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Ad spending in India to grow 12.1% in 2018: Magna report

Livemint:  December 11, 2017

New Delhi: Advertising expenditure in India will grow 12.1% to reach Rs68,334 crore in 2018, IPG Mediabrands-owned media agency Magna said in an advertising forecast report released on Monday.

The forecast for 2018 is higher than the 11.5% forecast for 2017 that the agency put out in June, which has now been cut marginally to 11.1% due to the prolonged effect of demonetisation and the temporary disruption caused by the goods and services tax (GST). Ad spending this year is expected to reach Rs60,972 crore by December end, Magna said.

In contrast with Magna’s optimistic prediction, Publicis Groupe owned media agency Zenith India said in it’s Advertising Forecast report released last week that advertising in 2018 will grow at 8.4% to reach Rs58,422 crore.

The growth in ad spends is being aided by an upswing in the economy after bold structural reforms like demonetisation and GST introduced in July, the IPG Media report stated. The upcoming assembly polls next year along with increased spending by sectors like automobile, fast-moving consumer goods (FMCG) and e-commerce are bound to further assist growth in advertising spends.

“We are convinced that 2017 adex (advertising expenditure) growth was held back because of demonetisation and GST. The government’s intent to relook at the incidence of taxation is evident and there are traces of revival in economic activity. Hence, we expect 2018 to do better than 2017,” said S. Venkatesh, executive vice-president, Magna India in an emailed response.

“The first leg of election campaigns, government publicity on social reforms, financial sector and a slight rebound in steadfast categories like FMCG and auto will aid the growth of ad spends next year. There is bound to be increase in adex due to IPL acquisition cost going up, but the extent depends on the market demand at least in the initial few years. While over the top (OTT) players are growing in the country, there is still room for television households growth. The success of free to air (FTA) was a revelation and we expect the contribution from them to increase.”

Unlike global markets like US and China, India will witness growth in all the traditional media platforms, the report said. In terms of media channel growth, while digital is growing fastest at a rate of 25.2%, it will be followed by television growing at 12.2%, radio 10%, and outdoor at 9.7%. Print will grow at a modest 6% in 2018.

Advertising revenue will grow at a compound annual growth rate of 12.1% to touch Rs 1.07 trillion by 2020. The report stated in the next five years, digital will grow at over 21.6%, leading the growth for the advertising industry. However, in terms of market share, television will continue to dominate with 41% share, followed by digital and print which will have 25% share each. Mobile will displace desktop to become the third largest advertising category by 2020.

In terms of brand categories, the report identified five key segments that will drive ad spends next year. Automobile sector will witness growth due to strong domestic demand owing to rising income, middle-class and a young population. Demand for commercial vehicles will also grow because of heightened infrastructure activity and the government’s focus on electric vehicles to meet emission targets. Therefore, auto sector will significantly contribute to ad spending.

Meanwhile, fast moving consumer goods (FMCG) penetration will increase with modern trade growing faster in tier-II and Tier-III cities, further increasing ad spends. The government’s financial inclusion initiatives are expanding the reach of banking, financial services and insurance (BFSI) coverage to rural areas, which will also see BFSI players spending on advertising. With rural electrification and e-commerce expansion, the consumer durables segment will witness growth.

Propelled by increasing smartphone penetration, digital literacy combined with affordable data costs will help the e-commerce sector grow, which will contribute to advertising growth further.

“I’m quite optimistic about 2018. Advertising industry has gone through a dull year and a half after the implementation of reforms like demonetisation and GST. I expect organised players like big FMCG companies and domestic firms to increase their ad spends in the coming year fuelling the growth of Indian adex,” said Sandeep Goyal, chairman, Mogae Media, a digital and mobile media company.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.