. An online searcher can now turn up to Internet to look out for information in its vicinity. Local search engines have been developed where in searcher needs to enter its query pertaining to the area and the results are displayed for that locality such as Google Local (http://local.google.co.in). 4) Rising cost per click: As SEM grows, so does the cost associated with it. In increasing cost environment, advertisers have to partake with money to enjoy PPC, resulting in rise of expenditure of SEM. 11

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5) Increase in demand for online advertising: As more and more users are getting hooked to Internet, the demand for online advertising is on an increase. Due to this steady increase in the Internet users, the industry now has a ready audience to be targeted online; they have started looking at this new channel of advertising (online advertising) and have started allocating budgets for the same. 3.1

Growth in mature markets: US and Canadian SEM Industry Size North American region can be considered as a developed market in the SEM industry. The region houses the maximum number of agencies which provide SEM services to advertisers. From a value of USD 4 billion in 2004, this market has grown at the rate of 300% to reach USD 12 billion in 2007. Over time, paid placement has increased its share in the total industry while share of SEO has remained constant. Advertises seem to have shown less affinity for paid inclusion. Faster results through paid placements seem to attract the advertisers and the high cost involved in paid placement is resulting in its high share in the industry. Table 6: U.S. & Canadian SEM Industry Size Estimate Advertiser SEM Spending 2004 2005 2006 Paid Placement

2007

$3,341,878,176

$4,771,061,673

$8,064,169,000

$10,648,350,000

Paid Inclusion

$181,725,673

$245,775,760

$93,879,000

$85,290,000

Organic SEO

$492,057,200

$642,994,066

$1,107,767,000

$1,279,210,000

$71,558,325

$90,357,143

$122,042,000

$171,690,000

$4,087,219,374

$5,750,188,644

$9,387,857,000

$12,184,540,000

SEM Tech Total

Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, December 2007. Global Results

There has been a decrease in the management of in-house organic SEO. In 2006, 84% of SEO was managed in-house while in 2007, this figure dropped to 79%. Advertisers are now hiring SEM agencies to optimize their website so that their website comes up in the first few searches. The reason can be attributed to the fact that various SEO outsourcing countries like India are emerging to cater to these needs. SEO outsourcing ensured high results at lower costs resulting in high ROI. 3.2

SEM is stealing the show amidst various marketing channels High ROI through SEM have encouraged the advertisers to focus more on this marketing channel leading to shift of other marketing budgets to this form of marketing.

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Figure 8: Shift of Marketing / IT Funds to Search Marketing Programs 20%

Print magazines advertising

32%

16%

Direct mail

17%

15%

Web site development

Base: 2007- 234 Advertisers 2006-61 Advertisers

22%

13%

TV advertising

13%

Print newspaper advertising

13%

15%

10%

Affiliate Marketing

9%

Print yellow page advertising

5% 3%

Online yellow page advertising Point-of-sale promotions

1%

Coupons

1%

2007

8%

5%

3%

2%

Radio Ads

9%

Telemarketing

4%

Other

23%

7%

0%

5%

10%

15%

20%

25%

30%

35%

Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, December 2007. Global Results

As compared to 2006, budgets for traditional media advertising like ads in magazines have shown the greatest shift. More and more advertisers are now shifting to SEM to fulfill their marketing needs. SEM industry in 2007 is able to attract the attention of radio advertisers, thus managing a 9% shift away from it. 3.3

Emergence of new search opportunities in SEM Search has moved away from the plain vanilla techniques and become more evolved. Various new techniques like behavioral targeting, demographic targeting and daypart targeting are being developed to woo the online users and ease their search process.

