Technology is changing the face of advertising in Indonesia

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The Indonesian advertising industry passed the USD 11 billion revenue threshold in 2015 and total media spend is growing at more than 15% per year. At the same time the advertising game is changing radically due to the impact of digital technology – in this post we look at the profound consequences for both companies and consumers.

Digital advertising spend is growing fast in Indonesia

The shift to digital marketing that has occurred in more advanced Southeast Asian markets such as Japan and South Korea is now taking hold in Indonesia, and companies here are recognizing that they need a new operating framework for their marketing activities.

Conventional marketing communications processes are in transition – from one-way, highly- structured messaging via conventional channels such as TV and print to an open, dynamic, and collaborative dialog taking place across many platforms between companies and their customers.

Indonesia leads the Asia-Pacific region in terms of the projected growth rates for total media expenditure, ahead of powerhouses like Singapore and China. The market research firm eMarketer recently projected that the rate of growth for digital advertising spend in Indonesia will be five times that of the Asia Pacific region to 2018.

Paid advertising delivered to desktops, laptops, smartphones and tablets will show an annual average increase of 65% in Indonesia through to 2018, compared to 13% p.a. for the region.

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The shift to digital advertising game is inevitable

Let’s take a look at the factors underlying the transformation of advertising in Indonesia. We see two closely-related drivers causing this shift, namely

1. The evolution of the ‘mobile-first ‘ economy in Indonesia, and

2. The ’hyper social’ nature of Indonesian consumers.

Indonesian companies and advertising agencies are adjusting their media campaign strategies as these trends gather pace.

With consumers becoming more well-informed and increasingly empowered through technology, the battle for ‘share of mind’ and most importantly ‘share of wallet’ is intensifying.

1. Mobile-first

Mobile connectivity continues to change the way that Indonesians conduct their personal and business lives. They will have the power to buy what they want, where they choose, whenever is most convenient for them– all as a consequence of the ubiquity of wireless service in most parts of Indonesia.

All the vital signs for the wireless market in Indonesia are strongly positive, as the mobile gadgets owned by most Indonesians – smartphones or tablets – will likely be their primary computing device.

  • Smartphone penetration will hit 28% by end-2014, according to Google in their annual Consumer Barometer survey. And demand is accelerating as smartphones become more affordable, with the entry level price point in Indonesia now approaching USD 30.
  • Total data traffic ‘payload’ across the Big 3 mobile networks – operated by Telkomsel, XL Axiata and Indosat – has been doubling every year since 2011. The Cisco Visual Networking Index (VNI) predicts that total mobile data traffic in Indonesia will increase by a further five times through to 2018.
  • Indonesians are increasingly turning to mobile apps rather than native web browsers as they seek a better user experience on their smartphones. InMobi , a global mobile ad network provider, report that Indonesia is an “app-crazy nation”, accounting for 8% of total app downloads globally. The rate of per-user app downloads for Indonesia is second only to Malaysia, according to InMobi. It is clear that apps will drive future media consumption on mobile devices, and advertisers have to prepare for this reality.

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Meanwhile, mobile web optimization is an important consideration for Indonesian advertisers, and the dominance of smart gadgets compels companies to offer a high quality user experience across multiple device platforms and multiple screen sizes is .

Core functionality such as searching, browsing and transacting via a mobile site has to be seamless and intuitive in order to create and sustain a high level of consumer engagement.  Otherwise savvy Indonesians will inevitably look for better alternatives.

However the dizzying trend towards multi-screen usage within Indonesia (see below) implies that companies are obligated to maintain a coherent and integrated communications strategy across multiple channels – online and offline – even in a ‘mobile-first’ market such as Indonesia.

2. Hyper social

The way that Indonesians have integrated social media applications into their lives is changing the balance of power between consumers and the brands that they follow. More than ever, they are creating communities, generating unique content and voicing their opinions loud and clear.

Facebook is a foundation platform for advertisers

With 65 million active users in Indonesia, advertisers are leveraging the unique position of Facebook as a social media hub in order to extend the reach and impact of their marketing campaigns.

