Foreign and local advertisers vie for Indian consumers, but who’s doing it better?

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India is fast becoming a mobile player to contend with. In addition to the government’s promises to improve online infrastructure and increase internet connectivity, the growing smartphone user base and more affordable data packages from disruptive players like Reliance Jio are positioning India as a mobile market leader.

Naturally, companies — both foreign and local — are quick to follow the market boom, recognizing the incredible potential that India’s growing mobile subscribers can offer. This past year, for example, we’ve seen companies spending heavily on app install advertising in India.

But with the influx of international advertisers pouring into Indian markets, comes concerns from Ola, Flipkart, and other major Indian companies, who have called on the government to enact protectionist measures against their foreign competitors. They claim that “US companies are burning cash in a price war.”

Beyond the increase in mobile subscribers, both international and local advertisers are grappling for access to the rising Indian middle class because of their increased purchasing power. Indeed, looking at the app advertising landscape in India, we see that the battle between local and foreign advertisers for the attention of Indian consumers is only intensifying.

The broader app ecosystem

Looking generally across app categories, our research found that domestic players are the biggest ad spenders in India, representing a large group of companies responsible for 48 percent of the total spend. The US, a group which is only made up of a few large players, is a close second (39 percent), followed by China (5.8 percent). This is consistent with global trends that show local Indian advertisers increasing their mobile ad spend by 13.3 percent in 2016, while the US increased their ad spend by a much lighter 2.8 percent.

Shopping

If we look purely at the number of advertisers, we see that the shopping category is dominated by local players. It’s interesting to note, however, that local app advertisers spend less on average than their international counterparts. In that sense, international players like Amazon, OLX, and AliExpress dominate the shopping category in terms of spend, but not in mass.

It’s large budgets from advertisers like these which even out the picture between domestic and foreign players, and that heavy spend seems to be paying off. Amazon is steadily increasing its market share, demonstrating just how effective mobile advertising in general — app install advertising in particular — can be.

In contrast to last year, in which ecommerce firms like Flipkart, Snapdeal, and Jabong were all among the top 10 television and print advertisers, data by AdEx India shows that the same local players are spending significantly less on advertising in 2016. Instead, they are focusing on profitable growth; AdEx attributed this to a “change in strategy” and “scarce funding.”  In fact, foreign player Amazon is the top ecommerce advertiser by far this year.

Although AdEx India’s data strictly covers television and print advertising, their findings are consonant with our own data. We can, therefore, assume that budget cuts are consistent across the board, affecting mobile and in-app ad spending as well.

The slowdown is most probably why foreign players such as Amazon, OLX, and AliExpress are out-spending Flipkart and Snapdeal. In fact, in June, Amazon announced it would be investing an additional US$3 billion in India, a portion of which will likely be allocated to in-app ad spend.

Entertainment

In the entertainment app category, domestic advertisers make up a massive majority (87.5 percent) of entertainment’s total in-app ad spend. This is likely due to the strength of time-honored cultural institutions in India, such as Bollywood and Cricket, which foreign advertisers, unfamiliar with Indian culture, would have a tougher time replicating.

It’s reasonable to assume that the average Indian user would be less interested in foreign-produced entertainment content. This is one potential reason why local advertisers are so strong in India.

Still, foreign advertisers are pushing hard. Netflix, for example, recently partnered with an Indian movie production house to help produce original content for the region. Sacred Games will be the first of many Hindi-English series on Netflix. In order to succeed in India, foreign advertisers will need to follow Netflix’s lead, investing in local content and adapting their creatives to Indian culture. Only companies well-versed in the country’s cultural nuances will find success in the entertainment category.

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Conclusion