The Pitch Madison Ad Report 2017 was unveiled today. The report states that in 2016, the Indian advertising industry grew by almost Rs 5500 crore, adding another 12.5% to Adex to reach Rs 49,480 crore, but narrowly missed crossing the Rs 50,000 crore mark due to demonetisation that took even economists by surprise. If not for demonetisation, the growth would have been 16.2% and Adex would have crossed the Rs 50,000 mark. But demonetisation knocked off Rs 1650 crore from Adex. Despite this, the growth in Adex at 12.5% is close to the mid-year projection of 13.2%. Growth came mainly on the back of spends in Digital which grew by 40%+. It now stands at Rs 7,315 crore, having grown by as much as Rs 2200 crore.
However, with 2017 being the year of remonetisation, the market is expected to grow 13.5%, adding Rs 6,672 crore to Adex to reach a total size of Rs 56,152 crore.
The categories that contributed most to the overall growth in 2016 (excluding Digital/OOH/Cinema) is the evergreen FMCG sector followed by Telecom and Auto. FMCG continues to be the most dominant sector with a 32% (LY 33%) share of the total Indian advertising industry, followed by Auto at 10% (LY 10%) and then Telecom8% (LY 7%). e-commerce that had taken the media market by storm in 2015 contributed only 4% to the total pie in 2016. In fact, investment by e-commerce category decreased by more than Rs 500 crore across TV + Print + Radio in 2016. Within FMCG category, toilet soaps, toothpastes, deos & washing powders continue to be the most dominant sectors. The categories that contributed most to the overall growth in FMCG are shampoos, deos, tea, health supplements and hair/skin care ranges.
Impact of demonetisation on Adex:
Several advertisers pulled out their campaigns in November-December 2016. De-growth varies widely ranging from a 67% drop in household durables to just a 1% drop in Auto. In absolute terms, the drop is the highest in FMCG category. It is pertinent to note that if not for demonetisation, the November-December months would have seen a growth of at least 10-13%. The estimated actual loss of Adex on account of demonetisation for November-December is Rs 1,650 crore. When demonetisation was announced on the evening of November 8, 2016 by Prime Minister Narendra Modi, most large and medium-sized advertisers welcomed the move. However, nobody anticipated the dramatic negative effect it would have on primary sales and consumer off-take. The first to feel the negative impact were the large FMCG companies because of their shorter sales cycles. Wholesale demand and rural demand seem to have abruptly crashed on the back of shortage of cash. Many large advertisers wanted to cancel their last two-week or one-week activity but because of contractual agreements managed to only postpone the activity to December. Many were cautious in sending out the Release Orders in the first two weeks of December, resulting in an acute drop in demand for Television time in that period. Many other categories, that were not regular advertisers, postponed their activity. In sharp contrast, we saw increase in activity of mobile wallets, but this did not really count for much. The overall m-wallet industry spends grew by as much as 32%, but because of its small base, resulted in an addition of only Rs 100 crore.
As of February 2017, it appears that Adex is on its way to recovery and it is expected that by end of April, it would have fully recovered; though some large rural brands may take a while longer.
The road ahead in 2017:
Since the first four months of 2017 are the remonetisation phase, the report projects the growth in these four months to be no more than 8%. But we do see Adex swinging back into action from May to October, and therefore project a growth rate of 14% during this period. Since Adex decreased in Nov-Dec 2016 by 8%, it is expected that the growth rate in Nov-Dec 2017 over corresponding months in the previous year to be a dramatically high 24%.
According to the report, in 2017, optimism for good growth in Adex, starting May, comes from high government investment in infrastructure, lower corporate and personal taxes for small and medium companies and the masses, good government support for the poor and consequently the wide scale expectation of yet another year of high GDP growth.
Television grew by 9% to reach close to the Rs 19,000 crore mark, and is 2 percentage points lower than the mid-year projection of 11% growth. This is the lowest growth TV has witnessed in the last three years. Television de-grew in November-December 2016 by as much as 21%, compared to last year on account of demonetisation, losing an estimated Rs 850 crore. Yet, with 38% share, Television continues to be the largest contributor to the advertising pie. In terms of absolute numbers, TV advertising has grown by Rs 1,570 crore.
