Desi online retailers like Flipkart.com, myntra.com unleash ad blitzkrieg

MUMBAI: A fledgling Indian online retail industry has unleashed big buck mass media advertising in the past six months as they seek to build businesses with a broader urban consumer base in the country. Advertising from e-tailing portals surged 228% on television, 78% in print and 797% on radio compared to the same period last year, said data from TAM Media Research. Start-up firms-such as Flipkart.com, myntra.com-flush with funds from private equity investors led the way in creating brand buzz going beyond the top metros, which some skeptics argued was reminiscent of the build-up to the dotcom bubble a decade ago. The growth numbers from TAM are based on ad volumes and not absolute spends. One industry source said the Bangalore-based online retailer Flipkart has marked Rs 100 crore as its advertising budget- significant for a four-year-old firm still soaking in losses. Flipkart, which sells books and electronics online, is labelled as the poster boy of Indian e-commerce and has invested heavily in building distribution and brand visibility across 50 cities. "E-commerce is at a very nascent stage but witnessing a lot of traction with urban audiences. Mass media advertising by e-commerce players will hasten this process and make more people shop online," said Ravi Vora, VP, marketing, Flipkart.com, backed by marquee investors such as Tiger Global and Accel Partners. Travel portals like makemytrip, yatra and cleartrip entered mass media advertising sometime back but the rush of brand-building activity from the e-tailing fraternity worries critics, who caution against the hype surrounding online retailing. "It is widely known that advertising does not build a strong online business. Successful online brands like Amazon, Facebook, Twitter and eBay almost never advertised. Great online brands are built through tremendous word of mouth. If you don't organically have it, no amount of ad spend can get it for you," said Mahesh Murthy, founder, Pinstorm, and co-founder, Seedfund. Rishi Khiani, CEO, Times Internet, which runs timesdeal.com and indiatimes.com, agreed, "The advertising push may drive initial traffic but post that the growth will depend on the word of mouth. Advertising does help in creating a differentiator but brands have to maintain their margins to run the business successfully," he said. Flipkart and others have been able to shore up sales riding on the back of ongoing media spends. "We feel our campaign has been successful and we plan to continue with our marketing activities," Flipkart's Vora added. India's consumer internet story has been one of the hottest themes for US investors, which was reflected when makemytrip listed on Nasdaq last year with $1 billion market cap. "The intersection between deepening internet penetration and rising disposable income in India is an exciting sweet spot," said Brewer S Stone, MD, Pacific Crest, a boutique investment bank involved with makemytrip's US listing, in a recent interaction. But Murthy, an internet industry veteran, cautioned: "This happened the last time around when Rediff, Indya and HomeTrade spent loads of cash. It will happen this time around too-just let the dust settle down in a year's time. We weren't prepared for the last bubble." The Indian e-commerce market is expected to cross Rs 46,000 crore in 2011 driven by the travel industry, with Indian Railways accounting for bulk of these transactions. The e-tailing industry is a distant second with 8% share, according to estimates from the Internet and Mobile Association of India.