By ALIEFYA VAHANVATY
(with inputs from Neeta Nair and Simran Sabherwal)
Speaking at a conference in Sydney a couple of weeks ago, Sir Martin Sorrell, head of global holding company WPP, cautioned that too much marketing emphasis had been placed on Digital and that the pendulum would swing back towards traditional Print and TV. “People are still going to read, they’re still going to watch, but they’re going to read and watch in a different way,” he declared.
Closer home, Television ad spends hit total revenues of Rs 8,200 crore in H1 2015 (January-June) compared to Rs 6,800 crore in H1 2014, with e-commerce, FMCG and auto companies being the biggest drivers of this growth, as estimated by the revised Pitch-Madison Media Advertising Outlook (PMMAO), a study that analyses trends in the Indian advertising industry. ICC Cricket World Cup, the Indian Premier League and Delhi state elections also contributed to the overall growth in H1 ‘15.
PMMAO revised its forecast upwards to 13.8% growth for the total advertising market, as against the original forecast of 9.6% growth, projected in February 2015. The northward climb of TV advertising from earlier 10% to 21% for the full year, will result in the total market reaching Rs 42,234 crore in 2015, stated the report.
Meanwhile, ZenithOptimedia’s latest Advertising Expenditure Forecast expects mobile Internet advertising to overtake newspaper advertising next year, accounting for 12.4% of global ad spends while newspapers account for 11.9%. Mobile Internet will be the third-largest advertising medium, behind Television and desktop Internet, and will grow 38% in 2016 to $ 71 billion, while newspaper advertising will shrink 4% to $ 68 billion, according to the report. Mobile advertising continues to be the driving force behind the growth of the entire advertising market, contributing 83% of all new ad dollars between 2014 and 2017, says the ZO report.
There are countless stories to be told accounting for a dynamic and expanding advertising market in India. While the votes are in and everyone agrees that H1’15 has lived up to, and in case of TV and e-commerce, even exceeded expectations, with the festive season nearly here, experts predict that H2 will only get rosier. With new age companies with sky-high valuations attracting fat investments, new consumer durable product launches (remember Micromax a year ago was a mobile player, but today is aggressively selling HD TV sets and of course, Nestle India is set to go all out to recoup lost market-share with aggressive advertising) there’s plenty to look forward to.
WHICH MEDIUM APPEALS MOST TO MARKETERS?
WHO’S SPENDING?
FMCG has been the largest contributor in absolute terms, contributing as much as Rs 4,200 crore and accounting for 51% of the total Television ad spends, according to the PMMAO. Consumer packaged goods companies spent more on advertising and promotion in the three months ending June 30 compared with a year ago, to grow sales in a sluggish market, and to prepare for a revival in demand that they see starting in September, stated business daily, Mint. The country’s largest packaged goods company, Hindustan Unilever Ltd (HUL), increased its advertising and promotion spending by 22% in the three months ended June. Britannia Industries Ltd increased it by 15.6%, Emami Ltd by 38.1%, Dabur India Ltd by 15.5% and Colgate-Palmolive (India) Ltd by 11.08%, the paper reported.
Nestle India, in a bid to revive its flagship Maggi brand, as well as drive growth of other categories, is looking at increasing its advertising spends in the next few months. “We have always focussed on traditional media – TV, Print, Outdoor, Radio. But now we are also increasingly concentrating on the driver for our communication strategy of the future – digital media. But, I don’t think Television will ever take a backseat in the foreseeable future considering that 60% of the population consumer television on a daily basis. Interestingly, on the other side, it’s also a fact that 90% of the population has a mobile. And 70% of them are using the Internet on their smartphone, so the increasing role of digital media cannot be underestimated. The generation of today is a generation that is native to mobiles. Mobile is not just a mode of communication but a central part of their lives. And so by extension it becomes a centre of attention for brands including Nestle,” says Suresh Narayanan, the recently-appointed MD of Nestle India.
