Highlights of Sam Balsara’s presentation of the Pitch Madison Media Advertising Outlook 2015

23 Feb,2015



Hello and welcome to the Pitch Madison Media Advertising Outlook 2015.Thank you very much for coming this afternoon to find out about what happened in 2014 and what is our prognosis for 2015 in terms of media spends in different media and different categories.We have put together an interesting and hopefully educative afternoon with accomplished speakers talking about subjects ranging from Media to Fmcg to elections to the new age digital companies to corporate advertising.
Last year we said that 2014 would be a Buoyant year and am delighted to inform you that we were right!I would now describe the year just gone by as FANTASTIC!
Why do I say Fantastic?The Indian advertising industry in 2014 grew by 16.4%, almost at par with our forecast of 16.8%. When we projected a growth rate of 16.8% last February mostMedia professionals felt the projected growth was too high and Media sales professionals wondered if their bosses were going to increase their sales targets!

In terms of absolute numbers, the advertising industry increased by Rs. 5,200 Crs and touched Rs. 37,100 crs in 2014.

The 2 main categories that have fuelled the overall growth in 2014 were the Lok Sabha general elections along with the 5 state elections, and E-commerce players contributing as much as Rs 2,300 Crs and Rs 1,150 Crs. respectively. Thus almost half the growth came from Elections alone and the 2 categories account for 2/3rd of the growth. Of the 16.4% growth rate registered in 2014 it is significant to note that nearly 7.2 percentage points is on account of elections alone, 3.6 percentage points is on account of E-commerce. It is again significant to note that existing categories contributed to only 5.6 percentage points of the overall growth.
What is our growth forecast for 2015?
Whilst the growth in 2014 was Fantastic, mainly because of election spends, we are equally bullish for 2015 too but our forecast has to recognize that 2015 is not an election year.
A 9.6% growth rate, is what we forecast in 2015 which will take the industry further up to reach nearly 41000 crores. We expect the overall market to grow by more than Rs. 3500+ crores
That’s a spectacular growth of 27.5% over 2 years
Note, this figure of 9.6% should be compared with the like to like category growth of 5.6% achieved in 2014 and not the overall growth of 16.4%. A stable government at the centre that is focusing on growth of the Indian economy, positive market sentiment, upbeat consumer confidence and India once again attracting global attention, are all the reasons why we are doubling our growth forecast to 9.6% from the earlier years like to like growth of 5.6%.
Getting into the details of why 9.6% Biggest cricketing event ICC World Cup already underway is expected to earn a revenue of almost a 1,000 crores Rs. 500 crores is likely to be additional, just because of world cup and the balance as part of organic growth across sectors
Other contributing factors to growth are likely to be: New advertisers Separate sales of HD channels, hopefully will attract new premium brands to advertising Facility of Geo targeting ads will attract more, local and retail advertisers on TV New channel launches from existing networks Further push by E-commerce companies and mobile and social apps Spends on Assembly elections in Delhi and two other states Increased government spending on print, since the new government strongly believes in communicating with their electorate about their new thinking, concepts, etc We are confident that government will finally launch phase 3 expansion no later than September 2015, and since a very large number of radio stations are expected to open up, this should pull in atleast Rs. 70 crores of additional advertising revenue in the last quarter of the year
Here’s a 13 year review of the advertising market, having gone up from under 10,000 crores to almost 41,000 crores over 13 years. We have thus achieved a compounded annual average growth rate of 13% over these 12 years, but it is significant to note that the rate of growth in the last 6 years has been under 10%. Whilst, it appears that the advertising industry has grown steadily over these 13 years, the trend in growth rates as you can see is a wildly fluctuating one.
Compared to India’s growth of 16.4%, the global advertising market grew by just 5.3% but of course in absolute terms the global advertising market is now estimated at US $ 411 billion where as India is at 6 billion which puts India’s share at a far from respectable 1.50%
India maintained its 12th rank in the global ad market. The US further increased its share which now stands at almost 43% of the global market. China also increased its contribution from 11% to 14% and has overtaken Japan as the second largest advertising market. Japan has dropped significantly in terms of contribution from 13 to 9%.
India was the fastest growing ad market in 2014 but may slip to the second position in 2015, just below China
Coming back to India, let’s look at the Medium wise figures. Print continues to be the largest segment and accounts for 41.2%, followed closely by TV at 38.2%. The gap between Print and TV has marginally widened. Digital has now got used to occupying the 3rd place with a 11% share. Outdoor, Radio and Cinema make up for the balance 10%.
Digital continues to be the only medium to grow share at the expense of TV + Print + OOH. Radio & Cinema have maintained overall share.
Digital continues to be the only medium to grow share at the expense of TV + Print + OOH. Radio & Cinema have maintained overall share.
It is interesting to note that the combined share of OOH, Radio and Cinema is lower than the share of Digital.
In terms of growth rates, Digital grew the most in 2014 followed by Radio, Print, TV and OOH in percentage terms. In 2015, we expect TV to grow faster than all other media except digital at 10%.
Moving to Television
Television last year grew at 14% to reach Rs. 14,158 Crs but has dropped its contribution to total advertising and is now at 38%. The 2 main categories that have fuelled the overall growth of TV industry in 2014 are Lok Sabha general elections along with 5 state elections, and E-commerce players. The total spending by these 2 categories is in excess of Rs.1,050 Crs out of the total growth of Rs. 1,700+ crs. However this year we expect TV to grow by 9.5% on the back of ICC Cricket WC, Assembly elections in 3 states, HD Channels, Geo Targeting on TV, and new channel launches
Hindi GEC contributes nearly 27% of the overall TV revenue and continues to remain the leader of the pack. A change in the pecking order saw Tamil Nadu C&S overtaking News to occupy the second rank with their ad revenues growing in contribution from 7.2% to 8.5%.
