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No dramatic drop in digital ad spends post demonetisation, say industry experts

01-February-2017
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No dramatic drop in digital ad spends post demonetisation, say industry experts

The advertising industry braced for impact on November 8 for a very rough landing as it entered the last quarter of the financial year. According to estimates by industry experts, the move to demonetise high value currency notes in November was expected to impact around 20 per cent of yearly advertising budgets. In fact, FMCG companies, which contribute to nearly 30 per cent of all ad spends, cut advertising spends by large margins soon after the demonetisation move was announced. While it is true that the industry as a whole bore the brunt of demonetisation, the digital advertising sector may have been shielded from the worst of the impact, some experts say.

Number of industry insiders have observed that ad monies have moved from the more expensive mainline advertising mediums like television to digital in the face of demonetisation. Rajiv Dingra, CEO and Founder, WAT Consult, said that the digital marketing sector was not greatly impacted by the demonetisation move. He said that if anything, he has noticed a spike in digital advertising post demonetisation.

Echoing Dingra’s views, Sanjay Mehta, Jt CEO, Mirum, said that he has also not noticed any significant dip in client spends on account of demonetisation. He said that some clients, say in the retail sector, who could have been impacted by the cash crunch, and might have even reduced digital spends, did not do so. “Largely speaking, with the mix of clients we have, we did not see any dramatic drop in ad spends in the digital medium.”

Reasons to stay digital post note-ban

Mehta added that for mainline media campaigns that involve large budgets, clients have held back or slightly delayed their campaigns for the moment. He noted that while they do so, they can’t afford to not be visible in the market, so they are utilising the digital medium. “This gives a boost to the digital budgets. Essentially budgets meant for mainline have been diverted to the digital medium.Some clients have even come up with new digital campaigns which were not planned for the first quarter this time,” he added.

Explaining why the digital marketing sector was shielded from the demonetisation wave, Charulata Ravi Kumar, CEO, Razorfish and SapientNitro, said, “In financial crisis of any kind, typically all non-measurable spends are curtailed. And for this reason, digital remains on priority.” She further said that the digital sector has been growing at a pace that is 4 times that of the industry and as such did not slow down during the phase when a lot of clients paused their advertising in conventional media. “The low total cost and its all pervasive nature has made it imperative and so remaining insulated,” she said.

Shaping the digital ecosystem

Kumar went on to say that the post-demonetisation phase in fact demonstrated widely that the digital medium is not just for tech savvy audiences. “The increased emphasis on the move from analogue to cash during the demonetisation journey also served as a subtle reminder to clients that digital is surely gaining importance in all spheres of life and that helped digital marketing as whole. Importantly it shattered myths of some marketers believing that digital was only for the evolved and savvy urban consumers. Need makes humans adapt faster than the blink. Indians will synchronise to digital changes at an even faster pace hereon,” she said.

Suveer Bajaj, co-founder, FoxyMoron, explained that the demonetisation drive has impacted digital advertising both with the ‘rush’ factor and ‘reach’ factor. He said, “Digitisation has now become a Rush with millions of Indians thronging to the internet seeking for immediate relief. This has also seen a surge in smartphone sales in SEC C and D where most people access the internet for the first time through their smart phones. This will have a dramatic effect on the Reach both in terms of mediums and devices.”

Going digital for tactical advantage

On the other hand Bajaj, also said that he does not think that the digital marketing sector has been shielded from the impact of demonetisation. He said, “Advertising as an industry is the first to take a hit when any industry faces budget cuts. For industries that faced major setbacks due to demonetization, advertising saw an immediate, albeit short term impact on n=both advertising and digital spends. Various industries that have over 50 per cent of sales coming from cash sales such as the unorganised consumer electronics and IT space, real estate, luxury goods, travel, etc. saw a massive dip and and almost immediate cut in digital advertising budgets. Several companies got off the horse entirely until their business don't get back on their feet, which could take anywhere in excess of two quarters. Considering Q3 is a peak spending quarter for most businesses, events, activations, etc. were completely crippled in the absence of cash. However, there was an obvious rush by opportunists in cashless industries where tactical spends could take advantage of the void created in the lull period. Further, BFSI spending saw (and continues to see) a major spike in digital spending with the obvious uptake of digital products and the potential ripple effect the next few quarters may forecast.”

Forecast for the next two quarters

Mehta said that the budget will be a deciding factor as to how spending for the rest of this quarter and next quarter will be like. “Many are waiting eagerly to see what more comes out from the budget. The government needs to revitalise the industry and this is one of the most crucial budgets from this government, so there are a lot of expectations to spur growth in the industry.” Bajaj said that realistically, businesses that were affected by demonetisation will continue to lay low for the next two quarters.

Ravikumar felt that the outlook is very healthy with robust growth at the expected 35% to 40% to continue. “To avail the benefits of this, transforming sectors such as BFSI and Retail will have to overhaul their Customer Experience offering because the reigns of power are slowly but surely shifting to the consumer. For marketers, it’s a good time to revisit the old adage ‘The early bird catches the worm’,” she said.

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