2020 will witness muted ad spends
GroupM TYNY 2020 report makes it evident that Indian advertising will witness a slow growth and digital will be the driver
GroupM, the media investment group of WPP, has announced their advertising expenditure (ADEX) forecasts for 2020. As per the GroupM futures report 'This Year, Next Year' (TYNY) 2020, India will continue to top the list as the fastest-growing major ad market in the world.
TYNY forecasts India's advertising investment to reach an estimated INR 91,641 crores this year. This represents an estimated growth of 10.7 per cent for the calendar year 2020. And digital ad spending keeps growing, TV steady and Print is holding ground.
Now let’s dig deeper into the report and the numbers shared. (The AFAQS article has the complete report embedded)
According to the report, India is the fastest-growing major ad market in the world and India is ranked the third-highest contributor to incremental ADEX in 2020. India has 11 per cent year on year growth but how much have we spent? 2019f 12 USD billion and in 2020f it is 13 USD billion. The US meanwhile spends 227 USD billion in 2019f and by 2020f it is standing at 246 USD billion.
Digital ad spend is growing and it is encouraging but it got a hit in the 2019f vs 2018 and the 2020f vs 2019 is on a recovery mode. Not just digital, TV has also been hit badly and it is slowly recovering.
The Indian advertising market has been hit badly and now it is in a recovering mode.
In my earlier story about the DAN Digital Advertising Report 2020, I had highlighted that the Indian advertising market is on a recovery mode now.
Digital is the medium that is going to witness the strongest growth of 27% in 2019 -2020. And hence the medium is the poster boy. The report shared by the end of 2019, the digital advertising industry stood at Rs. 13,683 crores, up at a rate of 26% from Rs. 10,859 crore in 2018.
If you see the above graph the medium has seen a dip from 32% in 2018 to 26% in 2019. Thereafter the projection shows that the medium picks up but the growth percentage is crawling.
Additionally, the DAN report highlighted the fact that the television’s unprecedented reach the medium still owns the largest pie at 39% followed by Print at 39% and Digital at 20%.
While TV’s reach has increased to 96% of the total audience, the time spent has reduced by 21% leading to an average of 11 hours spent per week on TV. And hence it is one of the reasons why it has seen slower growth in 2019 over the last year with its share shrinking from 40% in 2018 to 39% in 2019. The same holds true for print in India - the medium has seen a slower growth with its media spends share declining from 31% in 2018 to 29% in 2019.
Similar trends were observed in the GroupM report - TV still receives the maximum spends and digital has left print behind.
Reasons for the slow growth
Overall the Indian advertising spends have taken a set back and one of the reasons has been the Indian economy which hasn’t been in great shape. Indian economy witnessed a slowdown in 2019 and the advertising industry felt the tremors.
Advertisement spends growth rates barely touched 9-10 per cent in 2019 reported The Mint. Compared with a more robust growth rate of 12-13 per cent in 2017 and 2018, though this year was one of the general elections and the cricket World Cup.
Economic distress, plummeting employment rates and a sharp decline in consumption have forced companies to rework their advertising budgets.
The market was expecting the dull phase to change during the festive season. But the festival season saw an 8-9 per cent growth in ad spends. Though moderate compared to the 13-14 per cent increase in festival advertising spend last year.
Ecommerce companies and handset brands were the biggest spenders this festival season. Consumer durable brands also returned after a long hiatus, but FMCG advertising spend was flat. Auto companies, which have undergone huge erosion in demand, also stepped up their ad spend in order to get rid of inventory.
According to a September report by Credit Suisse, consumer goods companies are likely to post their worst revenue growth in the last 15 years as the slowdown in the sector intensifies due to lower farm incomes, liquidity crunch, and rising unemployment. Due to this the fast-moving consumer goods (FMCG) are shifting their focus to consumer promotions to drive volume in a sluggish market while being cautious on investing heavily on advertisements to save cost, reported Livemint.
“Channel partners and sales promotions would have gone up by 50-60 basis points on a year on year basis in the first half of the year. Spending on consumer offers would have gone up by 100-150 bps as percentage of sales. Now there are new ways of engaging with the consumers," Sameer Shah, Head- Finance (India & SAARC) of the Mumbai-based firm, adding that focus on digital and e-commerce have also helped bring down the advertising costs to an extent.
FMCG brands are the biggest investors on TV but thanks to the NTO, most refrained from spending. With NTO, viewers have the option of paying only for channels they want to watch and can drop others from their list. The consumers have to select their choices of channels and packs by visiting the website of TRAI, DPOs or MSOs.
While there have been very early positive results of TRAI’s NTO roll out but the advertising revenue of niche channels, especially English genre channels, are known to have been severely impacted.
With no major events, low consumer demand and a slowdown in sectors, 2020 will have a muted growth.
The outlook for the new year is bleak and, as such, the advertising industry will not go beyond single-digit growth next year, said Sandeep Goyal, chairman, Mogae Media, a Mumbai-based marketing and communication agency to Livemint.
Today the consumer is seeking better value so brands will have to be effective and efficient with their advertising strategies.