SEM India - Search Engine Marketing in India - Exclusive Research Report by IAMAI & eTechnology Group@IMRB - Presentation Supported by Paavan Solanki

1. IAMAI
Internet and Mobile Association of India
SEARCH ENGINE MARKETING
A Report by IAMAI & eTechnology Group@IMRB
2007 - 2008

2. © 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.
1
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 Secondary
module 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 Description
General Information Search includes search
related to any query resolution which cannot be
General categorized into financial, educational,
entertainment, product or travel search. E.g. job
search, news search
Financial and Business Information includes
Financial search related to shares, mutual fund, economy,
banking etc
Education related Information Search includes
Educational search related to exams update, mock tests,
academic projects, etc
Entertainment related Information Search
Entertainment
includes search related to movies, music etc.
Products for home and personal purchase
includes search on shopping sites like eBay,
Purchase of products
future bazaar, etc. on product pricing, brands ,
features, etc.
Travel packages and tickets information includes
Travel and Ticketing search related to ticket availability, PNR status
checking, etc.
1.3 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%
3% 3% 2% 1%
Google Yahoo! Rediff 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 % Users
Google 88%
Yahoo 55%
MSN 37%
Rediff 14%
Indiatimes 6%
Source: I cube 2007
Sify 5% 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 16%
College going students 26%
Young Men 27%
Older Men 14%
Working Women 10%
Non Working Women 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 40%
Other 4 Metros 31%
Small Metros 21%
Cities with 5-10 lakh population 5%
Cities with Less than 5 lakh
3%
population
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 Paid placement Paid inclusion
optimization (Pay per click)
Natural Sponsored
results links
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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 $ 12.7
billio
ns US
Dolla
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.
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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 2007
Paid Placement $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
SEM Tech $71,558,325 $90,357,143 $122,042,000 $171,690,000
Total $4,087,219,374 $5,750,188,644 $9,387,857,000 $12,184,540,000
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% Base: 2007- 234 Advertisers
2006-61 Advertisers
15%
Web site development 22%
13%
TV advertising 13%
13%
Print newspaper advertising 15%
10%
Affiliate Marketing 9%
Print yellow page advertising 8% 2007 2006
5%
3%
Online yellow page advertising 5%
3%
Point-of-sale promotions 1%
2%
Coupons 1%
Radio Ads 9%
Telemarketing 4%
23%
Other 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 day-
part 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 Time of the day
Yes 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% 11%
No, we are not currently No, we are not currently Yes, we are retargeting Yes, we are targeting Yes, we are targeting
re/targeting searchers re/targeting searchers searchers who have searchers through an ad searchers who have
but plan to in next 12 and do not plan to in already visited my site network searched on major
months next 12 months 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 Mom entum in
Benefits w ork done
Less Low cost
Benefits of
Investm ent service
Outsourcing
Directed Professional
Focus 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. 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.
4.1 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
Ahead of alternate outsourcing hubs W
Low score on the lateral thinking
parameters
Increase in salaries
Growth of Indian economy Lack of information about India
Young India Apprehensions of Data security
O
Growth in IT/telecom infrastructure
Growth in Internet as a media T
Threat of loosing expertise
Further weakening of US $
Opportunities Threats
4.1.1 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 below-
Higher 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 below-
Lack 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
Industry revenues for FY 2007-2008 USD 112.5 million
Growth expected 55%
Growth over last year 100%
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 Domestic
no domestic clients
presence 33%
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.
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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
175
All figures in
millions
(USD) 112.5
FY 2007-2008 FY 2008-2009 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
Junior 150%
Middle 100%
Senior 100%
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 70-
80% 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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