Various agencies have predicted an average growth rate of 12% in ad spends in 2015; quality of growth minus last year’s big election money will indicate well-being of the M&E industry in India
By Aliefya Vahanvaty
This is the season for annual ad spends reports and global media agencies are busy unveiling their advertising expenditure forecasts. They predict an almost similar growth of 12% in ad spends in India in 2015, while the FICCI-KPMG projections expect the Indian Media & Entertainment industry to register a CAGR of 14% to be worth Rs 1,27,500 crore in 2015.
WPP’s media-buying agency GroupM released its ‘This Year, Next Year’ (TYNY) media forecast numbers recently, while similar projections have been doing the rounds since late last year. In December 2014, Magna Global, the strategic global media unit of IPG Mediabrands, and Publicis Groupe SA’s ZenithOptimedia both announced their ad revenue predictions for India for 2015. Coming up in the next couple of weeks is the much-awaited Pitch Madison Media Advertising Outlook 2015.
What the industry waits to see is how the adex fares minus the buoyancy brought about by high spends on election-related advertising and high voltage marketing by e-commerce players last year. If it manages to touch the predicted growth rates through incremental increase in ad spends by advertisers, it will be an indicator of improved business and consumer confidence. With cautious optimism being the buzzword, India Inc. has already begun 2015 on a strongly positive sentiment both in terms of consumer spending and business outlook.
What boosted ad spends last year?
The elections and e-commerce were the major ad spend categories last year, says the Group M report. Ad spends, which touched Rs 43,490 crore in the calendar year 2014, saw an increase of 12.5% over 2013.
According to Election Commission data, the BJP and the Congress spent over Rs 714 crore and Rs 516 crore, respectively, in the 2014 General Election and the Assembly polls in various states. Assuming the smaller regional parties together spent as much as the Congress and BJP put together, the total party spends could be in the region of Rs 2,000-4,000 crore.
According to newspaper reports, media buyers and sources close to the BJP’s campaign confirmed that the party could have spent about Rs 5,000 crore by May 12, 2014 when the last phase of polling took place. The party had booked 15,000 hoardings across India for up to three months. With each hoarding costing as much as Rs 2-3 lakh per month in cheaper locations to as much as Rs 20 lakh per hoarding per month in Mumbai’s Nariman Point, the total cost was Rs 2,500 crore. In the Print media, the BJP bought the most prominent ad slots across national, regional and vernacular newspapers for 40 days at an estimated cost of Rs 500 crore, as revealed by party sources. The advertisement budget for magazines was an additional Rs 150 crore. In TV, the BJP bought about 2,000 spots a day across Hindi, English and regional news, general entertainment and sports channels at a budget of Rs 800-1,000 crore. It spent another Rs 150 crore during the T20 World Cup. The online and Radio budget was about Rs 35 crore. Asked to comment on its ad budget, a senior BJP leader had said, “The expenditure would be about Rs 700-750 crore.”
But it wasn’t the elections alone. The second half of 2014 saw e-commerce and smartphone makers dominate ad spends during the festive season. As every e-commerce company was trying to establish brand identity and grab consumer eyeballs, high spending on marketing was essential. In a bid to out-do each other, top-players poured substantial money into advertising. Year 2014 witnessed some of the very high spending marketing budgets from some e-commerce companies which did not even exist a few years ago. Around Rs750 crore was spent on advertising by e-commerce companies in 2014, including those that run popular sites Flipkart, Snapdeal, Jabong, Olx, and Quikr, as well as niche players like Zivame, Pepperfry, FabFurnish etc., according to data compiled by TAM Media Research, the television viewership-monitoring agency that also monitors advertising.
So what lies in store for 2015?
Post-election euphoria is slowly converting into positive signs of economic revival as markets surge and investor confidence improves. This, coupled with economic reforms, disinvestment policies and RBI's measures in keeping key rates unchanged, is benefiting the economy.
Cricket is already reaping the benefits of ‘achhe din’. Though ad rates have increased by approximately 50% in the 2015 World Cup, the increase in estimated TV ad revenues as compared to the 2011 tournament have also been in line. The TV ad spends in 2011 was Rs 700 crore. This year, the World Cup is estimated to garner Rs 1,000-1,200 crore.
In terms of the categories that are going to drive ad spends, e-commerce is expected to lead the charge in 2015. There is increased competition in this sector and no dearth of funding, states the Group M report.
“Fundamentals remain extremely strong this year. Last year, the elections kicked off that sentiment. I think this sentiment has taken form in many of the segments such as e-commerce and FMCG as well as other segments that are positively affected by the growth in the economy, by stabilization of prices across categories and there is generally a prospect of 'achhe din' and that prospect continues. In addition to that, the mobility industry is going through a boom and everything continues to look good for smartphones,” says Raghuvesh Sarup, Sales Director, Microsoft Mobile.
“FMCG may or may not grow at a fast pace but what is definitely something to watch out for is the growth of e-commerce in FMCG. This is very, very nascent right now but all of us are actually gearing up for this. And a lot will depend on how FMCG companies and e-tailers can partner jointly on this. There is very good potential in this especially for premium lifestyle aspirational brands to go through the curve of e-commerce. That's one of the key trends I see playing out for marketing in FMCG this year,” says Sunil Kataria, Chief Operating Officer, Sales Marketing & SAARC, Godrej Consumer Products Ltd. “What is definitely helping and which I think will translate to spends also is that globally commodities are down, oil prices are down, the dollar is more favourable than last year and this is leading to margin expansion for all the FMCG players and other sectors as well. Once the margin expansion happens, companies will be under pressure to plough the money back, and they will have to put it back in advertising or promotions,” he adds.
But not everyone is convinced about ‘achhe din’. “Ad spends in 2015 are going to be static or grow very marginally. There is going to be a much stronger pressure on marketers for key performance indicators. There will just not be a viable reason for people to go on blowing money in communications. Instead, there will be a stronger focus on direct communications; mobile and Internet.
While there are obvious issues out there, this is an area with a much stronger focus, and consequently, the quality and the engagement and the experience has to be very strong as well,” says Abdul Khan, Global Chief Marketing Officer, Alef Mobitech. “FMCGs will continue to be strong but there will be constant revision. I don’t see this grand marketing budget but rather a very flexible, almost variable and almost like a weekly or a fortnightly assessment of the marketing budget... So I continue to see the reign of short-termism,” he adds.
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