According to the exchange4media Group’s Mobile Ad Spends India Report 2016 released at The Maddies, advent of 4G and smartphone penetration fuel growth rate of mobile ad spends; segment expected to grow @78% to reach Rs 1,280 crore in 2016, and @70-80% to reach Rs 2,200 crore in 2017
BY ABHINN SHRESHTHA
India is considered among the fastest growing advertising markets in the world, and within that the mobile advertising segment has been showing the fastest growth though it still accounts for a tiny portion of the overall ad spends. According to eMarketer, it will just account for 3.3% of total ad spends in 2016. This is not an insignificant sum, as it represents almost double of last year’s mobile ad spend estimates.
Most estimates project Indian mobile ad spends to continue to grow at a rate of 80-100% in 2016, with a slightly lower growth forecast for 2017.
The exchange4media Group’s Mobile Ad Spends Report 2015 had projected a growth rate of 60% with total ad spends of Rs 720 crore in 2015. For this year’s report, we again had extensive conversations with marketers, media planners, digital and mobile agencies to understand growth of ad spends in this segment. According to our estimates, mobile ad spends will grow at an even higher rate of 78% to reach Rs 1,280 crore in 2016. This segment is expected to keep growing in the range of 70-80% into 2017 to reach around Rs 2,200 crore.
GROWTH DRIVERS OF MOBILE ADVERTISING
Among the biggest influencers in the growth of mobile advertising will be the introduction of 4G and increase in smartphones. India is expected to pip the US to become the second largest smartphone market in the world by 2017, according to Morgan Stanley. The firm projects that India will see a 23% CAGR in terms of units sold as compared to 5% for China for the same period.
“What we have generally seen the world over is that when a third of all phones become smartphones, mobile advertising gets a huge boost. In India, about 18-20% of all phones are smartphones, so that inflexion point is still 18-24 months away. Consumption of video on mobile will be huge in the future and that is when sectors like FMCG and others will start spending big money on mobile advertising because that is when it will becomes more mass market,” comments Ashish Bhasin, Chairman & CEO South Asia Dentsu Aegis Network and Chairman of Posterscope and MKTG Asia Pacific. Nadeesh Ramachandran, VP (Sales) at Vserv, points out that some of the other drivers for the amazing growth seen in mobile ad spends are a push by the government towards digitization, a transformation being seen in the way India Inc. consumes content and focus on smart data-led marketing. “The biggest driver for growth of mobile ad expenditure in 2016 is the consumer himself. Indian smartphone users, on an average, spend 169 minutes per day on their devices, with this user base growing at a 26% CAGR from 2013 to 2017. Today, most of the media interactions and touchpoints are on mobile, which generate consumers’ interest and intent signals,” Ramachandran adds.
“Mobile advertising is growing at a rate that will surpass all forms of advertising in 3-5 years. TV will be disrupted first and we’re already seeing marketing budgets shifting from TV to mobile. In the coming years, it will be the de facto mode of purchases and I expect significant improvements in marketing budgets,” says Arun Pattabhiraman, VP & Global Head of Marketing, InMobi.
THE PROMISE OF 4G, AND ARRIVAL OF JIO
Now, 4G and especially, the launch of Reliance Jio, is expected to lead to a sea change in the Indian telecom landscape with the widely held belief that data costs will decrease while bandwidth increases, which will directly lead to increase in consumption of content on the mobile.
“Access to faster and higher order generations of technology only means improving width and depth of the medium. This means more people and more time from existing people who are reached by the medium. This augurs well for all,” comments the VP, Media Planning & Strategy (Vibrant) for Reliance Jio. The launch of Reliance Jio is one of the biggest reasons being seen for the proliferation of faster mobile Internet as it will make the market more competitive. We have already seen both Airtel and Vodafone slashing data tariffs. In a pricesensitive market like India, this will be a huge game-changer. However, the launch of Jio is still mired in some issues with the company being blamed for alleged violations of tariff norms by its competitors. On the other hand, reports indicate that competitors might be blocking calls from Jio networks to their own.
TRAI is meeting various telecom operators to discuss these and other issues concerning 4G. One can only hope that they find a solution that benefits the ecosystem in its entirety. The other reason that there seems to be a hint of caution about 4G is that 3G did not quite live up to its expectations and telecom infrastructure in India still leaves a lot to be desired. “The 4G experience will be great if telcos can develop the infrastructure. Mobile advertising will be fuelled a lot more by a combination of 4G and video. Video consumption will go up in a huge way, but unless the infrastructure is improved, it does not make sense. There are opportunities, but these are subjective to infrastructure problems getting solved,” says Charulata Ravikumar, CEO of Razorfish India.
On the marketer side, Manan Mehta, VP (Marketing) Yash Raj Films also feels that infrastructure is still a challenge. “We will have to wait and see how 4G will change the game. More bandwidth will increase content consumption and bring in new concepts like IoT, augmented reality, etc. A lot of things will change if 4G becomes mainstream. There will be a lot more experiments and trials,” says Mehta.