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Behavioral targeting helps the marketers to reach out to their target segment based on their customers’ tastes and preferences and previous search behavior. Demographic targeting enables these marketers to reach out to certain customers based on their demographics such as age and gender. Day part targeting allows the marketers to target its customers based on the timings of the day. As per SEMPO 2007 survey, advertisers are willing to shell out extra cents for these evolved techniques. They are highly interested in these techniques, especially the behavioral targeting and demographic targeting. Figure 9: Willingness to Pay More for Certain Types Base: 237

20% 43% 70%

80% 57% 30%

Demographic Targeting

Behavioral Targeting

Yes

Time of the day

No

Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, December 2007. Global Results

Behavioral targeting technique is still in its early days and yet not able to attract much of the investment presently despite the fact that 80% of the advertisers are willing to pay more for it. Figure 10: Advertisers Interest in Behavioural Targeting for Search Retargeting 40% 35%

14%

12%

No, we are not currently No, we are not currently Yes, we are retargeting Yes, we are targeting re/targeting searchers re/targeting searchers searchers who have searchers through an ad but plan to in next 12 and do not plan to in already visited my site network months next 12 months

11%

Yes, we are targeting searchers who have searched on major portals

Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, December 2007. Global Results

40% of the advertisers are currently not using this technique but plan to use it in the next year since it ensures them to target their customers in a better manner, based on their likes and preferences.

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4.0

Emergence of India as a preferred destination for SEM outsourcing Companies have entered the market of search engine marketing and optimization to obtain better returns on their investments. It has proved to be one of the best tools for marketers to ensure that the customers are well aware of the website thereby boosting their sales. Most of these services are being outsourced. Outsourcing to a country, like India, provide immense benefits. Some of the benefits are described below: Figure 11: Advantages of Outsourcing to India

Com m ercial Benefits

Less Investm ent

Mom entum in w ork done

Benefits of Outsourcing

Directed Focus

Low cost service

Professional expertise

1. Low cost service: This aspect acts as the biggest push for outsourcing. Outsourcing any specialized activities, to countries where labor costs are minimal, provide significant reduction in cost. 2. Professional expertise: Outsourcing ensures that highly skilled professionals manage the desired services. India provides an effective pool of talent that has the ability to contribute towards serving SEM requirements. 3. Directed focus: Organizations are able to maintain its exclusivity by outsourcing some its work. This enables them to concentrate on their main objectives and core competencies. 4. Less capital-intensive: Outsourcing eliminates the need for capital expenditure on infrastructure. There is no cost incurred on manpower recruitment and training. All these responsibilities rest on the shoulders of the organization that has been selected for outsourcing.

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5. Commercial benefits: Outsourcers are able to delegate work without having outsourcing agency on the payroll of the company. It is not imperative for organizations to pay for benefits to outsourcers. 6.

4.1

Momentum in work done- The outsourced work is done on a contractual basis and thus the time required for doing SEM work is quite less, if outsourced, in contrast to executing it in-house. SWOT of India as an SEM outsourcing destination The status of search engine marketing outsourcing in India can be studied well by doing a SWOT analysis. The below diagram summarizes the reasons of whys and why-nots for outsourcing SEM and SEO to India.

Figure 12: SWOT of India as an SEM outsourcing destination Strengths

Weaknesses

Lower Cost

Training requirement is higher

Adequate manpower in IT

Paucity of GAP qualified manpower

S

Time zone advantage

W

Low score on the lateral thinking parameters

Ahead of alternate outsourcing hubs

Increase in salaries

Growth of Indian economy

Lack of information about India

Young India

Apprehensions of Data security

O

T

Growth in IT/telecom infrastructure

Threat of loosing expertise

Growth in Internet as a media

Further weakening of US $

Opportunities

4.1.1

Threats

Strengths for Outsourcing SEM activities to India India presents enormous benefits to attract the organizations for outsourcing their SEM work to India. These are listed below:

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Lower Cost - The biggest benefit India offers to the organizations world wide is its low cost of service. This attracts organizations to outsource its search related services to India. According to Finfacts Ireland survey (2006) by Mercer Human Resource Consulting on international salaries comparisons, India ranks among one of the countries offering lowest pay to IT managers with US $ 26,500. This is quite low as compared to the high paying nations where pay range between US $ 93,200 (in Spain) to US $ 161,900 (in Switzerland). Adequate manpower in IT - India has always been known world wide as a country bestowed with the gift of knowledge and skilled manpower. Here people are highly educated and equipped with the requisite skill set to help them achieve success. Besides being hard working, Indians are considered to be smarter at work as well. Further, the number of English-speaking individuals in India is on the rise which is an added advantage. At present, out of the 250 Mn of urban population, 205 Mn are literate and 77 Mn speak English language. (Source: I-Cube 2007). Ahead of alternate outsourcing hubs – Indian workforce holds endorsements from recognized companies such as Google. Google, through one of its initiatives, has introduced certified programs for online advertising professionals. This initiative is popularly known as Google Advertising Professional (GAP). Compared to other countries in outsourcing market (Philippines, South Africa and China), India has more qualified GAP professional than others. (Source: http://www.whoisagap.com) 2 . Time zone advantage – Organizations in the western region of the world gather impressions of “round-the-clock” activity when they outsource their work to countries in Asia. For them, the time zone of India is a favorable factor as during typical work hours for Indians, overseas customers are off their work schedule. This, however, is not a distinct advantage as some of the IT outsourced organizations tend to align their work schedules with their international clients. 4.1.2

Weaknesses for Outsourcing SEM to India Although strengths related to outsourcing to India abound, there are still certain drawbacks that an outsourcing organization needs to be cognizant of. They are listed belowHigher training requirement – It has been observed that SEM work requires a lot of training as the activities require deep understanding of business-specific context. Organizations undertaking outsourcing activities tend to assume work that is repetitive in nature. They tend to invest less amount of time in training. Paucity of GAP qualified manpower - Though the English speaking population is increase in India; it has only 33 Google Ad words Qualified Advertising Professionals (including individuals and companies). This is low (only about 10%) as compared to US (with 434 GAP) and other western nations.

2

Please refer to http://www.whoisagap.com/companies/ to get a list of companies that are GAP certified.

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Which has the highest number of GAP qualifiers. If India expects to attract outsourcing activities from US, this specific comparison might fare negative. Low score on the lateral thinking parameters - SEM requires a lot of lateral or creative thinking as it requires business or domain specific understanding. Right keywords can enhance the hits on the client’s website dramatically; whereas, the wrong choice of keywords can have an equally reverse effect. Increase in salaries - India is on a continuous growth phase. Employees received an average hike of 11.9% to 16% in their pay packages in 2006. (Source: 11th annual Salary Increase Survey conducted by Hewitt Associates). The expected growth in salaries for the year 2007 was 14.7%. Thus the rising salaries in Indian scenario present a challenge for the companies who outsource their work to India as now they have to shell out more pennies for the same work being done, thus shrinking their profit margins. 4.1.3

Opportunities seen with India as a destination for SEM Outsourcing activities: The huge growth stories of India speak of the enormous opportunities that lie ahead for the foreign marketers to reap from Indian organizations. Growth of Indian economy- With the service sector contributing over 55% to the country’s GDP, India is slowly metamorphosing itself into a service oriented economy from an agro based economy. The fact that India’s GDP is likely to overtake certain developed economies like France and Germany by 2015 (Source: Goldman Sachs reports) shows the huge room for growth in the outsourcing business Young India- When compared to aging economies like Germany and France, India is a young nation.30% of India’s population will be between 25-44 years of age in 2020.Thus this young and energetic manpower resource offers a huge potential to cater to the outsourced work. (Source: Goldman Sachs reports). Growth in IT/telecom infrastructure- The growth in the IT/Telecom infrastructure has facilitated good band connectivity with the rest of the world. Adding to this is the upward swing in the tele-density and internet penetration. Thus the companies into outsourcing can connect to the clients without much difficulty and at cheaper rates. Growth in Internet as a media- Presently India has 42 Million people who have experienced Internet in one form or other. (Source: I-Cube 2007.) As per FICCI’s reports, Internet advertising is expected to show the highest growth at 43% by 2011 of all the media segments. This opens for huge opportunities for the companies to outsource their work to Indian companies.

