#flipkart isn’t leaving any money on the table anywhere. Soon, the online retailer will start displaying seller advertisements on its portal*.
When it goes live, it will be the first e-commerce portal to offer the third party advertising.
The move is likely to boost its margins, as the company tries to pull its bottomline up. While Flipkart sold goods worth $1 bn in this year, like all other e-commerce companies, it is still making losses.
Why it makes sense
Flipkart is ranked at No 10 by Alexa in India. In the month of June, comScore said that Flipkart has nearly 12.6 mn unique visitors. If you can make more money off the traffic, why not? Sample this: Amazon is expected to make over $ 1 bn in ad revenues in the US alone by 2015!
Flipkart has the purchase history of customers, and also information on what users are looking for. Meanwhile, Google targets ads based on search, and Facebook, on the social graph. Targeted information on what a particular user has bought and is looking to buy next will be a big plus for advertisers.
In the e-commerce space, Flipkart already has huge competition despite hitting its $1 bn GMV target. Snapdeal and Amazon are two adversaries that it will have to outdo. Both the portals have deep pockets, Amazon for obvious reasons, and Snapdeal thanks to the $133.77 Mn funding led by eBay in February 2014. Snapdeal too is targeting $1 bn in GMV by 2015.
Taking a Leaf Out of Amazon’s Book
Amazon already has an ad network in the US. In 2008, the company had begun trials and testing of ‘Product Ads’ that lets third party retailers advertise their products on Amazon. Users clicking on the products are then redirected to the retailers website.
Currently, Amazon offers product ads, display ads and sponsored links to advertisers.
An eMarketer report pegs Amazon’s worldwide ad revenues at $610 million in 2012, over 45% jump from the previous year. It also forecast ad revenues to reach $835 million in 2013. Amazon does not publicly disclose revenues gained from ads.
Flipkart had raised $160 million in funding in October 2013, putting its overall funding at $540 million. In a space where funding is drying up and an increasing need for profitability, the ad service may be a welcome relief.
Amazon entered the Indian e-commerce space a little late, and has still not introduced its ad network in the country.
Related Discussion : How will Flipkart Ads Help Flipkart
*Hattip: Siddharth Jaiswal