According to e-Tailing India, a knowledge repository for the online retail industry, from around 700 e-commerce companies of some scale and size in 2014, the number has swelled to more than 1,700 which include both big and small players in the space. E-commerce players grew by 70% and now account for 6% of the market, stated the PMMAO. And these start-ups are not shy of showcasing their offerings through aggressive marketing strategies in an attempt to lure customers to spend their monies online rather than at a retail outlet.
Top media planners say that the heavily funded online start-ups are the ones splurging without watching returns on investment. They point out that online advertisers are neutralizing losses of traditional advertisers and are leading the huge spurt in demand with the retail sector in general, projected to see spends in the region of 8-9% in the next few months. Industry estimates put the outlays between January and mid-May at close to Rs 1,052 crore — that’s nearly three-fourths of the Rs 1,483 crore spent by e-retailers in all of 2014.
With a tab in the region of Rs 1,500-2,000 crore, industry experts also expect e-commerce to displace the auto sector to occupy the third spot in the big spenders’ race in 2015. Meanwhile, the FMCG segment, with advertising expenses of Rs 8,000-9,000 crore, will easily hold on to the top spot while the telecom-mobile category, which spends some Rs 5,000 crore each year, should retain its second place.
“This year, ad spends will see 11-12% growth more than last year. While last year had the general elections, this year we had the World Cup and IPL coming in so that kind of evens out. As far as e-commerce is concerned, it is definitely a larger volume this year compared to last year and there is undoubtedly growth over there. A lot depends on this festive season. Besides e-commerce I expect automobiles, white goods, mobile phones, etc., categories to start spending,” says Ashish Bhasin, Chairman and CEO, South Asia, Dentsu Aegis Network.
Media reports say another reason e-commerce ad spends will spike in H2FY’15-16 is because both Flipkart and Snapdeal are looking for 1 billion dollar (Rs 6,300 crore) funding each from their current investors. In Flipkart’s case, it has already managed to raise $700 million (approx 4,500 cr) from their existing investors at a valuation of $15 billion (around 96,000 cr) according to an Economic Times report in July this year. It is not yet clear whether this fundraiser is part of negotiations with New York-based hedge fund Tiger Global and other investors since early this year to raise a billion dollar round, or if negotiations with these investors are still on. So, with more money coming into the market, it will fuel ad spends in the next few months, typically overlapping the festive season.
Also reportedly, most of these e-commerce portals, including Flipkart, Snapdeal, Jabong and others, reported poor Q1 sales numbers. As a result of this, there will be immense pressure on the top e-tailers to offer good discounts, so that the e-commerce players can make the most of it during the Diwali season which also translates into more aggressive media campaigns.
THE MEDIA PIE
India’s media ad spends are just 1.1% of the global total, according to eMarketer. This year, ad spending will rise 8% to just $6.6 billion and a little over $900 million of it will go toward digital ads, which works out to about 14.2% of total ad spends, the third smallest share worldwide, ahead of only Argentina and Indonesia states the digital marketing research firm. But by 2019, digital ads will command a share of more than a quarter of total ad spending in India, ahead of even France, Spain, Italy and Brazil, predicts eMarketer.
According to the latest ‘Global Media Intelligence (GMI) Report’ on key digital trends worldwide released by eMarketer, in collaboration with Starcom Mediavest Group (SMG), “Internet access growth in Asia-Pacific is expected to be 8.2% in 2015 and then remain around 7% for the rest of eMarketer’s forecast period, through 2019.”
“We haven’t revised Group M estimates at the start of the year, because we think we are pretty much on track... we are looking at an overall Adex growth of 12.7% in the year 2015 over the year 2014. Out of which 46% is TV and 34-35% is Print. Digital is going to end this year with about 9.5% to 10% of the total Adex and the balance 10% is divided between Radio, Cinema and Outdoor. In terms of the growth rate as per Group M estimates, TV is growing at the rate of 16%, Print is growing at about 5-6%. If you break that up, you will see a strong growth in the regional language dailies which are growing at a decent double digit rate. Digital is growing at about 35% but at a relatively small pace as compared to Print and TV. Other media, Cinema as per our estimate, is growing well 20-25% year on year but off a very small base,” says CVL Srinivas, CEO, Group M, South Asia.
