‘With a Slow Start, Ad Spends may Rise Only 10% This Year’

Im­pact of de­mon­eti­sa­tion ex­tends from the last quar­ter to the present, says a GroupM Re­port

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Mum­bai: In­dia’s big­gest me­dia-buy­ing agency GroupM ex­pects 2017 ad­ver­tis­ing spend to ex­pand 10% — the slow­est pace in three years — as the im­pact of de­mon­eti­sa­tion ex­tends from the last quar­ter to the present, mark­ing a tepid start to the busi­ness in the new year.

“De­mon­eti­sa­tion shaved off about 2% from ad­ver­tis­ing ex­pen­di­ture last year. If not, growth could have been be­tween 13% and 13.5%,” said CVL Srini­vas, CEO, GroupM South Asia. “This year, we are ex­pect­ing a neg­a­tive im­pact of about1.5% on over­all growth. The first quar­ter will give a slow start to the year, with the mar­ket pick­ing up from March-April, fu­eled by a sta­ble re­cov­ery process post de­mon­eti­sa­tion.”

Ad­ver­tis­ing ex­pen­di­ture (Adex) will likely ex­pand at the slow­est pace since 2014 to about .₹ 61,204 crore from ₹ 55,671 crore in 2016, GroupM said. Its as­sess­ment fol­lows the ac­knowl­edge­ment by a raft global CEOs at com­pa­nies as di­verse as Unilever and Coca-Cola that the gov­ern­ment’s move to overnight re­strict the use of 500- and 1,000- ru­pee bills had tem­po­rar­ily af­fected sales in the quar­ter end­ing De­cem­ber.

Af­ter re­vival in sales dur­ing Oc­to­ber, de­mand for con­sumer goods that dom­i­nate ad­ver­tis­ing spend in In­dia fell by a third in the next two months, when the im­pact of de­mon­eti­sa­tion be­came man­i­fest. The tran­si­tory loss in pur­chas­ing power caused con­sumer com­pa­nies to re­port be­tween1% and 9% de­cline in the De­cem­ber quar­ter sales in In­dia, where about 98% of con­sumer trans­ac­tions were made us­ing cash be­fore cur­ren­cies were swapped. Ac­cord­ing to Nielsen, the .₹ 2.5-lakh-crore mar­ket for fast-mov­ing con­sumer goods (FMCG) could take a hit of about 1.5% of net sales, amount­ing to ₹ 3,840 crore.

FMCG’s share in the ad­ver­tis­ing pie has de­clined by 1% to 27%, ac­cord­ing to GroupM's ‘This Year Next Year 2017’ re­port. Also, con­sumer-cen­tric busi­nesses such as ecom­merce and tele­com, which were at the fore­front of busi­ness growth in the last two years, have low­ered their spend­ing amidst con­sol­i­da­tion. World­wide, GroupM es­ti­mates Adex to in­crease by 4.4%, with Asia-Pa­cific ex­pand­ing by 6.3%. The re­port said In­dia re­mains one of the fastest grow­ing ad­ver­tis­ing mar­kets glob­ally.

Ac­cord­ing to the re­port, there will be in­cre­men­tal Adex of $23 bil­lion in 2017, with In­dia emerg­ing the sixth-largest con­trib­u­tor. While 80% of in­cre­men­tal ad spends growth in ma­jor mar­kets comes from dig­i­tal me­dia, in In­dia the num­bers are more evenly split be­tween tra­di­tional and dig­i­tal me­dia. Dig­i­tal me­dia ac­counts for about 40% of the in­cre­men­tal ad spend growth, demon­strat­ing that un­like many other mar­kets, TV and print still have head­room to grow in In­dia.

Dig­i­tal is lead­ing the adex growth, with a 30% ex­pan­sion in 2017 at ₹ 9,490 crores and is es­ti­mated to take a 15.5% share of the to­tal adex, com­pared with 13% last year. Within dig­i­tal, mo­bile will con­sti­tute 70% of the en­tire spend­ing, with video be­ing the big­gest growth driver. How­ever, tele­vi­sion, which al­ways grew faster than the over­all adex, is ex­pand­ing slower for the first time in many years.

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