Economic slowdown: Diwali fails to bring cheer for digital advertising

The medium’s growth expectation from Diwali was around 20-25% this festive season but industry experts say it remained in the 10% range only

e4m by Shikha Paliwal
Updated: Nov 6, 2019 8:43 AM

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digital ads

This Diwali, the expectation from digital advertising wasn’t one of ‘irrational exuberance’ as compared to last year. However, industry watchers were expecting a better show from the medium in comparison to its traditional counterparts.

The reason for the cautious optimism was a weakening economy that has been tough on the advertising industry for the last few months. The question now being asked is - whether or not Diwali lived up to the industry’s expectations?

A post-Diwali analysis of ad spends shows that while it was not all gloom and doom for digital advertising, it did fall short on expectations and was largely flat. The growth expectations from Diwali alone was around 20-25 per cent for the medium this festive season, instead, the industry experts say it was somewhere in the 10 per cent range.

Industry experts had predicted Rs 7,000-7,500 crore for digital advertising this festive season (September to December). Of these total spends a healthy chunk was expected to come in from Diwali alone, but now with spends falling short of expectations it will have an impact on the total earnings from this year’s festive season.

The reason for the lacklustre show was due to conservative spends by certain sectors. Auto sector, for one, depends heavily on advertising during Diwali for their new launches but on the back of poor sales, the sector has moved focus from ads to discounts and promotional activities. Even the FMCG and BFSI sectors were seen treading cautiously with their advertising budgets.

Some sectors like e-commerce and consumer durables, real estate, mobile manufacturers did buck the trend but it wasn’t enough to lift the overall sentiment.

Explains Vishal Chinchankar, Chief Digital Officer, Madison World, “This festive season, we witnessed a spike in media investments by categories like e-commerce and retail. However, on the other end we also saw muted investments from BFSI and Auto categories. I believe, it was quite a flat growth on digital media spends during this festival.”

Apart from the impact of the economic slowdown, the fact that spends were stacked up in the first half of the year for General Elections, IPL and the World Cup, also had a role to play, believes Gopa Kumar, COO, Isobar India. “While we hoped that spends would go up, except for some categories, the expenditure was relatively flat,” Kumar said.

Weak consumer sentiment has played spoilsport for brands this Diwali. Low key festivities were almost palpable during the festival of Dhanteras too this year. Despite a slew of economy-boosting measures by the government, like the corporate tax cut, the initial spring in the step is now missing from the business community which is evident in the conservative ad spends.

However, the slowdown was also the reason that the digital medium was expected to draw in attention to itself in times of austerity. Experts believed that the cost-effective nature of the medium would see brands moving their ad spends onto digital more aggressively. While the medium has fared better than its traditional counterparts, it wasn’t with the gusto that stakeholders were expecting.

According to Arvind Nair, Regional Director (Delhi), Mirum India: “The slowdown is quite evident across the board. But to add to the slowdown, it’s important to note that this was an election year and also had the Cricket World Cup - two of the biggest spending periods that happens and budgets were split. We have seen an overall increase, but the growth figure might not be as high as we saw in the previous years. A lot more investments were made in the consolidation of ad modules to drive effectiveness and increase brand value.”

Digital advertising, as a medium, has seen the strongest growth in the past few years. The reason for this spectacular growth can be attributed to factors like efficiency, measurability of ROIs, ability to boost targeted campaigns, its multi-channel nature, brand engagement and, of course, cost effectiveness.

The growing popularity of the medium is evident in numbers that point out the trend in shifting of spends to digital. According to the DAN-e4m report, released earlier this year, the shift from traditional to digital media has been happening at a rapid pace. The digital media contribution was expected to reach 21 per cent of the total advertising spends by the end of next year and 29 per cent by 2021. Of the biggest spenders, the report stated, in terms of overall contribution to the digital advertising market, FMCG emerged to be the largest category with a contribution of 28 per cent, followed by e-commerce (17 per cent), Consumer Durables (12 per cent) and BFSI (12 per cent).

Amidst a cautious approach from most of the big spenders on the medium, it comes as no surprise then that digital failed to create the fireworks that were expected this Diwali.

“Overall, given the slowdown and the economy, the growth YOY was probably not as much as we saw in the previous years. We did see more sectors divert the budgets to digital this year in comparison to previous years. We have seen good movement in the B2B space as well this year, with brands investing in programmes and programmatic,” Nair added.

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