NEW DELHI: Internet advertising expenditure is set to triple in India during the next three years, according to Microsoft, the IT group.

The company reported that search and display ads combined are now worth between $240m and $250m annually in the country, but suggested figures should hit $750m by the 2013/14 financial year.

One factor behind this trend is an increase in online penetration, with analysts pegging the current number of internet users in the 70m to 100m range, but forecasting this total should rise dramatically.

"There is also the emergence of the middle class and disposable income is growing," Sanjay Trehan, the head of MSN India, told exchange4media. "So it is this whole environment and the ecosystem that will drive growth."

However, numerous challenges still exist, such as the comparative expense of buying a PC, inadequate infrastructural development, low connectivity speeds - hampering the uptake of rich media - and a lack of viable monetisation models.

Trehan further argued that as approximately 2% of all Indian adspend is allocated to the web, it is very difficult for competing media owners to generate meaningful revenues.

"The pie in itself is so small, and there are so many players who are struggling to get a share of the pie," he said.

More specific requirements include the need for a unified audience measurement body and the widespread use of opt-in tools so consumers can choose whether to receive marketing messages, a model which is inconsistently applied at present.

Advertising agencies also have a part to play in changing this situation, Trehan asserted, a role some major networks seem unwilling to adopt.

"There are instances that the clients are demanding digital, but the larger ad agency is not actively selling it," he said. "They feel that they can make easy money in other mediums. That is why they are not supporting it."

More positively, declining data costs and the rise of web-connected mobile phones, often employed instead of computers as the primary means of accessing the net, are lending a distinct look to India's digital market.

"I feel that from India's point of view, mobile is the most important screen of the three screens - TV, PC and mobiles. The challenges that content developers will be facing increasingly would be to customise the content for mobile," said Trehan.

Data sourced from exchange4media; additional content by Warc staff