According to the EY – FICCI FRAMES report 2019, ‘A Billion Screen of Opportunities’, digital ad spends grew 34% to comprise 21% of the total ad market. The article explores digital advertising trends such as ad spends sentiments, inventory analysis, and more as shared by the report.
The growth in ad spends on digital was on account of several factors:
1. Improved demonstration of return on ad investment through placement of ads closer to the point of purchase
2. Heavy digital evangelism by ad agencies, along with the “cool factor” of working on digital media and with India’s burgeoning digital start-up ecosystem
3. A large SME base, increasingly focused on performance advertising and less on brand building
4. Use of digital media by several large traditional advertisers to experiment with niche product launches and higher-priced variants
Today, digital platforms provide household targeting with 10% wide slabs across various parameters and as telcos and e-commerce platforms build their consumer data, individual targeting will – subject to data privacy concerns – enable more focused targeting.
1.Ad volume analysis
YouTube remained the largest platform for digital advertising 21% of total digital ad insertions in 2018 as web monitored by TAM AdEX were on YouTube.
Other top web publishers (by number of ad insertions) are in the table below.
Approximately 56% of ad insertions and value were on 4% desktop, while 44% were on mobile. Mobile advertising share could exceed desktop in 2019 as it is expected to grow at over 40%. 83% of Indian consumers were accepting of or neutral to pre-roll advertising if it was relevant to them.
2. Inventory utilization fell due to volume growth
As Indian broadband subscribers increased by 41% in 2018, ad inventory grew exponentially and resulted in a glut of inventory in the digital ad market. Industry interviews and analysis indicate that while watch time could grow 3 to 3.5x over the next five years, resulting in a massive inventory surplus, revenues will grow only around 2x.
The report estimates that CPMs will correspondingly fall by up to 50% for non-premium inventory.
The key for revenue growth will therefore be innovation around new ad formats, voice search and transactions, better targeting, regional language content, focus on performance advertising, premium content, etc.
3. Services was the largest advertising category
The largest advertising category (by number of ad insertions) was services, which comprised e-commerce, online shopping, media and entertainment, real estate, etc.
The top five advertisers were Amazon, Girnar Software, Google, Netflix and Flipkart. Amazon accounted for 5% of total ad insertions.
4. Banner ads were most prevalent in 2018
Over 40% of all ad insertions were banner ads, followed by HTML5. Video insertions were at 22%. Video insertions have more than doubled over the last two years as they garner higher advertising rates.
5. Share of local language ads increased
The share of ads in local languages has increased significantly in 2018. While small businesses always preferred local ads to reach local audiences, larger advertising brands took to local language ads in a big way in 2018.
As the reach of the internet continues to be fueled by regional subscribers, the report expects that the share of language advertising will reflect that of TV, i.e., eventually, only 4-5% of ads will be in English, around 50% in Hindi and the balance in local languages.
The CPM differential is limited – just 10-15% lower than English and Hindi since the primary construct remains audience based buying.
6. Share of programmatic ads doubled
Interviews have shown that programmatic increased from 10% of total digital ads in 2017 to around 20% in 2018 and the contribution of programmatic could continue to grow to around 50% by 202154.
The CPMs also reduced by up to 20% for non-premium ad inventory during the period, while most premium ad inventory ranged from US$2.5 to up to US$1055. Industry discussions indicate that programmatic currently constitutes up to 30-40% of overall share of revenues for some OTT platforms. Programmatic could also move to other traditional media over time, as the case for efficiency and performance grows. The first signs of this have been seen in more developed advertising markets.
7. Share of advertising modes
8. Ad value analysis
Four ad categories spent over a quarter of their total ad spends on digital.
Percentage spends on digital by category
Four categories spent over 30% of their ad spends on digital media – BFSI, telecom, consumer durables and e-commerce. Contribution wise, FMCG doubled its share of spends on digital since 2017.
9. Category composition of digital advertising 2018
By value, FMCG was the highest spender on digital, comprising 28% of total spends, followed by e-commerce, consumer durables and BFSI.
Over 300,000 small and medium advertisers used the digital medium
Large ad platforms claim that there are now over 300,000 small and medium enterprise digital advertisers i.e., those who never or barely advertised on traditional mediums like TV and radio, or were advertisers in local print and classifieds. They expect that this number is growing significantly and could reach 500,000 advertisers within five years.
Their spends are focused on performance advertising – predominantly search and classifieds, on platforms like Google, Facebook, Flipkart, Amazon, Just Dial, etc. However, the report is unable to verify these ad spends, as data was not available for review. Industry discussions indicate these spends to be around INR72 billion.
Survey of marketers indicated that 34% of respondents would spend more on digital advertising if ad fraud issues were addressed, while 45% would increase spends despite knowing of the risk.
10.Ad fraud was a serious concern
Our survey of marketers indicated that 34% of respondents would spend more on digital advertising if ad fraud issues were addressed, while 45% would increase spends despite knowing of the risk.
11. The native ad dilemma
Native advertising was preferable, but the cost of implementing it was sometimes too high for many publishers, leading to lower uptake than it warranted. Several publishers mentioned its appeal to advertisers, but were unable to implement the same across devices, formats, etc. in a real-time manner.