Despite the wariness, there is still optimism. “The coming of 4G and the penetration of smartphones will provide easy Internet access to people. If you see, FM radio grew because radio was available everywhere, especially when people were travelling. It is the same scenario with mobile,” says Dinesh Vyas, Associate Vice President (Planning) at OMD.
According to Vinod Thadani, Sr Business Director at GroupM Media India, “With more content providers like Voot, Hotstar, etc., entering the picture, videos have become a huge real estate though earlier there was a big gap between infrastructure and content… 4G will have a huge impact. It is still nascent at the moment and might take 3-6 months for the ecosystem to stabilize across players. Looking at the growth in infrastructure, even content providers have upped their game. This is being seen not only in video content but also other OTT services like news, entertainment, etc.”
Vaibhav Odhekar, COO & Co-Founder, POKKT, also highlights smartphone adoption and growing mobile Internet usage as the key drivers of mobile ad spends. “With 3G/4G and newer players like Jio disrupting the pricing models, there will be significant mass adaption of Internet usage on mobile. Brands will spend where the user is present and where he can be reached easily. India missed the broadband bus, but we are definitely riding the smartphone wave,” he asserts.
VIDEO CONSUMPTION EXPECTED TO EXPLODE
One of the direct consequences of a better telecom infrastructure is expected to be huge growth in video content consumption. As per a 2016 FICCI-KPMG report, online video consumption was up to 66% from 49% a year earlier. “Mobile video is forecasted to grow by around 55% annually through 2020 and will then account for around 60% of all mobile data traffic. With an increasing number of people watching videos on their smartphones, the industry has recognized the potential that mobile video ads can offer,” says Tripti Lochan, CEO, South East Asia & India at VML Qais.
BFSI, E-COMMERCE, FMCG & AUTO SECTORS LEAD
Media planners and digital agencies we contacted say BFSI continues to be the most bullish in terms of mobile ad spends while spends from Auto, e-commerce and FMCG are also substantial. Other major spenders include Consumer Durables, Telecom, Retail and Media & Entertainment.
“Mobile-first companies like taxi services, e-retailers, food delivery companies and OEMs like Samsung, Micromax and Telecom companies are major spenders on mobile along with technology companies like Google and Intel. There is a lot of mobile ad spending that is happening directly, which does not go through media planners. Video formats (both in-stream and out-stream) and native advertising will be the growth engines for mobile. Native is already outperforming display,” informs Vikas Gulati, MD (Asia) at Opera Mediaworks.
Also, contrary to earlier concerns, media and digital agencies say that though there might have been some reduction in overall ad spends by the top three e-retailers, this is being made up for by the newer entrants who focus on performance marketing. “It’s a misconception that e-commerce companies are trimming down ad spends. While e-commerce players are wary about traditional ad spends, they are focusing more on RoI-driven channels like mobile. In a broader scenario, with the change in FDI norms and the concept of deep discounts being hindered, e-commerce players will look at advertising as an important medium to drive sales. Even sellers on platforms will look at advertising to increase sales,” adds InMobi’s Pattabhiraman.
CHALLENGES IN THE WAY OF SPENDING ON MOBILE
With the mobile ecosystem growing so rapidly, certain challenges are to be expected. We have already seen how the growing use of adblockers has become a matter of concern. According to adblocking expert PageFair, 122 million Indian smartphone owners used adblockers as of March 2016. Then there are questions about attribution, viewability of ads, lack of standard metrics, a complicated ecosystem, etc., that need to be addressed.
“One big need is for a common attribution platform and channel that measures across different platforms. The problem is that no one attribution model can work for every brand or category, so you need to figure out which is the best option for your own category or brand. Without compromising what a channel does best, we should be able to attribute its contribution in the right proportion and right manner. I think this will solve a lot of our digital marketing complexities,” says Nitin Agarwal, AVP & Head of Marketing, ShopClues.
Chirag Shah, Co-founder of Seventynine, says that presence of too many players and layers in the ecosystem with little clarity on platform or network value propositions is a great challenge for present day advertisers. “It’s very difficult to evaluate each and every solution provider and select those with suitable solutions. It is a big challenge for a marketing team. As a result, sometimes the results achieved are not positive and the whole ad-tech industry gets stereotyped for it,” he points out.
“As a marketer, I need to have a good sense of my ROI from any investment. But most metrics presented in the mobile ad business today are just markers of a path. They don’t really show any substantial result for the brand’s investment. So while the brand manager can use it like an audit report for action taken, the ability to propel the brand ahead gets missed out,” says Aditya Save, CMO of People Interactive.
He adds that the absence of a large number of well differentiated brands on the supplier side, i.e, among networks, tech partners and aggregators, also tends to be a challenge as this means that every advertiser must spend valuable time, trying to understand each entity. “It often delays and derails an advertiser’s ability to spend, especially in a sector where technology is galloping so fast every day,” he explains.
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