Online Advertising Market - India July 2009

Executive Summary SAMPLE Market Factors influencing growth Competition Trends Estimated to be worth INR XX bn in 20- - and forecast to register INR YY bn in 20-- Online Advertising accounts for just a% Indian advertising industry Fastest growing segment in Indian advertising industry at b% CAGR from 20- - -20-- BFSI, Online publishers and IT/Telecom are the major revenue contributors Niche & emerging nature of medium coupled with low barriers to entry could lead to greater competition Acquisitions and investments by foreign players as well as Private Equity firms is providing a boost to this nascent industry Largely dominated by search engines and portals d% of the total revenues go to the top 8-10 portals/portal group sites Online Ad networks have started gaining acceptance in the Indian market in the past 2-3 years Around X ad networks exist as of 20 -- , accounting for e% of the total online ad spend Online user base of ZZ mn in 20-- despite low penetration rate of just c%; computer literacy & growing penetration in urban areas alone will add significantly to the user base In addition to domestic user base, a large number of expatriate Indians, who consume Indian content, form a target audience Encouraging consumption patterns including usage, frequency and response to advertising Low Internet-user/literacy-rate ratio and low availability of Indian vernacular content exhibits immense potential since majority of users prefer accessing vernacular content

Estimated to be worth INR XX bn in 20- - and forecast to register INR YY bn in 20--

Online Advertising accounts for just a% Indian advertising industry

Fastest growing segment in Indian advertising industry at b% CAGR from 20- - -20--

BFSI, Online publishers and IT/Telecom are the major revenue contributors

Niche & emerging nature of medium coupled with low barriers to entry could lead to greater competition

Acquisitions and investments by foreign players as well as Private Equity firms is providing a boost to this nascent industry

Largely dominated by search engines and portals

d% of the total revenues go to the top 8-10 portals/portal group sites

Online Ad networks have started gaining acceptance in the Indian market in the past 2-3 years

Around X ad networks exist as of 20 -- , accounting for e% of the total online ad spend

Online user base of ZZ mn in 20-- despite low penetration rate of just c%; computer literacy & growing penetration in urban areas alone will add significantly to the user base

In addition to domestic user base, a large number of expatriate Indians, who consume Indian content, form a target audience

Encouraging consumption patterns including usage, frequency and response to advertising

Low Internet-user/literacy-rate ratio and low availability of Indian vernacular content exhibits immense potential since majority of users prefer accessing vernacular content

Advertising Industry Online Advertising Industry Factors influencing growth Trends Competition

Advertising Industry

Online Advertising Industry

Factors influencing growth

Trends

Competition

Online medium currently accounts for just a% of the total market but is the fastest growing sub-segment Although online advertising has been in India since the dot-com era, the market crossed the INR XX bn mark as recently as 20-- The market was worth INR YY bn in 20-- by revenue growing at a% p.a. since 2004 Online medium’s share of total advertising market has risen from just b% in 20-- to c% in 20-- Market is forecasted to grow at a slower rate of c% p.a. till 20-- primarily due to: Current economic environment Massive reduction in advertising budgets across major client sectors Pressure on prices or ad rates However, online is growing faster than other segments due to fundamental drivers such as: Low input costs for advertisers Increasing awareness of online usage in India among marketers or advertisers Growth in online user or audience base SAMPLE Overview Sources: u a% 2004 v b% 2005 w c% 2006 x d% 2007 y e% 2008 z f% 2009F Revenues Share of Total Advertising t% INR bn 0% 1% 2% 3% 4% Online advertising – Share of total e% Print d% 1% b% TV Outdoor Radio Online c% a% Others Online Advertising – Market Size

Although online advertising has been in India since the dot-com era, the market crossed the INR XX bn mark as recently as 20--

The market was worth INR YY bn in 20-- by revenue growing at a% p.a. since 2004

Online medium’s share of total advertising market has risen from just b% in 20-- to c% in 20--

Market is forecasted to grow at a slower rate of c% p.a. till 20-- primarily due to:

Current economic environment

Massive reduction in advertising budgets across major client sectors

Pressure on prices or ad rates

However, online is growing faster than other segments due to fundamental drivers such as:

Low input costs for advertisers

Increasing awareness of online usage in India among marketers or advertisers

Growth in online user or audience base

Although advertising through search engines is dominant, other options include portals, online ad networks and websites SAMPLE Portals Websites Online Ad Network Online Ad Network Advertiser Website Website Contributes online ad space to the network Online ad networks effectively act as a one-stop interface between multiple advertisers and publishers Search Engine = Ad space sold directly to advertiser = Ad space sold through intermediary Advertising Options Website Website --- --- --- Website Website

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Additional target audience of large and typically wealthier Indian expatriates More access and consumption of online medium, including Indian content Higher speed of Internet connections More frequency and longer duration Increase in response to online advertising Despite high literacy English usage is low Minimal availability of vernacular content despite majority preferring to surf vernacular medium Domestic Internet User Base Large Expatriate Population Positive Consumption Patterns Literacy & Language Barrier Factors influencing growth Large online user base of X mn despite penetration of just a% Increasing penetration to significantly widen user base

Additional target audience of large and typically wealthier Indian expatriates

More access and consumption of online medium, including Indian content

Higher speed of Internet connections

More frequency and longer duration

Increase in response to online advertising

Despite high literacy English usage is low

Minimal availability of vernacular content despite majority preferring to surf vernacular medium

Large online user base of X mn despite penetration of just a%

Increasing penetration to significantly widen user base

` Trends Acquisitions and investments by foreign players as well as Private equity firms is providing a boost to this nascent industry Niche & emerging nature coupled with low barriers to entry in this industry could lead to rise in competition BFSI, Online publishers and IT/Telecom are the major revenue contributors for the online advertising industry in India

The developing online advertising market in India is already witnessing stiff competition among domestic as well as international players SAMPLE a% Company 1 b% Company 2 c% Company 3 d% Company 4 3% Company 5 e% Company 6 f% Others Most used search engine Competition Online advertising industry in India is largely dominated by search engines and portals In spite of the online industry’s long tail, u% of the total revenues go to the top 8-10 portals/portal group sites Search accounts for almost v% of the total online ad market by revenues Company 1 dominates the search advertising market while Yahoo India has a hold on display and banner advertising Company 2, an Indian based search engine and services portal, managed w% of the total online ad revenues in fiscal year ended March 31 st , 2008 From the past 2-3 years, ad networks have started gaining acceptance in the Indian market Currently, India has close to X online ad networks In 20--, x% of total online ad spends were on ad networks which is expected to increase by Y basis points over the next year Online ad networks in India Source: 1% J E I D H C G B F A

Online advertising industry in India is largely dominated by search engines and portals

In spite of the online industry’s long tail, u% of the total revenues go to the top 8-10 portals/portal group sites

Search accounts for almost v% of the total online ad market by revenues

Company 1 dominates the search advertising market while Yahoo India has a hold on display and banner advertising

Company 2, an Indian based search engine and services portal, managed w% of the total online ad revenues in fiscal year ended March 31 st , 2008

From the past 2-3 years, ad networks have started gaining acceptance in the Indian market

Currently, India has close to X online ad networks

In 20--, x% of total online ad spends were on ad networks which is expected to increase by Y basis points over the next year

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