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  1. Advertising expenditure: faster growth foreseen after media agencies see demonetisation effect wearing off

Advertising expenditure: faster growth foreseen after media agencies see demonetisation effect wearing off

A yearly ritual, many media agencies across networks have come up with their advertising expenditure (AdEx) forecast for 2017.

By: | Published: February 28, 2017 7:41 AM
advertising expenditure, ADEx, WPP’s GroupM, Publicis’ Zenith, Madison Media, demonetisation, Demonetisation aftermath, Sam Balsara, OTT platforms, durables, education, mobile handsets A yearly ritual, many media agencies across networks have come up with their advertising expenditure (AdEx) forecast for 2017. (Source: Reuters)

A yearly ritual, many media agencies across networks have come up with their advertising expenditure (AdEx) forecast for 2017. So far, WPP’s GroupM, Publicis’ Zenith and Madison Media have released their reports — of AdEx growing, but at a slower pace. The reports foresee growth at a much better pace after March, as the demonetisation effect likely wears off. As per GroupM, the overall AdEx will see a 10% growth corresponding over last year’s growth. The other two agencies are little more optimistic when it comes to overall percentage increase with Zenith predicting the ad expenditure growth for India up by 11.2% over 2016 and Madison forecasting the growth at 13.5%.

The agencies all ended the year with lower percentages (GroupM — 12%, Zenith — 13%, Madison — 12.5%) than what they had started the year with. But in absolute terms, the money invested by companies in advertising will see a jump as per the agencies in mostly all mediums. GroupM sees the investment touching as high as R61,204 crore in 2017, Madison at R56,152 crore and Zenith at R54, 344 crore.

Demonetisation aftermath
Unlike previous years, 2017 will see subdued growth thanks to the demonetisation announced by Prime Minister Narendra Modi last year on November 8. Post this, ad spends plummeted, negating the positive trend before that.
Says CVL Srinivas, chief executive officer, GroupM, South Asia, “Demonetisation shaved off 2% from the total growth ending the year with 12% increase over 2015. FMCG which forms one-third of the AdEx saw a sluggish year and even e-commerce moved downwards last year.”

Similarly, media agency Madison highlights that the demonetisation move knocked off R1,650 crore from the AdEx in November and December 2016, wherein TV de-grew by 21% and lost R850 crore, and print lost R580 crore in those two months.

Talking to BrandWagon earlier, Zee Unimedia chief operating officer Ashish Sehgal had agreed that demonetisation would have a small-term impact on the industry. However, he believes that with time, the economy will heal too. Marketers will try to capture people’s refreshed mindsets once the market gets over this phase, and will woo them with newer campaigns or heavy advertising.

“We can see improvement in demand for advertising in Jan’17 compared to Nov-Dec’16. By Feb-Mar, we anticipate AdEx to register some growth,” asserts Sam Balsara, chairman and MD, Madison World.

Silver lining
On a brighter note, globally, India continues to be among the top 10 contributors to ad spend growth, along with others such as the US, China, Indonesia, the UK, the Philippines, Japan and Germany. Tanmay Mohanty, group CEO, Zenith India, says, “Ad spending in India is on a steady growth curve and is likely to stay that way in 2017, buoyed by the state elections in Uttar Pradesh and Punjab, the upcoming Champions Trophy, and the continued expansion of regional newspapers and television. In fact, we expect 2017 to see increased ad spending by categories such as mobile wallets, telecom 4G, BFSI, mobile handsets, FMCG and consumer durables.”

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Digital continues to be a favourite among advertisers, as the medium continues to see an uptake in advertising spends. GroupM estimates the digital AdEx to grow by 30% in 2017 to R9,490 crore, estimated to take a 15.5% share of the total AdEx this year. Ad spends will grow on OTT platforms as internet speeds improve and catch-up TV gains ground.

Print too is a sweet spot for advertisers this year. Agencies agree that it will be a modest year for newspapers too. Madison highlights that print continues to be the second highest contributor after TV to the total advertising pie, with its share close to 37%. In 2017, the print advertising market is expected to grow by 9.5% to reach R20,000 crore with dailies and regional publications leading the growth. A key contributor to the growth of print advertising is likely to be organic growth from various print loyalists such as auto, durables, education and mobile handsets.

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