The Interskale blog

Digital marketing sounds easy. How difficult can it be, given that one has used Facebook, LinkedIn, browsed a zillion websites, bought goods online and done many other things digital, is an unstated premise of marketers and other executives at many newbie and would-be clients of digital marketing. Almost every company executive has an opinion of what digital marketing is capable of and what it takes to achieve it. And the vast majority of these clients have little or no hands on exposure to the various facets of this field.

In our discussions with a few thousand organizations over the last 11+ years, we have come across very many misconceptions. Presented here are just a selected few typical ones.

1. My brand needs to be present on more digital channels
   Here the thought – and this is an example – is that listing and promoting my brand or company on Instagram, a Facebook, Google My Business (Google listings), YouTube and LinkedIn is not enough, it should be present on Twitter, Pinterest, Quora, WhatsApp for Business and many more channels.
   
   In most cases, being present on all channels is not needed. There will never be enough relevant traffic for one’s own brand on each and every channel and the incremental benefit of being present here can be inadequate looking at the management time and/or cost involved.
   
   Thankfully, more and more clients seem to be understanding this. However, we do come across clients with a strong preference for a channel even though it doesn’t meet the above criteria of threshold traffic and incremental benefit.
   
   
2. I cannot see my ad on Google.
   All advertisers, whether online or offline, like to be able to view their ads running.
   
   When I was an offline marketer running print, TV and outdoor ads, if my brand’s ad ran on a given day, a colleague or two would often walk up to me at my desk and chat me up about the ad. It provided me reassurance or validation that the advertising is getting noticed as well as dipstick feedback on the ad itself .
   
   For Google Search ads advertisers, Googling one’s own product will not always show up the ad for this product. The reasons are many. Firstly, if a person repeatedly searches for her or his own ad ogle but but never clicks on the ad, she/he may stop seeing it. That’s because Google’s system detects the IP address of the computer, and stops showing you ads that it thinks you aren’t interested in. Secondly, the ad may show up at bottom of page 1 or on later pages, which may get missed. Thirdly, the ad may not match very well with the actual search term (word being searched) so Google chooses not to show it. Fourthly, the budget may not be adequate on a given day to serve ads against all the relevant searches. Fifthly, the ads may not be targeted to the location where the client lives or they may be scheduled for specific hours or days of the week. Lastly, in Smart Automation, Google Ads current preferred way of running campaigns, Google Ads prioritizes against which searches to show the ads based on machine learning. It prefers showing ads to people with intent to buy or in the market to buy and deprioritizes showing ads to others.
   
   The problem can arise on other ad platforms too, Google Ads above was by way of example.
   
   3. Please add or remove a few keywords to my Google Search campaign
   In the good old days viz. till a few months ago, Google Ads recommended that any one or more of three types of keywords viz. broad match, phrase match and exact match be used for the Search Ads campaign. Currently, the recommendation is to use broad match keywords as much as we can: in such cases Google Ads machine learning takes care of the rest.
   
   However, clients are accustomed to the old method and often recommend specific words be added or deleted from the campaigns. A client once asked us to remove two keywords out of about 15 keywords being used for a campaign, as he felt these two keywords were the least relevant. However, data showed that ads were hardly being shown against these two keywords anyway. The Google Ads system had figured out on its own that these two keywords gave the least number of keywords for the ads, the landing page and campaign settings in use.
   
   4. The most important thing my website needs is a better design.
   We have heard clients wishing to discuss just the design of a new website. There is no doubting the merits of a great design but it’s not enough. And we don’t subscribe to the above statement.
   
   A good website needs the right strategy, content, features, visual design, UI design, web technology, maintenance and organic marketing in order to grow traffic and succeed in achieving its given goals.
   
   And if at all we were to choose one item which an excellent website needs it would be great content. Simplicity in design and error-free web development would rank in positions two and three.

5. Digital marketing is the only marketing I need
As a consumer marketer, I always considered more than one channel to reach my target audience
e.g. press and TV or press and outdoor or press, outdoor and in-shop, to give three among many
options.

