Indian adspends to grow 18.4% next year: Magna Global

 

By A Correspondent

 

In its latest report on the global advertising marketplace, market services conglomerate IPG’s strategic research arm Magna Global estimates that media spends will grow 18.4 percent in 2016. Media owner advertising revenues grew by +3.2% in 2015 to $503 billion. This is lower than the previous forecast (+3.9% in June 2015) and represents a slowdown compared to the 2014 growth (+4.9%).

 

Erosion in shares is a reality even for television: Venkatesh S  Like every year, we posed a few questions to Venkatesh S, EVP, Director Intelligence Practice on the basis of the numbers and report posted by IPG’s Magna Global   16.3 percent this year as against your forecast at this time last year for 2015 being 13.3 percent. And now a forecast of 18.4 percent growth next year? Way too optimistic, na? In 2015 both television and digital has seen unprecedented utilization. In the case of television, supply restrictions have been breached even by the networks which were following earlier. On Digital, E-commerce, M-Commerce, other services like Housing and Quikr and auto aggregators have increased their spends   Digital will see a one off blip in revenue in 2016 thanks to opening of new advertising platforms from Instagram and Twitter. Content creators like AIB and TVF have seen success in audience acceptance. Native advertising is another format which will start contributing to the overall pie.   Television adspends are going to be down further next year as per your forecast. What would you attribute this to? From +18.5% to +15.1% is because of the NRS (non-recurring spends) getting neutralised. 15.1% is a very healthy growth when globally TV is diminishing   The total market share of all digital has just got into two digits even though growth is very high. Your comments Digital is still 1/10th of traditional spends and traditional is still growing even at its current scale. 17% market share in 2016 will give this category scale and by 2020 we expect the shares to equal print.   From the 12th largest in 2015 to the 7th largest in 2020. Given that we have a population of a billion-plus and are the world’s largest democracy with a not-down-in-dumps GDP, this rise from #12 to #7 is pretty slow, right? India is in the bottom of the Ad Spend per capita ranking (at $7 compared to APAC at $40 and Global at $87). I think we have made progress in making media accessible to the entire populace through cable digitisation, mobile penetration, radio privatization, publishers expanding their edition network etc. On the measurement front too TV has expanded. This will aid media owners to monetise their audience and in turn grow the advertising economy.   So guess the biggest headline forecast is that India will see market share of digital equalling that of print by 2020? This was expected to happen one day and not that print has stopped growing but digital volumes are attaining scale.  While globally digital is going to be the number one category in two years, India will take a long time to achieve this.   You hope that IRS or some such study will help print win back market share in 2016. Since it doesn’t appear to be happening as of now, is the erosion here to stay? Erosion in shares is a reality even for television. Measurement permanency will help reduce the intensity of this and gives an opportunity for the 2nd and 3rd rung publications to get their due advertising share.   So which sector was the biggest advertiser in 2015 (sports, e-comm, telecom, polls…)? And which do you expect to be in 2016? Sports have been one of the marquee content because of ICC World Cup. In 2015 while E-commerce has been the major driver of growth in 2016, E-commerce and Telecom will fight out for a larger share of media space.

As China is slowing down ((slightly), India has become the most dynamic economy among BRICs and among all the large nations monitored by Magna. Real DGP grew by +7.3% in 2015 and will grow again by +7.5% in 2016 according to the IMF, with consumer price inflation at around 6% per year. In that context advertising spending grew by +16.3% in 2015 to 487 billion rupees (approx. $8 billion) allowing India to become the 12th biggest ad market in the world at the expense of Russia.

 

In 2016, ad revenues will be boosted by economic stabilisation and the incremental spending generated around non-recurring even-year events (US Presidential and General elections, UEFA Football championship in Europe, Summer Olympics in Brazil). Magna Global is hence predicting ad sales to grow by +4.6%, marginally less than its previous forecast. Neutralising the impact of non-recurring events (NREs) in 2014, 2015 and 2016 (generating approximately 0.9% of extra growth in even-numbered years), the global ad market would have grown by +4.1% in 2015 and +3.7% in 2016, which suggest no real 2016 acceleration in the underlying ad demand, beyond the cyclical drivers.

