1. Advertising expenditure, how it turned out throughout the year across industry lines

Advertising expenditure, how it turned out throughout the year across industry lines

The year has been good for us. There were many new entrants (app-based businesses like Ola, Uber, etc) for outdoor publicity along with traditional clients such as telecom, real-estate, BFSI, automobile, fashion, entertainment, jewellery, etc. With the introduction of technologies like neons, bluecasting and digital outdoor formats, the inquiries for outdoor promotions have significantly increased this year.

By: | Updated: November 22, 2016 6:40 AM
Every year, numerous media agencies bring out their AdEx (advertising expenditure) predictions to forecast which sectors and categories are going to spend big bucks in advertising. (Express Photo) Every year, numerous media agencies bring out their AdEx (advertising expenditure) predictions to forecast which sectors and categories are going to spend big bucks in advertising. (Express Photo)

Every year, numerous media agencies bring out their AdEx (advertising expenditure) predictions to forecast which sectors and categories are going to spend big bucks in advertising. While most of them revised their predictions owing to the market scenario mid-year — for instance, IPG Mediabrands revised it from 18.4% to 16.2%, Madison from 16.8% to 13.2% for 2016 — the statistics played a role in understanding the growth of various categories and sectors. This year, events like state elections, T20 World Cup, Rio Olympics, etc were seen by planners as the reason to generate incremental ad spends. Apart from this, the 4G landscape gave ample opportunities for both service providers and handset manufacturers to accelerate spends.

As the year draws to a close, Meghna Sharma of BrandWagon talks to media agencies, marketers as well as the platforms to get a lowdown on how the AdEx predictions fared this year and what drove it.

BFSI Sanjay Tripathy

Senior EVP — Marketing, Product, Digital and E-commerce, HDFC Life

Different agencies predicted the AdEx for this year. How has the banking industry fared?

Banking has been growing by a substantial 5-7% y-o-y on the back of the growth in TV and digital spends. We have seen spends in print decline gradually. New and challenging players in the banking sector are driving awareness through TV by being present in relevant corridors in media.

What are the reasons for this?

BFSI has seen many new entrants already active in the ATL space. In addition, indirect competition in the form of e-wallets and other alternatives has spurred existing players into action.

As an advertiser, do you see the RoI on the AdEx?

BFSI is a complex category and interaction with customers is limited to only a couple of times a year. Building a strong brand preference is challenging given category limitations, increased competition and low product differentiation. Media investments have a strong correlation in creating strong brand awareness.

Compared to the West, how can India improve its AdEx?

Unlike digital, where there is real-time data available, traditional media lacks a robust measuring mechanism to justify ad spends. Also, there are several challenges around availability of rich consumer data to truly strategise and plan media spends. An improvement on both these counts will help improve AdEx.

Auto Virat Khullar–Head — Marketing, Renault India

Different agencies predicted the AdEx for this year. How has the auto industry fared?

Consumer products, automobile and e-comm companies continue to drive growth similar to 2015. While FMCGs continue to lead with 28%, the second biggest category, automobile, is contributing to 8% of overall media spend. The category is growing in line with overall ad spends at 15%.

What are the reasons for this?

New launches, especially in the compact SUV segment and entry-level segments have attracted huge investments on media.

Do you see the RoI on the investments on the AdEx?

With clutter in the media and consumers being spoilt for choice, it’s essential to be top of mind and every player needs to outshout the competition. Yes there is good RoI and we measure it from time to time.

Compared to the West, how can India improve its AdEx?

In a young country like India media habits are shifting towards digital and social. The West is more evolved and India is not far behind in utilising media efficiently. Digital spends are growing at a rapid pace y-o-y.

FMCG Rajeev Dubey-Head — Media, Dabur

Different agencies predicted the AdEx for this year. How has the FMCG segment fared?

FMCG is not affected by the festive season per se, but overall, there are some categories that have seen an increase in expenditure while some haven’t. I was looking at some industry data and I noticed that the category saw a decline in AdEx because there weren’t any new launches from the big brands. For example, in the shampoo category, two-third of the expenditure is

divided between HUL and P&G, and if they have a decline, it’s bad for the whole segment.

What are the reasons for this?

