India's E-Commerce Firms Slow to Adopt Search Marketing: NetElixir

Google has named 2012 the tipping point for online shopping in India spurred by non-metro cities.

The search leader recorded 128 percent year-on-year growth and predicts to continue triple digit increase this year.

With such enormous potential, Google is not the only company eyeing India.

Local companies that were seeking businesses in matured markets are now refocusing their efforts in the country.

NetElixir, a search marketing agency from Hyderabad targeting e-commerce firms in North America and Europe has set up an Indian business development team in January.

Established in 2005, its global clients include Lenovo, Oneida, K-Swiss, and Toys”R”Us.

Udayan Bose, founder and CEO of NetElixir (pictured left) shares his insights on search marketing trends in India, how it differs from the U.S., and tips for online retailers in the region.

Excerpts of the Q&A below:

ClickZ: What are the challenges to the slow pace of SEM (search engine marketing) adoption in India?

Udayan Bose: First, online shopping is still in its infancy in India and restricted to a very limited customer segment.

Second, new VC-funded e-commerce firms that have emerged over the past two to three years often are struggling to validate their business models. They start search marketing with unrealistic expectations and are disappointed when the results do not meet expectations. As a result, their SEM strategy is constantly in a state of flux and agency hopping becomes a norm for them.

Third, lack of appreciation for the value of search marketing. Search marketing, if done well and consistently, becomes not just a revenue driver but also a rich source of consumer insights. However, there has to be a disciplined approach towards this. In an e-commerce ecosystem, where business models are yet to be validated in many cases, this becomes a difficult if not improbable dream.

CZ: Why are e-commerce firms in India not focused on brand building?

UB: Most newbie venture capital-funded e-commerce firms start their existence with borrowed oxygen (cash). They have high monthly burn rates and are under tremendous pressure from their VCs to deliver. To compound their problem, they are trying to sell to a limited base of online shoppers who are extremely price conscious that can even be classified as bargain hunters. Most newbie e-commerce firms know their life span is 36 to 48 months (if they are lucky). Under such extraordinary pressure, how can these companies be expected to build a brand? Ninety percent of them choose the “easy but fallacious route” – discounting. The result is a bitter price war and total commoditization of their brands.

CZ: How does search marketing in the U.S. differ from India?

UB: Search marketing in the western world has assumed a level of sophistication that is missing in India.

Online consumers: buying capacity and sophisticated searchers: Because of deep broadband and 4G penetration, standardized market preferences, and factors like solid logistics and support infrastructure, payment security, and customer preference for value and brand. Western markets are innovators and early adopters of online shopping and “search.” The search marketing industry growth was clearly driven by the “customer pull” and heavy usage of search for identifying and buying products.

Tech innovations: Western digital media is hyper competitive. Any agency or solution provider has just two options – innovate or perish! The competitiveness of the markets coupled with customer preferences for “smarter, faster, and better” solutions forces search marketers to constantly innovate. For example, Google made 72+ changes in algorithm/management dashboard/new ad formats in the first 10 months of 2012. That is seven changes per month! Unless search marketing providers innovate, it’s very easy for them to go out of business fast.

Regular knowledge sharing and emergence of specialists: There were over 50 digital marketing conferences in 2012. This doesn’t even include the local meet-ups and workshops being held by individual companies. The quantum of knowledge sharing that happens via these peer group interactions is enormous and quality of exchanges is very high. Also, since search marketing has been growing for 15+ years now, there is a large group of talented practitioners/experts.

Because of these factors, the technology being used for optimizing search marketing campaigns, the people running search campaigns, and the processes being used are all at a different level in terms of sophistication.

CZ: What are some tips for online retailers doing SEM in Asia?

UB: I must state upfront that search marketers in Asia have a complex challenge on their hands. Because of the reasons mentioned above, search marketing strategy, execution, optimization, and continuous insight generation assume a vastly different dimension compared to the western markets.

Despite the uniqueness of their situation, three things that retail search marketers in Asia should focus on as they strive to run successful campaigns are:

1. Strategic approach towards SEM: Start with a search marketing strategy that is in line with your business goals. Unfortunately, most search marketers approach search as a short-term tactical measure of driving new sales. This short-term approach is wrong and has to be avoided at any cost. Write down your search marketing goals such as specific numbers for one primary goal and one secondary goal; identify three strategic initiatives that will help you achieve these goals (e.g., gain 30 percent share-of-voice for SEM in states X,Y,Z, etc.), and then establish specific, time-bound, and measurable tactics that will enable you to execute the strategic initiatives successfully.

2. Know what products to promote. Map all your products based on margin and velocity (volume/time sold). Classify the products into various segments. Have differentiated SEM strategy for each product segment. Avoid promoting the products that are low margin and low velocity.

3. Use the right KPIs. To track progress, build your set of custom key performance indicators (KPIs). Your business and goals are unique, so why should you not create a set of key metrics that help you measure progress accurately? A great metric that is extremely direct marketing focused is “value click.”