Bullish consumer sentiment, heightened competition & stable economy boost ad spends?

Taking away from what has already been said by tech and digital experts in wake of improved market sentiment, the digital advertising industry has a found fresh validation of its bullish outlook in GroupM’s latest ad spends report—This Year, Next Year 2014.

Digital boom

According to the report, advertising expenditure on digital as a medium is expanding at 35 per cent. This is against television growing at 14.8 per cent and print medium being led by regional publications and local advertisers. 

“It’s a positive outlook overall for the industry. Particularly (and not surprisingly!), the digital space, which along with higher spends, will see advertising breaking new ground, marketers being experimental. The strategic and targeted solutions available to brands in the digital and social channels make it all very interesting. From our experience and work in the region we are seeing brands in the e-commerce and consumer technology sectors exploring new frontiers with both earned and paid media in India,” commented Papri Dev, Managing Director, Zeno Group, India.

New heights

Next year, global advertising expenditure will finally surpass the peak seen before the global financial crisis, although this recovery is patchy with some markets remaining well below the 2007 level, the new study said.

GroupM has revised their annual estimated advertising expenditure (AdEx) for 2014 to 12.5 per cent from 11.6 per cent released earlier this year.

The media management investment operation of WPP forecast that global ad spend would increase 4.5 per cent in 2014 to reach $534 billion, and 5 per cent in 2015 to hit $560 billion.

“At a macro level it’s good to see a continuing recovery in advertising. It echoes with the positive sentiment for the business as well as the positive sentiments in the country. I believe India is back as the No. 1 country in terms of consumer confidence (it had slipped to third a year back),” said Nikhil Sharma, Director - Marketing, Perfetti Van Melle India.

India outlook

The fastest-growing markets are expected to include India, Brazil and Russia, although GroupM warns that its Russia forecast—already reduced from 10 per cent to 6 per cent—is dependent on the situation in Ukraine remaining stable. 

According to Suresh Eriyat, Founder and Creative Director, Eeksaurus, “Rising competition among brands has helped leverage advertising across all platforms as a necessity. This therefore spells a bright future for the industry in the years to come. With a steady growth of population, the Indian ad industry will grow immensely in the global scenario.

An ever-growing market with a growing population, India has opened up the market to MNCs. While in the West, the trend of consumerism has been popular even in advertisements, it has been noticed that after a point in time, once the trend dies down, the sale of the product goes down as well. In order to increase market shares and the volume of sales in India, these brands need to change their focus from consumerism to improving lives instead. Changing audience preference and opinion has left the audience feeling the need to engage rather than just purchase products. Indian advertisers therefore need to stop looking for short term benefits and instead of aping the West, concentrate of fostering relationships that will in-turn ensure sales of their product.”

Nikhil Sharma feels India punches under its weight and currently accounts for only close to 1.5 per cent of global AdEx but our growth rates as reported are much higher than the developed world. “I think that advertisers will continue investing in a growing market. Most of the FMCG categories are under penetrated and have a lot of headroom to grow and therefore will continue to see investments particularly in mediums like TV which is still unmatched in terms of penetration.”

Global outlook

All said, the report points out that globally this progress is not spread evenly. Just 17 markets will account for 93 per cent of expected ad growth this year. The US leads the way with an expected additional $162 billion of spending, followed by China, adding $76 billion. Other countries contributing include Nigeria, Kenya and Vietnam.

Of China, report editor Adam Smith observed that the consumer economy was continuing to grow. “This, plus intensive digitization of advertising, keeps China ad investment rising at or near double-digits, with no large print legacy to correct,” he said.

The Western Europe outlook, however, is less bright. In the Eurozone area, which accounts for 73 per cent of the regional economy, ad spend is still 20 per cent below the 2007 peak; amongst those countries hardest hit by the crisis—Greece, Ireland, Spain, Italy and Portugal—it is 47 per cent below the peak.

The report notes that Western Europe also has the world's most print-heavy advertising, although the downward trajectory of ad spend in this medium is slowing from double digits to single digits. And, according to Smith, Western Europe is also the most-digitized ad region in the world, “though this may finally be maturing to judge by digital ad investment growth slowing from double- to high-single digits in 2014 and 2015”.

In Asia, GroupM warns that the political and economic challenges being faced in several countries—Indonesia, Malaysia, Thailand, Philippines, Singapore and Vietnam—indicating that ad growth in the Southeast Asia region would slip from double-digit growth to mid-single. 

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