Is Facebook facing issues with advertisers in India?

India has Facebook's second largest user base, but advertisers might be wary of its value

Financial trends and news by Steven Loeb
August 12, 2015
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India has been an important market for Facebook for a while now, especially since it reached 100 millionusers in the country last year and, in the process, became the social network's second largest userbase, behind only the United States. 

That number means nothing, though, if Facebook cannot monetize those users, and that now seems to have become an issue for the company due to a variety of issues.

The company, which has offices in Hyderabad, Mumbai, and New Delhi, and whose Indian user base has now grown to 132 million, is having trouble getting advertisers on board, according to a report out from Reuters.

That is despite attempts to lure them with with features that include free email support for questions about advertising and advice on increasing sales in a bid to boost revenue from its second biggest market.

Monetarily, Facebook is losing big to some of its rivals, most notably Google, the company that it has beentussling with for supremacy in the ad market. Whereas Google earnings between $7 and $8 per user inIndia, Facebook is only making a mere 15 cents per user. 

So what is holding Facebook back from making the big bucks? It seems to be a few things, and they mostly seem to have do with the issue of trust.

First, the company has been in India for the past five years, where as Google has been there for the past11 years. They know Google better, and they trust the company more. In addition, there seems to be a bias against social media, with advertisers remaining skeptical of thevalue of advertising on social media, and still prefering ads on television instead. 

And there is still the issue of access, with over 90 percent of Indian users in Facebook using the service on a mobile phones, but without the ability to pay for the increase in data consumption. The company is trying to alleviate the problem with services like Facebook Lite, which uses less data.

It is also trying to get Internet access to more people through its initiative, though the company could be facing issues on that front as well, due to regulations over net neutrality.

Perhaps things are not as bad as this report makes them out to be, though. According to market research company eMarketer, there are about 252 million people with Internet in India, which means that more than half of the people in India with Internet are on Facebook.

As of May, Facebook also had, by far, the highest number of display ad impressions in India, with over 5,300, or 26.7% total. Google only had 2,400, and 12% total.

"When it comes to advertising, Facebook is India’s largest digital publisher based on desktop digital display ad impressions, according to comScore Ad Metrix," E-Marketer said.

Among Facebook's advertising clients in India are Unilever, P&G, Coca-Cola, Nestle, Reckitt, Mondelez, Gilette, Garnier and others. It also recently signed new partnerships with advertising holding companies IPG and Dentsu. Last year it inked its first deak with WPP’s Group M. So, on the surface, things seem to actually be going quite well.

Advertising revenue particularly from mobile, is extremely important to Facebook's bottom line.

In its most recent quarterly earnings, Facebook posted revenue of $4.04 billion, $3.8 billion of which came from advertising, an increase of 43% from the same quarter the year before. Mobile accounted for 76% of that advertising revenue, up from approximately 62% of advertising revenue in the second quarter of 2013.

Even more important, more than half, 51.3 percent, of Facebook's $4 billion in revenue came from outside North America.

Given the importance of India to Facebook's future growth, if the apprehension is real, the company is going to have to find some way to convince advertisers to jump on board.

VatorNews reached out to Facebook to see if it had any statement on this report, and to find out, what plans, if any, it has to address this situation, but the company had no comment. 

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