Marketers are centralizing and aggregating their social media programmes on Facebook with direct linkages to adjacent platforms:

  • Mobile messaging applications e.g. LINE (20 million active users in Indonesia) and WeChat (15 million users)
  • Engagement channels e.g. Twitter (30 million users)
  • Professional networks e.g. LinkedIn (3 million users)
  • Lifestyle channels e.g. Pinterest (1 million users)

Other advertising channels are maturing quickly

The hyper-social, mobile-first nature of the Indonesian market offers advertisers an opportunity to open up alternative marketing communications channels.

Video sharing:
Indonesians are avid consumers of mobile video material and are highly pro-active in sharing relevant content – including ads and promotional offers – within their social media circles. Given their reach and familiarity in Indonesia, both Facebook and Blackberry Messenger (BBM) are popular channels for distributing video material to family members and friends.

Video-based content is perceived to be a richer, higher value alternative to the text and icon-based communications available from the popular mobile messaging apps such as LINE and WeChat.

Multi-screen usage:
Indonesian cross-screen users – those individuals having simultaneous access to a TV and a smartphone or tablet – consume a daily average of nine hours of total screen media. This is the highest level of multi-screen engagement in the world, with the global average being around seven hours of media time per day.

So across a typical day, Indonesians may be watching TV, as well as checking their social media accounts, browsing web content, viewing videos and clicking through adverts via a selection of connected devices.

Leveraging the capabilities and effectiveness of these adjacent media platforms, as well as appreciating the motivations of consumers as they shift from one device to another is the basis upon which advertisers can unlock the newly-emerging multi-screen marketing opportunity.

Social commerce:
Unsurprisingly Indonesians prefer to transact in a social manner, and they are pro-active in sharing news of their purchases and recommending products on social media sites via photo-messaging, tweeting or blog posts.

Social media applications enable Indonesians to shop virtually and interactively with their contact networks, thereby emulating the conventional retail experience.

Mobile and social already combine to play a role throughout the in-store shopping process, with customers searching for products on their phone, scanning bar codes and making purchases in a seamless fashion. And advertisers are using location-based technologies such as geo-fencing to track customers within the vicinity of shopping malls in order to offer localized promotions and incentives.

Advanced wireless-enabled technologies such as sensor networks and wireless beacon applications will also become part of the in-store capabilities available to advertisers, as they seek to engage with shoppers in an ever- richer retail experience.

Icehouse, an early stage Indonesian mobile app developer, has recently launched an interactive app in conjunction with the prestigious Pacific Place Mall in Jakarta. The app combines Bluetooth technology with photo streaming functionality to offer a Treasure Hunt game and prize awards to mall visitors. The goal is to stimulate new customer footfall and to revitalize the experience of regular shoppers.

This is a very encouraging sign for the tech start-up community in Jakarta – and will be a spur to other app developers throughout Indonesia. Given the vast potential and unique characteristics of the Indonesian market, there are exciting times ahead for the local advertising industry and for the eco-system that supports it.

Indonesia’s age of mobile video is approaching fast

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As smartphone penetration in Indonesia continues to accelerate and LTE/4G networks are launched in the major metropolitan areas during 2015, digital video is set to become the dominant element of the entertainment experience for Indonesian mobile consumers. So what does Indonesia’s age of mobile video mean for network operators, mobile consumers and advertisers in Indonesia?

Video is everywhere

Digital video content is becoming increasingly pervasive. The unique blend of sight, sound and motion – once available only via the household TV – is now within reach of Indonesian consumers everywhere they go and on every screen they use. On TV, online, on-demand, on a smartphone or on a tablet device.

Video-based applications and content are seen to be the primary growth driver for mobile data traffic in the coming years, as the convergence already underway between mobile broadband and personal entertainment services gathers pace. The ‘anytime, anywhere’ availability of full-motion, high definition video content will become the norm within the next 3 to 5 years in Indonesia.

This trend is reflected in the industry forecasts which analyze global networking patterns, driven by a combination of video, social networking, and collaboration applications. The Cisco Visual Networking Index (VNI) predicts that video services will generate nearly two-thirds of all Internet traffic in Indonesia by 2018.

