Snapdeal joins Flipkart to push ad business to cover e-commerce losses

Alibaba-backed online e-commerce marketplace Snapdeal has launched its next-generation advertising platform called Snapdeal Ads, to help sellers better target customers based on their online buying behaviour.

Snapdeal is following market leader Flipkart in making significant investments to develop advertising as an additional revenue stream. The two companies continue to undercut costs of products to compete with global rival Amazon, while still trying to keep investors happy.

The company says about 10 per cent of the 300,000 sellers on its platform use Snapdeal Ads and, on average, these sellers have seen business double compared to other sellers. The new advertising platform will allow sellers to target users based on their browsing behaviour, location and purchase history, apart from allowing them to target a specific group of customers.

“Snapdeal Ads will allow sellers to reach their customers in a more precise manner, help build targeted campaigns, measure impact and return on investment on a real-time basis. We have addressed the marketing challenges faced by our sellers by providing a simplified advertising panel to fulfil their diverse business requirements,” said Tony Navin, senior vice-president of partnerships and strategic initiatives at Snapdeal.

Snapdeal’s investor Alibaba, the largest e-commerce firm in China, earns half its revenue from ads. Snapdeal launched its native ads platform in November 2015, helping sellers prominently list their products on its website and mobile apps. Both Snapdeal and Flipkart are looking to reduce the commissions they charge on the sale of every product. This is expected to incentivise sellers and attract more sellers to their respective platforms.

India’s new foreign direct investment norms for e-commerce marketplaces prohibit offering discounts to lure customers. This, along with the restriction that customer engagement has to be done by the seller on their marketplaces, has forced both Flipkart and Snapdeal to look at advertisement to power a large chunk of their revenues.

In December 2015, Flipkart began running a pilot for a zero-commissions model for 350 sellers on its platform. In May this year, Snapdeal, too, took a cut in its commission for certain product categories to counter falling sales as a result of rising competition.

With a $300 million investment over the past eight months in logistics, it seems that advertising might not be the only mode of revenue that Snapdeal is exploring.

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