The private FM industry is expecting radio ad spends in this festive season to grow by around 25 per cent even as some operators feel the growth could be as high as 30 per cent. When asked for reasons for this optimism, they point out to a number of different factors, including repo rate cut, emergence of new, aggressive categories like e-commerce and increase in ad rates.
"Since all radio players have raised rates, the festival spends on radio will see a 9-12 per cent jump purely on rates and due to festival season clubbed with many cricket series, we will see a bonus on radio spends. Our estimate this festival will see a growth of 20 per cent plus over last year," opined Vineet Singh Hukmani, MD of Radio One.
However, not all players are looking at increased ad rates especially for the festive period. For example, Red FM has already announced that it has increased ad rates by 35 per cent back in September, while Big FM is also expected to increase its ad rates by 30-35 per cent. On the other hand, Oye FM CEO Harish Bhatia said that the operator had a rate hike in March and there were no plans to increase rates at this point.
"The industry, overall, is expected to increase ad spends by 10-15 per cent during the festive season. The prime time rates of radio are expected to increase by about 30 – 35 per cent," said Ashwin Padmanabhan, COO at Reliance Broadcast Network Limited.
Factors affecting growth
PM Balakrishnan, CEO of Allied Media was of the opinion that festive ad spends would increase across mediums considering the fragmentation being seen and how difficult it is to reach audiences. He agreed that the sentiment was definitely better this year so radio could expect double digit spends in the period.
Other factors expected to become significant for the increase in ad spends is the recent repo rate cut announced by RBI. "This year should be better because of the repo rate cut. Things are looking better and it seems as if corporates are also looking to be more active," said Bhatia.
Nisha Narayanan, COO of Red FM pointed out that a reason why radio operators are feeling so optimistic is because of the sound growth of economy. Speaking about the rate cut, she opined that the industry was hopeful that real estate sentiments would also pick up and clients would come forward with their promotional offers to sell inventories, especially in metro and mini metro markets.
On similar lines, Padmanabhan also agreed that, apart from e-commerce, consumer durables, auto, retail and real estate industry would be the categories accounting for high ad spends this festive season.
"As per industry estimations, India Inc is planning to dole out upwards of Rs 2,000 crore on advertising, marketing and promotional activities. Also, the overall advertising spends this festive season are expected to be at least 15-20 per cent higher than last year. This sharp spurt can be attributed to factors like change in government, positive advertiser sentiment and favorable macro-economic outlook. Keeping the above in mind and ever growing reach and acceptance of radio as an effective local medium, we strongly feel that this festive season will be full of opportunities for us," she told us.
E-commerce will drive ad spends
The e-commerce sector has emerged as the single, most important sector in terms of ad spends for the radio sector said operators and media planners we spoke with. As one media planner put it, the market is being driven by new age digital companies who want to build up market cap quickly and hence are willing to spend aggressively.
The head of another prominent radio station told us that e-commerce is among the top 3 categories for all radio operators and accounts for, anywhere between 18-22 per cent of total ad revenues for a station. When asked about the overall ad spends during the festive season, the person said that it could increase by 15-20 per cent over last year.
And it is just not the large players like Flipkart and Amazon who are spending. For example, Bhatia informed us that emerging digital companies like OLA, Taxiforsure, Grofers, Askme, etc. have become significant spenders on radio advertising, joining the likes of Flipkart, OLX and Amazon, which are also highly active brands.
"New-economy players like OLX, Jabong, Flipkart, Groffers, PayTM, Pay U Money, Urban Clap, Bla Bla Car, Snapdeal, etc. have chosen radio as their preferred choice for advertising. The target audience of e-commerce is the youth which incidentally overlaps with listener share of radio industry. E-commerce firms have shown their faith on the reach of radio and it is becoming an integral part of their marketing strategy. While this category was always active on radio, this year we expect roaring growth as they are also multiplying their ad and marketing budget," explained Narayanan.