 

In terms of geographies, Asia-Pacific was the most dynamic region (+6.5%). Latin America and Central and Eastern Europe, once the fastest-growing regions, are both suffering from dramatic economic slowdown reflected in ad spend cuts (-3% in CEE, +3.8% in Latam). Meanwhile, Western Europe continues its recovery (+2.9%), while North America is slowing down (+2.0%).

 

Of the 73 countries analysed by Magna Global in this update, 62 experienced ad revenue growth this year and eleven (incl. Russia, Finland, France, Greece, Peru, Singapore) suffered a decrease. The biggest contributors to the 2015 slowdown are the two BRICs countries affected by severe economic difficulties: Russia, where ad revenues are now expected to decrease by -12% (previously -11%), and Brazil (+4.4%, unchanged). On the other hand, the 2015 growth estimate for China, India and the US have increased. For 2016, only four markets are expectred to remain in the red while 69 (including Russia) will experience some level of growth.

 

Asia-Pacific: this year +5.6%, Next Year +5.2%

Media owners ad revenues increased by an estimated +5.6% in 2015 to $146bn, making APAC the second-largest region with nearly 30% of global spend. This is down slightly from previous expectations of +6.3%, despite the fact that growth was slightly stronger than expected in two of the region’s biggest markets (China +9.9%, India +16.3%).

 

Growth in 2016 is expected to be slightly weaker, at +5.2%, due to continuing slowing of the region’s economy. APAC is now the second-largest global region, behind North America, having passed EMEA, with 29% of global ad revenues generated in the region. Given the high growth rates expected in APAC going forward compared to EMEA, the region will become increasingly critical to global advertising spend growth, notes Magna Global.

 

APAC’s GDP growth is expected to be +6.5% in 2015 according to the IMF, down from +6.8% in 2014. Economic growth will again slowdown slightly in 2016 to +6.3% as China continues to transition to a consumer economy while India accelerates. Despite concerns about APAC growth weakness and the spillover to the global economy, it’s important to keep in perspective that it’s only modest slowdown and APAC growth remains significantly ahead of most of the western world, notes the Magna Global report.

 

India: this year +16.3%, Next Year +18.4%

Advertising revenue increases by INR 68 billion to touch INR 487 billion in 2015.  On the back of increased volumes, Television revenue will add +18.5% (Dec 2014 +11.9%) to reach INR 200 billion.

 

While television market share is up by a percentage point (41%) Print goes down from 41% to 38% to touch INR 183 billion (growth of +7.7%). In 2016 Television is estimated to grow +15.1% and Print +8.2%.

 

Digital formats continue to grow the maximum at +49% to touch 57 billion rupees and thereby increase its market share to 12%. Ad sales generated from Video and Social increasingly will be through mobile impressions while Desktop in the near future will still be the domain for Search and Display. Share of mobile from 32% will be close to half the pie in 2016. Programmatic outside of Search will grow +5.7%.

 

Newer formats and revenue streams (Twitter and Instagram opening up new advertising and influencer management platforms), bandwidth expansion through 4G launch and traditional advertisers increasing their digital budgets will contribute to the growth of +67.3% in 2016.

 

Radio with a market share of 4% will grow +14% in 2015. Through the expansion of foot print and there by volume is estimated to add +16% in 2016. OOH will grow +11.9% in 2015 and by another +10.4% in 2016.

 

Magna Global estimates total advertising revenue to touch 576 billion rupees in 2016.

 

The T20 World Cup, encouraging response from audience to non-cricketing leagues, state elections, 4G launch are some of the drivers for the advertising economy in 2016. E-commerce will continue to pursue GMV’s, most action will be seen in the telecom sector followed by Auto and FMCG advertising.

 

Digital television and expansion of the measurement panel will allow advertisers to reach more consumers and broadcaster to better monetize their audience in 2016. While so far India is bucking the global trend of declining spends on Print by growing at a high single digit rate, Digital market shares are projected to equal Print by 2020. Magna Global hopes the 2016 round of data will get the currency out of the data dark period and aid the category to fight market share erosion. The second round of the Phase III auction, commissioning of the new stations won in the first round of bidding will keep radio top-of-mind, the report adds.