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Slowdown woes: Cost corrections hurting the OOH industry

Slowdown woes: Cost corrections hurting the OOH industry

Author | Pallavi Goorha | Tuesday, Feb 17,2009 6:58 AM

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Slowdown woes: Cost corrections hurting the OOH industry

With companies cost cutting and reducing their advertising budgets by almost 35-40 per cent, the outdoor advertising industry has started losing out to the Internet advertising firms, who are witnessing a growth of almost 65 per cent CAGR. Although Mumbai and Delhi comprise 50 per cent of the outdoor market in numbers, 70 per cent of values in terms of money are coming from Tier II and III cities, that have also been affected drastically.

Nabendru Bhattacharya, President, OgilvyAction India, said, “OOH is the only cost efficient, least spillover medium, hence, I can safely say, the least effected medium in this slowdown. In Novemer 2008, the OOH industry was hit by the producers’ strike, hence TV channels, who are primary spenders, stayed away from the medium due to no new shows during the November to mid-December period. However, other advertisers continued to be present on the medium. In January and February 2009, we have seen the space being filled up gradually and vacancy level reduced from 35 per cent in December to hardly 10 per cent at present.”

According to Bhattacharya, “The trends visible are the very strengths of the medium, which is a localised medium. 10-12 years’ back, we saw local boutique stores, shoe stores, furniture shops, retail, real estate and PSU banks and insurances companies in Mumbai. Bollywood movie releases have filled in the vacant OOH space.”

He admitted, “Cost corrections by 10-15 per cent have been visible across the medium. Tender properties are running into huge losses in Delhi and Mumbai. We may see tender surrender/ revision. The OOH industry is looking at some relaxation in pricing from applicable authorities. I see OOH continuing to have a higher demand situation given the next six months’ line up – viz. IPL, T20 World Cricket, Lok Sabha elections, TV channels line-ups, and telecom players launching in various circles..

“I feel, the OOH medium needs less budget to initiate campaign. Clients will monitor their costs very closely and use that medium which will deliver efficient ROI and fulfill campaign objectives in a particular market or city, besides avoiding huge spillovers. Hence, OOH will become medium of choice in recession,” Bhattacharya asserted.

Farid Kureshi, CEO, Zee OOH, noted, “When even Google has started to make people redundant, you know there are tough times ahead for the media industry. We face the most challenging market known by any of us, and the hit is across all media vehicles. Outdoor, especially billboards, as cost of entry is very low, has been hit the hardest. Owners who will hold on to their nerves will survive, the rest will either shut shop or sell out. There are also external pressures, both legislative and regulatory, that will determine the health of the outdoor industry in the longer term.”

Kureshi added, “The new rule of BMC will specifically reduce the number of sites as no billboards will be allowed on heritage buildings. Also, multiple sites on a single building would be hit. This will affect inventory positions as well as most owners.”

M Kumar, GM - Brand Development, Jagran Engage, pointed out, “Compared to the global fraternity, the Indian economy is still slated to grow around 7 per cent and the impact of the crisis resulting from well-known companies going for bailout packages/ shutdowns/ takeovers is not pronounced just yet. Several investors are staying away from putting their money in the stock market, more because of sentiments than for any other reason, so is the case with media. Pink slips in India are restricted to only a few sectors. So, while these sectors will exercise caution, few others will fill in and continue to spend. Call it recession or a slowdown; not surprising that A & M spend is the first to go under the scanner. So yes, there is a cut in spends from advertisers across media. As far as OOH is concerned, there is a 20-25 per cent impact. The up side is that in these times advertisers are getting deals that are to die for, so it is great for them.”

Kumar further said, “Mumbai and Delhi together garner close to 60 per cent of the overall OOH spends, and the nature is largely national, while local advertising is minimal. Because these national clients have cut back on spends or put their plans on hold, you see empty hoardings. It is also the time when one sees the number of owners. We are also aware of certain campaigns, where because OOH still remains the most cost effective medium, are seeing standalone advertising. As an aside, the fact that sections in the media have noticed and talking about empty outdoors is also telling – OOH as a medium is making the right impact.”

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