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Why Carat is bullish on India’s ad market

MUMBAI: India continues to be the fastest-growing ad market globally and is set to pace up at 13.9% in 2017, according to global media network Carat.

Apart from India, Vietnam and the Philippines are the only other Asian markets that will see a double-digit growth rate this year. In India, ad expenditure is expected to accelerate by 12% in 2016, a buoyant year with multiple media events taking place in the market, including the T20 Cricket World Cup, the Indian Premier League (IPL), as well as the state elections.

Conversely, more moderate growth remains in China where ad spend is expected to increase by 5.7% in 2016 and 5.5% in 2017, as the market adjusts to a ‘new normal’ economic landscape. Hong Kong, Taiwan and Thailand all struggle due to lacklustre economic growth and weak demand.

Releasing its updated forecasts for worldwide ad expenditure, Carat has said that the ad expenditure will continue to be extremely bright in India.

Key growth factors for India

Retaining its position as one of the fastest-growing world economies with real GDP growth of 7.5 per cent in 2016, the positive advertising outlook for the Indian market is expected to continue through 2017, growing further by 13.9 per cent. Additional media-related statistics include:

  • India is one of the few large markets where all traditional media platforms still show positive growth. Holding the highest share of spend of 38.5% in 2016 and 38.0% in 2017, TV is forecast to grow by 12.3% in 2016 and 12.5% in 2017, driven by investment from FMCG brands and e-commerce companies.
  • Newspapers still represent the second-largest media type with 35.7% share of total spend in 2016, and this is expected to continue to grow by 10.5% this year and 10.8% in 2017.
  • As in other markets, digital is the fastest-growing media type in India (31.5% in 2016 and 39.6% in 2017), but its share of spend (8.9% expected in 2016 and 10.9% in 2017) still remains relatively low compared to the resilient traditional media.
  • India is gradually transitioning from a mobile-first to a mobile-only country. Mobile spend is forecast to grow by 27.2% in 2016 and 35.1% in 2017. Carat also notes that since 2013 there has been a steady uptick in India’s ad revenue growth. The growth has been 8.1%, 8.7% and 11% in 2013, 2014 and 2015 respectively.

The global scene

Based on data received from 59 markets across the Americas, Asia Pacific and EMEA, Carat’s latest global forecasts show that ad spend will reach $548.2 billion in 2016, accounting for 4.4% growth year-on-year. The healthy outlook is fuelled by a buoyant 2016, marked by high-interest media events including the Uefa Euro Championships, the Rio 2016 Olympics and Paralympics, as well as the upcoming US presidential elections.

In 2016, Carat reports a positive outlook for most regions with particularly robust growth in North America (5%) and strong recovery in Russia (6.2%), countering lower expectations in some markets. The US continues to show positive market confidence with forecasts revised up to five per cent as the US presidential elections alone are expected to generate US$7.5 billion of incremental spend.

Despite a slight moderation following the EU referendum, the UK continues to be the largest ad market in Western Europe, with positive growth of +5.4% expected in 2016, exceeding the average rate of 2.9% in the region. Advertising forecasts are also set to remain strong in Latin America and Asia Pacific, with 10% and 3.9% growth respectively in 2016, in spite of Brazil’s lower expectations and China’s adjustments to its ‘new normal’ economic landscape.

Despite a slight decline due to volatility in some markets, the positive momentum of the global advertising spend is expected to continue into 2017 reaching $570.4 billion, a 4% year-on-year growth, led by the ongoing upsurge of digital media.

As the leading media type in 13 of the markets analysed, digital continues to grow at double-digit prediction levels of 15.6% in 2016, accelerating further at 13.6% in 2017. Driven by the high demand of mobile, online video and social media, digital media spend is expected to reach 27.7% share of total global media spend in 2016, increasing to a predicted 30.2% in 2017.

While TV continues to hold the highest share of total media spend of 41.1% in 2016—boosted by high-interest media events—it is expected to grow at a more moderate rate of 2.3% in 2017 with a lower predicted share of spend at 40.3%.

In line with expectations, print ad spend is forecast to continue to decline by -5.5% in 2016 and by -4.3% next year. Excluding print, Carat’s forecasts reconfirm year-on-year growth for all other media in 2016, highlighting year-on-year positive growth for cinema (4.5%), radio (2.4%) and OOH (3.5%), with predictions slightly revised down for 2017.

Asia Pacific

Ad spend forecasts for the Asia Pacific show continued growth of 3.9% in 2016 and 4.2% in 2017, marginally revised down from the March 2016 report (4.4% and 4.7%, respectively).

Overall, the outlook for the region paints a mixed picture with variations at local levels. Double-digit growth rates in India (12%), Vietnam (10.6%), the Philippines (9.9%) and a solid performance in Australia (5.4%), are countered by declining spend in Hong Kong (-11.8%), Taiwan (-7.6%) and Thailand (-5.2%), due to lacklustre economic growth and weak demand.

