(Update: we added some responses by both Adways Indonesia and Interspace Indonesia)
Within the span of just two weeks, two Japan-based companies made moves into the Indonesian market by launching somewhat similar online affiliate advertising platforms focusing mainly on cost-per-action (CPA) clicks. The first of the two companies is advertising firm Adways Indonesia, with its product SmartDriver. Just a fortnight later, Interspace Indonesia launched its AccessTrade. What challenges await these two firms in Indonesia?
CPA is an affiliate advertising method whereby advertisers pay sum of money in return of a determined course of action from the users. This action can come in the form of purchases or filling out a survey. Publishers will integrate ads from advertisers on their page. And when a user comes to the publisher’s page and makes an action set by the advertiser – like clicking on the ads and then making purchases on the advertiser’s site – then the publisher will earn income from that action based on the price that had been set by the advertisers.
The reasoning behind the two companies’ moves is quite simple: Indonesia’s e-commerce market boom is definitely one to look out for, and the country is poised to become the world’s seventh biggest economy by 2030. So it’s only natural for a company to want first-mover advantage in this burgeoning economy.
While advertisers could get their money’s worth through CPA for sales, the same might not be the case for the publishers. PriceArea’s Andry Suhaili, whose price comparison company has connected with Adways’ SmartDriver, says that there are two hurdles in tracking down the purchases made by Indonesian users.
First, some people can decide to make purchases via their family and friends instead of doing it themselves. Second, and more importantly, Indonesians mostly make online purchases via bank transfers or cash-on-delivery (COD). Those are two forms of offline transactions which are very tough to be traced, and without online records of a purchase, publishers won’t receive any money.
As of December 2012, there are reportedly only 7.8 million credit card holders in Indonesia. While that number alone is already bigger than the population of Singapore, it’s just a mere three percent of Indonesia’s whole population. Furthermore, given the relative newness of credit cards, it’s likely that only a handful of those Indonesians will use their cards to make online purchases.
Both Adways Indonesia’s Hayato Takano and Interspace Indonesia’s Takashi Matsuura second Suhaili’s concerns, but they are confident that Indonesia’s long term e-commerce growth makes the country a worthwhile market to be in.
Takano adds that they have faith that just like what happens to any market in the world, Indonesia’s online payment and e-commerce market growth would grow side by side. The growth for online transactions is inevitable as online payment systems like Ipaymu and Inapay have room to grow popular too. Besides all that, another challenge that CPA ad platforms are facing in Indonesia is how they need to educate the market first.
Will the new CPA affiliate advertising platforms face difficulties here? Perhaps in the short term, but they would be able reap the benefits in years to come when consumer trust for online payment transactions increases.
(Editing by Josh Horwitz, Steven Millward)