Every year IPL gets its fair share. FMCG companies do experiment with cricket a bit but the rest of the year isn’t determined by cricket or any other sport. For us, every day counts. So, even if we create an impact through cricket or any big property, we have to distribute the money throughout the year. New launches, markets, competition and communication are what drive the sector and the AdEx.

As an advertiser, do you see the RoI on the investments on the AdEx?

If you look at the sum total of all FMCG companies, you will find that typically 5% of the total turnover is spent on ATL and BTL advertising, but overall ad to sale ratio is 12-14% as per the balance sheets of all top companies. For different categories, there are different RoIs. It is not a straight line.

Compared to the West, how can India improve its AdEx?

We are still way more focussed on television and ATL. The West has moved much ahead of us in such terms. But if we talk about proposition (spend on AdEx) then I guess we are both at par.

How did the AdEx fare this year?

If you look at y-o-y figures, we have seen the same numbers in the sector. I think it has been consistent for the category.

Ashish Bhasin –Chairman and CEO, South Asia, Dentsu Aegis Network

How far have the AdEx predictions made by the agency come true this year?

Our predictions have been relatively conservative. Last year, we had predicted a 12% growth in AdEx. We do a quarterly revision and in our last revision, we maintained it at 12%. Most of our competitors had predicted very high percentages which were lowered later. So far, our predictions have stood true with a 99% accuracy in the last three years.

What are the main reasons behind it?

In AdEx, it has to be a collection of various categories, different advertisers, different mediums, different trends all factored in with the current situation. For instance, in e-commerce it was very easy to see that the boom was going to ease out. And at the same time, it was going to add on because Amazon, Flipkart, etc are there for the long term. So, you don’t have to just look at global predictions. Also, you need to factor in known events like elections, IPL, etc. After all it is a prediction, so nobody can get it 100% right.

Which sectors stood true to the predictions and which did not?

The one which stood true to our predictions was e-commerce. The whole market got it wrong. We had predicted that this particular sector will see a slowdown.

Compared to the West, what does India need to do to improve its AdEx?

AdEx needs a lot of resources behind it; it has to be build up brick by brick which we lack in India. For instance, digital is growing, but within it some aspects are growing faster — video is faster — while some are growing slowly. Now that Jio has been launched, bandwidth will be available to the consumer at a cheaper rate so this will have certain implications on video consumption. This has to be build up, and one must not take a figure by just thinking that things are looking great so we should predict a high percentage.

CVL Srinivas–CEO, South Asia, GroupM

How far have the AdEx predictions made by the agency come true this year?

After a sluggish January-August (around 10% growth), the festival spending was relatively better (around 15% growth). We expected the year to end with 13-14% growth compared to our earlier estimate of 15.5%. However, with the recent demonetisation development we are seeing a pullback of ad spending across many sectors. This could have a further negative impact in the short term on the

AdEx although in the long run it would benefit the economy immensely.

What are the main reasons behind it?

Most of us expected e-commerce to slow down in 2016 versus 2015 in terms of growth rate but we didn’t think it will happen as early as April. FMCG was a surprise growing at less than 10%. So while sectors like auto, media and government increased ad spends, the slowdown in e-comm and FMCG growth rates were the main reasons for pulling the AdEx down.

Which sectors stood true to the predictions and which did not?

Media, auto and government have increased their spends by decent double digits so far in the January-October period. Categories like FMCG, telecom, BFSI and e-commerce have had below average spends although there was a slight ramp up in September. On an annualised basis, telecom, real estate

and retail were also on the lower side.

Compared to the West, what does India need to do to improve its AdEx?

We need to encourage more entrepreneurs to invest in brand building. India is still an under-branded market relative to the size of the economy. The more local success stories we are able to build (where brand value leads to unlocking enterprise value), the better for the AdEx. We can do this by developing more effective local media options to grow the long tail of advertisers or by creating models that help entrepreneurs divert some part of their capital to brand building. For established players to spend more in advertising we need to ensure media platforms deliver the business objectives that have been laid down. This needs a combination of robust measurement systems combined with data and analytics. With businesses under so much pressure today, every rupee spent needs to be accountable.

From left Sanjeev Gupta, Ashwin Padmanabhan and Dushyant Kohli (Express Photo) From left Sanjeev Gupta, Ashwin Padmanabhan and Dushyant Kohli (Express Photo)

OOH–Sanjeev Gupta–MD, Global Advertisers

Different agencies predicted the AdEx for this year. How has the OOH advertising industry fared?