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4.1.4

Perceived threats in India as an SEM outsourcing destination Besides presenting a gamut of advantages, there are certain barriers that hinder the organizations to look up to India as a solution to their search engine marketing and optimization solutions. Client base for a typical SEM organization are domestic as well as international. Consequently, the resources involved cater to disparate markets. The clients receive services through utilization of common pool of non-local resources. This presents operational aspects that clients would be unaware of, which are elaborated belowLack of information about India- The fears that restrict the organizations from turning to India can be attributed to the fact that they have endless apprehensions for the country and its people. They are quite ignorant about the culture of India, how the people are here, how they work, etc. and thus hesitate in giving their work to India. They thus feel that because of the cultural difference between their native country and India, Indians will not be able to understand them and thus will be incapable of working as per their requirements. Apprehensions of Data security- One rotten apple spoil the whole basket. The same holds true for SEM outsourcing. With a few instances of data leakage in BPOs, organizations doubt the integrity of Indians and thus fear in outsourcing their work to India. Threat of loosing expertise- One of the fears that encompass the organizations who wish to outsource is the fear of loosing their expertise to India. This is because they have the fear that they can loose their client base and team more easily to Indian companies if the latter set up a competitive company. Erratic behavior of exchange rates- Exchange rate between US$ and INR have been irregular lately. Any long-term predictions regarding economic relationships between domestic and foreign organizations are tough to chart. Consequently, immediate cost saving aspects of outsourcing is not apparent.

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5.0

Search Engine Marketing Industry in India In the global scenario, Internet advertising has started acquiring the ad spends on various media organizations. But in India, SEM is yet to grow much. As per I-Cube report released in 2007, of 250 Mn urban population in India, there are 29 Mn active Internet users. This indicates that there is a large room for the Internet users to grow. Figure 13: SEM Marketing India

5.1 Current Industry size Table 7: SEM Industry in India USD 112.5 million Industry revenues for FY 2007-2008 55% Growth expected 100% Growth over last year

In 2006, USD 59 million was annualized spend by all advertisers targeted at Indian audience 3 . Since search is the most done online activity after email, search engine marketing is expected to grow leaps and bounds. The market revenues for the FY 2007-2008 are expected to be around $ 112.5 Mn, with a high growth of around 100%. This USD 112.5 million SEM revenue is constituted by 3 entities, domestic clients, international clients having domestic presence and international clients with no domestic presence. Each contributes equally to the revenues with USD 37.5 million.

3

Source: ‘State of Search Engine Marketing in India’, a report by IAMAI and Pinstorm

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Figure 14: Distribution of SEM Revenues

International clients with no domestic presence 33%

Domestic clients 33%

International clients with domestic presence 33%

The growth in the revenue can be attributed to numerous factors. Some of them are enumerated below:

1) Increase in Internet user base: More and more users are experiencing Internet and thus becoming habitual to it. With mere 4.9 Million claimed Internet users in 2000, the base has grown to 42 Million in 2007. 21

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2) Increase in search: The basis of SEM lies in search through search engines. The users have become net savvy. Increasingly, their information requirement, for any product or service, is search engine. 3) Increase in awareness: In December 2006, SEMPO (Search Engine Marketing Professional Organization) India Group was initiated having local as well as global representatives on its member list. This coupled with various Google’s initiatives and SEM workshops like Search Camp has lead to increase in awareness level of SEM. 4) Increase in sectors employing SEM tactics: The benefits of SEM have attracted the organizations across the verticals. And the increasing internet user population has added fuel to this fire. 5.2

Growth expected With growth in Internet penetration in India, advertising on it is also expected to grow and thus the SEM industry. As Internet penetrates in the cities beyond top metros, organizations are expected to take advantage of it and tap this medium through SEM. This market which is at its nascent stage is expected to show a year-on-year growth of 50% for FY 2007-2008 and FY 2008-2009. The industry with revenues of USD 112.5 million in FY 2007-2008 gives an impression of being limited. However, it is expected to gain respectability in size by FY 2009-2010 with revenues worth USD 225 million – doubling within next 2 years. Figure 16: Expected Revenues for SEM 225

All figures in millions (USD)

