Group M growth projections for 2012 are in danger of going under as ad spends stay tight
January 2012
6-7% growth in ADEX is what Group M projected at the start of the year. Though lower than the 15-20% growth the industry was used to, it was still seen as a gettable number, given the tough economic climate.
October 2012
The scenario today, however, is very different. With just a little over two months left for the end of the calendar year, the forecasted 6-7% growth rate may just be a little difficult to achieve. According to GroupM’s This Year Next Year report, the first half of 2012 witnessed just 1% growth in ADEX. What is a concern, as per the report, is that of the two biggest revenue generators, Television de-grew by 4% and Print saw a marginal increase of just 2%. This, even as advertising volume on Television grew by 9% and in Print by 8% in H1 2012.
In simple terms, this means that if a growth rate of 6% has to be achieved, then the industry has to grow at a rate of 12% in the second half of the year. However, growth in July, August and September has been muted. In this scenario, all eyes are on the traditional big-spending months of October, November and December. If the last three months too disappoint, then the industry, which is used to double-digit growth, could be looking at 2012 being a flat year (or marginal growth year) in terms of ADEX.
This is primarily because some of the major categories of advertisers – Auto, Telecom, BFSI and Consumer Durables, witnessed de-growth and curtailed their expenditure.
H1: IPL DISAPPOINTS
The first half of 2011 had two big properties, namely the ICC Cricket World Cup followed by IPL 4, which delivered in terms of rating and revenue. However, this year, no property was able to entice the advertisers, including IPL 5, which delivered on the ratings front. According to Group M’s Prasanth Kumar, “IPL had challenges on demand side as people did not want to put so much on that property at that point in time.” As per Ashish Sehgal, Chief Sales Officer, ZEE, “The degrowth could possibly be because of the South markets such as Tamil Nadu which have been facing blackouts. Also, IPL didn’t perform at par with expectations and could have led to a fall in numbers. The overall advertising growth is correct as even we have witnessed an increase.” The significant point to note here is that though the advertising volume grew, the resultant commercial GRPs witnessed a 3.5% de-growth.
Print also followed a similar script, as advertising volume grew by 8% in H1 whereas ADEX showed a marginal increase of 2% in the same period. It was particularly challenging for English dailies (which saw a 8% de-growth in volumes) and magazines. On the positive side, regional dailies excepting Bengali witnessed growth with Kannada dailies logging in an impressive 66% growth in volume. This growth was largely on the back of demand from its retail clientele. Retail, in fact, saw the highest growth of 13% among all categories in this period and overtook education as the biggest spender on Print in terms of volume. Dailies, on their part, introduced different brands and products which helped clients across different sectors to identify with the product. However, one factor that hit Print publications was the fact that big spenders like consumer durables curtailed their ad spends, but real estate and auto have showed some traction of late.
It was a similar story in Radio too. It saw its advertising volume growing by 38% but ADEX was up by only 1%. FMCG, Retail, Real Estate and Services upped their spends in Radio by nearly 50%. However, the biggest challenge for Radio remains the delay in Phase III implementation and no reliable audience measurement matrix, which affects advertising rates and packaging. Radio is also seen as the last preference in the marketing mix, and has been overtaken by Digital in attracting ad spends. According to Harish Bhatia, CEO, MY FM, “The low growth in spends is a situation that will remain as long as Radio is sold & bought like a commodity. Lack of a robust measurement currency and inappropriate media buying behaviour by advertisers has further led to this situation.” B Surendar, Senior VP & National Sales Head, Red FM 93.5 adds, “The general slowing down of the economy did affect advertising spends in the first half of this year. While fundamental factors like inflation & high interest rates, industrial growth, rupee depreciation, impact of Europe’s financial woes, etc., were primarily responsible for this trend, the not-so-positive sentiments in the minds of advertisers added to the problem.”
