How digital marketing drives digital economy

In the midst of a major shift among a wide range of advertisers, digital advertising tools are taking on special significance. Small and medium-sized businesses have been particularly active clients.

The digital economy accounts for nearly 8% of Russia’s gross domestic product (GDP). According to the Russian Association for Electronic Communications (RAEC), the digital market volume reached 12.2 trillion rubles last year, marking a 29% increase compared to 2021. RAEC divides the Internet economy into four main segments: e-commerce, marketing and online advertising, infrastructure, and digital content.

E-commerce represents 94% of the entire digital economy. Last year, the share of e-commerce increased by 32% compared to 2021. However, e-commerce primarily exists and develops thanks to online advertising and marketing. In 2022, the volume of this segment was 10% lower than the year before, at 389.2 billion rubles. This was due to the exit of global participants and advertisers from the market. Elizaveta Kalinina, Chief Client Officer for Digital Media of OMD AMS, states, “Online marketing has undergone drastic changes, perhaps more than ever before.” In the summer of 2022, the entire industry had a pessimistic outlook. The market was expected to experience a prolonged decline. However, in reality, the decline never materialized.

In 2023, the online advertising market rebounded and returned to growth. “According to our data, the volume of traditional Internet advertising, such as banners, videos, and performance, increased by 33% in the first half of 2023 compared to the same period in 2022,” says Boris Omelnitsky, President of the Association for the Development of Interactive Advertising (ex. IAB Russia).

In his words, market players have adapted and learned to operate under new conditions.

Furthermore, the field of Internet marketing has attracted new participants.

Everybody’s Game

«The geopolitical crisis has not hit the market as hard as expected», comments Elizaveta Kalinina. «A range of advertiser categories has expanded to include finances, retail, food, mass media, small and medium-sized enterprises, and the government sector».

Mass entry of small and medium-sized enterprises (SMEs) into the advertising market turned out to be an important trend. Nowadays, these enterprises have become new active users of most innovative solutions, as well as key contributors to the development of digital advertising, as noted by market players.

Overall, SMEs play an active role in e-commerce today. For instance, back in 2020, 60% of entrepreneurs surveyed by Business Solutions and Technologies (formerly part of the Deloitte group) began or expanded their work with marketplaces. Today, over 70% of sellers on all marketplaces are SMEs.

«The role of SMEs is growing both in the economy and marketing. Entrepreneurs shape city infrastructure, develop local brands, and fill gaps in the market. We see many successful examples in the clothing industry, convenience goods, and in the service sector», continues Elizaveta Kalinina.

As noted by Irina Alexeeva, Deputy Vice President and Chief Commercial Officer of VK, digital tools help small companies compete with large brands. «This is equally true for social media, map services, and advertising platforms». According to the expert, in July 2023, the number of entrepreneurs on VK grew by 25% year-over-year basis, and their feed posts increased by 36%. Interactions with business communities were up 22%. This includes users navigating to items and services profile cards, placing orders, sending messages to public pages, and making inbound calls for detailed information.

VK representatives note that the growth of such activity on the social network leads to an increased need in promotion. Investments by small and medium-sized enterprises in VK projects have increased 52% in the first half of 2023 compared to the same period last year.

«Small and medium-sized enterprises are major drivers of the economy, including the digital economy», confirms Ekaterina Kutsyna, Director for Digital Platforms Development at Gazprom-Media Sales House (part of Gazprom-Media Holding). «Mindful budget allocation, quality optimization, and clearly forecasted high ROI are even more relevant for SMEs than for large companies».

A New Outlook

The transformation of the market landscape and the emergence of new players have spurred interest in testing available promotion channels and platforms, such as retail media (advertising on retailer platforms), messenger apps, and bloggers.

«All players have had to urgently adapt to new market conditions. It’s challenging to achieve growth in turbulent circumstances, but urgent restructuring has allowed for quick replacement of large platforms that exited the market. At the moment, it is safe to say that we have no shortage of technological solutions», claims Daria Rodionova, Chief Communications Officer of Global Hybrid.

«The fastest growing channel, retail media, is now competing with outreach tools and developing image and video formats», notes Elizaveta Kalinina. Data from the OMD AMS agency indicates that local programmatic advertising (algorithmic advertising acquisition) exhibited a 39% growth in 2022, taking over the vacant spot left by the Google marketing platform, which is now banned in Russia. In 2023, the growth of programmatic advertising persists, driven by Connected TV, Mobile, and OLV (advertising videos that are inserted before, during or after viewing the main video). Elizaveta Kalinina forecasts that the influence marketing segment might grow by 23–35% by the end of the year, despite the slight decrease in the crisis year.

«Enterprises, especially small and medium-sized ones, actively utilize dozens of digital tools in their marketing mix, including both performance and media formats», according to Irina Alexeeva. «On one hand, everyone needs measurable results, such as increased market share and sales. On the other hand, it’s important not to overlook investing in media advertising, especially considering the changing needs of businesses. This approach is particularly relevant for new companies and brands that need to tell their story and distinguish themselves from competitors in the new environment».