Spend forecasts in the region also reflect a more conservative growth in China, as the market adjusts to a ‘new normal’ economic landscape. This trend is expected to continue in 2017, with the Asia Pacific region growing at a healthy, yet moderate growth forecast of 4.2%.

China

The world’s second-largest advertising market is expected to reach $81.8 billion spend this year. Following many years of double-digit economic expansion, China is now experiencing a more moderate growth, reflected in a steady 5.7% ad spend forecast for 2016.

As the market has now entered a ‘new normal’ era, its advertising spend is predicted to increase at a similar rate of +5.5% in 2017. Other insights into the Chinese advertising landscape include:

  • TV still commands the majority share of total spend in China, a predicted 53.4% share in 2016 and 51.2% in 2017. However, with fierce competition from digital and moderate year-on-year growth (1.7% in 2016 and 1.3% in 2017), TV’s share of total spend in China shows a negative trend falling by 1–2% points a year since 2010.
  • Digital is the second-largest media type in China, with 25% share of total spend predicted in 2016 and double-digit growth of +25.9% in 2016 and +21.4% in 2017.
  • Mobile is driving total digital spend growth, with a forecast increase of 47.1% in 2016 and 34.6% in 2017. With more than 656 million smartphone users in China in 2016, mobile is forecast to reach over a third (34%) of total digital spend in 2017.
  • Online video is expected to increase by 42.3% in 2016 and 34.5% in 2017 as the use of professionally generated content grows exponentially in the market.
  • OOH, the third-largest media type in China, is predicted to increase at a solid 4.1% in 2016 and 3.8% in 2017, with China’s metro development and airports being key growth drivers.
  • In contrast, print continues to show consecutive year-on-year declines, with newspapers expected to slump by -14.9% in 2016 and -16.2% in 2017, and magazines by -12.2% in 2016 and -13.1% in 2017.

The US

Ad spend in North America continues to show positive momentum in 2016, with a strong 5% growth forecast (revised up from 4.6% predicted in March 2016), ahead of the global growth prediction of 4.4%. North America is expected to generate $213.3 billion, 38.9% of total global ad expenditure in 2016.

The positive outlook for the region is primarily driven by steady growth in the US, the largest ad market, where spend is estimated to reach $204.8 billion in 2016, increasing by 5% (revised up from 4.7% forecast in March 2016).

Growth in the US is fuelled by the upcoming US presidential elections, accounting for approximately $7.5 billion of additional spend, as well as the Rio 2016 Olympics and Paralympics, which contributed to a strong first half of the year in the market with an incremental $1.3 billion spend.

In 2017, despite the lack of major media events, the US ad market will maintain its positive momentum with a steady but more moderate +3.8% year-on-year growth (marginally revised down from Carat’s March forecast of 4%).

Other highlights of the US ad market

  • TV, predominantly local, will make up approximately 70% of the $7.5 billion incremental spend from the US presidential elections this year.
  • TV will continue to command the largest share of advertising spend, accounting for 38% of all investments in 2016 and 37.3% in 2017. TV is forecast to grow by 4% in 2016 and 2% in 2017.
  • Digital spend growth of 16.7% in 2016 continues its upward trajectory with video (50%), mobile (49%) and social media (45%) leading the way. Digital spend is forecast to hit $56.8 billion in 2016, comprising 27.8% of total US ad expenditure, and it is predicted to increase to 30.5% in 2017. Digital growth is expected to continue its double-digit level of 14% in 2017.
  • Print share of spend continues to erode, driven by newspapers declining by -9.0% in 2016 and 2017.

Australia

The Australian advertising market in 2016 is expected to generate growth of 5.4%, building on the strength of digital, which continues to generate strong double-digit year-on-year increase.

Other key drivers of growth include a 12-week lead-up campaign to the Federal elections held in July 2016, as well as the Rio 2016 Olympics and Paralympics, collectively accounting for an estimated $110 million spend this year.

Despite the absence of major media events in 2017, the positive outlook for Australia is predicted to continue next year at a healthy pace of 4.5%, also facilitated by the return of the Liberal Coalition to power that is expected to bring positive business conditions.

Western Europe

Ad spend in Western Europe is forecast to deliver moderate growth of 2.9% in 2016. Markets showing the highest growth predictions this year include the UK (5.4%), Ireland (7.5%), Sweden (6.4%), Spain (5%), as well as recovering Greece (4.2%).

Markets with lower or declining growth in 2016 include France (0.9%), the Netherlands (1.3%), Finland (-0.6%), Switzerland (-1%) and Norway (-3.7%).

Ad expenditure in Western Europe is expected to reach $94.4 billion in 2016, representing 17.2% share of global ad spend and increasing by 2.7% in 2017, slightly revised down from the 3.1% predicted in March 2016 report.