Print retains its secure position in the holy trinity of media vehicles continuing to grow at a steady clip of 10% according to media estimates. It has the benefit of a very large base of advertisers and experts say that Print has at least six times the number of advertisers than Television. So by sheer number of advertisers, Print is protected. But the percentage spent by the large advertisers on Print has come down over the years, warn experts. At the same time, quite a few FMCG advertisers are once again discovering the power of Print because they realise that multimedia is the way to go. And Print, if used selectively and tactically, can substantially add to reach at a reasonable cost.
But the biggest ad spend bonanza for H1FY’15-16 has surprisingly not gone to Digital and instead continues to remain with TV. Says Sam Balsara, Chairman of Madison World, “As our interim report says, surprisingly Television has jumped by 20.6% between January to June. As against our original prediction, of TV growing by around 10%, January to June itself has seen it grow by 20.6%. We have not revised our forecast for other media, but I believe all of them will grow at a marginally higher rate than what we originally predicted. Overall, it is boom time for media, especially the TV industry. If the BJP promised acche din for everyone and are waiting for them, they have already come to the Television industry.”
Nikhil Gandhi, Vice-President and Head of Revenue, Media Networks, Disney India, says “Overall, it’s been better than last year and there is a very positive sentiment and mood out there. Of course, there is a bit of caution as well. The other thing is also the advent of BARC which we thought earlier would affect advertising adversely, but it hasn’t and actually has been received very positively. We’ve seen an 18% growth over last year, which is very healthy and surpasses the industry growth. Ad spends are looking vibrant for the next few months. We have no inventory available for the next quarter and that is a good enough indication for how we are seeing the market shaping up.”
Media planners also point out that Radio, Outdoor and Cinema have been a little on the backfoot and all of them need to take constructive steps to give TV, Print and Digital a tough fight. The Advertising Agencies Association of India (AAAI) and Indian Outdoor Advertising Association (IOAA) have recently signed a historic agreement to regulate the Outdoor business and ensure its systematic growth. With Radio finally getting into Phase III, it will open up lots of inventory in small towns and will encourage advertisers to discover the power of Radio. Cinema is looking at going into 100% Digital, which will make it easier for the medium.
The Medium and the Method
Within Digital, it is the mobile advertising ecosystem that industry experts believe will be worth in excess of Rs 700 crore in 2015; a jump of just over 60% as compared to 2014. However, this increase is just a prelude for a much larger shift in how companies are approaching mobile ad spends, which will start becoming apparent in 2016 and 2017, say experts. Says Prasun Basu, MD, South Asia, Millward Brown, “If you want to increase your digital spends, go Mobile, but there is a lot more to the roles that different media play. Television has done very well in this year and has grown in share and spends. The synergy between the traditional and new mediums is very very strong because they do different tasks. So the real story is in integrated marketing across channels by utilizing the benefit of one channel or the other and that gives you extra multiplier effect when you do that well. So I would say Digital and TV is a great combination.”
“Within Digital, programmatic buying is going to be the big thing. How you are really able to buy audiences and not media. It is much sharper targeting, far better context. We are soon getting into that space and I think that will be the trend for future,” says T Gangadhar, Managing Director, MEC.
Srinivas too thinks that it’s no longer a question of media mix itself but rather what media is the most effective to drive a particular campaign’s objectives. “Earlier, there used to be a lot of dependence on Television and Print. Today we are seeing budgets of clients getting split across other media as well. FMCG clients until 4-5 years ago spent about 90% of their budgets on TV. Today that has changed; they are spending quite a bit in Print and Digital. Regional language dailies have attracted quite a bit of advertising from them. The media mix, consumption across media is changing with the times. This is the single biggest difference between today versus 5-6 years ago with respect to media planning.”
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