What lies ahead for digital advertising in 2023
Considering the economic scenario, advertising budgets will be cut marginally, but digital AdEx will not be impacted much, say experts
After being a flagbearer of advertising for a couple of years, digital media giants are going through a rough patch now. The second half of 2022 has been particularly difficult for giants like Google, Meta, Twitter and Amazon--which are major digital advertising platforms. Google is reportedly planning to let go of 6 per cent of its employees which is roughly about 10,000 people out of 1.8 lakh employees. Meta laid off over 11,000 employees, Twitter is left with less than a third of its entire workforce, and Amazon is also expected to continue layoffs well into 2023.
The sudden slowdown at the big techs has come at a time when their Indian counterparts are reporting a jump in revenue. Google India and Meta India, which dominate the Indian digital market with over 80 per cent share, have posted Rs 25,000 and Rs 16,000 crore of ad revenues respectively in FY22 that amounts to Rs 41,000 crores compared to over Rs 23,000 crore that they pocketed together a year ago. Amazon India too collected nearly Rs 7,000 crores of ad revenue in FY22.
How will the churn at these giants impact digital media and the Indian digital advertising ecosystem as a whole in 2023? Will digital ad spend continue to grow? exchange4media sought to find the answers:
Rajiv dubey, head of media, Dabur India, says, “Barely two months ago, there were intense debates on moonlighting in the tech industry which suggested a shortage of workers. Now, suddenly tech workers are being laid off. I feel, tech companies are in a rationalization phase at the moment. Perhaps they overinvested in some categories, like Meta invested a lot in metaverse, but after losses, is focussing back on the main platform. Twitter was also losing money and Elon Musk is putting the house in order; hence the rationalization.”
This is a temporary phenomenon and hence its impact on digital AdEx would be limited, says Dubey, adding, “The digital AdEx will not come down but its rate of growth may be stunted. Digital will have a double digit growth but the CAGR for next three years may remain below 30 per cent.”
“Macroeconomic situation across the world is not very positive which may negatively impact the advertising spend in 2023”, says Paras Mehta, Business Head, Matterkind, an IPG group company.
“The brands headquartered in the US will reduce the ad spending. Indian brands may also tighten their purse strings. However, digital AdEx will not decline. It will continue to grow though its growth may come down to a single digit. We are expecting a shift in offline money to online one,” Mehta speculates.
Mehta explains that digital will grow for many reasons; such as it offers a complete measurement of customer journey, there is no entry barrier to be present in digital platforms, it's a lot easier to create an online campaign compared to traditional campaigns.
“While there are job losses in that part of the world, it won’t impact India. In fact, India will be hiring a lot more in 2023 and India’s growth story is poised as predicted,” says Rammohan Sundaram, Country Head & Managing Partner – Integrated Media, DDB Mudra Group.
Sundaram explains, “Our economy is robust and does not get impacted because of the issues that are being faced by the west and while sentiments in the US are low on consumerism, it is more to do with how their story is panning out and our dependency is largely human capital-driven.”
Rahul Vengalil, Executive Director, Everest Solutions, a Rediffusion group company, feels that considering the economic scenario, advertising budgets will be cut marginally, but digital AdEx will not be impacted much.
“Most brands have realized that traditional media is costly. They are focussing a lot on video advertising which is getting a major share of their ad budget pie. Hence, digital Adex will not contract in 2023. However, we may not be having as many campaigns as we used to have before. Reduction in ad production budget is also likely. Instead of large scale shoots, brands may opt for rehashing some campaigns,” Vengalil says.
Adds Ahmed Aftab Naqvi, Global CEO & Co-founder, GOZOOP Group, “Given the boost of super-fast network protocols like 5G and AI, digital media will see the continuation of innovations and developments in transformative technologies. Programmatic advertising and industry-specific social engagement actions will witness a positive growth. Categories like FMCG and Tech hold the potential to bring about the delta increase in media spends.”
Naqvi insists that digital advertising will continue to grow and increase its share of the overall advertising bucket.
Sundaram echoes the sentiments, “In 2023, digital advertising will be the flagbearer of AdEx growth in India. In December 2022, digital advertising would have overtaken television advertising spends, however, there is a shift is in consumption and device changes. Cable and satellite (C&S) consumption on television will decrease but family viewing is not stalling. Television as a device will continue to beam content but the source of those beams are changing. C&S is dropping and 4G streaming is increasing. With 5G round the corner, digital advertising is only going to dramatically increase in 2023.”
