With growth and profitability of FMCG companies coming under pressure and ad budgets of e-commerce firms getting optimised due to funding constraints and consolidation, advertising spending on TV is expected to be muted in both calendar year 2017 and FY 2017-18, according to estimates drawn up by Kotak Institutional Equities. Despite a low base, the growth will be flattish in CY2017 at 10% and marginally higher for FY18 at 13%, the brokerage firm has noted in its research report. For the past three to four years, TV ad spends have seen a growth of around 14-19%.
However, Kotak has not ruled out the possibility of triggers that can change the situation in the second half of FY18. Strong government stimuli to boost consumption, acceleration in unorganised-to-organised shift after implementation of the goods and services tax, and a rise in ad intensity led by Patanjali, Reliance Jio and/or Alibaba could change the scenario.
In fact, according to Kotak, TV industry ad spends grew at about 10% in CY16, which was below its estimate drawn at the beginning of the year at 15%. Demonetisation, weak ad spends from FMCG firms, delays in the RJio launch, and lower than expected ad intensity in telecom were the prime causes. However, on the brighter side was auto (9% of TV ad spends) category, which grew in the mid-teens.