TV here to stay with digital largest medium for ad spends

Total adex in India is expected to grow 16% in CY23 wherein digital is set to contribute ~60% in incremental ad spend, as per Pitch Madison Report 2023. This shows its sheer dominance (41% share in CY23 for digital); the share of TV and digital in India adex may remain at 73%, much below the global average (91.4% share – TV and digital), as TV may retain a higher share in India due to low average revenue per user (ARPU) and mass campaigning benefits, says Karan Taurani, senior analyst at Elara Capital. 

Magnitude: The Pitch Madison report states India’s adex was at INR 898bn in CY22, up 21% YoY (32.8% higher vs pre-COVID), as digital contribution moved up sharply from 23% to 38% in the past three years. On the other hand, TV contribution remains at 34% vs 37% in CY19; TV has been one of the most resilient mediums, which has been able to sustain its adex share of 34-38% post-COVID whereas other mediums, such as print, radio and out of home (OOH), were lower. 

Within TV, Hindi GEC, sports and Hindi movies remain the silver lining as they grew 7.4% YoY, 40.8% YoY and 22.2% YoY (contribution of 23.6% YoY, 23.6% YoY and 5.4% YoY, respectively, in CY22), led by increased consumption (most growth in Hindi GEC was due to surge in Hindi second GEC adex as its Free Commercial Time volume grew 47% YoY) whereas the news genre fell 3.5% YoY (contribution of 9% in CY22); adex from the regional GEC genre was up 11.9% YoY with a contribution of 29% in CY22, as regional still offers respite for TV and has yet to see a big negative impact due to digital media. FMCG, eCommerce and auto verticals are key for TV ad as they account for 70% of TV ad spend whereas eCommerce ad spend for TV grew 21% YoY with a share of 20%. 

Within digital advertising, social and search continue to command the lion’s share; however, the share of social remains flat at 22% vs pre-COVID; search fell 700bp to 16% from 23% in pre-COVID; this was due to the shift to video, eCommerce and influencers; the share of eCommerce remains flat at 16% whereas video rose 100bp YoY to 30%. As per Madison, total ad expenses in India may grow 16% in CY23E to INR 1,042.3bn, helped by growing consumer confidence, moderating inflation, rising SMB business and recovery from COVID-19; ~40% of ad spend currently comes from SME advertisers.

Triggers: According to Taurani, India will be one of the nations which will not see a big fall in TV adex share; it is expected to sustain in the range of 30-35% in the medium term, as 1) ARPU remains low at INR 350 on average, and 2) it is still the preferred medium for mass campaigns across age groups and markets; the share is much higher than the global average where TV is a mere 17% of adex share, primarily due to 1) higher ARPU on TV, 2) global audience’s willingness to pay for SVOD services; the share of print adex in India fell 100bp YoY to 21% in CY22, and we believe there is still potential to move lower (global average of 5%), as this medium has seen little respite post-COVID in terms of ad spend, which is still 900bp lower than pre-COVID) and less willingness to pay for news content online. Near- term concerns persist for overall ad spend growth in India, due to budget cuts by new- age and eCommerce companies, which may be offset by better spend in verticals, such as FMCG, telecom and auto (traditional verticals still contribute 62% of total ad expenses in India).

Watch the diet: If TV adex share were to remain intact, it would be a driver and help the merged entity of Sony-Zee leverage on their strengths to gain market share in the medium term and surpass Disney as the largest broadcaster in India, bolstered by the merged entity’s combined sports offerings; strength in the regional genre due to a minor shift toward digital media bodes well for firms such as SUNTV. Further, fragmentation within the digital ad expenses market opening up in favor of eCommerce & video and other segments is a positive for programmatic firms, such as Affle India, which depend on the CPCU model; we also believe ad spend in the CPCU model will be the least affected on the negative in terms of budget cuts, as it is ROI- and conversion-led, which, in turn, would help Affle India outperform the industry average growth rates. Hence, TV and digital are here to stay with digital being the largest medium for ad spend in India, concludes Karan Taurani.

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