Jan 6, 2009

Business - Q&A ZEDO Inc;CEO

Roy de Souza is the founder and chief executive officer of ZEDO Inc. The San Francisco-based company is the third largest ad-serving firm in the world, behind the likes of Google’s DoubleClick and WPP Group’s 24/7 Real Media. ZEDO apparently helps advertisers and publishers on the net manage complex ad campaigns via platforms developed by it. A keen speaker on online advertising issues, Roy was in Mumbai recently to take stock of the situation here. ZEDO, for the record, has two offices in India, one in Mumbai, the other in Goa. Roy spoke at length to FE’s Viveat Susan Pinto about the online advertising industry in India and abroad and what he intends doing here. Excerpts:

What is the turnover of ZEDO?

We do not disclose figures. All I can tell you is that the company has been growing strong. The change in the economic environment has not affected us much. What will happen next is unclear, but we are hoping the impact will not be too much in the future as well, as the recession in the developed world deepens further.

However, online advertisers would have begun pulling out of the scene with the recession setting in abroad?

The impact that we are seeing is not much, I reiterate, although we do expect some changes in the industry, going forward. Website owners who work with us tell us that they are already observing signs of this change in the mindset of a few clients. These are the brand advertisers, who are unable to measure the effectiveness of online campaigns. These clients are cutting back or rather looking to cut back on their online spends.

Who are the big advertisers online?

There are two kinds—the brand advertisers and the direct marketers. The latter could typically be your credit card companies, financial services players, travel companies etc. These are the ones that have a precise or tangible benefit to communicate and are in a position to track the performance of their campaigns online. Brand advertisers cannot do that. There is no precise benefit that the campaign communicates. It’s a brand campaign. Naturally, these guys cannot track the performance of their campaigns, and hence, during phases like these, when the economic climate is not so good, they prefer to cut back on their online spends.

Nonetheless, isn’t the online ad space also consolidating at the same time?

Yes, that’s true. There was a lot of consolidation in 2007 and in early 2008. This kind of consolidation will continue. But that is just one part of the game. The other part has to do with the technology you adopt, how swift you are, and above all, are you willing to innovate? I think the focus of players should be there. It should be on innovation.

An environment like this presents you with an opportunity to do that. Clients become demanding during such a phase. They want bigger ads, more aggressive ads. Ones that can be noticed and deliver better results. This calls for innovation. In my opinion, the next two years will see a lot more innovation from players in the space.

Are you saying that online ads will get more irritating?

You can conclude that. The trend that I am expecting to see now is that advertisers are going to put bigger and more irritating ads online. That is because it is comparatively difficult to sell advertising now due to the slowdown. People have become cautious and prefer not to spend indiscriminately on any medium for that matter, whether online or offline. When they do spend, they want results, more often, immediately. In their minds, that is possible when the ads are obvious to the viewer. The fact that you say online ads are irritating indicates to me that you are taking notice of them. It hasn’t gone unnoticed in other words. That is the game—to bring the ad to your attention somehow even if that puts you off. Frankly, that is a call that the advertiser and the website owner would have to take in the future. Sometimes, they are discreet while on other occasions, they are not.

You said that brand advertisers are likely to slash their spends online. However who spends more on the web?

By volume, it’s the direct marketers who are bigger. They buy more, but pay less. The brand advertisers, buy less, but pay more for each ad. It also differs from website to website. If the website quality is good, chances are there will be more brand advertisers. If the website is unknown, there could be more direct marketers. However, search engine advertising has a high proportion of direct marketers, not brand advertisers. It’s difficult for the latter to make a statement there. For companies such as Coca-Cola and Pepsi, it’s not possible to be advertising on a search engine. They can’t make it colourful there. They would rather advertise on a good website or on television.

Will internet advertising gravitate towards TV advertising?

Yes, it may, especially, on videos. You’d be amazed, but we do a lot of video advertising in India. On videos, in my opinion, advertising will move to a TV model. Before you watch the video, for instance, there could be a 10 to 15-second commercial as you have it on TV, mid way through, there could be another ad and again at the fag end—all of this much like the commercial breaks you see on TV. So yes, video advertising will move to a TV model. Advertisers are happy about this. They are comfortable putting money behind this because the effect is similar to TV. I see this happening in India. People who do a lot of videos, clips etc and put it on the websites, prefer inserting ads into these videos. Rajshree Media, UTV, companies who we work with in India, want ads in their videos. This is a good opportunity to monetise their videos. I find advertisers too interested in these formats today.

Is it easy inserting ads in videos?

Actually, no. It is difficult to put ads in videos. We are developing a technology that can do it in flash. In any case, such a mode makes it easier for those who already have video content. Ads can then appear inside the video. Everybody loves the final execution—the advertiser and the one who has created the video.

What is your take on the online advertising industry in India?

It’s growing. And if I may say, growth is faster here than in the US, but on a smaller base. It will accelerate as broadband and personal computer penetration improves. One impediment to growth here though is that the PCs are shared between the users. That can impact growth at the individual level. But I am hopeful that things will improve as the price of PCs comes down further making it easier for people to own a PC as it is with the ownership of TV sets.

Apart from India, where else do you see growth happening?

Brazil, China, Russia—the BRIC countries. I am of the view that the economic slowdown is not likely to bring down internet usage. Internet is an important part of an user’s life. For instance, I find users here using the internet to look up their email, surf, chat, to do some vital things. People here don’t exactly shop online, but whatever they do is important to them. So I don’t see the importance or the relevance of the net getting lost because of the slowdown. People will continue using the net for various reasons. This is as true here as it is abroad. The difference is that the markets in the West are saturated. People have a desktop or a laptop and are connected online. It is in countries such as India, which have the potential because not everybody here has a desktop or laptop yet. Therein lies the opportunity.

Who are your clients here in India? Rajshree Media and UTV are the names you mentioned.

Yes. There are some media clients we have, plus there are some websites too who we work with in India. Big websites, social network sites and there are a whole host of them who are our clients in the US.

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