A FANTASTIC 2014
Balsara began his presentation by reporting that 2014 had indeed been a buoyant year as expected. He said, “Last year we said that 2014 would be a buoyant year and I am delighted to inform you that we were right!” He explained, “The Indian advertising industry in 2014 grew by 16.4%, almost at par with our growth projection of 16.8%.” He continued, “In terms of absolute numbers, the advertising industry increased by Rs 5,200 crore and touched Rs 37,100 crore in 2014.”
The two main categories that fuelled the overall growth in 2014 were the elections, both the Lok Sabha General Elections and the five state elections, and e-commerce players. While the elections contributed as much as Rs 2,300 crore, e-commerce players added Rs 1,150 crore to the overall growth. Out of the registered 16.4% growth rate, nearly 7.2% was on account of elections, followed by 3.6% of e-commerce, and 5.6% by existing categories.
A BULLISH 2015
Moving on to 2015, Balsara noted, “Whilst the growth in 2014 was fantastic, mainly because of election spends, we are equally bullish for 2015 too but our forecast has to recognize that 2015 is not an election year.” He continued, “A 9.6% growth rate is what we forecast in 2015 which will take the industry to reach nearly Rs 41,000 crore.” The overall market is expected to grow by more than Rs 3,500 crore. Balsara said, “That’s a spectacular growth of 27.5% over two years.” He also pointed out, “This figure of 9.6% should be compared with the like to like category growth of 5.6% achieved in 2014 and not the overall growth of 16.4%.”
FACTORS DRIVING 9.6% IN 2015
A stable government at the Centre that is focusing on growth of the Indian economy, positive market sentiment, upbeat consumer confidence and India once again attracting global attention, are the fundamental reasons for doubling the growth forecast to 9.6% from the earlier years’ like to like growth of 5.6%. 2015 is also the year of the biggest cricketing event, the ICC World Cup 2015, which is expected to earn revenue of almost Rs 1,000 crore. Balsara listed some of the other contributing factors as follows:
• New advertisers, along with further push by e-commerce players and mobile and social apps
• Separate sales of HD channels are likely to attract new premium brands
• Geo-targeting ads likely to attract more local and retail advertisers on TV
• New channel launches from existing networks
• Spends on Assembly elections in Delhi and two other states
• Increased government spending on Print since the new government strongly believes in communicating with their electorate
Balasara added, “We are confident that the government will finally launch Phase 3 expansion no later than September 2015, and since a very large number of radio stations are expected to open up, this should pull in at least Rs 70 crore of additional advertising revenue in the last quarter of the year.”
BREAKING DOWN THE MIX
Print continues to be the largest segment and accounts for 41.2% of the total market, followed closely by TV at 38.2%. Digital occupies the third place with a share of 11%. Outdoor, Radio and Cinema make up the balance 10%. Digital continues to be the only medium to grow share at the expense of TV, Print and Outdoor, all of whom marginally lost share whereas Radio and Cinema have maintained their share. Balsara pointed out, “It is interesting to note that the combined share of OOH, Radio and Cinema is lower than the share of Digital alone.” Digital grew the most in 2014 followed by Radio, Print, TV and OOH in percentage terms. In 2015, TV is expected to grow faster than all other media, except Digital, at 9.5%.
In 2014, TV grew at 14% to reach Rs 14,158 crore but has dropped its contribution to total advertising and is now at 38%. However, this year TV is expected to grow by 9.5% on the back of ICC Cricket World Cup, assembly elections in three states, HD Channels, geo-targeting on TV and new channel launches. Hindi GEC contributes nearly 27% of the overall TV revenue and continues to remain the leader of the pack. A change in the pecking order saw Tamil Nadu C&S overtaking News to occupy the second rank with their ad revenues growing in contribution from 7.2% to 8.5%.
In terms of category contribution, the pecking order remains the same with a marginal 3% shift in contribution from FMCG to e-commerce. FMCG continues to rule the roost contributing 54% of total TV spends (down from last year’s 57%), followed by telecom, digital, e-commerce (14%) and auto (7%).
Print grew by 16% to reach Rs 15,274 crore and continues to be the largest contributor in the total advertising pie with a share of 41%. Dailies grew by 17% and magazines by 6%. Of the total growth of about Rs 2,100 crore, nearly 85% or Rs 1,800 crore has been contributed by elections and e-commerce players. Increase in advertising during festival season by small and retail advertisers has also contributed to the growth. Print is expected to grow by another 5.3% in 2015.
For the second consecutive year, FMCG is the largest contributor even in Print, although the contribution is only at 13.6%. 2014 saw Hindi Dailies again topple English with a share of 38% in spends. The dominance of English newspapers is declining for the second year. Hindi newspapers are now the largest contributor to the Print advertising pie.
Radio has grown by 17% as against earlier growth projection of 15%. E-commerce advertisers have used Radio extensively as well. This growth has also come on the back of higher inventory being sold across stations. Radio has maintained its share of 3.5% of the total advertising pie with total revenue of Rs 1,285 crore in 2014, an increase of nearly Rs 190 crore over 2013.
Real estate and home improvement continue to lead the pack contributing to 12% of total Radio spends. Revenue from e-commerce players sees the highest growth rate in 2015 followed by auto and media while revenue from FMCG and corporate sector shows decline in growth.
Cinema has grown by 10% as against the projected growth rate of 7% and is at 0.5% contribution to advertising pie with total revenue of Rs 184 crores in 2014. The rapid expansion of multiplexes in tier I and II cities is a big reason for the growth of cinema advertising in India
The total Outdoor spends grew by 12.9% in 2014. Conventional Outdoor, against the projected 7% growth, grew by 13%. Transit Media too grew by 12% as against projected growth of 10%. Transit media rode on the back of the new T2 terminal in Mumbai, initiation of Metro services in Mumbai and higher organic spends in Kolkata. Organic growth was seen in categories such as telecom, automobile, BFSI and retail. Outdoor has maintained its share of 6% of the total advertising pie in 2014 with total revenue of Rs 2,233 crore, an increase of Rs 256 crore over 2013.
Display including video, social and mobile grew by 33% while search increased by only 26%. With more FMCG and telecom players getting into the fray, video, social and mobile formats saw larger traction. Given the explosion of smartphone adoption, the trend is expected to continue in the coming years.
ADVICE FOR ADVERTISERS
Balsara listed five pieces of advice for advertisers. He said:
1) Focus on effectiveness and not only on efficiency.
2) Experiment should be our mantra. And here our guiding principle should be “Fail often, fail fast”.
3) Media can move mountains. Better to focus on few brands and advertise them heavily.
4) Since budgets are finite and often limited by P&L considerations, you need to prioritize markets sharply. In the priority 1 markets, spend and exposure must be at least twice that of priority 3 markets, otherwise prioritization is meaningless.
5) As media spends get larger and larger, media decisions are being taken at lower levels. If you want media to work for you, greater involvement of corner rooms is required.