пятница, 1 июля 2011 г.

The future of digital marketing in Russia/Ukraine

A friend of mine from Finland recently asked me to comment on specifics and prospects of digital marketing in Russia - he is writing a book together with some European guru. Here are my answers somewhat adopted for a blog.

1. How do you see the future of (digital) marketing in your home market?

My home markets are Russia and Ukraine, I consider all other CIS countries just following the path of those two. Baltic countries really stand alone, as very small but highly penetrated with digital marketing and services.

Digital marketing is already big in Russia, around $1bln out of total $8bln spent on advertising (50% being the TV). Russia alone is 4th largest advertising market in the world (which sounds really strange to me :). Thus, $7 is spent in a year on digital marketing only.

The future is clearly bright: i) the market is growing much faster than Internet penetration, which is max 45% versus 60%-85% in developed countries, ii) population (especially those aged 13-30) is taking digital marketing as prime source of consumer proposals, iii) purely digital business models in e-commerce are demonstrating tens of millions of revenues already (www.KupiVIP.ru, www.Ozon.ru, etc.)

I expect $20 spent per capita in Russia/Ukraine (total 182mln people) in 2015 on digital marketing. Fast growing penetration of smartphones and notepads is making the future even brighter. iPhone and iPad sales volumes in both countries are exponential.

2. What are the biggest challenges for the future of marketing in your market?

From simple to more complex (not in priority of importance/scale). Some of them are typical for the rest of the world, like d) and f).

a. Internet penetration
While Russia being a nation of 85% of population in urban areas with relatively low cost of connecting households, Ukraine remains a country of 45% only living in urban areas. Even though, Russia is still penetrated with the Internet at 45% max of all households. Thus further motivation of telecoms to build networks, invest into network CapEx is essential to achieve high Internet penetration and achieve break-even point for most of niche online businesses and and therefore marketing agencies.

b. Underdeveloped COD/Delivery infrastructure
While in Ukraine COD issue is solved by both government-owned UkrPoshta, which can provide COD on the whole country's territory, Russia still lacks reliable solution for most of the population. Even the largest e-commerce player like Ozon is still struggling to deliver goods to major Russian cities, not speaking about the rest of the country.

c. Low trust to online payments
Whether it is online services or goods to deliver, the biggest barrier for the Internet users (besides underdeveloped delivery services) is low trust to online payments using credit cards, the most common way to pay.

d. General digital culture
Some industries suggest significant performance improvement when online technologies and marketing are applied. Such top-of-mind examples include doctors, accountants and taxi drivers. However, these groups have been very conservative in adopting online/digital technologies, including marketing, lead generation and demand/supply management.

e. Piracy
While there is a great demand for paid content online, which can be also monetized through revenue-sharing and other means, the scale of "digital piracy" outscores any imaginable scale in the former USSR. This is a definite stopper for most classic content producers/providers to go online and offer premium content with an option of monetizing ad leads, either through subscription or ad-based business models.


...And the most critical and complex one:

f. Media metrics and sociodemographic data accuracy
The key issue in digital marketing, however, for it to become a recognized member of the media family among white- and blue-collar executives, is when metrics are introduced similar to those used by traditional media (cover%, reach%, frequency, affinity, etc) which are still long way to collect and introduce due to imperfect or lacking data. Most of the potential leads remain totally anonymous until they buy something. Our efforts at a social media monitoring startup to collect sociodemographics among those posting in blogs (not speaking about those just reading) lead to only 20%-30% accuracy of the data. And the media like TV have a very rich playground of data coming from their panels, including usage, attitude and psychographic data, which digital marketing still lacks.

3. How do you see the role of digital in the future in your business?

Digital marketing had already demonstrated a significant value in i) generating new leads, as well as ii) reducing marketing costs per order/customer. For instance, offline lead generation for our social media monitoring system sometimes took up to $150 spent on new lead. Recent digital marketing initiatives allowed customer acquisition costs (SAC) drop to as much as $0.15 (fifteen cents, not a typo).

On the other side of the counter, expansion of professional agencies and monitoring systems for social media had taken a surge in 2010-2011, as many large businesses (including FMCGs like P&G, electronics manufacturers like Samsung, LG, Nokia, GE, etc., telecom providers like Yota, MTS, Beeline) have noticed a significant influence of online opinion/buzz on their sales volumes/intention to buy and recommend. One of the marketing directors at a large(st) mobile phone manufacturer in Russia once told me: "3-5 posts by popular bloggers can overrun the effect of a $3m TV campaign...".

Thus I see future of digital marketing as very bright. It will endanger traditional business models in marketing and advertising very soon.