E-commerce adex lags in H1'16 as sector sees consolidation

Ad spends by e-commerce sector have seen a decrease in the first half of 2016, observe media planners. Pitch Madison released its mid-year advertising report recently. Upon review of advertising expenditure in H1 2016, Madison Media found that growth in all media is more or less as per its original projections released earlier in the year, but there is a slowdown in the TV advertising growth rate.

The reduction in e-commerce ad spends could also be a reason why television ad spends  have just grown 11 per cent in H1’2016 as opposed to a predicted growth rate of 20 per cent for the year, according to the revised Pitch Madison numbers.

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E-commerce Ad Spends A Likely Culprit?
The revised Pitch Madison report said that e-commerce ad spends for H1’16 fell by 37 per cent in H1’2016 as compared to spends for the same period last year. According to the report, the category’s contribution to overall adex fell from 7 per cent in H1’15 to 4 per cent in H1’16.

Speaking on the release of the revised numbers, Vikram Sakhuja, CEO, Madison Media & OOH said, “The drop in growth rates in TV is led by a lower contribution of e-commerce which is a category known to pick and choose high priced inventory / impact programmes and substituted by FMCG users who resort to everyday advertising and seek high value for money.”

Ashish Bhasin, Chairman and CEO South Asia, Dentsu Aegis Network (DAN), also agreed that e-commerce ad spends were lower in H1. “E-commerce ad spends have gone down as was expected. The euphoria is over. Maybe we will see an increase during the festive season as the more stable players will spend on advertising,” he told us.

Dinesh Vyas, Associate VP (Planning) at OMD, opined that the consolidation being seen in the e-commerce space is one more reason for the less ad spends by this category in the first half.

Digital Expected To Continue Strong Performance

Speaking about the expectation for the year, Bhasin said that he expects H1’2016 adex to be somewhere around 12 per cent, which is also what the company expects for 2016. On the performance of individual mediums, he said, “Digital continues to be 3 times the average of other mediums. We are expecting print to show single digital growth with TV showing double digit growth.”

On the topic of television ad spends as compared to digital, Sanjay Tripathy, Senior EVP  and Head (Marketing, Analytics, Digital & E-Commerce) at HDFC Life felt that, overall, online has been the fastest growing segment for a while and has been eating into the spends across all categories. “Moreover, its (digital) reach keeps increasing significantly quarter after quarter. That said, as of today, television remains the cheapest medium if you are looking to reach the masses, and that I don’t think is going to change any time soon. Therefore I think we will continue to see advertisers lining up to promote their brands though television,” he said.

Though agreeing that digital and especially mobile is seeing the most interest, Vyas felt that HD channels on television are also seeing a lot of interest from advertisers. He said, “HD channels are gaining in prominence. We are seeing people subscribing to these channels. Even TV networks are pushing HD channels.” He was also of the opinion that due to networks like Amagi, etc, smaller brands that used to mainly advertise on print and radio are now moving to television.

“The automobile category has been booming in the first half of 2016. This could be because of a number of new launches that have been happening across car segments. In terms of mediums, mobile is ruling the roost due to an inclination to spend more on mobile among advertisers. There has been some shift of magazine and newspaper adex to digital. I think one of the major trends being seen is the resurgence of print due to Patanjali. It has changed everything for print. They have spent a lot on print as well as TV, more so than other FMCG brands,” he further told us.

The View From The Other Side

From the advertiser perspective, television and digital seem to still be the favoured mediums. For example, Amit Syngle, President of Technology, Sales & Marketing at Asian Paints, said he expected a good second half to 2016 in terms of advertising spends due to a “buoyant scenario”. “The implementation of the 7^th Pay Commission’s recommendations will mean that people have more disposable income. Also, the monsoon has been good this year so we feel the next few months will be crucial.”

When asked about how H1 was for Asian Paints in terms of advertising and what could be expected from the company in the second half, he said, “We spent strongly (in Q1) on television and were very active on social media and digital. We also spent on print but the spends were mainly on digital and television. In the second half, we will be adding radio and outdoor to create a 360 degree view around our existing campaigns.”

Tripathy was of the opinion that advertising spends for the first half of the year would not be too different from H1’2015.

“Over all advertising spends in India is estimated to increase by 14-15 per cent this year. And as we speak, I believe media companies must be busy gearing up for the festival season which is where the biggest spike in ad consumption still happens in India,” he opined.
 

“Most of the information (on ad spends) at this point seems to be indicative and some are just speculative. Overall I can only say we haven’t seen any telling signs so far. Big impact properties have pretty much held their rate and we haven’t seen media sales guys pushing heavily discounted properties to us so far this year. Having said that, in some sectors I do believe we will see changes. For instance, with more accountability being demanded by funding stake holders, E-Commerce businesses  which were among the largest spender last few years, I believe will reduce spending and take a more calculated approach. But that apart, I believe we will have to see how the festival season pans out before anything concrete can be said,” he added.

Speaking about HDFC Life’s approach towards advertising this year, Tripathy informed that spends have been consistent with previous years and TV and online remain the key mediums. He attributed this to a continued effort to grow consideration and engagement.  “Today we enjoy close to 80-95 per cent awareness in most key markets. Hence, we have reduced spends in mediums and activities which largely drive visibility and awareness. So digital, DTH, cinemas and television will be our primary mediums of communication. Other mediums shall be used to largely as support for the above,” he explained.  

 

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