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India’s ad expenditure to see higher growth in 2015, predicts ZenithOptimedia
MUMBAI: ZenithOptimedia has predicted the advertising expenditure in India to grow by 12 per cent to Rs 40,307 crore in 2015, as against 10.7 per cent in 2014.
The growth will be primarily fuelled by print at 12 per cent, TV at 10 per cent and online and mobile at 25 per cent. Other media are expected to grow between 5 and 10 per cent, ZenithOptimedia said in its new Advertising Expenditure Forecasts.
With just over six months of the Narendra Modi-led newly elected government at the Centre, the government seems to have captured the collective consciousness of the country, states the report. Falling food prices as well as oil prices have contributed to a reduction in the Consumer Price Inflation to a historic low of 5.52 per cent in October.
IMF and World Bank have forecast an identical 6.4 per cent growth in 2015, up from 5.6 per cent in 2014.
“We enter 2015 with a strongly positive consumer and business sentiment, albeit recognising that consistent on-ground delivery and reforms will be needed to keep this sentiment up. Hence, cautious optimism, though with way more optimism than same time last year, is still the right expression,” the report mentions.
Going ahead, the agency expects consumption to continue picking up, with passenger car and utility vehicle sales turning positive, credit card spending on the rise, loans for durables growing.
From an ad-expenditure point of view, FMCGs will continue their dominance, but given the weak monsoons, some categories might stay flat or have slow growth. High growth is expected from telecom, e-commerce, mobile phones, cars and two-wheelers, retail, realty and the BFSI sector. 2015 will also be the year of ICC Cricket World Cup, which will also be a trigger to growth in ad expenditure, states the report.
The new TV measurement system BARC is scheduled to launch in 2015, as is the much-awaited Phase III expansion of FM radio. Regional media across print, TV and all other media continue to drive growth in media consumption.
With the internet base increasing to 250 million, smartphone ownership is expected to reach 200 million by 2014 end, and the country awaiting the launch of 4G services by telecom operators, online and mobile will continue to see the maximum growth rate. Digital advertising, however, has become dearer as the government decided to re-impose service tax on this.
ZenithOptimedia, meanwhile, has forecast the global ad spend to grow by 5 per cent in 2015 and 6 per cent in 2016.
The rise of mobile advertising and social media, as well as the transition to programmatic buying of digital display, will help the global advertising market grow 5–6 per cent a year over the next three years. It is expected to reach $545 billion in 2015, up 3.3 per cent in 2014.
2016 will be a quadrennial year, states the report. Given the Summer Olympics, US Presidential elections and the UEFA European Football Championship, the agency expects these events to propel ad spend to 5.6 per cent growth that year, before it slips back to 5.2 per cent in 2017.
Global ad spend growth is being restrained by weakness in Japan and the Eurozone. Japan’s seemingly intractable economic problems limit its ad market to 2–3 per cent annual growth, and the report states that it does not expect it to improve over the forecast period. The Eurozone, however, is poised to end 2014 with its first year of growth since 2010, with further improvement likely over the next few years.
Ad spends across the Eurozone fell by 15 per cent between 2007 and 2013. The worst hit markets were Greece, Portugal, Spain and Ireland that lost 49 per cent of their ad spend over this period, while France and Germany held their ground, shrinking by just 3 per cent.
However, Greece, Portugal, Spain and Ireland all began to make strong recoveries in 2014 and over the next few years are expected to substantially outperform the Eurozone average, growing at 5.4 per cent a year through to 2017. Their recovery will help Eurozone ad spends grow 0.8 per cent in 2014, a substantial improvement on its 2.9 per cent decline in 2013. Meanwhile, the core economies of France, Germany and Italy (which together account for about two thirds of the Eurozone economy) are stagnating.
ZenithOptimedia forecasts ad spend in France to shrink at an average rate of 0.3 per cent a year between 2014 and 2017, while Germany grows by just 1.3 per cent and Italy by 1.5 per cent, below the Eurozone average of 2.0 per cent.
The report further mentions that the Ukraine crisis has disrupted advertising in Eastern Europe. Russia has had trading sanctions imposed on it, and has retaliated with its own. International investors have withdrawn their capital and the government has imposed restrictions on foreign involvement in the economy. This has coincided with a sharp drop in the price of oil, Russia’s main export. After many years of double-digit ad spend growth, Russia’s ad market is forecast to grow just 1.8 per cent this year and 1.1 per cent in 2015, followed by 4.6 per cent growth in 2016 and 9.2 per cent in 2017.
The crisis has had greater effect in Ukraine, where violence has disrupted distribution chains and frightened away foreign investors, including big advertisers. Thus, ad spend in Ukraine is forecasted to fall 49 per cent this year and 10 per cent in 2015, followed by 6 per cent recovery in 2016 and 2017 from a greatly reduced base.
Mobile is becoming the main driver of global ad spend growth, and is forecasted to account for 51 per cent of all new advertising dollars between 2014 and 2017.
“We expect mobile advertising to grow by an average of 38 per cent a year between 2014 and 2017, driven by the rapid spread of devices, innovations in ad technology and improvements in user experiences,” states the report.
However, mobile’s share of ad spends remains well behind its share of media consumption. Mobile will account for 6.2 per cent of all ad spend in the US this year, while eMarketer estimates it will occupy 23.3 per cent of media consumption time, mentions ZenithOptimedia.
It adds that this is partly because a lot of conventional display advertising does not work well on mobile. Compared to desktop display, mobile banners take up more screen space, are considered more intrusive, and are more likely to annoy consumers than engage them. Because mobiles don’t accept cookies, retargeting and tracking from the ad to the purchase is usually impossible.
ZenithOptimedia Worldwide CEO Steve King said, “Mobile technology is creating new opportunities for brands to build relationships with consumers, while programmatic buying is making brand communication cheaper and more effective. Social media provides a strong example of how to advertise effectively on mobile platforms, and we expect mobile marketing to develop further as other media learn from this example.”
One area where digital display has proved very successful on mobile is social media. Facebook and Twitter have rapidly restructured their operations for mobile consumption and advertising, and between them are on track to capture 33 per cent of all mobile ad spend in 2014. This is well above their 10 per cent share of all digital ad spend.
Transition to programmatic has given a sharp boost to traditional display, the report highlights. Agencies are swiftly adopting programmatic buying, which allows them to target display ads accurately and efficiently. This has provided a sharp boost to ‘traditional’ digital display, as well as video and social.
Growth in traditional display leapt from 14 per cent in 2012 to 18 per cent in 2013, and is estimated at 26 per cent in 2014, its fastest rate of growth since 2007.