Demonetisation shaved 2% off total Adex growth in 2016: CVL Srinivas
India’s advertising investment is expected to reach an estimated Rs 61,204 crore in 2017, a growth of 10 per cent over 2016. This has been forecast in GroupM’s biannual advertising expenditure futures report, ‘This Year Next Year’ (TYNY) 2017, released yesterday.
As per GroupM, the ad spend in 2016 was Rs 55,671 crore. 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 E-commerce.
Deceleration in Adex growth in 2016
Speaking at the event yesterday, CVL Srinivas, CEO, GroupM South Asia, pointed out that 2016 was a very volatile year, where every prediction on ad estimates went haywire. He mentioned, “We ourselves put out an Adex number of 15.8 per cent at the start of the year, but actually ended up the year at 12 per cent. In 2015, the Adex had grown at 14.2 per cent over 2014.”
Srinivas further said that one of the reasons for this fall was the sluggish growth recorded by the FMCG sector, which is close to 30 per cent of the Adex. “Almost one-third of the Adex is moving at a slow pace, which obviously pulls things down,” he added.
Second reason for the fall was the slowdown witnessed in the e-commerce sector, which, Srinivas noted, happened in April 2016 itself, even as January-March 2016 was a good period for e-commerce.
These apart, sectors like consumer durables, traditional retail and real estate also continued to have a sluggish year. “Even when you look at the January-October period of 2016, before November 8 (when demonetisation was announced), the AdEx growth trajectory was a bit muted. And with the demonetisation, the impact was definitely felt mid-November and end December. Demonetisation by itself shaved off about 2 per cent of the total growth as per our estimate. Thus, keeping these factors in mind, and even if there was no demonetisation, we would have still ended the year not at 15.5 per cent, but at 13 per cent or 13.5 per cent.”
A silver lining called Digital
Amid such challenges there was a silver lining as well, with a huge spurt seen in digital mobile growth. A lot of spends in digital today is happening on mobile, with a lot of campaigns bring conceptualised mobile first and within that, video’s contribution has been significant.
Speaking about the broadcast sector, Srinivas said, “We saw a lot of growth happening in FTA (Free-To-Air) channels. Because of DD Free Dish, the FTA channels have got a very high reach in the last one or two years.” He further pointed out that a medium like Cinema had continued to do well. “In 2016, because of consolidation happening in that sector and wider range of movies coming out, the audience is taking to both Hollywood and Indian films. Therefore, Cinema, even after being a small component of the total AdEx, continued to do well,” Srinivas, while stating that there were some blind spots in 2016.
Talking about GroupM’s performance in the year gone by, he noted that 2016 was an action packed year for the group. “We had a few major announcements. We acquired a company called ‘Essence’ in 2015 globally, which is one of the world’s largest digital agencies and we brought it to India in 2016. Its office is based out of Gurgaon and they work with us closely and are also looking to expand their presence in India. Also, more recently we acquired stake in Mediacom. Apart from these two, all our agency brands did very well. Every year we keep winning more and more awards. We continued to maintain a 90+ per cent strike rate in business pitches and 99+ per cent client retention rate y-o-y despite a huge base of clients.”
He further said that some of the other units that support GroupM’s agency brands and have contributed quite a bit to the industry, include Vinit Karnik-led ESP Properties. He added, “ESP Properties not only brought out a lot of interesting studies and reports, it has been pretty much at the forefront of shaping the entertainment sports in partnership space in India, which, I know, is very much fragmented with a lot of players. We see ESP to be a very integral part of our overall business.”
“Also, Dialogue Factory led by Dalbir Singh, which is our activation and rural marketing practise, has been working with some of the biggest advertisers in the country. Another unit of ours, which we have not spoken about too much but is doing phenomenal work, is Gain Theory. It is our global analytics hub which is based out of Bangalore and headed by Sunder Muthuraman. It has been doing some path-breaking work in areas of Marketing and Business Analytics. Then we have M-Platform, which is another recent announcement where we have actually tried to integrate some of our digital platforms like Xaxis as well as our performance marketing unit, roll it up with data and try and get a little more organised. All of these put together are making us, as a network, definitely move up the value chain,” Srinivas added.
He concluded by saying that GroupM, over the last many years, has been trying to develop a few more practices and today, the group has reached a stage where all of these practices have hinged around data and intelligence. “I think the biggest difference between us and most of the others in the business is that we have invested a lot in terms of data and technology and have created a very powerful data stack,” he signed off.