Consumer sentiments are positive
Anil Suryavamshi, Associate Vice President, Planning, Carat India, recalls the 2001 recession when the “lipstick index” phenomenon was born.
“Estée Lauder observed an increase in lipstick sales during that recession. In 2023, we can expect to see a similar story. We have seen beauty and cosmetics sales going up as young women are more inclined to prioritizing buying skincare and beauty as treats when on a budget. Ulta Beauty smashed its Q2 earnings expectations across all major categories. Coty’s cosmetics sales are up, with “prestige” sales rising by 20 per cent during the beauty brand’s financial year. Meanwhile, Target and Walmart are both refreshing their beauty departments, with Walmart offering a more affordable display called Beauty Finds,” Suryavamshi points out.
He explains further, “Revenge travel is back with a bang - the number of people purchasing vacations or travel tickets has increased by 19% since mid-2021(outside China). People have been cooped up for so long, so many aren’t willing to scrap getaways again. According to the survey done by GWI, upon asking what would bring them joy in the future, 55% said travel/taking vacations – ranking second behind spending time with their family.”
Hence, even as financial confidence is starting to dip, clothing and ordering delivery tops the budget treats list in 2023. So, every recession brings out new learning and it will be interesting to see what this one is going to teach us, Suryavamshi added, highlighting the positive sentiments of consumers and markets.
Mihir Palan, VP, Media, Kinnect, also feels that India won't remain untouched by global recession. “The economy is expected to have a below par growth of 5.9%. This will force India inc. to look at cost optimisation measures, as a result digital ad spends which gives dual gain in terms of reach as well as ROI will gain increased importance in the media mix. However, TV will continue to dominate the AdEx industry for 2023 but online spends will almost come at par with the TV,” says Palan.
Focus to be on performance marketing
Rajiv Dubey says that the brands would focus a lot on performance marketing in 2023. However, it won’t last long and the focus will be back on brand building sooner or later.
Performance marketing is focused on generating leads and sales, while brand marketing is focused on building awareness about the brands which requires major budgetary allocations.
Reels & YouTube Shorts to boom
Experts say that videos, especially short-form videos, will continue to dominate the digital advertising segment.
Shradha Agarwal, Co-Founder and CEO- Grapes, says, “Instagram Reel has been at the top of the list for this year. It acted as an effective medium for brands, businesses and creators to connect with their target audience. Brands/ agencies will harp on the platform in 2023 also. The key trends that will dominate the digital marketing industry will be YouTube shorts and brands focusing on data-enabled content. Content creators are looking forward to experimenting more with YouTube shorts as from next year monetization will happen, which opens another avenue for brands to focus on a different territory.”
Tech adoption to grow
‘Integration’ will be the keyword for digital media in 2023. The industry expects an increase in the adoption of technology, especially in Artificial Intelligence and Machine Learning by brands to cut the cost.
“We have seen how Cadbury used AI in its Diwali ad with actor Shah Rukh Khan to promote hundreds of local enterprises. Use of AI/ML will help cut the cost of content creation, script, auto automatization,” says Paras Mehta.
Digital media would be integrated into traditional means to create unique engagement pathways to connect with the people, says Rajni Daswani, Director - Digital Marketing, SoCheers.
Daswani adds, “One of the major examples of this is the upward trajectory of digital outdoor screens and billboards. While they’re definitely likely to find more use cases, it’ll be interesting to see how 3D and 4D billboards are used in brand campaigns. With brands like Tanishq and Hyundai having already made headways in this direction, the stage has already been set.”
“Further, integration of advanced technology into digital is going to find way more prominence. MadTech - the convergence of Marketing, Advertising and Technology - has visibly grown in the last year. MadTech will be a much more commonly-used term in the digital sphere in 2023,” she further explained.
Talking about technology, Daswani said, Metaverse is yet to be leveraged to its full potential. We have obviously seen some brands being the forerunners of metaverse marketing, like Nike, Gucci, Coca-Cola, etc. With more brands and advertisers joining the foray in the coming year, the audience will get to experience certain aspects of the metaverse in more detail.”
She adds that experimenting and innovating with the creator economy is the way to go about it.
Hiring to go up
Considering the fact that tech companies are witnessing a slowdown, one of the possibilities that can emerge is that a lot of agencies hire people from the technology side depending on the work demand. However, agencies need to be more observant of the salary packages because there is a huge pay parity between both industries, Agarwal says.
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