Currently, I work at a pure-play digital agency that does virtually no offline work, yet we always
encourage our clients to concurrently look at offline options if they can. Here are a few specific cases
to illustrate this.

Offline media is expensive and less targeted so more wasteful. Yet TV and press can have faster or
instant impact. Again, for new brands, PR works very well and complements digital marketing. If
nothing else, invest in a call centre and product promotion (deals). The specific choices of what
offline marketing to do will depend on the brand or product and the specific context, but in
marketing we believe that two legs are better than one.

Within digital marketing itself, we rarely recommend just one service or channel. SEO complements a
website, while Facebook Ads often complements Google Search Ads.

These then are just five misconceptions that we, a digital agency, commonly encounter.

The emerging landscape of public Internet companies

India has 47 unicorns and 232 soonicorns and at least half a dozen of these Internet companies are set to float or will likely float their maiden IPO. The names include Zomato, Mobikwik, PayTM, Nykaa, Policy Bazaar, Lenskart and Delhivery. Analysts say many more will follow in the coming years.

For the stock market novice, a unicorn is a company with a $1 billion+ valuation and a soonicorn (lovely name!) is a company likely to get there ‘soonest’. The sentiment (of the stock market variety) is that the Covid-19 pandemic has increased consumer adoption of the products and services of these primarily tech, Internet-fueled enterprises. This has lead to an attractive window of opportunity for getting listed.

The Indian Internet sector has been around since 1998 (August 15, 1998 is when India got it’s first Internet Service Provider, VSNL) but only a handful of companies have ever gone public, either on foreign bourses or on Indian ones. Rediff.com listed on the NASDAQ in 1999, followed by Make My Trip and Yatra Online in 2010. On the NSE/BSE, Info Edge (naukri.com) listed in 2006 and Infibeam, Bharat Matrimony, Indiamart and Ease My Trip followed over a decade later (2016 onwards).

The upcoming, anticipated flood of Internet companies hitting the stock markets will therefore be a rare, momentous occasion and a turning point for the sector as a whole.

Revenue streams and their importance to Internet companies

Having myself been part of the Internet sector since 1999 – an involvement which includes being part of the management team which first took an Indian Internet company public (Rediff.com on NASDAQ) – I can say that Internet companies work under vulnerable circumstances. They must meet investors outsized growth expectations while competing with equally smart, charged-up rivals and while confronting potentially disrupting regulatory, trade, globe and consumer forces.

Therefore the better diversified the business, the better its management will sleep at night. Diversifying sources of revenue – what I have here called revenue sources – is an important step to be considered to make Internet companies safe and secure.

It’s thus a good time to refresh ourselves on the different revenue streams available for Internet companies and the key factors required to succeed for each. I know of 8 types of revenue or revenue streams, of which the first four can be considered major and the last four minor.

Major revenue streams

For most Internet companies, these revenue sources account for the bulk of the revenue. In no particular order, these are as follows.
1. The first revenue stream is e-commerce. B2C businesses (say Lenskart) can sell their products online on their own website. Further, they can supplement such revenue via marketplaces such as Amazon.com.

The key success factor here is having differentiated products and the ability to build trust.

One can also build marketplaces (e.g Nykaa and Policy Bazaar) and earn commission revenue. Succeeding in these require building value-added offerings, relentless focus and preferably an early to market start.

Ticketing, which includes travel, movies and hospitality, as well as shared mobility (Uber) services is a big segment within e-commerce. The other big segment is delivery, whether this be food delivery, grocery or other. These are transaction-based or fee-based service businesses.

The key success factor for the fee-based service businesses is achieving critical scale through an appropriate level of investment, though partnerships and tech innovation, while also achieving operational efficiency.

2. The second way for a business to make money off the Internet is to generate leads.

While an individual lead does not result in a sure-shot sale or predictable revenue, across a large number of leads it is possible to guesstimate conversions and revenues.

The nature of leads generated varies according to the business. These could, for example, be consumer durable companies generating requests for a product demo or a home visit; these could be clinics, salons and other service businesses providing appointments for patients; schools and universities looking for admissions enquiries or housekeeping and gifting companies seeking meetings with Admin heads of large corporates.

