BUY WORD: E-commerce drives 21 per cent of India’s digital ad market
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With digital advertising, marketers gained amazing reach. Now, with AI tools, we are at a stage where businesses can be marketed across geographies, age groups, cultures and regional languages within seconds.
AI is fundamentally transforming digital advertising with smart tools that aid sharper targeting, real-time optimisation and measurable outcomes at scale. Global platforms like Google and Meta are using AI to enhance ad relevance, reduce wastage and improve campaign performance. Digital adtech tools have accelerated pace, as hyperlocalisation and unique-to-target ad solutions help businesses unleash potential and expand customer reach. AI-powered programmatic advertising has led to 20 per cent increase in conversion rates and 30 per cent boost in return on ad spend.
In CY24, digital advertising formed 77.7 per cent of total ad expenditure (more than $300 billion) in the US and 80 per cent in China. While India’s digital ad penetration was only 50 per cent, it is fast growing.
Key drivers
The strong shift towards digital is driven by two key megatrends: the rapid adoption of 4G data services post 2016 and the accelerated digital migration during the Covid-19 period. This transition is now further supported by evolving consumption patterns, including a surge in 4G users to 640 million at a compound annual growth rate (CAGR) of 15.2 per cent from CY17 to CY24, a healthy 21.6 per cent CAGR in online shoppers to 248 million (CY19-24), and 20 per cent CAGR in social media users at 462 million.
In CY24, digital media surpassed television, capturing 32 per cent of India’s media revenues at ₹80,200 crore (16 per cent in CY19), mainly catalysed by digital advertising (₹70,000 crore). Key growth engines included e-commerce advertising (plus-65 per cent year-on-year to ₹14,700 crore) and rising viewership for regional OTT content.
Social and search media
In India’s digital advertising landscape, the combined share of social and search media (Meta and Google) has declined from 75 per cent in CY19 to 68 per cent in CY24. This is mainly due to the fragmentation of the video advertising space with the rise of OTT platforms and a pivot to e-commerce-led advertising. Going forward, social and search may continue to underperform as newer segments outpace them. A meaningful revival in search advertising is likely only through AI-led innovations that enhance conversion outcomes.
E-commerce ads
E-commerce currently accounts for 21 per cent of India’s digital advertising market, with a robust CAGR of 44.9 per cent over the past two years. This growth is expected to accelerate with the proliferation of quick-commerce platforms. India’s quick-commerce advertising market is estimated over ₹2,500 crore, accounting for 20–23 per cent of e-commerce advertising, and poised for exponential growth with the rising spread to non-metro markets.
Amazon and Flipkart currently dominate with 75 per cent share of e-commerce advertising. But this could be challenged as quick-commerce platforms capture a bigger share — particularly in categories such as grocery, beauty and personal care, as also accessories. Our estimates suggest quick commerce’s total addressable market (TAM) could be 45–50 per cent of India’s e-commerce market.
Video ads
The video advertising market has surged over the past five years, thanks to OTT fragmentation and a growing appetite for online content. The growth was further accelerated by free streaming of IPL on JioCinema. YouTube dominates the video ad space with 70 per cent share, followed by JioCinema at 15 per cent. The ecosystem includes broadcasters, global platforms and regional apps. With giants like Amazon entering the space and Netflix exploring ad-supported models, competition is set to intensify, potentially squeezing smaller platforms.
Programmatic ads
India’s programmatic advertising is 42 per cent of digital advertising and continues to outperform with a CAGR of 27 per cent (CY21-24), fuelled by e-commerce growth, mobile-first consumption and AI-led targeting. Rising OTT viewership, regional content adoption and local adtech players like InMobi and Affle are expanding reach. As brands chase return on investment and scale, programmatic is emerging as the core of digital strategy.
(The writer is Senior Vice-President, Elara Capital)
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Published on May 4, 2025