The year has been good for us. There were many new entrants (app-based businesses like Ola, Uber, etc) for outdoor publicity along with traditional clients such as telecom, real-estate, BFSI, automobile, fashion, entertainment, jewellery, etc. With the introduction of technologies like neons, bluecasting and digital outdoor formats, the inquiries for outdoor promotions have significantly increased this year.

What are the reasons leading to this?

Firstly, there were many launches this year in various sectors such as telecom and the launch of 4G services by every operator. The launch of residential projects and new shows on TV contributed to the growth of OOH this year.

How do you see the sector improving the AdEx percentage?

Development of infrastructure like expressways, airports, skywalks, metros, public utility spaces, shopping malls, bus terminals, railway network and SEZs would give a boost to outdoor advertising.

Compared to the West, how can India improve its AdEx?

Policies related to tenders of transportation and public utility space need to be more transparent. Other than this, bringing new technologies, 3D innovations and infrastructure should also improve to help out-of-home advertising industry growth in India.

Radio Ashwin Padmanabhan–COO, Reliance Broadcast Network Limited (RBNL)

Different agencies predicted the AdEx for this year. How has the radio industry fared?

The radio and broadcast industry by far has lived up to the desirable performance and with the launch of new frequencies, it looks even more promising. The steady growth in advertising revenue will surely be significant through the rest of the year. The ad spends in radio have increased over the year as it is a cost effective medium to reach out to specific target groups.

What are the reasons for this?

Radio stations are expanding their footprints in rural areas with some having more than one frequency in a particular state, thus providing maximised reach to the advertisers. Also, the innumerable on-ground initiatives devised by radio stations help greatly in delivering the key message to the consumer and also in providing significant recall value.

As a medium, how do you see the sector improving the AdEx percentage?

With radio among the preferred platforms for advertising due to cost effectiveness and wider reach, the revenue generated will add value to the overall AdEx percentage. Once the number of frequencies increases across the nation, there will be higher and fiercer competition among the players to appeal to advertisers with distinctive deliverables and provide greater return value. This would mean an increase in ad revenue by 2-5% in the overall AdEx percentage.

Compared to the West, how can India improve its AdEx?

It would not be fair to compare India with the West in terms of AdEx as several geographical and cultural factors play an important role in the economy and revenue. India has consistently been ranked as the fastest growing economy and given its GDP performance, India can clearly be recognised as a competent player. There is always room for growth.

Digital- Dushyant Kohli Head — Growth, nexGTv

Different agencies predicted the AdEx for this year. How has the digital sector fared?

The digital space has remained pretty vibrant this year, marked with the advent of OTT players and international players. There has been an overall growth in the AdEx this year, where digital has been the fastest player. With an estimated growth rate of 15.5% from last year and more than R7300 million spent already in the first quarter of 2016, AdEx in all probability, will be exponential in the future.

What are the reasons for this?

The present day user has been the driver of the change. Millennials have emerged as the key consumer demographic in India today and the changes in the economy are merely ripples created by the same. The rise in the number of OTT players to 15 today, along with the entry of global players in India further testify to the fact that OTT is here to stay and grow. Besides, the entire ecosystem is taking a giant leap towards digitalisation, reflected in the increasing popularity of m-commerce and mobile wallets. Cost is another factor working in the favour of the popularity of OTT and digital mediums.

As a platform, how do you see the sector improving the AdEx percentage?

The reduction in costs of advertisements is well supported by an increase in the number of OTT platforms, further increasing the ad inventory for the businesses and advertisers. Organisations are already co-branding, co-producing and associating with popular web-content based shows to make the best use of multiple opportunities offered for advertising.

Compared to the West, how can India improve its AdEx?

Constant innovation is the key. Indian users are yet to mature completely in regards to OTT viewership. Hence, advertisements need to be more contextual and inbound, instead of irrelevant. Compared to the West, we still have much work to do in the inbound approach of marketing and advertising, although we have already begun the process. Interactive advertisement, investing in storytelling and offering an experience to the users instead of boring them needs to be the next step towards advertising evolution. Besides native advertising, advertising in keeping with the cultural ideologies of one’s own country and a much more nuanced understanding of what makes the local consumer tick, will definitely help the industry to grow.

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