175

112.5

FY 2007-2008

FY 2008-2009

22

FY 2009-2010

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5.3

Manpower requirements for the industry The industry which looks so promising and shows high growth prospects, demands intake of huge manpower to cope up with the growing demand of SEM outsourcing among Indian organizations. The industry is short of this manpower not only at the junior level but also at the middle and senior level management. Table 8: Shortage of manpower in SEM industry Industry manpower requirements 150% Junior 100% Middle 100% Senior

Junior Level: India house a total of 205 Mn literate urban population, of which 77 Mn are English literate and 65 Mn are PC literate. (Source: I-Cube 2007). The manpower at the junior level demand fresh graduates or even undergraduates. However these people should be armed with the English verbal skills. This is required because for SEM outsourcing industry in India, it is imperative to have good communication skills as this industry has fair number of foreign clientele. The doors of this industry are open to even people at “pre MBA” stage. Their verbal and written skills are very important as the industry is primarily text driven- be it in the form of technology implementation or content. At present each SEM outsourcing organization has around 60-75% of their employees on junior management post. Our research indicates that there is a need of additional intake of nearly 60%. Middle Level: Professionals with 2-5 years experience in client servicing or in brand management qualify for the middle level management. Generally such professionals hold a management degree. In addition, some organizations also demand that the individuals hold some certifications from recognized search engine organizations, such as Google - GAP, Yahoo!-Yahoo Ambassador or Microsoft-adExcellence program. In our research organizations mainly alluded mainly to GAP qualifiers. Around 15-30% employees of any SEM outsourcing organization are in the middle level management. There is an apparent shortage of 50% at this level indicated by our respondents. Senior Level: These individuals are highly qualified people with experience of 5-20 years in client servicing, creative, media planning and operations. Depending on the size of the organization, these may vary from 5-20% of the total employee base of the organization. It is desirable that these people have some sort of affiliation with the certified programs of various search engines. SEM outsourcing industry is looking forward in the year for a 100% rise in recruitment of these people. During the course of research, we found that a typical SEM organization has 7080% of employees that are responsible for technological aspects.

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5.4

Clientele for the industry SEM outsourcing organizations serve domestic as well as the international clients. Of the total client base, majority are the domestic clients which accounts for almost 75% of the total clientele. The balance is international clients. The countries who outsource their SEM work to India are, primarily, South East Asia (Malaysia, China, and Singapore), USA, UK, Spain and Middle East (UAE, Saudi Arabia). All clients are not influential in driving the organization’s revenues. ‘80-20 rule’ is applied here, i.e., 80% of the revenues come from 20% of the clients. Most of the organizations do not charge on per project basis but they enter into yearly contractual agreement. These clients bill for more than USD 0.25 million for a yearly contract. However, on an average, the billing for any contract is USD 0.125 million for 1 year contract. Typically, 30-100 projects per year are being undertaken by SEM outsourcing organizations. The portfolio of domestic clients majorly comprises verticals from BFSI (banking, financial services and insurance), travel, major portals and education. However, verticals like computer hardware/peripherals and telecom are soon catching up to reap benefits from this growing market.

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6.0

The Future of SEM Though SEM industry has seen huge growth in recent years along the globe, it is yet to achieve its full potential given the expansion expected in search and the Internet user base in India. There is also a widespread expectation of transformation of Internet medium to a dynamic form. Consequently, advertisements will not be predefined but will be created on a real time basis. More precise measurement of advertising is expected to take place. There is a strong possibility, in such a scenario, that agencies such as online ad networks may assert their existence (e.g. tyroo.com). At present, search engines are capable of understanding just the textual language. With the advent of newer technologies, it is very likely that search engines will be able to understand pictures and visual data. As compared with the global trends, SEM industry in India is still in its introduction stage. Different types of targeting like day time, demographics, etc are yet not popular in India. But with advent of time, this industry is expected to surpass the current levels and perform as per the international trends. India being one of the biggest IT outsourcing hubs in India is expected to soon follow the similar trend in SEM outsourcing business as well. However, it needs to undertake measures to equip itself with appropriate skills.

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