Internet use in Mexico – strong growth, broadening market, but massive untapped potential

31/05/2011

By: Danny Meadows-Klue

The rise of internet use in marketing is happening much faster in Mexico. From the pavement cafes of Polanco to the glass box skyscrapers of Santa Fe, in Mexico City Danny Meadows-Klue finds a growing internet economy and ambitious marketers readily using online tools from search to mobile and keen to exploit everything social media has to offer in Mexico.

The first time I worked in Mexico was before Google opened its doors. Today search takes 24% of all online adspend, and the role of the web in the media mix has transformed. 35m Mexicans are online – and among them the most affluent and influential in the country.

The role of the web in marketing continues to spread, and with TV commercials driving audiences to the web, and out of home media littered with URLs, that shift is continuing quickly. The reason is simple: for those 33m consumers the web isn’t a small element of their media, it’s becoming central.

Across Latin America, web access began as the luxury for young affluent office workers; a new generation of business people looking for smarter ways to work and liking what they found online. Today that audience has broadened: housewives are switching their soap TV viewing to the TV network’s websites, teenagers are using Twitter, and seven out of every ten Mexican internet users are on Facebook. Demographics are broadening, and with the rise of social media, the breadth of the role the web plays in people’s lives is growing fast.

Mexicans who have internet access are online 4hrs per day. It’s a big slice of the time people spend with media, but as internet usage and in Mexico has grown, it’s brought with it a new type of media multitasking. 28% of Mexican internet users are listening to the radio while online and probably more regularly watch TV while browsing on a laptop playing with games on a mobile phone. The focus of attention is shifting, and increasingly it’s the TV screen which is secondary in the home.

Web advertising

Brands, albeit rather slowly, are realising this. Budgets are switching, and the role of digital media in the mix is rising. The current growth in online advertising is around 35% year on year, the growth rate is strong in real terms, though less than the 70%+ year on year rises of the early days of the Mexican web marketing industry. Since 2005 the sector has enjoyed more than 1000% growth, though many brands are yet to do more than build a basic brand web site.

Strangely many media agencies are still over-selling TV, and while 30 years of audience research proves that the 4 big channels can cover the whole country, nobody seems to be asking how many of the commercials are truly being watched. Just like their large neighbour north of the boarder, Mexican consumers have become media savvy and shifted their focus away from TV.

A recent survey suggested that 65% of firms are already spending 10% of their marketing budgets online, leading the industry to be worth around 3.4bn pesos last year. A quarter of that spend went into search engine advertising (much more if you count the less visible optimisation to get sites discovered for free). 52% of the budgets were traded using the cost per thousand (CPM) model of media buying and just over 60% of the spend was in display advertising that has become strong thanks to upmarket motoring and finance ads. Classifieds and directories account for around 15% of spend, and while growing rapidly in volume are only growing slowly in real terms: the price of classifieds are falling.

The industries in Mexico that have started to truly embrace the web are common to the early adopters in other markets. Automotive, business services and finance are three of the lead categories, with online advertising and brand websites forming a key stage in the consumer’s journey to purchase. Investment in Google and Bing has proved effective at driving traffic, and strong local portals like Yahoo, MSN and Terra provide key platforms. But beyond the high-consideration purchase categories that prove such a natural fit for the web, consumer packaged goods brands are starting to mobilise with Food and Drink one of the highest potential growth categories.

Internet use in Mexico

As in most technologically developing markets, email remains a dominant growth driver for the web, with 70% of internet users in Mexico describing email as being key for them. 49% claim to download music, 41% visit chat-rooms, 34% share photos or videos and 30% play online games, with simple casual games becoming the dominant platform for interaction.

If you take a consumer’s typical day and look at the time they spend with media, the numbers are surprising. Around 28% of that ‘media time’ is spent online, ahead of 21% for radio, 16% for traditional TV and 20% for cable TV. Looking at the time spent online gives a detailed and clear picture of the real scale of the shift in consumer attention. And once you start using the web, there’s no going back.

Judging by the emptiness of the Apple store in Polanco, tablets are yet to get any traction. The huge signs announcing the arrival this month of the iPad 2 don’t seem to be converting into sales. Young professionals are hungry for iPhones, but there is little sign that tablet computing is going to move quickly beyond a small status-minded group of early adopters. The mobile wars are intense, with Nokia E8 billboards a common sight around town and Blackberry taking to the streets with promotions in the parks that include one unlucky guy dressed up as a 7ft tall black shiny Blackberry. I pity him as it’s 34 degrees and not yet noon.

Advertising trend spotting

Social media development, online media and mobile marketing are all growing fast, with consumer brands in particular looking for ways to integrate online into their mixed media campaigns. This year three quarters of large brands are planning to increase their spend online and none are intending to reduce. This will lead to more branded content as well as online advertising, and a greater push into social media. In contrast, the dominant four TV networks will come under increasing pressure as their ad rates don’t seem to justify the engagement.

Barriers to growth remain

But doing digital in Mexico is not easy. Since 2005 when the industry started to mobilise, there have been weaknesses in the quality of audience data and questions about the claimed audiences of many websites. Allegations of corruption among media agencies are less common today, but the industry has not yet emerged into the more mature phase of the efficient markets of Europe and the USA, leaving some brands still, rightly, questioning the impartiality of the advice their advisors give.

Wider barriers marketing directors describe as holding them back in digital include are more familiar: the lack of experience in their teams, lack of the right type of measurement models, varying capability within traditional and digital agencies, and an emotional connection to TV that defies rational media planning.

Social networking in Mexico is massive

Social networking in Mexico seems unstoppable. The sector has traffic levels rising 106% year on year. Facebook is at its tipping point, with 7 out of 10 current Mexican internet users enjoying Facebook accounts – at the expense of Orkut or MySpace which are not gaining ground - and 3 out of 10 are on Twitter, suggesting Twitter is enjoying the same accelerated growth here as it is in Indonesia and some of the other leapfrog mobile markets.

Consumers are clearly ready for relationships with brands through social media, with 3 out of 10 Mexican internet users already claiming to be fans or followers of a brand within a social network.

Where next?

The next leap for internet use in Mexico will be mobile. Current replacement rates of smartphones are set to unlock a massive increase in the numbers of consumers with smartphone access during the next 18 months. Older generation handsets are being passed on within families and in parallel with the quality of mobile web experiences improving. Bandwidth costs – both mobile and fixed line – remain uncomfortably high, but the amount of bandwidth needed by consumers is falling in cash terms.

That’s why mobile web users are no longer confined to the bars and restaurants of Polanco and Santa Fe, and why the million taxi drivers that weave through Mexico City are soon as likely to be facebooking as they are texting. Looking beyond the BRICS markets, Mexico is now a key internet market to watch.

Danny has been coaching firms in digital marketing for over 15 years. More than 45,000 people have attended his talks and courses in over 30 countries. He set up and ran the UK and European IAB trade associations for almost 10 years, was the pioneering publisher of Telegraph.co.uk, held the Vice Presidency of NBC’s European internet business, and has been a government policy advisor in the UK. He is chairman of the Digital Training Academy that coaches marketing teams to improve their ROI and founder of the Digital Strategy Consulting practice that creates internet marketing strategies for brands. He is a Commissioner at the digital marketing regulator in the UK, and the publisher of Netimperative and Digital Intelligence. He now coaches management teams, helping them accelerate their businesses and transform their organizations. Contact him on Danny@DigitalStrategyConsulting.com or http://uk.linkedin.com/in/dannymeadowsklue

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