In-depth: Analysing ad spends trends in the East markets - Growth Vs challenges

The East market has seen a rapid adoption of digital technologies, which has led to increased internet penetration and smartphone usage, creating new avenues for digital advertising. As mobile advertising is becoming important, companies are focusing on mobile-first strategies, including mobile app advertising, and in-app targeting, to reach consumers effectively on their mobile devices.

This shift towards digital channels has led to a growing demand for adtech solutions that can effectively target and engage consumers online. There is also a growing demand for regional content and localized advertising campaigns that resonate with the cultural and linguistic diversity of the East market.

Advertisers and brands are focusing on innovative and creative campaigns to capture the attention of the East market audience and differentiate themselves in a competitive landscape. This drives up ad spending as companies aim to capture market share.

The ad spend growth in the East has been impressive, with digital advertising leading the charge. According to recent reports by Madison, GroupM, and FICCI EY, the advertising industry in regions like India has seen double-digit growth in 2023, with digital ad spending growing by over 30%. This growth is driven by several factors, including increased internet penetration, the proliferation of smartphones, and the booming e-commerce sector. For instance, India’s digital ad spend is projected to reach $3.8 billion in 2023, according to GroupM.

According to Neelesh Pednekar, Co-Founder & Head of Digital Media, Social Pill, “The key reasons for this surge include the digital transformation of businesses, consumer preference for online shopping, and the effectiveness of digital ads in driving engagement and conversions. The East market’s young, tech-savvy population is also a significant driver, with over 60% of the population under 35, making digital channels the most effective way to reach this demographic.”

Yousuf Rangoonwala, Founder, Kakkoii International, too, pointed out that recent surveys by reputable organizations like Madison, GroupM, and FICCI EY highlight a notable growth in ad spending in the Eastern market, albeit with certain challenges. “While the region shows promise, the pace of change remains gradual compared to other parts of India, primarily due to entrenched traditional business mindsets and economic constraints. To unlock the full potential of the Eastern market, brands and agencies must adopt a strategic approach focused on mobile-centric advertising, social media content, and e-commerce channels. By aligning marketing efforts with evolving consumer preferences and leveraging digital platforms effectively, brands can capitalize on the untapped opportunities in the Eastern market and drive sustainable growth,” he added.

Yasin Hamidani, Director, Media Care Brand Solutions, added here, “The East Indian market has witnessed a significant growth in advertising spending, mirroring the overall trend observed in the advertising industry. Recent surveys conducted by Madison, GroupM, and FICCI EY study on the ad industry indicate a notable increase in ad spending in 2023, despite the challenges posed by the economic landscape.”

Several key factors have contributed to this growth. Firstly, the increasing digitalization and internet penetration in the East Indian market has provided advertisers with new avenues to reach their target audience. With the proliferation of smartphones and social media platforms, brands have expanded their digital advertising budgets to capitalize on the growing online consumer base. Secondly, the rise of e-commerce and digital-first brands has fueled competition in the market, prompting companies to invest more in advertising to maintain their market share and attract customers. Additionally, the recovery of various sectors post-pandemic has led to increased consumer spending and confidence, creating favorable conditions for advertising expenditure growth.

Hamidani added, “Furthermore, the advent of innovative advertising formats such as influencer marketing, programmatic advertising, and native advertising has provided advertisers with more effective and targeted ways to engage with consumers, driving higher ad spends in the process. Overall, the combination of digital transformation, market competition, consumer recovery, and advertising innovation has contributed to the significant growth in ad spending observed in the East Indian market and the advertising industry as a whole.”

Understanding the challenges

On the other hand, Angad Singh Manchanda, CEO & Co-founder, Chimp&zInc, remarked that digital ad spending in the East market has experienced sluggish growth, especially evident in social media platforms like Meta, and regions facing challenges such as Western Europe and China. However, despite these challenges, the global forecast predicts an increase in total ad spending, with digital ad spending still showing growth, albeit at a slower rate compared to previous years. The key reasons for the decline in ad spending in 2023, as indicated by recent surveys, could be attributed to various factors such as economic pressures on consumers, leading to a preference for free or low-cost ad-supported options, the need for relevant and engaging ads to sustain this model, and the impact of macroeconomic uncertainties affecting growth forecasts.”

Additionally, the shift towards new advertising channels and formats, coupled with challenges faced by traditional advertising methods, could also contribute to the decline in ad spending in 2023.

Manchanda, however, believed that despite the ongoing challenges, the ability to adapt and innovate is crucial for maneuvering through the ever-changing advertising landscape. It is all about staying flexible and resilient as market dynamics shift. To stay ahead, it is important to embrace new trends and cater to what consumers want, ensuring continued growth and relevance in this ever-evolving industry.

“The decelerated ad spend growth in 2023, as reported by studies from Madison, GroupM, and FICCI EY, reflects a confluence of factors,” noted Saijal Jain, Media Buying Manager, Adbuffs, adding, “Economic uncertainties have led brands to tighten budgets, prioritizing essentials over advertising expenditures. The digital advertising space is increasingly crowded, diminishing the returns on traditional ad spending and pushing companies to seek more impactful engagement methods. Shifts in consumer behaviour, including a preference for authenticity and skepticism towards ads, alongside the rise of ad-blocking technologies, have made conventional advertising strategies less effective. Furthermore, stricter data privacy regulations and a pivot towards performance marketing have necessitated a reassessment of ad budgets, focusing on channels that offer clear, measurable returns. This period also sees a strategic shift from customer acquisition to retention, emphasizing personalized marketing over broad ad campaigns, reflecting a nuanced approach to sustaining brand loyalty in a competitive market.”