The key categories that fuelled the overall growth of Rs 1,570 crore in 2016 are FMCG (Rs 692 crore) and Telecom (Rs 475 crore). E-commerce category dropped dramatically by 34% to come down to Rs 812 crore dropping share from 7% to 4%. FMCG, however, continues to rule the roost contributing 51% share of total TV spends (52% in 2016), followed by Telecom 12% (10% in 2016) and Auto 8% (8% in 2016)
Print grew by a mere 7% (compared to forecast of 10%) to cross the Rs 18,000 crore mark. It continues to be the second highest contributor after TV to the total advertising pie, with a share close to 37%. While dailies increased by 8%, magazines as a medium failed to gain advertiser interest for the second year in a row and saw negative growth. With consumers postponing their purchases post demonetisation, leading print medium users like FMCG, Auto, Durables and Education did not spend to the usual extent during the last quarter of the year. Print de-grew in November-December on the back of demonetisation, and lost almost Rs 580 crore in terms of absolute numbers. However, like TV, if one compares the period January to October, print grew by 10% (at par with projections).
Nearly 50% of Print’s growth of Rs 1,216 crore is accounted for by four categories - FMCG, Auto, Education and BFSI. In terms of category contribution, FMCG is the largest contributor to the Print pie, with a contribution of 15%. Automobiles are the second largest contributor at 14%, followed by Education (10%). Contribution of e-commerce comes way down with just 3%. The e-commerce category has dropped significantly by 15% to come down to Rs 621 crore in 2016. While only four categories account for 75% of Television advertising, it takes as many as 14 categories to contribute the same percentage to Print advertising, demonstrating once again that Print is less vulnerable to any category de-growth.
The Digital advertising market had an impressive growth of 43% in 2016. It has been growing at 30%+ every year for the last five years. In fact, Digital is the only medium that has grown more than the earlier projections and the only one that was not really affected by demonetisation. The Digital advertising market now crosses the Rs 7,300 crore mark. Though the absolute spends on Search have increased, its share of the digital pie has been stagnant at 36% due to exponential increase in video consumption. Consumption of Digital video content and hence spends on online video advertising have skyrocketed in 2016. Mobile displays have also grown at a faster rate than last year as the mobile platform is becoming the primary choice today to consume content. The continued growth of Digital is fuelled by mobile, online video and social media, which are increasingly attracting more advertising investment.
Radio has grown by 13% in 2016 to become a Rs 1,750 crore market and has maintained its share of the total Advertising pie at 3.5%. In terms of absolute numbers, Radio advertising has grown by Rs 200 crore. BFSI and Media advertisers have emerged as one of the main contributors to the growth in Radio advertising, followed by the Automobile category. In terms of category contribution, Real Estate (10%) & FMCG (9%) sector continue to lead the pack followed by Auto sector (7%). E-Commerce & Telecom categories have maintained their investment in Radio. On account of demonetisation, Radio de-grew by 15% in November-December, 2016. In terms of absolute numbers, advertisers put a hold on their campaigns worth approximately Rs 42 crore. However, if we look at the period January to October 2016, the Radio industry has grown by a whopping 20% (higher than projections).
The Out of Home (OOH) market grew by 9% in 2016. Transit media too grew by 9%. In terms of absolute numbers, OOH advertising is now a nearly Rs 3,000 crore market. Conventional Outdoor, against the projected 12.5% growth, grew by 9.5% including Digital OOH and malls. The lower actual growth rate was on account of regulatory litigations and demonetisation. Transit Media grew by 8.5% as against the projected growth of 14%, bringing down the overall Outdoor growth to 9.2%. Airports and Metro branding media were the front-runners. Retail, Hospitals, Restaurants, Education and Real Estate are the top three categories in terms of contribution to OOH’s growth. The highest growth was recorded in Retail category (20%). The top three categories contributed to more than 40% of the overall growth. Mumbai continues its lead as a major contributor (15%) followed by Delhi (12%) and Bangalore (9%). The impact of demonetisation has been pronounced on OOH. The report estimates an OOH loss of Rs 110 crore in November-December on the back of demonetisation. However, in 2016, OOH maintained its contribution to the total media pie at 6%.
Cinema advertising continues to be a marginal player in Adex at approximately 12.5% with total revenue close to Rs 525 crore in 2016. It has registered a growth rate lower than the overall Adex growth rate, despite its miniscule size.
This year too, approximate spends of the Top 50 advertisers of India for the year 2016 was unveiled.