‘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
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.