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These forecasts are of great interest (and concern!) to mobile network operators in Indonesia, as they contemplate the impact of the demand for bandwidth-hungry video applications and content on their existing network resources.

The ‘Big 3’ operators – Telkomsel, XL Axiata and Indosat – have committed to cumulative capital expenditure of circa USD 3 billion in 2014, the bulk of which will be dedicated to improving the coverage and capacity of their respective radio and transmission networks. And with total mobile data payload across these networks set to increase by more than 2X this year compared to 2013, this investment requirement will continue to accelerate as the operators prepare for the commercial launch of LTE/4G technology in 2015.

Indonesian consumers love video

Indonesians engage in more active screen time than any other nation on the planet. A recent survey by media research firm Millward Brown stated that tech-savvy Indonesian consumers devote an average of nine hours per day to using multiple devices – via TV, computer, smartphone and tablet. This compares to a global viewership average of seven hours per user per day.

Closer to home, the survey also found that these multi-screen users in Indonesia registered over 23% more media time than their counterparts in other Asia Pacific countries, including the highly- developed markets of South Korea and Japan as well as the peer economies of Thailand and Philippines.

Moreover, video content is an increasingly important part of the communications and sharing behavior of Indonesians within their social media circles. UK-based On Device Research conducted a recent survey among mobile Internet users in Indonesia in order to understand their preferences for watching and sharing video content.

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Here are the headlines of the research, which in turn shows that Indonesians see video sharing as means of enhancing the existing social interactions they enjoy with their friends and associates. Video-based sharing is also seen by them as a richer, higher value alternative to popular mobile messaging apps such as WhatsApp and LINE as well as conventional SMS.

  • 58% of respondents watch at least one video per day and 82% watch a video on their smartphone or tablet at least once a week. Only 4% claim that they do not watch any video content at all.
  • YouTube has an absolute monopoly on mobile video, with 96% of respondents citing YouTube as their preferred video channel.
  • 65% of respondents actively share the video material that they watch on their mobile devices, with over half of them routing this content via their Facebook accounts.
  • Blackberry Messenger (BBM) is still popular, with 20% of respondents using it to distribute video material within their social media circles.

Based on these trends, it follows that mobile video viewership in Indonesia will increasingly lead to shared media experiences, particularly among the 16 to 34-year-old age group.

Video-based advertising will change the marketing game in Indonesia

Indonesians are still most receptive to advertising via TV, largely due to its familiarity and reach, but the hyper-social, ‘mobile-first’ nature of the Indonesian market offers advertisers an opportunity to open up marketing communications channels.

However, the media placement and campaign management disciplines associated with conventional TV, radio, print and outdoor campaigns differ greatly from those for the mobile channel. The length, format and content of mobile advertising programs mean that marketing messages may – in theory at least – be more closely aligned with the known circumstances and preferences of target customer groups.

As well as applying standard demographic attributes (i.e. age, income, location), advertisers in Indonesia are increasingly looking to use more explicit variables such as mobile device type (i.e. smartphone, tablet) , device model and mobile operating system (i.e. Android, iOS, Windows) in order to serve up mobile video ads to their audiences.

And it doesn’t stop there. Facebook has recently introduced a new advertising technology called bandwidth targeting, aimed specifically at markets such as Indonesia and Thailand, where mobile network availability and quality is still highly variable.

This technology gives advertisers the ability to configure mobile ads based on the likely quality of a user’s network connection, by modifying ad content according to whether a user has a 2G, 3G or 4G connection.

Another pertinent finding from the above-referenced On Device research study is that 85% of the videos watched by Indonesians are short-form clips (i.e. below 10 minutes in length). In reality, advertisers are likely to find they can easily and effectively deliver their messages in a much shorter format.

Hence they are not compelled to produce long, narrative clips to grab the attention of consumers. In reality, short duration videos may lead to higher response rates – including the sharing of ad content with friends and associates.

Indonesian marketing professionals know from experience that the early adoption of new advertising and promotional techniques can give them a competitive edge over their rivals. Nevertheless the challenge comes in investing in these new marketing channels before they are fully established and proven in Indonesia. Fortune will favour the brave!