Digital is a segment that witnessed impressive growth of 31% in ADEX (YoY) during the first half. According to Dippak Khurana, CEO & cofounder, Vserv.mobi, “The economy witnessed a slow pace in growth in the first quarter. In such a scenario, brand marketers resort to mediums that offer sharper targeting. Digital offers them that, especially driven by the fact that an increasing number of consumers in India are now connected through Internet-enabled devices.” This is corroborated by Venkat Mallik, President, Tribal DDB & Rapp, India who says, “Categories that have supported digital advertising like Financial Services, IT, Telecom, etc., have increased their share of digital spends and a number of new categories have entered the digital advertising arena, such as FMCG, which has otherwise been a somewhat reluctant/tactical user of Digital.”
H2: WILL IT DELIVER?
Though the first half of H2 was muted, the festive and marriage season could help turn things around for the industry (even though Jul-Sep was muted). Plus, the much-anticipated Pakistan cricket team’s tour of India is guaranteed to draw big ratings on screen. This, along with big ticket television properties like KBC and Bigg Boss 6, should augur well for the television fraternity. Multi Screen Media India, President, Network Sales, Rohit Gupta, observes, “With big properties such as Kaun Banega Crorepati on Sony, we are all sold out, which is a healthy sign. All big categories such as FMCG, Consumer Durables, Telecom, etc., are advertising in a big way and no cut-backs have been seen. So yes, we are likely to witness noticeable growth.”
This feeling of optimism is also evident in the Print space. Arunabh Das Sharma, President, BCCL, says,“India’s GDP growth is expected to go through this low phase in H2 also, with marginal improvement by the end of the year. This improvement, along with the festival season, should make our H2 better than H1.” The festive season is also likely to see categories like Auto, Telecom and Real Estate upping their spends as they undertake a slew of launches. The one segment that will probably see the biggest growth in percentage terms would be Digital as companies across categories look to increase spends in this space. According to LK Gupta, VP-Marketing, LG India, “Digital media, which plays a very important role in the consumer’s journey of searching and evaluating products, will be given a bigger share to have an early influence on potential customers.” Digital is also the top focus for retail going ahead. “We’ve invested a good amount of time & money understanding the Digital scenario, which has been quite beneficial. A large part of the focus for this year and the next will be on Digital,” says Mukesh Sawlani, Director, And Designs.
Outdoor campaigns too find many takers. For premium apparel brand GAS, OOH is the preferred mode of communication, especially during the festive season. “Since festivals play a major role in driving business and increase customer spends, we run city-specific OOH campaigns. For example, currently we have an extensive OOH campaign in Kolkata targeting consumers during Durga Puja,” says Amit Dhanjani, Head-Marketing & Communication, Gas India.
BUT THE CONCERNS PREVAIL…
Television and Print together garner close to 85% of all advertising spends, with the biggest spenders being from the FMCG, Retail, Consumerdurables, Auto and Telecom sectors. Of these, Telecom and Consumer-durable segments curtailed their ad spends (in H1) and this was a major reason for the flat growth in ADEX. This points to a larger problem, wherein overdependence on certain segments could hurt the growth of the industry at large. Barring FMCG (due to nature of business), all other segments have seen a slowdown in spends at one point or the other and the challenge for TV, Print, Radio, Digital and OOH would be to target new categories, besides the traditional spenders. The task would include enticing the client with a differentiator solution, which would tempt the client to invest in the proposition. With margins under pressure and growth slowing down, it remains to be seen how companies deploy their advertising budgets. Advertisers, on their part, look to newer mediums in advertising which are low on cost, high on impact and reach out to a larger audience.
But, the bigger question remains that even if ad spends increase substantially in the last quarter of the calendar year, will we average out to 6% growth for the entire year? The low base effect from last year could aid in pushing up the number, but this looks to be a tough ask and the figure is likely to be revised downwards. The focus will be on adding new categories and, more importantly, providing value for clients as an incentive to spend more. Possibly, the ADEX spends for the year could be flat, muted or see just a marginal increase from last year, and this would be a big challenge going ahead.
Feedback: simran.sabherwal@exchange4media.com