In my experience, the key success factors here are brand recognition (is the brand known and better known than competition) and savvy online marketing. Also, online marketing for lead generation works best for products and services of a certain minimum ticket value.

An example of an Internet company whose revenue works off lead generation has been Just Dial. Of course, a large number of offline or non-Internet businesses depend on lead generation. These were the examples cited above (viz. consumer durables, clinics, universities and corporate gifting).

3. A third revenue stream is subscriptions. Ongoing and daily needs lend themselves to subscription businesses. These needs include milk, newspapers, magazines, paid e-mail, paid music apps and premium LinkedIn accounts. These have recurring customer revenues thanks to the subscription.

Products and services delivered online – such as paid email (this would exclude milk) are often though not always on a freemium model – where the basic service is free and the service that has value-added features needs to be paid for.

As a marketer, I believe the field is also ripe for subscriptions of other ‘real-world’ products. AI-driven home delivery of coconut water, fruits and medicines anyone?

4. The fourth revenue stream is online advertising. This is the domain of media companies. For online advertising, one can have one’s own sales team or seek a partnership with resellers and ad networks. The best known ad network is Google Display Network, for which one can sign up online via Google Ad Sense.

Internet ads are ‘cheap.’ The key success factor here is getting large amounts of traffic to one’s website.

If one has large amounts of traffic and a brand, one can generate sponsorship revenue, which usually is high ticket revenue and not linked to the ad performance.

Minor revenue streams

The first three of these sources are not very common. The last (eight) source is a potentially important and I would say an emerging revenue stream, at least in the Indian market.

5. The fifth revenue stream is selling virtual goods. Items like paid avatars are used in gaming (cf. Ten cent, China) and have been earlier tried in social networking sites as well.

The key success factor here is the ability to create a very large user community online.

6. Syndication is a sixth revenue stream. Media brands with unique, quality content can consider syndication or licensing of their content. Thus, New York Times articles are syndicated to publications world-wide.

7. A seventh revenue stream is affiliate revenue. One can work as an affiliate site, sending traffic to and generating sales for a larger, more established website/brand.

The key success factor for an affiliate is becoming an authority or expert within a specific ‘domain’, attracting niche traffic interested in this topic and then sending this traffic to a website selling goods in the same ‘domain’. E.g. a sports news site can be an affiliate for a sports goods site and a books review blog can be an affiliate for an online bookstore.

8. In today’s day and age, all businesses with a strong online revenue component contemplate a brick and mortar component to their business. An online presence drives offline revenue just as offline presence can drive online revenue.

In this omni-channel world, revenues from retail stores can be considered as the eighth revenue stream for Internet companies.

That makes it 8 revenue streams that I know of. Are there others? If you do know, do drop a line.

The evolving revenue-mix

All Internet companies do end up diversifying their revenue mix. Google was primarily advertising-led but moved to fee-based services. Amazon was mainly e-commerce, then moved to fee-based services with AWS and now counts online advertising as it’s fastest growing business. LinkedIn, now a unit of Microsoft, makes money from job hiring fees, premium memberships and online ads. At Internet portal Rediff.com (where I worked), we made money from advertising, e-commerce and subscription services such as paid email and matchmaking.

India’s Internet companies have most notably pursued creating brick and mortar chains. Eyewear major Lenskart has over 80 retail stores. Here, companies seem to prefer the franchise model, presumably because it is faster to market and asset light (growth X ROI!). Flipkart has an online ad business that brings in some decent revenue.

I suppose most Internet businesses will attempt to diversify their revenue streams. They will seek to encash (monetize!) their brand, user base, talent bank et al (see key success factors above for each of the 8 revenue streams).

What are the detailed dynamics driving these trends? The answer is beyond the scope of this post. Many must have studied this well already, it will be interesting to know who.

Well, this is what I know. Something to think of ahead of the anticipated gravy train of digital IPOs in India, which starts tomorrow (14th July, 2021) with Zomato.