Though Facebook, Instagram, and Google are likely to remain important channels for digital advertising, we can expect to see a shift towards alternative channels like e-commerce and affiliate marketing platforms in the coming years as advertisers look for new ways to reach and engage their target audiences. As per our recent study on Digital Ads, we find various formats of e-commerce, i.e., horizontal, vertical, D2C, live commerce etc. and online travel to be well placed to increase their share of Digital Ads. This will be driven by their higher share of the internet economy as well as a higher number of digitized merchants.

1. Digital Ad Spend poised to shift away from Facebook / Instagram and Google to alternative channels like e-Commerce and affiliate marketing platforms

We assess near-term ad spends in Southeast Asia could stagnate due to a weak macro outlook. However, Digital ad spends are expected to grow rapidly. Within this, the share of ads on various formats of e-commerce is likely to grow.

Rising online penetration in retail gives significant headroom for digital ads to grow organically on these platforms.

Further, the returns on ad-spent on these platforms ranks better versus traditionally popular platforms like Facebook and Google (Conversion rates are up to 5x higher in e-commerce and affiliate ads) We notice that the lower Customer Acquisition Cost (CAC) and higher Life-Time-Value (LTV) on e-commerce platforms is making them progressively more attractive alternatives.

2. There is significant growth in the online merchant base, and merchants are increasingly shifting their Ad spend wallet to digital channels

There has also been an acceleration in merchants opting for online sales and spending on online channels.
Due to the operational ease of online channels, merchants have stuck to e-commerce platforms and are increasingly shifting ad spends towards the e-commerce platforms.

3. The e-commerce market is poised for a shift towards digitally native brands and inventory-led marketplaces – models which are highly attractive for digital ads

As e-commerce evolves, inventory led models and digitally native brands are poised to take larger share in the market driven by better profitability and quality control aspects. This also puts digital ads in a good position to grow rapidly due to high attractiveness of these models.

4. Case study – Coupang Ad revenues expected to increase significantly going forward owing to sellers increasing their digital spend on ads

a) We notice that Coupang from Korea has increased online seller participation and is leading
to rapidly accelerating ad revenue

b) Coupang is on-boarding more large merchants and brands on the inventory-led side and hence
moving away from a largely marketplace focussed model.

c) The increased number of merchants will lead to increasing per capita spend on ads as merchants
look for advantages over competition

d) Significant increase in ad revenue expected leading to 50%+ growth in ad revenue