Irina Alexeeva suggests that the key platforms for this are social networks, content services, and video platforms that are used by tens of millions of Runet users. For instance, companies are increasingly posting and sharing corporate news in communities or groups on Vkontakte and OK. They are also turning to VK Video or VK Clips to create video content, including collaborations with influencers. According to data from VK, in the first eight months of 2023, customers and businesses invested in native promotion in video clips seven times more than they did a year ago.

In Pursuit of the Consumer

Businesses recognize the need for diverse digital advertising tools, since digital advertising continues to drive demand. According to Igor Postalenko, Director of Online Marketing Management at Tinkoff, «Before, our channel split was formed around the big four platforms. Now, their number has increased drastically».

Postalenko mentions that large advertisers are willing to collaborate with new faces in the advertising market who have access to the resources needed to develop infrastructure and data on consumer behavior. «In exchange, we expect new, unconventional approaches to increasing traffic and optimizing advertising campaigns».

«To us, the relevance of a tool depends on its ability to effectively capture consumers’ attention and the space where they spend most of their time», says Natalia Dmitrieva, Chief Executive Officer of SberSeller Sales House. Social networks and websites with specific content, including video content, are the most popular among today’s users.

For example, Mediascope data shows that in the first half of 2023, Russians aged 12 and older spent at least one hour on social networks every day. In October 2023, video resources accounted for 18% of the overall internet consumption among Russians. The average time spent daily on video resources increased by 4 minutes compared to the same period in 2022 (for all Russians over the age of 12 who used the internet on desktop or mobile devices).

«Tools that help us optimize time and financial costs in terms of data analysis, hypothesis building, and advertising message efficiency are the most important», emphasizes Natalia Dmitrieva.

Challenge Accepted

«For efficiency in the modern advertising market, it is essential to conduct both quality and quick industry analysis, including risk assessment and the search for unconventional growth points», notes Maria Silkina, Chief Executive Officer of the Mega agency (part of the Okkam Group). This requires investing in skilled data specialists and actively testing artificial intelligence (AI) technologies by market players.

Silkina reminds us that in the past, well-known global and local vendors often limited their media plans to only a few popular platforms. At present, however, given a limited number of known platforms and the emergence of new ones in the Russian digital marketing scene, choosing the right platform has become more challenging. «It is crucial for marketing agencies to develop transparent methodologies for assessing new platforms», she notes.

These goals, along with many others, will become achievable through artificial intelligence (AI), the importance of which is growing in all marketing processes. «Even now, these technologies are actively utilized for targeting, content creation, and other purposes. There is a trend toward reducing human effort in mechanical work: optimization of advertising campaigns with the help of ML algorithms, automatic creation of creatives based on given parameters, and the generation of resizes in mere seconds without a designer», according to Daria Rodionova. AI and machine learning (ML), she says, also help predict the likelihood of a user making a conversion and change the auction bid accordingly. «Such optimization significantly boosts performance metrics».

«Data based on deep analytics are the oxygen of the modern marketing», claims Ekaterina Kutsyna. Big Data and AI, especially with integrated ML, allow modern tech companies to adapt to new trends and efficiently optimize promotion costs, she notes.

According to Irina Alexeeva, as video services and influencer marketing continue to evolve, engaging content for users, content creation and monetization tools for creators, and communication channels with target audiences for companies will all become more important. The expert predicts that the trend for use of content platforms and video services will only grow further. According to Irina Alexeeva’s forecasts, automation solutions for sequential communication chains in different channels that take into account previous business-client interactions will become even more in demand. This improvement enhances the customer experience through personalized communications and data-driven, tailored interactions. The demand for such solutions is growing among both large enterprises and small and medium-sized businesses, the expert notes.

Technological progress has made digital-out-of-home advertising possible, according to Sergey Naumov, Marketing Director of the Russ Group. «Thanks to the development of audience measurement methods and the emergence of ad buying tools common to the digital world, the digital-out-of-home segment (targeted outdoor advertising) has been integrated into digital marketing tools in the last few years».

In general, all participant in the advertising market expect the Internet segment to continue to grow. Based on the 2023 results, as well as in 2024, the growth of the classic digital advertising market will be 16–18% year-over-year, and the share of digital media in the media mix will increase by 1 p. p. annually, predicts Elizaveta Kalinina. Experts of the seventh National Advertising Forum talked about factors that drive development of the digital economy and online advertising.

https://advertisingforum.ru

As estimated by RAEC, the volume of the Internet economy in Russia is expected to grow by 29% in 2023, reaching 15.8 trillion rubles. The promotion of local brands, an increase in the share of SMEs, and the wider use of new advertising channels will facilitate the growth of the advertising and marketing segment, which, based on this year’s results may see an overall increase of 5%.

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