Marketers shifting ad money from Search to e-commerce & social channels?

Amid budgetary constraints, CMOs are funneling their ad dollars to conversion-focused platforms, say industry experts

by Team PITCH
Published - September 08, 2023
4 minutes To Read
Marketers shifting ad money from Search to e-commerce & social channels?

Marketers globally continue to face budget constraints again this year. While recovery is still out of reach, marketing budgets have shrunk further from 9.5% of company revenue in 2022 to 9.1% in 2023, according to Gartner's latest report “State of Marketing Budgets 2023”.

Amid budgetary constraints, the digital advertising landscape is rapidly evolving. Marketers are slashing spends on Search as ad impressions have declined, survey points out.

The ad dollars are now being shifted to conversion-focused platforms such as e-commerce and social media channels, paving the way for an exciting new era of dynamic advertising opportunities.

Rammohan Sundaram, President - Integrated Media, DDB Mudra Group, says, “Consumers now primarily discover and purchase products on platforms like Amazon, Flipkart, Snapdeal, and others, leading to a shift in advertising budgets towards these platforms. This has led to a drop in Search spend which is directly correlated to the growth of product ads on other platforms.”

FMCG brands are at the forefront of budget cuts on Search, says Sundaram. “We've observed a trend of funds moving towards other platforms in the Consumer Packaged Goods (CPG) sector. However, financial clients allocate the highest budgets to Search.”

Echoing the sentiments, Sajal Gupta, CEO, Kiaos Advertising, opines, “Marketers are optimizing their ad spend to reduce wastage. Investments on marketing technologies are being scrutinized to focus on core processes with connection to business outcome.”

e-Commerce media a new battleground

E-commerce media emerged as a new battleground for digital advertising during the pandemic. Amazon and Flipkart ad business started growing fast during the pandemic when millions of consumers shifted to e-commerce shopping. Flipkart posted 50% year-on-year growth in ad revenue at ?2,000 crore in FY22. Amazon India's advertisement revenue rose 63% to ?4,170 crore. These two sites alone generated more than ?6,170 crore of ad income in FY22, as per their annual reports.

India’s digital advertising budget grew from about Rs 38,000 Cr to over Rs 50,000 Cr between 2021 and 2022. Search, primarily Google Search, has been getting the lion's share of the digital advertising budget over the years, roughly half of the country’s digital advertising spend.

Now, Amazon India commands more than 8% of the overall online ad market, trailing Google India (Rs 24,000 Cr), and Facebook India (Rs 16,000 Cr).

Shradha Agarwal, Co-founder and CEO of Grapes, affirms that Search is being shifted from Google and YouTube to Social Search. “Over 60% of the world’s population is spending an average of 2 hours 24 minutes on social media platforms. So, it stands to reason that they use it not just to ‘explore’ but also to ‘search’. A recent report even stated that 44% of internet users aged 16 to 64 use social media as a primary source of information when they’re researching brands.”

According to Agarwal, “By funnelling their search budgets into social media, brands are moving in compliance with this changing consumer behaviour pattern. Instead of looking at what typically works or what should work, brands are going for what has proven to work by putting all their eggs in the social media basket.”

Search marketing is a very potent lower funnel tactic. So, as long as the marketers are driving actual action from their social media efforts, to rival the results of a paid search, I think the gamble is paying off.

"Commerce media is the third big revolution in digital after search and social. Ecommerce advertising touched one billion dollars in 2022. Advertising spends on ecommerce platforms in India had surpassed $1 billion (Approx Rs 8,000 Cr) in 2022 and is likely to expand faster than the whole digital advertising ecosystem in the coming years as more customers purchase online,” as senior ad executive said.

He explained, “E-commerce offers advertisers more focused insights into consumption behaviour than generalized interests revealed on other digital platforms. It is also among the fastest-growing online ad segments in the country. This could speed up as e-commerce scales up on new digital infrastructure that should make it more competitive.”

With Flipkart and Amazon operating their data management programs, advertisers have a better quality audience as it involves actual shopping behaviours and transactional data and hence a shift in spends is being observed towards ecommerce players, another expert pointed out.