Vandana Ramkrishna, Chief Operating Officer, Madison Media Ace, observed, “While the overall spending scenario in the East market has plateaued in the last year, Print & Outdoor has grown by 12-15% on the back of industries like Cement, Steel, Real Estate to name a few. However, the AdEx for TV saw a declined growth of 5 -7% as no new player has emerged in the last couple of years. Categories like Retail FMCG, and Consumers Goods have not fired as the growth of capita income of Eastern region is lowest as compared to rest of India, resulting in lowering/ no spending power.”

Mohit Anand, Co–Founder & CEO, Secure Connection, shared, “Historically, the East market chips in about 7-10% of the whole advertising pie, and that hasn’t changed lately. However, there has been a noticeable shift in how companies allocate their advertising budgets. More and more businesses are veering away from traditional advertising methods – such as newspapers, TV ads, and billboards – and embracing the digital landscape. This transition is particularly evident in the decline of ad spending in traditional mediums like regional newspapers. The driving force behind this change is the evolving preferences of consumers. Increasingly, people are turning to digital platforms for their news, entertainment, and daily information needs. For instance, the number of individuals favouring digital news sources over printed newspapers is on the rise, leading to a decline in readership even among those who still receive physical newspapers.”

As consumer habits evolve, advertisers are adjusting their strategies, accordingly, prioritizing digital advertising channels to reach their target audiences effectively.

According to Delphin Varghese, Co-founder & Chief Revenue Officer, AdCounty Media, “Based on the information provided in the Global Mid-Year Forecast for 2023, it seems that the ad industry, media, and entertainment industry may have observed a decline (DE growth) in ad spending in 2023.”

Some important statistics shared by Varghese are as follows:

• Television and print media experienced a decline in advertising revenue, with television showing a decrease of 1.2% and print media declining by 4.8%.
• Although digital advertising grew by 8.4%, the dynamic rise of digital advertising has slowed compared to previous years.
• The global economy is experiencing a trend of normalization, with the IMF forecasting a slowdown in global inflation to 7.0% in 2023.
• Overall, these factors suggest that the ad industry may have observed a decline in ad spending in 2023, as indicated by the term ‘De-growth’.

According to the FICCI EY study on the ad industry, media, and entertainment industry, here are some key reasons attributed to this trend:

• With economic growth moderating, businesses might have been more cautious in their advertising expenditures.
• The ban on certain large and high-yield advertising categories like gaming and betting could have contributed to the decline in ad spending.
• Changes in consumer behaviour, influenced by factors such as the pandemic and technological advancements, might have led to a re-evaluation of advertising strategies.
• The report mentions a slowdown in direct-to-consumer (D2C) brand investments, which could have had a cascading effect on advertising spending.
• The rise of digital media consumption and the changing landscape of traditional media might have influenced advertising budgets.
• As digital media continues to gain prominence, advertisers may have shifted their budgets to digital channels, affecting traditional media's share of ad spending.

Su Piow Ko, VP, AET Displays, noted, “Advertising in India has come a long way in the last few years. The industry is one of the fastest-growing markets in the world, with India being the third largest contributor in the world of advertising, after China and the US. This notable surge in ad spending can be attributed to several key factors. Primarily, the increasing digitalization and internet penetration in India have led to a surge in digital advertising, with advertisers leveraging online platforms to reach a wider audience. Additionally, India’s robust economic growth and expanding consumer market have created opportunities for advertisers to invest in advertising campaigns to capitalize on growing consumer spending. Besides that, the emergence of new advertising formats and platforms, such as social media and OTT (Over-the-Top) streaming services, has provided advertisers with innovative avenues to engage with consumers. Furthermore, the focus on brand building and promotion, coupled with the rise of influencer marketing, has contributed to the overall growth of the advertising industry in India. Collectively, these factors highlight India's increasingly prominent role in the global advertising arena, reflecting the country's dynamic and rapidly evolving market conditions.”

Kritika Arora, Director - Performance and Acquisitions, Globale Media, added here, “Amid global decline and geopolitical concerns, the global advertising growth was seen at a mild 4-6%. According to the FICCI EY report, the Indian Media & Entertainment sector grew by 8% in 2023, reaching Rs 2.3 trillion. Digital advertising grew 15% in 2023 and surpassed traditional advertising for the first time. It accounted for 51% of the total ad spends and is the largest share of the ad pie.”

Sharing her views on the ad spend growth in the East market, Rajni Daswani, Director - Digital Marketing, SoCheers, said, “Basis my understanding, the decline that we have seen is likely due to economic slowdown, which has seen certain industries like FMCG that are heavy advertisers in the East slow down on spending a bit.”

Himmath Jain, Co-founder and Director, AS-IT-IS Nutrition shared: "In contrast to other regions in India, which are reaching market maturity, the Eastern market is experiencing robust double-digit growth. This accelerated market expansion necessitates a proportional increase in advertising investment to capture and sustain market share. In response, we have escalated our advertising budget by 50% compared to the previous year. This strategic budget augmentation is aimed at leveraging the burgeoning market potential, ensuring our brand remains at the forefront of the sports nutrition and fitness landscape in this rapidly evolving market."