In terms of category contribution, the pecking order remains the same with a marginal 3percentage points shift in contribution from FMCG to Ecommerce. FMCG, continues to rule the roost contributing 54% share of total TV spends (down from last year’s 57%), followed by Telecom/Digital/ Ecommerce (14%) & Auto (7%).
In TV, the total FCT consumption has grown by over 18% in 2014. But if you take only those channels which existed in 2013, the growth in FCT comes down to 6.4%. Length of Average duration of a commercial seems to be inching up in the last 3 years and is now firmly at 24 seconds.
There is a significant increase in average viewership of any TV channel of 7% in all day parts, but an even higher 11% increase in off prime. The drop that we had seen in 2012 has now been made up and more
Let’s review Print
Print grew by 16% to reach Rs. 15,274 Crs and continues to be the largest contributor in the total advertising pie with a share of 41%. Dailies has grown by 17% and is in line with our earlier projections. Magazines too have grown by 6% and is in line with our projections. Of the total growth of around Rs. 2100 Crs, nearly 85% or Rs. 1,800 Crs has been contributed by Elections & E-commerce players. Increase in advertising during festival season by smaller and retail advertisers has also contributed to the growth. And we expect Print to grow by another 5.3% in 2015.
Total space consumed in Dailies decreased by 2% but the average size of an ad also marginally increased to 45 col. cms.
In terms of Volume of advertising space consumed, Hindi Dailies continue to be ahead of English Dailies contributing 35% of the total volume from Dailies while English Dailies contribute 24%.
It is significant to note that for the second consecutive year, FMCG is the largest contributor even in Print, although the contribution is only at 13.6% compared to TV where its contribution is 53%. For years FMCG was not a major contributor and it was Auto, Education and Real Estate that ruled the roost in Print. These categories along with clothing, fashion, jewellery and retail together contribute to only 40% of the total print spends.
2014 also saw Hindi Dailies topple English with a share of 38% in spends. The dominance of English newspapers is declining for the second year. Hindi newspapers are now firmly the largest contributor to the Print advertising pie.
Moving on to RADIO
Radio being a local medium was extensively used by all political parties including individual candidates for campaigning during the Lok Sabha general elections & 5 State elections. Radio has grown by 17% as against earlier growth projection of 15%. This growth is despite Phase 3 not coming into force as anticipated at the start of 2014. E-commerce advertisers have also used the radio medium extensively for all their tactical offer based campaigns. The growth has also come on the back of higher inventory being sold across stations. Radio has maintained its share of 3.5% of the total advertising pie with total revenue of Rs.1,285 crores in 2014, an increase of nearly Rs. 190 crores over 2013.
In terms of category contribution, Real Estate & Home Improvement sector continue to lead the pack contributing to 12% of total Radio spends followed by Telecom/Digital and Ecommerce (9%) & BFSI ( 8%). Revenue from Ecommerce players sees the highest growth rate in 2015 followed by Auto and Media , while revenue from FMCG & Corporate sector shows decline in growth.
Let’s see CINEMA
Cinema has grown by 10% as against the projected growth rate of 7% and is at 0.5% contribution to advertising pie with total revenue of Rs. 184 crores in 2014. The rapid expansion of multiplexes in tier I and II cities is a big reason for the growth of cinema advertising in India
Let’s see what’s happening in OUTDOOR
The total Outdoor spends grew by 12.9% in 2014. Conventional Outdoor, against the projected 7% growth, grew by 13%. Transit Media too grew by 12% as against projected growth of 10%. Political parties spent heavily on OOH for both Lok Sabha Elections & 5 State Assembly Elections. E-Commerce category too gained momentum in 2014. Transit media rode on the back of new T2 terminal in Mumbai, initiation of Metro services in Mumbai & higher organic spends in Kolkata. Organic growth was seen in categories like Telecom, Automobile, BFSI and Retail. Outdoor has maintained its share of 6% of the total advertising pie in 2014 with total revenue of Rs. 2,233 crores, an increase of Rs. 256 crores over 2013.
Finally we come to Digital
Display including Video, Social and Mobile grows by 33% while Search increases by only 26%. With more FMCG and telecom players getting into the fray, Video, social and mobile formats saw larger traction. Given the explosion seen in smartphone adoption, we expect the trend to continue in the coming years
So as you can see there has been a lot of action in the media world and to squeeze value out of this busy, noisy, media world, advertisers need to do a few things differently.I have 5 pieces of advise for my advertiser friends.
My first piece of advise is to focus on effectiveness and not only on efficiency. Media seems to get the worst of everyone on rates. But Brands should not forget that the reason they advertise is to improve their brand health parameters and we have seen that certain properties, events and festivals, though expensive can impact brand health parameters in a substantial way, justifying the premium over vanilla buys.
Experiment should be our mantra. And here our guiding principle should be “Fail often, fail fast”. I have often seen marketing teams are painfully slow on certain media decisions. We often suffer from analysis paralysis.
Our recent experience with BJP and the aggressive e-commerce spends on Print and TV in the last year have ably demonstrated that “Media can Move Mountains”. But, in my view most brands fail to take full advantage of what media has to offer by under-resourcing their campaigns. Better to focus on few brands and advertise them heavily.
A corollary point, I would like to make is that since budgets are finite and often limited by P&L considerations, you need to prioritize markets very sharply and in the priority 1 markets spend and exposure must be atleast twice that of priority 3 markets, otherwise prioritization is meaningless.
For some unexplicable reasons I have noticed that as media spends get larger and larger, media decisions are been taken at lower and lower levels. If you want media to work its magic for you, greater involvement of corner rooms is required.
Thank you

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