India shielded from social media ad troubles, for now | The Financial Express

India shielded from social media ad troubles, for now

Twitter, which posted a quarterly loss of $270 million in the April-June quarter, is looking at other revenue models under new owner Elon Musk, including offering the blue tick for $8 a month

India shielded from social media ad troubles, for now
Meta, which owns Facebook, Instagram and WhatsApp, posted a loss for the second consecutive quarter in July-September with a fall in ad sales among the prominent reasons

From Twitter to Meta and Google-owned YouTube, which have thrived predominantly on digital ad sales, revenues are on a slide with advertising drying up.


Twitter, which posted a quarterly loss of $270 million in the April-June quarter, is looking at other revenue models under new owner Elon Musk, including offering the blue tick for $8 a month, and assuring advertisers that Twitter will be “the most respected advertising platform in the world”.


Meta, which owns Facebook, Instagram and WhatsApp, posted a loss for the second consecutive quarter in July-September with a fall in ad sales among the prominent reasons. Google-parent Alphabet, too, could not withstand disruptions in the global economy and saw a significant decline in online advertising as it posted a Q3 net profit of $13.9 billion, down 27% from last year.


With most social media companies getting roughly 90% of their revenue through ad sales, the situation appears grim given the downturn in the global economy, coupled with high inflation that prompt companies to slash spending. However, this trend has not transcended to India, home to the second-highest number of social media users, as per analysts.


There may be some decline in ad revenue for social media channels globally, but India doesn’t see the same trend, feels Kedar Kulkarni, VP– digital, Puretech Digital, a full-services digital agency based in Mumbai. “We see a year-on-year rise in media spending on Meta, Twitter, DV360 – YouTube & Display platforms in comparison to last year. The year-on-year growth is over 18%,” he said. Twitter and YouTube India declined to comment while queries sent to Meta in India didn’t elicit any response at the time of going to press.
On the fall in digital ad spending globally, the executive said, “Perhaps, the impact is yet to be felt in India. We have seen that mature businesses have been able to scale up digital spending in comparison to relatively new-age businesses, which have seen a decline in spending. This also stems from a decline in startup funding.”


On similar lines, Raja Lahiri, partner, Grant Thornton Bharat, said, “Social media revenues through advertising and other sources are expected to rise on the back of rapid expansion in user base and its future growth potential, as well as a pivot in consumer behaviour to adopt and use social media apps extensively.”


This can be seen in Meta’s India performance. Facebook India Online Services, the registered entity for Meta in India, garnered gross ad revenue of `16,189 crore in FY 2021-22, up 74% year-on-year, as per the company’s latest regulatory filings with the Registrar of Companies, as per media reports.


Business strategist and independent director Lloyd Mathias, too, feels that social media is on a good growth trajectory this year and in the foreseeable future as well. “The key driver is the growth in short-form videos across platforms like Instagram Reels, YouTube Shorts, and the many Indian video platforms that jumped in to fill the void created by TikTok’s India ban – Moj, MX Taka Tak, Josh, Roposo, Chingari and Mitron,” he said.


Instagram Reels, which was launched following the India ban on Tiktok, has gone on to become highly popular, with new research indicating that around 200 million people spend about 45 minutes a day on short-form videos, a figure that is expected to surge.

Capitalising on the trend, Google has announced advertising on Shorts. Notably, YouTube ads saw a fall of 1.9% year-on-year in the July-September quarter, 2022.


Despite global headwinds, advertising investment is forecast to grow globally and in India, as per the latest Dentsu Global Ad Spend Forecast report. The report points to a continued recovery despite another year of economic uncertainty, with global 2022 ad spend of $738.5 billion, which is based on an adjusted growth forecast of 8.7%. Digital continues to drive the global ad spend growth this year, which is supported by video (+23.4%), paid social (+21.9%), search (+12.9%), and programmatic (+19.9%). Led primarily by digital advertising which will grow 31.6%, the Indian advertising market will hit $11.1 billion this year, as per the Dentsu report.


And in the digital space, social media remains a lucrative avenue. “From a marketers lens, social media platforms provide targeted reach at lower costs that provide brand and business outcomes across the funnel,” said Vishal Jacob, chief transformation & digital officer, Wavemaker India.


However, the road ahead isn’t all smooth. A possible shift could be because brands’ targeted messages through social media platforms may have reached a limit and are no longer delivering the way they used to deliver earlier, says Ambi Parameswaran, author and an independent brand coach“The advertising revenue rates may differ due to various headwinds as the stock price of companies like Meta and Alphabet have come down as there is a feeling among brand owners that social media lacks credibility due to excessive fake news and unverified accounts, so it is possible to see a gradual shift towards physical media. Many may even move back to radio or print, and that’s what stock markets are recognising and correcting the share price of companies like Meta,” he adds.


If advertising money shifts out of social media, it will have long-term repercussions too. Parameswaran warns, “If serious ad money moves out, social media platforms could be told to stay out from taking content from newspapers or television. This will eventually happen. Thus, revenue growth may continue but profit growth will slow down.”

Also Read: Omnicom Media Group India assigned integrated media mandate for Electrolux

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First published on: 05-11-2022 at 08:02:00 am
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