Reported spends on TV advertising revenues show a mere 2% increase for the first 10 months of 2014 versus a year ago....
THE YEAR 2014 was slow and stagnant for the advertising industry. Contrary to the optimistic predictions by most agencies in the beginning of 2014 as well as mid-year, the growths over 2013 have been in the low single digits for television and print. Counter-intuitive as it seems in the face of ebullient growth projections, the facts tell a different story.
Reported spends on TV advertising revenues show a mere 2% increase for the first 10 months of 2014 versus a year ago. This is not surprising at all giving the sluggish investment levels of the FMCG sector. This sector has been facing headwinds due to rising input costs as well as consumer inflation. FMCG spends on television have remained flat in 2014. This has primarily led to the industry not growing as the FMCG sector accounts for 55% of TV ad expenditure. If not for political party advertising and the rise of e-commerce, the TV ad industry would have seen marginally negative growths. Big-ticket properties saw a decline in demand. This lack of appetite for risk taking on media properties reflected the challen-ges that marketers faced and their inclination to play it safe.
The other challenge that TV faces is one of currency. While 50% of the TV spends are decided basis a rationality primed decision making model (loosely speaking, ratings data primed with gut calls are used to make choices), spends on big ticket properties such as cricket and the choice-making on niche channels have largely been driven by gut or what one could dub as the ‘People-like-us’ heuristic (The thinking is on the lines of ‘consumers of my brand are like me. I watch English entertainment. Hence my consu-mers watch English entertain-ment’). My objective is not to question the veracity of this syllogism. Rather, it is to place on record that the entire niche channel TV industry, that should have an estimated ad spend of close to R3000 crore today, generates revenue completely on similar heuristics with no accountability. This industry is now under threat from online video. The reach of online is growing, and substantially so in the metros. The profile of YouTube is more upscale, the CPM (cost per impression) is better and so is its ability to add incremental reach. This is a tsunami that might subsume niche channels unless they address it urgently through measurement. The lack of measurability of niche channels is a snake that might come back and bite its own tail. While the talk today of the new measurement system is about additional homes in rural and small town India, I would say that improving measurement in metros and class-1 towns to reflect diversity of TV viewing behaviour is of greater importance and urgently required if the niche channel space wants to ward off the rising threat of online video.
Given the market conditions, print advertising revenues have actually seen an increase of close to 10% in the first 10 months of the year. Political parties have, of course, contributed handsomely to this growth. Besides this, however, what is encouraging for the industry is that it has seen spends in the FMCG, auto and durable sectors. The print sector would be disappointed in seeing that e-commerce spending on TV has grown at a much faster pace than it has on print. While it still commands a higher share of spending in this sector, the fact that TV has grown in contribution would be a source of concern.
Digital has seen growth in excess of 30% this year. However, I would dub the whole digital transition in India as disappointing. There is more talk about digital amongst many marketers and spends are still yet to happen in real earnest. Inertia and force of old habits seem to be part of the problem. The other issue is one of a currency for digital that measures exposure. TV and print benefit from the fact that their currencies only measure exposure. Digital today does not have one that mirrors this and it is slowing down screen neutral planning. Also, there are not too many options to spend on digital today. The lack of a vibrant, competitive marketplace is slowing down the medium’s expansion. China, for instance, saw a massive growth in online video because there were four to five equally strong online video channels. Seen from that perspective, India is still lagging behind. The rise of Facebook video should thus be seen as a positive development for the online video industry.
Radio as a mass media continues to do well. With a reach in excess of 180 million, it is only behind TV. Access to radio was spurred on by the exponential growth of the mobile industry. However, smartphones now pose a serious threat to the medium. The advantage of radio is anytime accessibility and its ability to allow one to multi-task. The smartphone has taken on the accessibility platform and multi-screen consumption is a reality today. On the brighter side, it has often been seen that during slow periods of economic growth, radio has benefited. It may be that the low outlay requirement and the ability to localise help.
From the consumer side, TV fragmentation continues to increase across the country including the southern states. This is a positive development for the smart media planner. In a stagnant market, if there is fragmentation, then TV planning can actually help save costs. Mobile and smartphone penetration will continue to explode, but unless the bandwidth issue is addressed, these opportunities will continue to be part-dream, part-reality. 2015— well, it’s going to be interesting to say the least.
The wait for ‘achhe din’ (good days) in a real sense continues with a cautioned sense of optimism. The big game-changer is not going to be the new industries but whether FMCG will grow in advertising spending across TV, print, online and radio.
The author is CEO, Starcom MediaVest Group. India