India’s Digital Advertising Expenditure to grow by 30% in 2017

Digital Advertising Expenditure

GroupM, today released its biannual advertising expenditure futures report ‘This Year Next Year’ (TYNY) 2017, forecasting India’s digital advertising expenditure to reach an estimated Rs. 9,490 crores in 2017. This represents a growth of 30% for the calendar year 2017 over the corresponding period in 2016.

As per GroupM, the ad spending in 2016 was Rs. 55,671 crores. Even though the year began on a very optimistic note, the overall 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 Ecommerce. In the Januray-October period itself 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.

Speaking on the TYNY 2017 report, 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.” Explaining the media scenario, 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.”

Looking at the advertising industry worldwide, GroupM estimates the global advertising expenditure (adex) to grow by 4.4% and Asia-Pacific to grow by 6.3%. With an estimated adex growth of 10%, India remains one of the fastest growing ad markets globally. While 80% of incremental ad spend growth in major markets comes from digital media, in India the numbers are more evenly split betwen traditional and digital media. Digital media accounts for about 40% of the incremental ad spend growth.

The Indian advertising expenditure growth rate is also in line with the revised GDP forecast; India’s GDP is estimated to grow between 6.5 to 7.5%. This will be led by low interest rates, sustained urban demand and the impact of key policy reforms. Over the last seven years, ADEX to GDP growth ratio has been between 1.5-2X, and 2017 will be no exception.

GroupM also elaborated on the major media trends that will emerge in the Indian advertising industry. These include trends in sports programming, content, data and digital media. Globally, GroupM has been leading the conversation on viewability with brands and partners. Taking this program forward, Lakshmi Narashimhan, Chief Growth Officer explained the importance of viewability, “As India matures as a digital advertising market, transparency and trust are critical for higher adoption of the medium. Those adopting high viewability standards will be able to differentiate themselves on quality parameters. Once implemented, platform choice and pricing will depend on viewability scores.”

GroupM estimates the Digital Advertising Expenditure to grow by 30% in 2017 to Rs. 9,490 crores. The digital advertising expenditure is estimated to take a 15.5% share of the total Adex this year. There will be a high emphasis on viewability metrics and outcome based optimization. Ad spends will grow on OTT platforms, as internet speeds improve and catch up TV gains ground. 2017 is estimated to be a modest year for newspapers with 4.5% growth. The increase in ad spends expected from print heavy sectors like Auto, BFSI, e-wallets will contribute to this growth.

This Year, Next Year, is part of GroupM’s media and marketing forecasting series drawn from data supplied by holding company WPP’s worldwide resources in advertising, public relations, market research, and specialist communications. The TYNY report is the most comprehensive understanding of the estimated media spends by advertisers in the current year. It also highlights some of the industry sectors that will have a major effect on digital advertising expenditure across media.