Ad spends to grow 10% in 2017, says GroupM

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GroupM, in its biannual report on the future of advertising expenditure, ‘This Year Next Year’ (TYNY) 2017, estimates that ad spends in India will grow by 10% over the last year.

The media agency forecasts advertising investment in India to reach Rs 61,204 crore this year. The country remains one of the fastest growing ad markets globally.

The ad spends in 2016 were Rs 55,671 crore, according to the report. Even though the year began on a very optimistic note, the overall advertising expenditure (adex) took a downturn due to lower-than-expected ad spend growth from sectors like FMCG, traditional retail, telecom and sporadic spending in categories like e-commerce.

In the January-October period, the adex was growing at a lower trajectory than forecasted. Furthermore, demonetization in the last quarter had a negative impact of about 2% on the total adex in 2016, said the report.

Among the mediums, digital is still expected to grow the fastest at 30%, touching Rs 9,490 crore this year; however, it has slowed from 47% growth in 2016.

TV will see the highest spends, although the growth would decline to single-digits. Ad spends on TV will grow to Rs 27,378 crore, up 8% from last year. With ‘Free To Air’ channels adding more inventory and pure HD content gaining ground, the market will also see a consolidation of niche channels.

The print medium is expected to grow 4.5%, an increase from the 4% from 2016. Ad spends on print are expected to grow to Rs 18,258 crore. The increase in ad spends expected from print heavy sectors like Auto, BFSI, e-wallets will contribute to this growth. Vernacular and regional newspapers will see a higher growth rate.

CVL Srinivas, CEO, GroupM South Asia, said, “Despite a volatile 2016, we are estimating advertising expenditure growth at 10% in 2017. The first quarter will give a slow start to the year, with the market picking up from March-April, fueled by a stable recovery process post demonetization. Sectors that are contributing to this positive trajectory include auto, media and e-wallets. In addition, government and political parties will increase spending with elections in several states this year.”

He added, “Digital is leading the adex growth with a 30% growth, while TV continues to be the largest medium in the mix. Print continues to grow at a stable rate of 4.5% and is still the second largest medium in the Adex.”

While 80% of incremental ad spend growth in major markets comes from digital media, in India the numbers are more evenly split between traditional and digital media. Digital media accounts for about 40% of the incremental ad spend growth.

Radio is expected to grow at a little over 10%, there is scope for the medium to pick up as the Phase 3 rollout is completed in 2017. Higher growth is expected as stations will see the supply impact of the full year.

Other media such as OOH will witness good traction from sectors addressing rural audience and premium niche audience. As per the trend in recent years, Cinema advertising will grow at a high double digit rate of 20%. Cinema consolidation has led to investments in infrastructure, this coupled with the growing acceptance of premium Indian and Hollywood content by advertisers augurs well for the medium.